'Tax-cheating' providers win $6.6B in Medicaid payments

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Thousands of providers who slid through the system got billions in Medicaid reimbursements even though they owed the government millions in taxes, the Government Accountability Office said.

According to the GAO report released to the public yesterday, about 7,000 Medicaid providers in the selected states of Florida, New York and Texas had roughly $791 million in unpaid federal taxes, but they still received $6.6 billion from the program in 2009.

Seventy-seven percent of them owed payroll and individual and corporate taxes, and nearly three-quarters (72 percent) owed outstanding taxes for more than five years.

GAO also profiled 40 Medicaid providers, including hospitals, dentists, homecare providers, medical suppliers and other healthcare entities. The providers received $235 million in Medicaid reimbursements but didn't pay taxes of about $26 million. In one case, a provider not only owed the government money but also was caught participating in medical billing fraud.

Not surprisingly, senators, who commissioned for the GAO investigation, called the findings "outrageous," Sen. Carl Levin (D-Mich.), chairman of the Senate Permanent Subcommittee on Investigations, said in a statement yesterday.

Sen. Tom Coburn (R-Okla.) of the Senate Finance Committee fired off too about the delinquent providers who still got payments. "People who cheat on their taxes show a clear disregard for the law so they might be more likely to defraud Medicaid or even harm patients," he said. "GAO's findings raise serious questions about steps that need to be taken to improve the integrity of the Medicaid program."

Although the Internal Revenue Service can levy taxes for Medicare payments, it doesn't do the same for Medicaid payments because they are not technically considered federal funds, the Associated Press noted.

If officials had the authority to impose continuous levies on Medicaid payments, the IRS could have collected between $22 million and $330 million in the selected states that year, GAO said.

GAO also noted that the amount of unpaid taxes could be much higher; it found the numbers are likely "understated" because they don't reflect providers who simply didn't file taxes or underreported income. However, it also noted the sample of three states and 40 cases don't necessarily represent all Medicaid providers.

The agency recommended the IRS figure out how to collect back taxes from Medicaid providers and improve coordination among states.

For more information:
- check out the GAO summary and report (.pdf)
- see the statement from Coburn's office
- read the AP article

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