Kentucky proposes plan to expand Medicaid coverage for inmates


By Sarah Charles Wright

Kentucky’s rate of fatal overdoses climbed again last year by five percent, according to the Office of Drug Control and Policy, and has continued to increase substantially in 2020, as substance use disorder (SUD) treatment is complicated by the COVID-19 pandemic. Access to treatment for all who need it has always been a complex issue, and for those who are incarcerated, it is even more difficult.

Although Medicaid beneficiaries in Kentucky with a substance use disorder have access to treatment and case management services, Kentucky’s inmate population is excluded from that access. Federal Medicaid law does not permit state Medicaid agencies to pay for healthcare services for prison or jail inmates. Medicaid suspends an individual’s Medicaid eligibility and enrollment when they become incarcerated. Any healthcare coverage they receive in a corrections facility is paid for from state or local funds.

High Recidivism

Earlier this year, the Kentucky Legislature acknowledged in budget legislation that the inability of inmates to access Medicaid-covered SUD services while incarcerated and after their release leads to high recidivism rates and jail and prison overcrowding. To change this cycle, the Legislature directed the Kentucky Department for Medicaid Services (DMS) to work with the Department of Corrections (DOC) and other agencies to develop a federal Section 1115 Medicaid Waiver demonstration project to allow inmates with SUDs to enroll in Medicaid to receive covered SUD treatment and recovery services while incarcerated and have immediate access to services as Medicaid members when they reenter the community.

The hope is that participation in the demonstration project will reduce the likelihood of serial incarceration for drug offenders with SUDs and help stem the economic and social toll the opioid crisis has taken on Kentucky communities. If approved by the Centers for Medicare and Medicaid Services (CMS), Kentucky’s SUD demonstration project will be the first of its kind in the nation.

The DOC has operated a substance abuse program in state and local corrections facilities for the last ten years; medication assisted treatment was added to the program in 2016. More than 2,600 inmates across Kentucky are participating in the DOC’s substance abuse program, and approximately 4,000 more have been identified as eligible to participate.

However, even if an inmate is successful in the DOC’s substance abuse program while incarcerated, that support ends when the inmate leaves prison or jail. According to the DOC and the DMS, individuals with SUDs are at high risk for relapse, recidivism and drug overdose death when they are released from custody. Consequently, it is critical for them to be enrolled or reinstated with Medicaid as soon as possible so they can access treatment and recovery support services. Social, financial and practical barriers often prevent this from happening.

Medicaid Waiver

The Medicaid Waiver application proposes that inmates with a primary SUD diagnosis be deemed eligible for and enrolled in Medicaid to receive SUD treatment services in the DOC’s substance abuse program as Medicaid covered inpatient/residential services. Additional covered services for inmates will include a recovery support program for graduates of the program and case management by a licensed clinical social worker who will arrange for participating inmates to immediately access and continue SUD-related services when they reenter the community.

DMS will work with the DOC and other state agencies to create a new Medicaid provider type specifically for the DOC’s substance abuse and recovery programs, and a new definition of SUD programming for incarcerated Medicaid members under the state Alcohol and Other Drug Entity (AODE) licensure statute. Providers interested in participating will be required to have an AODE license. Two new bundled weekly service codes – one for substance abuse program services, and the other for recovery services – will also be created for use by providers of those services.

Medication-assisted treatment will be available for inmates who meet American Society of Addiction Medicine criteria but furnished separately through the corrections facility’s onsite medical provider. Participating inmates will be asked to select a Medicaid managed care organization prior to their release. Once selected, the MCO will be responsible for coordinating the individual’s access to continued recovery and other healthcare services after they leave the facility.

DMS hopes to receive CMS approval of the Waiver demonstration project and start implementation before the end of 2021. A copy of the Waiver application may be accessed on the DMS website at

-Sarah Charles Wright is a partner in Healthcare Law at Sturgill, Turner, Barker & Moloney, PLLC in Lexington, Kentucky.