GAO: Tax cheats get millions in Medicaid money

One in every 20 health care providers getting taxpayer money from Medicaid is delinquent on federal taxes, and in some cases the tax cheats are years behind in paying the Internal Revenue Service, according to an audit by congressional investigators.

The Government Accountability Office looked at about 7,000 providers in three large states whom Medicaid reimbursed more than $6 billion in 2009 and found that they had nearly $800 million in unpaid federal taxes.

In two cases, the health care companies — which include dentists, doctors, private ambulances and medical supply companies — had been under criminal investigation, including for medical billing fraud.

“It is outrageous that health care providers who cheat on their taxes are getting paid with taxpayer dollars through the Medicaid program,” said Sen. Carl Levin, chairman of the Senate’s investigative subcommittee.

The Michigan Democrat called for the government to prohibit companies with unpaid taxes from receiving Medicaid money.

Medicaid is the federal-state partnership health care program for the poor. It spends hundreds of billions of dollars a year to reimburse health care providers for services to beneficiaries.

One dentist whom the GAO reviewed owed more than $100,000 in federal taxes, but continued to spend money on fine dining, trips and spa treatments.

Another couple who owned a nursing business and owed more than $3 million in taxes claimed the problem was the timing of government payments. When the IRS took action, the company reduced its business with Medicaid.

The owners also bought a new home while the business debt was growing, the GAO said. The IRS eventually referred the case to the Justice Department for action.

The GAO said the IRS is usually allowed to deduct unpaid taxes from other government payments, but the IRS does not believe Medicaid reimbursements for care qualify as federal payments. The GAO said the IRS could have recovered up to $330 million of the money owed in 2009 if it had used those tools.

“People who cheat on their taxes show a clear disregard for the law, so they might be more likely to defraud Medicaid or even harm patients,” said Sen. Tom Coburn, Oklahoma Republican and a medical doctor. “GAO’s findings raise serious questions about steps that need to be taken to improve the integrity of the Medicaid program.”