Healthcare oligopoly is Affecting u.s. economy converted

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(Important Note: The information contained in this document is important to every one living in
the United States. This document is a compilation of several of my writings, some stand by
themselves, but at times the information is repeated, therefore the information flow is slightly
haphazard. I only ask you use common sense for determining the truth of the information. The
document contains information from several dated sources, the primary purpose is to illustrate
specific points. Several of the charts have been reproduced throughout the document. Included in
the write-up are legal definitions and case law that support those definitions; this information is
required to show how our law enforcement agencies failed to enforce our laws, thereby
contributing to our nation’s dilemma. The purpose of the article is to inform the reader of the
causes of our national dilemma, where we stand as a nation, damages done to our nation, costs to
individuals, and an initial plan to start us on a recovery.)
How is the Healthcare Oligopoly Destroying U.S. Economy?
Health care in the United States is provided by many distinct organizations. Health care facilities
are largely owned and operated by private sector businesses. 58% of community hospitals in the
United States are non-profit, 21% are government-owned, and 21% are for-profit. According to
the World Health Organization (WHO), the United States spent $9,403 on health care per capita,
and 17.1% on health care as percentage of its GDP in 2014. Healthcare coverage is provided
through a combination of private health insurance and public health coverage (e.g., Medicare,
Medicaid). The United States does not have a universal healthcare program, unlike most other
developed countries.
In 2013, 64% of health spending was paid for by the government, and funded via programs
such as Medicare, Medicaid, the Children's Health Insurance Program, and the Veterans Health
Administration. People aged under 65 acquire insurance via their or a family member's employer,
by purchasing health insurance on their own, or are uninsured. Health insurance for public sector
employees is primarily provided by the government in its role as employer. Managed care, where
payers use various techniques intended to improve quality and limit cost, has become ubiquitous.
The United States life expectancy is 78.6 years at birth, up from 75.2 years in 1990; this ranks
42nd among 224 nations, and 22nd out of the 35 industrialized OECD countries, down from 20th
in 1990. In 2016 and 2017 life expectancy in the United States dropped for the first time since
1993. Of 17 high-income countries studied by the National Institutes of Health, the United States
in 2013 had the highest or near-highest prevalence of obesity, car accidents, infant mortality, heart
and lung disease, sexually transmitted infections, adolescent pregnancies, injuries, and homicides.
A 2017 survey of the healthcare systems of 11 developed countries found the US healthcare system
to be the most expensive and worst-performing in terms of health access, efficiency, and equity.
In a 2018 study, the USA ranked 29th in healthcare access and quality.
Prohibitively high cost is the primary reason Americans have problems accessing health care. The
rate of adults uninsured for health care peaked at 18.0% in 2013 prior to the ACA mandate, fell to
10.9% in the third quarter of 2016, and stood at 13.7% in the fourth quarter of 2018, based on
surveys by the Gallup organization beginning in 2008. At over 27 million, the number of people

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without health insurance coverage in the United States is one of the primary concerns raised by
advocates of health care reform. Lack of health insurance is associated with increased mortality,
about sixty thousand preventable deaths per year, depending on the study. A study done at Harvard
Medical School with Cambridge Health Alliance showed that nearly 45,000 annual deaths are
associated with a lack of patient health insurance. The study also found that uninsured, working
Americans have an approximately 40% higher mortality risk compared to privately insured
working Americans. (Source Wikipedia)
This document will show that:
• we can cut our national health care costs to less than 50% of what we spend today,
• have full medical coverage for everyone, without increasing our taxes,
• eliminate State Medicaid taxes,
• rebuild our manufacturing system, and
• increase lower and middle classes income. (See: New Tax Proposal)
Per capital Income (current dollars)
Increase in per capita income $ 8.9 k in 1980 to 50 k in 2019 in current dollars terms
Source: Bureau of Economic Analysis
$-
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Per capita Income ( current dollars)

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Individual’s insurance deductibles rising because employers cannot afford to pay for full coverage.
Some of the highlighted things about the healthcare industry of the USA that shows the various
trends and fluctuations over the past few years because of too much spending on healthcare sector,
which results in high health care cost and providing low services.
• The U.S. spends more on health care as a share of the economy — nearly twice as much
as the average OECD country — yet has the lowest life expectancy and highest suicide
rates among the 11 nations.
• Of the Thirty-five OECD member countries, the U.S. Healthcare System is ranked thirty-
fourth in quality of care.
• The U.S. has the highest chronic disease burden and an obesity rate that is two times higher
than the OECD average.
• Americans had fewer physician visits than peers in most countries, which may be related
to a low supply of physicians in the U.S.
• Americans use some expensive technologies, such as MRIs, and specialized procedures,
such as hip replacements, more often than our peers.
• The U.S. outperforms its peers in terms of preventive measures — it has the one of the
highest rates of breast cancer screening among women ages 50 to 69 and the second-highest
rate (after the U.K.) of flu vaccinations among people age 65 and older.
• Compared to peer nations, the U.S. has among the highest number of hospitalizations from
preventable causes and the highest rate of avoidable deaths.

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• Twenty-nine percent of employees are involved in administrative and bill collecting
activities.
• Healthcare Insurance Companies have about 250,000 sales and administrated people.
The given chart is about the U.S. spends more on health care than any other country:
The average annual premiums for employer-sponsored health insurance in 2019 are $7,188 for
single coverage and $20,576 for family coverage. The average single premium increased 4% and
the average family premium increased 5% over the past year. Workers’ wages increased 3.4% and
inflation increased 2%.
Source: 2019 Employer Health Benefits Survey, Kaiser Family Foundation
A new TransUnion Healthcare (NYSE:) analysis revealed that patients experienced an 11%
increase in average out-of-pocket costs during 2017, rising from $1,630 in Q4 2016 to $1,813 in
Q4 2017. The analysis also revealed that in 2017, on average, 49% of patient out-of-pocket costs
per healthcare visit were below $500; 39% were $501-$1,000; and 12% were more than $1,000.
Total hospital revenue attributable to patient financial responsibility after insurance increased 88
percent between 2012 and 2017.
Source: New TransUnion Healthcare analysis finds patients continue to see rising costs

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U.S. health care spending increased 4.6 percent to reach $3.6 trillion, or $11,172 per person in 2018. The
growth in 2018 was faster than in 2017 when health care spending increased 4.2 percent. The faster
growth in 2018 was associated with faster growth in the net cost of health insurance, which increased
13.2 percent following growth of 4.3 percent in 2017, due primarily to the reinstatement of the health
insurance tax in 2018. The overall share of gross domestic product (GDP) related to health care spending
was 17.7 percent in 2018, down from 17.9 percent in 2017. The insured share of the population was 90.6
percent in 2018 and 90.8 percent in 2017, as the number of uninsured increased by 1 million to 30.7
million in 2018.
Source: Centers for Medicare and Medicaid Services, National Health Expenditures 2018 Highlights
Employers are paying more and employees are paying more for health insurance. Instead of
increasing wages the employers have to spend more on employee benefits.
The average annual premiums for employer-sponsored health insurance in 2019 are $7,188 for
single coverage and $20,576 for family coverage. The average single premium increased 4% and
the average family premium increased 5% over the past year. Workers’ wages increased 3.4% and
inflation increased 2%.
Source: 2019 Employer Health Benefits Survey, Kaiser Family Foundation

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Staggering medical bills are the biggest driver of personal bankruptcies in the US. In fact,
66.5% of all bankruptcies are related to medical issues, either because of expensive medical bills
or time away from work, reported Lorie Konish for CNBC, citing a study by the American
Journal of Public Health. The study looked at court filings for a random sample of 910
Americans who filed for personal bankruptcy between 2013 and 2016, and found that 530,000
families file for bankruptcy every year for medical issues or bills.
With a national single-payer health care system all these personal bankruptcies caused by
medical bills go away!
In almost all cases the health care providers have filed medical claims in federal or state courts,
wherein they have presented medical bills and contracts as prima face evidence and swore under
oath the amounts listed on the bills were accurate and represented the debt owed. Of the claims
made two-thirds were patients had private insurance coverage but the amounts were insufficient
to cover the bills. There is only one federal agency, the Internal Revenue Service (IRS) that does
not recognize the amount listed on an insured patient’s bill as being legitimate. This fact is what
has destroyed the financial well-being of the United States.
Rising health cost with low quality of service
The U.S. currently spends more on health care services than any other country, exceeding 17.5%
of gross domestic product (GDP). In all years since 1983, medical spending rises faster than the
CPI inflation and the economy as a whole, but prior to 1983 the increase was less than the CPI

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increase. The economic destructive force of employer paid health care costs is caused by the
accumulation of health care costs: it can be compared to the principle of value added taxes in the
production of a good sold. During each step, the employer adds the preceding cost of each step’s
health care benefits to the product or service. Then at each step, the cost is marked up, and then
passed on to the next buyer of the good, until the final good is manufactured and sold.
In 2020 Mexico had 2.38, Canada had 2.52 and the United States had 2.35 doctors per 1,000 people.

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Health care prices in USA

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The chart shows:
• every industrial country has both private and government sponsored health care systems,
• the amount spent by the U.S. government is greater than the average spent by all industrial
countries. The average includes the amount spent by the United States,
• The chart shows the amount spent by the government is larger than the OECD average.
Percentage Changes 1987 – 2011
Hospital Gross Billing 1354%
Hospital Revenue 372%
Consumer Price Index 95%

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Healthcare costs is about 10% of the GDP of most developed countries. In fact, for the US this
figure will be close to 18% by the end of 2019. This isn’t surprising—the healthcare sector is the
US’s largest employer. The cause of health care expansion is predominately due to violations of
the consumer protection laws, illegal billing practices, lack of correct taxing practices, and a
possible cover-up by the Internal Revenue Service. Large U.S. employers are predicting that their
health care costs for 2020 will rise a median of 6 percent if they don't make any cost management
adjustments, and by 5 percent if they adopt cost management initiatives, such as alternative
network models, or renegotiate their contracts, a new survey shows. Roughly 41 percent of large
employers plan to use cost-management tactics to reduce projected health plan cost increases.

