WASHINGTON — Thousands of Medicaid health care service providers still got paid by the government even though they owed hundreds of millions of dollars in federal taxes, congressional investigators say. A legal technicality is making it harder for the IRS to collect.
In a report released Thursday, the Government Accountability Office says Medicaid payments to doctors, hospitals and other providers aren't technically considered federal funds, since they're funneled through state health care programs.
Because of that glitch, the IRS can't just shut off the payment spigot to collect tax debts. Investigators only looked at three states, so the full extent of the losses is even greater.
One dentist who received more than $100,000 from Medicaid while owing back income taxes was spending money on fine dining, trips, spas, shopping and wine, the report said.
In another case, a medical transport company received more than $1 million from Medicaid while owing millions in unpaid payroll taxes for its employees. Not paying the payroll taxes is a violation of federal law.
Medicaid, a federal-state program that mainly serves low-income people, is the companion to Medicare, which primarily serves seniors.
While the IRS can block Medicare payments to scofflaw providers using something called a "continuous levy," it is precluded by law from using the same strategy to go after Medicaid payments – even though the federal government pays about 60 percent of the costs of Medicaid.
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