updated 11/15/2007 11:45:48 AM ET 2007-11-15T16:45:48

Senators urged federal agency officials Wednesday to come up with a way to collect money from Medicaid providers who owe back taxes, even though legal hurdles have hindered collection efforts.

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"It is long past time to find a way to withhold Medicaid payments from those providers who are shortchanging the very taxpayers who are supplying their paychecks," Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on Investigations, said at a hearing.

The panel's top Republican, Norm Coleman of Minnesota, urged the officials to "put your heads together" and find a solution.

The subcommittee was taking up a report which found that more than 30,000 Medicaid providers — doctors and others in the health care field — owe at least $1 billion in federal taxes, yet still receive payments for their services.

Tax fraud allows life of luxury
The report, by the Government Accountability Office, Congress' investigative arm, said that some of the worst offenders live in luxury, residing in million-dollar homes and driving high-dollar vehicles. Photos of some of those possessions were displayed at the hearing.

The GAO looked at doctors, hospitals and other Medicaid providers in seven states — California, Colorado, Florida, Maryland, New York, Pennsylvania and Texas. Medicaid is the federal-state partnership that provides health coverage to about 55 million poor people.

The GAO's Gregory Kutz posed the question of what was being done to stop tax fraud among Medicaid providers.

"Unfortunately, the answer to that is nothing," he said.

The GAO said that if the IRS had a system to levy part of the Medicaid payments, it could have collected between $70 million and $160 million last year. But because Medicaid payments are paid by states, the IRS does not consider them to be "federal payments" subject to the Federal Payment Levy Program.

"Unfortunately, we have been advised by counsel that the (levy program) as currently structured is not a tool that can be used to collect payments made by states to Medicaid providers," said IRS Acting Commissioner Linda Stiff.

Dennis Smith, an official at the Centers for Medicare and Medicaid, agreed, adding that any attempt to include the states in a levy program would be expensive.

Uncooperative behavior
Coleman took aim at that agency, saying that throughout the investigation, "CMS' assistance has been begrudging at best ... Requests from GAO, on behalf of this subcommittee, have been met with resistance and uncooperative behavior."

Kenneth Papaj, commissioner of the Treasury Department's Financial Management Service, said that the agencies would seek ways to come up with a process to collect from Medicaid providers that doesn't become a burden on the federal government or states.

"We expect that this will be a complex and long-term effort," he said.

Levin urged the officials to come up with recommendations to fix the problem within 30 days.

The report followed a similar one in March that found that doctors and other health care providers were still receiving government checks for treating Medicare patients, even while owing a total of more than $1 billion in back taxes.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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