Roy J. Meidinger
The Purpose of the Presentation is to discuss what is wrong with the present system, where it went wrong, why it went wrong, how the system should work, and a recommendation of what should be done.
My name is Roy Meidinger, although you may not have hired me, I have been in your employ as a system analysis for the past eight years, examining the Health Industry. I am giving you my report of what I believe is the truth.
The starting point of my investigation is I knew nothing of the Health Industry; this was my greatest strength because I had no preconceived beliefs. All I knew was that for every reaction, there was some cause.
I found massive false accounting violations, tax violations and anti trust violations, such as price discrimination, price fixing, economic coercion, and illegal boycotts. The results of which have caused horrendous damages and would eventually lead to the destruction of the Republic.
Accounting Fraud of Health Provider
Under the accrual accounting system when a bill is issue by a Health Provider to a private-pay payer, the face amount is the recognized income.
When a Health Insurance Company is involved the hospital recognizes a lesser amount of income revenue and writes the difference off to an adjusting account called Third Party Contract Adjustment. This is a false accounting entry. The correct entry should have been kickback given to Insurance Company for recommending its policyholders. An Information Tax returns, 1099C should have been submitted to the Insurance Company and Government, listing the amount as a forgiveness of debt.
Looking at any annual report, it shows the billed revenue, the net revenue and the difference between the two, which is a kickback. The amount of the kickback is taxable income; it is not an allowable deduction, because it is for an illegal purpose and taxes should have been collected from the provider.
Accounting Fraud of Health Insurance Company
The Health Insurance Company Has the Legal obligation to pay the entire amount, except for co-payment to the Health Care Provider, if it posts the entire amount. The Health Insurance Company posts on its Accounts Payable, the agreed upon contractual amount. The false accounting is this entry, it should have been the total amount billed. If the Insurance Company posted the full amount, it would have a legal obligation to pay it. Since the Insurance Company posted the lower amount this becomes the only expense to be deducted from revenue. The missing amount, except for the policyholder*s co-payment, should be an entry to the revenue accounts, as kickback from Health Provider.
The Total billed amount is given to the Insurance Company from the provider, which they list this amount on the Explanation of Benefits Forms, sent to their policyholders. The omission shows up no place, but would have been posted if the Information Tax returns, 1099C, was forwarded with the forgiveness of debt.
The amount not recorded is revenue, which should be taxed.
Price Discrimination of Health Provider
The Provider set up two distinct amounts to be collected; one for cash paying customers and one for customers whom had Insurance Companies. The amounts appear on the Annual accounting report submitted to the Health Care Finance Administration, HCFA. If you are a cash-paying consumer, you pay a higher price for same services, usually three to four times more.
The consumer group hurt most is the independent small business group, which pays a higher price, making their costs higher, making competition harder.
In order to puff up the price the Health Provider agreed to put a higher price on the policyholders* bill then agreed upon in the contract between the Health Provider and the Insurance Company. In the contracts between Providers and Insurance Companies, there is a clause, an agreement requiring this procedure of listing the higher price, of the policyholder. This is fixing the price for a third party.
At one time the insurance companies shifted the costs of services to the policyholder. The policyholder paid a co-payment based on the full price, listed on bill, instead of lower agreed upon price. As prices were puffed up, the share of the costs was increased to the policyholder. In order to maintain the puffed up prices with other Providers, they joined national information services, sharing every aspect of their billing, then raised their prices to stay in line with their competitors, creating a common pricing scheme. Therefore, when you go to a Provider, the price is not determined by the cost of providing the services but what someone else is charging.
The puffed up price is also used to overcharge the Employer, who pays for the Health Insurance coverage. The Employer pays a percentage of the difference of the full face value on the bill and the contracted price the Insurance Company gets. The higher the price is puffed up, the greater amount of money the employer pays. With a national pricing scheme taking place, the employer has no true price comparisons to rely on.
The Medicare program distributes its funds by a formula that uses a regional distribution system; if a region*s prices go higher than another*s, that region gets more money. The higher the prices go, the more money HCFA is paying out; the more money the Government pays the larger the kickbacks can be given to the Insurance Companies. The higher the kickbacks the greater the amount the employer is paying for the health coverage. The more money HCFA pays the higher our taxes go.
