Great Expectations: CMS Lays Down The Rules For Saving Billions With Medicaid RACs

States now have final instructions on what is expected for their Medicaid Recovery Audit Contractor (RAC) programs, which are required to be in place at the beginning of 2012. The new Final rule, issued September 16 2011, put forth CMS’ expectations for the RAC program, with states expected to be in compliance in just three months. Vice President Joe Biden announced the release of the Final rule, along with revealing more efforts by the federal government to track state progress in reducing improper unemployment insurance payments as well as directing each cabinet secretary to “undertake a waste and efficiency review that will target unnecessary, wasteful and inefficient federal spending.” Vice President Biden also stated:

“Today’s announcements on cutting waste in Medicare, Medicaid and Unemployment Insurance shows that we can make our government more efficient and responsible to the American people. If we’re going to spur jobs and economic growth and restore long-term fiscal solvency, we need to make sure hard-earned tax dollars don’t go to waste.” 

The Medicaid RAC program is modeled after the Medicare RAC program, which HHS claims has already recovered nearly $670 million to date in 2011, almost an 800 percent increase in recovered taxpayer dollars compared to 2010.  The program is projected to save $2.1 billion over the next five years. If the Medicaid RACs fulfil HHS’ expectations, states should receive approximately $900 million in returned payments.

Section 6411 of the Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148), enacted on March 23, 2010, directed states to establish Medicaid Recovery Audit Contractor (RAC) programs by Dec. 31, 2010. States must contract with one or more RACs, which will review Medicaid claims submitted by providers of services for which payment may be made under the state plan or a waiver of the state plan to identify over payments and underpayments.

Medicaid RACs will be required to:

  • (1) hire a minimum of one full-time medical director who is a doctor of medicine or doctor of osteopathy;
  • (2) hire certified coders unless the state determines that certified coders are not required for the effective review of Medicaid claims;
  • (3) educate providers, including notification to providers of audit policies and protocols;
  • (4) require RACs to include customer service measures such as providing a toll-free customer service telephone number; and
  • (5) limit the look-back review to a three-year period; and (6) establish a limit on the number and frequency of records requested by a RAC. States are encouraged to adopt specific program elements that are part of the permanent Medicare RAC program.

They will have the flexibility to design and implement their RAC programs in the following areas:

  • (1) medical necessity reviews;
  • (2) extrapolation of audit findings;
  • (3) external validation of accuracy of RAC findings; and
  • (4) types of claims audited.

The final rule took comments from several organizations under consideration and made changes from the proposed rule, released earlier this year. Medicaid claims that are more than three years old cannot be audited, each auditor must hire a licensed physician as a medical director, states much coordinate their Medicaid RAC activities with other auditors, as RACs cannot audit claims that are already under investigation by another entity, and states must set limits on the number of medical records that RACs can review in addition to the frequency that the RACs can request the records.

 Kathleen Sebelius joined Vice President Biden to discuss the release of the Medicaid RAC Final rule, stating:  

“Today we are building on an already successful program that targets improper payments in our health care programs and recovers those dollars, making Medicare and Medicaid more reliable and responsible. We simply can’t afford to see even one penny of our health care dollars wasted and expanding this program will help us reach that goal.”

CMS has also just released the first transmittal for it’s Medicaid Program Integrity Manual which will provide support and assistance to states as they begin using the RAC program and other program integrity efforts. States are encouraged to use this reference point to understand the goals of Medicaid program integrity, improve communication and transparency of program integrity and educate outside entities of the evolving functions of the new Medicaid Integrity Program.