The central fact upon which correctional medical care hinges is this one: Inmates are the only residents of the United States with a constitutional guarantee of medical care. I say "residents" rather than "citizens" because the guarantee of healthcare while imprisoned applies to illegal immigrants as well as U.S. citizens. There is no such guarantee for the rest of us residing freely in the U.S. If we free U.S. citizens want medical care, we have to figure out some method of paying for it. Most of us do this by obtaining some type of medical insurance, usually through our employer or from the government.
However, inmates aren't working and so it is rare for an inmate to have private insurance. Also, inmates also lose the right to use any federal insurance plan when they are incarcerated. By law, Medicaid and Medicare benefits (with few exceptions) cannot be used while incarcerated. Incarcerated inmates also lose VA benefits and even active duty military insurance. We can't take a jailed veteran, for example, to his next VA clinic appointment. He is no longer eligible to use the VA system, even to get his medications refilled.
Instead, every correctional facility has to set up its own independent medical program that is paid for by whatever entity is in charge of the jail. Counties pay directly for the medical care of the inmates in their county jails. Each state pays for this medical care of their state prisoners out of the general fund. And the federal government funds medical care for inmates in federal prisons. Any way you look at it, this is your tax dollars at work!
The federal prisons and about half of the state prison systems hire the nurses, counselors, dentists, doctors, etc. they need to staff their medical services as federal or state employees. The other half of the states have privatized their prison medical services and so negotiate with correctional health companies to provide these services. Jails have a similar breakdown, although the bigger the jail, the more likely they are to have it privatized.
This unique (for the U.S.) system of providing medical care to incarcerated inmates makes correctional medicine different in many important ways from medical care in the free world.
What this system means for inmates is that they all have equal access to medical services. There are no "haves" and "have-nots" like there are in the outside world, where uninsured people do not have equal access to medical care with the insured. Inmates don't have to do anything to be eligible for medical benefits, other than be incarcerated. In this way, correctional medicine is similar to socialized medicine, like in Canada.
The only time that inmates re-enter the world of fee-for-service medicine is when they need specialty care that cannot be provided in the jail or prison medical clinic. As an example, let's say that an inmate breaks his hand in a fight and needs surgery. The orthopedist would submit her bill to the county for payment like she would bill the insurer of any other patient. Most states have legislation that such services are reimbursed at Medicaid rates, even though Medicaid itself is not used.
What this direct payment system means for me is that I am paid a flat fee for my jail services, a fee that I negotiated with the sheriff and the county commissioners. Doctors in state prisons are paid a set salary for what typically is a 9-5 job. There are no fee-for-service charges for any of us. We don't bill Medicaid or Blue Cross for doing a physical exam or any procedures, like lancing an abscess. From my perspective, I love it! I'm freed from the tyranny of DRGs and those damn ICD-10 codes that I hated in my previous medical life. I can't overstate how wonderful this is for my personal satisfaction with my career.
Another important difference between this system and the "outside" medicine is that there is a budgeted ceiling for medical expenditures. For example, consider a typical state prison system. The legislature budgets a certain amount of money for the Department of Corrections, including the prison facilities, the salaries of the Correctional Officers ... and the money to run medical services. Included therein is the money to pay for the inmates on dialysis, as well as money for cancer chemotherapy and the drugs for hepatitis C. It is all included. There can be a lot of pressure on correctional physicians to count pennies. I myself don't think this is necessarily a bad thing.
Physicians on the outside generally do not have to worry about counting pennies or any budget ceiling. An outside physician can prescribe the new expensive biologics that are advertised on TV to one patient without having any impact on her other patients. This is not true in a prison system. If prison docs use a super expensive medication with an "iffy" benefit profile for one patient, that means that there is that much less money for mundane but important stuff like treating type 2 diabetics. Correctional medical administrators have to wrestle with these types of trade-offs all the time, as well as routinely having to beg state legislators for more money for inmate medical needs -- not a top legislative priority, I can tell you!
The United States has two very different medical systems -- one for free citizens and the other for incarcerated residents. Compared with the rest of the world, the way we fund medical care for incarcerated inmates is less weird than the rest of the U.S. medical system. I find it interesting that the strikingly different correctional medical system does not get more press as we debate the merits and problems of our gargantuan cousin! That's the real question.