A bill is being considered in the House of Representative that would once again encroach on our Constitutional rights. 


What is it?


The bill itself is innocuous enough.   It is the Medicare reimbursement bill, which is being called up on Capitol Hill, the “Doc fix bill.”  The part of the bill that is encroaching on our Constitutional rights is what some in the Congress want to
add to the bill. 


Federal Tort Reform. 


Tort Reform is being pushed by the American Medical Association and the insurance industry.   The AMA has no interest in protecting the Constitutional rights of Americans. 
They want to protect Doctors.   The AMA was also a prime supporter of Obamacare, so
their track record of good ideas is not that great.


The insurance industry along with the Doctors have destroyed the free market in the health care sector of the economy. 


Why does health care cost so much?  It is not the medical malpractice lawsuits as the big insurance companies would have you believe.  It is because there is no competition.


Doctors now set their prices based on what the insurance companies will pay.  But, we the public don’t even know what the cost is. 
All we know is we pay a $25 co-pay and we have a deductable and that is


Doctors have no incentive to compete because their prices are controlled by the insurance industry. 


Now, the same people who managed to destroy the free market for healthcare and drive up costs of healthcare now want to destroy another part of the free market.


As I have mentioned in previous blogs, the free market is wonderful.  It encourages good behavior and punishes bad behavior.  
The civil court system is a part of the free market.  It is the part that punishes bad


Federal Tort reform is a really bad idea.  First, this is an issue that belongs to the States under the 10th Amendment.  Second, this is a direct challenge to the 7th Amendment right to a civil jury trial.


Conservative scholars like Randy Barnett and other great Americans like Virginia Attorney General Ken Cuccinelli have not only called it unconstitutional but threatened litigation if Federal Tort Reform ever becomes


I have this morning sent a letter to John Boehner and Eric Cantor, asking them to make certain that Federal Tort Reform is not included in the “Doc fix bill.” 


This is one issue that is not as dramatic or as sexy as some of the other issues we have fought but it is just as important.  I encourage you call your Congressman and ask them to oppose Federal Tort Reform.


Here is the letter I have sent to John Boehner and Eric Cantor 


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Look closely at your next medical statement. Note that the amount that the insurance company paid is always far below what the doctor billed. But the doctor usually accepts the insurance payment as payment in full. Now, why would they do this?

It is so that they can write the difference off as bad debt and pay no income tax on what they did get paid.

Is there a doctor in the house?

Tell, me that this is not true!

Why is it OK for the govt. to "price fix" but when it happens in the private sector it's called "collusion" and subject to civil penalties?  We need to get the govt. out of the healthcare business and allow the private sector to fix pricing ala the free market. 

right on max. in medicare the government sets the price that the federal government pays to doctors and hospitals whether they like it or not and usually it far below what the same procedures are charged to private insurance. with all this the government is still trillions in the hole.

Absolutely incorrect!  The amount billed is like the "retail price" of many items, which often has little relation to the "street price."  The physician usually has to accept the insurance payment because of his contract with the insurance company.  The difference between amount billed and insurance allowable can NOT be written off as a bad debt.  (And even if it could, that would not preclude payment of income tax on the amount paid.)

You're telling me that losses cannot be written off?  News to me!

So, now medicine has a "street price"?  Do I have to look for the tennis shoes hanging on the power lines?

How is it a loss. If I spend an hour on something but I only get paid $800 instead of the $1,000 that I wanted? I still made $800.

You didn't get the other $200 that your medical degree and your invoice say you earned!

You are wrong, Jeff.  The only way a bad debt can be deducted from income is if the FULL amount had already been declared as income, which is typical of the accrual system of Generally Acceped Accounting Principles.  If the doctor booked $1,000 of income when he performed the procedure, but only received $800, he can "write off" the $200 to reflect the actual receipt.  It does not in any way reduce the tax paid on the $800. In come is declared when earned rather than when actually received in order to better match procedures and profit when examining the financial statements of the practice.


The actual reason for the higher billed amount is the fact that most insurance plans pay a percentage.  The doctor overbills by that amount, then forgives the rest in order to "bury" the deductible for the patient.  In this way patients come back for more frequent treatment since they don't actually have to pay anything.  This also drives the cost of insurance up.

Who's to say that doctors are not billing the insurance companies for the full amounts?  Do you work with either one?  Do you have insider information?

All an engineer has to do is list it in his books as the full amount, and bill the client for the full amount. In this case the client would be the insurance company. Why would the itemized statement even include the full amount if the doctor did not bill them for it? What purpose would it serve except to cook the books?

Jeff, pay attention.  The doctor bills the insurance company the full amount...that is what I said!  They inflate the amount billed, the insurance company pays their percentage, which is the amount the doctor wanted in the first place.  He "writes off" the percentage not paid by the insurance company, which is SUPPOSED to be the deductible paid by the patient.  The doctor does this to make it "free" to the patient so that they will come back more often and increase his practice at our expense.


When I started my medical practice (in the 1970's) most insurance was based on reimbursing the patient the "usual and customary rate" for medical services.  The doctor charged $50, the patient paid $50 and got reimbursed the UCR, generally about 80%.  Patients cared about what a service cost, because they paid the bill (even if it was mostly reimbursed.)  Physicians couldn't set fees too high, or they'd lose patients to a lower-cost provider.

As a professional courtesy, or in a case of hardship (charity) the doctor might TWIP  ("take what insurance pays"), accepting the insurance payment as full payment.  But he could not lower the fee to that amount, because the "usual and customary rate" was based on the stated fee.

By the time I retired from medical practice, nearly all the "health insurance" was in the form of HMO's and PPO's, and they (like Medicare) send the physician a printout each November stating (without negotiation) what they will pay for each service or procedure.

Therein lies a large part of the problem with escalating medical costs:  The 'client' is the insurance company, not the patient, and the patient often has no skin in the game (beyond a $5 or $10 copay.)

I don't know how engineers handle accounting, but I've never heard of any medical practice using the accrual method of accounting.  If I billed $100 and got paid $80, there's no write-off of the $20 and it does not count as a loss.  And it certainly does nothing to reduce the tax liability on the $80 received.

This was my point exactly, Doctor.  The uncollected amount does not in any way reduce taxes on the collected amount.  I don't know what Jeff was talking about.  You did not, however, address the fact that doctors bill the insurance company a higher amount and then forgives the balance so that the patient does not pay the deductible.  A very good friend of mine admitted that she did this.  This leads to oeveruse.  The "open Bar" mentality.  If it's free, they take more.


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