District of Columbia, United States Jun 5, 2019 (Issuewire.com) - The D.C. Circuit Appeals Court, case No. 19-1021, has affirmed the Tax Court's ruling in the case of Meidinger versus Commissioner of Internal Revenue (CIR) by making a false claim. Meidinger is suing the CIR for a breach of contract, of an IRS Whistleblower claim, for not doing any investigations or proper audits of the healthcare industry or collecting any taxes on the kickbacks prevalent in the healthcare industry.
But the Courts have falsely changed claim and now say the Whistleblower is suing for an award of $2.7 trillion, that is 30% of the $9.0 trillion tax revenues the IRS should collect. The change filed by the courts is so ridiculous and it is illegal. A Whistleblower would not sue for a reward when no taxes have been collected. Any person who is familiar with the IRS Whistleblower law knows you cannot get an award unless the IRS receives tax revenues. A knowledgeable Whistleblower would not waste their time or the Court's time with such a stupid case.
Where would a $9.0 trillion tax shortfall come from? The healthcare Industry’s revenues are approximately $3.5 trillion dollars. in actual revenue paid and collected (see methodologies used to calculate Gross Domestic Product). The private-pay insured members make up 70 per cent of the patients. The providers cancel about 85percent of the patients’ debts owed by the insurance companies. This means 85 per cent of insured private-pay billed revenue for tax purposes is not being reported. The tax laws have a statute of limitations of six years. Please do the math.
The IRS Whistleblower claim is simple and straight forward. The healthcare providers bill all private-pay patients the same amount for the same medical services. The amount listed on the bill is the debt owed by the patient to the provider, and it is the amount that is included in determining the provider's gross income. When the private-pay patient is insured, the debt is transferred to the insurance company. If you have ever seen an Explanation of Benefits form (EOB) from the insurance company, it shows the patient's billed amount, the actual debt owed by the insurance company to the provider. The insurance company does not pay the full patient's billed amount, the debt owed to the provider. The difference is a partial cancellation of debt that is taxable income to the insurance company.
The industry would like people to believe this is a discount, but if it were a discount it would have to be listed on the patient's bill, then a lower net amount would be recorded, and there would be no difference between billed amount and amount actually paid. This is a false belief because of the new patient’s contract or bill supersedes any prior agreements.
This methodology failed to recognize the Uniform Commercial Code(UCC) Parole Evidence Rule, that the implied patient’s contract, either of in-fact or in-law superseded any previous contract between the provider and the insurance company. As to the amount listed 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. B.F. Goodrich v. Brooks (Fla App) 113 So 2d 593; Bailey v. Lankford, 54 Okla 692, 154, P671 Annotation: 20 ALR 469, s. 54 ALR 702, 105 ALR 1358: therefore, the billed amount listed on the patient’s bill is the amount that must be used for determining realized taxable income.
Don't get hung up on the co-payment listed on the EOB, this is not a medical expense, it is an amount the insured patient owes the insurance company that the provider collects for the insurance company. The co-payment is included in the approved amount the insurance company pays. This is the only amount the patient pays, and it makes the individual feels so happy he or she does not have to pay the full amount billed. He or She does not realize how much his or her employer has to pay in premiums and probably does not care. The employer does not understand the premiums are calculated on the amount billed and not the actual amount paid. The employee does not realize the high premiums paid by the employer are taken from the employees’ wages.
This use of the standard charges on all private-pay patients’ bills is used by the Centers for Medicare/Medicaid Services (CMS) to determine the reimbursement rates paid for the Beneficiaries’ medical services and the amounts allocated to the States Medicaid Programs. This is the primary reason the federal governments' healthcare expenditures are so high.
Healthcare providers are not generous individuals, consider the fact that over a million people a year have to file for bankruptcy a year because they can't pay their medical bills. What is most surprising is the fact the majority of these bankruptcies come from insured patients that cannot cover the shortfalls of their medical insurance. The reason the providers give the partial cancellation of debt to the insurance company is so the insurance company would list them as being on-network. It guaranteeing the insured member a lower co-payment then by going to an off-network provider, thereby steering the insured member to the provider.
The payment to the insurance company is for steering the covered member to the provider and is a kickback. The fact the tax laws (26 USC § 162(C)(2)) state the provider has to pay the same taxes on the cancelled debt as the insurance companies have not dissuaded these kickbacks because the IRS does not enforce the tax law on kickbacks. There are no exceptions to this law, it even applies to not-for-profit hospitals.
