Medicaid Audit Improvement Act

Summary#

The Medicaid RAC Improvement Act of 2026 would amend the Social Security Act, the law that includes federal Medicaid requirements. Its stated goal is to improve Medicaid recovery audits and identify more overpayments. It is an introduced Senate bill, not current law, so passage is uncertain.

  • The federal Secretary would have to improve oversight of state exceptions from Medicaid Recovery Audit Contractor (RAC) requirements, including tracking expirations and requiring annual reports from states with approved exceptions.
  • States would have to include claims paid by Medicaid managed care organizations and specified health plans in their RAC programs, and provide assurances about those programs by January 1, 2028.
  • State contracts with those plans would have to let each plan either conduct its own payment review for a set period or allow a state RAC contractor to do the review. Plans would also have to cooperate with the contractor.
  • RAC contracts would have to cover payments made in the audit fiscal year and payments from the four previous fiscal years, starting 120 days after the relevant amendment takes effect.
  • The Secretary would have to send Congress annual reports, study barriers to state participation, and run a five-year demonstration project intended to increase the number of states with RAC programs.

What it means for you#

  • States: They would have to report which entity reviews each payment stream, including payments to managed care plans and some non-state-funded payments. States with approved RAC exceptions would also face annual reporting and expiration notices. The bill does not set out a full process for how reviews or appeals would work.
  • Medicaid managed care organizations and named health plans: State contracts would have to give them a choice: conduct payment-integrity reviews during a designated period, or permit a state RAC contractor to do them. The plan’s review period could not exceed the shorter of 18 months after a claim payment or the contract term. Plans would have to cooperate with RAC contractors; if a plan chose its own review period, contractor cooperation would apply after that period ends.
  • Medicaid providers: They could be affected by audits of payments, including older payments, but the bill does not spell out which providers would be reviewed or create a new provider application process.
  • Medicaid patients: The bill does not directly change eligibility for Medicaid or covered benefits.
  • Taxpayers: The bill aims to improve detection and recovery of overpayments, but does not guarantee a particular amount of savings.

Money#

No cost information is in the available material.

  • The bill requires federal studies, reports, and a five-year demonstration project, but gives no cost estimate or specific funding amount.
  • States would have new reporting and contract requirements; the bill gives no estimate of their staffing or administrative costs.
  • The required study would examine RAC contractors’ start-up costs and possible payment arrangements, but the bill does not itself provide start-up funding.
  • The bill does not change taxes or fees.

What is unclear#

  • The text limits the statutory exception provision to December 31, 2028, and also requires notice that an approved exception’s expiration date cannot be extended after 2029. How those dates fit together is unclear.
  • The bill does not define terms such as “robust,” “substantial portion,” or “adequate process,” or set detailed rules for reviews, decisions, or appeals.
  • It does not explain how states should coordinate these reviews with other payment-integrity reviews or resolve disputes between a plan and a RAC contractor.
  • It does not specify how states would be selected for the demonstration project or what support it would provide.
  • The Social Security Act provisions being amended were not supplied, so the existing rules and the bill’s full effect compared with current law could not be verified.

Case for#

  • The bill appears intended to make state RAC programs cover claims paid by managed care plans, not just other Medicaid payment streams.
  • More consistent state and federal reports could show where overpayments and underpayments occur and how states’ audit methods differ.
  • The required study would examine whether contractor payment arrangements or start-up costs make it harder for states to run RAC programs. The demonstration project could test ways to address barriers the study identifies.
  • Covering payments from the four previous fiscal years could give auditors a broader period in which to identify overpayments.

Case against#

  • States and health plans would face added reporting, contracting, and cooperation requirements, but the bill does not estimate their costs or specify how much federal support they would receive.
  • Auditing payments from four previous fiscal years could mean reviews reach well back in time. The bill does not explain how that period would work alongside a plan’s option to conduct its own review.
  • The bill gives the Secretary broad room to set procedures and judge whether state processes are adequate, without spelling out standards or appeal rights for those decisions.
  • The exception dates may leave states uncertain about how long existing exceptions can remain in effect.