Medicaid and Financing Health Care for Individuals Involved with the Criminal Justice System

The appropriate use of federal Medicaid dollars to help expand health care coverage for individuals involved with the criminal justice system presents an opportunity to achieve reductions in state and local spending, while minimizing known health and public safety concerns associated with reentry following incarceration. However, opportunities to maximize and maintain Medicaid enrollment for eligible individuals in this population, and especially to make use of Medicaid to finance certain types of care provided to those who are incarcerated, have been largely underutilized by states. This brief provides an overview of opportunities to expand health care coverage, as well as access to and continuity of care; improve public health and safety outcomes for individuals involved with the criminal justice system; and reduce state and local expenditures on corrections and health care. <--break->

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People in prisons and jails often have complex and costly health care needs, and states and local governments currently pay almost the entirety of these individuals’ health care costs. In addition, it is estimated that as many as 70 to 90 percent of the approximately 10 million individuals released from prison or jail each year are uninsured. Lack of health insurance is associated with increased morbidity and mortality, and the high rate of uninsurance among individuals involved with the criminal justice system is compounded by rates of mental illness, substance use disorders, infectious disease, and chronic health conditions that are as much as seven times higher than rates in the general population.

When an individual returns to the community after incarceration, disruptions in the continuity of medical care have been shown to increase rates of reincarceration and lead to poorer and more costly health outcomes. Research shows that the first few weeks after release from incarceration are the most critical in terms of connecting people to treatment. Reentry into the community is a vulnerable time, marked by difficulties adjusting, increased drug use, and a 12- fold increase in the risk of death in the first two weeks after release. For many, the failure to provide a link to healthcare coverage and services upon release results in needless, potentially months-long gaps in their access to health care. If they access care at all, these individuals often rely upon hospital emergency room services, shifting much of the cost burden to hospitals and state, county, and city agencies. 

This failure to link individuals involved with the criminal justice system to health coverage and  services upon release from incarceration is especially costly to state and local governments. Total state and local spending on uncompensated health care for the uninsured reached $17.2 billion in 2008. Individuals involved with the criminal justice system, who make up as much as one-third of the uninsured population in the United States, can be expected to account for a significant portion of this spending.  Furthermore, elevated recidivism rates, which are associated with a lack of access to health care for individuals with mental illnesses or substance use disorders, contribute to the burden of state and local corrections spending.

The appropriate use of federal Medicaid dollars to help pay for health care provided to this population can save states and localities money, in addition to minimizing health and public safety concerns associated with reentry following incarceration. However, opportunities to maximize and maintain Medicaid enrollment for eligible individuals in this population, and especially to make use of Medicaid to finance certain types of care provided to those who are incarcerated, have been largely underutilized by states.

Historically, adults who do not have dependent children or do not meet disability criteria have not been eligible for Medicaid, which has limited the extent to which the program has funded services for people involved with the criminal justice system. Under the Affordable Care Act (ACA), a significant portion of the justice-involved population will gain eligibility for Medicaid coverage for the first time. Some will qualify for federally subsidized health insurance plans offered through the state health insurance marketplaces, but the majority will be newly eligible for Medicaid under the law’s expansion of the Medicaid program. States that make full use of opportunities to enroll eligible individuals in their criminal justice systems in Medicaid and appropriately leverage the program to finance eligible care can realize considerable cost savings by diverting more individuals to treatment—which is significantly less costly than incarceration—and by reducing reliance on state-funded health care services for the uninsured.

There are also opportunities to achieve budget savings for certain health care services provided to those who are incarcerated. Although the Medicaid “inmate exclusion”—which refers to language in the Social Security Act barring the use of federal Medicaid funding to pay for health care services for “inmates of a public institution”—limits the ability of states and localities to draw on Medicaid funding for inmate health care, certain exceptions to this provision can generate important cost savings. Medicaid payment for services provided in correctional settings is restricted by the inmate exclusion, but federal law does grant states the authority to use Medicaid to finance inpatient health care services for incarcerated individuals when provided by a licensed medical facility in the community, i.e., one that is not under the authority of the corrections agency. Only a few states have yet opted to take advantage of this opportunity. However, with the expansion of Medicaid under the ACA, an opportunity exists for states to better leverage Medicaid to help finance inmates’ inpatient medical care.

This paper will provide an overview of federal Medicaid law related to people involved with the criminal justice system; discuss policy options available to improve continuity of coverage while ensuring federal funds are spent appropriately; provide state examples of best practices; and give recommendations for state and local governments.

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Medicaid and Financing Health Care for Individuals Involved with the Criminal Justice System