Medicaid and Incarcerated Individuals

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Updated August 24, 2023
Medicaid and Incarcerated Individuals
Medicaid is a joint federal-state means-tested entitlement
In a 2016 State Health Official (SHO) letter, the Centers for
program that finances the delivery of primary and acute
Medicare and Medicaid Services (CMS) provided
medical services, as well as long-term services and
additional guidance on the definition of inmate, stating,
supports, for a diverse low-income population. States that
“CMS considers an individual of any age to be an inmate if
operate their programs within broad federal rules are
the individual is in custody and held involuntarily through
entitled to federal Medicaid matching funds. (See CRS
operation of law enforcement authorities in a public
Report R43357, Medicaid: An Overview.)
institution.” Thus, for the purposes of Medicaid, CMS
generally does not distinguish between individuals who are
The Patient Protection and Affordable Care Act (ACA; P.L.
detained in a public institution pending disposition of
111-48, as amended), and a subsequent Supreme Court
charges and those who are incarcerated post-sentencing (for
decision (National Federation of Independent Business v.
an exception, see “Special Rules for Eligible Juveniles”).
Sebelius), made it optional for states to expand Medicaid
Individuals are not considered inmates for the purposes of
coverage to non-elderly adults with income up to 133% of
Medicaid if they have “freedom of movement” (e.g., ability
the federal poverty level beginning in 2014. In states that
to work outside a facility, to seek health treatment in a
expanded Medicaid, many individuals transitioning into and
community setting). Therefore, individuals on probation or
out of incarceration—a population that tends to have higher
parole, under home confinement, residing in halfway
rates of substance use disorder, mental illness, and chronic
houses under the jurisdiction of state or local governments,
disease than the general population—were eligible for
etc., are generally not considered inmates.
Medicaid for the first time. This In Focus describes how
incarceration can impact the availability of federal
Medicaid Payment During Incarceration
Medicaid payment and an individual’s Medicaid coverage.
Public institutions are required to provide medical care to
inmates as a consequence of the 1972 Supreme Court ruling
Medicaid Inmate Payment Exclusion
Estelle v. Gamble, which found that deliberate indifference
Historically, Medicaid has not been a major source of
to a prisoner’s serious injury or illness constitutes cruel and
funding for the health care of incarcerated individuals. This
unusual punishment. Inmate health care can be costly for
is mainly because federal Medicaid statute generally
state and local governments, and billing Medicaid can
prohibits the use of federal Medicaid funds to pay for the
offset a portion of these expenses for coverable services
health care of an “inmate of a public institution”
when eligible inmates are inpatient for 24 hours or longer in
(hereinafter referred to as the inmate payment exclusion)
a medical institution. CMS provides guidance on which
except when the individual is a “patient in a medical
settings qualify as medical institutions in its 2016 SHO
institution” that is organized for the primary purpose of
letter, stating that medical institutions can include hospitals,
providing medical care. Additionally, pre-ACA, many
nursing facilities, and intermediate care facilities for
incarcerated individuals did not meet Medicaid eligibility
individuals with an intellectual disability that are certified
criteria, so when the inmate was a patient in a medical
Medicaid providers, also serve members of the general
institution, the stays were not billable to Medicaid (see
public, and house and provide treatment based on medical
“Medicaid Payment During Incarceration”).
need rather than incarceration status, among other criteria.
Inmates of Public Institutions
Services provided to inmates in medical institutions on an
Generally, an individual detained in a local jail, state or
outpatient basis still are subject to the inmate payment
federal prison, detention facility, or other setting that is
exclusion. Similarly, any inpatient and outpatient medical
organized for the primary purpose of involuntary
services provided in settings that “primarily or exclusively”
confinement is an inmate of a public institution for the
treat inmates are subject to the inmate payment exclusion
purposes of Medicaid. Public institution is defined in
because they are considered correctional (not medical)
federal regulation as “an institution that is the responsibility
settings. Separate 2016 CMS guidance provides that such
of a governmental unit or over which a governmental unit
settings can, among other things, limit personal privacy,
exercises administrative control,” with exceptions for types
restrict choice of physician, and use nonmedical restraint,
of settings such as medical institutions, among others.
all of which would disqualify them from obtaining
Federal regulations define inmate as someone living in a
certification as a Medicaid provider.
public institution, with certain exceptions for individuals
living in public educational/vocational institutions to secure
Medicaid’s “patient in a medical institution” exception
education or vocational training or individuals residing in a
applies to federal inmates, but the Bureau of Prisons
public institution temporarily (e.g., pending arrangements
chooses to retain responsibility for the payment of health
for community residence).
care services for its inmates, so in practice, the policy is not
applied to inmates in federal prisons.
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link to page 2 Medicaid and Incarcerated Individuals
Medicaid Eligibility for Inmates
Special Rules for Eligible Juveniles
Inmates who are eligible for, or enrolled in, Medicaid do
Two recent laws modify the treatment of “eligible
not become ineligible for Medicaid based on their inmate
juveniles;” defined as individuals under 21 years of age and
status alone. The statutory inmate payment exclusion is a
