Some Medicare Providers Have Not Paid Taxes

More than 27,000 Medicareproviders, or 6%, owed back taxes totaling more than $2 billion in 2006, butthey are still receiving full payments from the program, according to a Government Accountability Office report released on Thursday, the Washington Post reports (Lee, Washington Post,6/20). For the report, ordered by the Senate Homeland Security Investigations Subcommittee, GAO examined about 436,000Medicare providers who received payments in 2006 (Yen, AP/St. Paul Pioneer Press, 6/19). Medicare paid out $402billion in 2006 (Washington Post, 6/20).

GAO found that $896 million, or about half, of the back taxes were from payrolltaxes the providers withheld from employees but did not turn over to the Treasury Department. In some cases, the funds were diverted into personal accounts,according to the report (AP/St. Paul Pioneer Press, 6/19).According to the report, $581 million of the owed money was from individualincome taxes (Zhang, Wall Street Journal, 6/20). The report didnot identify the providers who owed back taxes (Hall, USA Today, 6/20).

The report also found that some nursing homes that owed taxes also had health and safety violations or did not have necessary licensing (AP/St. Paul Pioneer Press, 6/19). GAO said the total back taxes owed are "substantially understated" because the investigation did not include all Medicare providers, including those who did not file tax returns.

Recommendations

GAO made the samerecommendation it made as early as 2001: CMS shouldadopt the Federal Payment Levy Program that would allow the InternalRevenue Service to withhold Medicare payments to providers until the back taxesare paid. Under the levy program, agencies often withhold about 15% of paymentsto providers. GAO estimates that Medicare would have collected more than $140million in unpaid taxes in 2006 using this system (Wall Street Journal,6/20).

The report also said that CMS should enhance screening of Medicare providersand require providers to disclose tax debts. Under federal law, IRS cannotdisclose back tax information on providers, even to CMS, without the providers'permission.

The report states, "As federal deficits continue to mount, the federalgovernment must take all effective measures to collect the billions of dollarsof unpaid taxes. Because payroll taxes fund the Medicare program, Medicareproviders should especially pay their fair share of taxes owed."

CMS Response

CMS officials said thatthey would consider GAO's recommendation to improve screening. In addition,they said that about 60% of Medicare payments would be subject to the levysystem by October. The remaining payments would be subject to the levy systemwithin the next few years.

Investigations Subcommittee Chair Carl Levin (D-Mich.) and ranking member NormColeman (R-Minn.) have introduced a bill that would require CMS to use the levysystem for all Medicare payments within four years. The House has passed asimilar bill (AP/St. Paul Pioneer Press, 6/19).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.