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National Health Spending (% of GDP)
Healthcare expenditures in the U.S. are significantly higher than those of other developed countries
Source: OECD Health Statistics 2019, July 2019
Standard Of Living By Country 2020
The Social Progress Imperative uses the Social Progress Index to rank countries based on their quality of
life. The Social Progress Index combines the scores of three main indexes:
• Basic Human Needs (health care, sanitation, and shelter)
• Foundations of Wellbeing (life expectancy and access to education and technology)
• Opportunity (personal rights, freedom of choice, and general tolerance)
This suggests that GDP is not the only gauge for a higher standard of living; however, the top ten
countries with the highest quality of life rankings are developed nations. Having a strong
economy has a positive impact on providing the three indexes.
The table below also provides indexes for safety, health care, pollution, and climate, all factors
that contribute to the quality of life, health, and happiness of a group of people.
The United States is ranked 13th in the quality of life index at 176.77. The US safety index and
health care index are relatively low compared to other nations with a very high quality of life.
Below is a table with each country’s quality of life index, as well as their safety index, health
care index, pollution index, and climate index.
Standard Of Living By Country 2020
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
National Health Spending (% of GDP)

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Source:
These countries have the highest quality of life
CSV JSON
Country
Quality of
Life Rank
Quality of
Life Index
Safety
Index
Healthcare
Index
Pollution
Index
Climate
Index
Denmark 1 196.47 75.28 79.22 20.79 82.29
Switzerland 2 196.08 78.82 73.23 21.31 79.24
Finland 3 195.06 77.25 75.27 11.57 62.79
Australia 4 189.73 57.3 76.82 23.15 94.2
Iceland 5 188.12 76.85 65.66 15.65 68.81
Austria 6 187.82 76.77 79.46 21.78 80.36
Netherlands 7 186.41 71.46 75.63 27.34 87.56
Germany 8 184.3 65.4 73.58 28.42 82.8
New
Zealand
9 183.07 59.11 73.71 23.49 95.46
Sweden 10 180.52 52.79 69.41 17.45 73.58
Norway 11 179.78 66.49 74.36 20.29 71.37
Estonia 12 178.27 77.83 68.49 19.88 64.28
United
States
13 176.77 53.27 69.23 35.74 76.75
Japan 14 176.46 84.09 80.48 36.78 85.26
Spain 15 173.56 68.93 78.42 39.16 94.55

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Some of the statistics that must know about the USA Health Care Industry in 2020:
• The global health industry was worth $8.45 trillion in 2018.
• Global healthcare spending could reach over $10 trillion by 2022.
• The US has the greatest healthcare spending, sitting at $10,224 per capita.
• The US spends twice what other countries do on healthcare.
• There are 784,626 companies in the US healthcare sector.
• McKesson is the biggest US healthcare company with annual revenue of $208.3
billion.
• The internet of things (IoT) can lower the costs of operational and clinical inefficiencies
by $100 billion per year.
• 64% of physicians believe the IoT can help reduce the burden on nurses and doctors.
• The reason for the loss of manufacturing and the loss of wealth because the overall
United States trade deficit shrank last year for the first time in six years as the American
economy cooled, domestic oil production soared and President Trump waged an
aggressive global trade war to rewrite America’s trading terms.
• Both imports and exports fell as American factory activity slowed and businesses and
consumers felt the impact of tariffs imposed on China, the European Union, Canada,
Mexico and other nations. Total American exports dropped $1.5 billion to roughly $2.5
trillion, while imports fell $12.5 billion to $3.1 trillion.
• Soaring domestic oil production was a major factor in the shrinking trade deficit, cutting
into imports of foreign crude oil by $30.3 billion last year. Exports of civilian aircraft
also fell $12.6 billion last year, reflecting the fallout from the deadly crashes of Boeing’s
737 Max airplanes.
• Manufacturing productivity in the U.S. is rated very high, but it is a false indication of the
manufacturing industry. The increase in productivity has been attributed to use of new
automated manufacturing methods, but in reality, it may be caused by the removal of
marginal profitable manufacturing goods, being produced in other countries, from the
equation. The country has moved into producing larger costly products like planes, trains,
trucks, cars, etc., but the majority of consumer goods come from other countries.

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Healthcare Industry is destroying Manufacturing Industry in U.S.A.
Without a strong Manufacturing Industry our national wealth is leaving our country.
Balance of goods and Services Trade
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
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2019
Manufacturing Health Care

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U.S. Trade Deficit started in late 1980s
$-250
$-200
$-150
$-100
$-50
$-
1999 2000 2001 2002 2004 2005 2006 2007 2009 2010 2011 2012 2014 2015 2016 2017 2019
inBillions Balance on goods and services Trade
( quaterly, seasonaly adjusted)

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U.S. Payment of health care costs by employers is the cause of loss of m
manufacturing companies and manufacturing jobs. Health care costs are
passed on to next contributor in manufacturing process.
Step 1 Costs Step 2 Costs Step 3 Costs
In order to create a competitive manufacturing industry in the United States with other countries,
all health care costs and FICA tax costs must be eliminated from employers’ operating costs and
payment of these benefits moved into personal and business income taxes.
Manufacturing Sales
Price
Income Tax
Percentage
FICA Taxes
Indirect Health
Care Benefits
Employee
Healthcare
Benefits
Manufa
cturing
Materia
l
Wa
ges
Manufact
uring
Sales Price
Income
Tax
Percentag
e
Manufact
uring
Material
Wages
Break-even Point
Break-even
Point
Competitive Pricing
FICA Taxes
Indirect
Health Care
Benefits
Employee
Healthcare
Benefits
Manufact
uring
Material
Wages
Income
Tax
Percent
age
FICA Taxes
Indirect Health
Care Benefits
Employee
Healthcare
Benefits
Manufact
uring
Material
Wage
s
Manufactu
ring Sales
Price
Income Tax
Percentage
FICA Taxes
Indirect
Health
Care
Benefits
Emplo
yee
Health
care
Benefit
s
Ma
nuf
act
uri
ng
Ma
teri
al
W
a
g
e
s

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Good Tariff versus Bad Tariff
A tariff is a tax on the people of the United States, to make them stop purchasing other
countries' products, by raising their costs, but it will only work when there is an alternative to
the products being purchased, therefore until the manufacturing industry is fixed we should
limit the use of tariffs.
An example of good and bad tariffs is illustrated by the two tariffs affecting Harley-Davidson
Inc:
Good: History has taught us that thirty-three years ago, President Ronald Reagan saved Harley-
Davidson (NYSE:HOG) by imposing draconian import tariffs on Japanese motorcycles. By
giving the sole American motorcycle maker some breathing room from competition to retool,
Harley was able to get its act together, turn profitable, and even request the tariff protection be
ended early.
Pulling itself up by its bootstraps. After being bought out in 1981 by a group of investors led by a
former AMF executive, Harley-Davidson immediately set about to remake itself. Over the next
several years it:
• Retooled its factories
• Introduced the innovative 1340 cc V2 Evolution engine
• Developed the Softail hidden rear suspension system
• Switched from rigid-mounted engines to rubber-mounted
• Introduced just-in-time inventory management systems
Bad: Tariffs have wiped $1.4 Billion Off Of Harley-Davidson’s Market Cap.
In March 2018, Trump imposed a 25% tariff on steel and 10% on aluminum imported from the
European Union. Trump tweeted that “trade wars are good, and easy to win.” Even if Harley-
Davidson only used U.S.-produced steel, the prices it paid would be higher, as domestic producers
could raise prices.
In retaliation, the EU increased the tariffs on motorcycles from 6% to 31% on June 22 (which
added $2,200 to the average cost of a Harley-Davidson), and a few days later Harley-Davidson
announced that it would be moving some production out of the U.S. to avoid the higher tariffs.
In 2019 and 2020 the tariffs have reduced the Gross Domestic Product and substantially made
worse the National Debt to Gross Domestic Product Ratio, where it is the worse in our countries
history.
Debt-To-GDP Ratio
What Does the Debt-to-GDP Ratio Tell You?
When a country defaults on its debt, it often triggers financial panic in domestic and international
markets alike. As a rule, the higher a country’s debt-to-GDP ratio climbs, the higher its risk of

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default becomes. Although governments strive to lower their debt-to-GDP ratios, this can be
difficult to achieve during periods of unrest, such as wartime, or economic recession. In such
challenging climates, governments tend to increase borrowing in an effort to stimulate growth
and boost aggregate demand. This macroeconomic strategy is a chief ideal in Keynesian
economics.
Economists who adhere to modern monetary theory (MMT) argue that sovereign nations capable
of printing their own money cannot ever go bankrupt, because they can simply produce more fiat
currency to service debts. However, this rule does not apply to countries that do not control their
own monetary policies, such as European Union (EU) nations, who must rely on the European
Central Bank (ECB) to issue euros.
A study by the World Bank found that countries whose debt-to-GDP ratios exceeds 77% for
prolonged periods, experience significant slowdowns in economic growth. Pointedly: every
percentage point of debt above this level costs countries 1.7% in economic growth. This
phenomenon is even more pronounced in emerging markets, where each additional percentage
point of debt over 64%, annually slows growth by 2%.
KEY TAKEAWAYS
• The debt-to-GDP ratio is the ratio of a country's public debt to its gross domestic product
(GDP).
• If a country is unable to pay its debt, it defaults, which could cause a financial panic in
the domestic and international markets. The higher the debt-to-GDP ratio, the less likely
the country will pay back its debt and the higher its risk of default.
• A study by the World Bank found that if the debt-to-GDP ratio of a country exceeds
77% for an extended period of time, it slows economic growth.
United States National Debt and Presidents Responsible For It
President Tenure Debt
0
20
40
60
80
100
120
140
160
1966 1970 1974 1978 1983 1987 1991 1995 2000 2004 2008 2012 2017
Total Debt as % of GDP
Total Debt as % of GDP

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Donald Trump 2018-2021 $4.78 Trillion*
Barack Obama 2010-2017 $8.59 Trillion
George W. Bush 2002-2009 $5.85 Trillion
Bill Clinton 1994-2001 $1.40 Trillion
George H. W. Bush 1990-1993 $1.55 Trillion
Ronald Reagan 1982-1989 $1.86 Trillion
Jimmy Carter 1978-1981 $299 Billion
* As projected in FY 2019 budget
Article & Sources:- http://howmuch.net/articles/usa-debt-by-president
Debt from 1929 to 2017 - https://www.treasurydirect.gov
Debt from 2018 to 2021 budget- https://www.whitehouse.gov
The above chart does not reflect the Three Trillion Dollars spent for the COVID-19 Pandemic.
During the 2016 presidential campaign, Republican candidate Donald Trump promised he would
eliminate the nation’s debt in eight years. Instead, his budgets would add $8.3 trillion during that
time. It would increase the U.S. debt to $28.5 trillion at the end of eight years, according to Trump's
budget estimates. The Congressional Budget Office forecasted that $13.5 trillion would be added
to the national debt because of the tax cut.

