Parts C and D Recovery Audit Program

Improper payments cause billions of dollars in annual losses to the Medicare Program. A recent report by the U.S. Government Accountability Office estimated that improper payments totaled $48 billion in FY 2010. This number accounts for roughly one-third of the estimated total improper payments for the federal government.

The Medicare Recovery Audit Contractor Program

Implemented as a demonstration program through The Tax Relief and Health Care Act of 2006, the Recovery Audit Contractor (RAC) program was created to:

• Identify and correct past improper payments to Medicare providers
• Implement procedures to help the Centers for Medicare & Medicaid Services (CMS), Medicare carriers, fiscal intermediaries, and Medicare Administrative   Contractors (MACs) implement actions that will prevent future improper payments.

The RAC program was permanently implemented for Medicare Parts A and B on a nationwide basis by January 2010. Under the Patient Protection and Affordable Care Act (ACA) legislation enacted in March 2010, CMS is required to expand the RAC program to the Medicare Part C (Medicare Advantage) and Part D (Prescription Drug Benefit) programs. The amendments to the existing Medicare Fee-for-Service (FFS) RAC statute at section 1893(h) of ACA provide CMS with general authority to enter into contracts with RACs to identify and reconcile overpayments and underpayments in Medicare Parts C and D.

The Medicare Part D RAC

The CMS Center for Program Integrity (CPI) serves as CMS' focal point for all national and state-wide Medicare and Medicaid programs and CHIP integrity fraud and abuse issues. Identifying and preventing improper payments in Medicare Parts C and D is central to that work. CMS/CPI manages the Medicare Part D RAC program as a component of that goal.

The Part D RAC employs a model similar to the one used in the Medicare Parts A and B RAC program to audit Part D Sponsoring Organizations (sponsor). The Part D RAC:

• Reviews previously paid individual Medicare claims (prescription drug events) to sponsoring organizations and pharmacies to determine overpayment and underpayment
• Provides information to CMS to help prevent future improper payments
• Refers any potential fraud findings identified during the auditing process to the Medicare Drug Integrity Contractor

RACs are paid on a contingency basis. They only collect payment if they accurately uncover improper payments. Sponsors may appeal RAC findings (see the Part D RAC Appeals section). Should a sponsor appeal a RAC finding, the RAC will not receive payment until the appeal process has been completed and the audit finding upheld.

By managing the Part D RAC program, CMS/CPI is:

• Reducing the number of non-compliant claims submitted by Part D sponsors
• Increasing the level of protection for Medicare beneficiaries and American taxpayers.