I have what seems am odd tax question
 

I had an experience in the past when someone screwed me out of some money, and there was really no way I could collect the money, even if I got a judgment against them. I ended up sending them a 1099, based on the idea that in effect I had "paid" them the dough. I don't really know how it turned out in the end for them, but heard second hand that this was the beginning of a lot of tax troubles for them. I was not the first person to have bad dealings with this party.

Now for the question.

My office manager just wrote off a BUNCH of billing for Medi-Cal, the California version of Medicaid, for patients that have it as a secondary insurance. This cannot be written off as a business loss. Question is, what would be the effect of my sending a 1099 to the state for the amount written off? It is a service I provided that they did not pay for. In the same situation with an individual, that is income to the person that got the "free" services. I realize the state does not pay taxes, so income does not impact them that way, but what would happen?

PM sent w/ some personal information

I don't see how the 1099 has any purpose. you aren't picking up the income regardless.

This doesn't answer your legal question anymore than your imagination could do, but here's a moral-ethical thought: These people are on Medi-Cal. They're living subsistence lifestyles. They may not have been right to stiff you their bills, but your business doesn't stand much to gain from filing a 1099, and it can only bring further tax problems onto these people. Maybe just leave them alone. Sometimes you/we just all lose.

(A bit fumbled today, sorry this might not make sense.
I have daily computer problems as well)

Are you asking whether to file: 'Actual-time' services, vs. 'book-time' services?

1099 is not unusual for "debt forgiveness" - I've seen them issued to individuals who negotiated credit card debt away. If you sent a 1099 to the state medicaid agency, I think the only thing that would happen is you would spend $.49 on a stamp.

I'm puzzled as to why the debt write off on the business side is not deductible. We're the revenues not taxed when the agency was billed? Perhaps you're a cash basis taxpayer?

OP never got paid, so there was no revenue to tax. He can't write off the debt. It's as if those dollars never existed (particularly in his wallet).

Cash basis never picked it up; accrual write off bad debt.

I am not a CPA, but it seems to me that you could personally write a check to your business (personal loss) to cover the unpaid amount (business loss), then have your company reimburse your expenses (not income), and enjoy the personal tax write off, and business write off for your personal expenses.

Again, I'm not a CPA, don't even pretend to be one, but if you are paid by your company, I can't see anyone working for the government being smart enough to figure it out.;)

Against (offsetting) revenue recognized in prior period.

I write off the bad debt, but it does not give me any tax benefit at all in doing so.

I am not talking about a 1099 to the people who received the service for free. My contract does not allow me to bill them, or anyone else for services their insurance failed to pay for. That is balance billing and is illegal.

I am talking about sending it to the state, whether California or the Feds. They are the "responsible" party, financially anyway. I know the state does not pay taxes, but they are getting "income" from me in the form of services that they will not pay for at all, let alone pay the "going rate"

Why did they not pay?

Short answer, because they can get away with it.

There are number of reasons though.

Podiatrists are excluded from Medi-Cal as providers, but the services I provide are covered if done by an MD. I still think the state association should have filed a class action suit for that 5 years ago, when these shenanigans were first pulled, but that is neither here nor there. This does not release me from my responsibility to see those patients if they turn up in the ER and I am on call.

Another way this happens is if Medi-Cal is a secondary insurance. For example, it used to be that if someone had medicare and medi-cal as a secondary insurance, medicare would pay 80% of allowed charges and medi-cal would pick up the remaining 20% of the discounted fee. They would still pay me in that situation, I believe because it would violate federal law if they did not, but I am not sure why they would pay if secondary. They have done a few things in the last few years that have resulted in that 20% never getting paid. Generally the reason given for this was that the 80% that I got from Medicare was more than they allowed, so we are not paying our end. I believe this has something to do with them lowering their fee schedule so it is the lowest reimbursement for any Medicaid program in the country.

This usually is not more than a hundred dollars per patient, depending on the service provided, but it adds up. You do a couple a week, and it turns into a grand by the end of the month. I don't mind doing free stuff for individuals, but doing free stuff for the state is too much.

So regardless of what you do, they will hang their hat on the "more than they allowed" figure(s).

Your entity got paid by the primary insurer more than the secondary insurance determined is fair in total for the folks that require the subsidies.

Argh!

I think you know the outcome regardless of what you do. (i.e., Assume the position)

didn't a bunch of hospitals go bankrupt because of something like this?

You start 1099ing the state and I can see an audit coming your way. Just leave well enough alone.

Dad has said that very same thing to me on a number of occasions. I know that is the answer, just like to vent a bit. I know with absolute certainty that it is going to get worse is the thing.

I still think we should have filed a class action suit on them five years ago. Would have been a slam dunk. We don't want to make them look bad


Effing babies I am running with, I tell you what. I guess it is like it has been so often in the past, go along to get along.

It's not just the state/MediCal that's screwing you. I found out today that non-govt insurers are underpaying me. I do a lot of worker's comp. As you know, to be "recognized" as a provider by an insurance company (private or WC) you have to be on their MPN (Medical Provider Network). Most if not all WC insurers require you to be on Blue Cross before they will allow you into their WC MPN. For WC in CA, there is an official fee schedule (OMFS). The WC insurers are supposed to pay based upon that fee schedule. This past January, there was actually an increase (!) in reimbursement for things like hand and foot in the OMFS (though there was a general decrease for most other types of procedures). I thought that would be a good thing for me.

But in talking to my billing staff today, I have realized that this year the WC insurers have started paying me based upon Blue Cross rates...because they rationalize that I am a Blue Cross provider. This is not a mistake on their part. They are selecting the lower fee schedule (Blue Cross) for their payments. So despite the supposed increase in the WC fee schedule that I thought I'd realize, I'm actually making less this year than last. Conveniently for them, last year they paid the WC fee schedule, as it reimbursed less than Blue Cross.

And this year, rolled into the sweeping reimbursement changes in WC, is another new gem: all appeals must be filed within 90 days, or else the statute of limitations expires. So my billing staff has to be very on-the-ball to review every single payment that comes in (in a timely fashion) and to see if it's been paid on the proper WC fee schedule, or based upon Blue Cross rates. Very sneaky on the insurance companies, huh? We're planning on renegotiating our contract with Blue Cross to reword our agreement so close this "loophole" the WC insurers are using.

Remember the Golden Rule: He who holds the gold, makes the rules.

WC? Eff that noise, PITA every single time.

The fee schedule thing, new twist on the "silent PPO" scam.

By virtue of my insurance contracts, they put me on the covered California list as a provider. Since they did it without asking me, I can opt out, and have. It is sort of an all or nothing deal with the covered California plans. Since the vast majority is Medi-Cal, this was sort of a no brainer.

I wonder how many doctors will be forced out of business in the next few years.