Coleman, Levin Investigate Medicaid Doctors Owing Over $1 Billion In Back Taxes

GAO finds that up to $160 million could have been recouped in 2006 alone if payments to Medicaid practitioners were levied

Washington, D.C. – Continuing their efforts to root out waste, fraud and abuse of taxpayers’ dollars, Senator Norm Coleman (R-MN), Ranking Member of the Permanent Subcommittee on Investigations (PSI), and Subcommittee Chairman Carl Levin (D-MI) will be holding a hearing today at 3:30 p.m est entitled, Medicaid Providers That Cheat on Their Taxes and What Should Be Done About It. The hearing will present evidence that roughly 30,000 physicians and health care service providers that receive billions of Medicaid dollars every year owe back-taxes of more than $1 billion. The study, conducted by the Government Accountability Office (GAO) at the request of the Subcommittee, was limited to seven states that make up only 43 percent of Medicaid expenditures. As a result, the actual total is much larger – potentially as high as 60,000 providers owing $2 billion in back-taxes. GAO estimated that, if the payments to Medicaid providers in just those seven states had been levied, the federal government could have recovered up to $160 million in one year alone. “These doctors are supposed to be serving the most needy, instead they are cheating taxpayers in order to line their pockets,” said Coleman. “These are not your everyday tax-cheats. These are health-care providers that receive billions from Medicaid every year, but at the same time, refuse to pay their fair share of taxes. Not only are they cheating American taxpayers, they are abusing their employees. Rather than following the law, many of these Medicaid providers diverted their employees’ payroll taxes to buy luxury cars, boats, and multi-million dollar properties.” “The vast majority of physicians and companies who participate in the Medicaid program are true public servants who deserve our admiration and gratitude. But a small portion of Medicaid medical providers are public delinquents who are not paying their taxes,” said Levin. “It is long past time to tell the Medicaid tax-dodgers that it is not okay for them to shortchange the very taxpayers who are supplying their payment to them and force honest American citizens to shoulder the taxes they are shirking.” The Centers for Medicare & Medicaid Services (CMS) is the organization that manages the Medicare and Medicaid programs on behalf of the federal government. Of the $324 billion paid by Medicaid last year, $185 billion (roughly 57%) came from the federal government. The federal share of a Medicaid claim is between 50% and 83%, depending on the state’s per capita personal income relative to the national average. For more than ten years, the IRS had failed to determine whether Medicaid payments were covered under the Federal Payment Levy Program. Recently, the IRS has issued an informal decision stating that Medicaid payments do not constitute federal payments because payments are sent to the states, which, in turn, pay the Medicaid providers. “The key question that looms over this problem is whether the federal government can levy the payments that these Medicaid practitioners receive under the Federal Payment Levy Program. If the IRS’s informal decision holds we need to find a way a viable way of recouping taxpayer dollars. There are complex legal and technical hurdles to we need to overcome to find an answer to this problem, but we have had great success in the past. At today’s hearing, I intend ask CMS, IRS and FMS to find a solution that takes taxpayer dollars out of the pockets of tax cheats,” Coleman added. “I will ask the relevant government agencies to work with the subcommittee and commit to solving this problem.” “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. But federal tax levies don’t now apply to Medicare medical providers who get paid with a mix of state and federal dollars,” said Levin. “We need to figure out how to enlist the tax levy program to stop those Medicaid medical providers from putting taxpayer dollars into one pocket while stiffing Uncle Sam by dodging their taxes.” Medicaid, the government health care program for the poorest Americans, covers roughly 55 million people, of which 27 million are children, 14 million are adults in families with children, 8 million are people with disabilities, and 6 million are aged 65 and over. This is the fifth hearing to result from the Subcommittee’s three-year investigation into contractors that provide goods or services to the federal government, but fail to pay their fair share of taxes. A 2004 hearing determined that 27,000 contractors with the Department of Defense had tax debts totaling roughly $3 billion. Due to the Subcommittee’s oversight, collections from delinquent Defense contractors skyrocketed by 4,415% – from a mere $680,000 in 2003 to $31 million in 2006 alone. The Subcommittee has achieved similar success across the entire federal government. Over the course of the Subcommittee’s investigation, levies on payments to deadbeat federal contractors have jumped 746%, raking in an additional $122 million in back-taxes. The following witnesses will be testifying before the Subcommittee: MR. GREGORY D. KUTZ Managing Director Forensic Audits and Special Investigations Unit U. S. Government Accountability Office MS. LINDA E. STIFF Acting Commissioner Internal Revenue Service U. S. Department of the Treasury THE HONORABLE KENNETH R. PAPAJ Commissioner Financial Management Service U.S. Department of the Treasury MR. DENNIS G. SMITH Director, Center for Medicaid & State Operations Centers for Medicare & Medicaid Services U.S. Department of Health and Human Services __________ FOR ADDITIONAL INFORMATION, CONTACT: Tara Andringa (Levin) 202.228.3685 LeRoy Coleman (Coleman) 202.224.5641