The U.S. Department of Health and Human Services (HHS) announced yesterday (September 14, 2011) the release of its final rule for the Medicaid Recovery Audit Contractor (RAC) Program. RACs detect and correct past improper payments by reviewing claims after payments have been made.

HHS projects that the Medicaid RAC Program will save $2.1 billion over the next five years, $900 million of which will be returned to the states. The Medicaid RAC program is based on the Medicare RAC program, which has recovered almost $670 million to date in 2011. The Medicaid RAC program will be largely self-funded, with HHS paying RAC auditors a contingency fee based on any improper payments auditors recover that took place in the previous three years.

The final rule was released in conjunction with a cabinet meeting convened to discuss waste reduction at federal agencies. Vice President Biden announced a new initiative, the Campaign to Cut Waste, and HHS Secretary Sebelius discussed the waste-cutting Medicaid RAC program.

The HHS press release on the Campaign to Cut Waste and Medicaid RAC Program is available here.