CMS launches RAC rules for Medicaid

In an effort to reduce the number of improper payments under state Medicaid plans, the Centers for Medicare & Medicaid Services has proposed new rules for Medicaid's Recovery Audit Contractor program.

"Reducing improper payments is a key goal of the administration, and the tools provided by the Affordable Care Act will help us achieve that goal," said CMS Administrator Donald Berwick, MD. "We are using many of the lessons that we learned from the Medicare RAC program in the development and implementation of the Medicaid RACs, including a far-reaching education effort for healthcare providers and state managers."

Created in 2003 and focused on Medicare payments, RACs are independent contractors that seek out improper payments and overpayments. There are four regional RACs, and the program was rolled out to all 50 states last year.

Under the Affordable Care Act, states must also establish Medicaid RAC programs and are required to submit their plans 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.

According to the proposed rule, states can choose their method of paying Medicaid RACs – either on a contingency basis or under some other fee structure agreed to by each party for identifying underpayments. For overpayments, states will pay RACs on a contingency basis.

Under the regulation, as proposed, a state may use its current administrative appeals process or modify its process for Medicaid RAC-related appeals. All fees paid to the Medicaid RACs must come from amounts recovered after all available appeals have been exhausted.

In the mid 2000s, the RAC Demonstration Project, which operated in only a handful of states, identified nearly $1.3 billion in improper Medicare payments.

With the Dec. 31 deadline looming, CMS has launched programs to help states understand both the Medicare and Medicaid RAC programs.  On Oct. 1, CMS released a State Medicaid Director letter which provided initial guidance to states regarding the RAC program. It also issued an educational DVD titled "Medicaid RACs: Are You Ready?" targeted to state Medicaid and program integrity directors, and recently held a webinar for states that offered RAC procurement tips. Additionally, on Nov. 4, CMS hosted an educational forum describing lessons learned from CMS' experience with Medicare RACs.

CMS is encouraging interested parties to comment on the proposals included in the regulation. These include the payment methodology for identifying overpayments and underpayments as well as the recovery of overpayments and correction of underpayments, and the requirement that RACs report fraud or criminal activity whenever they have reasonable grounds to believe such activity has occurred.