More Than 30,000 Medicaid Providers In Seven States Owe More Than $1B In Federal Taxes, GAO Report Finds

Main Category: Medicare / Medicaid / SCHIP
Article Date: 15 Nov 2007 - 12:00 PDT

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More than 30,000 Medicaid providers, or about 5%, in seven states owe the federal government more than $1 billion in unpaid federal taxes for fiscal year 2006, according to an audit released Wednesday by the Government Accountability Office, USA Today reports (Wolf, USA Today, 11/14). The report, which will be discussed at a Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigation hearing on Wednesday, follows a similar report in March that showed 21,000 federal health Medicare contractors and physicians failed to pay $1.3 billion in federal taxes in FY 2005 (Zhang, Wall Street Journal, 11/14). The Medicaid audit focused on providers in California, Colorado, Florida, Maryland, New York, Pennsylvania and Texas (Frommer, AP/St. Paul Pioneer Press, 11/13).

According to GAO, most of the unpaid taxes involved payroll taxes that were withheld from employees' wages but never paid to the federal government. The report states that thousands of Medicaid providers "abused the federal tax system, with little or no consequence." GAO noted that if a system were in place to withhold some Medicaid payments to providers who owe unpaid taxes, the federal government would have recouped $70 million to $160 million in FY 2006 (Hilzenrath, Washington Post, 11/14). However, the report noted that federal law does not prohibit medical providers who have failed to pay taxes from participating in Medicaid, adding that CMS officials believe such a restriction would affect states' abilities to provide health care access for low-income residents (AP/St. Paul Pioneer Press, 11/13).

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Subcommittee ranking member Norm Coleman (R-Minn.), who along with Subcommittee Chair Carl Levin (D-Mich.) requested the GAO study, said, "These doctors are supposed to be serving the most needy. Instead, they are cheating taxpayers in order to line their pockets." Levin said, "The federal tax levy program is designed to make sure that folks who get paid with taxpayer dollars get a portion of those dollars withheld if they have outstanding tax debt," adding, "We need to figure out how to ... stop those Medicaid medical providers from putting taxpayer dollars into one pocket while stiffing Uncle Sam by dodging their taxes" (USA Today, 11/14).

CMS spokesperson Jeff Nelligan in an e-mail statement said the objectives of the GAO report "were based on big misconceptions about the authority and responsibilities of the Medicaid program." Nelligan did not specify what those misconceptions were, and he did not respond to e-mail and telephone messages seeking clarification, according to the AP/Pioneer Press. CMS Acting Administrator Kerry Weems, commenting on a draft of the report, said the "implication is that there is some direct correlation between owing taxes and being a Medicaid provider." GAO said, "Our report clearly states that the vast majority of Medicaid providers are paying their taxes" (AP/St. Paul Pioneer Press, 11/13). The agency added that it is "concerned that CMS stated it would be inappropriate" to restrict those who failed to pay their taxes out of Medicaid (Wall Street Journal, 11/14).

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