States without False Claims Acts
There are currently fourteen states that have not adopted a False Claims Act or a statute containing a qui tam provision that is similar to the one found in the federal False Claims Act. This means that these states are ineligible for a 10% increase in their share of any amount recovered under the federal FCA related to the Medicaid program. This bonus recovery is meant to incentivize the states to adopt a state false claims act as robust as the federal counterpart and to include a comparable qui tam provision to allow individuals to share in any potential recovery.
Although these states do not currently have a state False Claims Act or a qui tam provision, all of them have enacted some type of generally applicable Medicaid anti-fraud statute intended to prevent the submission of false or fraudulent claims to the states’ Medicaid programs. Some of them even provide whistleblower protection. Moreover, whistleblowers in these states may still pursue an action under the federal False Claims Act for false claims submitted to obtain payment or other compensation from the federal government.
- North Dakota
- South Carolina
- South Dakota
- West Virginia
There is considerable pressure on these states to enact a False Claims Act that mirrors the federal FCA. Not only do these states lose out on a 10% increase in any federal FCA recovery, but in some states like Alabama, state prosecutors can only bring criminal (and not civil) actions in cases of fraud or abuse against the state’s Medicaid Program. Additionally, states that pass a False Claims Act based on the federal FCA would be able to pursue lawsuits against any entity that does business with the state, as opposed to only those who interact with the state’s Medicaid program.
Importantly, since most fraud cases are based heavily on information provided by whistleblowers within a company, a qui tam provision that incentivized these individuals to come forward would most likely result in more financial recoveries for a state. Indeed, cases based on state false claims acts that mirror the federal FCA have resulted in significant recoveries for state treasuries. In California, for example, a state FCA settlement returned more than $187 million to taxpayers. Similarly, Texas secured $45 million in a single case in 2004. Prosecutors in Illinois have won between $6 and $7 million between 2000 and 2004 as a result of lawsuits brought under the state False Claims Act. Finally, the state of Florida has recovered in excess of $28 million from Medicaid fraud prosecutions. The attorney generals of these states have concluded that their state false claims acts will return even more money to state taxpayers.
Critics contend that passing a state False Claims Act only encourages frivolous lawsuits and a more hostile business environment during a time in which many legal scholars have called for tort reform. Notably, opposition is usually spearheaded by those who are the most vulnerable to these types of lawsuits, major healthcare providers. While frivolous lawsuits are a concern to our legal system, the federal FCA, on which a state False Claims Act would be based, contains a number of checks to weed out such cases. For example, the state attorney general would serve either as a co-plaintiff or monitor throughout the case to provide a degree of quality control. The attorney general could decide to dismiss any case he or she perceives as frivolous, whether or not the relator objects. Moreover, the FCA holds relators who file frivolous claims liable for a defendant’s attorney’s fees and expenses.
Recent Legislative Proposals
While state legislatures debate whether or not to pass a False Claims Act based on the federal FCA, some of them have begun to move forward with such proposals.
In February 2013, Alabama State Senator Arthur Orr introduced legislation to establish a State False Claims Act to authorize individuals to file lawsuits as qui tam relators on behalf of the state. The State Senate has assigned the bill to the General Fund Budget Committee.
In June 2013, two Pennsylvania legislators introduced a proposal based on the federal FCA that would permit qui tam lawsuits.
In February 2014, despite significant progress, the West Virginia House of Delegates withdrew its support for a False Claims Act that had been approved by the House Judiciary Committee.
Kentucky House Speaker Greg Stumbo filed legislation in February 2014 to incentivize whistleblowers to come forward with allegations of fraud against the state.
In April 2014, Vermont lawmakers, at the urging of the Attorney General’s Office, introduced a bill that would mimic the federal False Claims Act.
Page last updated: August 2014