CMS Pub. 100-04, ch. 1, § 01.1

When Medicare denies coverage or adjusts the payment amount for items or services,

these actions are documented using codes reported on the provider’s remittance advice.

Medicare, like all other health insurance payers, uses remittance advice codes in

combination to create one message. This combination includes a Claim Adjustment

Group Code (Group Code) and a Claim Adjustment Reason Code (CARC). Frequently,

payers also use one or more Remittance Advice Remark Codes (RARC) to add additional

detail. RARC coding is optional unless the CARC definition requires an accompanying

RARC, so RARCs may not appear on all remittance advice messages.

Each of the codes in the message communicates different information:

• Group Codes assign financial responsibility to the provider or the beneficiary

• CARCs communicate the general reason why the payment is different from the

billed amount

• RARCs, when used in combination with CARCs, provide additional or more

specific payment adjustment information

In certain cases, RARCs may also be used alone to provide information unrelated to the

difference between the amount billed and the amount paid. In these cases, the RARC

definition always begins with the word “Alert.”

Remittance advice codes are identified in standard code sets that are used by all payers,

as required by HIPAA. Since the definitions of the codes are an industry standard, the

instructions in this manual refer only to the code values. Providers and contractors can

access the definitions of the codes at the official Washington Publishing Company

website.

Section 1171 of the Social Security Act requires a standard set of operating rules to

regulate the health insurance industry’s use of electronic data interchange (EDI)

transactions. Operating Rule 360: Uniform Use of CARCs and RARCs, regulates the

way in which group codes, CARCs and RARCs may be used. The rule requires specific

codes which are to be used in combination with one another if one of the named business

scenarios applies. This rule is authored by the Council for Affordable Quality Healthcare

(CAQH) Committee on Operating Rules for Information Exchange (CORE).

Medicare and all other payers must comply with the CAQH CORE-developed code

combinations. The business scenario for each payment adjustment must be defined, if

applicable, and a valid code combination selected for all remittance advice messages.

Providers and contractors can access the business scenarios and code combinations at:

caqh.org/CORECodeCombinations.php. When remittance advice messages are used to

explain payments to providers, Medicare Summary Notice (MSN) messages are used to

explain payments to beneficiaries.

In order to provide remittance advice codes and MSN messages consistently throughout

the Medicare Claims Processing Manual, the one of the following standard language

statements will be included as necessary.

• If the CARC/RARC being reported is included in the CAQH CORE list of valid

combinations:

“The contractor shall use the following remittance advice messages and

associated codes when rejecting/denying claims under this policy. This

CARC/RARC combination is compliant with CAQH CORE Business Scenario

[Insert Business Scenario number].

Group Code: [Insert Group Code]

CARC: [Insert CARC number or N/A if the RARC is an Alert message]

RARC: [Insert RARC number(s) or N/A if a RARC is not needed]

MSN: [Insert MSN message number(s)]”

• If the CARC is not included in the CAQH CORE publication and therefore,

standard business scenarios do not apply:

“The contractor shall use the following remittance advice messages and

associated codes when rejecting/denying claims under this policy. The CARC

below is not included in the CAQH CORE Business Scenarios.

Group Code: [Insert Group Code]

CARC: [Insert CARC number or N/A if the RARC is an Alert message]

RARC: [Insert RARC number(s) or N/A if a RARC is not needed]

MSN: [Insert MSN message number(s)]”