Doctors reimbursed despite tax bills

WASHINGTON – Doctors and other health care providers who owe the federal Treasury more than $1 billion in back taxes are still receiving government checks for treating Medicare patients.

In one case, a doctor received nearly $100,000 in Medicare payments during the first nine months of 2005 despite a $600,000 overdue tax bill. The doctor owned several homes. Another physician gambled millions of dollars and purchased a luxury car – while defaulting on an installment agreement with the Internal Revenue Service that required monthly payments of $10,000. Medicare paid that physician about $100,000 in 2005.

Lawmakers want the Health and Human Services Department to participate in a payment system that would allow the government to garnish a percentage of the Medicare reimbursements going to tax scofflaws.

“What you see are cases of folks who are really living the good life,” said Sen. Norm Coleman, R-Minn. “These are not folks who are scraping by, and somehow, just by timing, they can’t meet their obligations.”

In recent years, the Senate Committee on Homeland Security and Governmental Affairs has investigated an array of contractors who benefited from government payments even as they declined to pay federal taxes.

Now, the committee, in particular its Permanent Subcommittee on Investigations, is focusing on the health care system. It asked the Government Accountability Office to determine whether physicians and other health care providers have unpaid federal taxes and, if so, to determine the magnitude of the problem.

Investigators highlighted 40 cases that they found to be the most egregious. They did not identify any of the doctors, nor would they even say whether the providers were male or female or list states of residence. However, investigators said they were referring all 40 cases to the IRS for criminal investigation.

The GAO noted that there is a program available that would allow Medicare to garnish some of the taxes owed when it reimburses providers for their work. But Medicare officials have neither participated in the levy program nor participated in a task force dedicated to improving the program, the auditors said.

As a result, auditors estimated that the federal government lost the opportunity to collect between $50 million and $140 million in unpaid taxes during the first nine months of 2005.

Leslie V. Norwalk, acting administrator for the Centers for Medicare and Medicaid Services, said the agency is concerned about tax fraud. It worked with the IRS and local and state officials to identify providers who did not report Medicare income for tax purposes. The effort identified nearly $100 million in unreported income in Los Angeles County.