BILL ANALYSIS

S.B. 1038

By: Sparks

Human Services

Committee Report (Unamended)

BACKGROUND AND PURPOSE

According to the National Health Care Anti-Fraud Association, up to 10 percent of any given state's annual spending on health care is lost each year to fraud, waste, and abuse. The bill's sponsor has informed the committee that while some losses may stem from inadvertent errors, a portion is directly linked to knowing misconduct. The Office of Inspector General (OIG), as the state agency responsible for enforcing administrative violations against state health and human service programs, aims to align Chapter 32, Human Resources Code, with the health care fraud violations outlined in Chapter 36, Human Resources Code, and in Chapter 35A, Penal Code, to enable consistent pursuit of misconduct across criminal, civil, and administrative domains. S.B. 1038 seeks to resolve this issue and strengthen the OIG's Medicaid enforcement by clarifying the scope of impermissible activities that may subject an actor to administrative remedies, ensuring that the OIG's authority effectively applies across different health care delivery systems, and providing a modernized remedy structure to increase the OIG's effectiveness in recovering taxpayer dollars and deterring future unlawful behavior.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

S.B. 1038 amends the Human Resources Code to revise and expand the list of conduct that constitutes a violation under Medicaid. The bill replaces the violation of presenting or causing to be presented to the Health and Human Services Commission (HHSC) a claim that contains a statement or representation the person knows or should know to be false with the violation of knowingly submitting or causing to be submitted a claim that contains a false statement, misrepresentation, or omission of a material fact. The bill includes the following as conduct constituting a violation:

· knowingly making or causing to be made a false statement or misrepresentation of a material fact to permit a person to receive a benefit or payment under Medicaid that is not authorized or that is greater than the benefit or payment that is authorized;

· knowingly concealing or failing to disclose information that permits a person to receive a benefit or payment under Medicaid that is not authorized or that is greater than the benefit or payment that is authorized;

· knowingly applying for and receiving a benefit or payment on behalf of another person under Medicaid and converting any part of the benefit or payment to a use other than for the benefit of the person on whose behalf it was received;

· knowingly making, causing to be made, inducing, or seeking to induce the making of a false statement or misrepresentation of a material fact concerning the conditions or operation of a facility in order that the facility may qualify for certification or recertification under Medicaid, including certification or recertification as any of the following entities:

o a hospital;

o a nursing facility or skilled nursing facility;

o a hospice provider;

o an intermediate care facility for individuals with an intellectual disability;

o an assisted living facility; or

o a home and community support services agency;

· knowingly making, causing to be made, inducing, or seeking to induce the making of a false statement or misrepresentation of a material fact concerning information required to be provided under a federal or state law, rule, regulation, or provider agreement pertaining to Medicaid;

· knowingly presenting or causing to be presented a claim for payment for a product provided or a service rendered by a person who is not licensed to provide the product or render the service, if a license is required, or is not licensed in the manner claimed;

· knowingly making or causing to be made a claim for the following:

o a service or product that has not been approved or accepted by a treating physician or health care practitioner;

o a service or product that is substantially inadequate or inappropriate as compared to generally recognized standards within the particular discipline or within the health care industry; or

o a product that has been adulterated, debased, or mislabeled, or that is otherwise inappropriate;

· making a claim and knowingly failing to indicate the type of license of the provider who actually provided the service;

· making a claim and knowingly failing to indicate the identification number of the licensed provider who actually provided the service;

· knowingly obstructing HHSC's office of inspector general (OIG) from carrying out the OIG's statutory duties; and

· knowingly making, using, or causing the making or use of a false record or statement material to an obligation to pay or transmit money or property to the state under Medicaid, or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the state under Medicaid.

The bill expands the violation that involves a contracted Medicaid managed care organization (MCO) failing to provide to HHSC information required to be provided by law, HHSC rule, or contractual provision by including failure to provide required information to another appropriate agency as applicable conduct and adding a reference to such an agency's rules.

S.B. 1038 does the following to provide for the meaning of terms referenced in the violation conduct descriptions:

· establishes the following regarding the term "knowingly":

o a person acts knowingly with respect to information if the person has knowledge of the information, acts with conscious indifference to the truth or falsity of the information, or acts in reckless disregard of the truth or falsity of the information; and

o proof of a person's specific intent to commit a violation of applicable provisions is not required in a civil or administrative proceeding to show that the person acted knowingly with respect to information;

· repeals a statutory provision establishing that a person "should know" or "should have known" information to be false if the person acts in deliberate ignorance of the truth or falsity of the information or in reckless disregard of the truth or falsity of the information and that proof of the person's specific intent to defraud is not required;

· defines "material" as having a natural tendency to influence or to be capable of influencing; and

· changes the meaning of "claim" from an application for payment of health care services under Title XIX of the federal Social Security Act that is submitted by a person who is under a contract or provider agreement with HHSC to an application, request, or demand for a benefit or payment under that title.

