The Centers for Medicare & Medicaid Services Provided Medicare Part D Coverage to Beneficiaries Confined in Mental Health Facilities for Court-Ordered Purposes

During calendar years 2006 through 2011, the Centers for Medicare & Medicaid Services (CMS) CMS accepted prescription drug event records from Medicare Part D sponsors totaling over $12.6 million on behalf of beneficiaries who were confined in mental health facilities by court order under a penal code (confined beneficiaries). Had those same persons been enrolled in Medicare Parts A or B, payment for Parts A or B services would generally not have been made. This occurred because CMS policy permits Medicare payments to be made on behalf of confined beneficiaries enrolled in Part D but not on behalf of those enrolled in Part A or Part B.

Federal regulations state that an individual is eligible for Medicare Part D benefits if he or she is entitled to benefits under Part A or enrolled in Part B and lives in the service area of a Part D plan. However, under current policy for the administration of Part D, CMS does not consider confined beneficiaries to be incarcerated for the purpose of Part D eligibility, regardless of the reason for their confinement. For Medicare Parts A and B, beneficiaries in custody of penal authorities include confined beneficiaries. Medicare generally does not pay Part A and Part B benefits to incarcerated beneficiaries, but those beneficiaries retain their entitlement to Part A and can retain their enrollment in Part B with the payment of premiums. Accordingly, these individuals would be eligible for payments under Part D

We recommend that, to be consistent with the relevant provisions of Medicare Part A and Part B, CMS revise the Manual to prohibit Part D payments made on behalf of confined beneficiaries, which could have resulted in cost savings associated with $12.6 million in gross drug costs that CMS accepted for the 6-year period we reviewed. CMS concurred with our recommendation and described corrective actions that it had taken or planned to take.