Texas wants to hire private auditors to hunt for overpayments in the part of Medicaid run through private health plans, and the state estimates the effort would return $72.4 million a year once it is fully running. The Texas Health and Human Services Commission (HHSC), the agency that runs Medicaid, published the proposal in the Oct. 23 Texas Register. Anyone can comment until late November.
The proposed rule would expand what HHSC calls its recovery audit contractor program. A recovery audit contractor is a company the state hires to review claims after they have been paid and flag payments that were too high or too low. Until now the program has applied to fee-for-service Medicaid, where the state pays doctors and hospitals directly. The rule would extend it to managed care, where the state pays a monthly fee to private health plans, which then pay providers. House Bill 142, passed in 2025, directs the expansion by amending state law, according to the notice.
The state’s own fiscal note puts numbers on it. HHSC estimates a cost of $1,626,357 in fiscal 2026, then reductions in state costs of $18,888,907 in fiscal 2027, $41,453,360 in fiscal 2028 and $72,422,268 in each of fiscal 2029 and 2030. Those four years of reductions add up to about $205 million. The note describes the savings as coming from returning misspent funds. These are projections, and the notice does not say how much would come from health plans versus individual providers.
The notice lays out how a review would work. The agency’s Office of Inspector General, its program-integrity unit, must approve each review. The contractor cannot start until at least one year after the payer received the claim. A provider asked for records that fails to produce them can receive a technical denial, meaning the claim is rejected for lack of documentation. The contractor then sends written notices that state any overpayment or underpayment and explain how to appeal, and providers get a first-level and a second-level appeal. Overpayments are recovered “from the provider or MCO,” the notice says, using the abbreviation for managed care organization.
HHSC says it is moving the rule from one chapter of its rulebook to another because recovery auditing is a program-integrity function that belongs with the inspector general. The proposal also repeals the old version of the rule.
The notice includes no comments from providers or health plans, the doctors, hospitals and other providers billing Medicaid and the plans that pay them. They have until the comment period closes to respond.
The expansion arrives as Medicaid oversight of managed care is already under scrutiny. The Dispatch reported in September on a state law requiring public posting of penalties against Medicaid plans.
Written comments go to HHSC’s Rules Coordination Office in Austin or to HHSRulesCoordinationOffice@hhs.texas.gov, with the subject line “Comments on Proposed Rule 26R083.” The notice sets the deadline at 31 days after the Oct. 23 issue, which works out to Nov. 23, and lists Nov. 22 as the earliest date the agency could adopt the rule.