FRANKFORT — Two proposals before the state legislature would encourage whistle blowers to come forward to help the state recover potentially millions of dollars in fraudulent claims.
"We think there is a lot of waste in the Medicaid system," said Sen. Tom Jensen, a Republican from London and a sponsor of Senate Bill 11. "It is the fastest-growing portion of our state budget."
The bill would encourage people to help root out fraud in the $6 billion state-federal health care program for the poor.
SB 11 would allow a whistle blower who works for a Medicaid provider or contractor to turn over evidence to prosecutors and receive a portion of the money recovered. It would allow the state to recover triple damages from a provider that defrauds the state.
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House Speaker Greg Stumbo, D-Prestonsburg, has sponsored similar legislation in the House. House Bill 4 would expand the provisions of a state false claims act to include whistle blowers of any company that does business with the state.
"I want to see this used not just in (Medicaid), as the Senate is proposing, but anywhere fraud with state dollars is taking place," Stumbo said. "There is only so much our law enforcement and auditing officials can do. ... This will put every citizen on the lookout for fraud."
The federal False Claims Act allows the federal government to go after businesses that knowingly defraud the federal government. Nearly two dozen states — including Tennessee and Indiana — have their own false claims acts.
It's a legal concept dating to the Civil War and has been effective in other states, Stumbo said.
In California, for example, the state was able to recover $197 million from Bank of America after the bank improperly kept unclaimed city bonds, according to the False Claims Act Legal Center.
In Texas, a hospital had to repay $14.5 million for false reporting, inflating charity work and engaging in kickbacks. In Hawaii, a provider had to repay the state $4 million for wrongfully recycling and repackaging unused drugs from nursing home facilities, according to the center.
But there are concerns about the bill.
Attorney General Jack Conway said he doesn't oppose the concept of either bill but expressed reservations about the possible cost.
Because of the state's dwindling finances, Conway's staff, which includes the Office of Medicaid Fraud and Abuse Control, has gone from 250 to 190 people in recent years. The Senate version would cost his office $700,000 to $1 million, he said. Stumbo's bill probably would cost even more because it goes beyond Medicaid providers.
"I would need more staff and resources," Conway said.
Stumbo, a former attorney general, said if his bill is passed, and the state is able to recover millions of dollars in fraud, that money could pay for additional staff.
"My bill gives the attorney general's office from 5 to 15 percent of the total recovered proceeds, depending on its level of involvement," Stumbo said. "I believe it will pay for itself and generate significant recoveries for Kentucky taxpayers."
Under both proposals, a private attorney could pursue a whistle-blower lawsuit if the attorney general decides not to do so.
Hospitals and other health care providers oppose the bills.
Nancy Galvagni, senior vice president of the Kentucky Hospital Association, said the organization opposes both proposals because of concern that hospitals could be prosecuted for innocent mistakes.
"Mistakes in billing can occur for a number of reasons — something is coded incorrectly, a computer system glitch, et cetera," Galvagni said. "This is not fraud." Currently when mistakes happen they are handled by an administrative process, with any improper payment returned to the state."
A written statement by the Cabinet for Health and Family Services, which oversees the state's Medicaid program, said there is no opposition to either bill, but there is concern about a provision in the Senate version. The provision would require whistle blowers to report possible fraud to their employers before pursuing a whistle-blower claim or turning over the information to the attorney general.
"The requirement to notify the employer would, in all likelihood, defeat the purpose of the act and may conflict with the provisions" of the federal act, the statement read.
The bills do not create new classifications of fraud, an ongoing concern as the legislature tries to modernize and streamline the state's criminal code.
Stumbo's bill also exempts tax-related cases or cases involving local governments.
SB 11 passed unanimously in the first four days of the legislative session in January. It will now be referred to the House.
HB 4 has been referred to the House Judiciary Committee.
The legislature reconvenes Tuesday after a three-week hiatus.