CMS finalizes Medicare rule with key improvements for justice-involved populations

Key Takeaways

On November 1, the Centers for Medicare & Medicaid Services (CMS) published a final rule that, in a major advocacy win for counties, will improving access to Medicare for justice-involved individuals who are in pre-trial status or who are reentering the community. The CY 2025 Medicare Hospital Outpatient Prospective Payment System final rule reflects significant updates to Medicare’s “custody” definition and Special Enrollment Period (SEP) for formerly incarcerated individuals.

NACo joined partners in advocating for a narrower definition of “in custody” to expand access to vital healthcare services. In direct response to these comments, CMS clarified in the final rule that individuals released to the community pending trial, such as those in pretrial supervision or released on cash bail, as well as individuals on parole or probation and residing in halfway houses or home detention are not considered to be in “custody.” This important update ensures these individuals can maintain access to Medicare benefits, supporting better health outcomes and smoother transitions back into the community.

Read the Final Rule  Read NACo’s Comments to CMS

Impacts of the final rule

• Narrowing the definition of “custody”: CMS finalized its proposal to exclude individuals on bail, parole and probation or in home detention and halfway houses from Medicare’s "custody" definition. This critical update ensures Medicare can pay for healthcare services provided to these individuals, who were previously ineligible for the program.
• Revised Special Enrollment Period (SEP) criteria: The rule also updates Medicare SEP eligibility for justice-involved populations and expands eligibility criteria to include individuals released to community supervision or halfway houses. This expansion simplifies access to Medicare, reducing gaps in coverage and ensuring smoother transitions from incarceration to community life.

County impact

The finalized changes significantly impact counties, which play a pivotal role in health and justice systems. By updating the custody definition, counties can connect individuals reentering the community to essential Medicare benefits, lowering uncompensated care costs. Expanding healthcare access for justice-involved populations also supports successful reintegration, reduces recidivism and enhances public safety.  

Next Steps

NACo remains committed to working with CMS and federal partners to implement policies that strengthen county-operated health and justice systems. The final rule also provides a new opportunity to advocate for Medicaid Inmate Exclusion Policy (MIEP) reform, emphasizing the need for Medicaid to align with Medicare’s definitions of continuing versus suspending coverage for pretrial and reentry populations. These efforts will further bridge gaps in care, enhance community reintegration and support better health outcomes for justice-involved individuals.

MIEP Toolkit