The policyholders of the Insurance companies have to avoid anyone not on the Insurance Companies Network. They must only deal with the ones giving the largest kickbacks. If a policyholder goes to an off net Provider, they must pay a fine of 10 to 30 percent of the face value of the bill, or the entire bill. The policyholder cannot seek the lowest costing provider or one that may give better quality service.
If your medical services are not life threatening, you cannot go to an off net provider; your freedom of choice is denied you. The off net charge is a form of economic coercion, which is a form of slavery.
The deceivers said that if we mass-produce medical services the prices would go down, so we gave up our right of choice and the costs and prices went up.
The deceivers said that if used mass purchasing we would get larger discounts, instead we got larger kickbacks and the costs and prices went up.
The deceivers said let*s call the kickbacks, secret discounts and make them trade secrets, so we passed laws and allowed them to work in secrecy and the costs and prices went up, especially to the independents and small businesses.
The deceivers said we will provide insurance plans for the small business owners, group them together use our purchasing power for lower prices, so we allowed them and our costs and prices went up.
What This Means
Economic Slavery is a fact of life in the Health Industry. The false accounting is real, the Price Discrimination is real, the Price Fixing is real, the illegal Boycott is real and the overcharges to the Federal and State Health Programs is real.
Tremendous amount of wealth has been transferred to the Health Industry, beyond the capabilities of this report.
With this exception, when reporting the information to the government, I informed them that the false prices were being used to adjust the Gross Domestic Product (GDP) and the Consumer Price Indexes (CPI), which are used in calculating the Cost Of Living Adjustments, COLA, of all federal contracts and raises. A study performed for the government concluded that a slight adjustment to these indexes would save a trillion dollars, to the federal government, in the next twelve years. So the government quietly adjusted the medical portion of these indexes. But the fact remains these indexes were puffed up for the last thirty years.
Violations of Fraud law, Anti Trust law, Tax law, Qui Tam law, Racketeering Influenced and Corrupt Organizations law, Health Insurance Portability, Medicare law and matching State Statues have been done and are being done.
The penalties will result in forfeiture of all property and life in prison.
The evidence is overwhelming of the illegal acts. But are they guilty?
Topics of Discussion
The System went wrong because the procedures set up by the bureaucrats were wrong, but more importantly the Health Care Law is wrong.
The procedures for calculating the Governments Charges
In order to calculate the government*s reimbursement, the average charges for the private pay patients* bills and the government beneficiaries* bills are used. Therefore, the Government Programs require the full charges to be put on every bill, even though they know this amount will not be paid. This means that the face amount on the government program bills is false but it complies with what is required by law.
The face amount listed is the average calculated by a method in the Health Providers manual, which states that the discounted charges given to the Health Insurance Companies are to be ignored, and that the full face amount is to be used. In other words, it is not a true average of the amounts collected but an average of the amounts listed on the bills, Which happens to be the full charge as listed the providers* master charge list. It also means that the providers were following an instruction that was in error because there are no discounts given to Health Insurance Companies.
What the paragraph should have said is the calculation should ignore the functional discount given. The functional discount is 2 net 30. That is, a 2 percent discount given for paying the full amount with in a 30-day period of billing. This is a common practice in all industries. This paragraph created illegal discounts in the Health Industry, created price discrimination and legitimized it in the minds of the Health Industry.
The procedure for determining the recognized taxable income
The face amount on the private-pay patient with Insurance Company is greater then the actual revenue collected, like the government contracts. In the Internal Revenue Service Auditor*s Guide book for the Health Care Industry, the accounting adjustment item called *Contract Adjustment* says, this item is to be used for adjustments for Third Party Payers. This is in error since it should only be used for government contract adjustments, which does not agree with the law for private pay patients. So when an auditor is investigating or is asked about this adjusting item, they believe it is okay to be utilized for private-pay patients. But this is not the law. In order to balance the books for government billings, an accounting adjustment item was created called *Contract Adjustment*. In this account the difference in the Government billings was recorded and then subtracted from the billed revenues to give the correct recognizable income.
