Reports question $125 million in Medicare payments for inmates, illegal aliens

A lag time in getting accurate information from the Social Security Administration caused Medicare to make as much as $125 million in improper payments for healthcare provided to people who were incarcerated or living illegally in the country, two new reports say.

Acting CMS Administrator Marilyn Tavenner partially disputed the findings, saying it wasn't clear that all $125 million was incorrectly paid and that it might be prohibitively expensive to try to recoup all of the money.

Medicare rules say that generally a state government, not the federal treasury, is responsible for the cost of healthcare provided to “incarcerated individuals,” including people in prison, on home detention or living in halfway houses. Medicare is also not responsible to pay for the care of people whose legal status in the U.S. is revoked.

Two reports released Thursday by investigators at HHS' inspector general's office found that the CMS actually did a good job of making sure Medicare doesn't pay for healthcare in cases when the Social Security Administration gives timely information about prisoners' and illegal residents' status.

However, the auditors said they found $125 million worth of care given to people whose disqualifications were provided to the CMS after services were delivered. The investigators said the agency lacked any procedure to go back and recoup the costs in cases where the information was provided late.

Auditors said $34 million in payments for 12,000 prisoners (PDF) between 2009 and 2011 appeared to have been improperly made. A second report said that $92 million in payments for 2,600 people who had their legal status in the U.S. revoked (PDF) in those years also appeared to have been improperly paid out.

In written responses to both reports, Tavenner said the CMS would strengthen its policies and try to go after some of the money, but she disputed the notion that all of the payments were illegitimate.

With the prisoners' care, Medicare rules say that the federal government will pay for beneficiaries' bills in states that stick prisoners with the cost of care, and some of the 12,000 prisoners probably lived in such states, she said.

Likewise, she wrote that some of the 2,600 immigrants whose U.S. status was revoked may actually have had their legal status “retroactively updated,” which would have made the costs proper.

“CMS is committed to collecting overpayments identified in this OIG report,” Tavenner wrote. “In recovering overpayments, CMS must take into account the respective cost benefit of recoupment activities, including potential appeal costs and efforts to manually reopen, reprocess and track these claims.”