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Health Care Fraud
These are 10 known important health care provider fraud schemes in USA:
1. Billing for services not rendered
2. Billing for a non-covered service as a covered service
3. Misrepresenting dates of service
4. Misrepresenting locations of service
5. Misrepresenting provider of service
6. Waiving of deductibles and/or co-payments
7. Incorrect reporting of diagnoses or procedures
8. Overutilization of services
9. Corruption (kickbacks and bribery)
10. False or unnecessary issuance of prescription drugs
Insurance Fraud
Insurance fraud is a deliberate deception perpetrated against or by an insurance company or
agent for the purpose of financial gain. Fraud may be committed at different points in the
transaction by applicants, policyholders, third-party claimants, or professionals who provide
services to claimants. Insurance agents and company employees may also commit insurance
fraud. Common frauds include “padding,” or inflating claims; misrepresenting facts on an
insurance application; submitting claims for injuries or damage that never occurred; and staging
accidents.
People who commit insurance fraud include:
• organized criminals who steal large sums through fraudulent business activities,
• professionals and technicians who inflate service costs or charge for services not rendered, and
Ordinary people who want to cover their deductible or view filing a claim as an opportunity to make a
little money.
Some lines of insurance are more vulnerable to fraud than others. Healthcare, workers
compensation, and auto insurance are generally considered to be the sectors most affected.
Any Medical bill that lists a false billing amount would be considered a felony!
Different types of Health Insurance Fraud practices in the United States, Examples and its
Impact
This article provides an overview of the unknown type of health insurance fraud and its impact
throughout the United States. It is a conspiracy between the providers and the insurance
companies. It is evident that that this fraud is working by the high cost of healthcare in the United
States. It also elaborates the US insurance industry’s actions to reduce frauds.
Fraud is a way of committing a crime to gain financial benefits. It is the factor which does not only
cause unrest in society but also leads to economic destabilization. Insurance fraud is one of the
types which occur when any person, company or organization plans to deceive to gain insurance

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benefits and it is considered a serious crime. In some examples of health insurance frauds, people
manipulate their own records to increase the amount of compensation and to gain unlawful
benefits. However, sometimes wrongful deceptions by the insurance companies are also a part of
it. In fact, if the insurance companies deny the claim compensations of the insurers, it’s also being
considered as insurance fraud.
Reducing insurance deceptions is the first priority for insurers in order to protect themselves from
losses. Insurance frauds represent all types of insurance; but the world judiciary categorizes them
into two: Hard fraud and Soft fraud. The former one in which a person and organization
dramatically present a fake incident where the purpose is only to collect an excessive amount of
money from an insurance company. For instance, if a person who has been unemployed for a few
months and wants to claim insurance coverage to replace an old vehicle. Mostly the fraudsters
claim a fake car accident to claim the insurance coverage. These types of cases are very common
in the United States. The latter one in which a person and organization has a valid reason to claim
the insurance amount but falsifies some information to gain more benefits. To maximize the
benefits and compensations, they exaggerate the damages of the incident. It is not that serious a
fraud but still involves a cost for an insurance company as well as for their customers. Sometimes
minor accidents incur negligible medical treatment but fraudulently they claim health insurance
by reporting that they suffered from serious injuries and seeks elaborate treatment. It is hard to
determine the exact cost of health insurance frauds but according to estimates by The National
Health Care Anti-Fraud Association ‘health care fraud costs the nation about $68 billion annually
— about 3 percent of the nation’s $2.26 trillion in health care spending. Other estimates range as
high as 10 percent of annual health care expenditure, or $230 billion.’
The frauds which are caught are believed to be much lower than that which actually slips through
the loopholes in the system. Additionally, it is estimated that the whole US insurance industry’s
total annual losses are due to deceptive insurance claims. In one such case, a dermatologist Dr.
David Wexler in the United States, allow drug addicts to use its name for health insurance claims.
The doctor billed insurance companies an estimated amount of over $400,000 for minor surgeries
which he has never performed. In addition, he also provided patients narcotic medications to get
monthly kickbacks. At last, he was caught and imprisoned for 20 years and faced a penalty of up
to $ 1 million. Health insurance fraud is very common in the United States where the patients
commit it by falsifying and altering the medical information and the health care providers claim
the health insurance payments by billing for services which are not provided to the patients.
Furthermore, they receive a high amount of compensation in several ways includes billing for
procedures which are never performed, billings for 1 hour medical check-up when it was a 20-min
slot, billing for major medical procedures when it was minor, ordering tests that are not required,
referring patients to specialists even it is not required and scheduling unnecessary visits for
patients. There is no easy end to it when there is corruption at various levels and in different forms.
Therefore, the United States Congress passed the act “ Health Insurance Portability and
Accountability Act” which is known as “HIPPA” which considered health insurance fraud as a
serious offense and imposed penalties on every person who is found involved in the health care
fraud. It will not only discourage people and health care providers but also reduces the number of
fraudulent cases. According to The National Health Care Anti-Fraud Association (NHCAA), the
financial losses due to health care fraud are in the tens of billions of dollars each year.
Here are some of the major examples of health insurance frauds that happened in clinical
settings

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Fraud Insurance Claims – There are numerous pieces of evidence found that in cases medical
services providers claim compensations for services and procedures that were never performed or
provided.
Claims for non-covered medical treatments – Government and private insurance companies
authorize a certain set of services to their subscribers. In some cases, healthcare providers tried to
trick the system by claiming compensations for procedures that were not authorized.
Tempered dates and locations – In this type of health care insurance fraud, providers tried to
temper the data containing the information about the location and date of the services provided.
Inaccurate ICD and CPT coding – To support payment claims health care services providers
would add extra ICD and CPT codes and try to overcharge for services provided to patients.
Prescription drug fraud – Prescription drug fraud is one of the major types, costing billions to
US healthcare. Forged prescriptions and issuance of medication which was not required is a type
of prescription fraud.
Health insurance frauds are not only affecting insurance companies, financial institutions, and
government-run programs; these fraudulent activities are also affecting common people who are
law-abiding citizens and, pay their insurance premiums in time and have purchased insurance
coverage. However, due to fraud, they pay for the medical services which they never availed.

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Current health expenditure per person (current US$)
Per Capital Expenditure on Health doubled from $ 4,560 in 2000 to $ 10,246 in 2017

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Source: World Development Indicators
Cumulative Premium increase, inflation and earnings
$4,560
$4,911
$5,328
$5,737
$6,100
$6,452
$6,820
$7,176
$7,421
$7,699
$7,957
$8,170
$8,441
$8,648
$9,068
$9,538
$9,941
$10,246
2000 2001 2002 2003 2004 2005 2 0 0 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CURRENT HEALTH EXPENDITURE PER PERSON
(CURRENT US$)
72%
34%
26%
22%
13% 13% 11% 8%
17% 19%
11%
14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1999 to 2004 2004 to 2009 2009 to 2014 2014 to 2019
Cumulative Premium increase, inflation and
earnings
Premium Increases Overall Inflation Workers Earnings

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Cumulative Premium increase, inflation and earnings
Causes of damages done to Manufacturing Industry due to high health care
cost:
72%
34%
26%
22%
13% 13% 11% 8%
17% 19%
11%
14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1999 to 2004 2004 to 2009 2009 to 2014 2014 to 2019
Cumulative Premium increase, inflation and
earnings
Premium Increases Overall Inflation Workers Earnings

