CMS Finalizes Payment Rule, Including Update to the Custody Definition

Medicare payment rules prohibit coverage for a service if a beneficiary is not financially responsible for the care or if another government entity is obligated to provide or pay for the item or service. For years, the Medicare rules interpreting and implementing this general prohibition used an extremely broad definition of custody as it applied to people in the custody of penal authorities. In addition to people physically detained in jails and prisons—situations where federal and state law require the institution to provide and pay for necessary medical care—the rules created a bar to payment for care for people on bail, parole, probation, home detention and halfway houses. That meant that people living in the community who sought and received care from providers with no connection to the penal authority were denied Medicare coverage.

This disconnect was unique to Medicare. Though Medicaid and health insurance obtained through the ACA marketplaces are also barred from making payment where the insured is not responsible for the cost of care and/ or there is another responsible government entity, their payment policies recognize that, upon release, the individual becomes responsible for procuring and paying for their own health care so the payment prohibition ought not apply, even if there is some ongoing relationship between the penal authority and the enrollee.

CMS’s updated rule brings Medicare into line with these other government health insurances and with the practical realities of modern criminal justice practices by removing the bar on payment for those who are on bail, parole, probation and home detention or who are required to reside in halfway houses.

As part of this change, CMS is also updating the definition of custody for the purposes of the existing Special Enrollment Period for people who were recently incarcerated, and will allow people who have been released from physical detention and are on bail, parole, probation, or home detention and individuals required to reside in halfway houses to enroll or re-enroll in Medicare Part B without having to wait until after that status is terminated to reestablish Medicare coverage. This change will increase access to care during a complicated transition and will also increase administrative simplicity because it more closely aligns with the Social Security Administration’s criteria for determining incarceration status.

Read the full rule here.

Read a summary from CMS here.