[Congressional Record Volume 153, Number 72 (Thursday, May 3, 2007)]
[Senate]
[Pages S5600-S5602]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COLEMAN (for himself, Mr. Levin, and Mrs. McCaskill):
  S. 1307. A bill to Include Medicare provider payments in the Federal 
Payment Levy Program, to require the Department of Health and Human 
Services to offset Medicare provider payments by the amount of the 
provider's delinquent Federal debt, and for other purposes; to the 
Committee on Finance.
  Mr. COLEMAN. Mr. President, I rise to introduce the Medicare Provider 
Accountability Act on behalf of myself, and my colleagues Senator Levin 
and Senator McCaskill. This bill is a direct result of the recent 
bipartisan investigation by the Permanent Subcommittee on 
Investigations exposing Medicare physicians and related providers who 
cheat on their taxes. At our March 20 hearing, entitled ``Medicare 
Doctors Who Cheat On Their Taxes,'' the Subcommittee presented evidence 
that more than 21,000 physicians and other providers received millions 
of dollars through the Centers for Medicare and Medicaid Services, CMS, 
under Medicare Part B, even though they collectively owe more than $1.3 
billion in undisputed Federal taxes as of September 30, 2006.
  I think it is important to note that the vast majority of physicians 
are working hard to provide services to Medicare beneficiaries. In 
fact, I know that many doctors struggle with on-going reductions in 
payments under the so-called Sustainable Growth Rate.
  The focus of PSI's ongoing investigations has been tax fraud and 
government contractors. CMS is the only Federal agency of considerable 
size that has resisted participating in the Federal Payment Levy 
Program that I will describe later. As we looked into CMS, we found 
that there were physicians receiving payments from the government while 
they simultaneously withheld money from the government by cheating on 
taxes, and failing to pay child support or student loan debts. Through 
their actions, these ``bad apples'' are hurting efforts to promote the 
longterm sustainability of the Medicare Program.
  What is disturbing is that the delinquent doctors identified by our 
investigation were not hardship cases but rather folks living the 
``good life.'' This minority of physicians live in multi-million-dollar 
homes, own luxury vehicles and pleasure boats, and gamble with millions 
of dollars, yet still cheat the government.
  Some of the most egregious examples that GAO discovered include the 
following:
  An ambulance company received more than $1 million from Medicare in 
just the first 9 months of 2005, although it owed more than $11 million 
in back taxes.
  One doctor has refused to pay Federal income taxes since the 1970s 
and now owes more than $3 million in unpaid Federal taxes, and more 
than $1 million to another Federal agency. He was paid approximately 
$100,000 by Medicare in the first 9 months of 2005. He tried to hide 
his assets by attempting to transfer property to his children.
  Another physician who owes more than $1 million, primarily as payroll 
taxes withheld from his employees, received more than $1 million from 
Medicare between January and September 2005. He was flaunting his 
illegally gained windfall with a million-dollar home, 58-foot yacht, 
and ownership of several night clubs. His recently reported income is 
half a million dollars, but the compromise offer he made to the IRS 
only covers the penalty for nonpayment and not the overdue taxes 
themselves.