HCFA then established an annual report, listing various revenues and accounting items. The report created two revenue lines for the private-pay patients, one for patients with insurance companies and one without insurance companies. This led credence that there were two separate groups of consumers, which should be treated differently.
In order to balance the books for government billings, an accounting adjustment item was created called *Contract Adjustment*. In this account the difference in the Government billings was recorded and then subtracted from the billed revenues to give the correct recognizable income. HCFA then established an annual report, listing various revenues and accounting items.
The report created two revenue lines for the private-pay patients, one for patients with insurance companies and one without insurance companies. This led credence that there were two separate groups of consumers, which should be treated differently.
So HCFA created a non-standard accounting method, for the Health Industry and set standards and procedures for reporting the accounting entries. This is where price fixing was introduced into the Health Industry and legitimized in the minds of the Providers and Insurance Companies.
Guide Manuals versus the Law
In both cases, the manuals, which are only to be used as guides, were not in compliance to the law. The Government manuals were at fault. Unfortunately for the Health Industry, the courts have ruled that the following of procedures listed in guide manuals is no justification for breaking the law.
The most dangerous person in business is an honest person who does not know what he is doing, because no one questions their character or what they are doing. Everyone assumes it is legal. Even the honest person did not know what was going on, all they were doing was copying the successful ones.
Although I suspect a few did know, but will never be caught. In every industry there are a few individuals who do not belong, but on the whole the Health Industry is full of honest individuals whose character is beyond reproach.
Topics of Discussion
The Introduction of the Health Insurance Law created the bureaucratic agency, The Health Care Finance Agency.
Implementation of Health Care Law
The law created the largest Insurance Company in the country, with unlimited funds, capable of writing its own laws and no profit motivation. This was to be the end of normal business procedures in the Health Industry and created an unbalance in its relationships with other industries. The basis or intent of the law was to get the lowest cost of medical coverage for the aged. What it got was just the opposite.
Initially the law said the government was going to pay for only the costs of providing the medical services, it was no going to pay for any profits. The original payment plan was to determine the proportionate amount of costs and pay the government*s fair share. The aged was to be served by the Health Industry, an industry that was lowered to the status of a slave.
When the Health Industry realized it was going to receive revenue for costs, it created more costs. HCFA realized that this methodology was a failure and a second method was attempted. HCFA was going to dictate the price it was going to pay, and if the providers provided services at a lower cost, they could keep the difference. This methodology allowed for increases in the price, predominately based on the price the providers were charging the private pay patients and some cost factors. The Health Industry quickly learned how to increase their prices. HCFA forgot the golden rule of business: The fairest price and lowest cost is the fair market value of goods and services determined in a competitive market place.
The Consumers in the Health Industry
Prior to the introduction of the Medicare Law all the citizens of the country were the consumers of the Health Industry. After the law was introduced a large group of consumers were removed from the market place, from both the Health Providers and Health Insurance Companies. The full might of the government was utilized to control the market place. The aged now became the responsibility of the State. This group would no longer participate in a competitive market. The largest Insurance company was formed, HCFA, managed by bureaucrats, not businessmen.
When the Government management began, it upset the natural relationship and equilibrium with the other industries. All its interference*s required more bureaucratic control, until in the end there would be a tyranny of the state.
The Introduction of Price Discrimination by HCFA
Price discrimination is when you have a different ratio of cash to cost for the same goods or services for different consumers. The Government started price discrimination in the Health Industry. Two groups of consumers were created, one with profit included as a cost and the other where no profit was included. Those that were not Medicare Beneficiaries were to pay for all the cost of the profits of both groups in order to maintain the same status quo.
Real Life of trying to pay for only costs.
The billings on the annual reports given to HCFA show the different ratios for the two groups. But the overall Government*s share of costs has dramatically increased from where it was when Medicare first started to where it is today.
Under the Government*s plan to pay for only costs the governments share dramatically rose from 1966 to 1984. Unfortunately the costs to the private-pay patients were also increased. The percent of the GDP changed to reflect these increased costs. The wealth in the Industry increased.
