Over 27,000 health care providers that received Medicare payments during calendar year (CY) 2006 had payroll and other federal tax debts totaling over $2 billion, according to the Government Accountability Office (GAO). The GAO's analysis of data provided by CMS and the Internal Revenue Service (IRS) revealed abusive and potentially criminal activity.
Abusive activity. The GAO selected 25 Medicare providers with significant tax debt for more in-depth investigation and found that: (1) some providers diverted payroll taxes withheld from employees for other purposes; (2) individuals associated with some of these providers used payroll taxes withheld from employees for personal gain, while failing to pay their federal taxes; and (3) some providers received Medicare payments despite having quality of care issues.
GAO recommendations. The IRS can continuously levy up to 15 percent of each Medicare payment made to a provider until the provider's tax debt is paid. CMS, however, has not incorporated most of its Medicare payments into the continuous levy program. As a result, the GAO reported, for CY 2006, the government lost opportunities to potentially collect over $140 million in unpaid taxes. The GAO recommended that CMS (1) consider issuing guidance to require Medicare contractors to screen prospective Medicare providers for unpaid taxes and (2) incorporate all Medicare payments into the continuous levy program.
GAO Report, No. GAO-08-618, June 13, 2008.
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