BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2492 (Blumenfield) - California False Claims Act.
Amended: June 18, 2012 Policy Vote: Judiciary 4-0
Urgency: No Mandate: No
Hearing Date: July 2, 2012 Consultant: Jolie Onodera
This bill may meet the criteria for referral to the Suspense
File.
Bill Summary: AB 2492 would amend specific provisions of the
California False Claims Act (CFCA) to conform to the Federal
False Claims Act (FFCA), as specified.
Fiscal Impact:
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.
Minor, absorbable costs to the Department of Justice (DOJ)
Medi-Cal Fraud Control Unit (MFCU) and the Department of
Health Care Services (DHCS) Medical Review Branch internal
claims processes and investigations.
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.
Background: Existing law establishes the California False Claims
Act, which provides that a person who commits any one of several
specified acts relating to the submission of a false claim to
the state or a political subdivision shall be liable to the
state or political subdivision for triple the amount of damages
sustained by the government as well as the costs of the civil
action to recover the damages.
The CFCA is modeled after the Federal False Claims Act FFCA,
which was enacted during the Civil War and imposes liability on
persons and entities who defraud governmental programs. The FFCA
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includes a "qui tam" provision that allows individuals who are
not affiliated with the government to file actions on behalf of
the government (whistleblowing). Persons filing under the FFCA
stand to receive a percentage of any recovered damages. Claims
under the law have typically involved health care, military, or
other government spending programs. The government has recovered
billions of dollars under the FFCA in fraudulently obtained
public funds.
Under Section 1909 of the Social Security Act (SSA), states that
have false claims acts may qualify to receive a federal
incentive award of a ten percentage point increase in their
share of any amounts recovered under Medicaid-related false
claims. To qualify for the federal incentive, a state's false
claims act must:
Establish liability to the state for false or fraudulent
claims, as described in the FFCA with respect to Medicaid
spending;
Contain provisions that are at least as effective in
rewarding and facilitating qui tam actions for false or
fraudulent claims as those described in the FFCA;
Contain a requirement for filing an action under seal
for 60 days with review by the State Attorney General (AG);
and,
Contain a civil penalty that is not less than the amount
of the civil penalty authorized under the FFCA.
The FFCA was amended by the Fraud Enforcement and Recovery Act
of 2009 (FERA), the Patient Protection and Affordable Care Act
(PPACA) in 2010, and the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) in 2010. These three
federal acts amended the bases for liability in the FFCA and
expanded certain rights of qui tam relators.
The federal Office of the Inspector General (OIG) of the U.S.
Department of Health and Human Services (HHS) notified the AG in
a formal letter dated March 21, 2011, that upon its review of
the CFCA, it determined after consulting with the U.S.
Department of Justice, that the CFCA no longer meets the
requirements of Section 1909 of the SSA, both with regard to
compliance pursuant to the FERA, PPACA, and Dodd-Frank Act
amendments, as well as with other identified provisions of the
FFCA. A subsequent OIG letter dated August 31, 2011, identified
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one additional provision of non-compliance. The OIG has provided
the state with a two-year grace period until August 31, 2013, in
order for the state to resubmit an amended CFCA to address the
issues identified in both letters. Accordingly, the state will
continue to qualify for the financial incentive under Section
1909 of the SSA until August 31, 2013.
Proposed Law: This bill seeks to amend specific provisions of
the CFCA to conform to the FFCA in order to maintain
qualification for federal incentive awards. Specifically, this
bill:
Increases the civil penalty for specified violations of
the CFCA that currently ranges from $5,000 to $10,000 for
each false claim to $5,500 to $11,000.
Requires a court to dismiss a CFCA action or claim
unless opposed by the AG or prosecuting authority if
substantially the same allegations were publicly disclosed,
as specified.
Provides a statute of limitations for the AG to file
CFCA actions of six years from the date on which the CFCA
violation was committed or three years from the date when
facts material to the right of action are known, but in no
event more than 10 years after the date on which the
violation was committed.
Provides a statute of limitations for whistleblowers of
three years from the date the retaliation occurs.
Extends whistleblower protections to contractors and
agents.
Authorizes government employees to file CFCA claims
relating to Medi-Cal fraud in civil courts without having
to exhaust internal claims procedures.
Updates definitions of various terms to conform to the
FFCA.
Prior Legislation: AB 2760 (Tran) 2010 would have restricted
awards of attorney's fees in CFCA actions. This bill was not
heard in the Assembly Judiciary Committee.
AB 1196 (Blumenfield) Chapter 277/2009 amended the CFCA to
conform its structure to federal law, increased civil liability
for violations, and strengthened the government's ability to
prevent improper dismissal of false claims lawsuits.
Staff Comments: The DHCS has indicated no significant impact is
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anticipated on existing procedures related to its internal false
claims processes and investigations as a result of the
provisions of this bill, as the filing of a qui tam complaint
would not bar the DHCS from conducting internal corrective
procedures or investigations. To the extent additional qui tam
claims are filed as a result of eliminating the requirement of
having to exhaust internal claims procedures may potentially
result in an increased level of Medi-Cal fraud recoveries.
The provisions of this bill will preserve the state's
qualification for federal financial incentive awards related to
recoveries of Medicaid false claims. Information provided by the
DOJ reflects federal incentive awards of $26.4 million in 2009,
$19.2 million in 2010, and $43.3 million in 2011.
Medicaid-related fraud recoveries are divided between the Health
Care Deposit Fund administered by the DHCS and the False Claims
Act (FCA) Fund, administered by the DOJ.
The DOJ only receives incentive funds when a settlement or
judgment is reached which results in a recovery that exceeds the
amount identified as a loss sustained by Medi-Cal. Any funds
deposited into the FCA Fund are available to the DOJ upon
appropriation by the Legislature to support ongoing
investigations and prosecution of false claims. Staff notes the
FCA Fund condition statement reflects a $15.7 million loan to
the General Fund in 2010-11 pursuant to the Budget Act of 2010
and a transfer of $20 million to the General Fund in 2011-12
pursuant to the Budget Act of 2011.
By broadening the activities that may lead to the filing of a
false claims complaint, extending the time for filing actions,
and eliminating barriers to proceeding with a case, the Judicial
Council may experience an increased number of limited and
unlimited civil filings. It is unknown how many additional
filings might occur, however, to the extent there are 50
additional limited or unlimited civil filings, additional costs
would be in the range of $23,000 to $76,000 (General Fund).
These costs would be offset to a degree by increased civil
penalty revenues. Moreover, to the extent the increased filings
result in additional Medi-Cal fraud recoveries, increased
revenues to the state to the Health Care Deposit Fund and FCA
Fund would more than offset any additional costs to the courts
on an ongoing basis.
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