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2013 Claim Denials Due to Beneficiary Incarceration Status

Medicare will generally not pay for medical items and services furnished to a beneficiary who was incarcerated or in custody under a penal statute or rule at the time items and services were furnished.  For additional information about this policy, please refer to the Medicare Learning Network’s recent "Medicare Coverage of Items and Services Furnished to Beneficiaries in Custody Under a Penal Authority" Fact Sheet (ICN 908084).

In the summer of 2013, CMS initiated recoveries from providers and suppliers based on data that indicated a beneficiary was incarcerated or in custody on the date of service.  For these recoveries, CMS identified previously paid claims that contained a date of service that partially or fully overlaps a period when a beneficiary was apparently incarcerated based on information from the Social Security Administration (SSA).  As a result, a number of overpayments were identified. In some cases demand letters were released with appeals instructions, and, in many cases, automatic collections of overpayments were made.  However, CMS has since learned that the information was, in some cases, incomplete for purposes of collection.

CMS understands that this issue has been challenging for providers and beneficiaries, and we are actively addressing it.  We have restored the original data on the Medicare Enrollment Data Base.  Any new claims that are denied on or after October 28, 2013, because the beneficiary was incarcerated on the date of service, are based upon that information.  We are also identifying all of the claims that were incorrectly demanded or collected, making changes to claims processing system, and refunding amounts collected.  This process will identify the claims that were denied in error and reprocessing will be completed by the Medicare Administrative Contractors.   The majority of refunds should be completed by late December 2013.