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Medicaid Taxes Overdue

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By FREDERIC J. FROMMER, The Associated Press

Published: November 15, 2007

WASHINGTON - Senators on Wednesday urged federal agency officials to come up with a way to collect money from Medicaid providers who owe back taxes, even though legal hurdles have hindered collection efforts.

"It is long past time to find a way to withhold Medicaid payments from those providers who are shortchanging the very taxpayers who are supplying their paychecks," Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on Investigations, said at a hearing.

The panel's top Republican, Norm Coleman of Minnesota, urged the officials to "put your heads together" and find a solution.

The subcommittee was taking up a report that found that more than 30,000 Medicaid providers - doctors and others in the health care field - owe at least $1 billion in federal taxes, yet still receive payments for their services.

The report, by the Government Accountability Office, investigative arm of Congress, said some of the worst offenders live in luxury, residing in million-dollar homes and driving high-dollar vehicles. Photos of some of those possessions were displayed at the hearing.

The GAO looked at doctors, hospitals and other Medicaid providers in seven states: California, Colorado, Florida, Maryland, New York, Pennsylvania and Texas. Medicaid is the federal-state partnership that provides health coverage to about 55 million poor people.

The GAO's Gregory Kutz posed the question of what was being done to stop tax fraud among Medicaid providers. "Unfortunately, the answer to that is nothing," he said. The GAO said that if the Internal Revenue Service had a system to levy part of the Medicaid payments, it could have collected $70 million to $160 million last year. But because Medicaid payments are paid by states, IRS does not consider them to be "federal payments" subject to the Federal Payment Levy Program.

"Unfortunately, we have been advised by counsel that the levy program as currently structured is not a tool that can be used to collect payments made by states to Medicaid providers," said IRS acting Commissioner Linda Stiff.

Dennis Smith, an official at the Centers for Medicare and Medicaid Services, agreed, adding that any attempt to include the states in a levy program would be expensive.

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