Report: Medicare Doctors Owe Federal Income, Payroll Taxes
More than 21,000 physicians and other health care providers who participate in Medicare owe the federal government $1.3 billion in income and payroll taxes, according to a report scheduled for release on Tuesday by the Government Accountability Office, the New York Times reports. GAO plans to release the report at a Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigation hearing on the issue (Pear, New York Times, 3/20).
According to the report, health care providers who billed Medicare for outpatient services during the first nine months of 2005 owed $523 million in income taxes, $430 million in payroll taxes and $93 million in other taxes, such as corporate income and employment taxes (Zhang, Wall Street Journal, 3/20). The report found that physicians, physician-owned businesses, laboratories and ambulance operators owed an average of $62,000 in taxes, although GAO did not include those who owed less than $100.
About 5% of the health care providers owed taxes, the report found (New York Times, 3/20).
The report said that the taxes were not collected from the health care providers because HHS has not connected department computers to the Internal Revenue Service and other Treasury Department divisions, a move recommended by GAO in 2001 that would allow the agencies to identify those who owe taxes (Day, Washington Post, 3/20).
A provision in a 1997 law authorizes IRS to "levy certain payments made to delinquent taxpayers," but CMS officials have not participated in the program or a task force established to improve the program, according to the report. Under the program, for the first nine months of 2005, the federal government could have collected $50 million to $140 million in taxes owed by the health care providers, the report found.
In written testimony prepared for the hearing, GAO said, "Our investigation found abusive and potentially criminal activity," adding, "Many of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes" (Freking, AP/Philadelphia Inquirer, 3/20).
GAO in the future will examine hospitals, nursing homes and medical equipment suppliers that participate in Medicare to determine which have "abused the federal tax system while doing business with the federal government," according to the report (Washington Post, 3/20).
Sen. Norm Coleman (R-Minn.) said, "What you see are cases of folks who are really living the good life. These are not folks who are scraping by, and somehow, just by timing, they can't meet their obligations" (AP/Philadelphia Inquirer, 3/20). Coleman added, "These are folks that are doing extremely well, (owe) the government significant money and are still getting contracts" (Brady, CongressDaily, 3/20).
Subcommittee Chair Carl Levin (D-Mich.) said, "While stuffing taxpayer dollars in their pockets," a number of health care providers "are stiffing Uncle Sam by not paying their taxes" (New York Times, 3/20). Levin said that CMS should "join the government-wide tax levy effort" (CongressDaily, 3/20).
Leslie Norwalk, acting administrator of CMS, said, "We are very concerned about this issue and are working hard with the Department of Treasury and the IRS to ensure that we do not overpay providers or other entities who owe the IRS money." Norwalk also said that HHS has no authority to "deny physicians the right to participate in Medicare if they have tax debt" (Washington Post, 3/20).