Audit Finds 21% Annual Increase in State Prison Health Care Spending

Health care costs for the Department of Corrections have increased by an average of 21% annually in each of the last five years, partly because of rates that are inflated beyond those paid by Medicare and an increase in the number of hospital visits, according to an audit released Tuesday, the AP/Contra Costa Times reports. The state auditor found that new contracts negotiated by the prison system tripled the cost for some inpatient services; the department in some cases paid two to eight times as much as Medicare for inpatient services; and the system paid hospitals an average of 250% of the Medicare payment rate for outpatient services.

A previous audit released in April found the department failed to require competitive bidding on medical services contracts, which violated its cost-control policies and increased costs. State lawmakers have also found the system "virtually ignored budget limits," recently overspending by $500 million, the AP/Times reports.

According to the latest audit, the number of outpatient visits nearly doubled in the last five years, leading to increased costs for treatments that were once performed in prison clinics. The department is unable to explain why the number of outpatient visits has increased because "crucial information" was not collected, according to the AP/Times.

Auditors recommended that the department renegotiate its contracts, tying treatment costs to Medicare rates; analyze the increase in inmate visits to area hospitals; and take measures to lower the number of services for which inmates must seek treatment outside the prison system.

The Youth & Adult Correctional Agency said a state budget agreement reached Monday will address some cost concerns. Officials for Gov. Arnold Schwarzenegger's (R) administration said the budget agreement would reduce prison medical costs by more than $26 million, partly by increasing the number of employees who will negotiate contracts with outside medical providers and review medical expenses. The plan also calls for the Department of Corrections to use more generic drugs and specifies that certain services, such as liver biopsies for inmates with hepatitis C and blood dialysis, should be performed in prison hospitals (Thompson, AP/Contra Costa Times, 7/28).