The Truth About The Healthcare Industry

ISBN: 9781483550039

TABLE OF CONTENTS

Introduction

Chapter 1 - The Awakening

Chapter 2 – Preparing for the Battle

Chapter 3 – Facts about the Health Care

Chapter 4 – The Economic Damages

Chapter 5 – Congress – Courts - Executive Branch

Chapter 6 - What should be done now and in the future

Bibliography

•List of Contacts who were reached out to

•Laws – Statutes – Code ---Federal and State

•Glossary

•Addendum

•Miss-Use of Contract Adjustment Account

•AHA Report

INTRODUCTION

"America will never be destroyed from the outside. If we falter and lose

our freedoms, it will be because we destroyed ourselves."

Abraham Lincoln

Our national health care industry is supposed to be beneficial to the citizens of the United States. In reality, it is causing such great harm to our nation’s financial infrastructure it may even bring about the end of our republic. In simple terms, the cost health care is too high, the quality it supplies too low and the damages too great. The cause of these problems can be traced to the federal government’s actions, when it created the Medicare program in 1965 and, in particular, when it modified it in 1983 to create Medicare’s prospective payment system. Under the revised system, medical providers were to get reimbursed for Medicare beneficiaries’ care by Medicare’s rates, which were assigned to each of some 450 diagnostic groups. Medicare also mandated that the hospitals calculate their customary charges and list those amounts as if they were charges on their patients’ bills even though Medicare wasn’t going to pay those prices; it was going to pay only its DRG rates. The Social Security law defined customary charges as the amount medical providers customarily receive from all their private-pay patients.

The law did not apply to the way private, charge-paying patients paid their bills, either through their insurance companies or out of their pockets. However, beginning around 1983, the insurance companies and medical providers adopted a secret billing system that mirrored Medicare’s system. Under this system, medical providers would put their standard charges on all their bills for private-pay patients but collect amounts that differed vastly between two groups: those with insurance and those without. A medical provider then could agree in secret contracts with insurance companies to accept much less than than the standard charges from them in exchange for the insurance company referring large pools of patients to the medical provider. Only the uninsured patients paid the full price. Pretty soon, hospitals began jacking up prices, thereby shifting the burden of costs to the uninsured to compensate for the secret price mark-downs given to insurance companies. The medical providers also provided their standard charges, not their customary charges, which would have reflected the secret mark-downs to insurance companies to Medicare, which relied on accurate customary charge data to periodically adjust its reimbursement rates to keep them on par with inflation.

In effect, the government’s actions caused a health care industry that operated as a competitive and open marketplace with an oligopoly in which hospitals and insurance companies colluded to fix prices at higher levels for the uninsured.

The government subsequently failed to reform the private-insurance side of health care, and as a result, the oligopoly has functioned unchecked and uncontrolled ever since. The government could have implemented reform merely by enforcing existing anti-trust, consumer protection and tax code laws. That’s because this oligopoly’s tactics include restraint of trade, accounting fraud and tax evasion. These practices have netted this industry $21 trillion in extra income due to runaway price hikes in the last 30 years.

In the United States, we believe we get the lowest prices and highest quality through a competitive marketplace. However, when adversaries cooperate with each other to jointly raise charges, an oligopoly is created. This cooperation came about because the health care industry wanted more money from a faceless victim with deep pockets, the federal government.

There is far more danger in public monopoly than there is in a private monopoly, for when government goes into business it can always shift its loses to the taxpayer. The government never really goes into business, for it never makes ends meet, and that is the first requisite of business. It just mixes business with a lot of politics, and no one ever gets a chance to find out what is actually going on. By Thomas A. Edison

So, where has this system gotten us? We have the highest health care expenditures in the world and the lowest quality of services among the top industrial countries. We have 45,000 individuals dying each year because of lack of health care. These disturbing facts prove we have an oligopoly; an oligopoly created and sustained by Congress and the Executive Branch and covered up by the Executive Branch.

When one-industry functions without obeying the laws set down for all industries, the results are disastrous for the other industries. All industries are competing for the consumers’ dollars, so all industries must compete under the same laws. No corporations are exempt from obeying our laws, even the tax-exempt corporations are required to obey the law.

The present cost for our National Healthcare Expenditures is preventing our manufacturing industry from competing internationally and nationally. Over the last 30 years, we have closed 73,260 manufacturing companies, losing 7 million manufacturing jobs in the process. Personal bankruptcies due to health care costs now total more than 1.7 million per year. The U.S. has maintained a negative trade deficit for the past 30 years. Our trade deficit now exceeds $10 trillion.