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The United States cannot compete with other industrial countries because our manufacturing
costs of goods are higher than their selling prices of similar good. Our manufacturing costs
have increase year after year during the past three decades because our national health care
expenditures have increased during this same period, while the international competitors have
maintained the low health care expenditures. The reason is they are on a single-payer health
care system while we are not. Our country’s national healthcare expenditures are eighteen
percent of the GDP on health care, while other industrial countries average about seven
percent of gross domestic product. Our manufactures incur the costs of healthcare into the
price of manufactured goods, while our international competitors do not.
In the United States the majority of health care costs are paid by employers. Employer health
care costs come in two categories, direct costs, the costs paid for the employees’ benefits, and
indirect costs, the health care costs included in products or services they purchase from others,
and Social Security costs. All goods or services that are utilized have built into its price direct
costs of health care for its employees and indirect costs.
All manufacturers must sell their products at a price above their cost break-even line. Any
cost incurred by a manufacturer are marked up a reasonable amount to set the selling price,
cover taxes, cover product over-runs, and make a profit. For this discussion I am going to use
a forty percent markup.
Our country spends eighteen percent of the GDP on health care, while other industrial
countries only spend six percent. Our nation used to spend the same percentage as other
nations but that was prior to the industry giving secret kickbacks to the insurance companies
for referring their insured members to the providers. When you mark up the eighteen percent
by an additional forty percent, the total cost of direct and indirect cost goes to about twenty-
five percent of total manufacturing costs.
Since 1982 the health care industry increased its share of the GDP from seven percent to
today’s eighteen percent. Correspondently manufacturing industry decreased it share of the
GDP from thirty-four percent to twenty-three percent. The healthcare industry adapted
restraint of trade practices, eliminating competition between parties. The actual competition
was which provider was going to give the insurance companies the largest kickback in order
for the providers to have access to the insured members.
As the manufacturing marginal costs became greater than the competitive prices of similar
goods due to increased health care costs increases the companies closed and filed for
bankruptcy. The Federal Trade Commission and the Department of Justice were negligent in
not recognizing the harm one industry was doing to another industry. Our antitrust laws are
not only meant to protect us from one company becoming dominant in one industry but also
to protect another industry from being damaged by a rival industry. The DOJ did not even
recognize the price discrimination between private-pay patients, the actual difference
collected from uninsured patients and the insured patients. The uninsured patients pay six

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times more to the providers than the insurance companies pay for the same services, BUT the
insured pay more because the insurance premiums are based on the patients billed amount, the
charges listed on the insured member’s bill.
U.S. Net International Investment Position (Millions of Dollars, Annual, Not Seasonally
Adjusted)
Source: Federal Reserve Economic Data
Investment in manufacturing companies has moved to other countries.

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The legislative branch of our government got into the health care business in 1965 but failed
to control the costs spent on health care. There is an axiom that states: when the government
goes into business it never fails but passes on its losses to the people by increasing taxes. This
is what happened with Medicare and Medicaid. There was an early warning sign in 2006. The
amounts listed on the beneficiaries’ bills were causing problems. The General Accounting
Office was charged with determining the costs for Medicare Part B hospital out-patient
services. In their report to Congress it noted that if it would be allowed to recompute the
Medicare Part A hospital in-patient services, Medicare could save seventy-two percent for this
program. This fact was never acted on and completely ignored. Today, they could save a
figure that would be closer to eighty-five percent.
Spend on Medicare and Medicaid (% of Personal Income)
Increase in expenditure on Medicare and Medicaid from 2.6% in 1980 to 7.7& in 2019
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spend on Medicare and Medicaid

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Hospitals
32%
Other Health
27%
Physicians &
Clinics
20%
Prescription
Drugs
9%
Nursing Care
5%
Dental
4%
Home Health
3%

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Medicare Spending by Sponsor
Under the Prospective Payment System (PPS) new reimbursement rates for Medicare Services are
strongly influenced by the billed amount listed on the beneficiary’s bills sent to Centers for
Medicare/Medicaid Services; these amounts are supposed to represent the actual amount collected
by the provider for services rendered to private patients. These billed amounts are inflated because
they do not reflect the kickbacks given by the providers to the private insurance companies.
This chart shows how Medicare Spending has been increased because of the inflated charges
listed on the beneficiary’s bills. This is a !00% increase in the amount the government is paying.
30%
43%
23%
4%
Medicare Spending by Sponsor - 1987
Private Business
Households
Federal Government
State and Local Government
15%
35%
46%
4%
Medicare Spending by Sponsor - 2018
Private Business
Households
Federal Government
State and Local Government

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How the Government created the Healthcare Industry Oligopoly
The ongoing presidential debates on health care have highlighted the fact that the United States
has the costliest system, estimated three times more expensive than the average of the other
thirty-four industrial members of the Organization of Economic and Developing Countries
(OEDC). The other factor not spoken is that the U.S. has a ranking as the lowest in the quality of
health care, with the highest infant birth mortality, Six hundred and fifty accidental medical
deaths a year, and ninety million people without medical coverage. Although we spend more, we
have the lowest life expectancy. In other words, high prices and poor quality of service, the two
vital signs of the existence of an Oligopoly. An Oligopoly is like a trust, but instead of one
company, it is the whole industry, usually controlled by several big companies. The big
insurance companies control the Healthcare Industry Oligopoly.
The creation of this Oligopoly falls at the feet of the federal government. In its production of the
Medicare/Medicaid Programs, it created a uniform billing system; then, by its effort to control
medical costs by creating Health Maintenance Organizations (HMOs), that helped eliminate
competition. The leading causes of the Oligopoly is the failure of the law enforcement agencies,
the Department of Justices (DOJ) Antitrust group, failing to enforce the consumer protection
laws; but Still greater, the failure of the Internal Revenue Service (IRS) due to its lack of
knowledge of contract law and not enforcing Generally Accepted Accounting Principles (GAAP)
for accrual taxpayers and the collection of taxes mandated by the tax code. Under the accrual
method of accounting, revenues and deductions are recognized by financial instruments like bills
and checks, not by cash flow.
In 1965 our Medicare/Medicaid programs were created; they created a pot of gold in the federal
budget to pay for the allocated costs of medical services given to the beneficiaries. For the
Medicare program, the reimbursements relied on the allocation of provider costs based on the
proportionate amount of beneficiary bills compared to the total patient billings; therefore, there
was a requirement for accurate billings for the same services of government beneficiaries and the
private-pay patients. There was no provision for profits! The industry quickly began allocating or
creating new medical costs or facilities associated with the benefices' medical services, causing
prices and costs to spiral upward.
The Medicaid program created a pool of federal money, divided into twelve regions, with each
region getting a weighted amount, with each region annually proportion determined by the
increase in charges for medical services. To increase a region's share of the pool of money, it
motivated a competition for increasing charges or matching the increases in other regions.
Through this writer's efforts, this competition was eliminated.
The government programs designed a breach of accepted accounting principles for the first time
in our history from the accepted accrual accounting methodology, in that the amount listed on the
beneficiary's bill was not the actual debt owed to the provider, this is unlike the amounts listed
on the private-pay patients' bills. The government programs created two accrual accounting
systems. The new invoice was and still is a fake invoice that only contains medical and billing
information, but does not create a debt or legal liability owed to the provider

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.
In 1973 Congress passed the HMO law, allowing insurance companies to create provider
networks, to select and direct their insured members to the lower charging providers in a
geographic area. The idea was that the providers would compete with each other by lowering
their charges to get access to the insurance companies' members. The law was and is a restraint
of trade. HMOs did not take off until the late 1980s, but for a different reason; the insurance
companies began choosing higher charging providers rather than lower charging providers but
demanding that the provider accept a smaller payment amount than the standard charges listed.
The difference not paid was nick-named a "secret discount"; the insurance companies and
providers called the "secret discounts" trade secrets, removing medical billing transparency. The
"secret discounts" went from zero percent in 1983 to eighty-five percent today.
In 1983, to control the spiraling beneficiary costs, Medicare went from the proportionate
reimbursement of the expenses to the Prospective Payment System, the government grouped
related procedures based on diagnostics, and set a fixed reimbursement amount for each group
(DRGs). The idea was that a provider could make a more significant profit by lowering its costs.
The idea was that they would get higher returns by reducing their costs. It sounds like a great
idea, but there was a flaw built in the reimbursement methodology. The Social Security Law, 42
CFR 1395, Prohibition against any Federal Interference, this law mandated that the federal
government could not interfere in the administrated practices of the providers, therefore the
government paid the providers trillions of dollars but could not audit the providers to insure they
were following proper administrative procedures or accounting practices. The Social Security
Law mandated all the providers be on the accrual method of accounting, The Health Care
Financial Administration (HCFA), now known as the Centers for Medicare/Medicaid Services
(CMS) relied on the Internal Revenue Service to do its audits and insure the billing practices
followed Generally Accepted Accounting Practices (GAAP) for the private side of the providers
business.
The new law required an annual increase in the reimbursement rates; the new amounts would be
determined based on a bread basket full of indexes, with each index having different weights.
The heaviest weighted indexes are under the control of the industry; they are the medical
charges, the physicians' pay, and the Consumer Price Increase (CPI); the CPI included the fees
listed on the patients' bills. Since 1983 medical charges index has always been higher than the
CPI, bringing the CPI higher. So, by increasing medical charges and physicians' pay, the
government pays out more money, and each year the pot of gold in the federal budget gets more
significant, and so does our taxes. From this point in time, health care revenues begin to climb;
the major contributing factor is an increase in medical charges.
The largest financial group of medical patients is the privately insured patients, at seventy
percent. The insurance companies pass through the increasing charges by increasing their
premiums to their customers, the nation's employers. But they were not willing to pay the higher
fees for the medical providers to get more money from the government. Fraudulent accounting
fixes the problem of increasing charges and maintaining the same costs. In 1983 the healthcare
industry introduced the "secret discount," which is not a discount but a kickback paid to the
insurance company in the form of a cancellation of debt. A legal discount is placed on the bill at
the time of issuance and deducted from the gross amount given you a new net amount.

