RAC: How the Tax Relief and Health Care Act of 2006 Will Affect You

Medicare’s use of recovery audit contractors (“RAC”) is a polarizing subject. By recovering Medicare’s overpayments to physicians and other medical entities, RAC will save an estimated $10 billion over the next five years. Those savings should lower Medicare premiums. On the other hand, some physicians question the motives of RAC and see them as privately contracted “bounty hunters.” RAC have incentive-based pay—on average about 25 percent of the amount of recovered overpayments.

RAC are part of the Medicare Modernization Act of 2003, but have only been investigating overpayments to physicians since spring of 2005 in just three states: California, Florida, and New York… for now.

Less than a week ago, however, the U.S. House of Representatives approved the Tax Relief and Health Care Act of 2006, which calls for RAC to be expanded to all states no later than January 1, 2010 (see pages 163 – 167 of the legislative text). Dealing with RAC will soon be a reality for physicians nationwide.

Being proactive is ideal. When a Medicare overpayment is discovered, return the money before an audit can even take place. A recent article in Physician’s News Digest details who to notify and when.

Bruce A. Levy, an attorney specializing in health care fraud investigation and compliance, recommends three steps that can “audit proof” a practice. First of all, procedural codes and diagnosis codes should accurately describe services provided; beware of slightly differing codes or code modifiers. Additionally, taking detailed notes and documenting charts will help justify a physician’s actions, if audited. Finally, a voluntary compliance plan can be implemented to reduce billing errors and prevent erroneous claims. David Glaser, another attorney, also offers his advice for how to handle a Medicare audit.

As a physician, you may disagree with RAC and how Medicare overpayments are investigated. In light of the actions of Congress, it will be important to adjust and take preemptive measures, especially since Medicare overpayments are not uncommon.