Medicare Still Making Improper Payments on Behalf of Prisoners

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By James Swann

Oct. 7 — Medicare made about $34 million in improper payments to providers on behalf of prisoners in 2013 and 2014, according to a health-care watchdog report released Oct. 7, the third report in recent years documenting such payments.

Medicare didn’t identify the beneficiaries as prisoners when the claims were originally processed, and turned off a post-payment claims edit that could have identified their correct status, the Health and Human Services Office of Inspector General said.

Improper payments have long been an issue for the Medicare program, totaling $43.3 billion in 2015, or 12.1 percent of all Medicare spending.

The OIG recommended that Medicare create policies and procedures to prevent future improper payments on behalf of prisoners, and said Medicare contractors should try to recover the $34 million, if appropriate.

A 2014 OIG report found Medicare improperly paid $12 million from 2006 through 2010 on prescription drugs for prisoners, and a 2013 report found $34 million in improper Medicare payments for prisoners from 2009 through 2011.

Medicare is prohibited from making payments on behalf of beneficiaries who are under arrest or are imprisoned.

Eric Fader, an attorney with Day Pitney LLP in New York, told Bloomberg BNA that the report highlights some oversight failures, as the Centers for Medicare & Medicaid Services shouldn't have turned off the post-payment claims edit without having a plan B in place.

“However, CMS simply doesn't have the manpower to design a whole new system to collect incarceration data, so piggybacking on the Social Security Administration suspension data is really the only possible semi-solution,” Fader said.

The SSA is Medicare's primary source of data about beneficiary prison status. The CMS said it switched off the post-payment claims edit because it was worried that the data it was using from the Social Security Administration weren't accurate. Officials from the CMS told the OIG that the data often classified a beneficiary as being in prison when he or she was already released, and keeping the post-payment claims edit in place would cause legitimate payments to be identified as improper.

Without the claims edit in place, the CMS has no way to identify and recover improper payments.

Fader said that ideally the CMS would be able to use the SSA data as a starting point and augment it, rather than having to create its own separate system to collect prison data.

Improper payments have long plagued the Medicare program, and as recently as late September an OIG report found that the CMS improperly paid more than $9 million on behalf of 481 illegal immigrants in 2013 and 2014 (191 HCDR, 10/3/16).

Improper Payments

In the current report, the OIG said that existing policies to ensure that payments aren't made on behalf of prisoners are inadequate to block Medicare payments to prisoners.

When SSA-provided data are up-to-date and a beneficiary is shown to be in prison, Medicare payments can be blocked from being made. However, if the information isn't accurate and a claim is processed on behalf of a beneficiary who is actually in prison, the CMS has no way to detect and recover the improper payments, the OIG said.

Ellyn Sternfield, a health-care attorney with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, Washington, told Bloomberg BNA that reliance on incomplete or inaccurate data has plagued the CMS for years, whether it leads to payments for prisoners, illegal immigrants or the deceased.

Sternfield said the CMS dodges responsibility for these recurrent data issues because of its reliance on other entities, be it government contractors or other federal, local or state agencies, to develop and provide the data.

“Here CMS has a statutory responsibility that it has not fulfilled regarding payments for incarcerated individuals, but points to the fact that it decided to use data that SSA maintains for its own statutory responsibility to detect improper Medicare payments,” Sternfield said.

While the CMS admits that the SSA data are incomplete and won't identify all improper payments, the agency maintains that it's preferable to use it instead of developing its own processes, Sternfield said.

“As long as CMS can hide behind a contractor or another agency to excuse its failure to fulfill statutory responsibilities, this is not going to change,” Sternfield said, referring to improper Medicare payments.

While the CMS agreed with the recommendation to review the $34 million in improper payments and recover as much as possible, as well as review additional improper payments made outside of the OIG's audit period, it didn't agree with the OIG's call to create new policies and procedures to block future improper payments.

Following the OIG's recommendation would require signing information collection agreements with every penal institute in the country, the CMS said, which would basically duplicate the information received from the SSA.

Instead, the CMS said it's working with the SSA to get access to better data that will help block improper payments for prisoners.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

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