BILL ANALYSIS Senate Research Center C.S.S.B. 2458 89R23116 CMO-D By: Hughes Health & Human Services 4/10/2025 Committee Report (Substituted) AUTHOR'S / SPONSOR'S STATEMENT OF INTENT This bill strengthens the Office of Inspector General's (OIG) efforts to detect and prevent fraud, waste, and abuse (FWA) in Texas Medicaid. Recovering improper Medicaid payments is the responsibility of federal and state governments and the MCOs contracted to provide Medicaid managed care services. In 2003, the 78th Texas Legislature created OIG to strengthen HHSC's efforts to detect and prevent FWA in Medicaid and other state programs. One important cost containment tool that OIG utilizes is the Medicaid Recovery Audit Contractor (RAC) Program, which identifies and recovers improper Medicaid payments ONLY in fee-for-service. Claims submitted by the state's Medicaid MCOs, representing ~97 percent of all claims, are currently NOT included within the Texas Medicaid RAC review scope. It is the state's discretion whether to include Medicaid Managed Care in the scope of Medicaid RAC audits, and it is anticipated the OMB will issue guidance soon to include MCO claims in RAC reviews. With more than 95 percent of Texas Medicaid members enrolled in managed care, significant expenditures are at risk if these claims are not included in the Texas Medicaid RAC review. This bill seeks to clarify current law to include Medicaid managed care claims in Medicaid RAC audits for maximum identification and recovery of provider overpayments. The State of New York recently found over $60M per year under this enhanced identification and recovery model. Received from the Office of the Inspector General: S.B. 2458 Cost/Revenue Estimate FY 26 FY 27 FY 28 FY 29 FY 30 Cost (All Funds) ($6.1m) ($6.4m) ($3.1m) ($4.2m) ($4.1m) Revenue - $25.5m $46.5m $77.4m $77.4m TOTAL ($6.1m) $19m $43.3m $73.2m $73.2m Notes: Cost includes recovery collection, deconfliction database, and appeals process. The contingency fee of 12.5 percent is subtracted from the revenue in the table above. Implementation is expected to take approximately 24 months. Therefore, projected recoveries in managed care may not be fully realized for three to five years after the effective date of the legislation. The committee substitute: 1. Adds the Nelson/Huffman fiscal responsibility amendment, where the agency is required to implement the bill only if the legislature appropriates money specifically for that purpose. If the legislature does not appropriate money specifically for that purpose, HHSC may, but is not required to, implement the bill using other appropriations available for the purpose. 2. Per the request of the Texas Association of Health Plans, addresses duplication/interference in managed care overpayment recoveries vs. what the MCOs are required to do now. It limits the RAC's involvement when the MCO is still contractually required to recover and only when the OIG requests and deems it cost-effective. 3. Includes simple revisions per the request of the OIG, including using the word "review" instead of "audit." The rules that govern this refer to these as retrospective reviews. The OIG is required by statute to do audits by yellow book standards. "Recovery audit contractor" is a federal term, but "audit" in Texas statute has a specific meaning. C.S.S.B. 2458 amends current law relating to the review of claims and recovery of overpayments by Medicaid recovery audit contractors. RULEMAKING AUTHORITY Rulemaking authority is expressly granted to the executive commissioner of the Health and Human Services Commission in SECTION 1 (Section 544.0504, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 544.0504, Government Code, as follows: Sec. 544.0504. RECOVERY AUDIT CONTRACTORS. (a) Creates this subsection from existing text. Requires the Health and Human Services Commission (HHSC), to the extent required under Section 1902(a)(42), Social Security Act (42 U.S.C. Section 1396(a)(42)), to establish a program under which HHSC contracts with one or more recovery audit contractors to: (1) identify Medicaid underpayments and overpayments, including underpayments and overpayments under the Medicaid managed care program; and (2) recover the overpayments. Makes nonsubstantive changes to this subsection. (b) Authorizes an overpayment under Subsection (a)(2) to be recovered from either the provider or the managed care organization. (c) Prohibits a recovery audit contractor from initiating a review of a claim unless certain conditions are met or initiating a recovery effort on a claim if a managed care organization has not notified the office of inspector general (OIG) that the organization is auditing the claim. (d) Requires a managed care organization or provider who is the subject of a review conducted under this section, on request by a recovery audit contractor or OIG, to submit to the contractor or OIG all information necessary to perform the review not later than the date specified in the request. Provides that all information and materials obtained under this section are confidential under Section 544.0259(e) (relating to providing that all information subpoenaed or compiled by OIG is confidential and not subject to certain methods of release). (e) Requires the executive commissioner of HHSC (executive commissioner) by rule to adopt a process for appeals related to overpayments identified by a recovery audit contractor under this section. (f) Authorizes HHSC to contract with a third party to administer Subsection (b) or the appeals process adopted under Subsection (e). (g) Authorizes the executive commissioner, in consultation with OIG, to adopt rules necessary to implement this section. SECTION 2. Requires a state agency, if necessary for implementation of a provision of this Act, to request a waiver or authorization from a federal agency, and authorizes a delay of implementation until such a waiver or authorization is granted. SECTION 3. Provides that HHSC is required to implement the changes in law made by this Act to Section 544.0504, Government Code, only if the legislature appropriates money specifically for that purpose. Authorizes, but does not require, HHSC, if the legislature does not appropriate money specifically for that purpose, to implement those changes in law using other money available to HHSC for that purpose. SECTION 4. Effective date: September 1, 2025.
