CMS Pub. 100-04, ch. 1, § 10.4

Beneficiaries in State or Local Custody Under a Penal Authority

(Rev. 13593; Issued: 01-26-26; Effective:02-26-26; Implementation:04-27-26)

Individuals in custody of a penal authority generally have the status of public charges

and, as such, have no obligation to pay for the medical care they receive. The special

condition at 42 CFR § 411.4(b) for services furnished to individuals in custody of penal

authorities operates as a rebuttable presumption. The presumption is that individuals who

are in custody, as the term is described in 42 CFR § 411.4(b), have no legal obligation to

pay for health care items or services they receive while in custody; therefore, Medicare is

prohibited from paying for such health care items or services under the no legal

obligation to pay payment exclusion. The presumption can be rebutted by a showing

that: (1) the State or local government requires individuals in custody to repay the cost of

the medical services they receive while in custody; and (2) the State or local government

enforces the requirement to pay by billing all such individuals, whether or not covered by

Medicare or any other health insurance, and by pursuing collection of the amounts they

owe in the same way and with the same vigor that it pursues the collection of other debts.

NOTE: The A/B MAC (A), (B), or (HHH), or DME MAC will require evidence that

routine collection efforts include the filing of lawsuits to obtain liens against individuals’

assets outside the prison and income derived from non-prison sources.

• The State or local entity documents its case with copies of regulations, manual

instructions, directives, etc., spelling out the rules and procedures for billing and

collecting amounts paid for prisoners’ medical expenses. The A/B MAC (A), (B),

or (HHH), or DME MAC will inspect a representative sample of cases in which

prisoners have been billed and payment pursued, randomly selected from both

Medicare and non-Medicare eligible. The existence of cases in which the State or

local entity did not actually pursue collection, even though there is no indication

that the effort would have been unproductive, indicates that the requirement to

pay is not enforced.

The CMS maintains a file of beneficiaries in custody of a penal authority, obtained from

SSA, that is used to edit claims. Specifically, the data contain the names of the Medicare

beneficiaries and time periods when the beneficiary is in such Federal, State, or local

custody. These data will be compared to the data on the incoming claims. CWF will

reject claims where the dates from the SSA file and the dates of service on the claim

overlap. Any claims rejected by CWF will contain a trailer to the Medicare contractor

indicating the date span covered. Contractors will, in turn, deny payment of such claims.

Providers and suppliers that render items and services to individuals in custody of a penal

authority in a jurisdiction that meets the conditions of 42 CFR § 411.4(b)(1)(i) through

(iii) should indicate the requirements have been met for payment. Providers and

suppliers should use the “63” condition code for an entire claim or use the QJ modifier to

identify services at the line level (see Pub. 100-4, ch.1, section 190). Otherwise, the

claim or line(s) are denied.

The regulation at 42 CFR § 411.4(b) states:

“(b) Special conditions for payment for items or services furnished to an individual in the

custody of a penal authority.

(1) An individual in the custody of a penal authority is considered to have a legal

obligation to pay for items or services furnished to the individual only if the following

conditions are met:

(i) State or local law requires the individual to pay the cost of items and services that the

individual receives;

(ii) The penal authority enforces the requirement to pay for items or services by billing all

individuals who receive such items or services, whether or not covered by Medicare or

any other health insurance; and

(iii) The penal authority pursues collection of amounts owed for items or services

received in the same way and with the same vigor that it pursues the collection of other

debts.

(2) For purposes of this paragraph, a penal authority means a police department or other

law enforcement agency, a government agency operating under a penal statute, or a State,

local or Federal jail, prison, penitentiary, or similar institution.

(3) For purposes of this paragraph—

(i) an individual is considered to be in the custody of a penal authority if the individual is:

(A) Incarcerated in a jail, prison, penitentiary, or similar institution;

(B) Temporarily outside of a jail, prison, penitentiary, or similar institution on medical

furlough or similar arrangement;

(C) Escaped from confinement by a penal authority; or

(D) Required to reside in a mental health facility under a penal statute or rule.

(ii) Individuals who are not considered to be in the custody of a penal authority include,

but are not limited to, individuals who are—

(A) Released to the community pending trial (including those in pretrial community

supervision and those released pursuant to cash bail);

(B) On parole;

(C) On probation;

(D) On home detention or home confinement; or

(E) Required to live in a halfway house or other community-based transitional facility.”

Appeals:

A party to a claim denied in whole or in part under this policy may appeal the initial

determination on the basis that, on the date of service, (1) the conditions of §

411.4(b)(1)(i) through (iii) were met, or (2) the beneficiary was not, in fact, in custody

under authority of a penal statute.

A/B MAC (A)/RHHI Claims Processing Procedures

A/B MACs (A) must deny claims for items and services rendered to beneficiaries under

custody when CWF rejects the claim. Provide appeal rights as specified above.

Providers that render items and services to individuals in custody of a penal authority in a

jurisdiction that meets the conditions of 42 CFR 411.4(b)(1)(i) through (iii) should

indicate the requirements have been met for payment on the claim by billing as follows:

For outpatient claims, providers shall append a HCPCS modifier QJ on all lines with a

line item date of service during the incarceration period.

For inpatient claims where the incarceration period spans only a portion of the stay,

hospitals shall identify the incarceration period by billing as non-covered all days,

services and charges that overlap the incarceration period. Non-coverage billing

guidelines can be found in Pub. 100-04, Chapter 1, Section 60.

(NOTE: When the inpatient claim is correctly billed, the processing contractor will

append the payer-only condition code 63, which will allow the claim to process for

payment. This condition code indicates that the provider has been instructed by the state

or local government agency that requested the healthcare items or services provided to

the patient of the State or local government entity that it pursues collection of debts

incurred for furnishing such items or services with the same vigor and in the same

manner as any other debt.)

A/B MAC (B)/DME MAC Claims Processing Procedures

A/B MAC (B) and DME MACs must deny claims for items and services rendered to

beneficiaries when rejected by CWF. Provide appeal rights as specified above.

Physicians and other suppliers that render items and services to individuals in custody of

a penal authority in a jurisdiction that meets the conditions of 42 CFR 411.4(b)(1)(i)

through (iii) should indicate the requirements have been met for payment on the claim.

Providers should use the QJ modifier. Language approved for QJ reads:

“Services/items provided to a prisoner or patient in State or local custody, however, the

State or local government, as applicable, meets the requirements in 42 CFR 411.4(b)(1)(i)

through (iii).”

This modifier indicates that the physician or other supplier has been instructed by the

state or local government agency that requested the healthcare items or services provided

to the patient that State or local law makes the prisoner or patient responsible to repay the

cost of Medical services and that it pursues collection of debts incurred for furnishing

such items or services with the same vigor and in the same manner as any other debt.