The U.S. Government Accountability Office, the investigative arm of Congress, is reporting that approximately 7,000 health providers in New York, Texas, and Florida owed back taxes while collecting payments from Medicaid.

As reported in Bloomberg News, dentists and other health care providers in these three states allegedly owe $791 million in back taxes on the $6.6 billion they made in 2009 from Medicaid.

This represents about 5.6% of the Medicaid providers reimbursed by these same states during 2009.

From the GAO report: The 40 Medicaid providers GAO reviewed received a total of $235 million in Medicaid reimbursements (including Recovery Act funds) in 2009 and had unpaid federal taxes of about $26 million through 2010. The amount of unpaid federal taxes ranged from approximately $100,000 to over $6 million. In addition, IRS records indicate that providers in two of GAO’s cases are currently, or have previously been, under criminal investigation. For example, in one case a provider was caught participating in a medical billing fraud.

The Recovery Act increased the federal share of Medicaid funding. Since Federal law does not prohibit providers with tax debt from enrolling in Medicaid, GAO discovered that thousands of Medicaid providers do have unpaid federal taxes.

The Recovery Act required that the government track how the funds were distributed and how the recipient’s taxes were paid.

GAO compared Medicaid reimbursement information from these three states to known IRS tax debts as of September 30, 2009 and found that they were among those that received the largest portion of Recovery Act Medicaid funding.

Since Medicaid is administered by states, and not by the federal government, Medicaid payments aren’t considered federal and are more difficult to garnish by the IRS.

Dentists, what do you think the real issue is here?

For more on this story see: Medicaid Providers Owe $791 Million in Taxes, U.S. Says