Legislation Would Place One-Year Moratorium on Medicare Audit Program

Rep. Lois Capps (D-Calif.) has proposed legislation that would place a one-year, nationwide moratorium on the Medicare recovery audit program (RAC). The demonstration project, part of the 2003 Medicare law, uses recovery audit contractors to find overpayments and underpayments in Medicare fee-for-service reimbursements to health care providers. The program began in 2005 in three states and expanded in 2007 to three more. The pilot program will gradually be expanded nationwide, with 19 states being monitored by spring. According to the Centers for Medicare and Medicaid Services, about 96% of errors found by auditors were overpayments to providers. In three years, the program has found about $440 million in improper payments. Providers have appealed about 11% of overpayments uncovered through the program, and about 5% were fully or partially overturned. About $20 million has been paid to health care providers for underpayments.

Opponents of the program say that the contractors are given too much of an incentive to question payments because they receive about 20% of returned funds. In addition, health care providers say many appeals have not been completed, and many providers will not appeal claim denials because of the amount of money and time the process takes. CMS claims that the program has been successful and CMS has tried to address concerns about the program. When the program is expanded nationwide, all contractors will be required to have a medical director on staff, and CMS will limit to three years how far back into providers' records auditors can search for errors. In addition, records before Oct. 1, 2007, would be exempt from auditing. The agency also is developing regulations that would delay repayments until after the appeals process is completed.