Medicaid RAC Rule Published


The Federal Government has published a final rule that provides guidance to States related to Federal/State funding of State start-up, operation and maintenance costs of Medicaid Recovery Audit Contractors (Medicaid RACs) and the payment methodology for State payments to Medicaid RACs.

The rule requires states to co-ordinate with other agencies that are auditing Medicaid Providers and with State and Local Agencies. The role of a Medicaid RAC is to review Medicaid claims submitted by providers of services to identify overpayments and underpayments. Prior to this updated rule, the RAC's were limited to Pay for Service Medicaid Plans. RAC's were a three year pilot plan that began in 2003 and were made permanent in 2006. Between 2005 and 2008 RAC's were able to identify and recoup over 1 billion dollars in improper payments. 96% of the improper payments identified by RAC's were over payments, and 4% were under payments.

Among the changes in the updated rule are:
RAC's are required to provide consistent documentation for reviewing a claim.
Each RAC is required to have at least 1 full time equivilent (FTE) Medical Director who is a physician who will oversee the Medical Record Review Process.

Another change is how RAC's are paid. RAC's have always been paid on a contingency basis, and if the RAC determination is overturned at the first level appeal but the RAC was able to keep the payment if the determination was overturned at a later level. Now RAC's must return the fees if the appeal is overturned at any level.

It is of interest to note that RAC's are paid the same contingency fee if they identify an over payment or an under payment. So if a RAC determines that you were underpaid, and you are entitled to additional fees, the RAC recieves a 'commission' on that determination.

For the full final rule visit :