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Update: CMS releases Medicaid RACs final rule

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In February, the Centers for Medicare and Medicaid Services (CMS) delayed its expected April 1 implementation of the Medicaid recovery audit contractors (RACs) final rule until an unspecified time later this year.

That unspecified date became today: CMS released its Medicaid RACs final rule.

The new initiative, modeled after the Medicare RAC program, aims to fight waste and fraud in Medicaid and will save taxpayers an estimated $2.1 billion over the next five years, according to a press release from the Department of Health and Human Services (HHS). About $900 million will be returned to states.

“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,” HHS Secretary Kathleen Sebelius said in the press release today. “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.”

The rule itself implements section 6411 of the Affordable Care Act and provides guidance to individual states related to federal/state funding of state start-up, operation, and maintenance costs of Medicaid RACs, and the payment methodology for state payments to Medicaid RACs, according to the rule.

In addition, the rule informs states that an adequate appeals process is in place for providers to dispute any adverse determinations made by the Medicaid RACs and directs states to coordinate with other contractors, entities auditing Medicaid providers, and with state and federal law enforcement agencies.

An important difference between the existing Medicare RAC program and the Medicaid RAC program is that each Medicaid RAC is a state program, not a regional program, says Elizabeth Lamkin, MHA, partner, PACE Healthcare Consulting, LLC.

“Each state has a choice between plans A or B, and can set its own documentation limits independently,” she says. “For providers who serve multiple states, this could be a logistical nightmare when it comes to understanding multiple state rules.”

She continues, “I would suggest that providers become very familiar with their state’s rules and ensure that they are followed appropriately.”

Payment methodology determinations for states are outlined in the rule, as are the timing of payments to Medicaid RACs. In the rule, CMS offers two options that illustrate ways that states can structure payments:

  • Option one: If state A paid RAC A its fee when the RAC identified an overpayment, and provider A appeals and prevailed at any stage, RAC A would be required to return any portion of the contingency fee that corresponded to the amount of an overpayment that was overturned at any level of appeal.
  • Option two: If State B determined it would pay RAC B its contingency fee at the point at which the recovery amount is fully adjudicated, that is, at the conclusion of any and all appeals to available to provider B, then state B would pay RAC B a contingency fee based on the amount recovered.

In the end, there is not a clear answer on how states will handle this new Medicaid RAC program, says Lamkin.

“I suspect there will be a great deal of confusion, and much like the Medicare RAC demonstration project, providers will be able to voice their concerns and problems at some point.”

The regulations outlined in the final rule are effective on January 1, 2012.

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