Medicare providers owe $2 million in back taxes GAO finds tax abuse in Medicare program
[Hope Yen] (06/20/08)

Thousands of hospitals, nursing homes and other Medicare health providers owe the federal government more than $2 billion in payroll and other back taxes.

In some cases, they used the money to buy luxury cars, million-dollar homes and other personal items, congressional auditors say.

A report by the Government Accountability Office, obtained Thursday by The Associated Press, examined roughly 436,000 providers who received government payments in 2006 for treating Medicare patients. It found that more than 27,000, or about 6 percent, owed the federal Treasury back taxes.

Nearly half those taxes - $896 million - was money the health care providers withheld from their employee s' paychecks for Social Security and Medicare programs. Instead of paying those payroll taxes to the government, the owners of hospitals and nursing homes diverted it into personal accounts, the GAO said.

Some nursing homes also had health and safety violations or lacked the required licensing, in one case losing track of a patient who has yet to be found and in other cases not taking appropriate action to prevent a patient's suicide, investigators said.

"Medicare is a health care program that is designed to serve our nation's seniors, yet this investigation reveals that at all levels, from hospitals to nursing homes to doctors, some health care providers are subverting the tax system to line their pockets," said Sen. Norm Coleman, R-Minn., the top Republican on the Senate Homeland Security subcommittee on investigations, which requested the GAO report.

The GAO report urges the Centers for Medicare and Medicaid Services and its contractors to better screen prospective Medicare providers, such as requiring them to disclose tax debts. Under federal law, the Internal Revenue Service cannot disclose taxpayers' information, even to CMS, without their permission first.

It also calls for CMS to participate fully in an IRS program established in 1997 that would seize up to 15 percent of federal payments, such as Medicare reimbursements, until a tax debt is paid.

GAO urged CMS to join the program as early as 2001 and has since put out follow-up reports on Medicare tax abuse. CMS has hedged, citing in part technical difficulties.

By failing to participate, the federal government lost a chance to recoup more than $140 million in unpaid taxes in 2006 alone, GAO said.

"As federal deficits continue to mount, the federal government must take all effective measures to collect the billions of dollars of unpaid taxes," investigators wrote.

In a statement Thursday, Kerry Weems, CMS' acting administrator, said the agency was taking several steps to ensure that Medicare providers pay their taxes. CMS now has $10 billion a month in Medicare payments subject to the IRS tax repayment program, Weems said, and substantially more payments will be incorporated by October.

A report by the Government Accountability Office, obtained Thursday by The Associated Press, examined roughly 436,000 providers who received government payments in 2006 for treating Medicare patients. It found that more than 27,000, or about 6 percent, owed the federal Treasury back taxes.

Nearly half those taxes - $896 million - was money the health care providers withheld from their employees' paychecks for Social Security and Medicare programs. Instead of paying those payroll taxes to the government, the owners of hospitals and nursing homes diverted it into personal accounts, the GAO said. 

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