The greatest loss is the integrity of the physicians of our nation. The philosopher Voltaire once said, Men who are occupied with the restoration of health to other men, by the joint execution of skill and humanity, are above all the great of the earth. They even partake of divinity, since to preserve and renew is almost as noble as to create. Because they operate within a corrupt system, these individuals have violated their own fiduciary duty, to do no harm. They’ve relegated themselves in the stature to someplace lower than common thieves.

The only ones who can put a stop to these illegal procedures are the citizens of our nation. Consider this book the Manifest Destiny of the health care industry. It is a call to arms, for all good men and women to stand up and bring about needed changes. The time has come for us to create a single-payer system with universal coverage for all. The cost of this new system will be under a trillion dollars, less than half what the nation spends on health care now.

The work contained within will give you a general knowledge of economic theories, contract law, accounting principles, tax laws, and antitrust and consumer protection laws, and how the health care industry secretly conspired to violate these laws. You will get all the statistical facts showing the growth of the health care industry in the United States, and a comparison of other countries’ healthcare systems, their costs and quality. You will learn that the theft of $21 trillion has contributed massive damages to our financial infrastructure and society.

You will learn about the federal agencies of the Executive Branch that have the responsibility for policing the health care industry and what their reactions were. You will learn of an agency’s efforts to cover up the illegal activities. You will learn how Congress limited the authorities of these agencies to do a more thorough job, and limited the federal courts jurisdiction to address the problem.

As you read this material, keep in mind, the health care providers do not give discounts to insurance companies; they give kickbacks. If they gave discounts, the amount would be taken off the patient’s bill. Under America’s billing system, the patient’s bill doesn’t change; his insurance company merely doesn’t have to pay it all because of a secret contract with his hospital.

The book will conclude with a series of recommendations for immediate and future actions. There will be a call for a national debate and a referendum to adopt an alternative health care billing system. It is time we fix our National Healthcare System.

There was a news story in 1964 about the murder of Kitty Genovese in Queens, New York. She screamed for help as she was stabbed to death. Many people heard her screams but no one responded. They were either apathetic, or afraid they might be injured if they got involved, or convinced themselves others would have taken action if anything were amiss. Later, someone came up with the recommendation not to call for help but to yell fire, because everyone understands the damages fire can cause and will pitch in and help.

My belief is everyone is responsible for his or her neighbor and for maintaining the republic. Nevertheless, I understand your reluctance to take up arms and do something, so with that in mind take heed the final three words, Fire, Fire, Fire!

CHAPTER 1

THE AWAKENING

BY GREG MARTIN

Most of us in the United States believe strongly in free enterprise; but sometimes we forget that freedom and duty always go hand in hand, and that if the free do not accept social responsibility they will not remain free.

By John Foster Dulles

DRAFTED OR VOLUNTEERED

June 2, 1994 started out in a routine fashion for Roy J. Meidinger. The 54-year-old retired AT&T systems analyst rose from bed, shuffled into his kitchen, poured himself a cup of coffee and sat down in his favorite chair. He donned his eyeglasses and opened up his newspaper, the Fort Myers, Fla. News-Press. He took a sip of coffee. He had no idea he was about to stumble over a massive fraud in the nation’s health care system, or that he’d spend the next 20 years on a crusade to reform it.

He perused the paper for tidbits. His eyes landed on a headline about a health insurance company’s settlement in a Florida lawsuit. According to the article, Humana Inc., one of the nation’s largest health care companies, had just agreed to pay $6.2 million to settle the lawsuit. The Florida Attorney General had filed the suit. The suit claimed the insurance company, which at that time also owned a string of hospitals, had been systematically overcharging thousands of its patients since 1984.

The article described a system in which the Humana hospitals would give hefty discounts of up to 89 percent off the charges that the hospitals billed some 37,000 patients who had Humana insurance. The patients, however, did not get the discounts. They were forced to pay their co-payments calculated as a percentage of the full amount of their hospital bills.

For example, a patient with a hospital bill for $1,000 typically would pay 20 percent under his insurance policy, or $200, as a co-payment. However, the hospital would only charge the insurance company as little as $110. Under such a scheme, a patient could actually end up paying the whole bill while Humana paid nothing, stated Steven H. Parton, then-chief of the racketeering section of the State Attorney General’s Office.

As part of the settlement, Humana agreed to charge its Florida patients a co-payment based on what the insurance company actually pays the hospital for the patient’s care, rather than the full amount on the bill.

