Feds Outline Medicaid Audit Roles

States have until December 31 to indicate whether they plan to contract with one or more Medicaid “Recovery Audit Contractors” (RACs), according to an October 1 directive to State Medicaid Directors from the Centers for Medicare & Medicaid Services (CMS). The federal health reform law designates Medicaid RACs as contingency-fee based contractors, similar to the four Medicare RAC contracts now in place nationwide. Contractors will be tasked with identifying underpayments and recouping overpayments. States will be required to have programs in place to guard against overlapping audits by different contractors or agencies. Additionally, states will have to develop procedures to assure that instances of suspected fraud or abuse are forwarded to State Medicaid Fraud Control Units on a timely basis. The Medicare RAC experience demonstrates that overpayments exceed underpayments by a ratio of 9:1, according to officials. The directive states that federal financial participation (FFP) in contingency fees will be capped at the rate of 12.5 percent. CMS says it expects to waive state participation in Medicaid RAC programs “rarely and only under the most compelling of circumstances.”