SB1038

SB1038 broadens and reorganizes Texas’s administrative remedies for Medicaid fraud and abuse, while giving people more time to challenge an assessment. A “claim” now includes an application, request or demand for a Medicaid benefit or payment, not only a health-service payment application from a contracted provider. “Knowingly” includes knowledge, conscious indifference or reckless disregard of information’s truth; proving a specific intent to violate this section is not required to establish that knowledge standard in civil or administrative proceedings. The act also defines “material” as naturally tending to influence or capable of influencing. Final law, sections 2–4; Pre-act HR 32.039.

The administrative violation list now expressly covers false statements or material omissions in claims; false or concealed eligibility/payment information; diverting another person’s benefits; false facility-certification or required information; claims involving unlicensed providers, unapproved or substantially inadequate services, inappropriate products or omitted provider identifiers; knowingly obstructing the inspector general; and knowingly using false records or improperly avoiding obligations to pay the state. It retains referral/inducement restrictions, managed-care contract violations and supporting-documentation duties, and separates other violations defined by commission rule into their own category. The individual provisions specify when knowledge is required; this is not a blanket excuse from recordkeeping or other duties. Nor does the expanded list mean the conduct was previously lawful under every other statute. Final law, section 4, amended 32.039(b); Pre-act HR 36.002.

The ordinary remedy combines recovery and a penalty. Recovery now includes the payment or benefit received directly or indirectly, including payments to third parties, plus judgment-rate interest from payment. The penalty can include up to twice the amount paid, plus a per-violation amount. For injury to a person 65 or older, an adult meeting the statutory disability definition, or someone under 18, that amount has a $5,000 minimum and a $15,000 ceiling unless the referenced federal maximum is higher. For other violations the ceiling is $10,000 unless that federal maximum is higher. The federal reference includes inflation adjustments, so $10,000 and $15,000 are not absolute current ceilings. Each day of the specified obstruction, repayment-obligation or managed-care violation counts separately for this penalty. Final law, section 4, subsections (c)–(c-1); Pre-act HR 48.002; Federal penalty reference.

Missing claim-supporting records have a narrower remedy: the commission chooses either repayment of the claim amount or a penalty up to $500 per violation—not both under that provision. Other rule-defined violations no longer share that special limit. The protection for a commission-calculated and printed voucher remains unless the provider knowingly supplied false or misleading information or knowingly failed to correct it when given an opportunity; signing the voucher alone is not fraud, and rules must allow a correction grace period. Final law, section 4, subsections (c-2)–(d), and section 7; Pre-act HR 32.039.

A recipient of the initial notice now has 30 rather than 10 days to request informal review. After the review results, the deadline to request a formal hearing also increases from 10 to 30 days. Notices must describe administrative and judicial remedies. The existing payment, hearing, judicial-review and enforcement-stay procedures now refer to the full administrative remedy, not just a penalty; filing for review does not by itself mean collection is automatically stayed. Final law, section 4, subsections (f)–(r).

Signed May 13, 2025, the act took effect September 1, 2025. The amended 32.039 applies only to violations occurring on or after that date; earlier violations retain former law. If an agency determines federal permission is necessary to implement a provision, it must request it and may delay that provision pending approval. History; Final law, sections 8–10.