former foster youth up to the age of 26 who become
coverage (not an eligibility) exclusion. However,
incarcerated while enrolled in Medicaid or who are
historically, most states had policies to terminate an
determined eligible for Medicaid while incarcerated.
inmate’s Medicaid enrollment, in part as a way to avoid
Specifically, the Substance Use-Disorder Prevention That
inappropriate billing. If the inmate needed an inpatient
Promotes Opioid Recovery and Treatment for Patients and
hospitalization, the public institution would need to
Communities Act (SUPPORT Act; P.L. 115-271) prohibits
facilitate Medicaid enrollment of the inmate to bill
states from terminating Medicaid eligibility for “eligible
Medicaid for the stay. In addition, inmates whose Medicaid
juveniles” who become inmates of public institutions on or
was terminated during incarceration would have to reapply
after October 24, 2019; instead, the law allows states to
and be deemed eligible to have full Medicaid coverage
suspend Medicaid eligibility. The SUPPORT Act also
upon release (statute requires that states accept inmates’
requires states to redetermine the eligibility of eligible
Medicaid applications). Since the reapplication process
juveniles whose Medicaid is suspended, or to accept and
could lead to a gap in Medicaid coverage following
make timely eligibility determinations on new Medicaid
incarceration (due to uncertain release dates, delayed
applications for eligible juveniles, to enable full coverage
eligibility determinations, etc.), CMS sought to address this
upon release. A separate provision directs the HHS
issue via guidance that permits states to suspend Medicaid
Secretary to release guidance for a Medicaid Section 1115
for incarcerated individuals.
demonstration initiative under which the HHS Secretary is
permitted to waive certain federal Medicaid rules to allow
Medicaid Suspension for Inmates
states to test strategies to support community reentry and
improve care transitions for all incarcerated enrollees for a
Early CMS Guidance on Medicaid Suspension
temporary period prior to release. As of August 2023, CMS
In 2004 guidance, CMS permitted states to suspend an
granted one state (California) approval to cover specified
inmate’s Medicaid so that it could be more quickly
Medicaid services for incarcerated enrollees under the
reinstated upon release from incarceration (or in the case of
reentry waiver initiative; additional state submissions are
an inpatient hospitalization). The 2016 CMS SHO letter
pending approval.
offered similar direction by recommending that states place
“the inmate in a suspended eligibility status” or “suspend
The total number of inmates impacted by the SUPPORT
coverage by establishing markers and edits in the claims
Act is relatively small, and the act’s prohibition on
processing system to deny claims for excluded services.”
Medicaid termination for eligible juveniles does not extend
An eligibility suspension effectively pauses an inmate’s
to the majority of the inmate population. However,
Medicaid eligibility without terminating it. A coverage
according to a FY2019 Kaiser Family Foundation survey,
suspension maintains an inmate’s eligibility but limits
most states chose to suspend Medicaid eligibility for their
coverage to allowable inpatient services. Both suspension
adult inmate populations as well; 42 states suspended rather
methods can achieve the same end goal of faster
than terminated Medicaid eligibility for jail inmates and 43
reinstatement of full Medicaid coverage upon release from
states did so for prison inmates.
incarceration. Public institutions, states, and local
jurisdictions were not required to actively facilitate
Under the Consolidated Appropriations Act, 2023 (CAA
Medicaid suspension (or enrollment) for inmates until
2023; P.L. 117-328), beginning January 1, 2025, states are
recent changes to law required them to do so for certain
permitted to receive federal payment for allowable medical
assistance services provided to “eligible juveniles”
inmates (see “Special Rules for Eligible Juveniles).
while
detained pending disposition of charges. The CAA 2023
Timing of Medicaid Suspension
directs states to establish a plan within 30 days of the date
that an “eligible juvenile” is scheduled to be released that
The process of Medicaid suspension can require extensive
coordination between corrections and the state Medicaid
provides for specified screenings and referrals for
agency, as well as information technology system changes.
treatment. While the SUPPORT Act did not change the
This, in addition to unique state and local policies and
inmate payment exclusion, Medicaid coverage for eligible
processes, among other factors, contributes to variability in
juveniles is still generally limited to inpatient services; the
when states or jurisdictions initiate Medicaid suspension
CAA 2023 provision specifies that services provided under
during an incarceration; for example, one jurisdiction could
such plans are not subject to Medicaid’s inmate payment
wait 24 hours, whereas another could wait 60 days. The full
exclusion.
range of when jurisdictions suspend Medicaid is difficult to
Recent Legislation
determine. Similarly, data on the average length of time
between an inmate entering jail or state or federal prison
Bills that address Medicaid coverage for inmates have been
and Medicaid suspension are not readily available. Waiting
introduced in the 118th Congress. The Medicaid Reentry
to implement a Medicaid suspension can reduce
Act of 2023 (H.R. 2400/S. 1165) would remove the
administrative burden and the potential for unnecessary
Medicaid payment exclusion for all Medicaid enrolled
interruption in Medicaid coverage, but it also can create the
inmates in the 30 days prior to release from a public
risk of inappropriate billing of Medicaid.
institution, thereby allowing states to receive federal
matching funds for state plan services during the specified
period. Similar bills were introduced in the 116th and 117th
Congresses.
https://crsreports.congress.gov

Medicaid and Incarcerated Individuals

Evelyne P. Baumrucker, Specialist in Health Care
Financing
IF11830


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