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CMS Publishes Proposed Rule Regarding Medicaid RAC Activities

The Centers for Medicare and Medicaid Services (CMS) published a proposed rule on November 5 regarding RAC activities for Medicaid programs.  Section 6411 of the Patient Protection and Affordable Care Act (PPACA) requires states to contract with one or more Medicaid RACs by December 31, 2010.  By that date, states are also required to submit to CMS a State Plan Amendment (SPA) which documents the initiation of the Medicaid RAC program.  The proposed rule stated April 1, 2011 as a goal for Medicaid RAC implementation.

The proposed rule addresses four main points including contingency fees, reporting, appeals and coordination of audit efforts.  Comments are requested on the current methodologies for determining the maximum contingency fees allowed under the Medicaid RAC program.  According to the proposed rule, no state will pay a contingency fee higher than the maximum allowed under the Medicare RAC program, unless it provides ample justification for an exception based on the existing state law.  States must also provide incentives for the identification of underpayments to the Medicaid payments.

In addition, under the proposed rule states will report to the federal government only the net amount of collected overpayments after contingency fees that were paid to the contractor have been subtracted from the total.  Each state will be required to refund the federal share of the net overpayment amount to the federal government.  States will also have to issue reports describing the effectiveness of their Medicaid RAC programs.

The proposed rule also requests comments on giving states the option to utilize an existing process for appeals of RAC determinations or creating a new one specifically tailored to an individual state’s RAC program.  This could result in each state creating its own appeals process.

Finally, the proposed rule also addresses the requirement that states coordinate Medicaid RACs with other already existing audit entities.  CMS will seek to ensure that ongoing fraud investigations are not jeopardized, but also that the risk of overlapping audits is minimized.

For more information on Medicaid RACs or health care reform, please visit or contact a Wachler & Associates attorney at 248-544-0888. 

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