False Claims Act — A costly mirage for Pennsylvania taxpayers and a windfall for lawyers

The plaintiffs’ bar is working overtime to convince the Pennsylvania General Assembly to pass a state False Claims Act (FCA), arguing that it will raise revenue to help close the revenue gap currently preventing passage of a state budget. But the Legislature should not fall for this dubious (and self-interested) claim by the trial lawyers as it is one of the many false hopes promised by the proposed legislation.

What is a False Claims Act?

The federal FCA (31 U.S.C. §§ 3729-3733) was enacted in 1982, and provides that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages, plus exorbitant penalties of more than $27,000 per claim. In addition to allowing the United States to pursue perpetrators of false claims on its own, the federal FCA allows disgruntled and former employees acting as bounty hunters to file suits on behalf of the government—called “qui tam actions”—against those who submitted the claims at issue. Bounty hunters who successfully bring qui tam actions may recover a substantial portion of the government’s recovery, among other remedies.

In July, the Pennsylvania House of Representatives passed HB 1697, which would establish a state FCA. Medicaid is by far the largest area of recovery under a FCA. Yet, Pennsylvania already receives its share of Medicaid recoveries under the federal FCA. The established federal FCA provides a robust mechanism to recover improperly spent Medicaid funds and Pennsylvania recovers its full lawful percentage of the recovery despite not having a state FCA.

PA Already Has Mechanisms to Address Fraud

While proponents claim a state FCA is needed to fight fraud in Pennsylvania, there are numerous laws already on the books that provide a means to combat fraud against the Commonwealth, its agencies, or local municipalities. In 1977 Congress passed the Medicare/Medicaid Anti-Fraud and Abuse Amendment (42 U.S.C. §§ 1396, et seq.), authorizing states to create Medicaid Fraud Control Units to investigate and prosecute Medicaid provider fraud and patient neglect; the Pennsylvania Office of Attorney General (OAG) established its Medicaid Fraud Control Section the following year. In 2024, the OAG’s Medicaid Fraud Control Section ranked first nationally “in the number of fraud charges filed against individuals,” “third overall in convictions secured,” and “recovered more than $11.3 million in misused Medicaid funding.”

Additionally, the state’s Fraud and Abuse Control Act (62 P.S. §§ 1401, et seq.), authorizes the Department of Human Services to institute a civil suit against a provider “for twice the amount of excess benefits or payments plus legal interest from the date the violation or violations occurred.” The General Assembly also enacted the Care-Dependent Person Act (18 Pa.C.S. §§ 2713, 2713.1) and added the crime of Financial Exploitation of an Older Adult or Care-Dependent Person (18 Pa.C.S. § 3922.1) to provide the Medicaid Fraud Control Section with the necessary tools to complete those tasks.

Furthermore, Act 29 of 2017 provides the Pennsylvania Office of State Inspector General (OSIG) with the power to investigate and enforce certain public welfare fraud statutes. And multiple provisions of the Pennsylvania Crimes Code criminalize fraud, including 18 Pa.C.S. § 3922 (Theft by deception), 18 Pa.C.S. § 4107 (Deceptive or fraudulent business practices), and 18 Pa.C.S. § 4114 (Securing execution of documents by deception).

Given these existing laws, it begs the question: why the sudden need for a duplicative state FCA?

False Claims Offers False Hopes

A state FCA enables the plaintiff bounty hunter to get a double recovery, thereby reducing the amount of Medicaid recovered by the state. Under a state FCA, the bounty hunter will receive up to 30 percent of Pennsylvania’s portion of the recovery. Currently, the bounty hunter plaintiff is not allowed to dip into the portion of the state’s Medicaid dollars recovered under the federal FCA. When Pennsylvania recovers misspent Medicaid dollars under the federal FCA, the bounty hunter only recovers a percentage of the federal portion of the recovery. The double recovery under a state FCA reduces the overall amount recovered for Pennsylvania taxpayers for the benefit of the bounty hunter and attorneys. Make no mistake, this double recovery will only enrich bounty hunter plaintiffs’ and attorneys and is the real reason a duplicative state FCA is being pushed!

House Bill 1697 is now in the Senate. It should remain there and not proceed to the Governor’s desk. Instead of pushing for bigger and better ways for lawyer enrichment, let’s reform the civil justice system to remove barriers to creating jobs and providing health care in Pennsylvania.

The Pennsylvania Coalition for Civil Justice Reform is a 501(c )(6), not-for-profit, nonpartisan advocacy organization comprised of a diverse group of organizations and individuals committed to bringing fairness to Pennsylvania’s courts by raising awareness of civil justice issues and advocating for legal reform. Additional information is available at http://www.paforciviljusticereform.org, https://www.facebook.com/paciviljustice/ or https://twitter.com/paciviljustice.