Texas Passes New Laws Designed to Crack Down on Medicaid Fraud


Governor Perry recently signed four bills into law designed to combat Medicaid fraud, waste, and abuse. The bills are a mixed bag of enhanced enforcement capabilities for the state and a few new protections for healthcare providers. Most notably, the legislature made several changes to the Texas Medicaid Fraud Prevention Act (TMFPA), bringing the statute more in line with the federal False Claims Act.

Changes to the Medicaid Fraud Laws

On the enforcement side, S.B. 746 made several important changes to the TMFPA - Texas’ version of the federal False Claims Act - including:

  • Expanding the definition of “unlawful act.” S.B. 746 broadens the definition of conspiracy (prohibiting a conspiracy to engage in any conduct that violates the TMFPA) and incorporates a reverse false claim provision into the statute (making it unlawful to avoid repaying a Medicaid overpayment).
  • Adopting an explicit statute of limitations. In cases where the state declines to intervene, a whistleblower may recover unlawfully obtained funds for up to six years before the suit was filed, or three years from the date the state knew or should have known facts material to the unlawful act, but in no event, more than 10 years before the suit was filed.
  • Requiring dismissal of publicly disclosed claims. Courts are now required to dismiss claims that have been publicly disclosed in Texas or federal criminal or civil hearings, in Texas legislative or administrative reports, in other Texas hearings, audits, or investigations, or by the news media, except where the whistleblower qualifies as an “original source.” Under S.B. 746 an “original source” is now defined as a person who “has knowledge that is independent of and materially adds to the publicly disclosed allegation.”
  • Broadening the anti-retaliation provisions. Whistleblowers are now protected from discrimination based on their actions to investigate or report Medicaid fraud or the actions of “associated others.” The legislature also implemented a three-year statute of limitations for retaliation claims.

The legislature adopted additional enforcement provisions in S.B. 8, including giving the state more resources to investigate Medicaid fraud and restricting providers’ ability to market their services to Medicaid patients.

The bills also provide a few protections to Medicaid providers, such as:

  • Requiring the state to conduct a preliminary investigation of fraud allegations to determine whether a full investigation is warranted (S.B. 1803).
  • Requiring the state to employ experts to review medical necessity and quality of care findings before instituting an enforcement action (S.B. 1803).
  • Allowing providers to challenge overpayment and payment hold decisions in state court (S.B. 1803).
  • Prohibiting post-judgment interest from accruing if the federal government has a subrogation right until the government issues its demand letter for payment (S.B. 658).


The four bills present potential challenges for healthcare providers because Texas now has additional tools at its disposal to bring enforcement claims under the TMFPA. The state now has more resources to detect Medicaid fraud prior to receiving complaints, is able to restrict providers’ ability to advertise services to potential patients, and has broadened the definition of “unlawful acts.” However, the bills also provide additional protections for healthcare providers, which balance to some extent the state’s interest in enforcing its Medicaid laws and providers’ need for clarity and transparency. The new provisions and are set to take effect on September 1, 2013 and only apply to conduct occurring after that date.

For more information on the new legislation or any other health law questions, please contact any of the following attorneys:

Stacy L. Brainin


 Kenya S. Woodruff



 Nicole Somerville




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