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RAC demonstration project offers valuable lessons

CMS created the Recovery Audit Contractor (RAC) program as part of an effort to reduce improper Medicare payments by contracting independent auditors to detect and collect overpayments. The auditors are also charged with identifying underpayments, although during the RAC demonstration phase, about 25 times more overpayments were collected than underpayments paid ($980 million versus $37.8 million).

The demonstration project, which ended its three-year process in March 2008, is the best body of evidence we have to project what the permanent program will be like. The per-manent program continues to roll out across the country, with the goal of having all four RAC regions, each responsible for one-quarter of the country, fully operational by 2010.