Government Contracts Monitor
Coming Soon to a State Near You: Stricter False Claims Act Legislation
April 8, 2013
By: Eric Whytsell
In an attempt to ensure state false claims legislation keeps up with recent amendments to the federal False Claims Act (FCA), the Office of Inspector General of the Department of Health and Human Services (DHHS OIG) recently updated its guidelines for determining whether a state’s false claims act qualifies for monetary incentives provided under section 1909 of the Social Security Act.
The Deficit Reduction Act of 2005 (DRA) created those incentives for states to enact anti-fraud legislation modeled after the FCA. States found by DHHS OIG to have qualifying laws receive a 10-percentage-point increase in their share of any amounts recovered under such laws. Since the passage of the DRA, 28 states have enacted legislation that DHHS OIG has deemed qualified. However, during the same period, the FCA has been amended by the Fraud Enforcement and Recovery Act of 2009 (FERA), the Affordable Care Act (ACA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). These three acts amended several provisions of the FCA requiring approved state laws to be revised in order to retain their deemed status. As a result, DHHS OIG: (1) began analyzing compliance with the FCA as amended; and (2) provided a two-year grace period during which OIG-approved state acts would continue to be deemed compliant pending state amendment for resubmission.
That grace period ended March 31, 2013, two weeks after the effective date of the updated guidelines. As a result, in order to qualify for the incentive going forward, a state must amend and resubmit its false claims act to DHHS OIG for review under the new guidelines and either have the act approved or be under review.
The revised guidelines modify the criteria to be used by DHHS OIG to determine whether a state act appropriately establishes liability for false or fraudulent claims relating to state Medicaid expenditures. The modifications reflect FCA amendments that expanded liability to include false statements “material” to a false or fraudulent claim. They also enhance provisions that reward and facilitate qui tam actions by, for example, restricting state law limits on actions resulting from public
disclosures and modified the minimum percentages of recovery that a relator must receive under the state act. In addition, the new guidelines establish minimum civil penalty amounts of at least $5,500 to $11,000 to bring them in line with federal minimums.
What does all this mean for contractors? If the incentive program works as intended, contractors will soon be facing new, stricter state false claims acts that more closely resemble the current federal FCA. And given today’s tight budget environment, it seems likely that many states will make the required changes so they can take advantage of the incentive program and retain more of what they recover through their prosecution of fraud.
Eric Whytsell is the attorney responsible for the content of this article.