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The designers of the Prospective Payment System relied upon the enforcement of other laws.
Under the Consumer Protection Law, also known as the Antitrust Law, the prices are the same
for all private-pay patients. The Department of Justice (DOJ) is responsible for the enforcement
of these laws, especially price discrimination, and price-fixing. It is easy to look at the providers'
bills and decide all patients have the same amounts listed, especially since there are no discounts
listed on any patient's bill. The DOJ failed to recognize is that different amounts collected are
what determines price discrimination, not the charges listed on the patient's bill. When the
provider collects more from the un-insured patient than from the insured patient, the provider is
violating the price discrimination laws, which makes them subject to criminal and civil lawsuits.
When it comes to billing the beneficiaries of the government programs, the bill does not create
the legal obligation. Congress determines reimbursement amounts. The providers charge the
government patients the same price as the private-pay patients but do not collect the full amount.
The difference between the amount billed and the amount collected is a partial cancellation of
debt. Canceled debt given to the government goes unreported to the Internal Revenue Service
due to the fact the government does not pay itself taxes. In 1965, for financial reporting, to
distinguish between the canceled debt given to the private insurance companies and given to the
government, the Financial Accounting Standards Board (FASB) created the contract adjustment
account for government canceled debt deductions. In 1983 the industry began using the account
for both government and private business canceled debts.
In the healthcare industry, a kickback paid to someone for referring a patient is illegal; it has
criminal and financial penalties for the giver and receiver. The tax code states that no deduction
from gross income is allowed for kickbacks. The tax code does not recognize contract
adjustments as a legitimate deduction. The tax code only has two legal reductions from gross
income, bad debts and canceled debts.
The Internal Revenue Service (IRS) is responsible for auditing the accounts of providers and
insurance companies; it is their job to collect taxes on kickbacks. It is their responsibility to
know GAAP for an accrual method of accounting. The following is what the IRS is doing; it is
taken from a letter sent to me in 1999 through my Senator, by the Director of Exempt
Organizations and Large businesses:
"Mr. Meidinger raised a question regarding the proper tax treatment by hospitals and insurance
companies of the difference between the amount billed to patients and the amount paid by
insurance companies pursuant to contractual arrangements with the hospitals to satisfy those
bills. Mr. Meidinger expressed concern that the current practice caused costs to shift to patients
and government programs, such as Medicare and Medicaid.
Health care providers, such as hospitals, establish fees, and charge patients accordingly.
However, patients frequently are not responsible for payment of these charges due to
arrangements with third-party payers, such as insurance companies and Medicaid. The
providers enter into contractual arrangements with the payers regarding the amounts necessary
to satisfy obligations on behalf of the patients. The difference between the amount originally
charged, and the amount paid to satisfy the obligation is known as a contractual allowance.
Whether or not the arrangement present federal tax questions depend on the facts of the
particular case. We can assure you that we share your constituent's concerns with possible

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improper reporting.
Thank you for bringing your concerns to our attention."
Needless to say, nothing was done. The IRS believes the price of the services is determined by
the insurance company's contract, not the patient's contract or the patient's bill. The fact that the
providers swear the amounts are legitimate debts when they go to court to force payments of the
medical bills. The IRS lost sight of the fact that under the accrual method of accounting, the
private-pay patient's bill determines gross income. They lose sight of the fact that the insurance
company is not acting as an agent for their insured members but are requesting a partial
cancellation of debt from the patient's debt transferred to the insurance company.
In the healthcare industry, the providers instantly add the amounts billed to their gross income
then later, after receiving the Explanation of Benefits form from the insurance company, deduct
the difference not collected from the insurance companies as a contract adjustment. The IRS
does not know the tax code, which only allows two deductions from gross income, bad debts or
canceled debs, contract adjustment is not an allowable deduction. The IRS director is unfamiliar
with GAAP for accrual accounting. The IRS is the only agency that thinks that all insured
private-pay patients' bills are all false. Somehow, they forgot that the amount listed on the
patient's bill creates a legal debt and has never had the experience of going to the state and
federal claims courts where the providers swear the amounts listed on the patients' bills are
accurate. The courts treat the invoices as prima facie evidence or the fact that seventy percent of
the cases are against privately insured patients. The IRS lacks knowledge of the Uniform
Commercial Code for contracts that the Parole Evidence Rule states that a prior agreement
cannot alter the new contract with the patient or the billed amount. A patient's contract that states
they are liable for the full amount charged.
It is easy to argue that even though the insurance companies overcharge for their services and the
costs for the medical services are lowered by the canceled debt; their profits would increase and
be taxed. For the kickbacks given to the insurance companies, the insurance companies
reciprocate by steering their insured members to the providers. When an insured member goes to
an out-of-network provider, the insurance company charges the patient a higher variable co-
payment, a percentage based on the billed charges rather than a lower fixed amount required by
the HMO law, for additional administrative purposes. This practice is economic duress, and its
requirement is in the contract between the in-network providers and the insurance company; its
sole purpose is for the insured members to boycott the out of network providers. This practice is
a restraint of trade.
The kickback process has been going on since 1983, with devastating results to our country; the
kickbacks started at 1%, but today stands at 85%. To cover the payments given to the insurance
companies, the providers have continuously raised their charges. The Industry has continually
grown, increasing its portion of the Gross Domestic Product in two and a half decades by 11.2%.
When one industry grows, another shrinks, in this case, the manufacturing industry that has
shrunk by 11.2%, eliminating over hundred-thousand manufacturing companies and millions of
manufacturing jobs. With the loss of manufactured goods made in the United States, we created
a humungous trade deficit; the trade deficit is sending the wealth of our nation overseas.
Manufacturers are moving to Canada and Mexico, where all these countries have lower health

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care costs, and the employers do not pay for employee health care benefits. It is now estimated
that within twenty years, we will no longer be able to maintain our military, and we will lose our
standing as the world's most powerful nation.
As a nation, the adoption of a single-payer healthcare system will see a reduction of health care
costs, an increase in personal income, and an increase in tax revenues. The first costs to go are
the kickbacks paid to the insurance companies. Other cost reductions are the elimination of the
financial burden of collecting payments from patients, which include bill collectors, court costs
for collections of unpaid medical bills, and personal bankruptcies, and the cost of medical
malpractice insurance. The next cost reduction is the elimination of 250,000 highly paid
insurance salesmen; their need will no longer exist. The good news is the employers are now
paying for employees' health care benefits, will transfer these revenues to the employees' pay,
these revenues now become taxable income, with the more significant portion becoming
disposable income for the employees. A single-payer health care system would allow each to
choose the provider of their choice. Universal health care coverage would create new freedom
for employees, allowing them to change jobs without fear of losing their health care coverage.
The physicians and hospital managers would see a reduction of their income, being that these
incomes were created through illegal business practices. Their income would be more in line
with their counterparts in other industrial countries; it is estimated they make four times more
than their counterparts. The biggest gain for them would only be greater self-respect, something
our country has lost sight of.
The heads of the DOJ Antitrust group and the Commissioner of Internal Revenue, along with
their bosses, should be fired. The Antitrust group failed to see the damage done to the un-insured
private pay patients. It failed to recognize the change in the balance between industries and
losses in the Manufacturing Industry. The head of the DOJ was unable to understand the illegal
kickback scheme in the healthcare Industry or prosecute the offenders, the penalty being three
years in prison, and a twenty-five thousand dollar fine for each kickback. The IRS failed to
recognize and tax the kickback payments, which allowed the creation of the Oligopoly.
To destroy the Healthcare Industry Oligopoly, without throwing all participants in jail, the
government must collect the proper taxes on the kickbacks and barter income. If you have an
Explanation of Benefits form from your insurance company that shows the amount billed by the
provider and a lower amount paid by the insurance company, please file an IRS whistleblower
claim. The claim form and filing instructions are on the IRS Whistleblower website. Just say this
provider and insurance company is not paying taxes on the kickbacks. You may be entitled to a
share of the collected taxes as an award. The un-insured patients, who have overpaid their
medical bills, contact an attorney that specializes in state class-action lawsuits and sue the
provider for your overpayments.
President Kennedy said, "Ask not what your country can do for you, ask what you can do for
your country." If you want to save our country from financial ruin, bring back manufacturing to
this country, eliminate trade deficits, improve health care coverage, we must fix the problem that
causes it; we must put an end to the Healthcare Industry Oligopoly.

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Roy J. Meidinger
14893 American Eagle Ct.
Fort Myers, Fl. 33912
Tel No. 954-790-9407
Email RoyJMeidinger@comcast.net
Description of Tax Violation
Health care providers are paying illegal kickbacks to the private health care insurance companies,
and neither are paying the required taxes on the payments.
On the private-pay side of the health care provider, it has two distinct contracts, which create two
separate financial transactions, the patients and the health care insurance company’s contract.
The first contract, between the provider and the patient, creates the recognized income for tax
purposes. All patients’ bills, with the listed prices, are included in gross income.
The second contract, between the provider and the private insurance company, wherein the
provider pays a portion of the amount the insured member owes the provider, the cancelled
remainder is a kickback to the insurance company for referring its insured member to the provider.
This contract creates taxable income for both the provider and the insurance company.
In the Healthcare Industry, any cash or cash equivalent paid for referring s customer to the provider
is illegal.
Both the giver and receiver of the kickback have to pay taxes on the amount:
The insurance company does not include the forgiven debt income into its gross income.
The provider does not include the value of the services performed by the insurance company,
known as barter income, in its gross income.
The provider cannot deduct the kickback payment from its gross income.
The kickback paid to the insurance company is in the cash equivalent form of canceled debt. To
go undetected by the IRS, the provider lists the difference between the amount billed to the insured
patient and the actual amount collected from the insurance company as a contract adjustment.
The IRS failed to recognize the separate financial transactions created by the two contracts or the
timing of the financial transactions that is known as the matching principle in GAAP and for tax
purposes it is known as the economic performance principle, § 1.451.
The IRS failed to understand for taxable revenue purposes it is legal to write off the difference
billed to the government beneficiaries and what the government actually pays, but it is illegal to

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write off the difference of what is billed to a private-pay insured patient and what the private
insurance company pays.
The IRS failed to understand there is a difference between financial reporting of income and
taxable reporting of income.
The estimated taxes owed by the Healthcare Industry is Nine Trillion Dollars.
Summary of Damages done by Healthcare Oligopoly in Chart Form
The following chart shows:
• the growth of hospital billings,
• the growth of hospital revenues.
• the red portion the growth of the cancellation of debts, half being cancelled government
debt and the other half being kickbacks being kickbacks paid by employer to insurance
companies.

