According to a recent report, nine states are at risk of losing federal money unless they pass new false claims laws that meet with stricter federal standards.
The trouble began when Congress passed the Deficit Reduction Act of 2005. The measure included strong provisions which were meant to incentivize states to adopt similarly strong versions of the federal False Claims Act. The FCA exists to ensure that those who attempt to defraud the government are punished and includes a "qui tam" provision which allows whistleblowers, whose actions lead to recovery, to share a portion of the money officials recover.
To help sweeten the deal and get states to pass similarly tough measures, the federal government decided it would given an additional 10 percent of any Medicaid fraud settlement to the states that passed new false claims acts of their own. Fourteen states did just that, but these measures were thrown into doubt after subsequent federal laws further increased the strictness of federal regulations. Finally, the Department of Health and Human Services decided the changes to federal law meant that the previously compliant states now had laws that were too weak to qualify for the 10 percent bonus.
The states were given a grace period during which they could continue to qualify for the extra 10 percent incentive. Three states' grace periods ended in March and for 11 others the grace period ends on August 31st, meaning little time remains for the states to pass new and tougher laws if they want to ensure they continue getting valuable federal money. The states impacted by the coming deadline are California, New York, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Michigan, Nevada, Rhode Island, Tennessee, Texas, Wisconsin and Virginia.
Though it might seem obvious that the states should take whatever action is necessary to ensure their laws comply and that they are able to continue raking in additional federal money, some lawmakers have complained about the new, harsher requirements. For instance, opponents of the toughened False Claims Act say that passing such measures would require states to commit significant resources to investigating Medicaid fraud claims and would also require that they share recoveries with whistleblowers.
The drug and medical lobbies have pushed hard in such states against whistleblower provisions, arguing that they encourage frivolous lawsuits and lead to a hostile business environment. Afraid to run away big business, some lawmakers worry about passing the more stringent false claims acts that would be needed to keep collecting the 10 percent incentive. Rather than cave to corporate demands, lawmakers need to think about all that taxpayers stand to gain with the passage of new false claims acts.
Sources:
Incentivizing State False Claims Acts, published at NCSL.org.
OIG Issues Updated Guidelines on State False Claims Laws, by James Swann, published at Bloomberg BNA on March 15, 2013.
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