Reinstate RAC Audits Now! | Citizens Against Government Waste

Reinstate RAC Audits Now!

Letters to Officials

November 6, 2013
U.S. Senate
Washington, D.C.  20510

Dear Senator,

On November 1, 2013 the Centers for Medicare and Medicaid Services (CMS) issued sub-regulatory guidance suspending all recovery audit contractor (RAC) audits of short-stay inpatient claims for the first three months of 2014.  The latest change came on the heels of a previous 90-day suspension which went into effect on October 1, 2013 until December 31, 2013.  This extended suspension is puzzling in light of the fact that RACs have successfully recovered more than $7 billion in improper Medicare payments since 2009.

Citizens Against Government Waste (CAGW) opposes this wasteful policy.  Such regulatory interference will, according to CMS, cause the financially unstable Medicare Trust Fund to lose $2 billion.  

This under-the-radar manipulation of the RAC program rules effectively guts one of the most successful programs that Congress has mandated to curb Medicare fraud, waste and abuse.  RACs have proven to be highly successful at locating systemic abuses, tracing erroneous claims, identifying billing system vulnerabilities and flagging patterns that suggest more widespread fraud.

According to the Office of the Inspector General for the Department of Health and Human Services, in FY 2010 and 2011, “Over half (57 percent) of all recovered or returned improper payments resulted from medical services being delivered in inappropriate facilities (32 percent) or providers billing incorrect codes on Medicare claims (25 percent).  Improper payments also resulted from other sources, such as providers billing Medicare for services for deceased beneficiaries.”  

Medicare providers, particularly hospitals, have for years received billions in improper payments.  However, since the RAC program was first pilot-tested in 2005 and expanded nationwide in 2010, providers have had to return some of those overpayments.
The authority of CMS to unilaterally suspend the program is unclear.  One portion of CMS’ new guidance would prohibit RACs from reviewing past medical claims.  However, existing law mandates that RACs review improper claims going back three years.  

CMS justifies this stealthy suspension by saying that hospitals need time to adjust to the new rules regarding these claims.  Yet, medical necessity audits were the first group of claims flagged for review during the RAC demonstration program in 2005, and CMS specifically directed RACs to investigate this area, which has been prone to abuse.  Providers have therefore had sufficient time to learn to comply with CMS’ rules.

While CAGW recognizes that CMS’ current Medicare oversight programs are fragmented and could be made less onerous for providers, such reforms can only be enacted by law and not by regulatory fiat.  Above all, CMS should not tolerate a narrowing of the scope of the RAC program.  Instead, given the fact that the RAC program is far and away the most successful of all Medicare’s program integrity efforts, CMS should be exploring ways to broaden its scope.    

At a time when the national debt exceeds $17 trillion, taxpayers simply cannot afford the unjustified delay of an audit program that has thus far proven to be extremely successful at reducing wasteful spending.

Given the specious nature of the arguments being used to justify the suspension of the audits and the billions of dollars at stake for nearly 51 million people who rely on Medicare services, I urge you to demand that these audits be reinstated immediately.  


Tom Schatz
President, CAGW

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