  Another physician whose medical license is on probation owes more 
than $400,000 in unpaid Federal taxes. Despite this debt, he purchased 
a luxury vehicle predominantly with cash, deposited tens of thousands 
of dollars in cash in such a way as to avoid mandatory reporting to the 
IRS, and gambled away millions of dollars. Although he did report more 
than $600,000 in net profits for 2 recent years, he still managed to 
fall behind in his child support payments by tens of thousands of 
dollars and to default on his installment agreement with the IRS.
  Unfortunately, the list goes on and on. Worse, as if failing to pay 
their taxes was not a sufficient insult to American taxpayers, Medicare 
providers also owed $33 million in child support, $27 million in unpaid 
student loans, $114 million owed to other Federal agencies, and $22 
million in unpaid state income taxes.
  While these figures and case studies are obviously disturbing, the 
good news is that the Federal Government has two marvelous programs for 
recovering Federal debt from Federal payments, the Federal Payment Levy 
Program, FPLP, for tax debt, and the Treasury Offset Program, TOP, for 
non-tax debt, such as delinquent student loans, child support, and 
money owed Federal agencies. The Financial Management Service, FMS, 
handles both of these programs and matches pending payments from the 
Federal Government against outstanding Federal tax debt in the case of 
FPLP, and against other outstanding federal debt in TOP. If such debt 
exists, a levy of 15 percent or more is imposed upon each payment made 
to the delinquent taxpayer until that debt is recovered. FMS currently 
screens most Federal payments for unpaid taxes, including salaries and 
payments to contractors and vendors.
  The Government Accountability Office specifically recommended that 
CMS confer with the IRS and FMS to figure out how to get Medicare 
payments into the levy program. That recommendation came in six years 
ago, in 2001, so it is clear that CMS and the other agencies have been 
``on notice'' about this very issue for years. In fact, although CMS 
has been sending information on payments to Medicare Part C and D 
providers to FMS for matching in FPLP, it has failed to include the 
more than $300 billion in payments to Part A and B providers.
  As a result, the Federal Government has lost countless opportunities 
to levy Medicare payments made to tax-delinquent doctors and other 
suppliers. The GAO estimated that, if CMS had participated in the levy 
program, the government could have recouped anywhere between $50 
million and $140 million of unpaid Federal taxes from these Medicare 
tax-cheats in just the first nine months of 2005 alone. That does not 
include potential millions recouped for delinquent student loans, 
unpaid child support, and back-taxes owed to States.
  But we are not in the blame business, we are in the problem-solving 
business. So, the paramount question is how to fix this mess. Make no 
mistake: these are complex problems, but I am confident that we can fix 
them. This legislation is a good start.
  The bill, entitled the Medicare Provider Accountability Act, has 
three prongs to assist the Federal government with the collection of 
these outstanding debts. It establishes a timetable for CMS to join the 
Federal Payment Levy Program for all payments to Medicare providers, 
and expressly authorizes CMS to participate in the Treasury Offset 
Program to collect nontax debt. Finally, it enables the IRS to begin 
levying payments earlier in the notice process.
  First, this bill sets a deadline by which CMS must fully participate 
in the FPLP. Fifty percent of the payments to Part A and B providers 
must be sent to FMS for matching tax debt under FPLP within 1 year of 
enactment. Within 2 years of enactment, every Medicare provider 
payment, regardless of Part, will be checked by FMS under FPLP for 
outstanding Federal tax debt.
  Second, this bill gives CMS the authority to submit payments to its 
providers to TOP, which it had previously been unable to do. CMS and 
FMS testified at the hearing that CMS cannot legally participate in TOP 
as a Federal disbursing authority, and that to do so will require a 
Legislative fix. This bill explicitly includes payments to Medicare 
providers as disbursements that can be offset, allowing for the 
recovery of delinquent student loans, overdue child support, debts owed 
to other federal agencies and state taxes.
  In addition, this legislation enables IRS to levy Federal payments to 
recover delinquent tax debt earlier in the process. Currently, only 
about half of the $140 billion in tax debt eligible for

[[Page S5601]]

matching is ``turned on'' to allow FMS to begin levying payments 
through FPLP. This is a result of IRS's current procedure, sending four 
computer-generated notices followed by a Collection Due Process, CDP, 
notice. Although the delinquent taxpayer can enter a payment plan or 
challenge the amount throughout the process, the formal appeals process 
begins only after all of those notices are issued. This protracted 
process allows a delinquent taxpayer to drag out the process and 
prevent automatic levies anywhere from months to years. An additional 
problem beyond the delay is that by the time the appeals process 
concludes, the contractor may no longer be receiving Federal payments. 
This provision of the bill accelerates the collection process, enabling 
a postlevy appeals process, whereby the IRS can begin to levy Federal 
payments prior to the CDP notice. To be clear, this would permit the 
Government to begin levying payments earlier, while still preserving 
the taxpayer's right to appeal. This will not affect levies on third 
parties.
  Congress has spent much of this session focusing on health care. We 
all know that we have a crisis looming with Medicare. In order to 
ensure the long term sustainability of the program, we need to be sure 
that the money that is going out through this program is being spent 
efficiently and effectively. We also need to be sure that the money 
that is coming into this program through our taxes is being collected 
efficiently and effectively. They are part and parcel of the same 
problem. As we look for money to spend on programs to benefit our most 
vulnerable, this legislation can go a long way to identifying possible 
sources.
  I would especially like to thank Chairman Levin for his ongoing 
support of our efforts to address those who receive Federal payments 
without paying their taxes. This is truly a bipartisan effort and a 
bipartisan bill in its writing and its sponsorship.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1307

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Provider 
     Accountability Act''.

