Federal Health Care Auditing and Quality Control Improvement Act of 1986 - Amends the Social Security Amendments of 1967 to authorize the Secretary of Health and Human Services to test and measure the cost effectiveness of having audits and medical reviews under title XVIII (Medicare) of the Social Security Act performed by contractors other than the fiscal intermediaries and carriers which process claims under the Medicare program. Requires the Secretary, within one year of this Act's enactment, to recommend to the Congress the optimum level and type of Medicare audit expenditures.

Directs the Secretary to review the quality control program under title XIX (Medicaid) of the Act and, within one year of this Act's enactment, develop procedures and guidelines for such program which require States to implement corrective action plans and management information systems to prevent errors in the provision of services.