Meidinger didn’t give the article much thought. The settlement had apparently resolved the case. Besides, he was young and healthy and his insurance from AT&T ample to take care of himself and his wife. Meidinger’s elderly parents, who lived with Meidinger and his wife, Judy, in the spacious rural home the couple had built for their retirement, were covered by Medicare. There was nothing to worry about.

Co-payments couldn’t have been further from my mind, Meidinger recalls 20 years later. I didn’t care about co-payments. That was somebody else’s problem.

So, Meidinger tossed the newspaper in the trash. He went work in his second career as a real estate agent. After work, he enjoyed dinner with his family and went to bed. Later that night, however, he tossed and turned.

Something was bothering me and I didn’t know what it was, Meidinger recalls in his native New York accent. It was just this here little article that caught something in the back of my head that I couldn’t sleep with. It was a problem and it just kept gnawing at me.

Meidinger prides himself on his ability to solve puzzles. If he can’t solve a sudoku puzzle in the morning, he thinks about it as he sleeps at night, and usually wakes up with the solution in mind.

The Humana story seemed to have his mind hooked, like a puzzle without a solution. He couldn’t solve it because the puzzle’s picture was still obscured.

Meidinger was also good at analyzing systems. Early in his career, he’d worked the graveyard shift for the phone company. He monitored a regional telephone switching computer in New York. If a component failed, Meidinger would reroute its traffic through another component to keep the system operating, at least until dayshift technicians could fix it.

However, in his spare time, Meidinger would analyze the problems to determine their causes. He’d consider how those troublesome components may have become over-loaded with an excessive volume of calls patched in or out to other call switching centers in the network. He’d come up with ways to better balance the load.

He’d then analyze the effects of his modifications. The results proved his rerouting efforts had resulted in fewer component failures. Meidinger showed a report of his findings to his superiors. It came as a surprise. They hadn’t expected the night-shift worker to perform such miracles. Before long, his bosses promoted him to a Bell Laboratories think tank.

I had something of a reputation, says Meidinger.

The think tank’s assignment was to brainstorm on ways to maintain the analogue phone call switching system, which had become outdated, while another group developed the next generation of digital switching systems. Meidinger felt the assignment wasn’t challenging enough, so he took courses at night at Pace University. He took courses on business management, contract law, accounting and nuclear physics.

Meidinger’s penchant for delving into an array of topics stemmed from a quirk of his childhood. Despite having an unusually high IQ, he had been held back in grade school due to an eyesight problem that had gone undiagnosed. As a consequence, Meidinger didn’t read much. He did little homework. He felt like an outsider. That changed suddenly during his high school years, after he picked up a western novel in a candy store. He became so enthralled with the story, he couldn’t put the book down, straining his eyes to keep reading until he finished it. He realized he not only could read a book, he wanted to read books. He realized his mind could conquer any challenge. He also found his perspective as an outsider gave him the advantage of looking at challenges with an unprejudiced approach.

The key to systems analysis, according to Meidinger, is to focus on the big picture – the entire system – while trying to fix the little pieces. Any change in the cogs affects the output and the bigger the system, the bigger the effect of the cogs.

I’m a methods and procedures guy, Meidinger says. You set up a methodology and a procedure and then you just follow it through.

He began to ask himself, what was the big picture behind the Humana case. It wasn’t just an isolated case; it was a system.

Then it came to me, he says. I said to myself, ‘Wait a minute. If Humana has this billing system, I wonder if Medicare has it, too. I wonder if Medicare patients are paying 20 percent of the full, billed amount, or 20 percent of what Medicare actually pays.

He examined some recent out-patient medical bills his parents had received. They showed his parents were billed $11,774. But the Medicare rate for the care totaled just $2,417. His parents paid 20-percent co-payments based not on the amount Medicare had approved but on the full charges. So, instead of paying $604, they paid $2,221. That meant Medicare only had to pay less than $200.

Meidinger also learned, under the Social Security Act, hospital in-patients paid 20 percent of the Medicare reimbursement rates on their bills, not 20 percent of the full charges. He could see no reason why out-patients should pay more than Medicare’s share while in-patients paid 20 percent.

That got me outraged, he says. I thought, ‘That’s not what Congress intended.’

The Medicare rate is calculated as a flat fee that is supposed to represent the average cost of care for each of some 450 Diagnostic Related Groups. The government hikes the rate periodically to account for inflation. The rate is substantially less than what hospitals charge on their bills to patients because those amounts include profit. The intent of the Social Security Act was to fund only the costs, not profit, of medical care for elderly citizens.

