Medicare Pays, Even If Providers Do Not

Billions in Taxes Go Uncollected

Health-care providers are allowed to collect millions of dollars in federal Medicare payments each year despite owing the government more than $2 billion in back taxes, congressional investigators said yesterday.

The Government Accountability Office found that more than 27,000 nursing homes, hospitals, physicians and other providers flouted the tax system while collecting Medicare fees in 2006. That represented 6 percent of all providers in a Medicare program that served 43.2 million people and paid out $402 billion in benefits that year.

Some cases cited in the new report were especially egregious. They included a nursing home operator with a history of asset concealment schemes who filed $15 million in Medicare claims while owing $7 million in unpaid taxes and establishing a charitable foundation that purchased luxury cars for the owner's personal use.

And there was the hospital that collected $21 million in Medicare fees while owing $15 million in taxes, mostly for failing to forward to the Internal Revenue Service payroll taxes that were withheld from employees' checks.

The report did not cite provider names. Auditors performed the study at the request of Sens. Carl M. Levin (D-Mich.) and Norm Coleman (R-Minn.), the chairman and ranking Republican, respectively, of the Government Affairs subcommittee on investigations.

"Medicare is a healthcare program that is designed to serve our nation's seniors, yet this investigation reveals that . . . some health care providers are subverting the tax system to line their pockets," Coleman said in a statement.

The study follows other GAO reports and congressional hearings since 2004 that have looked into why billions of dollars in taxes owed by government contractors remain uncollected.

"It ought to be obvious that folks who make their living off taxpayer dollars have a special obligation to pay their taxes," Levin said in a statement

The IRS has an automated system to hold back a portion of payments to contractors who are delinquent on their taxes. Medicare officials have been slow to join, but Kerry Weems, acting administrator for the Centers for Medicare and Medicaid Services, said that all Medicare payments will be part of the program by October. "We take this issue very seriously," he said.