The Introduction of Price fixing by HCFA
When the cost allocation method did not work HCFA introduced the Prospective Payment System. This system introduced the Diagnostic Related Grouping, commonly called the DRG. The Prospective Payment System fixed the prices the government was going to pay for services. It said that if you provide services below this price you might keep the difference. It allowed for annual increases. These increases were tied to several ratios, the heaviest being the CPI and some other indexes controlled by cost factors. The actual increases were created by HCFA using smoke and mirrors. Instead of lowering costs, the Health Industry, responded by raising its prices and HCFA responded by raising its reimbursements. Again the Governments share increased, the costs to the private-pay patients increased, the percent of the GDP increased and the wealth in the Health Industry increased.
Price fixing by sharing information by HCFA
When HCFA entered the market place it established a national information data service. HCFA itemized every procedure, listing every price supplied on all its billing. Of course the information was very heavily weighted with information from the Medicare Beneficiaries, so the Health Industry new what services affected the government the most. From this information it was easy to create a national pricing scheme. I suspect weighted more on services the pricing information so a national pricing scheme developed HCFA also standardized the billing, where in the past there were a thousand different billing schemes it now came down to one, everybody could now see what the competition was charging and adjusted/raised there prices accordingly
The forms are listed in the manuals, the specifics of each line is detailed; All the procedures are the same and enforced by fines or criminal prosecution It was HCFA which created the Monopoly called the Health Industry; HCFA was the bureaucratic tool of the law passed by Congress
The creation of the Boycott by HCFA
HCFA wanted the Medicare Beneficiaries to deal only with Providers, which had joined the HCFA network. The physicians were broken up into two groups, participating and non-participating. A separate methodology for payment was set up. For participating physicians the payments were sent directly to the doctors, while for non-participating doctors, the money was sent to the patients and then the physicians had to either bill them for the full amount or collect the money from them afterwards. There were also penalties if the doctor charged an amount greater then the 115 percent allowed to non-participating doctors. Soon all doctors were participating members.
The Creation of Cost Shifting by HCFA
Cost shifting is where you have one group or a patient pay more than its fair share of the costs of the services. Cost shifting is done through a manipulation of figures set up by a proportion formula. Under Medicare Part B for Hospital Outpatient services, the law said the Beneficiary was to pay 10% of the face amount of the bill, while HCFA was to pay the remaining portion of the costs. As the false puffed up price grew larger and larger, the Beneficiaries* portion covered more and more of the costs; until it was as well above 70 percent.
HCFA was the first to start this practice of shifting costs and the last to stop. The sick and the elderly were being ripped off by the agency set up to serve them.
Real Life HCFA was first
The Government through its Agency, HCFA set up non-standard accounting practices, and violations of the Anti Trust laws. The private sector only improved upon its methods.
Health Industry response under HCFA
Does a corporation or industry have a conscience? The saddest moment in the Health Industry is when it let its collective conscience be silenced by the ease in which it was making money. The Hippocratic oath, the guide for the Health industry, its most important warning says: to do no harm.
When the Medicare law was introduced, it united the Health Industry to work for its downfall, not the principle of the law but the unjust implementation of the law. The Health Industry overcame a more powerful adversary and regained its financial status. But They still had the organization, procedures and methods in place. They were too powerful and continued past the point where they were good for society. Unwittingly they became enemies of the state. It must be understood, these are honest men who were acting out of desperation because their way of life was threatened. They did not know the long-term consequences of their actions.
Then a new generation came along and carried on the methodologies you taught them. The new generation could not understand or see what was happening, but sensed something was wrong. Their personal theme went from, I have earned this, to, I deserve this. An apathy for their work grew, the quality of your services declined, until the health of the nation is 35th of the industrial nations. Where the guilt lies will be argued for generations. I do not know.
My only hope is that they will be released from the shackles of an oppressive law. And that they will participate in a free market place, first healing themselves, then this nation, I know you love. The Health Industry is the ones who must care for us and lead us.
