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Recovery Audit Contractor Plan

RAC or Recovery Audit Contractor program was designed by CMS in 2007 to control overspending in Medicare Parts A and B. Since then, it has been focusing on auditing Part A and Part B claims alone, and is known as one of the most significant strategies put in place by the agency. However, as the RAC program does not cover Part C or Part D claims, there have been a push to expand the program lately.

As of now, patients eligible for Medicare Part A and B can enroll in federally approved healthcare plan (Medicare Part C), instead of going for traditional claim. Such health plans (MA Plans) receive monthly payments from Medicare and enrolled individuals, and are liable for compensating for all due care for the enrollees, as the traditional Medicare would have covered. MA Plans are also allowed to provide coverage for the services that are not included in the traditional Medicare Part A and Part B claims.

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Expanding RAC Program

In addition, MA Plans are also authorized to collect add-on payments from Medicare if there are too many “unhealthy” enrollees in the plan, which would ultimately lead to higher costs than expected initially. Nevertheless, the criteria to determine the number of “unhealthy” patients is self-reported, and are often accused of exaggerating the numbers to receive higher compensation. Even some outsiders questioned this Medicare payment model.

In view of that, both the OIG and GAO have issued reports suggesting an expansion in the RAC program. Where the OIG report urges that CMS should implement the Medicare Advantage RAC program by 2017, the GAO report recommends that CMS “establishes a legally binding RAC program for Medicare Part C.” Interestingly, CMS was federally authorized to expand the RAC program beyond Medicare Parts A and B since its initial implementation. Nonetheless, the agency is yet to decide whether to expand the current system or not.

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