CMS Announces Medicaid Recovery Audit Contractors Rule to Help Reduce Improper Payments

CMS has announced proposed new rules to help states reduce improper payments for Medicaid healthcare claims through the use of Medicaid Recovery Audit Contractors (RACs) as part of the Affordable Care Act’s larger strategy to crack down on waste, fraud and abuse in the healthcare system. Medicaid RACs are contractors, working for States, that will audit payments made to healthcare providers to identify Medicaid payments that may have been underpaid or overpaid, and recover overpayments or correct underpayments, similar to the RAC program in Medicare. Under the Affordable Care Act, States must establish Medicaid RAC programs by submitting state plan amendments to CMS by Dec. 31. The law allows CMS to provide extensions or exceptions to States, if necessary, and details regarding these processes are included in the proposed regulation. In addition, the proposed regulation issued by CMS outlines the requirements that states must meet and the Federal contribution CMS will provide to assist in funding the state RAC programs. Medicaid RACs will be paid by the States on a contingency basis to review Medicaid provider claims, identify and recover overpayments made for services provided under Medicaid State plans and Medicaid waivers. The proposed regulation allows States the discretion to determine whether to pay their Medicaid RACs on a contingency basis or under some other fee structure for identifying underpayments.