The small businesses are the ones most hurt. They are the ones that have the greatest stake in this country. Proportionately the medical costs are higher for the small businessman, making it harder for them to compete. When the Health Industry made the Federal Government a faceless victim, it failed to look into the faces of its neighbors. It failed to realize the businesses it caused to be closed, the jobs lost and the family hardship it inflicted.
Topics of Discussion: How the System Should Work
The system is supposed to be freedom of choice for the consumer in a competitive market place.
Freedom of Choice
The forefathers of this republic established three freedoms for the individual, Political Freedom, Economic Freedom and Religious Freedom; each one independent of the other but entirely dependent upon the other. We could not have political freedom if we did not have a sound economy; nor could not have religious freedom if we did not have both political and financial freedom.
Our laws are built upon the Constitution given to us by our forefathers.
Congress, in enacting the Anti Trust laws intended to extend the substantive prohibitions of the laws to the farthest reaches of its power under the Commerce Claus, Thereby mandating a national competitive business economy to the full extent that Congress could do so under its constitutional power to regulate interstate and foreign commerce. The economic theory underlying Anti Trust laws is that in the long run, competition is more effective to production and a trustworthier regulator of prices than an enlightened combination. The Anti Trust laws were designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as a rule of trade; it rests on the premise that unrestrained interruption of competitive forces will yield the best allocation of our economic resources, lowest prices, highest quality, and greatest material progress, while at the same time while at the same time providing environment conducive to the preservation of our democratic political and social institutions. The laws are intended to prevent all combinations and conspiracies, whether composed of employees, employers, producers, providers, users or consumers, from unreasonably restraining the free flow of trade. Commerce thrives under freedom, citizens thrive under good commerce.
When an individual*s or group*s freedom is taken away they will fight the oppressor and work for their downfall. It is better to have people work with you then to have people work for you. Our laws our designed to give us order and discipline, but discipline must not be so restricted that it interferes with the freedom of choice nor allow for the natural change, which takes place in our society.
Competitive market Place
It is natural for the buyer to try to get the best value for goods and services for the least amount of money. It is natural for the seller of goods and services to try and get the most amount of money for the least amount of value. This has been going on since we started recording history.
It is also natural that the seller of the same value of goods and services, who sells them for less, will get more business.
Value is determined by a relationship between quality and price. Value increases when quality goes up and price remains the same; Value increases when price goes down and quality remains the same. In a competitive market, value is improved because both quality goes up, and price goes down. An important aspect is that an informed consumer gets a better buy.
We all have the same goals for our country, peace, abundance and prosperity; for all of our people of all races, all groups, whoever they may be, wherever they may live.
Profit is a necessary cost
Profit is an essential cost. Profit allows a person to shelter their family and provide for their well being. Profit allows us to accumulate wealth and property. Property, is a positive good, it is desirable. The way we make it is what matters. Our National asset is the spirit to win and the courage to work, for each of us is control of their own destiny.
Quality is necessary
The satisfaction of a job well done and the pride that comes with it is something we earn, it is something that is given to us, in addition of the money, from the consumer of our services and goods. It is an essential part of our well being. Life is not all about looking at a balance sheet at the end of the quarter and seeing it in the black. It is also about looking at our services and goods and saying they have helped society.
Religious satisfaction comes to a person whose religious or spiritual values, tells them that I have contributed to society. Many of us at one time or another have put our well being before that of our neighbor, but it should not be done when we bring harm to our neighbor. To help us in our daily decisions we must continually seek the guidance of our religious leaders, teachers and counselors.
Competition is Necessary
The businessperson constantly pays attention to the details of the market place and adapts to a changing environment. He is constantly watchful of his costs, continually shaving away at them. He is trying to get the best value for his goods or services, because this person knows their competitor is doing the same thing. They are all trying to get the consumers dollar.
Even though the U.S. industry was playing on an unbalanced playing field it still managed to produce the highest productivity rate of any Industrial Nation. When the playing field is again balanced you will see substantial economical and productive gains. Historically investing in American Industry has brought the greatest returns for the investor. Even thought there have been a few unscrupulous losers, these have been an insignificant few, and I would put my trust in the American Industry. In this republic the only enduring qualities worthwhile are the spiritual, mental and physical health of its citizens, which is entrusted to each citizen.