S.B. 1038 makes the following changes regarding the damages and administrative penalty for which a person who commits a Medicaid violation is liable to HHSC:

· with respect to the person's liability for damages, which is currently the amount paid, if any, as a result of the violation and specified interest:

o specifies that the amount paid includes any payment made to a third party;

o includes a benefit received as a result of the violation among the person's liabilities; and

o clarifies that the amount paid or benefit received may be in a direct or indirect manner; and

· with respect to the administrative penalty, which is an amount not to exceed twice the amount paid, if any, as a result of the violation, plus an additional amount for each violation subject to certain limits:

o provides for the cap on the additional amount for a violation that results in injury to an elderly person, a person with a disability, or a person younger than 18 years of age, which is currently set at $15,000, to instead be the maximum dollar amount imposed for a civil penalty based on certain false claims against the U.S. government as provided by federal law if that amount is greater than $15,000; and

o provides for the cap on the additional amount for any other violation, which is currently set at $10,000, to instead be that federal maximum dollar amount if that amount exceeds $10,000.

The bill classifies the damages and administrative penalty together as an administrative remedy and, in provisions establishing procedures for imposition and collection of a penalty from a violator, replaces references to a penalty with references to an administrative remedy.

S.B. 1038 specifies that, for purposes of the administrative penalty, each day a person engages in the following conduct constitutes a separate violation:

· knowingly obstructing the OIG from carrying out its statutory duties;

· committing one of the existing violations that apply specifically to the acts or failures to act of a Medicaid MCO that contracts with HHSC to provide or arrange to provide health care benefits or services to individuals eligible for Medicaid.

S.B. 1038 repeals the provision making a person who commits one of the following Medicaid violations liable to HHSC for either the amount paid in response to the claim for payment or an administrative penalty capped at $500 for each violation, as determined by HHSC:

· failing to maintain documentation to support a claim for payment in accordance with applicable requirements; or

· engaging in any conduct that an HHSC rule has defined as a Medicaid violation beyond the conduct described in statute.

However, the bill makes a person who fails to maintain that documentation liable in the same manner as in the repealed provision.

S.B. 1038 revises the conditions under which the exception to the Medicaid violation provisions for a claim based on a voucher prepared by HHSC does not apply, as follows:

· removes language making that exception inapplicable if the provider submitted information to HHSC for use in preparing the voucher that the provider knew or should have known was false or failed to correct such information when provided an opportunity to do so; and

· replaces it with language making the exception inapplicable if the provider knowingly submitted false or misleading information to HHSC for use in preparing the voucher or knowingly failed to correct such information when provided an opportunity to do so.

S.B. 1038 expands the requisite contents of the written notice of a preliminary report issued by HHSC stating the facts on which HHSC concluded that a person committed a Medicaid violation to include a description of the administrative and judicial due process remedies available to the person. The bill extends the deadline by which a person who receives that notice may either give HHSC written consent to the report, including the recommended remedy, or make a written request for an informal review by HHSC from not later than the 10th day after the date on which the person receives the notice to not later than the 30th day after that date. The bill similarly extends the deadline by which a person who receives written notice of the results of an informal review requested by the person may make to HHSC a written request for a hearing from not later than the 10th day after the date on which the person receives the notice to not later than the 30th day after that date.

S.B. 1038 amends the Government Code to change the cap on the award that HHSC may grant to an individual for reporting Medicaid fraud, abuse, or overcharges from five percent of the amount of the administrative penalty imposed on the violator as a result of the disclosure to five percent of the entire administrative remedy imposed on the violator as a result of the disclosure, which includes both the damages and administrative penalty.

S.B. 1038 repeals the following provisions of the Human Resources Code:

· Section 32.039(a)(4); and

· Section 32.039(b-1).

The bill's changes to Human Resources Code provisions establishing the Medicaid violations and related administrative remedies apply only to a violation that occurs on or after the bill's effective date. A violation that occurs before that date is governed by the law in effect on the date the violation occurred, and that law is continued in effect for that purpose.

If before implementing any of the bill's provisions a state agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, the agency affected by the provision must request the waiver or authorization and may delay implementing that provision until the waiver or authorization is granted.

EFFECTIVE DATE

September 1, 2025.