Medicaid RAC Program Gives States More Flexibility, Attorney Says

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The nascent Medicaid Recovery Audit Contractor (RAC) program, slated to be implemented in April, will give states more flexibility in handling their Medicaid programs than the current Medicaid Integrity Contractor (MIC) program, Sara Kay Wheeler, an attorney with King & Spalding in Atlanta, said Feb. 3 during a webinar.

“The characteristics of the Medicaid RACs will be much more well received by the states than the MICs. States will be active participants in the program,” Wheeler said during the Health Care Compliance Association web conference, “Medicaid RACs: Get Ready, 'Cause Here They Come.'”

Medicaid RACs were created under the Patient Protection and Affordable Care Act and are designed to review and recover claims for improper payments, underpayments, and overpayments.

The MIC program was established by the Deficit Reduction Act of 2005, with the intent of reviewing and auditing Medicaid claims, as well as providing educational training to providers. Medicaid RACs will supplement, but not replace, the MIC program, Wheeler said.

One reason for the increased popularity of the Medicaid RACs is the level of control states will have in the administering them, Wheeler said.

State Programs.

A proposed rule the Centers for Medicare & Medicaid Services published Nov. 10, 2010, said states will have the discretion to design their own Medicaid RAC programs, as well as be able to decide which contractors to use in implementing the program.

The MIC program, on the other hand, is much more of a federally run organization, Wheeler said.

“On Sept. 29, 2010, the Centers for Medicare & Medicaid Services decided to take even more control over the MIC program, issuing an informational bulletin establishing a five-year look-back period,” she said. A look-back period is when a contractor can access medical records from a provider.

Stakeholders have questioned whether the new look-back period should have been handled through a formal rulemaking and have asked whether the MIC program as a whole is working, Wheeler said.

For example, Wheeler said a 2009report from the Department of Health and Human Services Office of Inspector General, MSIS Data Usefulness for Detecting Fraud, Waste, and Abuse (OEI-04-07-00240), raised questions about the timeliness and accuracy of the Medicaid Statistical Information System (MSIS) database, which is used by MICs during their audit process.

Duplicating Efforts.

While Wheeler expects states to embrace Medicaid RACs, she did acknowledge several concerns, such as MICs and Medicaid RACs duplicating their efforts.

States also will have to contend with their own budgetary shortcomings as they implement the new programs, she said.

“Medicaid spending has expanded dramatically, but state revenue has dropped,” Wheeler said. “There is a lot of pressure at the state level to balance budgets.”

Comments on the CMS proposed rule were due Jan. 10, but when asked when to expect the final rule, Wheeler said everything was speculative.

“Part of us expects the final rule to come out before April,” she said. “At the same time, we realize that CMS is very taxed with handling numerous health care reform issues.”

Several trade associations, including the American Hospital Association and Federation of American Hospitals, have called for CMS to extend the April deadline for states to implement their Medicaid RACs.

The CMS proposed rule is at

The CMS informational bulletin is at

The OIG report is at

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