The Office of Inspector General for the Department of Health and Human Services (OIG) completed its review of 24 individual state false claims acts for compliance with Section 1909 of the Social Security Act. This section, made effective on January 1, 2007, is intended to encourage states to enact or update existing state false claims act (FCA) legislation to facilitate the prosecution of state false claims act cases. Specifically, federal law provides a financial incentive to a state with legislation that is in compliance by increasing that state’s share of monetary recovery from any lawsuit brought under the state's false claims act by 10 percent.
To qualify for this incentive, the OIG in consultation with the Attorney General must determine that the state false claims act satisfies four requirements: (1) the state law establishes liability to the state for false or fraudulent claims described in the federal FCA with respect to any expenditures related to the state’s Medicaid plan; (2) the state law contains provisions that are at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims as those described in the federal FCA; (3) the state law contains a requirement for filing an action under seal for 60 days with review by the state attorney general; and (4) the state law contains a civil penalty that is not less than the amount of the civil penalty authorized under the federal FCA.
The OIG had previously reviewed and determined that the existing state false claims acts of 14 states satisfied Section 1909 requirements when measured against previous versions of the federal FCA effective at the time of the prior reviews. These states were California, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Michigan, Nevada, New York, Rhode Island, Tennessee, Texas, Virginia and Wisconsin. However, due to recent amendments to the federal FCA in 2009 and 2010 that modified the bases for federal FCA liability, revised provisions concerning qui tam relators, and increased the range of civil penalties from $5,000-$10,000 to $5,500-$11,000, the OIG found that these state laws were no longer compliant. For these 14 states, the OIG granted a 2-year grace period ending on March 31, 2013, during which time the states can update and resubmit their amended state false claims acts to the OIG for approval, but will continue to enjoy the 10 percent incentive with respect to any recovery awarded under their existing state FCA.
In the case of Wisconsin, for example, the OIG previously reviewed and approved the Wisconsin False Claims Act in November 2008. On March 21, 2011, the OIG found that the same statute now failed to meet the requirements of Section 1909 because, among other things, it failed to include expanded definitions of “claim,” “obligation” and “material” as contained in the recently amended federal FCA. The Wisconsin statute also failed to update the civil penalty amounts to $5,500-$11,000.
The OIG also reviewed 10 other states’ false claims acts and determined that these statutes also failed to meet Section 1909 requirements when compared to the current federal FCA. These states were Colorado, Connecticut, Delaware, Florida, Iowa, Louisiana, New Hampshire, New Jersey, New Mexico and Oklahoma. Since the OIG had not previously approved these states’ false claims acts, no grace period was granted.
One of the stated requirements of Section 1909 is for state FCAs to be “at least as effective in rewarding and facilitating qui tam actions” as the federal FCA. According to the OIG, state FCAs cannot “more broadly bar qui tam actions…” or “more broadly limit the relator’s recovery” and must “establish liability for the same breadth of conduct” as the federal FCA. Thus, revisions to the state FCAs to satisfy these federal requirements are likely to give rise to more state FCA lawsuits.