Program History and Authorities

Improper payments cause billions of dollars in annual losses to the Medicare program. A report by the U.S. Government Accountability Office estimated that improper payments totaled $48 billion in FY 2010. This number accounts for roughly one-third of the estimated total improper payments for the Federal Government.

The Recovery Audit Program was permanently implemented for Medicare Parts A and B on a nationwide basis by January 2010 to address this problem. On this page you will learn about the following:

• Program Authorities
• Part D RAC Program History
• Program Configuration
• Program Accomplishments

Program Authorities

Eliminating improper payments in the Medicare and Medicaid programs continues to be a major priority for the Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity (CPI).

Under the Patient Protection and Affordable Care Act (ACA) legislation enacted in March 2010, CMS was required to expand the Recovery Audit program to the Medicare Part C (Medicare Advantage) and Part D (Prescription Drug Benefit) programs. The amendments to the existing Medicare Fee-for-Service (FFS) RAC statute at section 1893(h) of ACA provide CMS with general authority to enter into contracts with Recovery Audit Contractors (RACs) to identify and reconcile overpayments and underpayments in Medicare Advantage (Part C) and Prescription Drug (Part D) programs.

Part D RAC Program History

The Medicare Modernization Act of 2003 (MMA) enacted the Medicare Prescription Drug Benefit, effective in 2006. In 2005, CMS implemented the Medicare Recovery Audit Contractor (RAC) Program as a demonstration program for Medicare fee-for-service (FFS); Medicare Parts A and Part B. The pilot program successfully corrected more than $1.03 Billion in Medicare improper payments. Based on the success of the pilot, CMS permanently implemented FFS RACs nationally in 2009. Section 6411(b) of the Patient Protection and Affordable Care Act (ACA) of 2010 expanded RACs to all Medicare programs and led to CMS’ award of the Part D RAC contract in 2011.

Program Configuration

The Part D RAC Program includes several organizations working in concert under CPI’s guidance and coordination. The Part D RAC:

• Reviews previously paid individual Medicare claims (prescription drug events) to sponsoring organizations and pharmacies to determine overpayment and underpayment;
• Provides information to CMS to help prevent future improper payments;
• Refers any potential fraud findings identified during the auditing process to the Medicare Drug Integrity Contractor.

Along with the RAC, two other organizations play key roles in the Part D RAC Program. The Data Validation Contractor (DVC) ensures the integrity of the RAC Program and the accuracy of the RAC findings through independent quality checks of the Part D RAC findings to confirm improper payment findings and measure the Part D RAC’s accuracy rate. The Part D RAC also refers cases of potential fraud to the National Benefit Integrity (NBI) Medicare Drug Integrity Contractor (MEDIC), the contractor responsible for detecting, preventing and investigating fraud, waste and abuse in the Medicare Part C and Part D programs.

The Part D RAC Program is integrated for retrospective detection and proactive prevention of improper payments.

Part D RAC Accomplishments

Under the direction of CPI’s Investigations and Audits Group's (IAG) Division of Plan Oversight and Accountability (DPOA), the Part D RAC has completed numerous multi-year audits of three types. The Part D RAC began the Excluded Provider Audits by analyzing prescription drug event (PDE) data for contract year (CY) 2007. The appeals process for this audit year was completed in 2013. Excluded Provider Audits for CYs 2008 through 2011 were completed in FY 2014. Additional audits currently under way in FY 2015 include review of providers who are unauthorized to prescribe certain Part D drugs (CYs 2009-2012) and DEA schedule refill errors (CYs 2010-2011).