Answer:
CARCs and RARCs are codes used on the Medicare provider remittance advice (RA) to explain any adjustment(s) made to the payment. 

CARCs, or Claim Adjustment Reason Codes, explain financial adjustments, such as denials, reductions or increases in payment. CARCs explain why a claim (or service line) was paid differently than it was billed. CARCs are used in the RA with group codes that shows the liability for amounts not covered by Medicare for a claim or service. Group codes include CO (contractual obligations), OA (other adjustments) and PR (patient responsibility). CARCs can be reported at the service-line level or the claim level. 

Example:

• CO-16: Claim/service lacks information or has submission/billing error(s) which is needed for adjudication. Do not use this code for claims attachment(s)/other documentation. At least one Remark Code must be provided (may be comprised of either the NCPDP Reject Reason Code, or Remittance Advice Remark Code that is not an alert.) Note: Refer to the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if present.

RARCs, or Remittance Advice Remark Codes, are used in the RA in conjunction with CARCs to further explain an adjustment or relay informational messages that cannot be expressed with a claim adjustment reason code. Most RARCs are supplemental and further explain an adjustment already described by a CARC. Other remark codes are informational and do not further explain a specific adjustment but provide general adjudication information. Informational remark codes start with the word "Alert." RARCs can be reported at the service-line level or the claim level. 

Examples:

• RARC MA120: Missing/incomplete/invalid CLIA certification number. RARC MA120 could be used to further explain CARC/Group Code CO-16
• Informational RARC MA15 — Alert: Your claim has been separated to expedite handling. You will receive a separate notice for the other services reported

Resource:

• IOM 100-04, Medicare Claims Processing Manual, Chapter 22, Section 60 (PDF, 120 KB)