LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session February 25, 1997 TO: Honorable Hugo Berlanga, Chair IN RE: House Bill No. 820 Committee on Public Health By: Cuellar House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB820 ( Relating to civil actions to recover fraudulent Medicaid claims.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB820-As Introduced FN Revision 1 Implementing the provisions of the bill would result in a net negative impact of $(735,391) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis This bill would amend Chapter 36 of the Texas Human Resources Code, the Medicaid Fraud Prevention Act, which prohibits fraudulent conduct with regard to the Texas Medicaid program. A private party would be allowed to bring suit on behalf of the State of Texas for violations of Chapter 36. The person filing the private lawsuit would be required to serve a copy of the petition on the State of Texas, and within the next 60 days the Attorney General may investigate the allegations and intervene and proceed with the action or decline to take over the action. If the State decides not to proceed with the action, the private plaintiff would have the right to continue the action. Under this bill, the State could either prosecute under Chapter 36 or pursue administrative remedies, in which case the private plaintiff could proceed with its lawsuit. If the State proceeds with the action, the private party would be entitled to from ten percent to 25 percent of any recovery. If the State does not proceed with the lawsuit, the private plaintiff could receive an amount that the court decides is reasonable, but not less than 25 percent or not more than 30 percent of the total recovery. The bill would also amend Chapter 531, Government Code, by adding Subchapter C, which would allow the Texas Health and Human Services Commission to grant an award to a person who reports Medicaid fraud if the disclosure results in the recovery of an overcharge or in the termination of fraud. The amount of the award would be at least ten percent of the savings to the State. The award by the Commission would be paid from money appropriated to the Commission, and additional money would not be appropriated to the Commission for the purpose of paying the award. The bill would take effect September 1, 1997. Methodolgy The bill's fiscal impact to the Office of the Attorney General involves the creation of a private lawsuit for conduct declared unlawful under Chapter 36, Human Resources Code. The Attorney General would be required to investigate and evaluate the merits of every notice of private lawsuit filed and to prosecute those lawsuits in which the Attorney General decides to intervene. It is estimated that there could be a substantial number of such actions filed because of the financial incentives in the bill for private citizens and that this bill would require the Office of the Attorney General to add one Assistant Attorney General IV, plus three other new employees, including an investigator, a legal assistant, and a legal secretary. It is estimated that the bill would result in costs to The Office of the Attorney General of $376,762 in fiscal year 1998, and $358,629 in subsequent years. The difference in these amounts reflects a one-time purchase of capital equipment in the first year. The bill allows the Attorney General not to proceed under Chapter 36, in which case other agencies could pursue administrative remedies, possibly requiring new personnel, including investigators, attorneys and support staff to investigate allegations of Medicaid fraud, assess administrative penalties, conduct administrative hearings, and adjudicate appeals. The Attorney General is allowed to recover court costs, attorneys' fees and investigative costs under the Appropriations Act, which could result in an offsetting amount of appropriated receipts recovered by the Attorney General. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Change in Number Savings/(Cost) of State from General Employees from Revenue Fund FY 1997 0001 1998 ($376,762) 4.0 1998 (358,629) 4.0 2000 (358,629) 4.0 2001 (358,629) 4.0 2002 (358,629) 4.0 Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 ($376,762) 1999 (358,629) 2000 (358,629) 2001 (358,629) 2002 (358,629) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: 304 Comptroller of Public Accounts 302 Office of the Attorney General 529 Health and Human Services Commission LBB Staff: JK ,BB ,JC