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This 1995 chart from the Health Care Finance Administration shows the rise of hospital and doctor
billings starting after 1983. Prior to that year the annual increases were below the increase of the
Consumer Price Index.

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The largest group of hospitals are Not-For Profit Corporation, 77% of hospitals.
The hospitals, for their private-pay insured patients and the patients on the Medicare Plus plans,
have been writing off six dollars for every dollar realized. Therefore, these write offs are subject
to taxation, and both the hospitals and the insurance companies owe trillions of dollars to the
American people. Our Tax Code mandates the Internal Revenue Service to collect these taxes or
come to some fair settlement with each non-compliant taxpayer, whether the taxpayer is a private
or public corporation, for-profit, not-for-profit, taxable or Tax exempt, and state entities.
Specifically, IRC 501, the ruling provision with regard to tax exemptions, appears to be self-
enforcing. IRC 503 refers to IRC 501 in every case where an exemption is granted or denied --
thus, IRC 501 is the basis for all organizational tax-exempt status. IRC 501(a) provides that "An
organization described in subsection (c) or (d) or section 401(a) shall be exempt from taxation
under this subtitle unless such exemption is denied under section 502 or 503."
Moreover, Treas. Reg. 601.201(n)(6) provides authority to revoke 501(c) tax-exempt status, under
the general administrative powers conferred on the IRS Commissioner by the Secretary of the
Treasury, pursuant to IRC 7805(a). Treas. Reg. 601.201(n)(6) (which is extremely long), begins,
"(i) An exemption ruling or determination letter may be revoked or modified by a ruling or
determination letter addressed to the organization, or by a revenue ruling or other statement
published in the Internal Revenue Bulletin. The revocation or modification may be retroactive if
the organization omitted or misstated a material fact, operated in a manner materially different
from that originally represented, or engaged in a prohibited transaction of the type described in
subdivision (vii) of this subparagraph. In any event, revocation or modification will ordinarily take
effect no later than the time at which the organization received written notice that its exemption
ruling of determination letter might be revoked or modified."
The following chart shows the Manufacturing Industries decline of GDP as the kickbacks
increased in the Healthcare Industry.

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Percentage Share of Manufacturing and Healthcare in GDP
Share of manufacturing decreasing on year on year basis while that of Healthcare is increasing
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Manufacturing Health Care

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This chart shows the U.S. Trade Deficit grew as the Manufacturing Industry declined.
Tax filing forms
Form 1120 - U.S. Corporation Income Tax Return - is the form used to report
corporate income taxes to the IRS. Form 1120 is also used to report income for other business
entities that have elected to be taxed as a corporation (an LLC that has filed an election to be
taxed as a corporation, for example).
Form 990 - Even though most tax-exempt nonprofit organizations do not pay federal taxes
(that is what “tax-exempt” means), most do have to file an informational return with the IRS.
This annual reporting return is called a Form 990.
An organization that normally has $50,000 or more in gross receipts and that is required to file
an exempt organization information return must file either Form 990, Return of Organization
Exempt from Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from
Income Tax.
Form 990T – Unrelated Business Income - Even though an organization is recognized
as tax exempt, it still may be liable for tax on its unrelated business income. For most

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organizations, unrelated business income is income from a trade or business, regularly carried
on, that is not substantially related to the charitable, educational, or other purpose that is the basis
of the organization's exemption. An exempt organization that has $1,000 or more of gross
income from an unrelated business must file Form 990-T. An organization must pay estimated
tax if it expects its tax for the year to be $500 or more. The obligation to file Form 990-T is in
addition to the obligation to file the annual information return, Form 990, 990-EZ or 990-PF.
Each organization must file a separate Form 990-T, except title holding corporations and
organizations receiving their earnings that file a consolidated return under Internal Revenue
Code section 1501
Form 1099-C. According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged
becomes taxable income to you. You'll receive a Form 1099-C, "Cancellation of Debt," from the lender
that forgave the debt.
How the IRS classifies cancelled debt
You might consider it unfair that a debt you successfully cancel or negotiate away comes back to
haunt you as taxable income. However, the IRS classifies cancelled debt as income because you
received a benefit without paying for it.
Form 1099-C
According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged becomes
taxable income. The IRS requires businesses to send a 1099-C to consumers if more than
$600 in debt was cancelled or forgiven.
The federal government requires you to pay taxes on cancelled debt. The bottom line, you
owe the federal government more money which means you’ll get a smaller refund check or
owe more money to the IRS.
Tax Income Reporting Exclusions: There are certain situations in which your debt can be
cancelled, but you don't have to report it as taxable income.
• The debt was discharged in bankruptcy (unless the debt was incurred for business or
investment purposes).
• Student loans that are forgiven by an educational institution that's tax-exempt and you
work for a certain number of years for a qualified employer. The debt was from a
mortgage on a primary residence lost in foreclosure, sold in a short sale, or from a
restructured mortgage. You'll still need to include this forgiven mortgage on your tax
return, but on Form 982, and shouldn't face any tax penalty on it.
• You were insolvent by least the amount of the canceled debt at the time the debt was
canceled. Being insolvent means your liabilities outweigh the fair market value of your
assets. In other words, you had a negative net worth when the debt was canceled. To take
the insolvency exclusion for canceled debt, you need to file IRS Form 982.

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Form 1099-B Barter Income - Information Returns for Bartering
Transactions
Barter exchanges are required to file Form 1099-B.pdf, Proceeds From Broker and Barter
Exchange Transactions for all transactions unless an exception applies. Refer to Bartering in
Publication 525, Taxable and Nontaxable Income and the Form 1099-B Instructions for
additional information on this subject. Persons who don't contract with a barter exchange or who
don't barter through a barter exchange but who trade services, aren't required to file Form 1099-
B. However, they may be required to file Form 1099-MISC.pdf, Miscellaneous Income. Refer to
the Form 1099-MISC Instructions to determine if you have to file this form. If you exchange
property or services through a barter exchange, you should receive a Form 1099-B. The IRS also
will receive the same information.
Generally Accepted Accounting Practices
Description
Generally Accepted Accounting Procedures (GAAP) and Generally Accepted Accounting
Standards (GAAS) are the conventions, rules, standards and procedures necessary to define
accepted accounting practices at a particular time; includes both broad and specific guidelines.
The source of such principles in the Financial Accounting Standards Board (FASB). The
standards are promulgated by the American Institute for Certified Public Accountants (AICPA),
which concern the auditor’s professional qualities and the judgement exercised by him in the
performance of his examination and in his report.
Note: The “contract adjustment account” is recognized by the Financial Account Standards
Board (FASB) for financial reporting the difference between the billed amount of beneficiaries
and the difference paid by government programs, but it is not recognized by American Institute
for certified Public Accountants (AICPA) or is recognized by the U.S Tax Code.
U.S. Tax Code accepts the guidance and enforcement of GAAP. The IRS auditors do not follow
or understand the auditing standards of GAAS.
There are differences for determining gross revenue and net revenue, between financial reporting
set up by GAAP and the taxable revenue set up by Congress.
Tax accounting procedures
1. Cash accounting: For tax purposes revenue is recognized when money is
received and deductions are recognized when money is spent.
2. Accrual Accounting: For tax purposes revenue is recognized when the
services are completed, the provider has a legal right to collect the debt or obligation and
a bill is issued. Deductions are recognized when a bill is received, establishing a debt to
be paid. The accrual more accurate method than the cash method; due to the fact it relies
on legal documents in which the accuracy of the amounts is easily verified.

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3. Healthcare Industry Accounting: The Tax law and the Social Security Law
require the Healthcare Industry be on the Accrual Method of Accounting.
4. Provider Billing Practices: Our consumer protection laws require all patients
be billed the same prices for the same services. There are no discounts given to any
patients! If there were any discounts given, they must be given to all patients and be listed
on the patient’s bill when the bill is made up. The bill establishes the legal obligation or
debt owed to the provider for the medical services and goods provided to the patient.
5. Revenue Recognition Principle: is a cornerstone of accrual accounting
together with the matching principle. They both determine the accounting period in
which revenues and expenses are recognized. According to the principle, revenues are
recognized when they are realized or realizable, and are earned (usually when goods are
transferred or services rendered), no matter when cash is received. In cash accounting – in
contrast – revenues are recognized when cash is received no matter when goods or services
are sold.
6. Contra Account: Definition of Contra Account - A contra account is a general
ledger account with a balance that is opposite of the normal balance for that account
classification. The use of a contra account allows a company to report the original
amount and also report a reduction so that the net amount will also be reported. The net
amount is often referred to as the carrying amount or perhaps the net realizable amount.
Examples of Contra Accounts
To illustrate, let's use the contra asset account Allowance for Doubtful Accounts. Since it
is a contra asset account, this allowance account must have a credit balance (which is
contrary to the debit balances found in asset accounts). The Allowance for Doubtful
Accounts is directly related to the asset account entitled Accounts Receivable. Therefore,
if the Accounts Receivable has a debit balance of $40,000 and the allowance account has
a credit balance of $2,000, the readers of the balance sheet will see that customers owe
$40,000 for past purchases but the company does not expect to collect $2,000 of the
$40,000. Therefore, the net amount of the accounts receivable that is expected to turn to
cash is $38,000.
A second example of a contra asset account is Accumulated Depreciation. For instance, if
a company has a plant asset such as Equipment with a debit balance of $92,000 and the
account Accumulated Depreciation has a credit balance of $50,000, the carrying amount
(or book value) of the equipment is $42,000.
Detailed Discussion of GAAP
Under GAAP a provider, doctor or hospital, would only place the amount it is entitled to on the
bill, on its accounts receivable for the patient and include the amount in its gross income account.
The provider would send a notification of the services it performed and the amount the insured
member’s debt is. An insurance company would put the patient’s debt amount on the provider’s
accounts payable and deduct the amount from its gross income.