     SEC. 2. INCLUSION OF MEDICARE PROVIDER PAYMENTS IN FEDERAL 
                   PAYMENT LEVY PROGRAM.

       (a) In General.--The Centers for Medicare and Medicaid 
     Services shall take all necessary steps to participate in the 
     Federal Payment Levy Program under section 6331(h) of the 
     Internal Revenue Code of 1986 as soon as possible and shall 
     ensure that--
       (1) at least 50 percent of all payments under parts A and B 
     of title XVIII of the Social Security Act are processed 
     through such program within one year of the date of enactment 
     of this Act, and
       (2) all remaining payments under such parts A and B are 
     processed through such program within two years of such date.
       (b) Assistance.--The Financial Management Service and the 
     Internal Revenue Service shall provide assistance to the 
     Centers for Medicare and Medicaid Services to ensure that all 
     payments described in subsection (a) are included in the 
     Federal Payment Levy Program by the deadlines specified in 
     that subsection.

     SEC. 3. APPLICATION OF ADMINISTRATIVE OFFSET PROVISIONS TO 
                   MEDICARE PROVIDER PAYMENTS.

       (a) In General.--Section 3716 of title 31, United States 
     Code, is amended--
       (1) by inserting ``the Department of Health and Human 
     Services,'' after ``United States Postal Service,'' in 
     subsection (c)(1)(A), and
       (2) by adding at the end of subsection (c)(3) the following 
     new subparagraph:
       ``(D) This section shall apply to claims or debts, and to 
     amounts payable, under title XVIII of the Social Security 
     Act.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to payments made after the date of enactment of 
     this Act.

     SEC. 4. STREAMLINING TAX LEVIES ON FEDERAL PAYMENTS.

       (a) In General.--Section 6330(f) of the Internal Revenue 
     Code of 1986 (relating to jeopardy and State refund 
     collection) is amended--
       (1) by striking ``or'' at the end of paragraph (1),
       (2) by striking the comma at the end of paragraph (2) and 
     inserting ``; or'',
       (3) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) the Secretary has approved a levy, including a 
     continuing levy under section 6331(h), on specified payments, 
     as defined in section 6331(h)(2),'', and
       (4) by striking the heading and inserting ``Jeopardy, State 
     Refund, and Collection From Federal Payments''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to levies made after the date of enactment of 
     this Act.

