BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 2492
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        CONCURRENCE IN SENATE AMENDMENTS
        AB 2492 (Blumenfield)
        As Amended June 18, 2012
        Majority vote 
         
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        |ASSEMBLY:  |46-26|(May 3, 2012)   |SENATE: |24-12|(August 13,    |
        |           |     |                |        |     |2012)          |
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         Original Committee Reference:    JUD.  

         SUMMARY  :  Amends various provisions of California's False Claim Act 
        (CFCA) to conform to the Federal False Claim Act.  Specifically, 
         this bill  , among other things:   

        1)Expands the ability of the Attorney General (AG) and other 
          government prosecutors to contest dismissal of false claims 
          actions on the basis of public disclosure, consistent with federal 
          law.

        2)Allows current and former government employees to file a false 
          claims action for Medi-Cal fraud without exhausting internal 
          procedures, consistent with federal law.

        3)Authorizes the court to reduce the share of proceeds that a qui 
          tam plaintiff would otherwise receive if the court finds that the 
          action was brought by the person who planned and initiated the 
          underlying violation, in conformity with federal law.

        4)Authorizes the court to award attorneys' fees to a prevailing 
          defendant in an action brought by a qui tam plaintiff or by the 
          state or political subdivision, consistent with federal law.

        5)Increases anti-retaliation protections for employees, contractors 
          or agents who pursue false claims actions in a manner consistent 
          with federal law, including reinstatement with the same seniority 
          status, two times the amount of back pay plus interest, and 
          compensation for special damages.

        6)Amends the statute of limitations for filing a false claims 
          complaint to conform to the federal statute of limitations, and 
          establishes a "relation-back" clause consistent with federal law.

         The Senate amendments  correct a typographical drafting error.








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        AS PASSED BY THE ASSEMBLY  , this bill was substantially similar to 
        the version approved by the Senate.
         
        FISCAL EFFECT  :  According to the Senate Appropriations Committee:

        1)Enacting conforming changes to the CFCA preserves the state's 
          qualification for federal financial incentive awards related to 
          recoveries of Medicaid false claims.  Since 2009, annual federal 
          incentive awards received have been in the range of $20 million to 
          $40 million, which are deposited in the Health Care Deposit Fund 
          and the False Claims Act Fund.

        2)Minor, absorbable costs to the Department of Justice Medi-Cal 
          Fraud Control Unit and the Department of Health Care Services 
          Medical Review Branch internal claims processes and 
          investigations.

        3)Potential ongoing costs in the range of $23,000 to $76,000 
          (General Fund) to the Judicial Branch to the extent there is an 
          increase in the number of limited and/or unlimited civil filings 
          under the CFCA, offset to a degree by increased civil penalty 
          revenues.
         
        COMMENTS  :  The federal Social Security Act (SSA) provides a 
        financial incentive for states to enact laws that establish 
        liability to the state for individuals that submit false or 
        fraudulent claims to the state Medicaid program.  For a state to 
        qualify for this incentive, the state false claims law must meet 
        certain requirements enumerated under the SSA, as determined by the 
        Office of Inspector General (OIG) of the U.S. Department of Health 
        and Human Services (DHHS) in consultation with the Department of 
        Justice.

        Earlier this year, OIG notified the California Attorney General that 
        the state is no longer in compliance with federal law that allows 
        California to potentially recover tens of millions of taxpayer 
        dollars in federal incentive awards on Medicaid-related false claims 
        recoveries.  In its letter, the OIG methodically listed a number of 
        specific provisions of the California False Claims Act that, in its 
        determination, should be changed because they "were not at least as 
        effective in rewarding and facilitating qui tam actions as the 
        Federal False Claims Act."  According to the author, this bill is 
        intended to make the changes "deemed necessary by DHHS to maintain 
        California's eligibility for the 10% Medicaid recovery awards, as 








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        well as conform to other amendments to the federal law made by 
        Congress in 2010." 

        This bill therefore seeks to implement a number of changes to the 
        state False Claims Act, as identified by the OIG, that are needed to 
        conform CFCA to its federal counterpart and preserve the state's 
        eligibility for the federal funds.  Among other things, this bill 
        modifies the definition of some key terms, increases civil 
        penalties, increases anti-retaliation protections for employees and 
        others who pursue false claims actions, and clarifies application of 
        the statute of limitations, all consistent with federal law.

        Opponents of the bill express concern with two major provisions-the 
        public disclosure bar and the award of attorneys' fees to a 
        prevailing defendant.  With respect to the former, they assert that 
        the bill "eviscerates the public disclosure bar - a limitation that 
        prohibits private lawsuits by qui tam plaintiffs who sue based on 
        information already public, which could expose employers to numerous 
        frivolous lawsuits all based on the same public facts.  Instead, 
        this bill would allow the Attorney General or prosecutor for any 
        reason to permit the private plaintiff's lawsuit to go forward, even 
        when it is based on public information."  Supporters of the bill 
        note that the public disclosure rule in this bill simply reflects 
        existing federal law, namely 31 United States Code Section 
        3730(e)(4), that the Inspector General has indicated state law must 
        conform to in order to preserve California's eligibility for federal 
        incentive awards.  In other words, opponents' objection to the 
        public disclosure rule in this bill appears to be an objection to 
        existing federal law that, if not conformed to in California, could 
        jeopardize access to significant federal incentive awards.

        Opponents also contend that the bill's provision on prevailing 
        defendant's attorneys' fees is not in fact conforming to the federal 
        False Claims Act with respect to the award of attorneys' fees to a 
        prevailing defendant.  The April 16 amendments seek to reflect 
        better conformity between the bill and federal law, and were 
        successful in removing the opposition of at least one other 
        opponent, the Southern California Contractors' Association.   


        Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334  FN: 
        0004466 











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