OIG: Nine state FCA laws do not meet federal standards

Statue holding justice scales

Nine states will have to amend laws allowing them to share in federal False Claims Act recoveries within the next two years following recent amendments to federal regulations and civil penalty increases.

State-based FCA laws must be at least as effective as the federal law. The Office of Inspector General’s (OIG) review of 29 states with FCA regulations found that legislation in nine states did not adhere to section 1909 of the Social Security Act, which provides states a larger percentage of fraud recoveries if they meet specific requirements. Recent amendments to the Federal False Claim Act have left some states out of compliance.

The states that need adjust their FCA laws include: Florida, Louisiana, Michigan, New Hampshire, New Jersey, New Mexico, North Carolina, Oklahoma, and Wisconsin.

Several states--including Florida, Michigan, Wisconsin and New Jersey--fell out of compliance because amendments through the Fraud Enforcement and Recovery Act of 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 that added new provisions to the federal FCA protecting whistleblowers against retaliation.

Some states offered less flexibility for whistleblower claims that did not elicit government intervention. For example, unlike the federal FCA, New Hampshire’s law does not allow for realtors to proceed with FCA claims if the state declines to intervene. A number of others did not carve out certain exceptions for whistleblowers that reported misconduct before news reports or government audits or hearings.

States have been more willing to explore localized FCA regulation in an effort to share in federal recoveries that impact Medicaid funds. Washington is the most recent state to implement its own FCA that's increased the number of fraud investigations and triggered multi-million dollar recoveries.