False Claims Act targeting government fraud passes House
by Angela Nicholas
American Red Cross
FRANKFORT — By a 91-to-1 margin, the Kentucky House of Representatives voted Monday for House Speaker Greg Stumbo’s effort to root our fraud across state government.
“The False Claims Act has proven to be a major success in the two dozen states that have it, and the federal government has relied on it in the modern era for nearly 30 years,” said Speaker Stumbo, D-Prestonsburg. “Actually, its first use goes back to the Civil War, when President Lincoln first implemented it to stop war profiteering.”
House Bill 401 has two main goals: Rooting out fraud and reducing the state’s deficit by potentially millions of dollars by giving whistleblowers strong financial incentive to step forward if state tax dollars are being misused.
“Kentucky’s False Claims Act would extend far beyond Medicaid, which is the sole focus in a handful of states with this legislation,” he said. “I want to see this used not just in that program, but anywhere fraud with state tax dollars is taking place. “There is only so much our law enforcement and auditing officials can do and a limit to how far they can reach; this will put every citizen on the look-out for fraud.”
Under the Speaker’s bill, those found guilty would be liable for up to three times the amount they had fraudulently billed the state; whistleblowers will be eligible to receive anywhere from 15 to 30 percent of the monies recovered as a reward for their service. Other civil penalties and attorney fees would be an additional cost for those found guilty.
Speaker Stumbo pointed to successes other states have seen using their False Claims Acts. In 1998, for example, California recouped $30 million from a computer manufacturer found to have sold the state defective computers; and in 2005, that state got $43.1 million from a company not fulfilling a contract to provide energy-efficient heating and cooling equipment to San Francisco schools. In 2001, Texas got $14.5 million from a hospital that had filed false paperwork, reported charity work it didn’t do and offered financial kickbacks.
Since 1986, according to the False Claims Act Legal Center, more than $25 billion has been recovered by False Claims Acts, with a substantial portion coming from healthcare companies. More information can be found online at http://www.taf.org/statefca.htm.
The legislation calls for the whistleblower to begin legal proceedings and gives the Attorney General the option to join on behalf of the state, with that office eligible for a portion of any amount awarded. Speaker Stumbo noted that he had pushed similar legislation last year and while he was Attorney General, and hoped that “this time we can get it across the finish line.” He added that both the current Attorney General and the Cabinet for Health and Family Services – the main enforcers of the bill – have helped form the legislation.
The Speaker’s bill could make Kentucky eligible for 10 percent more money recovered under Medicaid fraud. This is subject to federal approval, but it would let Kentucky receive up to 40 percent of the funds rather than 30 percent, which mirrors the traditional rate the state provides as part of its match for the $5 billion-plus program. The remaining funds would principally go to the federal government and the one who brought the initial legal action.
He said that the law does not create new levels of fraud, but offers an avenue for more cases to be prosecuted. It also does not apply in tax-related cases or those solely involving local governments.
“This legislation has a lot of potential, and I’m hoping we can move it through the Senate quickly,” Speaker Stumbo said. “The sooner we can get it enacted, the sooner we can bring about the kind of accountability Kentuckians deserve – not just in Medicaid, but everywhere in state government.”
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