To amend title XIX of the Social Security Act to strengthen State and local government efforts to investigate and prosecute fraud and abuse in the Medicaid Program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicaid Fraud Recovery Act of 
2008''.

SEC. 2. PROMOTING MEDICAID FRAUD INVESTIGATIONS AND PROSECUTIONS BY 
              LOCAL GOVERNMENTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b) is amended by adding at the end the following new subsection:
    ``(aa) Use and Funding of Local Fraud Units.--
            ``(1) In general.--Nothing in this title shall be construed 
        as preventing a county or other local government from 
        establishing a local fraud investigative unit to investigate 
        and prosecute provider and recipient fraud under this title 
        within the jurisdiction of such local government.
            ``(2) State recognition and funding of local units.--In the 
        case of the establishment by a local government of a local 
        fraud investigative unit in a State under paragraph (1), the 
        State shall provide in its State plan under this title the 
        following:
                    ``(A) Recognition of unit.--The plan shall 
                recognize such a unit and permit its operations in 
                accordance with this subsection and may not establish 
                internal procedures that prevent such a unit from being 
                recognized or functioning.
                    ``(B) Data sharing required.--The Department of 
                Health of the State and any administrative unit 
                responsible for claims administration under this title 
                in the State shall make available to such unit all data 
                relating to this title in the area of such unit.
                    ``(C) Pass-through payment of ffp.--The State shall 
                provide for payment, on a pass-through basis, to the 
                local government of the Federal financial participation 
                received by the State under section 1903(a) which is 
                attributable to expenses of such unit.
                    ``(D) Repayment of local share in case of 
                recoupment.--In the case of a State in which local 
                governments are responsible for paying a portion of 
                medical assistance expenses, if there is a recoupment 
                of funds under the State plan and--
                            ``(i) the recoupment was a result of 
                        activities of such a unit of local government, 
                        the State shall provide for payment to the 
                        local government of its original share of the 
                        expenses for which the recoupment is made; or
                            ``(ii) the recoupment was not the result of 
                        activities of such a local government unit, the 
                        State shall provide for the payment described 
                        in clause (i) to the local government unless 
                        otherwise provided under an agreement between 
                        the State and local government involved.
                    ``(E) Payment of bounty in case of local 
                prosecution.--If funds under the plan are recouped and 
                an investigation by such local unit led the recoupment 
                of funds, the State shall, from its share of such 
                recouped funds, provide for payment to the local 
                government of a bounty equal to 10 percent of such 
                recouped share.
            ``(3) Explanation for failures to prosecute.--If a State 
        refuses to prosecute a case which has been referred to it by a 
        local fraud investigative unit described in paragraph (1), the 
        State must provide to the unit a statement that--
                    ``(A) explains the reasons for such refusal; and
                    ``(B) identifies which entity is more appropriate 
                to handle the prosecution or resolution of the case and 
                the reasons for selecting such entity.
            ``(4) Requirement for semi-annual reports.--As a condition 
        for the provision of payments to a State (or to a locality 
        under paragraph (2)(C)) under subsection (a)(6), the State or 
        locality shall submit semiannual reports to the Secretary. Such 
        reports shall contain such information on investigations and 
        prosecutions of fraud under this title as the Secretary may 
        specify.
            ``(5) Method for determination of referrals.--For purposes 
        of this subsection, the State shall establish a method for 
        determining whether a recoupment of funds was a result of 
        activities of a unit of local government and for identifying 
        cases in which a local fraud investigative unit has referred a 
        case for prosecution.''.

SEC. 3. ENHANCED MEDICAID FUNDING FOR ANTI-FRAUD ACTIVITIES.

    (a) In General.--Section 1903(a)(6)(B) of the Social Security Act 
(42 U.S.C. 1396b(a)(6)(B)) is amended by inserting before the semicolon 
at the end the following: ``plus, not subject to the limitations of 
subsection (b)(3), 66\2/3\ percent of such additional sums expended in 
the quarter for fraud investigative activities, whether conducted by 
such unit or by local fraud investigative units described in subsection 
(aa)(1)''.
    (b) Effective Date.--The amendment made by paragraph (1) shall 
apply to expenditures occurring on or after October 1, 2008.

Summary: Medicaid Fraud Recovery Act of 2008 - Amends title XIX (Medicaid) of the Social Security Act to provide for: (1) use of local Medicaid fraud investigative units. And (2) enhanced Medicaid funding for anti-fraud activities by such local or state Medicaid fraud control units.