SEC. 2. PROMOTING MEDICAID FRAUD INVESTIGATIONS 
AND PROSECUTIONS BY LOCAL GOVERN-
MENTS. 
(a) IN GENERAL.—Section 1903 of the Social Secu-
rity 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 inves-
tigative unit to investigate and prosecute provider 
and recipient fraud under this title within the juris-
diction 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 pro-
vide in its State plan under this title the following: 
‘‘(A) RECOGNITION
OF
UNIT.—The plan 
shall recognize such a unit and permit its oper-
ations in accordance with this subsection and 
may not establish internal procedures that pre-
vent such a unit from being recognized or func-
tioning. 
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‘‘(B) DATA SHARING REQUIRED.—The De-
partment of Health of the State and any ad-
ministrative unit responsible for claims adminis-
tration 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 attrib-
utable 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 govern-
ment, the State shall provide for payment 
to the local government of its original 
share of the expenses for which the 
recoupment is made; or 
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‘‘(ii) the recoupment was not the re-
sult of activities of such a local government 
unit, the State shall provide for the pay-
ment 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
PROS-
ECUTE.—If a State refuses to prosecute a case 
which has been referred to it by a local fraud inves-
tigative 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 appro-
priate to handle the prosecution or resolution of 
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the case and the reasons for selecting such enti-
ty. 
‘‘(4) REQUIREMENT
FOR
SEMI-ANNUAL
RE-
PORTS.—As a condition for the provision of pay-
ments 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 in-
vestigations and prosecutions of fraud under this 
title as the Secretary may specify. 
‘‘(5) METHOD FOR DETERMINATION OF REFER-
RALS.—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 So-
cial 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), 
662⁄3 percent of such additional sums expended in the 
quarter for fraud investigative activities, whether con-
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ducted 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. 
Æ 
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