Comparing the Administrative False Claims Act and False Claims Act—Similar Names, But Decidedly Different Laws

• January 31, 2025

• Rachel V. Rose , Rachel V. Rose—Attorney at Law PLLC

When lawyers, whistleblowers, and compliance professionals hear or read “False Claims Act” they immediately think of the law that was enacted in 1863, 31 U.S.C. §§ 3279-33, which is typically referred to as the “FCA.” The law’s long history, its being touted by the U.S. Department of Justice (DOJ) and Members of Congress (think Senator Grassley and Senator Schumer) as “one of our most important tools for rooting out fraud, ensuring that public funds are spent properly, and safeguarding critical government programs,”[1] and its qui tam (aka whistleblower) provision make the connection natural in the world of federal fraud, waste, and abuse enforcement.

On January 6, 2025, DOJ announced that FCA settlements for fiscal year (FY) 2024 exceeded $2.9 billion.[2] Once again, health care topped the list with approximately $1.67 billion in recoveries.

Notably, the DOJ highlighted the 1986 amendments to the statute, as well as the pivotal role that whistleblowers play in FCA recoveries. Specifically,

In 1986, Congress strengthened the False Claims Act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblowers, or qui tam, actions comprise a significant percentage of the False Claims Act cases that are filed. Qui tam cases may be pursued by the government or the whistleblower, and this past year, significant recoveries were obtained by both. When a qui tam action is successful, the whistleblower, also known as the relator, typically receives a portion of the recovery ranging between 15% and 30%. The 979 qui tam suits filed in fiscal year 2024 breaks the prior record set in 2013, and this past year, the Justice Department reported settlements and judgments exceeding $2.4 billion in these and earlier-filed qui tam suits.[3]

For years, this natural connection rang true. Then, the National Defense Authorization Act (NDAA) for FY 2025 was signed into law on December 23, 2024. Buried in the text of the 2025 NDAA is a significant item, which was initially introduced by Senator Grassley (S. 659), that renamed and revitalized the Program Fraud Civil Remedies Act of 1986 (PFCRA).[4] The law formerly known as the PFCRA is now called the Administrative False Claims Act of 2023 (AFCA).

Unlike the FCA, which returns billions of dollars annually to the Federal Fisc and for FY 2024 saw relators initiate a record 979 qui tam actions, historically, the PFCRA, which has no qui tam provision, has seen significantly lower recoveries and is used sparingly by the federal government. For example, in 2012, the Government Accountability Office stated:

According to information provided by the Department of Justice (DOJ) and our survey of the Inspectors General (IG), five civilian agencies, the Department of Housing and Urban Development (HUD), the Department of Health and Human Services (HHS), Department of Energy, the Corporation for National and Community Service, and the Nuclear Regulatory Commission used the Program Fraud Civil Remedies Act's (PFCRA) authorities to refer 141 cases to DOJ for approval by the Attorney General during fiscal years 2006 through 2010. Of the 141 cases, 135, or 96 percent, were referred by HUD. The remaining four agencies referred a total of 6 cases during this period.[5] (emphasis added).

To put this in perspective, between 2006 and 2010, there were 2,130 qui tam cases filed under the FCA.[6]

Differences Between the FCA and the AFCA

Aside from the name, the two statutes have several things in common, including statutes of limitations, the involvement of the DOJ, and inflation adjustment of penalties. Congress also made the terms “knowledge,” “material,” “obligation,” and “false claim” in the AFCA consistent with those in the FCA Section 3729(b). So, what’s the difference?