  Mr. LEVIN. Mr. President, I join today with my colleagues, Senator 
Coleman and Senator McCaskill, in introducing the Medicare Provider 
Accountability Act. This bill targets Medicare, a program which is 
indispensable to the health of our citizens, because some Medicare 
service providers are profiting from the program while abusing the 
federal tax system. The facts show that, while the vast majority of 
Medicare health care providers are honest, tax-paying citizens, others 
are getting paid with taxpayer dollars while, at the same time, failing 
to pay their taxes.
  Legislation to stop this abuse is a product of the work of the 
Permanent Subcommittee on Investigations, on which I serve as Chairman 
and Senator Coleman serves as the Ranking Member. On March 20, 2007, a 
Subcommittee hearing presented testimony from the Government 
Accountability Office (GAO) showing that about 21,000 Medicare Part B 
health care providers, including doctors, ambulance companies, and 
medical laboratories, collectively owe more than $1 billion in 
delinquent taxes. GAO also determined that, despite this pending tax 
debt, during the first 9 months of 2005 alone, these health care 
providers had received payments on Medicare claims totaling around $140 
million. In other words, these providers were stuffing taxpayer dollars 
in their pockets at the same time they were stiffing Uncle Sam by not 
paying their taxes.
  Federal programs exist to stop this type of abuse. One key program is 
the Federal Payment Levy Program, which was established about ten years 
ago to enable the Federal government to identify federal payments being 
made to tax delinquents, and authorize the withholding of a portion of 
those taxpayer dollars to apply to the person's tax debt. That program 
has successfully collected taxes from federal payments made through the 
Treasury Department and by agencies like the Defense Department who 
screen their own payments to contractors through Treasury's Financial 
Management Service.
  As our March hearing demonstrated, however, despite a legal 
requirement to do so, The Centers for Medicare and Medicaid Services 
(CMS) have never participated in the tax levy program with respect to 
Medicare Part A and B payments. This failure means that, year after 
year, as much as $300 billion in Federal Medicare payments have not 
been screened for unpaid taxes. The first substantive provision of our 
bill would redress this situation by mandating CMS to bring all 
Medicare part A and B payments into the Federal Payment Levy Program 
over the next two years.
  The second part of our bill would enable CMS to participate in a 
similar automated program, known as the Treasury Offset Program, to 
collect non-tax debt, such as unpaid student loans and child support. 
GAO has determined that certain Medicare health care providers 
collectively owe hundreds of millions of dollars in student loans, 
child support, and unpaid state taxes that could be collected through 
administrative offsets.
  The third and final part of our bill would eliminate a barrier to 
including a large part of IRS's uncollected tax assessments in the 
Federal Payment Levy Program for collection from Medicare provider 
payments, as well as other federal contractor payments. Right now, for 
a variety of legal and technical reasons, only 45 percent of the tax 
debt assessed but still uncollected in 2006 was actually made subject 
to levy under the federal program. In 2006, over half of this assessed 
tax debt--some $67 billion--was never ``turned on'' for actual 
collection under the tax levy program. Now, $67 billion is a big 
number, even by Washington standards.
  One key reason that this tax debt was not ``turned on'' for 
collection by levy is that many of the accounts had not reached the 
stage in their processing where the required notice of intent to levy 
had been sent to the taxpayer. Until that notice is sent and the 
taxpayer has exhausted all rights of appeal available under the tax 
law, the

[[Page S5602]]

IRS is currently barred from placing a tax levy on the taxpayer's 
property. In the case of Medicare providers and other federal 
contractors, that means federal dollars continue to go into their 
pockets, without any withholding, despite their unpaid taxes.
  While it may be appropriate to delay tax levies on most types of 
taxpayer property until a taxpayer's appeals are exhausted, it makes no 
sense to keep sending taxpayer dollars to a tax delinquent Medicare 
provider or other federal contractor while they are appealing the tax 
assessment. Withholding should be allowed when it is taxpayer dollars 
that are being paid to the tax delinquent. That's why our bill would 
create a special rule for federal payments, allowing a tax levy to be 
initiated and continue in effect, while the taxpayer's appeal goes 
forward. The taxpayer would retain the same due process rights, but a 
tax levy would be allowed to begin earlier in the administrative 
process; it would no longer have to wait until all of the taxpayer's 
appeal rights were exhausted. For property other than federal payments, 
the bill would maintain the current system, requiring a pre-levy notice 
and exhausted appeal rights before the property could be levied.
  The vast majority of Medicare providers render valuable services to 
their patients, and they do so while paying their taxes. These honest 
health care providers are put at a competitive disadvantage by the 
Medicare tax cheats who reduce their operating costs by failing to pay 
taxes. Besides hurting honest businesses, this type of tax dodging 
hurts our country by undermining the fairness of our tax system and by 
forcing honest taxpayers to make up the shortfall needed to pay for 
basic federal protections--like health care. When these tax delinquents 
also receive large payments of federal funds, it adds insult to injury. 
We must force these tax dodgers to pay their tax debt, and a key tool 
is to subject any federal payments they receive to an effective tax 
levy program.
  The Medicare Providers Accountability Act would target those tax 
dodgers by strengthening the tax levy program and subjecting additional 
hundreds of billions of dollars in federal payments each year to 
screening for unpaid taxes. An improved tax levy program would, in 
turn, strengthen federal tax enforcement, take a load off the shoulders 
of honest taxpayers, and reduce the tax gap. I urge my colleagues to 
join us in supporting the bill's enactment.
  I ask unanimous consent that my remarks follow those of Senator 
Coleman in today's Congressional Record.
                                 ______