Fort Myers, Florida Sep 25, 2025  – Hidden Healthcare Kickbacks: How Providers and Insurers Cheat Taxes, Raise Costs, and Restrict Trade

Americans are encouraged to take action – to uncover illicit billing practices and demand accountability.

The U.S. healthcare system, already the world’s most expensive, is plagued by a covert arrangement between medical providers and insurance companies that potentially amounts to widespread tax evasion. This issue centers on the concept of a “negotiated fee,” a deceptive term that conceals a system of illegal payments. In reality, insurers do not determine the cost of medical services; the provider sets the price, and the patient legally consents to this price upon being billed. This scheme defrauds taxpayers, exploits patients, compromises national integrity, and guarantees a continuous increase in healthcare expenses.

Cash vs. Accrual Accounting

There are two primary accounting methods:
– **Cash Method**: Revenue is recorded only when money is physically received, and expenses are noted when they are paid.
– **Accrual Method**: Revenue is recorded when it is earned (e.g., when a bill is issued), and expenses are recorded when they occur, even if no cash has exchanged hands. For federal income tax purposes, the Supreme Court has ruled that the amount stated on patients’ (customers’) bills is the figure recognized for income tax reporting.

By law, for tax and Social Security purposes, healthcare providers and insurance companies are mandated to use the accrual method. This means the total amount billed should be reported as income at the time the bill is issued, not just the reduced payment received later.

Physicians and hospitals typically do not offer discounts. Every patient is invoiced for the full standard charge, and these invoices legally represent income. According to law, providers and insurance companies must adhere to the accrual method of accounting, which mandates reporting the complete billed sum as income. However, many providers and insurers operate as if using the cash method, only accounting for the lesser payments actually collected or disbursed.

Insurance companies worsen this situation by remitting less than the invoiced amount, categorizing the discrepancy as an “adjustment.” This constitutes canceled or forgiven debt. Under the accrual method, forgiven debt is considered income and must be reported, just like cash receipts. Tax legislation is explicit: for a debt to be forgiven, a valid debt must first exist. In this context, the patient’s bill establishes the debt, which then transfers to the insurance company and is expected to be paid in full. When a portion of that debt is “adjusted” away, it becomes forgiven debt that must be declared as income.

Both parties benefit. Providers lower their tax obligations by concealing income, while insurers leverage the higher billed amounts—rather than the reduced payments—to justify raising customer premiums. This arrangement also violates legal statutes: U.S. law forbids providers from compensating any individual or entity for directing patients to them, and such payments are taxable even if the provider operates as a not-for-profit organization.

Because patient invoices are protected by HIPAA and provider-insurer contracts are kept confidential as “trade secrets,” neither the IRS nor the public can discern the disparity between what was billed and what was collected. This lack of transparency keeps society and law enforcement uninformed, enabling kickbacks to flourish and the scheme to persist undetected, despite each patient being one of thousands affected.

Mechanism of the Kickback Scheme

• Insurance companies select providers who agree to the largest ‘write-offs’ on patients’ bills.
  2. The provider issues an invoice for the full legal charge, creating a financial obligation for the patient.
  3. The insurer pays less than the total amount, camouflaging the deficit as a ‘contractual adjustment.’
  4. Both the provider and the insurer report only the reduced payment to the IRS, rather than the complete legal income.

  Simultaneously, insurers pass on the medical costs they actually pay but utilize the inflated billed amounts when negotiating premium rates. This means patients and employers bear higher premiums, while insurers and providers covertly share the advantage of undisclosed write-offs.

Actions Every American Can Take

If your medical invoice or Explanation of Benefits (EOB) shows an ‘adjustment’ or a reduced payment, you possess potential evidence of a tax infraction. Remember, you might be just one patient among many, and each report contributes to building a stronger case. Submitting a report is confidential. The IRS will review the submitted documents and determine if an audit is necessary. The more reports they receive, the greater the likelihood of the industry facing comprehensive audits.

Here’s how you can proceed:

• **Contact Your Local IRS Office** — Request a Criminal Investigation Agent and provide copies of your bill or EOB.
• **Report Tax Evasion via IRS Form 3949-A** — Available at www.IRS.gov. Mail the completed form and supporting documents to:
  Internal Revenue Service
  Fresno, CA 93888-0025
• **File IRS Form 211 (Whistleblower Award Claim)** — Available at — List both the provider and the insurance company, attach relevant documents, and send to:
  Internal Revenue Service
  Whistleblower Office – ICE
  1973 N. Rulon White Blvd.
  M/S 4110
  Ogden, UT 84404

Note: Form 211 requires signature under penalty of perjury. Only submit information you genuinely believe to be evidence. All documents sent to the IRS are confidential, and your identity is safeguarded; your name will not be disclosed.

Significance of This Issue

The IRS is the sole federal agency equipped with the expertise to investigate this nationwide scheme. If left unchecked, billions of dollars in taxable revenue will remain unreported, shifting a greater tax burden onto average Americans. The illicit kickback arrangement—where providers compensate insurance companies for patient referrals—constitutes a restriction of trade that stifles competition and inflates healthcare costs. Uncovering and halting this practice is crucial for restoring fairness, accountability, and integrity within both our healthcare and tax systems.

Appeal to the Press and the Public

The media has a responsibility to highlight this issue, but lasting transformation depends on citizen engagement. Every American plays a vital role in dismantling the control that providers and insurance companies exert over our healthcare system. Begin by examining your medical bills and Explanation of Benefits (EOB) forms. If you notice “adjustments” or reduced payments, make copies—they could be evidence of misconduct. Share this information, report it to the IRS, and speak out to ensure others grasp what is occurring. Only through public awareness, reporting, and collective action can this scheme be exposed and brought to an end. This system cannot be rectified without your assistance.