Procedurally, actions under the AFCA are administrative and only initiated by the federal government. Like other areas of health care law that begin with agency review, administrative hearings, and an appeals process for the defendant, the AFCA has six steps:

1. The Investigating Official investigates allegations of PFCRA liability and submits a Report of Investigation on any potential PFCRA matter to a Reviewing Official.
2. The Reviewing Official assesses the evidence and plausibility of the PFCRA case. If the case is viable, the Reviewing Official may forward the matter to the DOJ for authorization to proceed with the PFCRA case.
3. If the DOJ authorizes the filing of a PFCRA case, the DOJ sends an authorization memorandum to the Reviewing Official.
4. Upon receiving the authorization memorandum, the Reviewing Official prepares the PFCRA claim and litigates the matter before a Presiding Officer.
5. A defendant may appeal adverse findings to the head of the Agency, and ultimately, to a U.S. District Court.
6. PFCRA provides for the enforcement of judgments through a separate suit filed by a U.S. Attorney in U.S. District Court. The statute also provides for the collection of judgments by administrative offset.[7]

The PFCRA provided, and the AFCA continues to provide, an administrative remedy with no whistleblower provision for a recovery by a private plaintiff for alerting federal agencies of false, fictious, or fraudulent claims and statements. While the PFCRA provided penalties up to $5,000 per claim with double damages possible up to a $150,000 threshold, the AFCA raised the maximum amount that a federal government agency can administratively recover to $1 million, plus the cost incurred by the government for investigating and prosecuting the fraud claims. 

By way of contrast, FCA actions are brought in federal court, rather than administratively, and can be initiated by private whistleblowers as well as the government. A review of the FCA’s nuances is provided below:

1. Cases can be brought by the federal government or through the whistleblower provision of the FCA, whereby a private person who is represented by an attorney, can provide a disclosure to DOJ and file a case under seal in a U.S. District Court, which correlates to the U.S. Attorney’s Office where the initial disclosure was provided.
2. If a whistleblower brings the case through the proper procedural channels, then the government may intervene, decline to intervene (which gives the whistleblower the option of moving forward and prosecuting the case), or dismissi the case. A whistleblower (known as a relator) is not an employee of the government.
3. The government remains the real party in interest, even in a qui tam case.
4. There is no maximum (or minimum) amount of recovery for a FCA case.
5. Damages may be trebled.
6. Penalties per violation may also be assessed and are adjusted annually.
7. Whistleblowers may be entitled to between 15-30% of the federal government’s recovery, as well as additional retaliation protections under Section 3730(h).

Since 1986, recoveries under the FCA total in excess of $75 billion. The FCA is the primary vehicle for fraud, waste, and abuse recoveries and from a resource allocation perspective, provides a greater return on investment.

Compliance Considerations

What does the revamped AFCA mean for the defense bar, clients, and compliance professionals? As a starting point, organizations should integrate the statute’s parameters into its policies, procedures, and training. For claims brought under the AFCA, due process will apply and the administrative procedures for an individual agency will govern. Since compliance with the underlying laws and regulations, as well as the truthfulness of statements in contracts, grants, and claims for payment is at the core of both the FCA and the AFCA, complying with legal requirements and providing truthful attestations remain consistent.

Though nonbinding, two fundamental resources for compliance programs are the Department of Health and Human Services Office of Inspector General’s General Compliance Program Guidance[8] and DOJ’s Evaluation of Corporate Compliance Programs,[9] which are both updated periodically. These resources incorporate 42 C.F.R. § 483.85 for compliance program elements, which include (1) written policies and procedures; (2) compliance leadership and oversight; (3) training and education; (4) effective lines of communication with the compliance officer and disclosure program; (5) standards and consequences; (6) risk assessment, auditing, and monitoring; and (7) responding to detected offenses and developing corrective action initiatives.

In sum, while the FCA will remain the primary enforcement tool, the AFCA gives the federal government a now enhanced option for administratively pursuing fraud claims for damages up to $1 million.

About the Author

Rachel V. Rose, JD, MBA is the Founder of Rachel V. Rose – Attorney at Law, PLLC (Houston, Texas), where she successfully represents clients in transactional, litigation, compliance and government enforcement actions in healthcare, cybersecurity and securities law, including the False Claims Act. She also teaches bioethics at Baylor College of Medicine and can be reached at www.rvrose.com.

ARTICLE TAGS

• Fraud and Compliance