The Medicare Recovery Audit Contractor (RAC) program was established by the Centers for Medicare & Medicaid Services (CMS) through the Medicare Modernization Act of 2003. In 2005, pilot programs were initiated in California, New York, and Florida. The goal of the program was to develop an efficient model to ensure correct payments to providers and suppliers submitting claims for reimbursement under Medicare Parts A and B.
These audits, consisting of a post-payment review of supporting documentation as well as data analysis, resulted in the identification of more than $900 million in overpayments and $38 million in underpayments made to Medicare providers during the three-year demonstration period. Based on the success of the RAC pilot program, the Tax Relief and Health Care Act of 2006 made permanent the Medicare RAC program.
In 2010, the passage of the Affordable Care Act (ACA) expanded the RAC program to include Medicaid. Section 6411 of the ACA specifically required states to
Contract with RACs to identify overpayments and underpayments of Medicaid claims, and to recoup overpayments;
Establish a process for entities to appeal adverse determinations made by RACs; and
Coordinate recovery efforts with other government agencies performing audits, including federal and state law enforcement agencies such as the FBI, HHS, and the state Medicaid Fraud Control Unit.
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