ACA wasn't supposed to have this happen

[pb4uski]

When revenue is recognized there would be a corresponding charge for any amounts expected to not be collectible - usually based on historical experience - (or for returns in a retail setting) so in most cases the effect on earnings of the "sale" would be the amount of cash expected to be collected for the services provided during the period. Differences between what is estimated to be uncollectible and the ultimate uncollectible amounts would flow through to earnings as a change in estimate as better information on collectability becomes available.

 

[2B]

GAAP used to allow for "cash received" as the way to report income but it is very difficult to use in a larger business. Sending an invoice and setting it as the "income" is much easier and then uncollected debt is downgraded periodically to reduce net income.

As for the original post not accepting "exchange policies," that doesn't make sense. More information would be needed. I suggest asking them about specific plans they are on. It may be that they are backing out of most plans.

Even under the most optimistic of assumptions, the ACA exchanges will provide a relatively small percentage of insurance policies. The largest provider of plans will remain the corporate sector. Here the impact is the new "essential coverages" that have been added.

The biggest problem I see with the exchange plans is that they will still require a significant deductible and copays. In the case of a cancer treatment the deductible will probably be eaten up almost immediately. I have received a letter from my current primary care doctor that payment is expected at the time of service and it sounds like they are switching to a "before" mode rather than collecting on the way out.

 

[Gatordoc50]

When revenue is recognized there would be a corresponding charge for any amounts expected to not be collectible - usually based on historical experience - (or for returns in a retail setting) so in most cases the effect on earnings of the "sale" would be the amount of cash expected to be collected for the services provided during the period. Differences between what is estimated to be uncollectible and the ultimate uncollectible amounts would flow through to earnings as a change in estimate as better information on collectability becomes available.

The timing of declaration of income may be different per accounting. No disagreement there. The inference was made that an uncollected debt could be used to reduce other income unrelated to the debt. In other words, if I had a million in income I could simply charge a million bucks for my next exam and write that bad debt against the original million. Therefore, padded bills become a means to evade taxation. That is just nonsense.

 

[pb4uski]

The timing of declaration of income may be different per accounting. No disagreement there. The inference was made that an uncollected debt could be used to reduce other income unrelated to the debt. In other words, if I had a million in income I could simply charge a million bucks for my next exam and write that bad debt against the original million. Therefore, padded bills become a means to evade taxation. That is just nonsense.

+1

 

[pb4uski]

GAAP used to allow for "cash received" as the way to report income but it is very difficult to use in a larger business. Sending an invoice and setting it as the "income" is much easier and then uncollected debt is downgraded periodically to reduce net income.....

I guess I wanted to be clear that the process of recording sales and of recording estimated uncollectibles are typically separate. Each sale results in income and a receivable. Then a separate process of estimating uncollectible amounts occurs that results in an expense and an allowance for uncollectible accounts which reduces receivables to the amount ultimately expected to be collected. However, since both processes happen in the same accounting period the net effect is as if the estimated uncollectible is recorded when the sale is recorded.

GAAP has never really allowed for cash received as income (at least not in the last 40 years) since cash basis is not GAAP but rather is an OCBOA (other comprehensive basis of accounting).

 

[MichaelB]

I guess I wanted to be clear that the process of recording sales and of recording estimated uncollectibles are typically separate. Each sale results in income and a receivable. Then a separate process of estimating uncollectible amounts occurs that results in an expense and an allowance for uncollectible accounts which reduces receivables to the amount ultimately expected to be collected. However, since both processes happen in the same accounting period the net effect is as if the estimated uncollectible is recorded when the sale is recorded.

Right. That means the revenue being discussed needs to meet two different accounting standards. First, it must be deemed revenue that is entirely collectable based on past billing experience. Then, when it moves to the balance sheet, the entire amount must be deemed collectable based on past collections experience. In either case not meeting the accounting (GAAP) standard would lead to misrepresentation of the financial statements.

 

[Texas Proud]

Not arguing and I know you have a banking/finance background but I am curious in the example I gave.

