Critical Analysis of Medicare RAC Program – Part 2
Initially RACs demonstration was restricted to only California, Florida, and New York. The results of the demonstration were acceptable because there is a huge amount that was recovered but still there was a lot of room to improve the performance.
Results
The results of RACs demonstration are quite satisfactory in CMS view. According to CMS, the demonstration program by the RACs collected most of the overpayment amounts (about 85 percent) and it was from inpatient hospital providers. Half of the improper payments were the result of incorrect coding.1 Although RACs were unable to identify all the improper payment claims but still they managed to correct $1.03 billion in Medicare improper payments. Approximately 96 percent ($992.7 million) of the improper payments were overpayments collected from providers, while the remaining 4 percent ($37.8 million) were underpayments repaid to providers. The MSP RACs collected fewer overpayments ($12.7 million) than the Claim RACs ($980.0 million)2.
The percentage of correcting improper payments increased gradually as the RACs became more systematic. Through the demonstration of March 27, 2008, out of $1.03 billions approximately 4 percent occurred in FY 2006, 34 percent in FY 2007, and 62 percent in the first half of FY 20083. This should be kept in mind that the total available claims were of $317 billions and RAC were able to identify only 0.3% of it which is $1.03 billions. 14% providers choose to appeal against RAC and 4.6% were overturned.CMS gave an assignment to Econometrica, Inc. to evaluate the validity of the results that RAC produced.
Cost of RAC’s
From its inception through March 27, 2008, the RAC demonstration cost only 20 cents for each dollar collected. RAC contingency fees were $187.2 million over the life of the demonstration. Medicare claims processing contractors’ costs were $8.7 million, and other expenses were $5.4 million.