Examples of Application of Government Entity Exclusion

50.3.3 - Examples of Application of Government Entity Exclusion (Rev. 13593; Issued: 01-26-26; Effective:02-26-26; Implementation:04-27-26) The following paragraphs explain the application of the governmental entity exclusion to various situations involving services rendered by governmental and non governmental facilities: 1. State Veterans Homes Many State governments operate veterans homes and hospitals. These institutions are generally open only to veterans and certain dependents of veterans, and include domiciliary, hospital, infirmary, and/or nursing home type facilities. These institutions are financed primarily from State funds; in addition, most receive nominal per diem payments from the VA for domiciliary care, hospital care, or nursing home type care for each veteran who would also qualify for admission to a VA hospital or domiciliary. When such a participating institution charges its residents and patients to the extent of their ability to pay, or seeks payment from available sources other than Medicare, benefits are payable for covered items and services furnished to Medicare beneficiaries. However, if it is the policy of the institution to admit and treat a veteran without charge simply because the individual is a veteran, or because the condition is service-connected, payment would be precluded under title XVIII. Per diem amounts paid by the VA to State veterans homes on behalf of those patients who are otherwise eligible for care in a VA facility may be credited towards any deductible, coinsurance, or noncovered amounts required to be paid by the patient. However, if a State veterans home collects amounts from the VA in excess of the applicable deductible and coinsurance, the A/B MAC (A) reduces the Medicare payment to the extent of such payments. 2. State and Local Psychiatric Hospitals In general, payment may be made under Medicare for covered services furnished without charge by State or local psychiatric hospitals which serve the general community. (See §50.3.1.) However, payment may not be made for services furnished without charge to individuals who have been committed under a penal statute (e.g., defective delinquents, persons found not guilty by reason of insanity, and persons incompetent to stand trial). For Medicare purposes such individuals are “prisoners,” as defined in subsection 3, and may have services paid by Medicare only under the exceptional circumstances described there. A psychiatric hospital to which patients convicted of crimes are committed is considered to be serving the general community if State law also provides for voluntary admissions to the institution. 3. Individuals in Custody of a Penal Authority 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. Consequently, under the statutory no legal obligation to pay payment exclusion, Medicare is prohibited for paying for such care. The no legal obligation to pay payment exclusion is the exclusion that is most likely to apply in situations when Medicare denies payment for medical services furnished to an individual in custody of a penal authority (see § 40.7 of this chapter above). However, the payment exclusions at 42 CFR § 411.6 and § 411.8 could also prohibit Medicare from paying for a beneficiary’s medical services. When a federal provider or agency actually furnishes a medical service to a beneficiary, then Medicare payment is prohibited by the payment exclusion at 42 CFR § 411.6. When a governmental entity actually pays for a beneficiary’s medical service, then Medicare payment is prohibited by the payment exclusion at 42 CFR § 411.8. 4. Health Department Outpatient Clinics Services rendered free of charge by State and local health department outpatient clinics are not covered unless the services are rendered because of the individual’s indigence or as a means of controlling infectious diseases. Thus, services rendered by city-operated clinics for the poor and clinics for the detection and treatment of such illnesses as venereal disease and tuberculosis are not excluded from Medicare coverage. 5. Vocational Rehabilitation (VR) Agencies Under the vocational rehabilitation (VR) programs of the various States, vocational training and services, including hospital and medical care, are provided to handicapped persons who qualify under State law. These programs are financed in part by a Federal matching fund program set up under the Vocational Rehabilitation Act. When items or services are furnished by a State VR agency, title XVIII benefits are payable if the agency charges all clients for its services or makes services available without cost only to medically indigent individuals. If a rehabilitation agency has paid for items and services furnished by nonproviders (e.g., physicians’ services and prosthetic appliances), it may claim the Part B payment due the beneficiary if the latter has authorized it to do so. The procedure is similar to that provided for State welfare agencies; the State vocational rehabilitation agency function is comparable to that of a State welfare agency in relation to a welfare recipient.