Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax System

GAO-08-17 Published: Nov 14, 2007. Publicly Released: Nov 14, 2007.
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In fiscal year 2006, outlays for Medicaid were about $324 billion; about $185 billion was paid by the federal government. Because GAO previously identified abusive and criminal activity associated with government contractors owing billions of dollars in federal taxes, the subcommittee requested GAO expand our work to Medicaid providers. GAO was asked to (1) determine if Medicaid providers have unpaid federal taxes, and if so, the magnitude of such debts; (2) identify examples of Medicaid providers that have engaged in abusive or criminal activities; and (3) determine whether the Centers for Medicare & Medicaid Services (CMS) and the states prevent health care providers with tax problems from enrolling in Medicaid or participating in the continuous levy program to pay federal tax debts. To perform this work, GAO analyzed tax data from the Internal Revenue Service (IRS) and Medicaid data from seven selected states based on magnitude of Medicaid payments and geography. GAO also performed additional investigative activities.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of the Internal Revenue Service should conduct a study to determine whether Medicaid payments can be incorporated in the continuous levy program.
Closed – Implemented
IRS completed such a study and concluded that, in accord with existing legislation, Medicaid disbursements do not qualify as federal payments and therefore cannot be incorporated in the continuous levy program.
Internal Revenue Service The Commissioner of the Internal Revenue Service should evaluate the 25 referred cases detailed in this report for appropriate additional aggressive collection action and criminal investigation as warranted.
Closed – Implemented
Through May 2012, IRS has evaluated the 25 cases and took appropriate collection actions, resulting in the closure of 23 of the cases.

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