Medicaid RAC Improvement Act of 2026
- Sponsor
- Rep. Bilirakis, Gus M. [R-FL-12]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Jun 24, 2026
Bottom line
The bill seeks to recover more Medicaid overpayments and prevent future improper payments through stricter oversight and expanded audit scope, particularly targeting managed care entities.
What it actually does
This bill aims to enhance the integrity of the Medicaid program by strengthening the Recovery Audit Contractor (RAC) program. It mandates improved federal oversight of state RAC programs, requires the inclusion of Medicaid managed care organizations in audit activities, and extends the retrospective audit period. The bill also directs studies and a demonstration project to address barriers to state participation and improve program effectiveness.
Proponents argue
Supporters argue that the bill will reduce waste, fraud, and abuse in the Medicaid program, ensuring that taxpayer dollars are spent more efficiently. They contend that expanding RAC audits to managed care organizations and improving federal oversight will lead to substantial savings and increase accountability across the system.
Opponents contend
Critics might argue that the increased administrative burden on states and managed care organizations could divert resources from patient care. They may also raise concerns about the potential for over-aggressive recoupment efforts that could disproportionately affect providers or lead to lengthy appeals processes, creating instability in the healthcare system.
The bill is relatively short and clearly structured, making it accessible for an informed reader to understand its core provisions within a reasonable timeframe.
Section 2(a), amending 42 U.S.C. 1396b by adding subsection (cc)(2)
Improved CMS Oversight of Medicaid RAC Program Exceptions
This provision requires the Centers for Medicare & Medicaid Services (CMS) to establish policies for clearly communicating the expiration dates of State Medicaid Recovery Audit Contractor (RAC) program exceptions and for monitoring these expirations. It explicitly states that RAC exception approvals will not be extended after 2029. Additionally, states with approved exceptions must submit annual detailed reports on their RAC programs, including audit methodologies and justifications for any limits or exclusions.
Supporters argue
Proponents argue this will ensure greater accountability and consistency across state Medicaid RAC programs, preventing states from indefinitely avoiding full participation in federal program integrity requirements.
Critics contend
Some states might view this as increased federal intrusion into state-run programs, potentially increasing administrative burden without sufficient federal support.
Tradeoffs
This provision balances federal oversight and program integrity goals against state autonomy and administrative flexibility.
Section 2(a), amending 42 U.S.C. 1396b by adding subsection (cc)(3)
Improved Reporting to Congress on Medicaid RAC Program Effectiveness
This section mandates that the Secretary of Health and Human Services, in collaboration with State Medicaid agencies, submit annual reports to Congress, starting December 31, 2027. These reports must detail the effectiveness of the Medicaid RAC program for the most recently ended fiscal year. The content includes state-specific information such as aggregate overpayments recovered, underpayments identified, savings from pre-payment reviews, appeal settlement percentages, and the top five initiatives to reduce improper payments, along with the Secretary's recommendations for program improvement.
Section 3, amending 42 U.S.C. 1396a(a)(42)(B)(ii) and adding (C)
Inclusion of Medicaid Managed Care Plans in RAC Programs
This provision requires state Medicaid RAC programs to be robust and explicitly include a review of claims paid by Medicaid managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs). By January 1, 2028, states must ensure their contracts with these managed care entities include provisions for payment integrity review. These entities must either conduct their own payment integrity reviews for a specified period (not exceeding 18 months post-payment or contract term) or agree to permit a state-engaged Medicaid RAC to conduct the review. All managed care entities must cooperate with state RACs.
Section 4(a), amending 42 U.S.C. 1396b by adding subsection (cc)(4)
Annual Reports Regarding State Payment Integrity Reviews (Comprehensive)
This provision requires each state to submit annual reports to the Secretary (starting one year after enactment) that identify the reviewing entity for every payment stream within its Medicaid program. This includes non-state funded payments and capitation or other payments made to managed care organizations, prepaid inpatient health plans, and prepaid ambulatory health plans. The Secretary is then mandated to compile this information and submit an annual report to Congress, along with recommendations for legislative and administrative actions.
Section 4(b), amending 42 U.S.C. 1396b by adding subsection (cc)(5)
Study on Barriers to State Participation in Medicaid RAC Programs
This provision directs the Secretary to conduct a study on the barriers that prevent states from establishing and implementing Medicaid RAC programs. The study must examine the contingency fee payment structure for recovery audit contractors, including its impact on market competitiveness and effectiveness based on state population. It will also explore alternative arrangements, such as multi-state contracts, and analyze the startup costs associated with new RAC programs, including recommendations for initial funding. A report detailing the study's results and recommendations must be submitted to Congress within one year of enactment.
Section 4(b), amending 42 U.S.C. 1396b by adding subsection (cc)(6)
Demonstration Project to Improve State Participation in Medicaid RAC Programs
This provision mandates that, based on the findings of the study on barriers to state participation, the Secretary shall conduct a five-year demonstration project. This project, to begin no later than two years after the date of enactment, is designed to increase the number of states that establish and implement Medicaid RAC programs. The Secretary is required to submit an interim report to Congress 90 days after the project's initiation and a final report, including an evaluation and recommendations, 180 days after its conclusion.
This conforming amendment explicitly limits the ability of states to receive exceptions from Medicaid RAC program requirements, stating that such exceptions will only be permitted 'through December 31, 2028.' This effectively sunsets all existing and future exceptions.
Section 2(b), amending 42 U.S.C. 1396a(a)(42)(B)(i)
Why it matters:While 'conforming amendment' is standard legislative drafting, its placement might also serve to downplay the significant policy change for states that have historically relied on these exceptions.
Case for: Ensures all states eventually comply with federal RAC program requirements, promoting uniform program integrity and preventing states from indefinitely avoiding robust overpayment recovery efforts.
Case against: States currently operating under exceptions may face significant administrative and financial burdens to establish full RAC programs within a relatively short timeframe, potentially leading to disruption or increased costs.
Estimated impact: Will compel several states to establish or significantly expand their Medicaid RAC programs by the end of 2028, potentially leading to increased overpayment recoveries nationwide and greater consistency in program integrity efforts.
This provision mandates that all state contracts with recovery audit contractors (including those for managed care) must provide for audit and recovery activities covering the current fiscal year and retrospectively for the four prior fiscal years. This extended look-back period takes effect 120 days after enactment.
Section 4(c), amending 42 U.S.C. 1396a(a)(42) by adding subparagraph (D)
Why it matters:Could be standard placement for a technical detail, but its significant impact on the scope of audits and potential liabilities for providers and managed care organizations might be less obvious to a casual reader.
Case for: Allows for more thorough identification and recovery of overpayments, especially those that are complex or take time to detect, thereby maximizing program integrity and ensuring accountability for past improper payments.
Case against: Increases the retrospective financial risk and administrative burden for Medicaid providers and managed care organizations, making it harder to reconcile past payments and potentially leading to disputes over claims that are several years old.
Estimated impact: Could significantly increase the volume and value of recovered overpayments due to the expanded look-back period, but also increases the financial liability for audited entities over a longer timeframe.