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The insurance company would then determine what it had to pay, utilizing the patient’s contract
and the contract it had with the provider. It then notified the provider by sending it an
Explanation of Benefits form. The difference of what it had listed on the provider’s account
payable and the amount it paid the provider would be posted on its contra account contract
adjustment. The amounts listed in the contract adjustment account would then be deducted from
its gross income. The contract adjustment amount would also be posted on its financial
statements. The posting of the contract adjustment account is fraudulent, the revenue should have
posted to a cancellation of debt account and added to its gross income, and recognized for
income tax purposes.
The providers are allowed to adjust their recognized revenue with legal write-offs, creating their
adjusted revenue for both tax purposes and financial reporting reports. Under financial guidelines
for financial reporting the difference of what a patient is billed and what the provider accepts as
payment from the insurance company is recorded as a contract adjustment that is deducted from
gross income. This is a fraudulent accounting entry. Under the tax laws the difference between
what the patient’s debt is and what the provider actually gets should be recorded as a cancellation
of debt, then deducted from its gross income. An information tax return should be sent to both
the insurance company and the IRS, notifying the IRS of the cancelled debt income the insurance
company received. If the cancellation of debt is payment for an illegal act, such as a kickback,
then the amount cannot be deducted from its gross income for tax purposes but would be
deducted from its gross income for financial reporting.
Laws affecting Accrual Method of Accounting:
Accrual Method: A method of keeping accounts which shows expenses incurred and earned for
a given period, although such expenses and income may not have been actually paid or received.
Right to receive and not the actual receipt determines inclusion of amount in gross income.
When right to receive an amount becomes fixed, right accrues. Obligations payable to or by
taxpayer are treated as if discharged when incurred. H. Liebes & Co. v. Commissioner of Internal
Revenue, C.C.A.9, 90 F.2d 932, 936. Entries are made of credits and debits when liabilities
arise, whether received or disbursed. Insurance Finance Corporation v. Commissioner of
Internal Revenue, C.C.A.3, 84 F.2d 382. The accrual method Larger companies often opt for the
accrual method to track and report income. Under this method, income is recognized as soon as a
transaction takes place, regardless of whether the money is received. In other words, a company
doesn't have to receive money to count it as income; it will recognize the amount in question as
long as it has reason to believe it will be paid what it's owed. As such, a company using the
accrual method will have to pay taxes on any recognized income it records, regardless of whether
that income has been received at the time its taxes are due.
Account Payable: A debt, owed by an enterprise, that arises in the normal course of business
dealings and has not been replaced by a note payable of a debtor. For example, bills for
materials received but not yet paid. Contract obligations owing by a person on open account.
State Tax Commission v. Shattuck, 44 Ariz. 379, 38 P.2d 631, 639. A liability representing an
amount owed to creditor, usually arising from purchase of merchandise or materials and
supplies; not necessarily due or past due.

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Account Receivable: A debt owed to an enterprise, that arises in the normal course of business
dealings and is not supported by negotiable paper. For example, the charge accounts of a
department store. But income due from investments (unless investments are the business itself)
is not Usually shown in accounts receivable. A claim against a debtor usually arising from sales
or services rendered; not necessarily due or past due.
Amount on the bill: A prior or contemporaneous extrinsic agreement as to the amount to be paid
is ineffective to vary the express terms of the instrument. In the case of Payne v. Nicholson,
supra, the Supreme Court of Florida, in discussing whether oral testimony in support of a
claimed set-off constituted an attempt to alter or vary the terms of the note, stated: "As
regards a promissory note, an extrinsic agreement as to the mode of payment, or the amount of
payment, must be ineffective, since the parties have expressly dealt with those matters in the
instrument; but an agreement to concede a credit or counterclaim, as offsetting the
obligation of the instrument, would be a separate transaction, not dealt with in the instrument,
and valid.” Wigmore on Evidence, § 2444; Bennett v. Tillmon, 18 Mont. 28, 44 P. 80; Buckeye
Cotton Oil Co. v. Malone, 33 Ga.App. 519, 126 S.E. 913; John Lucas & Co. v. Bradley, 4
Cir., 246 F. 693; Roe v. Bank of Versailles, 167 Mo. 406, 67 S.W. 303; Branch v. Wilson,
12 Fla. 543.
Cash Accounting revenues are recognized when cash is received no matter when goods or
services are sold and deduction are made when cash is paid out.
Contra Account A contra account is a general ledger account with a balance that is opposite of the
normal balance for that account classification. The use of a contra account allows a company to
report the original amount and also report a reduction so that the net amount will also be reported.
The net amount is often referred to as the carrying amount or perhaps the net realizable amount.
Customary Charge The median charge that the provider charges for a specific service or the
charge that the provider charges for a specific service a majority of the times it is billed.
Customary charges are reduced in proportion to the ratio of the amounts actually collected from
charge paying Non-Medicare patients to the customary amount. One of the items used was the
current customary charge listed on the beneficiaries’ invoices, the universal bill submitted to the
Medicare/Medicaid Programs. “42 CFR 405.503(a). Under 42 CFR 413.13 (e) (2) Customary
Charges are reduced in proportion to the ratio of the amounts actually collected from charge-
paying non-Medicare patients to the amount that would have been realized had customary
charges been paid and the provider (i) Did not impose charges in the case of most patients liable
for payment for its services on a charge basis; or (ii) Failed to make a reasonable effort to collect
these charges.” What this section means is the customary charge is determined by the average
amount of all the monies actually collected from all the private-pay patients for the same service.
Customary Charges. (Medicare Providers Reimbursement Manual section 2604.3)
Customary charges are those uniform charges listed in a provider's established charge schedule
which is in effect and applied consistently to most patients and recognized for program
reimbursement. Where a provider does not have an established charge schedule in effect and
applied to most patients, the determined "customary charges" are the most frequent or typical

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charges imposed uniformly for given items or services. However, in either case, in order to be
considered customary charges, they must actually be imposed uniformly on most patients and
actually be collected from a substantial percentage of "patients liable for payment on a charge
basis." Such charges must also be recognized for program reimbursement.
Contract Adjustment. This is the difference between the amount billed and the amount received
from the Medicare/Medicaid Programs, for tax purposes. For financial reporting this has become
the total amount of the difference between the amount billed to all patients, both government
program beneficiaries and privately insured patients and the actual amount collected. In the Tax
Laws there is no mention of contract adjustment. See discussion below of deviations from
accepted accounting procedures, in this case the write-off given the government; then check the
discussion on the Net Realizable Value (NRV) issued by the IRS Industry Director.
Discount is “a sum counted off or taken from the face or the amount of the paper at the time the
money is advanced upon it, whether the sum is taken for interest upon a loan or as the price
agreed upon a sale Salmon Falls Bank v. leyser, 22 S.W. 504, 509, 116 Mo. 51 Ohio St.68, the
discount should appear at the time the transaction is completed, i.e., at the time the invoice is
delivered to the patient reinforcing his or her “promise to pay”.
Imposed Uniformly on Most Patients To be considered "customary" for Medicare
reimbursement, a provider's charges for like services must be imposed on most patients
regardless of the type of patient treated or the party responsible for payment of such services.
Promissory note A signed paper promising to pay another a certain sum of money. An
unconditional written promise to pay a specified sum of money on demand or at a specified date.
Such a note is negotiable if signed by the maker and containing an unconditional promise to pay
a sum certain in money either on demand or at a definite time and payable to order or bearer.
U.C.C. § 3-104
Revenue recognition principle, a combination of accrual accounting and the matching principle,
stipulates that revenues are recognized when realized and earned, not necessarily when
received.
Realizable means that goods and/or services have been received, but payment for the goods
and/or services is expected later.
Sum certain amount in contract or negotiable instrument, or measure of damages in litigation,
that is fixed, settled, exact, or stated. Default judgement may be entered only for a “sum
certain,” which is a sum susceptible to reliable computation or determined by the court after an
accounting. Insurance Co. of North America v S/S “Hellenic Challenger”, D.C.N.Y., 88 F.R.D.
545, 548
Taxable income is the amount of income used to calculate how much tax an individual or a
company owes to the government in a given tax year. It is generally described as gross
income or adjusted gross income (which is minus any deductions or exemptions allowed in
that tax year).

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26 U.S. Code § 446 - General rule for methods of accounting
(a) General rule
Taxable income shall be computed under the method of accounting on the basis of which the
taxpayer regularly computes his income in keeping his books.
Deviation from Accrual Method of Accounting:
Required departures from GAAP
Under the AICPA's Code of Professional Ethics under Rule 203 - Accounting Principles, a
member must depart from GAAP if following it would lead to a material misstatement on the
financial statements, or otherwise be misleading. In the departure the member must disclose, if
practical, the reasons why compliance with the accounting principle would result in a misleading
financial statement. Under Rule 203-1-Departures from Established Accounting Principles, the
departures are rare, and usually take place when there is new legislation, the evolution of new
forms of business transactions, an unusual degree of materiality, or the existence of conflicting
industry practices.
The use of the contract adjustment account can be traced to the beginning of the
Medicare/Medicaid programs. The government created this new accounting methodology within
the Accrual Method of Accounting when it started the Medicare/Medicaid Programs fifty years
ago. This is the first time the amount listed on a bill was not accurate and therefore a
reconciliation account for balancing accounts, known as the “Contract Adjustment Account”,
had to be used. The Social Security Law required the “customary charge”, which is the medium
amount actually collected from all the charge-paying patients, rather than the standard amount.
The invoice was no longer a bill because the Government never intended to pay the amount
listed but was to be used as a source of information to determine what was actually being paid in
the private sector. During this time, the government only paid for the costs incurred by the
beneficiaries and the charges listed on the invoice were used to apportion the costs. The
“Contract Adjustment Account” was to be used only for government programs. The legal
requirement for the customary charge is written in the Social Security Law and within the
Hospital’s Medicare/Medicaid billing manual.
Recognized and Realized Taxable Revenue
A provider and insurance company go through several steps of procedures for recognizing
income and deductions. The first is the provider sends a copy of the medical services provided to
the insured member and the debt owed by the insured member. The second is the provider
accepts the patient’s debt and is obligated to pay it. The insurance company then determines
what it has approve for payment and what the insured member owes it, the co-payments and
deductibles. The insurance company pays the provider and both adjust their respective account
receivable and payable. Then for income tax purposes the difference between the patient’s debt
and the amount paid is listed in a contra adjustment account. The only account the U.S. Tax
Code recognizes on the private side of the health care business is the cancellation of debt
account.

