[L]egislation intended to help Vermont combat those who defraud government programs is on its way to Gov. Peter Shumlin’s desk.
The House voted Wednesday to concur with a Senate version of H.120, which creates a state False Claims Act mirroring the federal law, which dates back to the Civil War. The federal act was passed to punish unscrupulous vendors for selling the Union army faulty weapons or equipment.
The law allows people who discover that the government is being defrauded to file suit on the government’s behalf, and awards them a portion of any resulting settlement. Under the federal act, the U.S. government recovered close to $6 billion last fiscal year.
Much of what was recovered at the federal level comes from fraud in the finance and defense industries, but the Department of Health and Human Services consistently benefits from false claims suits to combat fraud in Medicare and Medicaid, the major government health care programs.
To encourage states to pursue fraud in their Medicaid programs, which operate through a state and federal partnership, HHS offers states that pass a federally compliant false claims act a larger portion of Medicaid fraud settlements.
“Anywhere from 3 to 10 percent of every dollar spent in government health care programs is related to fraud and abuse,” said Jason Turner, an assistant attorney general who leads the Medicaid fraud unit, citing national statistics.
From 2010 to 2014, Vermont’s Medicaid fraud unit, with help from the U.S. Attorney’s Office and the Department of Justice, has collected $23.5 million in settlements. The amount Vermont received as part of those settlements would have been greater had the state false claims act already been law.
“From a policy perspective, it would be imprudent for us not to have a state parallel to combat waste fraud and abuse,” said Rep. Willem Jewett, D-Ripton, vice chair of the House Judiciary Committee.
If Shumlin signs the legislation, Vermont would join 30 other states and the District of Columbia that have state false claims acts. A spokesman said the governor supports the bill but needs to review the legislation before signing it.
Vermont’s false claims act contains a retroactivity clause that drew opposition from groups representing health providers. The provision allows suits to be brought relating to fraud that occurred up to 10 years before the law’s passage.
An attorney representing the Vermont Association of Hospitals and Health Systems testified that the retroactivity provision might be unconstitutional because it “violates the ex post facto clause,” which protects people from being prosecuted for actions that were not illegal at the time they occurred.
It’s also a matter of “fundamental fairness” that residents and businesses should not be subjected to “potential of substantial penalties” for violating a law that didn’t exist when an alleged violation occurred, wrote Kevin Henry, an attorney with the firm Primmer Piper Eggleston and Cramer.
His testimony highlights legal challenges in New York and New Mexico to cases brought under the retroactivity clauses in those states’ false claims acts.
Jewett asked that the retroactivity clause be included to allow Vermont to participate in ongoing multistate fraud cases using its own false claims act, and to allow potential whistleblowers to bring cases that would predate the law’s passage.
A compromise brokered by Sen. Dick Sears, D-Bennington, when the bill was before the Senate, delays the retroactivity clause until 2016, when constitutional challenges in those states’ laws are expected to be resolved.
That would give the Legislature an opportunity to repeal the clause during the 2016 session to avoid a similar legal challenge.
