HARRISBURG — For more than two decades, state lawmakers from both parties have pushed for a new law to crack down on fraudulent government spending and encourage whistleblowers to come forward.
Each time, powerful health care and business interests stunted those efforts, arguing the legislation would lead to a deluge of frivolous lawsuits and put struggling rural hospitals out of business.
Supporters hope the proposal finally makes it across the finish line this year.
Last summer, a bill that would give the state a new way to target fraud passed the state House with broad bipartisan support, but it has not advanced in the state Senate. Democratic Gov. Josh Shapiro highlighted the issue in his budget address earlier this month, saying the law would allow Pennsylvania to “collect additional damages and recoup more state dollars that would otherwise be lost to fraud.”
“Let’s finally get it done,” he said.
The proposed law would mirror the federal False Claims Act, which allows whistleblowers to file lawsuits on the government’s behalf and receive a share of the money that’s recovered in damages and penalties, or paid out as a settlement. Federal prosecutors say the law is one of their most powerful tools against fraud.
In the most recent fiscal year, false claims cases recovered more than $6.8 billion in settlements and judgments, federal figures show, mostly from lawsuits involving alleged health care fraud. More than three-quarters of the money came from cases initiated by whistleblowers.
At least 29 states — including California, Florida, New York, and Texas — have passed their own versions of the law. Pennsylvania is the largest state without one. (Philadelphia and Allegheny County also have false claims laws.)
One reason states pass their own laws: a financial incentive from the federal government.
Many false claims cases involve allegations of fraud in Medicaid, which is funded jointly by states and the federal government. The financial proceeds from these lawsuits are also shared. States that have their own false claims laws can receive an extra 10% from the federal share.
Without its own law, Pennsylvania is leaving that money on the table and passing up another avenue to fight fraud, said state Sen. Lindsey Williams (D., Allegheny), who has introduced legislation to create 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,” she said, adding: “It’s way past time.”
Medicaid math
The federal False Claims Act is a product of the U.S. Civil War.
President Abraham Lincoln signed it into law in 1863 to fight back against contractors who sold the Union Army feeble and even blind horses, gunpowder bulked out with sawdust, and ships with rotting wood concealed beneath a fresh coat of paint.
In 1986, the law was amended to allow whistleblowers to sue on the government’s behalf and receive a portion of the proceeds. Since then, lawsuits initiated by whistleblowers have accounted for the lion’s share of cases filed and money recovered.
Some states limit their false claims laws to Medicaid cases, but the proposed legislation in Pennsylvania would cover a wider range of state spending.
Here’s how the proposed law would work: If an employee of a state contractor believes the company is billing for work that hasn’t been performed, they could file a lawsuit on the commonwealth’s behalf.
The suit would initially be filed under seal, giving the state attorney general at least 60 days to investigate further. The Office of Attorney General would have the option to pursue the case; otherwise, the plaintiff could proceed on their own. If the company were found liable, it would have to pay three times Pennsylvania’s actual losses, as well as a civil penalty — although most cases would likely end in voluntary settlements.
If the case involved alleged Medicaid fraud, Pennsylvania would split the proceeds with the federal government. As long as Pennsylvania’s law met federal standards, the commonwealth would receive an additional 10% from the federal government’s share.
The whistleblower could receive anywhere from 10% to 30% of any settlement, or damages, depending on a judge’s determination of how significant the information they provided was to the case. The law would also give whistleblowers additional protection from retaliation.
Whistleblowers often face immense personal risk in reporting wrongdoing. Advocates say that offering them a financial incentive to come forward is crucial, because tips from insiders are the most effective way of uncovering fraud.
A 2024 survey by the Association of Certified Fraud Examiners reviewed almost 2,000 reported cases of fraud and concluded that 43% were brought to light by a tip from a whistleblower — by far the most common method.
Opponents of a state false claims law say it would encourage opportunistic “bounty hunters” to bring lawsuits that most companies would likely settle to avoid the onerous financial penalties, regardless of the merits of the underlying allegations.
