BILL ANALYSIS Ó AB 2492 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2492 (Blumenfield) As Amended June 18, 2012 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |46-26|(May 3, 2012) |SENATE: |24-12|(August 13, | | | | | | |2012) | ----------------------------------------------------------------- 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. AB 2492 Page 2 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 AB 2492 Page 3 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 AB 2492 Page 4