	Magnitude of Unpaid Taxes of Medicare Part B Physicians, Health Professionals, and Suppliers

Our analysis of 2005 data found that over 21,000 physicians, health  professionals, and suppliers who received Medicare Part B payments  during the first 9 months of 2005 had over $1 billion in unpaid federal  taxes as of September 30, 2005. Because the IRS  database does not include amounts owed by taxpayers who have not filed  tax returns and for which IRS has not assessed tax amounts due, the  estimated amount of unpaid federal taxes is understated. Examples of Medicare Part B Physicians, Health Professionals, and Suppliers Involved in Abusive and Potentially Criminal Activity Related to the Federal Tax System

For all 40 cases involving Medicare Part B physicians, health professionals,  and suppliers with outstanding tax debt that we audited and investigated,  we found abusive and/or potentially criminal activity related to the federal  tax system. Rather than fulfill their role as “trustees” of this money and forward  it to IRS as required by law, these physicians, health professionals, and  suppliers diverted the money for other purposes. In addition, as discussed previously, willful failure to remit  payroll taxes can be a criminal felony offense punishable by imprisonment  up to 5 years, while the failure to properly segregate payroll taxes can be  a criminal misdemeanor offense punishable by imprisonment of up to a  year. In addition to failure to pay taxes, our investigations also revealed that  several physicians associated with our case studies received Medicare Part  B payments even though they had significant problems related to the  practice of medicine. A hospital revoked the physician’s hospital privileges for  substandard care and the state medical board also investigated the  physician. As a result, the federal  government lost opportunities to collect between $50 million and $140  million in unpaid taxes in the first 9 months of calendar year 2005. The basis of exclusion of certain  individuals and entities from participation in Medicare programs is made  by statute. HHS has not established a policy to obtain  Medicare applicants’ consent to obtain tax information from IRS to  consider in its Medicare eligibility decision making process. Further, HHS has not established policy to participate in the  IRS  continuous levy program, thus preventing IRS from capturing at least a  portion of the Medicare payments made to physicians, health  professionals, and suppliers that owe tax debts. In July 2001, we reported that HHS did not have plans to  participate in the continuous levy program and we recommended that the  Commissioners of IRS and FMS work with HHS to develop plans to  include Medicare payments in the continuous levy program. Appendix I: Scope and Methodology

To identify the magnitude of unpaid taxes owed by Medicare Part B  physicians, health professionals and suppliers, we requested from  Department of Health and Human Services (HHS) the related Medicare  Part B claims data for calendar year 2005. To identify examples of abuse or potentially criminal activity, we selected  40 Medicare Part B physicians, health professionals, and suppliers with  federal tax debts for detailed audit and investigation. To determine the extent to which HHS officials and their contractors are  required to consider tax debts or other criminal activities in the enrollment  of physicians, health professionals, and suppliers into Medicare, we  examined Medicare regulations and HHS policies and procedures for  enrollment. To determine the potential levy collections on the first 9 months of  calendar year 2005, we used 15 percent and 100 percent of the total paid  claim or total tax debt amount reported to TOP per IRS records,  whichever is less.
Why GAO Did This Study

Under the Medicare program, the Department of Health and Human Services (HHS) and its contractors paid a reported $330 billion in Medicare benefits in calendar year 2005. Because GAO previously identified government contractors with billions of dollars in unpaid federal taxes, Congress requested that we expand our work in this area to all Medicare providers. This testimony addresses Medicare physicians, health professionals, and suppliers for services related to senior health care, who received about 20 percent of all Medicare payments. Because of limitations in HHS data, GAO was asked to determine if Medicare Part B physicians, health professionals, and suppliers have unpaid federal taxes, and if so, to (1) determine the magnitude of such debts; (2) identify examples of Medicare physicians and suppliers that have engaged in abusive, or potentially criminal activities; and (3) assess HHS efforts to prevent delinquent taxpayers from enrolling in Medicare and levy payments to pay delinquent federal taxes. To perform this work, GAO reviewed data from HHS and the Internal Revenue Service (IRS). In addition, GAO reviewed policies, procedures, and regulations related to Medicare. GAO also performed additional investigative activities. We plan to report on the results of our work related to other Medicare providers including any needed recommendations later this year.

What GAO Found

Over 21,000 of the physicians, health professionals, and suppliers (i.e., about 5 percent of all such providers) paid under Medicare Part B during the first 9 months of calendar year 2005 had tax debts totaling over $1 billion. This $1 billion figure is understated because some of these Medicare health care providers have understated their income and/or not filed their tax returns. We selected 40 Medicare physicians, health professionals, and suppliers with high tax debt for more in-depth investigation of the extent and nature of any related abusive or potentially criminal activity. Our investigation found abusive and potentially criminal activity, including failure to remit to IRS individual income taxes and/or payroll taxes withheld from their employees. Rather than fulfill their role as "trustees" of this money and forward it to IRS, they diverted the money for other purposes. Willful failure to remit payroll taxes is a felony under U.S. law. Further, individuals associated with some of these providers used payroll taxes withheld from employees for personal gain (e.g., to purchase a new home) or to help fund their businesses. Many of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes. In addition, some physicians received Medicare payments even though they had serious quality-of-care issues, including license reprimands and prior suspensions from state medical boards, revocations of hospital privileges, and previous exclusions from the Medicare program. HHS has not issued Medicare regulations or policies requiring Medicare contractors to consider tax debts in making a decision about whether to enroll a physician, health professional, or supplier into Medicare. Further, HHS has not established a policy to obtain taxpayer consent to obtain tax information from IRS as part of its Medicare eligibility decision-making process. IRS can continuously levy up to 100 percent of each payment made to a federal payee--for example, a Medicare physician--until that tax debt is paid. However, HHS is not participating in the continuous levy program and thus the government has not collected unpaid taxes from Medicare payments. In the first 9 months of calendar year 2005, we estimate that the government lost opportunities to collect between $50 million and $140 million by not participating in the continuous levy program.