Pennsylvania Lawmakers Urged to Pass Long-Delayed State False Claims Act

Pennsylvania Governor Pushes for State False Claims Act to Combat Fraud

Governor Josh Shapiro has called on Pennsylvania lawmakers to pass a state False Claims Act (FCA) as part of his 2026 budget address, highlighting the potential to recover millions in fraudulently obtained public funds. The proposed legislation, House Bill 1697, has gained bipartisan support and would create a state version of the federal FCA, which has proven to be one of the government’s most effective tools in fighting fraud.

The federal FCA encourages whistleblowers to report fraud against the government by offering them protection against retaliation and allowing them to receive between 15% and 30% of recovered funds. In fiscal year 2025 alone, federal FCA cases recovered more than $6.8 billion for the U.S. government.

“We need to make sure Pennsylvania recoups as much as possible to protect the hard-earned money of our taxpayers,” said state Representative Frank Burns, a Democrat from Cambria County who sponsored the bill.

Pennsylvania has already seen success in fraud prosecution, with 119 cases of Medicaid fraud charged in 2024 resulting in more than $11 million in recovered funds. However, officials believe this represents only a fraction of potential recoveries possible with proper whistleblower incentives under a state FCA.

While many might associate Medicaid fraud with individuals falsely claiming eligibility, the more significant threat comes from healthcare providers and hospital systems that fraudulently bill the program. Since Medicaid is funded through a combination of state and federal dollars, recovered funds are split between both levels of government.

A critical financial incentive for Pennsylvania to adopt its own FCA is the federal government’s offer of an additional 10% of Medicaid recoveries to states with qualifying state FCAs. This bonus provision has already motivated 30 other states to implement their own versions of the law, while Pennsylvania continues to miss out on this additional revenue.

The proposed Pennsylvania FCA would have broader applications than just Medicaid fraud. It would provide tools to target contractors who illegally divert government funds across various state-funded programs, including infrastructure and construction projects. Notably, the Pennsylvania version would be stronger than its federal counterpart by covering tax-related fraud, which is excluded from the federal FCA and instead handled under the IRS whistleblower program.

While Pennsylvania has yet to act at the state level, both Philadelphia and Allegheny County have already passed their own versions of the FCA to recover misappropriated government funds at the county level.

Industry groups have opposed the legislation, claiming Pennsylvania doesn’t need its own FCA because it already benefits from Medicaid recoveries under the federal program. Critics of this position point out that this argument ignores both the 10% bonus Pennsylvania is missing and the fact that a state FCA would address non-Medicaid fraud as well.

Healthcare industry observers note that opposition from hospital associations and other healthcare providers likely stems from concerns about increased whistleblower claims affecting their financial operations. Healthcare fraud cases have historically represented some of the largest FCA settlements at the federal level.

The push for a Pennsylvania FCA has a long history, with legislative attempts dating back to 1997. Advocates argue that after numerous failed efforts, the time has finally come for Pennsylvania to join the majority of states that have already implemented this fraud-fighting measure.

As budget negotiations continue in Harrisburg, the proposed False Claims Act represents not just a fraud prevention measure but potentially a significant revenue enhancement tool for a state continuously seeking to maximize its fiscal resources without raising taxes.