About 7,000 Medicaid providers in Florida, New York and Texas with approximately $791 million in unpaid federal taxes from 2009 or earlier received more than $6 billion in Medicaid reimbursements, according to a recent study published by the U.S. Government Accountability Office (GAO).
This represents about 5.6 percent of all Medicaid providers reimbursed by those selected states during the 2009 calendar year, the GAO indicated. The Medicaid providers with unpaid federal taxes received a total of about $6.6 billion in Medicaid reimbursements that year, including American Recovery and Reinvestment Act of 2009 funding (better known as stimulus funds), the GAO continued.
The GAO acknowledged that the amount of unpaid federal taxes the agency had identified is likely understated because Internal Revenue Service (IRS) tax data reflects only unpaid taxes reported on a tax return or assessed through enforcement; it does not include entities that did not file tax returns or underreported their income.
The 40 Medicaid providers the GAO reviewed received a total of $235 million in Medicaid reimbursements in 2009 and had unpaid federal taxes of about $26 million through 2010. The amounts of unpaid federal taxes facing individual entities ranged from approximately $100,000 to more than $6 million, officials said.
In addition, IRS records indicate that providers in two of the cases are currently, or previously have been, under criminal investigation, according to the study. For example, in one case a provider was caught participating in a medical billing fraud. IRS may levy or seize property to satisfy a tax debt, and, in some instances it is authorized to use an automated process to levy federal payments made to delinquent taxpayers, the GAO indicated
Medicaid reimbursements never have been levied continuously using this provision of the law because the IRS determined that these reimbursements do not qualify as federal payments, the GAO added. However, if such a process could be used, estimates indicated that the IRS could have collected between $22 million and $330 million in the selected states in 2009.
Authorities said that some state officials with whom they spoke expressed concerns about implementing continuous levies, given the challenges they encounter with processing one-time IRS levies. For example, the GAO noted, some states have had difficulty reaching IRS revenue officers and have encountered problems with the IRS sending levies to the wrong address.
Federal law does not prohibit providers with tax debt from enrolling in Medicaid, the GAO indicated, noting that studies have shown that thousands of Medicaid providers do have unpaid federal taxes. Since any provider that received Medicaid reimbursements in 2009 also received stimulus funds, however, GAO was asked a) to determine the magnitude of unpaid federal taxes owed by Medicaid providers reimbursed in 2009 in selected states; b) to provide examples of Medicaid providers that have sizeable unpaid federal taxes; and c) to evaluate opportunities and challenges related to collecting unpaid federal taxes through a levy process designed to offset Medicaid reimbursements.
The GAO compared Medicaid reimbursement information from three states to known IRS tax debts as of Sept. 30, 2009. These states were among those that received the largest portion of Medicaid stimulus funding. To provide examples of Medicaid providers that have sizeable unpaid federal taxes, the GAO indicated that it conducted a detailed review of 40 Medicaid providers that had more than $100,000 of federal tax debt.
The GAO cautioned, however, that its sample of three states and 40 cases could not be extrapolated to all states and all Medicaid providers. Architects of the study also reviewed relevant laws and reports and interviewed federal and state officials.
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