The Medicaid RAC Improvement Act of 2026 seeks to strengthen the Medicaid Recovery Audit Contractor (RAC) program by implementing recommendations from the Comptroller General. It mandates improved oversight by the Secretary of Health and Human Services (HHS) over state RAC programs, including clear communication of RAC exception expiration dates and monitoring of these exceptions. States with approved exceptions will be required to submit annual, detailed reports on their Medicaid RAC program methodologies and audit limits. A significant provision requires the inclusion of Medicaid managed care organizations (MCOs) , prepaid inpatient health plans, and prepaid ambulatory health plans in RAC audits. By January 1, 2028, states must ensure that contracts with these entities either allow them to conduct their own payment integrity reviews or permit a state-engaged Medicaid RAC to perform such reviews. This aims to ensure comprehensive recovery of overpayments across all Medicaid payment streams. The bill also enhances reporting requirements, mandating annual reports from the Secretary to Congress on the overall effectiveness of the Medicaid RAC program, including state-specific data on recovered overpayments and underpayments. Furthermore, it directs the Secretary to conduct a study on barriers preventing states from establishing and implementing RAC programs, examining contingency fee structures and startup costs. Based on this study, a 5-year demonstration project will be launched to increase state participation, with regular reports to Congress. Finally, RAC contracts will be required to conduct audits for the current fiscal year and retrospectively for 4 fiscal years prior .