Press Release (ePRNews.com) - WASHINGTON - Jun 21, 2018 - This write- up is an open letter from Roy J. Meidinger, author of “The Truth About the Healthcare Industry.”
The spectacular rise of healthcare costs in the past thirty years started with the adoption of the Prospective Payment System (PPS) for Medicare. The PPS set up a system which grouped different medical procedures, known as Diagnostic Related Groups (DRG), then set a fixed price for each DRG. The idea was if the medical providers knew the amount paid, they would make every effort to lower their medical costs and earn higher profits for themselves. The fly in the ointment was a requirement that the government annually increase the amount paid for each DRG. The increases were to be calculated on several weighted economic factors, the heaviest being what the providers charged the private-pay patients, the non-government patients. As the charges went up, year after year, the Medicare reimbursement payments went up.
Before the introduction of PPS, the healthcare industry grew at a similar rate of inflation like the Consumer Price Index, but afterward, the healthcare industry grew at a much higher rate. An estimate of the extra money earned from this phenomenal rise of charges in the past thirty years gave the health care industry twenty-two trillion dollars of additional revenues, which came from other industries. This shift is responsible for the closing of seventy-five thousand manufacturing companies and the loss of seven million manufacturing jobs.
The formation of the health care oligopoly came about because of a common motivational goal, to get more money from the government. An oligopoly is a market form wherein a market or industry acts in the same way as a monopoly. Oligopolies can result from various types of cooperation which reduce competition and lead to higher prices for consumers. When it comes to financial interests, the industry has two key players, the providers, and the insurance companies; these two parties are directly opposite, the providers want more money, and the insurance companies want to pay less money. The insurance companies deviated from its primary business of spreading medical coverage risk, worked with the providers, motivated by the premise that if the providers got more money from the government, they would demand less money from the private insurance companies. The insurance companies usually pass through the insured member’s costs to their customers., but the higher the medical charges went up, the higher the premiums charged for the insurance companies products went up.
The providers make their money by providing services to their patients and then billing them for these services. In a free market system, all the players compete with each other to get more customers, and when the services are similar, they have to compete on price. Private health insurance plans cover the biggest group of private-pay patients, for which they are paid to cover the full amount billed. To gain the cooperation of the insurance companies in the scheme to raise charges, the providers billed the private-pay patients enormous amounts, sent the tabs to the insurance companies, thereby transferring the legal obligation of payments and then gave them secret kickbacks. The providers, to get access to the insurance company members, must pay the improper payment, whereby the insurance company steers the insured member to the provider, listing the provider as an approved in-network provider.
People usually understand kickbacks as paying someone with greenbacks and hiding these payments in some unobtrusive account. In the healthcare industry, everything is transparent to the public. The providers list the charges, the legal obligation on the patients’ bills, then transfer the legal obligation to the insurance company, give the insurance companies a partial cancellation of the patients’ debts and list these adjustments, the difference between the amount billed and the amount collected, as a “contract adjustments.” The providers and insurance companies are on the accrual method of accounting for income tax purposes, where the legal obligation is the charges listed on the patients’ bills and when the provider has a right to collect these amounts, are incorporated into the provider’s gross income. For income taxes, cancellation of debt is equivalent to a like kind of payment of cash. In the healthcare industry kickbacks are illegal, Congress passed the anti-kickback statutes to keep medical costs down. All providers, even not-for-profit corporations, must pay tax on the illegal payments. Every accounting entry is under the watchful eye of the Internal Revenue Service, which has the responsibility of auditing the providers and insurance companies and collect from each tax on the kickbacks.
For the past thirty years, the IRS failed in its audits of the industry and to collect the proper taxes. The IRS made the assumption the amount determined by the contract between the provider and the insurance company determined the amount included in the provider’s gross income. The IRS failed to correctly apply the Uniform Commercial Code Parole Evidence Rule for contract law, which makes the new patient’s contract and bill enforceable, rather than the insurance companies contract and amount approved.
The premise that the IRS followed for these false tax procedures ended on February 6, 2018. The IRS chief counsel’s office issued a letter to Senator Bill Nelson and Senator Marco Rubio, in which it states, the only time there is no cancellation of debt, is when a provider puts both the amount billed and the amount authorized for payment, on the patient’s bill. In the industry, no provider issues a patient’s statement with two separate charges, the providers list the standard fees, billed to all patients, both private-pay and government beneficiaries.
With this supporting legal declaration, provided by the IRS chief counsel’s office, along with supporting findings of experts in the accounting and economic fields, I have submitted an IRS WhistleBlower 211 claim against the entire healthcare industry. On June 6, 2018 the IRS WhistleBlower Office confirmed my submission and issued claim number 2018-009052, saying it will evaluate the information submitted and determine if an award is warranted. In a broad estimate base on a significant amount of canceled debt, the IRS should be able to collect nine trillion dollars of uncollected taxes for the past six years. The amount I expect the IRS to receive will not come close to the amount illegally obtained by the healthcare industry for the past thirty years. Through my Congressional representatives, I have also asked the Treasury Inspector General of Tax Administration (TIGTA) to investigate how this came about, how it was kept covered up and ensure our tax laws enforced. TIGTA has issued TIGTA Complaint # TRN-1804-0774 — IRS Coverup.
Roy J. Meidinger, author of "The Truth About The Healthcare Industry"