DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
                    SMDL #06-021 
              September 19, 2006 
 
Dear State Medicaid Director: 
 
We are writing to encourage your State to implement a State False Claims Act.  Section 6031 of 
the Deficit Reduction Act of 2005 (DRA) encourages and provides incentive for adoption of 
State False Claims Acts by decreasing the Federal medical assistance percentage by 10 
percentage points for recoveries from legal actions brought pursuant to such laws.  Section 6031, 
which will become effective January 1, 2007, also equally rewards those already in place that 
meet the specified requirements. 
 
To be eligible for the increased recovery rate, States must enact (or have already in effect) a law 
that the Health and Human Services Office of Inspector General (HHS OIG), in consultation 
with the Department of Justice, determines to meet several criteria, including: 
 
(1) establishes liability to the State for false or fraudulent claims described in 31 U.S.C. 
section 3729, with respect to any expenditure described in section 1903(a) of the 
Social Security Act; 
 
(2) contains provisions that are at least as effective in rewarding and facilitating qui tam 
actions for false or fraudulent claims as those described in 31 U.S.C. sections 3730 
through 3732; 
 
(3) contains a requirement for filing an action under seal for 60 days with review by the 
State Attorney General; and 
 
(4) contains a civil penalty that is not less than the amount of the civil penalty authorized 
under 31 U.S.C. section 3729.  
 
The CMS strongly supports State program integrity measures and wants States to be aware that 
State False Claims Acts may enhance the recovery of falsely or fraudulently obtained Medicaid 
dollars.  
 
The HHS OIG published guidelines in the August 21, 2006, Federal Register (71 Fed. Reg. 48552) 
it will use in the review of State False Claims Acts.  If you have questions related to these 
guidelines, please contact Mr. Roderick Chen, Office of Counsel to the Inspector General at  
 
 
 
 
 
  Page 2  State Medicaid Director 
 
(202) 619-2078.  If you have questions regarding section 6031 of the DRA that relate to CMS 
policy or procedures, please contact Mr. Robb Miller, Acting Director, Division of Field 
Operations, Medicaid Integrity Group, at (312) 353-0923. 
 
            Sincerely, 
 
            /s/ 
 
            Dennis G. Smith 
            Director 
             
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
  for Medicaid and State Operations 
 
Martha Roherty 
Director, Health Policy Unit 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Jacalyn Bryan Carden 
Director of Policy and Programs 
Association of State and Territorial Health Officials 
 
Christie Raniszewski Herrera 
Director, Health and Human Services Task Force 
American Legislative Exchange Council 
 
Lynne Flynn 
Director for Health Policy 
Council of State Governments