This legislation aims to strengthen the Medicaid Recovery Audit Contractor (RAC) program by implementing recommendations from the Comptroller General. It mandates the Secretary of Health and Human Services to establish improved oversight and communication policies for States regarding RAC program exceptions, ensuring these exceptions are clearly communicated and will not be extended beyond 2029. The bill also requires annual, detailed reporting from States on their RAC programs and mandates annual reports from the Secretary to Congress on the program's effectiveness, including State-specific data and recommendations for improvement. A significant provision requires States to ensure that Medicaid managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs) are included in payment integrity reviews by January 1, 2028. These entities must either conduct their own payment integrity reviews or permit a State-engaged Medicaid RAC to do so, cooperating with recovery efforts. This measure is designed to robustly identify and recoup or prevent a substantial portion of overpayments within managed care. Furthermore, the bill introduces additional measures for improving Medicaid payment integrity, including annual State reports on payment integrity reviews and subsequent Congressional reports from the Secretary. It directs the Secretary to conduct a study on barriers to State participation in Medicaid RAC programs, examining contingency fee structures, alternative arrangements, and start-up costs, with a report to Congress within one year. Based on this study, a 5-year demonstration project will be launched to increase State engagement. Finally, all RAC contracts must allow for audit and recovery activities covering the current fiscal year and four prior fiscal years.