Deficit Reduction Act of 2005

Does your organization receive or make annual payments of at least $5 million under a State Medicaid Plan? If so, the Deficit Reduction Act of 2005 (DRA) established new requirements concerning "Employee Education About False Claims Recovery" that will likely affect you in the very near future. These requirements apply to all "entities," including governmental agencies, organizations, units, corporations, partnerships or other business arrangements, whether for-profit or not-for-profit, that meet certain thresholds of Medicaid participation.

The DRA requires each State to amend its Medicaid Plan to put in place mechanisms to enforce the new DRA requirements. If your "entity" is covered by this statute, you will be required to establish and disseminate to all employees, contractors and/or agents written employee policies (which must be included in your employee handbook, if you have one) concerning false claims recovery. These policies must include detailed information about the False Claims Act and other statutory provisions, and your organization's policies and procedures for detecting and preventing waste, fraud and abuse. You also must include in the employee handbook a specific discussion of the laws described in the written policies, the rights of employees to be protected as whistleblowers, and a specific discussion of your policies and procedures for detecting and preventing fraud, waste and abuse.

All States are required to amend their State Plan to comply with their oversight and compliance responsibilities under the DRA.  Each State has until March 31, 2007 to amend its Plan. While the federal statute has an effective date of January 1, 2007, many States have not yet amended their State Plans. This gives affected employers little direction on how they can ensure their policies will be consistent with the compliance requirements which will ultimately be established under the applicable State Plans. In addition, CMS may, at its discretion, independently audit organizations or otherwise determine an organization's compliance at any time.