Georgia Newly Enacted State False Medicare Claims Act, O.C.G.A. § 49-4-168

On April 13, 2007, the Georgia General Assembly passed a bill titled "State False Medicaid Claims Act" ("SFMCA"), HB 551, which is widely expected to be signed by Georgia Governor Sonny Perdue by mid-summer. The SFMCA will add a new statute (i.e., O.C.G.A. § 49-4-168) to Title 49, Chapter 4 of the Georgia Code, which relates to state public assistance.

Georgia’s SFMCA includes a qui tam provision that allows private citizens to file actions against any party that recklessly submits false or fraudulent claims for payment of Georgia Medicaid funds to the state or any other party handling such funds. As an incentive to bring an action under the act, the Georgia SFMCA allows these private plaintiffs -- commonly known as “relators,” see Cook County, Ill. v. U.S. ex rel. Chandler, 538 U.S. 119, 122 (2003) -- to recover a percentage of the proceeds obtained by the state government. In general, this percentage varies between 15-30% of the proceeds recovered by the state  depending on (1) whether the government intervenes in a case and handles the litigation (rather than the relator) and (2) the relator’s overall contribution to the action.

National Wave of Similar State False Claims Acts Passed in Response to the DRA

Georgia’s passage of a state false claims act targeting Medicaid fraud is part of a national wave of similar state enactments over the past 18 months.

California was the first state to pass such a law in 1987, see 1987 Cal. Legis. Serv. 1420 (West), and until 2005, only 16 states had passed false claims laws with qui tam provisions (i.e., California, Delaware, District of Columbia, Florida, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Mexico, Tennessee, Texas, and Virginia). However, since the President signed the Deficit Reduction Act of 2005 (“DRA”) in February of 2006, which provides states with incentives to enact similar false claim statutes covering Medicaid claims. Georgia and at least 18 of its sister states have attempted to pass legislation to satisfy the DRA’s requirements.

With respect to the DRA’s incentives, the federal statute provides a 10% reduction to the portion of recoveries from actions brought under qualified state false claims acts that would otherwise have been reimbursed to the federal government commensurate with federal Medicaid funding to that state. For instance, if the federal government pays 65% of a particular state’s Medicaid expenses, that state would be permitted to retain 45% of the amount recovered in a false claims action brought pursuant to a qualified state false claims statute, rather than the traditional 35% that the state would have collected had the funds been recovered through a federal false claims action.

This provision of the DRA was strongly backed by Senator Charles Grassley of Iowa – a principal author of the 1986 amendments to the federal False Claims Act, 31 U.S.C. §§ 3729 – 3733, that are widely credited with rejuvenating the previously moribund statute -- who believed that adding state false claims statutes would deter Medicaid fraud and abuse by inducing whistleblowers regularly to report such misconduct. See Letter from Senator Charles Grassley to Daniel R. Levinson, Inspector General, Department of Health and Human Services (Mar. 17, 2006).

Inspector General Approval of Georgia Law Is Necessary, But Likely

In order for Georgia’s SFCA to qualify for the 10% benefit available under the DRA, the Inspector General of the Department of Health and Human Services (“HHS/OIG”) must determine, inter alia, that the Georgia statute “contain[s] provisions that are at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims as those described” in the federal False Claims Act. See 42 U.S.C.A. § 1396h. In August of 2006, the HHS/OIG issues “Guidelines for Evaluating State False Claims Acts,” which indicated that the HHS/OIG would only qualify state statutes that included provisions matching or exceeding the federal False Claims Act in numerous specific categories (e.g., damages, penalties, procedural protections for whistleblowers, and particular qui tam relators’ percentage-share of recoveries). Given this strict approach, it was no surprise that the HHS/OIG rejected 7 of the first 10 state statutes that were submitted for review. See http://oig.hhs.gov/fraud/falseclaimsact.html. However, as opposed to the laws passed by many of its sister states, Georgia’s SFCA copies all relevant portions of the federal False Claims Act virtually word-for-word. Thus, in all likelihood, the HHS/OIG will approve Georgia’s SFCA, thereby qualifying the state for the DRA’s 10% benefit on all recoveries under the act.