The Government Accountability Office (GAO) recommended in a recent report that the Internal Revenue Service (IRS) step up its enforcement of tax collections for Medicaid providers, finding that providers in three selected states owed nearly $800 million in unpaid taxes. In particular, the GAO suggested the IRS collect taxes automatically from Medicaid payments to large, tax-delinquent providers.

Roughly 7,000 providers – 5.6 percent of the total – in Texas, New York, and Florida owed taxes from 2009 and earlier. Those providers received more than $6 billion in Medicaid reimbursements. The GAO reviewed 40 of the providers in depth to reveal specific examples. The reviewed providers included businesses and individuals for a variety of services and institutions: nursing homes, hospitals, physicians, home care agencies, dentists, and durable medical equipment (DME)suppliers, among others.

In its response to the report, the IRS said it would require congressional action to begin collecting delinquent taxes automatically and continuously from Medicaid reimbursements – which under current law are not considered federal payments and therefor not eligible for the continuous tax levy program. Several bills – in 2011, 2010, and 2008 in both House and Senate – have been introduced to address the issue, but none has become law, the GAO report noted. The report estimated that, had a continuous levy program been in place, the IRS could have collected between $22 million and $330 million in unpaid taxes from providers in the three states it studied.

The IRS said it had taken action against the 40 providers reviewed by the GAO.