Are Doctors Garnishing Tax Payments to Recover Funds From Medicare?

Posted on June 25, 2008
Filed Under Healthcare economics |

The Wall Street Journal recently reported that Congress is urging Medicare administrators to assist the IRS in garnishing payments to doctors (and other “contractors”) who owe federal taxes. The Government Accountability Office estimates that providers owe more than $2 billion in back taxes, and withholding Medicare payments to providers is seen as an expeditious method of collecting those owed monies.

DrRich is shocked (shocked) not only that a body of Solons such as Our Congress could so egregiously misinterpret the actions of forthright American physicians, but also that the WSJ itself (a bastion of American capitalistic thought) could fail to recognize the true nature of those actions.

For DrRich suspects there is an alternative explanation that places the alleged tax deficiencies of American doctors in a somewhat different, and far more heroic, light. Namely, when (if) doctors are withholding tax payments, they are not doing so as common tax cheats. Heavens, no. Rather, they are doing so for entirely justifiable and noble (if illegal) reasons.

First, they are trying to break even. In contrast to what is seen with most of the revered professions (wherein the payment due to the professional is transparently negotiated, or is simply “set” by the professionals themselves according to what the market will bear), the pay of physicians is determined by Acts of Congress. Even now, before the next set of impending, Congressionally-determined physician pay cuts, Medicare does not reimburse doctors enough to cover the overhead of most office visits.* Some say this makes the business of office practice economically dicey. In fact, it is already impossible for a stand-alone, independent primary care doctor to make a living caring for Medicare patients.

Second, Medicare has successfully inculcated the Fear of God into physicians regarding the now-federal crime of healthcare fraud. The penalties for committing healthcare fraud are so onerous that merely being accused of it is enough to induce most physicians to beg for a settlement deal, regardless of the strength of their defense, and regardless of the fact that most such settlements are personally and professionally ruinous. And the opportunities to be accused of fraud are unlimited for even the most fastidiously honest among physicians. (The arcane E&M coding rules, which have been formally proven impossible to follow, afford the opportunity for the feds to point the fickle finger of fraud, quite arbitrarily, toward any American doctor who treats Medicare patients, at any time.) Not wanting to appear fraudulent to Medicare is foremost in the minds of American doctors (which pushes “wanting to help their patients” down to Number Three on physicians’ priority list, right after “wanting to avoid spurious malpractice suits”).

As a result of these two considerations, it is conceivable** that some physicians, wanting to continue the noble practice of caring for Medicare patients, but at the same time wanting to be fairly reimbursed for same (at least to the extent of breaking even), have made a simple calculus. Inasmuch as the government owes them fair reimbursement for services they render to government entitlees, and inasmuch as the government has not been forthcoming with said fair reimbursement (and promises to be even less forthcoming in the very near future), therefore (some physicians may have concluded), they will simply exercise whatever opportunities they may find to recover some of these owed funds on their own initiative. For much the same reason that Congress is proposing to garnish Medicare payments to doctors, perhaps some doctors are garnishing tax payments to the IRS.***

It would indeed be telling if physicians who reach such conclusions (if indeed there are such physicians) have decided to recover funds they feel the government rightfully owes them, not from Medicare, but instead from the IRS. These doctors would obviously have concluded, quite logically, that dealing with the wrath of the IRS is far, far less intimidating than dealing with the wrath of the federal healthcare fraud establishment, whose tactics would make the average American physician beg for the rights and considerations afforded to your average Guantanamo detainee (especially since last week.)

Small wonder that the relatively meek and unassuming IRS has asked for the help of their nastier federal brethren in cracking down on recalcitrant doctors.

Whatever the correct explanation for it, however, the prospect of the IRS and Medicare teaming up in enforcement efforts ought to send chills through every American physician, and should stimulate among them significant second thoughts about their career paths.

Speaking of which, here’s a second thought they should consider, and soon.

*These comments, as usual, pertain almost exclusively to PCPs. Specialists (such as DrRich when he still practiced), are doing just fine, what with the procedure-based reimbursement system their brethren on the RUC have arranged for them. Unlike PCPs, who lose money every time a Medicare patient darkens their door, specialists can make up for lowered per-unit reimbursements by cutting corners and increasing the volume of procedures they perform. It’s not particularly pleasant (or safe), but it is what it is, and the specialists have learned to get by.

**Note to IRS and CMS agents: Hi, fellas. DrRich has no personal knowledge, direct or indirect, of any of this sort of illegal behavior; he is simply taking known facts and extrapolating them to their logical conclusions.

***It is a law of history that bad law and bad regulations eventually create contempt for authority, and progressively render various illegal actions rationalizable, reasonable, justifiable, and finally, ethical. Even those who sympathize with physicians on this matter (and DrRich suspects these are few indeed), would say that that the rationale for not paying owed taxes has progressed certainly no further than the “rationalizable” stage, if that. But the natural tendency of governmental authority to progress toward arbitrariness is the very thing that  led Jefferson to muse that continued societal vitality might require revolutions every few generations. I’m just sayin’.

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