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The return of the RAC




Skim through the news coverage of the federal budget and you'll find some adversarial language. News organizations often refer to budget meetings as "wars" or "battles," as if lawmakers are stepping into a warzone, rather than a plush conference room.

These "wars" always appear to revolve around the very simple issue of waste. Despite the fact that both parties would probably agree that government waste is bad, exactly what constitutes wasteful spending varies tremendously.

As 2016 budget discussions consume lawmakers on both sides of the aisle, Citizens Against Government Waste (CAGW) released its coyly-named report, "Prime Cuts," which identifies ways in which the federal government could save nearly $650 billion next year. Tucked amid a slew of subsidy cuts and calls to end various government programs, CAGW advocates for the revival of one program: Recovery Audit Contractors (RACs).

The RAC program, perhaps one of the most divisive Centers for Medicare & Medicaid Services' (CMS) programs, was installed first as a demonstration project in 2005 as part of an effort to extend the Medicare Trust Fund. In 2010, it was rolled out nationwide, and the program collected nearly $10 billion in Medicare overpayments during its relatively brief lifetime. Last year, CMS was forced to put the program on hold amid an overwhelming backlog of more than 350,000 appeals.

If reinstated, CAGW says Medicare could save $24 billion over the next five years, but exactly how CAGW got to that number is unclear. Even during its best year--fiscal year 2013--RACs pulled in $3.65 billion. At that average the program wouldn't crack $20 billion in savings over five years. Regardless, the agency has brushed against a sensitive nerve, one that has been poked and prodded into oblivion over the last several years, pitting hospitals and providers against waste-watching advocates.

Both sides have drawn distinct lines in the sand. Providers and hospital associations argue that the RACs indiscriminately target hospitals and physicians, and generally act like bounty hunters. Watchdog organizations focused on government spending argue that the program effectively roots out billions in fraud, abuse, and waste.

As is often the case, the truth lies somewhere in-between. Yes, RACs recorded billions in recoveries, but multiple reports have highlighted the program's inefficiencies. A 2013 report by the Office of Inspector General (OIG) criticized CMS oversight of the RAC program, noting that the agency failed to address six referrals of potential fraud that it received from RACs and that it failed to properly evaluate RAC contractors. A year later, the Government Accountability Office (GAO) reported that CMS doesn't do enough to prevent duplicate reviews of provider payments. The RAC program might tally some eye-popping numbers, but if CMS isn't acting on fraud referrals, what's the point?

The RAC program also has its faults in how it was constructed, specifically the fact that RACs are paid on a commission, meaning the more overpayments they found, the more the company was paid by CMS. Proponents of this approach argued that it incentivized auditors to seek out fraud, waste and abuse. In theory, that makes sense, but it didn't pan out in practice, as many providers complained that RACs overstepped their bounds during investigations.

In some ways, the RAC program reminds me of the overzealous nature of other government programs, like the New Mexico behavioral health audit that charged 15 providers with credible instances of fraud. When the audit was finally released, it was riddled with errors. By then, patient care had been disrupted for thousands of individuals.  

The same thing may be happening with the ambulance pre-certification program for non-emergency transportation, which has disrupted patient care for many New Jersey patients in an effort to root out fraudsters. The intent may be pure, but the result is less than fair.

If you go by the numbers, the RAC program was one of the most successful CMS has ever had when it comes to identifying waste. I'm all for rebuilding the RAC program, as long as that's what it is: A rebuild. That means restructuring the commission-based payment system, building in levels of organized management and oversight and improving the broken appeals process. Simply plugging the program back in, without some significant adjustments, will signify any unwillingness to learn from past mistakes. 

CAGW is half right. The return of the RAC program could make for an effective and profitable redemption story, but only if lawmakers are willing to take a measured approach to reinstatement. Judging by the combative rhetoric I see in the headlines, I'm not entirely convinced that's possible. - Evan (@HealthPayer)