Recovery Auditing Is Vital To Medicare Solvency

Medicare loses more money to waste than any other federal program and is slated to be insolvent by 2028. As a result, in 2006, Congress mandated the creation of an oversight program to ensure providers are fairly reimbursed by Medicare and the solvency of the Medicare Trust Fund maintained. Following a highly successful three-year pilot program, the Centers for Medicare and Medicaid Services (CMS) launched the national Recovery Audit Contractor (RAC) program in 2009 to review post-payment Medicare claims, identify billing errors and ultimately, return Medicare overpayments to the Trust Fund and underpayments to providers.

Recovery audit contractors evaluate areas with high error rates and CMS approves improper payment issues the auditors can review. Recovery Auditors review no more than 5% of a provider’s Medicare claims to ensure billing complies with Medicare policy.

The goals of the program include:

  • Detecting and correcting past improper payments so CMS may implement actions to prevent future improper Medicare payments
  • Identifying areas of provider confusion within Medicare billing
  • Assisting CMS in addressing the high error rate within Medicare – 12.1% which equates to a loss of $43 billion per year
  • Helping to maintain the solvency of the Medicare Trust Fund for the millions of seniors who rely on the program

As a condition of the permanent Recovery Audit Contractor program, Congress required the contractors to be paid by contingency fee, withholding a portion of their recoveries to ensure a high-level of precision in identifying true billing errors only.

Key Accomplishments Of The Program

  • More than $10 billion in overpayments have been returned to the Medicare Trust Fund
  • More than $800 million in underpayments returned to providers
  • Recovery auditors have an accuracy rate of 95+% as determined by a third party reviewer
  • Majority of RAC decisions are upheld – only 9.3% of RAC findings are overturned on appeal
  • RACs have uncovered confusion among providers related to whether patients should be admitted as inpatient or outpatient, leading to important changes in Medicare policy
  • Named ‘Most Improved’ healthcare integrity program in terms of dollars returned to the government by the OIG in May 2014


Current Situation

On October 31, 2016, the Centers for Medicare and Medicaid Services (CMS) awarded the second round of contracts for the Medicare Fee-for-Service’s (FFS) Recovery Audit Contractor (RAC) Program, extending the vital program that identifies and returns Medicare improper payments back to the Trust Funds.

Five new contracts have been awarded – four regional contracts and one for a new region focused solely on auditing DME/HH-H claims nationwide. RACs in Regions 1-4 will conduct post-payment reviews to identify improper payments made in Parts A and B, excluding Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DME- POS) and Home Health/Hospice (HH-H) providers. The RAC in the newest region, Region 5, will conduct post-payment reviews on DMEPOS and HH-H nationwide.

Future Recommendations

  • Support the work of Recovery Auditors to ensure providers are fairly reimbursed
  • Continue ongoing dialogue among Medicare stakeholders to improve the Recovery Audit program
  • Increase provider education and support to bolster compliance in billing within Medicare policy
  • As recommended by the OIG, increase training of ALJs so their determinations are consistent with Medicare policy
  • Maintain robust, consistent oversight of Medicare billing to maintain the solvency of the Trust Fund for future beneficiaries

What Officials Say

Click here to find out what officials have to say.