Recovery Audits Will Be Expanded to Medicaid

July 25, 2010

The Centers for Medicare & Medicaid Services (CMS) is working towards expanding its recovery audit contractor (RAC) program to cover all of Medicare, as well as the Medicaid program.

RACs are third-party contractors who audit Medicare claims for improper payments. Currently, fee-for-service Medicare is the only program subject to the reviews.

Earlier this year, the Obama administration announced a government-wide effort to reduce improper payments made by federal agencies, including those under the Medicare and Medicaid programs.

The health care reform legislation adopted earlier this year requires that RAC audits be extended to Medicare Advantage, Medicare Part D, and Medicaid. A demonstration program operating on a limited basis found more than $300 million in two years.

But while the reform law set a date of December 31, 2010 for the expanded program, CMS faces a challenge in meeting that deadline, especially with respect to Medicaid.

Expansion of the RAC program to Medicaid will require coordination with 50 state programs, each with different eligibility standards and different levels of coverage. According to CMS officials, that could make inclusion of Medicaid by the December 31 deadline more challenging.

Physician groups have been critical of the RAC program, mostly due to the burden that the audits put on physicians’ practices. In an effort to address physicians’ concerns regarding disputed claims, audit firms are now required to hire a physician medical director.