Medicaid RACs: Coming Soon to a State Near You

Written by Brian Dunphy and Karen Lovitch

Eliminating fraud, waste, and abuse in health care has long been a top government priority, but — as demonstrated by a series of events this week — it likely will garner even more attention as the government seeks to reduce the federal deficit by $1.5 trillion over the next ten years. Providers should closely monitor the developments.

During hearings of the Joint Select Committee on Deficit Reduction held on September 13th, at least two members of the Committee, Senator Jon Kyl (R-AZ) and Representative Fred Upton (R-MI), pointed to rooting out fraud and waste in benefit programs as a source of savings.

On September 14th, Vice President Biden announcedwaste reduction efforts as part of the administration’s Campaign to Cut Waste. In particular, Vice President Biden and HHS Secretary Sebelius announced the release of a final rule for the Medicaid Audit Recovery Contractor Program (RAC), which is estimated to save taxpayers more than $2 billion over the next five years.

Medicaid RACs are designed to identify Medicaid overpayments and underpayments and to recoup any overpayments made to providers. RACs will review Medicaid claims submitted by providers. Cases of suspected fraud will be referred to law enforcement and may result in investigations for violations of fraud and abuse laws.

The final rule spells out all the details, but there are several notable highlights:

• states must enter into contracts with one or more eligible Medicaid RACs to review Medicaid claims (the final rule specifies eligibility requirements to become a RAC and payment from amounts recovered);
• the deadline for implementation is January 1, 2012;
• RACs will review paid Medicaid claims, with some exceptions (Medicaid managed care claims can be excluded from review);
• states must refer suspected fraud and/or abuse to the state’s Medicaid Fraud Control Unit (MFCU) or other appropriate law enforcement agency; and
• providers have a right to appeal an adverse RAC determination.

Even though most providers have become accustomed to the Medicare RAC  review process, handling Medicaid RAC reviews will present challenges because the final rule leaves some aspects of the program up to each state.  For example, each state will have its own appeal process and the ability to set number and frequency limits.

As the government increasingly tries to eliminate waste, fraud, and abuse in health care, providers must take great care to accurately bill Medicare and Medicaid programs. Providers should also be aware that their claims to Medicaid may be audited by RACs, and any issues must be referred to state MFCUs.

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