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Description
“Gross Income” is all items of income. Recognition of gain is when a transaction takes place
that is a taxable event. The realized taxable revenue or adjusted gross income, is when all the
legal deductions are deducted from gross income and only the remainder is taxed.
“Deductions from Gross Income” There are two recognized deductions from gross
income, Bad Debts” and “Cancellation of Debt”. To distinguish the legally allowed cancellation
of debt given to the government it is labeled as a “Contract Adjustment”. The reason for
this is the government does pay itself taxes, therefore there is no need to report the cancelled debt
the government gets on an information tax form, 1099C Cancellation of Debt.
“Revenue Recognition Principle” is a cornerstone of accrual accounting together with the
matching principle. They both determine the accounting period in which revenues and expenses
are recognized. According to the principle, revenues are recognized when they are realized or
realizable, and are earned (usually when goods are transferred or services rendered), no matter
when cash is received. In cash accounting – in contrast – revenues are recognized when cash is
received no matter when goods or services are sold.
“All-events test” 26 CFR 1.451-1 - General rule for taxable year of inclusion: The IRS tax
code is perfectly clear on when the bill is recorded as income; The all-events test is met when
both the following occur:
1) The existence of a liability is established.
2) The amount of the liability is determined with reasonable accuracy.

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Provider
Income from Medical Services
The providers regular business revenue comes from the services and medical goods it sells to its
patients.
The patient’s bill lists the prices of the medical services and is included in the provider’s gross
income. The amount listed cannot be altered by a prior agreement between the provider and the
insurance company. (See discussion on Parol Evidence Bill.)
As to the amount on the patient’s bill: A prior or contemporaneous extrinsic agreement as to the
amount to be paid is ineffective to vary the express terms of the instrument. In the case of Payne
v. Nicholson, supra, the Supreme Court of Florida, in discussing whether oral testimony in
support of a claimed set-off constituted an attempt to alter or vary the terms of the note, stated:
"As regards a promissory note, an extrinsic agreement as to the mode of payment, or the amount
of payment, must be ineffective, since the parties have expressly dealt with those matters in the
instrument; but an agreement to concede a credit or counterclaim, as offsetting the obligation of
the instrument, would be a separate transaction, not dealt with in the instrument, and valid.”
Wigmore on Evidence, § 2444; Bennett v. Tillmon, 18 Mont. 28, 44 P. 80; Buckeye Cotton Oil
Co. v. Malone, 33 Ga.App. 519, 126 S.E. 913; John Lucas & Co. v. Bradley, 4 Cir., 246 F. 693;
Roe v. Bank of Versailles, 167 Mo. 406, 67 S.W. 303; Branch v. Wilson, 12 Fla. 543. In the
previous cases the courts have affirmed that a second was caused by a separate transaction and to
be handled as a separate economic transaction and it has no effect to vary the terms of the note or
bill.
Barter Income - income is realized in the form of services, as well in the form of cash; see tax
code 1.61-12. Income other than cash must be reported at the fair market value of the goods or
services received. Fair market value is the price at which the property or service would change
hands between a willing buyer and a willing seller, neither being required to buy or sell, and both
having reasonable knowledge of the relevant facts. In the exchange between the provider and the
insurance company the evidence of the fair market value is the forgiven debt. Section 1.61-
2(d)(1) of the regulations provides that if services are paid for other than in money, the fair
market value of the property or services taken in payment must be included in income, If the
services were rendered at a stipulated price, such price will be presumed to be the fair market
value of the compensation received in the absence of evidence to the contrary.
The registering of a provider on its on-network list and steering insured members to the provider
has definite value given to the provider. The lowering of co-payments given to the insured
member for going to the on-network provider has value. The increase of the additional co-
payment charged to the insured member as an inducement not to use the off-network provider
and boycott the off-network provider has value to the on-network provider. The charging of a
second variable co-payment rate rather than a legally required flat fixed rate is a financial duress

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that has value to the on-network provider. All of these valued services must be included in the
on-network provider’s gross income under section 61(a).
Expenses for an inherently illegal nature, such as bribery or in the healthcare industry, kickbacks,
are not a deductible expense, See 1.162(c).
The providers participate in four separate financial transactions, 1) Recognition of revenue from
the patient, 2) receipt of payment from the insurance company, 3) forgiveness of debt given to
the insurance company, and 4) collection from the insured member the debts owed to the
insurance company, these are the co-payments and deductibles.
Normal Provider Income The initial entry of the hospital would be to record the invoice in the
amount of services rendered and other costs billed. The total amount invoiced would be recorded as a
receivable from the patient and an equal amount is reported as taxable income by the hospital.
Income is recorded by the hospital at the time when all the events have occurred which determine the
hospital’s right to receive it, and the amount can be determined with reasonable accuracy,
irrespective of the fact that the taxpayer hospital later forgives the obligation to make payment (Regs.
1.451-1(a)). This would be at the time services are invoiced to the patient. “Although this case
involves the accrual of income under § 451, the all-events test for determining the accrual of
deductions under § 461 also requires that the amount of the liability must be determined with
reasonable accuracy. See § 1.461- 1(a)(2)(i). The Service has acknowledged that the last event
necessary to establish the fact of liability under the all-events test of § 1.461-1(a)(2)(i) is the same
event that fixes the right to receive income under the all-events test of § 1.451-1(a). Rev. Rul. 98-39,
1998-2 C.B. 198. Accordingly, interpretations of the reasonable accuracy prong of the all-events test
of § 1.4611(a)(2)(i) are applicable in analyzing the reasonable accuracy prong of the all-events test of
§ 1.451-1(a).” Pawnee County Excise Board v. Kurn, 187 Okl. 110, 101 P.2d 614, 618.
Provider’s Patient’s Invoice
The invoice shows:
• the amount billed,
• the amount paid by insurance company,
• the amount written off as contract adjustment,
• the co-payment due from patient.

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Hospital Annual Cost Report – Breakdown of Patient Revenues – Write-Offs

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The annual cost report worksheet of one hospital, submitted to the Florida Health Care
Finance Administration, shows the sources of patients’ revenues, the write-offs given each group
and the total income to the hospital. The report shows that no write-off was given to the private-
pay uninsured patients. The report also stated that the hospital gives no discounts to any patient.
The write-offs given to the government programs are legitimate, covered by Federal and State
statutes. The write-off given to the privately insured patients are kickbacks. In 2015, this hospital
billed $3,192,058,007, wrote off $2,473,946,907, and actually collected $718,111, 100, or 22%
of billed amount.
Summary of Patient Billings done by Healthcare Oligopoly in Chart Form
The following chart shows:
• the growth of hospital billings,
• the growth of hospital revenues.
• the red portion the growth of the cancellation of debts, half being cancelled government
debt and the other half being kickbacks being kickbacks paid by employer to insurance
companies.
Source Floridan Health Care Finance Administration

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Insurance company
Definition of Insurance:
Revenue. The insurance companies make their income from selling its insurance products and
collecting premiums for them. The economic principle of insurance is that it spreads the
economic risk. This is the normal business of insurance companies. Insurance companies that
sell HMO products were supposed to try to select the lowest cost providers, and recommend
them to their insured members. Instead the insurance companies selected the providers that gave
them the biggest kickbacks, no matter if their charges were low or high. The kickbacks were in
the cash equivalent form of a cancellation of debt.
The entry made by the insurance company would be to record the cash payment of the hospital
invoice. If the payment amount is less than the amount invoiced by the hospital (including
invoice adjustments) and the hospital accepts the reduced payment amount as full payment for
the invoice, the insurance company must treat the amount discharged by the hospital as debt
forgiveness income (Regs. 1.61-12(a)). In general, the debt forgiveness income would be
recognized at the time that the creditor discharges the unpaid amount of the invoice.
In all instances the patient is the customer of the provider. The insurance company never buys
and medical goods or services. The insurance company’s function is to spread the possible
financial medical costs among its customers. The insurance company is paid in advance to pay
the insured members medical bills. The insurance company specifies it is not an agent or have
any agency relationship with the insured member, thereby assuring itself it cannot be sued for
medical malpractice. The insurance company is only a third-party payer. The exception to this is
when the insurance company forms an HMO and PPO and thereby is supposed to select the
lowest cost providers.
The insurance company assumes the full medical debt owed by its insured member.
Assumption of Indebtedness: Exists when person binds himself to pay debt incurred by another.
Pawnee County Excise Board v. Kurn, 187 Okl. 110. 101 P.2d 614, 618.
Accrual Basis for Payables Similar to the rule with receivables, reporting on the accrual basis for
payables means that the company records debts as expenses even if it has not yet paid them. The
company does not record all of its hypothetical expenses, only those that it is specifically
obligated to.
The forgiveness of debt given by the health care provider is a non-deductible tax item for the
provider since it is being paid for having the health insurance company refer members and/or
coerce members to use the health care provider. The tax laws clearly cover this un-allowed
deduction. Both Federal and State laws make this practice a felony crime. Generally, deductions
are not allowed for payments that constitute a bribe, kickback or other payment that is illegal
under any law of the United States or under any generally enforced law of a state subjecting the

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