I looked into the experiences that states have had with their own False Claims Acts, because almost every state is considering passing its own. I have tried to provide a brief summary that I hope is useful to you.
To encourage states to enact their own False Claims statutes with qui tam whistleblower provisions that are at least as effective as the federal Act, Congress created a large financial incentive when it passed the Deficit Reduction Act of 2005. States that have or enact such acts become eligible as of January 1, 2007, for a 10% increase in the state’s share of Medicaid fraud recoveries.
Many states, therefore, will consider whether to follow suit by enacting their own False Claims Act as early as 2007. Thus, it is important to consider other states’ experiences with their own state statutes governing false claims.
Most qui tam cases filed under the state statutes have been related to health care. Many are “global” Medicaid cases that were first developed in federal courts as Medicare and Medicaid fraud cases and that concerned a nationwide fraud which had been investigated by multiple federal and state jurisdictions.
Texas recovered $45.5 million in 2004 from pharmaceutical companies based on their allegedly overstating the price of prescription brand-name and generic-brand drugs. The Texas Attorney General stated that neither the lawsuit nor the settlement would have been possible had the state not enacted a qui tam provision.
California recovered $43.1 million in 2005 in a state false claims action alleging fraud in the installation and monitoring of heating and cooling equipment in San Francisco schools. In 2001, California recovered $31.9 million in an action alleging fraudulent billing during construction of the Los Angeles subway system. Similarly, California recovered $30 million in 2000 in a matter alleging the knowing sale of defective computers to the state and political subdivisions. In 1998, California recovered $187 million in an action alleging the improper retention of unclaimed municipal bonds.
Most of the state settlements have come from “piggy backing” on federal law enforcement efforts and from joining in global settlements. Experience with some of the newer state statutes is too recent to evaluate, but many states have reported the desire for more resources to develop such cases. Id.
It is critical to note that, by January 2007, the Office of Inspector General of the Department of Health and Human Services had reviewed the adequacy of the false claims statutes of ten states, and found that seven of the ten did not meet the requirements of the Deficit Reduction Act. HHS OIG approved the statutes of Illinois, Massachusetts, and Tennessee, while concluding that the following states’ statutes did not qualify for the financial incentives available to states under the Deficit Reduction Act: California, Florida, Louisiana, Indiana, Michigan, Nevada, and Texas. (See Office of the Inspector General).
Thus, while many of these states have benefitted financially by recovery of substantial damages under their respective false claims statutes, the statutes will need to be strengthened in order to permit those states to participate in the huge financial incentives available under the Deficit Reduction Act.