For although we have been successful in the past, and cannot forecast the future, we know there are greater things in life than just our material blessings, and that is why on each symbol of our wealth, the dollar, it is inscribed with, In God We Trust.
In youth we should invest in ourselves for the best return. In our mature years we should in our community and our savings. We invest our money in the hope that we will make money on our money, and that the money we make on our money will make more money until we are wealthy. We also invest in our educational system; this is our gift to the next generation, for this is where our future leaders will come from.
Great ideals and principles do not live from generation to generation just because they are right, nor even because they have been carefully legislated. Ideas and Principles continue from generation to generation only when they are built into the hearts of the children as they grow up. When actions are forced upon us, our spirit rebels. Only a hearth that is left open can hear the truth.
Our life reflects the doctrines by which we live by. Our wealth is the spirit of our people, its symbol is the dollar and on every dollar is a prayer, so that we may not lose our way, In God we trust.
Our country*s strength is that we protect every person*s religious beliefs and impose none. We do not have a single law imposing any religious beliefs.
Our citizens are protected when government protects our institutions and our schools where our hearts and minds are shaped. These must not be interfered with. For in the end there is always a price to be paid. Attend your house of worship on your day of worship, but what is the use; if at the very center of life a person defrauds their neighbor, or takes away a right of another, they insult their god. You have a duty to your god to live up to your faith. While a just government protects all in their religious rites, true religion affords government its surest support.
What This Means
If we have no faith in the principles with which we build life we are defeated. Our forefathers left us a beautiful plan that we can build upon.
Common sense dictates that industry must operate for the good of the family, the community and for society. America can continue to be the source of emotional and moral strength for the world on one condition. That condition is that this nation stays prosperous, progressive, civilized; that our program of justice moves progressively forward; that we continue that we continue to reduce the area*s of injustice within our borders. The great challenge of the century is to find ways and means of extending a practical program of justice to the farthest reaches of the world.
Economic freedom means political freedom, political freedom means religious freedom, it is important neither one controls the other. When you start accepting money from the other, no matter how benevolent the intention is at the beginning, there will always be a price to be paid. Power is built up only to fall, unless it rests on the one solid basis, that basis is the spirit of the country.
Topics of Discussion
Damages have been done, the guilt lies in the system, retribution has to be made or it will be a mockery of our laws.
Years of abuse have led to incalculable damage; it is beyond my capabilities of estimating.
The Industry violated many laws and it will have to hold themselves accountable for them. But For the most part I do not believe the great majority of individuals had any intent of breaking the laws. There are a few individuals who are guilty of violating the law, who had intent, and should be brought to justice. This will take years of investigation and will be the responsibility of our law enforcement and Justice System
Retribution Recommendation To Congress
No institution will be closed; No Business will be closed; No Person will lose their job.
These are the individuals who were entrusted with checking on the organizations.
What This Means
The National referendum for a Medicare Health Program will be continued.
This also means the Health Industry will be put back into a fully competitive situation and hopefully its relationship and balance with other industries will be re-established. All consumers will be treated the same and the Government will exert limited interference and control.
Payment of Services To System Analysis Team
The System analysis team performed an economic service and should be compensated for its value; a penny saved is a penny earned. I fully believe the laborer is worth wage for what he produces.
Trillion Dollars save for correcting GDP and CPI Indexes.
Correcting the cost-shifting scheme of Medicare Part B, Hospital Outpatient Services, along with many others.
Saving the Economy and Freedom and restoring competition in Health Industry.
Real Life for America
Each individual should ask what benefit they got out of work for themselves or their business. A small portion should be paid. But this money should only be paid from your abundance not from your need.
Win fall reward for finding Tax violators
If taxes are collected the person reporting the violation is entitled to a ten percent reward. In the name of the Meidinger family and the People of the United States this money is to be turned over to a non-sectarian humane organization for the free treatment of The Worldwide epidemic of Aids. To be used for the purchase of medicine, watches, and condoms, and the investment in research for a cure. This money will come from the Health Industry and be used to fight decease. Our neighbors are dying and they need our help.
What This Report Means
To my nation I wish good health and prosperity.