Incarcerated Beneficiaries - JF Part A
Incarcerated Beneficiaries
Claims Submitted for Items or Services Furnished to Medicare Beneficiaries in State or Local Custody Under a Penal Authority
If you submit a claim for items or services provided to a patient who's in custody (or incarcerated) on the DOS, we deny the claim. You or your billing agent will get a remittance advice (RA) explaining the denial. A remittance advice remark code (RARC) further explains an adjustment or gives informational messages that can't be explained with a claim adjustment reason code. When denying claims for services provided to patients under penal custody, the RA will include RARC N103. 42 CFR 405 Subpart I applies to claim denials resulting from patient custody status and MAC-initiated overpayment recoveries based on a review of claims paid before getting notified of a change in the patient's custody status.
Under 42 CFR 411.4(b), we can pay for items and services provided to incarcerated patients only when they meet both of these criteria:
- State or local law requires individuals to repay the cost of medical items and services they get while in custody.
- The state or local government entity enforces the payment requirement by billing and seeking collection from all such individuals in custody with the same legal status (for example, not guilty by reason of insanity), whether insured or uninsured. It must also pursue collection of amounts owed in the same manner and with the same effort that it pursues other debt collection. This includes any Medicare deductible and coinsurance amounts and the costs of items and services we don't cover. Also, the state or local entity must provide:
- Evidence that routine collection efforts include lawsuits filed to get liens against an incarcerated individual's assets outside the prison and income from non-prison sources
- Rules and procedures used to bill and collect amounts paid for an incarcerated individual's medical expenses (for example, regulations, manual instructions, or directives)
Submitting Claims That Meet an Exception
If you provide items and services meeting the exception criteria, submit claims using the appropriate CPT or HCPCS code and the QJ modifier. Starting July 1, 2025, use condition code 63 to indicate that services provided to a patient in state or local custody meet the requirements of 42 CFR 411.4(b) for payment. For inpatient claims when the incarceration period spans only a portion of the stay, hospitals should identify the incarceration period by billing all days, services, and charges that overlap the incarceration period as non-covered. MACs randomly select a representative case sample (both Medicare and non-Medicare eligible) to determine whether state or local entities appropriately bill and collect amounts paid for incarcerated patients' medical expenses.
