Deal Or No Deal? Why States Are And Should Continue Rejecting The Federal Mandate On State False Claims Acts

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States have been debating the merits of enacting new state

States have been debating the merits of enacting new state False Claims Acts (FCAs), or broadening existing ones, largely in response to a federal mandate included in the 2005 federal Deficit Reduction Act. The 2005 mandate dictates that to have a federally qualified FCA, the state must have a whistleblower provision targeted at Medicaid-related fraud that is at least as generous to whistleblowers as the federal civil FCA, which gives the whistleblowers up to 30% of recoveries. If a state enacts such a false claims act, the federal government will give states 10% more of the awards in cases brought under those laws.

A few states quickly passed laws to meet these standards, but most have taken a more careful and cautious look. These states want to know if the federal “deal” is worth it, both financially and in their ability to fight and deter fraud. To date, most states have not adopted these changes. This paper explains why this decision is sound from the perspectives of both economics and public policy.

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