Medicare providers keeping billions of taxes for themselves

Last update: June 19, 2008 - 7:36 PM

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WASHINGTON - Thousands of hospitals, nursing homes and other Medicare providers owe the federal government more than $2 billion in payroll and other taxes.

In some cases, they used the money to buy luxury cars and million-dollar homes.

A report by the Government Accountability Office (GAO) examined 436,000 Medicare providers who received government payments in 2006. It found that more than 27,000, or about 6 percent, owed taxes.

Nearly half of those taxes -- $896 million -- was money withheld from employees' paychecks for Social Security and Medicare programs. Instead of paying those taxes to the government, the owners of hospitals and nursing homes diverted the money into personal accounts, the GAO said.

"Medicare is a health care program that is designed to serve our nation's seniors, yet this investigation reveals that at all levels -- from hospitals to nursing homes to doctors -- some health care providers are subverting the tax system to line their pockets," said Sen. Norm Coleman, R-Minn., the top Republican on the Senate Homeland Security subcommittee on investigations, which requested the GAO report.

The GAO report urges the Centers for Medicare and Medicaid Services (CMS) to participate fully in an IRS program established in 1997 that would seize up to 15 percent of federal payments, such as Medicare reimbursements, until a tax debt is paid. CMS has hedged, citing in part technical difficulties.

By failing to participate, the federal government lost a chance to recoup more than $140 million in unpaid taxes in 2006 alone, the GAO said.

"As federal deficits continue to mount, the federal government must take all effective measures to collect the billions of dollars of unpaid taxes," investigators wrote. "Because payroll taxes fund the Medicare program, Medicare providers should especially pay their fair share of taxes owed."

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