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News of the Day ... In Perspective

3/26/2007

IRS wants to use Medicare to help collect delinquent taxes; Bush plan would raise revenues

According to the Government Accountability Office (GAO), more than 21,000 providers who receive Medicare payments owe more than $1 billion in back taxes.

Because Medicare is funded through payroll taxes, it has the authority to issue payments without going through the Financial Management Service, which checks for tax debts before issuing payments.

Had it used the federal system, Medicare would have collected at least $50 million in delinquent taxes during the first nine months of 2005 by withholding payments to providers.

Leslie Norwalk, acting administrator of the Centers for Medicare and Medicaid Services, said his agency is very concerned about the problem. “At this time, CMS has no explicit authority to deny physicians the right to participate in Medicare if they have tax debts.”

The GAO report came as Congress debates what to do about the 10 percent Medicare fee cut scheduled for next year. The Democrat-controlled Congress has pledged to observe “pay as you go” budget rules and would have to find revenue somewhere in order to reverse the cut (Jane Zhang, Wall Street Journal 3/20/07).

One source of “enhanced revenue” is the Bush proposal to restructure $250 billion of tax subsidies for health insurance, which has been scored by the Joint Committee on Taxation as a $334 billion “savings” to the federal government over 10 years. This estimate could cause Congress to take a look at the proposal, which had initially dubbed “dead on arrival.”

Rep. Pete Stark (D-CA) is opposed to the proposal, although he is exulting that President Bush has lost his tax-cutting credentials. Stark states that 58 million Americans would see a tax increase under the proposal. Those who get more than $15,000 in employer-owned insurance would pay more—unless they decide to buy a more cost-effective insurance plan. However, the average family buying insurance on their own would save about $3,500 a year on their federal taxes. Estimates are that between 3 and 10 million more families would obtain health insurance under the Bush plan.

“We suspect that the main unspoken concern about the plan is not that it raises or loses revenues, but that it moves America away from a government takeover of the health insurance market,” editorializes the Wall Street Journal. “Mr. Stark and others want the private health insurance market to fail—which is why they celebrate when the number of uninsured Americans rises” (“Alive on Arrival,” Wall Street Journal 3/19/07).

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