Intrigued, Meidinger began spending less time in his real estate office and more time in his personal office studying the health care billing system. At times, he’d glance up to the top of his bookshelf where there sat two small sculptures. One depicted Don Quiote on his horse and the other Sisyphus, the mythological character of an Albert Camus novel who was condemned to push a rock to the top of a mountain, only to have the rock roll down again. So he’d roll it up again. Meidinger wondered if he was, like Sisyphus and Don Quiote, embarking on a mission of futility. Yet he was drawn to press on.

He asked friends and family members to let him examine their medical bills and Explanation of Benefits forms. The EOB forms are documents that insurance companies send to patients after the insurance companies pay their portion of their bills. The EOBs state how much the insurance company paid and how much the patient owed in co-payments. The EOBs indicated the amounts that hospitals were collecting from insurance companies were far less than the amounts charged on their patients bills, yet no one seemed to be complaining about unpaid debts.

Meidinger asked some acquaintances who lived out of state about their bills. He learned they were all processed in the same manner. Hospitals or physicians nationwide routinely issued their bills in their patients’ names but sent them, with the full charges listed on them, to their patients’ insurance companies. The insurance companies then paid some previously negotiated amount that was much lower to satisfy their portion of the bills. The insurance companies then sent EOBs to the patients who then paid their co-payments. That suggested that, if one bill was unfair, several hundred million likely were unfair.

Meidinger took a closer look at the EOB forms. For most in-patients, including ones covered by Medicare, the forms showed that the government or the insurance companies were paying from 50 percent to 70 percent less than the amounts put on the bills. And while insured patients who received services as in-patients paid 20 percent of the vastly reduced amounts, other patients, including outpatients and anyone who did not have insurance, paid amounts based on the full charges.

But I don’t want to go among mad people, Alice remarked.

Oh, you can’t help that, said the Cat: we’re all mad here. I’m mad. You’re mad.

How do you know I’m mad? said Alice.

You must be, said the Cat, or you wouldn’t have come here.

― Lewis Carroll, Alice in Wonderland

It was like an ‘Alice in Wonderland’ billing system, Meidinger said. One pill makes your bill larger and one pill makes your bill smaller.

In the weeks that followed, Meidinger surfed the Internet for articles about hospital billing. He discovered he wasn’t alone in feeling that all patients should pay co-payments based on what hospitals actually collect from the government or private insurance companies. Meidinger corresponded with a couple of groups advocating reform. He called his representatives in Congress and sent letters to lobby them.

Eventually, the lawmakers acknowledged the Social Security law was unfair, at least for the Medicare outpatients who paid more than in-patients did. The lawmakers would eventually correct that injustice. Meidinger had made his point!

Yet, it didn’t feel like a victory. It felt like he was still missing a big piece of the puzzle, and it still bothered him. He wondered if the billing system was legal.

He downloaded the Social Security law, purchased a copy of Black’s Law Dictionary and read about Medicare and Medicaid’s requirements for hospital and physician reimbursements. He wanted to understand how the system accounted for what newspaper reports called secret discounts off their prices for both private-pay patients with insurance and Medicare beneficiaries.

The law requires the hospitals that participate in Medicare and Medicaid to account for all their revenues and expenses under the accrual method of accounting. Under that method, hospitals must record the amounts of their bills as revenues the moment they issue the bills, regardless of whether the providers actually collect all the money. If medical providers can’t collect the full amounts from the payors they could write off the difference as a deduction to balance the books.

Meidinger understood the accrual method from his studies in accounting. To him, not one of the categories that businesses use for writing off uncollected debt, such as bad debt or charity, seemed appropriate for the insurance company discounts. He figured that medical bills were debts owed by the patients that the medical providers, under the terms of their contracts with insurance companies, never intended to collect in full. So, the uncollected portions were neither bad debts nor charity.

As a real estate agent, Meidinger had become familiar with forgiveness of debt, a legal term that had tax implications. That issue comes up in foreclosure cases in which a lender agrees to accept possession of a mortgagee’s house in lieu of payment and waives the collection of any remaining debt.

Meidinger knew that, under IRS code, such a lender must account for the uncollected amounts as a forgiven debt and list it on an IRS 1099 form. The lost revenue is generally not tax deductible. The forgiven amount also must be considered as revenue for the borrower, for tax purposes.

But, in the health industry, who was the debtor? The patient or the insurance company? Meidinger pondered. It was the patient who received the medical goods