Pennsylvania Lawmakers Push for Stronger False Claims Act to Combat Fraud

Pennsylvania lawmakers are advancing bipartisan legislation that would strengthen the state’s ability to recover taxpayer money lost to fraud, particularly in healthcare and government contracting.

The proposal would enhance Pennsylvania’s limited False Claims Act by giving the state attorney general and private citizens more power to sue entities that knowingly submit false claims to state or local government agencies. Supporters say the reform could recover millions in fraudulently obtained funds while deterring future misconduct.

“This is about protecting taxpayer dollars,” said State Representative Seth Grove, a York County Republican who is sponsoring the bill in the House. “When companies defraud the government, they’re essentially stealing from Pennsylvania citizens.”

Pennsylvania’s current false claims provisions lack the teeth found in federal law and similar statutes in 31 other states. These stronger laws typically allow whistleblowers to file suits on behalf of the government and share in any recovered funds, creating financial incentives for insiders to report fraud.

The federal False Claims Act, originally enacted during the Civil War to combat defense contractor fraud, has become one of the government’s most powerful anti-fraud tools. In fiscal year 2023 alone, the U.S. Department of Justice recovered more than $2.6 billion under the federal act, with healthcare fraud accounting for approximately 90 percent of those recoveries.

Pennsylvania’s proposed legislation would mirror key provisions of the federal law, including triple damages for fraudulent claims and protection for whistleblowers from workplace retaliation. Legal experts say these elements are critical for effective enforcement.

“Without meaningful whistleblower incentives and protections, many fraudulent schemes go undetected,” said Stephen Sheller, a Philadelphia attorney who specializes in whistleblower cases. “Insiders are often in the best position to identify fraud, but they need assurance they won’t lose their livelihoods for coming forward.”

The state Department of Human Services, which administers Pennsylvania’s $35 billion Medicaid program, has expressed support for the measure. Officials estimate that fraud diverts hundreds of millions of dollars annually from legitimate healthcare services for vulnerable populations.

Opponents of the bill, including some healthcare industry groups and the Pennsylvania Chamber of Business and Industry, have raised concerns about potential unintended consequences. They argue that an overly aggressive false claims regime could lead to frivolous lawsuits against businesses that make honest mistakes in complicated billing systems.

“We need to ensure any legislation distinguishes between intentional fraud and inadvertent errors,” said Gene Barr, president of the Pennsylvania Chamber. “Companies shouldn’t face triple damages for good-faith mistakes.”

Supporters counter that the bill specifically requires proof that claims were submitted with knowledge of their falsity, providing protection for honest businesses while targeting bad actors.

The proposed legislation comes as states nationwide face increasing budget pressures and seek tools to maximize recovery of misspent funds. States with robust false claims laws can receive an additional 10 percent of federal recoveries in Medicaid fraud cases that involve both state and federal funds.

Attorney General Michelle Henry has made strengthening the state’s anti-fraud capabilities a priority since taking office. Her office estimates that Pennsylvania could recover an additional $30-50 million annually with an enhanced False Claims Act.

The bill has gained momentum in recent months, attracting support from lawmakers on both sides of the aisle. It has cleared committee hurdles and could receive a full vote in the House this session.

If passed, Pennsylvania would join the growing list of states empowering both government agencies and private citizens to combat fraud against public funds through strengthened false claims legislation.