IRS should investigate massive health care kickback scheme, claims whistleblower appeal

Fort Myers, Jan 8, 2019 ( – For more than 20 years, health care cost reform crusader Roy J. Meidinger has been trying to get a judge to hear the merits of his argument: that the way insurance companies negotiate secret contracts with medical care providers to cover patients bills amounts to a massive kickback scheme.

Now, thanks to a January 2018 legal precedent in which another whistleblower filed an unrelated claim against a company that ultimately paid $37 million in penalties to the IRS, Meidinger believes his day in court may finally come.

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Thats not because the plaintiff, in that case, Kenneth William Kasper, won any cash reward for blowing the whistle against his employer over unpaid over-time in 2009. In fact, Kasper won nothing. Whats significant about that case, however, is that the U.S. Court of Tax Appeals, which is authorized by Congress to hear IRS whistleblower claims in addition to taxpayer disputes actually agreed to review Kaspers claim for a reward even though it was rejected by the IRS. In the past, the court had refused to override decisions by the IRS whistleblowers office, saying it didnt have that authority.

That January 2018 decision is key to Meidinger, because he has twice appealed decisions by the IRSs whistleblower office to reject his claims, only to have the Tax Court summarily reject them. In his last case, the court granted motions from the IRSs attorney arguing Meidinger failed to state a sufficient claim.

Meidinger feels if he can get a judge to agree to hear his case, he can then get his hands-on discovery documents from the IRS. And those might show whether its investigation into his claims was misguided, or whether there ever was any investigation at all.

 Im an optimist, says Meidinger, who keeps a small statue of Don Quixote on the bookshelf above his desk. Thats why I read the comics every morning.

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Meidinger first took his case to the tax court in 2010 after the IRS whistleblower office rejected it. Meidinger, in his cases, argues that the way hospitals and other medical providers hand patients bills listing their standard, exorbitant prices, but then accept much less from insurance companies that have negotiated contracts with them nothing more than a kickback scheme.

The medical providers accept the lower secret prices, which average about 15 per cent of the providers standard prices because the insurance companies promise to deliver large numbers of their beneficiaries to the providers through on-net policies. The policies penalize patients who go to providers that arent on the insurance companies networks.

The system allows the medical providers to jack up standard prices to astronomical levels in order to make up the difference, and that shifts the burden of costs to uninsured patients who wind up paying six times more than insured patients for the same services, according to Meidinger.

Meidinger contends the secret prices arent discounts because discounts, under uniform commercial codes, must be given to the customer, not a third-party payer like an insurance company.

They are forgiveness of debt because, under the uniform commercial codes, as well as under the accrual method of accounting, which most medical providers use, the bill was given to the patient represents a legal obligation to pay, and it should be counted as revenue. If the patient fails to pay, the difference is bad debt, not a discount.

Actually, what the insurance companies and hospitals are doing amounts to forgiveness of debt, according to Meidinger.

Under IRS tax code, both those that forgive debts and those who are granted debt forgiveness for referring patients must pay taxes on the amounts forgiven.

For example, if a homebuyer defaults on a mortgage and the lender forgives the unpaid portion of the debt, both have to file an IRS 1099 form and the borrower must pay taxes on the amount.

Medical providers, however, write-off the difference between what they charge and what they collect from insurance companies as contractual adjustments. And the IRS has long accepted that practice.

 That doesnt make it legal, however, according to Meidinger. He argues there is no law or rule in any state or federal statute that authorizes businesses to write-off the difference between prices charged to all medical customers and the vastly lower amounts collected from some customers who have insurance.

Meidinger contends the secret prices negotiated by insurance companies are kickbacks because, in exchange, they deliver large numbers of patients to their on-network medical providers. Federal and state anti-kickback laws prohibit medical providers from paying anything in exchange for patient referrals.

In Meidingers 2010 case, the IRS whistleblower office concluded he didnt state a case in which he could collect a reward for turning in a tax evader. Thats despite the fact Meidinger had gone to great lengths to provide, literally, more than 1 million names of medical providers who had signed contracts with insurance companies to accept their secret prices.

Meidinger appealed to the tax court, which dismissed his case saying the court lacked jurisdiction to dictate to the IRS how to conduct its investigation.

Meidinger filed a very similar new case in August 2018, however, and after the whistleblower office rejected it, he again appealed to the tax court.

On Nov. 5, Tax Court Special Judge Peter J. Panuthos flatly dismissed Meidinger s case on a motion from the IRS arguing it failed to state a claim for which relief can be granted.

Meidinger filed a request to reconsider the case based on the courts own rule of procedure, number 161, which authorizes the court to reconsider cases if a judge based a decision on outdated case law. Meidinger cites the Kasper case as the new precedent.

Panuthos, however, revised Meidingers request to be pursuant to rule 162, which allows cases to be reconsidered if new evidence emerges. Since the request mentioned no new evidence, Panuthos declined to reconsider his dismissal.

Meidinger said, working with a tax attorney he drafted an appeal, which was introduced yesterday, in the U.S. 11thDistrict Court of Appeals in Atlanta.

The appeal argues the tax court judge abused his discretion by not fully reviewing Meidingers facts and considering whether the IRS should investigate them further.

Meidinger points out the price commercial codes prohibit secret prices and kickbacks because they result in price discrimination and raise the cost of health care.

The health care industry began to engage in secret price negotiations after Congress modified its Medicare and Medicaid reimbursement system in 1982. That law authorized medical providers to write-off the difference between their standard prices and the amounts Medicare and Medicaid paid as contract adjustments, but that method was intended only for the government programs, because the government was dictating the amounts it was going to pay for its public beneficiaries, according to Meidinger.

Before long, private insurance companies began using the same method for getting discounts off the bills of their private-pay beneficiaries. And they encountered little, if any, opposition from the IRS.

The result was a health-care cost spiral that has rendered the U.S. unable to compete, especially in such global markets as manufacturing. Meidinger, in a 2015 e-book he authored titled, The Truth About the Healthcare Industry, points out health care in the U.S. costs three or four times as much as in other leading industrialized countries. Most of the other industrial countries have single-payer, universal health care.

Meidinger points out the difference between the amount billed and the amount collected by medical providers would provide $1.5 trillion per year in tax revenue. If taxes had been paid on those forgiven debts since the system started in 1982, the IRS would have collected enough to py off our national debt, he says.

It was like a rubber stamp, says Meidinger of IRSs response to the medical billing system. Once the IRS stopped enforcing the tax code, the system just started to grow.

Meidinger, a retired AT&T systems analyst, first became aware of the problem 1995 after reading an article about a lawsuit over the billing practice at a Florida hospital. He then reviewed his parents health care bills and concluded the system just isnt right.

Since then, hes filed several whistleblower claims over how the system inflates reimbursement rates for Medicare and Medicaid. Those claims were rejected.

Hes written dozens of letters and articles and sent them to hundreds of government bureaucrats and politicians. They sparked little action,

He points out, a few years ago, the government recalculated the Consumer Price Index and Cost of Living Index to account for false inflation in the medical care field. He believes that was a response to an article he wrote that was published in a Commerce Department newsletter.

He also points out that health care was the most important issue in the November congressional elections, according to numerous pollsters. He takes some of the credit for that, too, citing that he wrote several letters to the Democratic National Congressional Committee urging that focus.

And now, hes hoping the appellate court will finally consider the facts of his case.

Meidinger is also hoping to spread awareness of the health care billing scheme because he knows it will take political will to reform it.

We need the support of the people, he says.

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Source :Internal Revenue Service, Whistleblower Office

This article was originally published by IssueWire. Read the original article here.

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