Authorities said Sanders attacked his grandparents in their Tishomingo County home in 1985, then fled before standing trial.
Sanders attorneys argued that if Sanders was insane when one crime was committed, it would follow that he was insane for the other attack that occurred moments later.
Prosecutors contended that the U.S. Supreme Court ruled in 1984 that a criminal defendant convicted by a jury on one count couldn't attack that conviction because it was inconsistent with the jury's verdict of acquittal on another count.
Prosecutors' position was that Sanders was competent when he killed his grandmother.
Sanders, now 46, was tried in Lee County in 2008 for the Dec. 29, 1985 slaying of his grandparents - W.D. and Elma Crawford - in their home on Pickwick Lake. He was convicted of murder in the death of his grandmother and found not guilty by reason of insanity in the death of his grandfather.
Authorities were unable to find Sanders for about 20 years. He was arrested in 2005 in San Antonio, Texas.
Circuit Judge Thomas Gardner sentenced Sanders to be confined to a state mental hospital upon his release from prison on his life sentence for his grandmother's slaying. Sanders is currently incarcerated in the state prison in Greene County.
In a 6-3 decision Thursday, the Supreme Court said there was nothing wrong with the jury verdicts or the sentences.
"After being properly instructed regarding the burden of proving whether or not Sanders was legally sane, the jury found him guilty. To do so, the jury necessarily had to make a judgment concerning one of the most difficult questions of fact - legal sanity - with which a jury may be presented. We are in no position to make a better judgment than the jurors, so we cannot say that Sanders' conviction was against the overwhelming weight of the evidence," wrote Justice Randy Pierce for the majority.
Presiding Justice Jess Dickinson said the jury's verdict was bizarre.
"No expert testified ... that Sanders was insane when he committed the first murder, but sane when he committed the second; and this is not surprising, since the record includes not a smidgen of evidence that would support such a theory. "