RAC Facts: Medicare Part A in Jeopardy, Congress Raises Concerns Over Limitations on RAC Program

Medicare Part A in Jeopardy, Congress Raises Concerns Over Limitations on RAC Program

According to a new report from the Congressional Budget Office (CBO), the trust fund for Medicare Part A (hospital insurance) will be bankrupt by 2026 – in just 10 years. 

The report projects that the fund’s annual expenditures will outpace income “in all years through 2026 except for 2018, producing annual deficits…that would rise to $54 billion in 2025, the final year before the fund was exhausted.”

According to the CBO, Medicare spending rose 7% in 2015, the fastest rate of growth for the program since 2009.  Medicare spending is projected to rise by another 5.2% in 2016, reaching 3.7% of GDP. On average, Medicare spending is projected to increase 6% year over year for the next 10 years.

The projected growth in spending is due in part to the increasing number of beneficiaries, with an average increase in Medicare caseloads of 3% per year. The number of Medicare beneficiaries is projected to increase by 36% by 2026.

Screen Shot 2016-02-12 at 10.44.46 AMSince 2011, the rate of Medicare fee-for-service improper payments has risen steadily from 8.6 percent to 12.1 percent, with a loss of $46 billion in misbilled taxpayer dollars in 2014 alone.

Senator Claire McCaskill (D-MO), the Chairman and Ranking Member on the U.S. Senate Special Committee on Aging, credited the Recovery Audit Contractor (RAC) Program, which Congress tasked with identifying improper Medicare fee-for-service billing and returning overpayments back to the Medicare Trust Funds, with returning $10 billion back to the program and extending its life by two years.

Unfortunately, the RAC Program has been scaled back over the past few years, preventing it from returning improper payments at the same rate of previous years. In addition, the Centers for Medicare and Medicaid Services (CMS) recently announced that starting Jan. 1 it was reducing the number of claims available for review by Recovery Auditors (RAs). Commonly referred to as additional documentation request (ADR) limits, this new policy means RAs can look at only 0.5% of a provider’s total number of paid inpatient Medicare claims from the previous year to determine if they were billed according to Medicare policy. The limit was previously set at 2%.

Congress has expressed concern over this new policy and the impact it will have on future Medicare solvency. Both the House Ways and Means Committee and Senate Finance Committee Chairman Orrin Hatch (R-Utah) have sent letters to CMS voicing concern over the new ADR limits, stating it could reduce the recovery of wasted Medicare dollars.

“This limit is significantly lower than what has historically been the record limit for RAs and appears to significantly curtail the ability of RAs to operate as Congress intended them to,” said Senator Hatch.


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