Medicaid final rule calls for states and RACs to reduce waste

The Centers for Medicare & Medicaid Services (CMS) issued a final rule, providing guidance to states about federal and state funding for the start-up, operation, and maintenance of Medicaid Recovery Audit Contractor (RAC) payments. Under the Patient Protection and Affordable Care Act, states must establish programs that contract with one or more Medicaid RACs to review Medicaid claims, with the goal of identifying over- and underpayments before the end of the year. The final rule is effective Jan. 1, 2012.

Under health reform, states are required to contract with RACs on a contingency-fee basis. Although there will be out-of-pocket expenses, the program costs will be offset by overpayment recoveries, according to the final rule.

"The Medicaid RACs are part of a significant initiative to reduce waste and improper payments and recoup the improper payments," states the rule.

The estimated net savings from 2012 to 2016 will be $1.22 billion to the federal Medicaid program and $910 million to the state Medicaid program, according to the rule.

In addition, the final rule says that states must ensure providers have the right to appeal if they dispute adverse RAC determinations. States also must coordinate with other contractors and entities auditing Medicaid providers, as well as state and law enforcement agencies.

For more information:
read the final rule (.pdf)
read the CMS statement of work (.pdf)

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