Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 1038 amends existing provisions of the Texas Government Code and the Human Resources Code to expand and refine administrative tools available to combat fraud and abuse within the state’s Medicaid program. The legislation modifies Section 544.0205 of the Government Code to broaden the eligibility for whistleblower rewards. Under current law, individuals who report Medicaid fraud may receive an award only if their report results in the imposition of an administrative penalty. SB 1038 updates this to include any form of “remedy” recovered under Section 32.039 of the Human Resources Code, thereby increasing the potential scope and impact of whistleblower incentives.

The bill also substantially revises Section 32.039 of the Human Resources Code to clarify and modernize its enforcement framework. It redefines the term “claim” to align more precisely with federal definitions under Title XIX of the Social Security Act and introduces the term “material,” which is defined as information that is capable of influencing decisions regarding Medicaid benefits or payments. These changes aim to enhance legal clarity in the prosecution and adjudication of Medicaid fraud cases.

Additional amendments introduced in SB 1038 strengthen the administrative remedies available to the Texas Health and Human Services Commission (HHSC). These include a broader array of penalties and enforcement mechanisms that can be applied when individuals or providers engage in fraudulent billing, make false representations, or otherwise abuse the Medicaid system. By tightening definitions, incentivizing citizen reporting, and expanding the commission’s authority to recover misused funds, SB 1038 aims to bolster the integrity and fiscal responsibility of Texas’s Medicaid program without expanding the size or general regulatory scope of government.

The Committee Substitute for SB 1038 made a number of refinements and additions to the originally filed version, though the core intent and framework remain the same: to strengthen administrative remedies against Medicaid fraud and abuse.

One of the most notable structural differences is that the substitute bill adds a new heading in Section 1 to reflect changes to Section 544.0205 of the Government Code, aligning reward language more consistently by replacing “administrative penalty” with “remedy,” which broadens the scope of actions eligible for whistleblower rewards. This change is minor between versions, but the substitute version likely presents it with more precise legal formatting and structure, adhering to drafting best practices.

In Section 32.039 of the Human Resources Code, the substance between the introduced and substitute versions appears largely consistent, especially regarding expanded definitions (e.g., “claim” and “material”), as well as the long list of prohibited fraudulent acts. However, a key distinction is likely in the organization, numbering, and perhaps the integration of related subsections (e.g., combining previously separate offenses or moving provisions for clarity). The Committee Substitute also reflects legislative process changes—such as committee vote information, which is absent from the introduced version.

Additionally, while the text of the offenses and remedies remains the same in both versions—including the extended list of Medicaid-related fraud acts and tiered penalty structure—the substitute version often clarifies language around procedural steps, likely responding to committee recommendations or stakeholder input. These revisions aim to ensure enforceability, improve statutory clarity, and align with rulemaking requirements of the executive commissioner.

In summary, the Committee Substitute builds on the introduced version without fundamentally changing its policy goals. It strengthens the legislative text through formatting, legal precision, and possibly minor procedural revisions while preserving the core intent of increasing administrative tools to combat Medicaid fraud and incentivize whistleblower reporting.

Author (1)

Kevin Sparks

Sponsor (1)

Candy Noble

Contact the Author

Sen. Kevin Sparks

Capitol Phone:

(512) 463-0131

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), SB 1038 is not expected to have a significant fiscal impact on the state. The legislation expands and clarifies acts that constitute Medicaid fraud or abuse, introduces more specific definitions (e.g., of false statements and intent), and increases potential penalties. These changes are expected to be implemented by state agencies—such as the Health and Human Services Commission (HHSC)—within their existing administrative and operational resources, including updates to policies and Medicaid provider contracts.

While the bill authorizes increased administrative and civil remedies, such as financial penalties for fraudulent behavior, the LBB notes that the potential revenue from these remedies is uncertain and cannot be reliably estimated. This is because the frequency and scale of future violations—and the extent to which the enhanced enforcement tools would lead to recoveries—are inherently unpredictable.

The bill is also not expected to create a fiscal burden for local governments, as it does not impose mandates or require new local enforcement activities. Thus, SB 1038 achieves its goal of strengthening Medicaid program integrity with minimal budgetary impact on both state and local governments.

Vote Recommendation Notes

SB 1038 is a comprehensive update to Texas law regarding administrative remedies for Medicaid fraud and abuse. It responds to longstanding gaps in Chapter 32 of the Human Resources Code, which has not been substantially updated since its adoption in 1987. According to the bill analysis, the legislation is aimed at strengthening the enforcement capacity of the Office of Inspector General (OIG) by modernizing definitions, clarifying the scope of violations, and aligning administrative remedies with those found in existing civil and criminal statutes related to healthcare fraud.

The bill advances the principle of personal responsibility by holding individuals and providers accountable for knowingly committing fraudulent acts within Medicaid. It also supports limited government by improving the use of existing enforcement tools rather than creating new bureaucracies or regulatory burdens. In doing so, it strengthens oversight while maintaining a lean government approach. Furthermore, by incentivizing whistleblower reports that lead to recoveries, the bill engages citizens in preserving the integrity of public programs—enhancing individual liberty and civic empowerment.

From a fiscal standpoint, the Legislative Budget Board determined that the bill has no significant fiscal implication for the state or local governments. While it may generate revenue through increased administrative penalties, this potential remains unquantified. The policy is structurally sound and cost-effective, aligning with free enterprise by deterring fraudulent practices that distort market fairness in Medicaid services and protecting ethical providers from being undercut by dishonest actors.

In sum, SB 1038 delivers a modernized framework for identifying, penalizing, and deterring fraud in Medicaid. It strengthens enforcement, upholds the rule of law, and protects taxpayer funds, all while avoiding unnecessary expansion of state power. For these reasons, Texas Policy Research recommends that lawmakers vote YES on SB 1038.

Related Legislation

HB 2886 (Same As)

View Bill Text and Status