DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
 
 
 
CPI-CMCS INFORMATIONAL BULLETIN       
 
 
DATE:  December 30, 2011            CPI-B 12-01 
 
 
FROM:  Peter Budetti         
    Director 
    Center for Program Integrity (CPI)           
 
    Cindy Mann  
Director  
Center for Medicaid and CHIP Services (CMCS) 
 
SUBJECT:  Affordable Care Act Program Integrity Provisions  Guidance to States--
Section 6411(a) - Expansion of the Recovery Audit Contractor (RAC) 
Program to Medicaid 
 
This informational bulletin is part of a series of bulletins intended to provide guidance regarding 
implementation of certain provisions of the Patient Protection and Affordable Care Act, Pub. L. 
111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. 111-
152, together called the Affordable Care Act.  Specifically, this bulletin provides further 
guidance on Section 6411(a), the program integrity provision of the Affordable Care Act that 
was addressed in the final rule titled Medicaid Program; Recovery Audit Contractors (CMS-
6034-F). 
 
Section 6411(a) of the Affordable Care Act, Expansion of the Recovery Audit Contractor (RAC) 
Program amends section 1902(a)(42) of the Social Security Act (the Act) and requires States to 
establish a RAC program to enable the auditing of claims for services furnished by Medicaid 
providers.  Pursuant to the statute, these Medicaid RACs must: (1) identify overpayments; (2) 
recoup overpayments; and (3) identify underpayments.  On September 16, 2011, the Centers for 
Medicare & Medicaid Services (CMS) published the final rule implementing this provision, with 
an effective date of January 1, 2012.  See http://www.gpo.gov/fdsys/pkg/FR-2011-09-
16/pdf/2011-23695.pdf.    
 
 
 
 
 
 
7500 Security Boulevard 
Mailstop: AR-18-50 
Baltimore, MD 21244   
Page 2  CPI-CMCS- Informational Bulletin 
 
Enhanced Contingency Fee 
 
In the final rule at 42 C.F.R.  455.510(b)(4), we stated that the contingency fee paid to the 
Medicaid RAC may not exceed that of the highest fee paid to a Medicare Recovery Auditor, 
unless the State submits, and CMS approves, an exception to the specified maximum rate, as 
specified in the Federal Register.      
 
On June 1, 2011, CMS increased the contingency fee by 5% for the recovery of improper 
payments associated with durable medical equipment (DME) claims that were identified by the 
Medicare Recovery Auditors.  The modification, therefore, increases the maximum contingency 
fee paid to a Medicare Recovery Auditor to 17.5% for DME claims only.    
 
As a result of this modification, CMS now authorizes States to pay their respective Medicaid 
RACs a contingency fee up to 17.5%, the current highest contingency fee paid to Medicare 
Recovery Auditors, for the recovery of improper payments made for medical supplies, 
equipment and appliances suitable for use in the home found within the home health services 
benefit authorized by section 1905(a)(7) of the Social Security Act.  This policy is consistent 
with the Affordable Care Act, which requires States to contract with Medicaid RACs in the 
same manner as the Secretary enters into contracts with the Medicare Recovery Auditors.  The 
policy is also consistent with guidance reflected in the Medicaid RAC final rule which aligns the 
Medicare Recovery Audit Program and Medicaid RAC program, to the extent possible. 
 
CMS intends to issue future guidance on updates associated with the Medicaid RAC final rule as 
well as the Medicare Recovery Audit Program Statement of Work when the Medicaid RAC 
program is impacted. 
 
Frequently Asked Questions 
 
We look forward to continuing to work with States to successfully implement the requirements 
of Section 6411(a) of the Affordable Care Act.  We have published guidance in the form of 
Frequently Asked Questions regarding the Medicaid RAC program.  The FAQs address 
questions about various sections of operational aspects in the final rule that States have posed 
such as conflicts of interest, appeals, contingency fee structure, State reporting, and program 
exceptions.  The FAQs can be found here: 
http://www.cms.gov/MedicaidIntegrityProgram/04_What%20is%20New.asp#TopOfPage  
 
Questions regarding the information contained in this bulletin can be directed to Angela Brice-
Smith at 410-786-4340 or via email at Angela.Brice-Smith@cms.hhs.gov.  
 
 
7500 Security Boulevard 
Mailstop: AR-18-50 
Baltimore, MD 21244