In a report issued July 27, 2012, the GAO recommended that the IRS “explore opportunities to enhance collection of unpaid taxes from Medicaid providers, including the use of continuous levies.” The GAO reviewed Medicaid reimbursement information from the three states which received the most Medicaid funding under the American Recovery and Reinvestment Act of 2009. The GAO found that in 2009, doctors, dentists, and other medical services providers who received $6.6 billion in Medicaid reimbursement owed the U.S. government $791 million in unpaid taxes from 2009 and earlier years. The GAO believes this estimate is low because it relies only on taxes which are self-reported and does not include amounts for which returns were not filed, underreported amounts, or amounts reported under a different tax identification number. Over 40% of the unpaid taxes were identified as payroll taxes and over 30% of the unpaid taxes were identified as income taxes. The study points out that Medicaid reimbursements made to delinquent taxpayer are subject to one-time, rather than continuous, levies during the collection process. GAO concludes that if it was possible to continuously levy Medicaid reimbursements, collections would increase dramatically. Congress has proposed changing the law so that Medicaid reimbursements are subject to continuous levy. However, this measure has not become law.
The GAO report is available here: GAO Report 593095.pdf