False Claims Laws Generate Millions in Revenue, Yet Pennsylvania Legislation Stalls

Pennsylvania lawmakers are pushing for the passage of a long-awaited False Claims Act that would help the state recover millions in fraudulent government spending and provide whistleblowers with incentives to report wrongdoing.

For more than two decades, bipartisan efforts to establish this legislation have been stymied by opposition from powerful healthcare and business interests. However, with a bill having passed the state House last summer with strong bipartisan support, advocates believe 2024 could finally see the measure become law.

Governor Josh Shapiro highlighted the issue in his recent budget address, emphasizing that the law would allow Pennsylvania to “collect additional damages and recoup more state dollars that would otherwise be lost to fraud.” His appeal to lawmakers was direct: “Let’s finally get it done.”

The proposed legislation mirrors the federal False Claims Act, which enables whistleblowers to file lawsuits on the government’s behalf and receive a portion of recovered funds. Federal prosecutors consider this law one of their most powerful tools against fraud. In the most recent fiscal year alone, false claims cases recovered more than $6.8 billion nationally, primarily from health care fraud lawsuits, with over three-quarters of that amount coming from cases initiated by whistleblowers.

At least 29 states have already enacted their own versions of the law. Pennsylvania, as the largest state without such legislation, is leaving money on the table, according to State Senator Lindsey Williams, who has introduced a state False Claims Act. “There is money that is being wasted, and we have an opportunity to do the best job we can to get that recovered,” Williams said. “It’s way past time.”

States have a financial incentive to pass their own false claims laws. When cases involve Medicaid fraud—a program jointly funded by states and the federal government—states with their own laws receive an additional 10% from the federal share of recovered funds.

The federal False Claims Act dates back to the Civil War era when President Abraham Lincoln signed it into law to combat contractor fraud against the Union Army. The law was significantly strengthened in 1986 when it was amended to allow whistleblowers to sue on the government’s behalf and receive a portion of the proceeds.

Under Pennsylvania’s proposed law, an employee of a state contractor who discovers fraudulent billing could file a lawsuit on the commonwealth’s behalf. The state attorney general would have at least 60 days to investigate and decide whether to pursue the case. If found liable, the company would face triple damages plus civil penalties, although most cases typically end in settlements.

Whistleblowers could receive between 10% and 30% of any settlement or damages, depending on the significance of the information they provided. The law would also strengthen protections for whistleblowers against retaliation.

Advocates argue that financial incentives are crucial for encouraging insiders to come forward despite the personal risks. A 2024 survey by the Association of Certified Fraud Examiners found that 43% of fraud cases were uncovered through whistleblower tips—far more than any other method of detection.

Opposition to the bill comes from several quarters. Curt Schroder, executive director of the Pennsylvania Coalition for Civil Justice Reform, characterized the legislation as “lawsuit abuse masquerading as fighting abuse.” The Hospital and Healthsystem Association of Pennsylvania warns that “rural hospitals may be just one frivolous lawsuit away from closure,” while accounting industry representatives fear lawsuits over differences in tax rule interpretations.

Supporters counter that the bill includes safeguards against frivolous lawsuits, requiring plaintiffs to pay defendants’ legal fees if a judge determines a case was meritless or filed for harassment purposes.

The financial impact of passing a state False Claims Act remains a point of contention. Although Pennsylvania would have to share recovered funds with whistleblowers, supporters argue that the increased number of cases would more than offset this cost. Eric Weitz, president of the Pennsylvania Association for Justice, put it bluntly: “Would you rather have to pay 30% to get another 20, 50, 100 million dollars per year or just not have it at all?”

Evidence from other states suggests substantial returns. Between 2015 and 2018, Texas recovered almost $4 million, Florida more than $6 million, and Massachusetts almost $22 million through their false claims laws.

The push for this legislation has spanned numerous legislative sessions. Bills passed the state House unanimously in 1999 and 2001 but stalled in the Senate. Despite multiple attempts between 2005 and 2025, compromise proved elusive.

With the bill now passed in the House and awaiting Senate action, it could become part of this year’s budget negotiations. State Senator Kristin Phillips-Hill, a Republican co-sponsor of the Senate version, called the legislation “a logical step” toward protecting taxpayer dollars. “My hope is that we’re going to have a really serious conversation about how to do this,” she said.