BILL ANALYSIS
Senate Research Center C.S.S.B. 2458
89R23116 CMO-D By: Hughes
Health & Human Services
4/10/2025
Committee Report (Substituted)
Senate Research Center
C.S.S.B. 2458
89R23116 CMO-D
By: Hughes
Health & Human Services
4/10/2025
Committee Report (Substituted)
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
This bill strengthens the Office of Inspector General's (OIG) efforts to detect and prevent fraud, waste, and abuse (FWA) in Texas Medicaid. Recovering improper Medicaid payments is the responsibility of federal and state governments and the MCOs contracted to provide Medicaid managed care services.
In 2003, the 78th Texas Legislature created OIG to strengthen HHSC's efforts to detect and prevent FWA in Medicaid and other state programs. One important cost containment tool that OIG utilizes is the Medicaid Recovery Audit Contractor (RAC) Program, which identifies and recovers improper Medicaid payments ONLY in fee-for-service. Claims submitted by the state's Medicaid MCOs, representing ~97 percent of all claims, are currently NOT included within the Texas Medicaid RAC review scope.
It is the state's discretion whether to include Medicaid Managed Care in the scope of Medicaid RAC audits, and it is anticipated the OMB will issue guidance soon to include MCO claims in RAC reviews. With more than 95 percent of Texas Medicaid members enrolled in managed care, significant expenditures are at risk if these claims are not included in the Texas Medicaid RAC review.
This bill seeks to clarify current law to include Medicaid managed care claims in Medicaid RAC audits for maximum identification and recovery of provider overpayments. The State of New York recently found over $60M per year under this enhanced identification and recovery model.
Received from the Office of the Inspector General:
S.B. 2458 Cost/Revenue Estimate
FY 26 FY 27 FY 28 FY 29 FY 30
Cost (All Funds) ($6.1m) ($6.4m) ($3.1m) ($4.2m) ($4.1m)
Revenue - $25.5m $46.5m $77.4m $77.4m
TOTAL ($6.1m) $19m $43.3m $73.2m $73.2m
FY 26
FY 27
FY 28
FY 29
FY 30
Cost (All Funds)
($6.1m)
($6.4m)
($3.1m)
($4.2m)
($4.1m)
Revenue
-
$25.5m
$46.5m
$77.4m
$77.4m
TOTAL
($6.1m)
$19m
$43.3m
$73.2m
$73.2m
Notes:
Cost includes recovery collection, deconfliction database, and appeals process.
The contingency fee of 12.5 percent is subtracted from the revenue in the table above.
Implementation is expected to take approximately 24 months. Therefore, projected recoveries in managed care may not be fully realized for three to five years after the effective date of the legislation.
The committee substitute:
1. Adds the Nelson/Huffman fiscal responsibility amendment, where the agency is required to implement the bill only if the legislature appropriates money specifically for that purpose. If the legislature does not appropriate money specifically for that purpose, HHSC may, but is not required to, implement the bill using other appropriations available for the purpose.
2. Per the request of the Texas Association of Health Plans, addresses duplication/interference in managed care overpayment recoveries vs. what the MCOs are required to do now. It limits the RAC's involvement when the MCO is still contractually required to recover and only when the OIG requests and deems it cost-effective.
3. Includes simple revisions per the request of the OIG, including using the word "review" instead of "audit." The rules that govern this refer to these as retrospective reviews. The OIG is required by statute to do audits by yellow book standards. "Recovery audit contractor" is a federal term, but "audit" in Texas statute has a specific meaning.
C.S.S.B. 2458 amends current law relating to the review of claims and recovery of overpayments by Medicaid recovery audit contractors.
RULEMAKING AUTHORITY
Rulemaking authority is expressly granted to the executive commissioner of the Health and Human Services Commission in SECTION 1 (Section 544.0504, Government Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 544.0504, Government Code, as follows:
Sec. 544.0504. RECOVERY AUDIT CONTRACTORS. (a) Creates this subsection from existing text. Requires the Health and Human Services Commission (HHSC), to the extent required under Section 1902(a)(42), Social Security Act (42 U.S.C. Section 1396(a)(42)), to establish a program under which HHSC contracts with one or more recovery audit contractors to:
(1) identify Medicaid underpayments and overpayments, including underpayments and overpayments under the Medicaid managed care program; and
(2) recover the overpayments.
Makes nonsubstantive changes to this subsection.
(b) Authorizes an overpayment under Subsection (a)(2) to be recovered from either the provider or the managed care organization.
(c) Prohibits a recovery audit contractor from initiating a review of a claim unless certain conditions are met or initiating a recovery effort on a claim if a managed care organization has not notified the office of inspector general (OIG) that the organization is auditing the claim.
(d) Requires a managed care organization or provider who is the subject of a review conducted under this section, on request by a recovery audit contractor or OIG, to submit to the contractor or OIG all information necessary to perform the review not later than the date specified in the request. Provides that all information and materials obtained under this section are confidential under Section 544.0259(e) (relating to providing that all information subpoenaed or compiled by OIG is confidential and not subject to certain methods of release).
(e) Requires the executive commissioner of HHSC (executive commissioner) by rule to adopt a process for appeals related to overpayments identified by a recovery audit contractor under this section.
(f) Authorizes HHSC to contract with a third party to administer Subsection (b) or the appeals process adopted under Subsection (e).
(g) Authorizes the executive commissioner, in consultation with OIG, to adopt rules necessary to implement this section.
SECTION 2. Requires a state agency, if necessary for implementation of a provision of this Act, to request a waiver or authorization from a federal agency, and authorizes a delay of implementation until such a waiver or authorization is granted.
SECTION 3. Provides that HHSC is required to implement the changes in law made by this Act to Section 544.0504, Government Code, only if the legislature appropriates money specifically for that purpose. Authorizes, but does not require, HHSC, if the legislature does not appropriate money specifically for that purpose, to implement those changes in law using other money available to HHSC for that purpose.
SECTION 4. Effective date: September 1, 2025.