Sen. Grassley hunting for unpaid taxes

The senator wrote the IRS seeking answers about billions in delinquent taxes from doctors and other health professionals who participate in federal health programs.

By Chris Silva — Posted Jan. 11, 2010

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A key lawmaker continues to press the Internal Revenue Service about how it intends to collect unpaid taxes from physicians and other medical professionals who keep collecting Medicare and Medicaid dollars.

Sen. Charles Grassley (R, Iowa) said a recent report concluded that federal contractors -- a term that includes physicians collecting public health pay -- collectively owe more than $3 billion in unpaid income taxes from 2008. The Government Accountability Office also has released reports in recent years indicating that such contractors accrue more than $1 billion in unpaid taxes each year, including payroll taxes used to fund Medicare and Medicaid, said Grassley, the ranking Republican member on the Senate Finance Committee.

These reports raise a tax fairness issue that needs to be addressed, Grassley said. "It's not right for a few to shirk their obligations, and it's especially offensive that these tax delinquencies come from federal employees and contractors."

In a Dec. 14, 2009, letter to IRS Commissioner Douglas H. Shulman, Grassley highlights details from several GAO reports investigating the tax debts of health care entities. In March 2007, for example, the GAO testified that more than 21,000 physicians, other health care professionals and suppliers paid under Medicare Part B during the first nine months of 2005 had tax debts totaling more than $1 billion. In June 2008, the GAO reported that Medicare participants who were paid during calendar year 2006 owed more than $2 billion in federal taxes, the senator noted in his letter. In that report, the GAO cited 90 specific cases of physicians and others who were tax delinquents. The agency declined to identify them in the report, instead referring the information to the IRS.

"Because of the seriousness of the abuses of the 90 health care providers identified by GAO, I would like a detailed description of all collection activities and other actions taken by the IRS subsequent to the GAO referral," Grassley wrote.

A spokesperson said the IRS could not give a specific date when it would respond to Grassley.

Starting in 2012, the IRS will begin withholding 3% of payments to any contractor doing work for federal, state or local governments, including those filing Medicare claims. After the money is used to satisfy any outstanding tax debts, any overage would be returned during the next year's tax season. But in the meantime, the government would hold onto that 3%, interest-free.

The American Medical Association strongly opposes the Medicare withholding provision in the tax statute and is calling on Congress to repeal it.

Missing improper payment reports

In separate action, Grassley sent a Dec. 17, 2009, letter to the Health and Human Services secretary and the acting Centers for Medicare & Medicaid Services administrator, asking why the federal government has failed, for the second year in a row, to deliver an annual assessment of what percentage of Medicare payments from the past fiscal year was improper.

CMS established the Comprehensive Error Rate Testing program in 2003 to monitor the accuracy of Medicare fee-for-service payments and report improper payment rates to Congress for each fiscal year, after responsibility for the reports was moved from the Office of Inspector General to CMS. The improper payment rate indicates the level of waste, fraud and abuse in the program.

In past years, CMS released its Medicare improper payment findings in mid-November. But Congress has yet to receive reports for fiscal years 2008 and 2009, Grassley said.

"Without this kind of assessment, administrators and policymakers aren't galvanized, as they ought to be, to do everything possible to better safeguard program dollars for beneficiaries and taxpayers," Grassley said. This is especially problematic in light of the impending insolvency of Medicare. Whatever the reason for the agency's inability to provide the data, the result is ineffective management of scarce Medicare dollars."

CMS said that due to "significant changes" in error rate methodology over the years, the agency is taking more time to ensure that the latest reports accurately explain those revisions and their impact. A spokesperson declined to say when the agency might be able to release the 2008 and 2009 reports to Congress.

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