Courtesy of THE WALL STREET JOURNAL
A congressional probe found that 27,000 doctors, hospitals, nursing homes and hospices paid by Medicare failed to pay more than $2 billion in federal taxes in 2006, and Medicare officials now say they are taking steps to stop the abuse.
The Government Accountability Office, Congress's investigative arm, reported that the total included $896 million in payroll taxes and $581 million in individual income taxes. Medicare, the federal insurance program for the elderly and disabled, is also the nation's largest health-insurance program.
The GAO said its own numbers are "substantially understated" because it didn't include all Medicare providers, among them those that didn't file tax returns.
The report, ordered by the Senate Homeland Security and Governmental Affairs Committee's investigations panel, is the result of the third tax-fraud probe involving health-care providers. Last year, the GAO found 21,000 of Medicare's doctors and outpatient services owed $1 billion in taxes through September 2005, and 30,000 providers of Medicaid services, the state-federal health-care program for the poor, owed more than $1 billion through September 2006.
Lawmakers have been pressing the Centers for Medicare and Medicaid Services to adopt the Federal Payment Levy Program that would allow the Internal Revenue Service to withhold government payments to contractors that owe taxes. Putting pressure on CMS, Investigations-Panel Chairman Sen. Carl Levin (D., Mich.) and Sen. Norm Coleman of Minnesota, the panel's ranking Republican, introduced legislation last year that would require Medicare to use the payment levy program for doctors, hospitals and outpatient services that provide services for Medicare patients.
The levy system allows the Internal Revenue Service to withhold all payments to providers who owe taxes until their debt is paid; agencies often withhold about 15% of payments to such providers. The GAO recommended in 2001 that the IRS and the Treasury Department's Financial Management Service work with Medicare to develop plans for using the levy program, which has been adopted by several agencies, including the Defense Department and the Postal Service. The GAO estimates Medicare would have collected more than $140 million in unpaid taxes in 2006 had it used the levy system.
"These tax deadbeats are guilty of shortchanging the government and forcing honest American citizens to shoulder the taxes they are shirking," Sen. Levin said in a statement. "It ought to be obvious that folks who make their living off taxpayer dollars have a special obligation to pay their taxes."
In response to pressure from Capitol Hill, Medicare officials said they will begin in October to subject 60% of Medicare fee-for-service payments to IRS scrutiny for tax delinquencies. The CMS said it will exchange Medicare payment information with the Treasury Department every day, said acting CMS Administrator Kerry Weems in a letter to the GAO.
Mr. Weems said the agency has taken some steps already to address tax evasion. In January, CMS proposed requiring some medical-equipment suppliers to "be free of federal or state tax debt." The agency is considering whether to expand the requirement to other providers and suppliers.
In addition, about 30% of Medicare's monthly payments, or $11 billion, are already subject to the tax-payment program. These are mainly payments to managed-care organizations, prescription drug plans and laboratories, Mr. Weems said.
Sen. Coleman called the CMS steps "encouraging," and he said he and Sen. Levin would "continue to move forward with our legislation to ensure these payments are levied."
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