Recent state enforcement actions send a clear message: pursuing cases under the FCA is no longer just the federal government's game, as state attorneys general have assertively wielded their authority under state versions of the FCA this year to target Medicaid fraud. While the state investigators continue to travel the well-worn path of collaboration with their federal counterparts, state attorneys general are also spearheading investigations, showing a willingness to act on their own, particularly in targeting for-profit health care companies promising – but failing to deliver – improved patient health outcomes.
The FCA imposes liability on individuals and companies who defraud federal governmental programs, typically by overbilling for services provided, falsifying records, or misrepresenting compliance with the government's contractual or regulatory requirements. Long after the federal FCA was adopted in 1863, states started to adopt parallel legislation beginning in the late twentieth century imposing liability on those who defraud state programs. Many of these state FCAs focus on – and are in some instances limited to – Medicaid fraud. And for good reason: federal law requires states to manage and administer their own Medicaid programs, and Medicaid has long been labeled a "high-risk" program for fraud over concerns about incomplete data and oversight challenges. Then, in 2006, Congress created a financial incentive to encourage states to adopt their own FCA qui tam statutes, a move that dramatically increased the number of states wielding their own FCA as a weapon against Medicaid fraud.
This year, state attorneys general have confidently leveraged this statutory authority to initiate FCA cases targeting Medicaid fraud – with or without federal involvement. Indeed, the decision on behalf of some state attorneys general to pursue cases independently might make sense given other ongoing conflicts between states and the federal government regarding the latter's role in aspects of Medicaid’s administration. And as the relationship between state and federal enforcers evolves during the second Trump Administration, so too have the theories under which state attorneys general are bringing Medicaid fraud claims.
For example, some Democratic state attorneys general have prioritized targeting health care companies that reap excessive fees from their patients in exchange for unnecessary or substandard services. In March, Massachusetts Attorney General Andrea Joy Campbell announced indictments against several laboratories, home health agencies, and individual physicians for their involvement in a $7.8 million fraud and kickback scheme. Defendants were alleged to have submitted false claims for unnecessary services, including requiring urine drug tests and home health services for patients when neither were medically necessary, while still presenting those services as "physician-authorized" and likely to improve patients' health outcomes.
Massachusetts' effort was handled exclusively in-house by the state's own Medicaid Fraud Division. Similar divisions in state attorney general offices across the country have bolstered states' capacities to pursue FCA cases independently – these divisions recovered $1.4 billion in FY 2024 alone. But just because these divisions are increasingly capable of acting alone does not require them to do so in each case, with states demonstrating a preference for evaluating coordination with federal enforcement authorities and with other states on a case-by-case basis. Some state Medicaid fraud divisions have continued to collaborate with each other and with the federal government. Earlier this year, for example, the attorneys general of Florida, Georgia, Michigan, and Nevada, alongside the DOJ, secured a nearly $20 million settlement against a behavioral health facility.
This year, state attorneys general have – like the federal government – also embraced state FCAs as a tool for achieving social policy goals. In December, Texas Attorney General Ken Paxton announced that his office had added charges of Medicaid fraud to ongoing cases against two primary care doctors in the state, whom the State of Texas had sued in 2024 for allegedly providing gender-affirming care to minors. Acting under the authority of Texas's Health Care Program Fraud Prevention Act – the state’s own version of the FCA – Attorney General Paxton alleged that both doctors had falsified records and fraudulently billed Medicaid in connection to performing these procedures. Paxton’s complaint seeks treble damages and civil penalties against each physician alleged to have assisted in procedures billed to Medicaid.
And state qui tam statutes are facilitating significant settlements in the context of single-state schemes that might otherwise have never seen the light of a courtroom. For example, last year, Illinois Attorney General Kwame Raoul announced a $70 million settlement with a group of investment banks that had allegedly rigged interest rates on bonds. The whistleblower that filed the qui tam, Edelweiss Fund LLC (Edelweiss), was also an investment bank. Edelweiss received a significant portion of the state’s recovery in relator share funds.
But strong advocacy by state attorneys general on both sides of the aisle has not automatically been accompanied by a lapse in cooperation with the federal government. Even as state enforcement intensifies, the DOJ retains an important role in combatting Medicaid fraud. In June, the DOJ announced one of the largest health care fraud takedowns in history, stating that it – along with 12 state attorneys general's offices – had uncovered nearly $14.6 billion in health care fraud, including $4 billion in Medicare and Medicaid fraud. Mirroring recent state FCA efforts, the DOJ said that the federal government, working alongside its state counterparts, was committed to prosecuting cases against defendants whose schemes cause physical harm to patients through "medically unnecessary treatments" that result in expenses but little improvement in patient well-being.
Looking ahead
As states continue to flex their enforcement muscles under the FCA to target Medicaid fraud and do so in varying degrees of cooperation with federal enforcement efforts, companies should be mindful of state-specific enforcement risks. Importantly, as state attorneys general gain experience and establish a track record of investigating and litigating under their state FCAs, those whose statutes are not limited to Medicaid will likely begin to pursue fraud on other types of government programs – from construction contracts to charter schools. In today’s enforcement environment, federal contracts and Medicaid are not the only revenue streams that create FCA and qui tam risk.