Medicaid False Claims Act Review 3

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DEPARTMENT OF HEALTH & HUMAN SERVICES APR 1 5 2009

Office of Inspector General

Washington, D.C. 20201

Wallace T. Hart Division Chief, Health Care Fraud Division Department of the Attorney General P.O. Box 30218 Lansing, Michigan 48909 Dear Mr. Hart:

Health and Human Services (HHS) has received your request to review the Michigan Medicaid False Claims Act, Mich. the Compo Laws §§ 400.601 through 400.615, under the requirements of section 6031(b) of Deficit Reduction Act (DRA). Section 6031 of the DRA provides a financial incentive for States to enact laws that establish liability to the State for individuals and entities that submit false or fraudulent claims to the State Medicaid program. For a State to qualify for this incentive, the State law must meet certain requirements enumerated under section 6031 (b) of the DRA, as determined by the Inspector General of HHS in consultation with the Department of Justice the law and consultation with DOJ, we have determined that the (DOJ). Based on our review of Michigan Medicaid False Claims Act meets the requirements of section 6031 (b) of the DRA.

The Offce ofInspector General (OIG) ofthe U.S. Department of

Any amendment to the Michigan Medicaid False Claims Act could affect OIG's determination that it meets the requirements of section 6031 (b) of the DRA. Therefore, please notify OIG of any amendment to the Michigan Medicaid False Claims Act within 30 days after such amendment. If

you have any questions regarding this review, please contact me or have your staff contact

Katie Arnholt at (202) 205-3203 or katie.arnholt~oig.hhs.gov.

~¿~ Sincerely,

Daniel R. Levinson Inspector General

cc: Richard P. Billera, Centers for Medicare & Medicaid Services

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DEPARTMENT OF HEALTH & HÙMAN SERVICES

Office of Inspector General

Washington, D.C. 20201

ACTION MEMORANDUM FOR THE INSPECTOR GENERAL Issue: Your signature is requested on the attached letter stating that the Michigan Medicaid False section Claims Act, Mich. Compo Laws §§ 400.601 through 400.615, meets the requirements of 6031 of the Deficit Reduction Act of2005 (DRA), 42 U.S.c. § 1396h, and therefore qualifies for the DRA incentive.

Discussion: Section 6031 of the DRA created a financial incentive for States to enact legislation that establishes liability to the State for individuals or entities that submit false or fraudulent claims to the State's Medicaid program. The incentive takes the form ofa 10-percentage point increase in the State's medical assistance percentage of any amounts recovered in an action brought under a qualifying law. For a State to qualify for this incentive, among other things, a State law must contain provisions that are at least as effective in rewarding and facilitating qui tam actions as the provisions in the Federal False Claims Act. Section 6031 (b) of the DRA requires the Inspector General to determine, in consultation with the Attorney General ofthe U.S. Department of Justice (DOJ), whether a State law meets the requirements in the DRA. On August 21,2006, the Office ofInspector General (OIG) published a notice in the Federal Register containing OIG's guidelines for determining whether a State law qualifies for the DRA incentive. The notice invited States to submit requests for review of State false claims acts to GIG. To date, we have approved for the DRA incentive the false claims acts of a total of 13 States-

Massachusetts, Ilinois, Tennessee, Virginia, Hawaii, Texas, New York, Nevada, California, Georgia, Indiana, Rhode Island, and Wisconsin. If you sign the attached letter, we wil have determined that one additional state qualifies for the DRA incentive (Michigan). We received a request to review the Michigan Medicaid False Claims Act, found at Mich. Compo Laws §§ 400.601 through 400.615. Based on our review and consultation with DOJ, we believe that Michigan's law qualifies for the DRA incentive. OIG reviewed an earlier version of Michigan's law and determined that it did not quality for the DRA incentive. In December 2006, OIG sent a letter to Michigan explaining why its law did not qualify for the incentive. On letter to Michigan setting forth additional reasons why July 24,2008, OIG sent a supplemental the law currently under review Michigan's law did not qualify. The amended version of addresses all of the concerns that OIG identified in its two prior letters.

As explained in the Action Memorandum associated with the July 24, 2008, letter, there is a provision in Michigan's law that DOJ believes renders it less effective than the Federal False Claims Act at facilitating and rewarding qui tam actions. Specifically, Michigan's law requires not the court to award the defendant attorney's fees and expenses and to impose a civil fine of more than $10,000 against the relator if the relator continues with a case that has been declined by the State and the court finds that the relator's case was frivolous. The Federal False Claims Act allows the court, in its discretion, to award a defendant attorney's fees in similar situations, but does not impose a civil fine. DOJ believes that this additional fine is punitive and, therefore, renders Michigan's law less effective in rewarding and facilitating qui tam actions. We believe that the Federal False Claims Act's provision is clearly punitive and that Michigan's addition of the $10,000 fine, although also punitive, would not significantly deter relators. Accordingly, this provision was not included in the July 24,2008, letter as a basis for GIG's determination that Michigan's law did not qualify for the incentive. This provision is also in the amended version of Michigan's law.

Recommendation: We recommend that you sign the attached letter, stating that the law submitted by Michigan the DRA. fulfills the requirements of Decision: Approved:

Iml

Date:

Disapproved:

4/5/09 .

Attachment:

Tab A: Michigan DRA Letter

Contact: Katie Arnholt Telephone: (202) 205-3203 Concurrence:

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Assistant Inspector General for Legal Affairs

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