“It becomes lawsuit abuse masquerading as fighting abuse,” said Curt Schroder, executive director of the Pennsylvania Coalition for Civil Justice Reform, which represents businesses and industry groups opposed to the bill.
The Hospital and Healthsystem Association of Pennsylvania says a state false claims act could force medical providers to cut back their services, warning that “rural hospitals may be just one frivolous lawsuit away from closure.”
The state association representing certified public accountants also opposes the bill because it would allow cases to be filed over state and local tax issues. This could lead to lawsuits over differences of opinion on unclear tax rules, the organization argues.
The bill that passed the state House last year includes a provision that would require a plaintiff to pay the defendant’s legal fees if their case was unsuccessful and a judge found the lawsuit was “frivolous, clearly vexatious or brought primarily for purposes of harassment.”
Still, state House Minority Leader Rep. Jesse Topper (R., Bedford), who voted against the bill, said during the floor debate that it does not do enough to ensure lawsuits are not filed over minor mistakes. He said he supported the concept, but “we need to ensure businesses and hospitals are also sustainable.”
Missing millions
One point of contention is how much money Pennsylvania could expect to bring in by passing its own false claims law.
A legislative analysis of the bill that passed the state House in 2025 did not attempt to put a figure on this. It estimated that enforcing the law would cost roughly $1.4 million in the first two years, because the state attorney general’s office would need to hire more than 20 additional staff.
Opponents argue that with its own law, Pennsylvania could actually bring in less money – even with the 10% federal bonus. That’s because the commonwealth would have to pay the whistleblower’s share from its portion of the proceeds. Under the status quo, Pennsylvania keeps all of that money. (In a seemingly incompatible scenario, they also warn a new law would prompt a surge of lawsuits.)
Supporters agree that Pennsylvania would collect less on a case-by-case basis, but contend this would be more than outweighed by an increase in the number of cases filed.
“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, which represents trial lawyers.
“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 brought in millions of dollars after passing false claims laws, a 2019 report by the state House Government Oversight Committee found. Between 2015 and 2018, according to the report, Texas recovered almost $4 million; Florida, more than $6 million; and Massachusetts almost $22 million.
There was “ample evidence,” the report concluded, that Pennsylvania should follow in their footsteps.
25 years of trying
The effort to create a state false claims act in Pennsylvania goes back years.
In 1999 and 2001, false claims bills passed the state House unanimously, but stalled in the upper chamber. Similar measures were introduced in almost every legislative session between 2005 and 2025, but did not progress.
“We could never get a compromise done,” said state Rep. Bryan Cutler (R., Lancaster), who previously served as majority leader and speaker. Cutler voted in favor of the bill the House passed last summer, but said at the time it needed “stronger guardrails.”
The idea seemed to gather momentum in 2019, after a statewide grand jury found “systemic issues” that left Medicaid in Pennsylvania vulnerable to fraud.
Shapiro, then state attorney general, joined with a group of mostly Republican lawmakers to propose reforms, including yet another attempt at passing a state false claims act.
Not having such a law, Shapiro said at the time, had a “significant and negative ramification” for taxpayers. He called the proposed legislation “a good, commonsense idea with bipartisan support that deserves the attention of both chambers.”
That effort was unsuccessful, but a false claims bill introduced by Rep. Frank Burns (D., Cambria) eventually passed the state House with broad bipartisan support last summer.
The state Senate has not advanced the bill, although it could be folded into this year’s budget negotiations.
Shapiro’s likely opponent in the gubernatorial race, Republican state Treasurer Stacy Garrity, previously told Spotlight PA she supports the idea.
A spokesperson for state Senate Majority Leader Joe Pittman (R., Indiana) did not respond to questions from Spotlight PA about whether he supports the bill.
A spokesperson for state Attorney General Dave Sunday said his office had no “public commentary” on the measure.
State Sen. Kristin Phillips-Hill (R., York), a co-sponsor of her chamber’s version of the bill, 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.”
Spotlight PA reporter Stephen Caruso contributed to this story.