It doesn’t take a magnifying glass and a slavish devotion to the news to realize that as our domestic economic troubles deepen, the after effects begin to resemble falling dominoes.

The sudden fanaticism about federal spending has been followed by tough decisions by state governors on how to balance theirs states’ budgets. In this environment of ever diminishing returns, you would think that the very last thing the states would need is a mandate to come up with another program by the end of the year.

You would be wrong.

On the heels of the beginnings of the permanent RAC program, the Patient Protection and Affordable Care Act (PPACA) mandated the expansion of RAC’s into Medicaid services. On October 1st, an 8-page letterwas sent to all state Medicaid directors outlining preliminary time lines and guidance for the Medicaid Recovery Audit Contractor programs. A number of important points were raised in the letter for the programs going forward.

First, states have until December 31, 2010 (that’s 79 days from now) to establish programs to contract with RAC’s to audit payments to Medicaid providers. This will require states to submit a state plan amendment, or SPA, to their CMS regional offices which includes either an attestation of the establishment of a plan or a statement of intent to seek an exemption from the provision. The letter is clear in stating that complete exemptions from the plan would be granted “rarely and only under the most compelling circumstances”. I translate this to be the federal way of saying “never”.

Second,  there was an interesting note regarding contingency fees. CMS expects to publish the highest allowable contingency fee payable to a Medicare RAC no later than December 31, 2013, with this published rate coming into effect for all RAC activity after July 1, 2014. In the interim, the states contingency fee rates should be “reasonable and determined by each state”. States have the option to pay the contingency fees either as a percentage of collections or as a flat fee, but should be structured to offer an incentive to identify underpayments. Given that the Medicare ratio of overpayment/underpayment identification is currently 9:1, coupled with the compressed time frame that states are facing, a majority of these contingency fees will be structured for percentage of collections. 

Third, the Medicaid RAC program is not meant to replace existing cost control programs already in place. The federal rules state that these efforts must continue to be fully funded and uninterrupted. This is where the true usefulness of the Medicaid RAC program will s0meday come into play. I can see a day in the near future, based on the results of the Medicaid RAC program, where states either urge the government to make the Medicaid RAC’s the sole fraud control unit for Medicaid, or they request exemptions from the RAC program. The direction the states take would be based on the costs of maintaining both programs via state budget and which program has the best return on investment.

After initial contracting, states are expected to fully implement their RAC programs by April 1, 2011.

The letter is clear in stating that continuing guidance is forthcoming regarding Medicaid RAC programs. This would appear to be the first of many such letters about to appear. For the physician community, this is yet another entity in the alphabet soup listing of regulations requiring adherence in the near future. For the states, it is one more bombarding salvo of regulatory munitions aimed directly at their already strained budgets.

10:35 am, October 13th, 2010 |