CMI Urges Congress to Mandate Medicare RAC Pre-Pay Claim Reviews

Leveraging expertise of recovery auditors could prevent billions lost to improper billing

Washington, D.C. – Today, the Council for Medicare Integrity (CMI) asked Members of Congress to champion the authorization of a prepayment Recovery Audit Contractor (RAC) Program to review Medicare Fee-For-Service (FFS) claims before they are paid to identify errors and prevent tens of billions in improper payments from draining from the program each year.

Medicare loses more money to improper payments than any other program government-wide. An improper payment is made when a Medicare provider misbills a claim – often billing to the wrong code, duplicating the submission of a claim or even providing services that are not medically necessary. Over the past four years, more than $166 billion has been lost from the Medicare program due to these types of billing errors.

Year Medicare FFS CERT

Billing Error Rate

Improper Payments Per Year
FY2013 10.1% $36 billion
FY2014 12.7% $46 billion
FY2015 12.1% $43 billion
FY2016 11.0% $41 billion

Historically, Recovery Auditors (RAs) have reviewed post-payment Medicare claims to identify improper payments, recover those funds and return them to the Medicare Trust Fund. According to Medicare Trustees and a new Kaiser Family Foundation issue brief,  actuaries estimate that at current spending levels the program will only be able to cover hospital insurance benefits for seniors until 2028. After that, Medicare will have to reduce coverage to 87 percent of what is covered today, relying solely on dwindling payroll deductions to fund the program.

RAs previously reviewed just 2% of Medicare provider claims and have returned more than $10 billion in improper payments to the program – extending the life of Medicare by two full years. Unfortunately, recently, RAs have been scaled back to review only 0.5% of provider claims – greatly reducing the amount of improper payments that can be identified, leaving billions unrecovered.

In FY2012, the Centers for Medicare and Medicaid Services (CMS) launched a three-year Prepayment Review Demonstration project to have RAs review certain error prone Medicare claims before they were paid. As a result of this short pilot program, RAs prevented more than $192 million in improper payments from being erroneously paid out. Due to the success of the demonstration, the GAO recommends that “CMS should actively seek legislative authority to have RAs conduct prepayment claim reviews.” Unfortunately, despite this direction, CMS has still not made RAC pre-payment review permanent.

Based on the results of the Pre-Payment Demonstration project, adding RA reviews of claims before they are paid will save Medicare billions each year and bring the program in line with the best practices leveraged by commercial insurance companies.

A RAC pre-pay review of claims could be modeled in a way similar to their current post-payment integrity efforts.  For example:

  • RAs could identify issues needing prepay review, and present them to CMS for approval. This would be an improvement over the Demonstration project that had Medicare Administrative Contractors (MACs) selecting the claim types.
  • RAs could issue Additional Documentation Requests, instead of the MACs, reducing the confusion seen in the Demonstration.
  • The back-end processes could be streamlined to ensure the program is operating efficiently.

“It’s more important than ever that Medicare improper payments are drastically reduced,” said Kristin Walter, spokesperson for the Council for Medicare Integrity. “The Medicare Trustees have repeatedly reported that if current spending levels are maintained, the Part A Trust Fund is at risk of insolvency in just 11 years. If Recovery Auditors are permitted to review Medicare claims before they are paid, they could prevent Medicare from hemorrhaging billion in taxpayer dollars each year, reduce provider-perceived audit burden and ultimately, extend the life of this vital healthcare program for future beneficiaries.”

For more information, please visit: www.medicareintegrity.org.


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About the Council for Medicare Integrity

The Council for Medicare Integrity is a 501(c)(6) non-profit organization. The Council’s mission is to educate policymakers and other stakeholders regarding the importance of healthcare integrity programs that help Medicare identify and correct improper payments.

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