Orin Hatch: 8% Medicare
Payments Were Paid Improperly
June 30, 2013
U.S. Senator Orrin
Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today
delivered the following opening statement at a committee hearing
examining Medicare Recovery Audit Contractors (RACs):
I welcome this opportunity to discuss one of the key tools used by the
Centers for Medicare & Medicaid Services (CMS) to identify and recover
improper payments in the Medicare program: the Recovery Audit
Medicare improper payments are a serious issue.
In 2012, Medicare covered more than 49 million elderly and disabled
beneficiaries at an estimated cost of $550 billion.
Of that amount, CMS reported that the improper payments for Medicare
were estimated to be more than $44 billion.
That means eight cents out of every dollar spent on Medicare was paid
improperly. That rate is unacceptable especially given the recent
Medicare Trustees Report which said that the Medicare trust fund could
be depleted by as early as 2022.
Reducing the amount of improper payments is imperative to extending the
financial longevity of the Medicare trust fund and to ensuring that
Medicare continues serving patients for years to come.
CMS identifies and recovers improper payments by hiring contractors to
conduct audits of the one billion-plus claims submitted to the Medicare
program each year. Auditing is essential to ensuring Medicare payments
are submitted properly and that federal dollars are being spent wisely.
The RACs are a key part of CMS’ strategy and audit millions of Medicare
claims each year. However, we need to make sure that RACs are going
about their work in a smart, productive way.
Over the past three years, CMS has made many important changes to the
RAC program that have significantly improved their efforts to recover
improper payments. RACs have increased the amount of collected
overpayments from $75 million in 2010 to $2.3 billion in 2012.
Along with recovering federal dollars, RACs returned $100 million in
overpayments to providers in 2012.
Clearly, these are positive steps, but we are still a long way from
eliminating even half of the estimated $44 billion in improper Medicare
Now, RACs must a walk a fine line between chasing down every last dollar
and putting an unnecessary burden on our nation’s caregivers.
Even though RACs have reviewed less than one percent of claims
nationwide, their efforts can be burdensome to providers caring for sick
patients. No one goes into the health care business to respond to
auditors’ requests for dozens of documents.
Yet, we have heard from providers across the country that responding to
RAC audits can be a long and painful process. Providers have also stated
that, at times, the RAC audits seem arbitrary and that the people
conducting these reviews do not fully understand Medicare requirements
or acceptable medical practice.
These kinds of reports concern me.
I support requirements that minimize burdens on providers by reducing
the look-back period to three years, limiting the number of medical
records requested, and accepting electronic copies of requested
Another issue that concerns me is the high rate at which RAC decisions
are overturned on appeal.
The HHS Inspector General reported that, of the 41,000 appeals that
providers made to Administrative Law Judges, over 60 percent were
partially or fully favorable to the defendant.
a high rate of reversals raises questions as to whether RACs are being
too aggressive or do not understand current medical practice.
Currently, CMS is reviewing RACs’ bids for new contracts for the coming
years. As they review the bids, I’d like to see CMS take into
consideration the balance between program integrity and administrative
There is a lot of unrecovered money still out there and RACs are an
important component in the effort to get some of that money back where
it belongs. But, we need to make sure they are going about it the right
Once again, I thank the Chairman for calling this hearing and look
forward to working with him on this important issue.