CMS Issues Medicaid State Director Letter on ACA Guidance Regarding Contract Audits and Recovery of Medicaid Overpayments

CMS on October 1st issued a letter to State Medicaid Directors that provides preliminary guidance on Section 6411 of the Affordable Care Act (ACA), the Expansion of the Recovery Audit Contractor (RAC) Program.  According to the guidance letter, each state is required to establish its own Medicaid RAC program if one is not yet in place. States must submit their initial plans or begin the process to apply for a waiver by December 31st. CMS said it would "maintain flexibility in the design of Medicaid RAC program requirements" for states that are already using outside contractors.

States are already required to have RAC programs under fee for service Medicare and now the ACA requires that states establish programs to contract with one or more Medicaid RACs for the purpose of identifying underpayments and overpayments and recouping overpayments under the State plan and under any waiver of the State plan with respect to all services for which payment is made to any entity under the State plan or waiver. This includes HCBS waivers 1915c and 1915i.

The ACA requires that CMS ensure States and their Medicaid RACs coordinate their recovery audit efforts with other entities. These entities include contractors or entities performing audits of entities receiving Medicaid payments, as well as with Federal and state law enforcement, such as Department of Justice, the FBI, HHS OIG Medicaid Fraud Control Units (MFCUs), and other state entities.