WASHINGTON--According to a Government Accountability Office report released Wednesday, more than 30,000 Medicaid providers over seven states owe the federal government more than $1 billion in taxes for 2006.

Medicaid providers from California, Colorado, Florida, Maryland, New York, Pennsylvania and Texas--in all, representing about 5 percent of the program's providers--were found to be cheating on their taxes, thus defrauding the government out of billions. The report comes on the heels of a study earlier this year that showed Medicare providers owe some $1.3 billion in taxes for 2005.

Most of the unpaid taxes were payroll taxes withheld from employees' wages but never paid to the government, the report found, and some providers diverted the money for their own benefit. "Many of these individuals accumulated substantial assets including million-dollar houses and luxury vehicles," the GAO said.

Of 25 cases selected for in-depth studies, the GAO found "abusive and related criminal activity" in all of them. Some providers were also cited for substandard patient care.

"These doctors are supposed to be serving the most needy. Instead, they are cheating taxpayers in order to line their pockets," Sen. Norm Coleman, R-Minn., told USA Today.

Coleman requested the study with Sen. Carl Levin, D-Mich., who called for the adoption of a tax levy to address the problem. The GAO said if such a levy had been in place in the seven states, the federal government could have collected between $70 million and $160 million toward the tax debts.

Others have suggested preventing those providers with federal tax debts from enrolling in Medicaid. But officials with CMS have said that could adversely impact states' ability to provide health care to low-income people.