RAC Myth vs. Fact | Council For Citizens Against Government Waste

RAC Myth vs. Fact

Letters to Officials

July 8, 2014

U.S. Senate
Special Committee on Aging
Washington, DC 20510


Dear Senator,

On July 9, the U.S. Senate Special Committee on Aging will hold a roundtable discussion entitled “Improving Audits: How We Can Strengthen the Medicare Program for Future Generations.”  In advance of this hearing, the Council for Citizens Against Government Waste (CCAGW) would like to clarify several misconceptions about the most powerful tool at the taxpayers’ disposal to reduce improper payments in the Medicare Program:  Recovery Audit Contractors (RACs).

Myth: RACs are able to choose which claims to audit at random without any input from the Center for Medicare and Medicaid Services (CMS).   
Fact: RACs are permitted by CMS to audit certain claims only after they employ sophisticated analytical tools, such as the Comprehensive Error Rate Testing (CERT) program, to identify high-cost areas at risk for improper payments.  RACs must get permission from CMS to proceed with any post-payment reviews they conduct.      

Myth:  RACs are unaccountable.
Fact:  According to the Government Accountability Office, RACs are “subject to more rules and regulations than any other post-payment audit contractor.”

Myth: The majority of RAC audit findings are inaccurate and are overturned during the appeals process.
Fact: A December 13, 2013 CMS report found that all RACs are working at an accuracy rate above 90 percent, with an average accuracy rate of 95.2 percent.  At a June 25, 2014 hearing before the House Energy and Commerce Subcommittee on Oversight and Investigations, CMS Program Integrity Office Deputy Administrator Dr. Shantanu Agrawal reconfirmed that only 7 percent of all RAC determinations are overturned on appeal.  

Myth: RACs do not incur any penalties for incorrect audits.    
Fact:  If the improper payment determination is overturned at any level of the appeal, RACs must return the received fee.

Myth: RACs “hold” reimbursements to providers during the appeals process.
Fact:  RACs are post-payment auditors, therefore their reviews occur only after CMS reimbursements have been sent to providers.  

Myth: RAC audits are voluminous and onerous for hospitals because RACs can review as many claims as they want from a provider.  
Fact: Legally, RACs are only allowed to draw 2 percent of a provider’s total Medicare records, and are not permitted to request records more frequently than every 45 days.  By law, RACs must reimburse hospitals for additional records requests at $25 per medical record.  In spite of this low threshold, RACs are finding errors in nearly 50 percent of the billing records they examine.  

After steadily dropping for several years, the Medicare improper payment rate increased from 8.5 percent in fiscal year (FY) 2012 to 10.1 percent in FY 2013.  Medicare improper payments grew from $45 billion in FY 2012 to $49 billion in FY 2013.  These increases occurred at the same time CMS was beginning to restrict RAC audits.  The upward trajectory in this type of egregious wasteful spending directly conflicts with Congress’s intent, since lawmakers passed two bills since 2010 to cut improper payments.    

I urge you to consider this information when making any decisions that will affect the future of this highly effective anti-waste program.


Tom Schatz
President, CCAGW

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