Shapiro Urges Pennsylvania to Pass Whistleblower Protection Law

In a significant push against government fraud, Pennsylvania lawmakers are once again attempting to pass legislation that would establish a state False Claims Act, a measure that has been stalled for more than two decades by opposition from healthcare and business interests.

The proposed law would mirror federal legislation that allows whistleblowers to file lawsuits on the government’s behalf and receive a share of recovered damages and penalties. Last summer, the bill passed the Pennsylvania House with strong bipartisan support but remains stalled in the Senate.

Democratic Governor Josh Shapiro highlighted the issue in his recent budget address, urging legislators to finalize the bill. “Let’s finally get it done,” Shapiro said, emphasizing that the law would enable Pennsylvania to “collect additional damages and recoup more state dollars that would otherwise be lost to fraud.”

The federal False Claims Act, dating back to the Civil War, has proven to be one of the most effective tools against government fraud. In the most recent fiscal year alone, federal false claims cases recovered more than $6.8 billion in settlements and judgments, with over three-quarters of that money coming from whistleblower-initiated cases.

Pennsylvania remains the largest of the 21 states without its own version of the law. This absence not only limits the state’s fraud-fighting capabilities but also costs it financially. States with their own false claims laws can receive an additional 10% from the federal government’s share of recovered Medicaid fraud damages.

“There is money that is being wasted, and we have an opportunity to do the best job we can to get that recovered,” said State Senator Lindsey Williams, who has introduced legislation to create a state false claims act. “It’s way past time.”

Under the proposed legislation, if an employee of a state contractor believed the company was submitting fraudulent bills, they could file a lawsuit on the commonwealth’s behalf. The state attorney general would have 60 days to investigate and decide whether to pursue the case. If found liable, the offending company would pay triple damages plus civil penalties.

Whistleblowers could receive between 10% and 30% of settlements or damages, depending on the significance of their information. The law would also provide additional protection from retaliation, a crucial provision given the personal risks whistleblowers often face.

According to a 2024 survey by the Association of Certified Fraud Examiners, whistleblower tips uncover 43% of fraud cases – making them the most effective detection method by far.

Opposition to the bill comes primarily from healthcare and business organizations. The Hospital and Healthsystem Association of Pennsylvania warns that “rural hospitals may be just one frivolous lawsuit away from closure.” The Pennsylvania Coalition for Civil Justice Reform characterizes the proposal as “lawsuit abuse masquerading as fighting abuse.”

The state’s association of certified public accountants opposes the bill’s inclusion of state and local tax issues, arguing this could lead to lawsuits over differences of interpretation of unclear tax rules.

To address these concerns, the House-passed bill includes a provision requiring plaintiffs to pay defendants’ legal fees if their lawsuits are deemed frivolous or harassing. However, House Minority Leader Jesse Topper, who voted against the bill, argued that more protections are needed to prevent lawsuits over minor mistakes.

The financial impact of the legislation remains a point of contention. While a legislative analysis estimated enforcement would cost approximately $1.4 million in the first two years for additional staffing at the attorney general’s office, it did not project potential revenue.

Opponents suggest Pennsylvania might actually collect less money despite the 10% federal bonus because whistleblowers would receive a share of proceeds. Supporters counter that this would be offset by an increase in cases.

“We are talking about tens of millions more dollars being received that aren’t even being pursued,” said Eric Weitz, president of the Pennsylvania Association for Justice. “Would you rather have to pay 30% to get another 20, 50, 100 million dollars per year or just not have it at all?”

Other states have seen significant returns after passing similar laws. Between 2015 and 2018, Texas recovered almost $4 million, Florida more than $6 million, and Massachusetts almost $22 million, according to a 2019 report by the state House Government Oversight Committee.

The effort to create a state false claims act in Pennsylvania dates back to 1999, when a bill passed the House unanimously but stalled in the Senate. Similar measures have been introduced in nearly every legislative session since 2005.

As budget negotiations approach, the false claims legislation could potentially be incorporated into broader fiscal discussions. With support from both Governor Shapiro and his likely Republican challenger, State Treasurer Stacy Garrity, the bill may finally have the momentum needed to become law after a quarter-century of attempts.