Meidinger claims that neither the provider or insurance companies pay any taxes on these kickbacks. So why isn't the IRS collecting these taxes? The answer is there is a second group of patients where the providers are allowed to write off the difference of what the provider bills and what the provider actually collects, this group is the beneficiaries of the Medicare/Medicaid programs. Congress or the states determine what is paid to the providers, but instead of listing on the beneficiaries’ bills what is actually paid the Medicare/Medicaid law requires the providers to list the same standard charges as charged to the private-pay patients. The difference between billed and actually collected is listed in a contra adjustment account, titled contract adjustment. The amount listed in this account is then subtracted from the total gross income to determine the adjusted income. This adjustment is utilized for financial reporting and income tax purposes, the IRS calls this procedure net realizable value (NRV), that only recognizes actual revenues collected from government programs.
The IRS made the assumption that since the billing methods of the insured patients resembled the beneficiaries billing methods of the government programs, there was no tax issue on the kickbacks. Since the kickbacks were not being taxed, the insurance companies continually demanded more substantial and larger payments from the providers, therefore the providers needed to raise their charges to cover the kickback expense, and added a little bit extra for themselves. The continual raising of the medical fees to cover the kickbacks is why our nation's healthcare costs are so high.
The IRS knew this illegal accounting practice was happening and issued an industry directive to its auditors to check the contracts between the providers and insurance companies to make sure they were for a legal purpose, but failed to educate their auditors in contract law. The IRS auditors never looked at the contracts. The Healthcare industry also claimed these contracts were trade secrets, therefore unavailable to anyone.
The Industry Director Directive on Contractual Allowance Issues in the Healthcare Industry, LMSB Control No.: LMSB-04-0807-056 Impacted IRM 4.51.2. The directive made it mandatory that the auditors examine the providers’ contracts when the providers used the contract adjustment account, to stop its misuse. “The computation of contractual allowances for book purposes follows generally accepted accounting principles (GAAP) and utilizes the concept of net realizable value (NRV). Contractual allowances determined for book purposes often do not provide a proper determination of taxable income.” (Emphasis added)
The write off of the kickbacks cannot be used if;
- the patient’s contract says they are liable for the full payment of the billed amount,
- the insurance companies contract assumes full responsibility of the insured members' bill,
- the insurance companies’ contract is for an illegal purpose and unenforceable.
(Note: All of the above are present on the private side of the healthcare business; it is a fact the HMO law requires the insurance companies to pay all the insured members medical bills.)
This process of partial cancellation of a patient's debt started in 1982, with the introduction of the Medicare Prospective Payment System. Before the new payment system was introduced, there was no partial cancellation of debt given to the insurance companies and no kickbacks. The IRS will not do any audits of the healthcare industry because it would have to admit it made a mistake. The executive branch will not admit this is happening, so it assigned the Department of Justice to fight this case. The only way it is really going to be settled is for people to ask Congress to find out why no taxes are being collected on the illegal kickbacks in the healthcare industry.
It is a fact the Chief Tax Court Judge appointed a special judge solely to dismiss the CIR's motion to dismiss the tax court case, but the special judge did just the opposite. The special judge said I cannot bring my case to tax court unless the IRS has done an investigation. The special judge said a Whistleblower cannot make a claim unless the IRS does a judicial or administrative investigation of the identified taxpayer. The IRS Whistleblower Office refuses to do any investigation.
Meidinger filed a case on the grounds the IRS breached its contract with the Whistleblower. The Supreme Court has stated that when an agency offers an award for information and the Whistleblower accepts the offer and provides information a contract is made. The IRS Whistleblower Office has procedures to reject any claim that is not plausible, sending the rejection immediately. In this case, the IRS Whistleblower Office accepted the information and set up administrative files on all the identified taxpayers and then issued claim numbers for each taxpayer. Then the IRS Whistleblower Office refused to do any investigations, breaching their mandated responsibility to enforce our tax laws and collect taxes.
The Appeals Court did not even affirm the special judge's order or any legal arguments presented but changed my claim to say I was suing for an award and that I was not entitled to an award because the IRS did not collect any taxes. I have now filed a motion for a rehearing by the D.C. Circuit Appeals Court and have included the Chief Judges Order. I pray to God someone will intervene with the Appeals Court and make them do their job, rule with justice and support the Chief Tax Court judge’s order.
See the attached motion for a rehearing; the motion contains the Tax Court Chief’s motion:
Media Contact
Saving the World RoyJMeidinger@comcast.net 954-790-9407 14893 American Eagle Ct.
