When I saw this, it reminded me of another GAO investigation I remember from earlier this year that found a similar problem with the Medicare program (see our coverage of that report from last March). What is similar between these two reports (aside from the tax cheaters) is that the Center for Medicare and Medicaid Services (CMS) - the government agency responsible for implementing these two programs - claims there is nothing they can do about this.

To a certain extent, they might be right. Because of restrictions in law, CMS does not have explicit authority to deny health care providers from participating in either Medicare or Medicaid if they owe tax debts. In most cases, it would be illegal for the IRS to disclose those debts to the CMS - so they couldn't screen providers out anyway. The IRS can use a program called the Federal Payment Levy Program to satisfy tax debts by seizing some of the money paid to federal contractors, but Medicare officials have choosen not to participate in that program (this should probably change). But even that program won't help Medicaid. Medicaid payments are disbursed by various state agencies, and the IRS does not have a mechanism set up to automatically deduct money from those payments.

These are all valid points, but doesn't mean we shouldn't do anything about it. The Federal government should not be conducting business or making payments (either federal assistance or contract payments) to individuals or entities who owe taxes to the government. Period. Hopefully Congress will take some steps to clear up the obstacles preventing the IRS, CMS, and other government agencies from working together to streamline payments to health care providers so the government can collect the revenues that are due.