Hospital list price is $250,000
Insurance company customary reimbursement payments would $50,000
the poor uninsured person ultimately agreed to pay $25,000 over 5 year.

How much did the country spend on health care in this hypothetical?

Under this example, $25K...

Bad debts and discounts are a reduction of income and not an expense... IOW, the $250K might show up somewhere, but at the bottom of income only the $25K is left...

 

[Gatordoc50]

Since there are set reimbursement rates for each procedure there isn't any advantage to charging in excess of the stated rate. Any overcharge is useless which means there isn't such a thing as a " padded " bill. Those without insurance may pay higher fees but that isn't padding either. The only way for providers to milk the system would be by performing unnecessary procedures. But there are safeguards to prevent this with treatment ore-approvals and consumerism. Consumerism is enhanced with high company's and deductibles.

 

[Gatordoc50]

Since there are set reimbursement rates for each procedure there isn't any advantage to charging in excess of the stated rate. Any overcharge is useless which means there isn't such a thing as a " padded " bill. Those without insurance may pay higher fees but that isn't padding either. The only way for providers to milk the system would be by performing unnecessary procedures. But there are safeguards to prevent this with treatment ore-approvals and consumerism. Consumerism is enhanced with high company's and deductibles.

High copays.

 

[2B]

Consumerism is enhanced with high company's and deductibles.

Most people are not knowledgeable enough to question their doctor and the few that are generally won't. I suspect that people that can't afford the high deductibles and copays will decline services. Many of which will be needed.

I personally have a high deductible plan but I'm more interested in the PPO pricing for the medical costs. I'm amazed what the "list price" is for many of the procedures and office visits. It seems that a doctor or hospital should be happy to give people the most favorable prices up front if the person is paying at the time of service.

DW and I met our deductible this year for the first time in whenever. We did have his and hers colonoscopies which definitely pushed us to the limits.

 

[Gatordoc50]

Most people are not knowledgeable enough to question their doctor and the few that are generally won't. I suspect that people that can't afford the high deductibles and copays will decline services. Many of which will be needed.

I personally have a high deductible plan but I'm more interested in the PPO pricing for the medical costs. I'm amazed what the "list price" is for many of the procedures and office visits. It seems that a doctor or hospital should be happy to give people the most favorable prices up front if the person is paying at the time of service.

DW and I met our deductible this year for the first time in whenever. We did have his and hers colonoscopies which definitely pushed us to the limits.

+1
There hasn't been much talk yet of patients rejecting treatment due to high deductibles. But I believe that it's going to be significant. I think we all assumed that the ACA was somewhat thought out prior to passage. Whether you're for it or against it, it's definitely a total wing job.

 

[2B]

+1
There hasn't been much talk yet of patients rejecting treatment due to high deductibles. But I believe that it's going to be significant. I think we all assumed that the ACA was somewhat thought out prior to passage. Whether you're for it or against it, it's definitely a total wing job.

It's not that I'm not for the concept of the ACA. I have always been concerned by what I have seen as the obvious (to me anyway) "unintended consequences" that are now being revealed.

 

[killingme]

Please, an explanation or snippet so members know what the link leads to.

Apologies, thought the link title was fairly self explanatory.

 

[whitestick]

After reading a lot of the comments, I had calmed down a bit on the doctor thing, THEN, went to another doctor - a General Practitioner who told me the same thing, and even added some more. This one said something to the effect that the new exchange stuff was about a large check being written to cover the health care, and that the doctors and hospitals were fighting about who controlled that check, and which one was going to be doing the distribution to the others. Apparently the doctors thought they were losing, so they have decided to not participate in the exchange insurance deal. She was pretty adamant about it, and said she had already elected not to participate. Now I'm worried again. Seems there is more to this story then has been told, just like the lie about "You can keep your present insurance". Just saying that IF this is true, and IF it continues, the ACA may prove to affordable, cause there are only a few, presumably cheap doctors willing to take it, and we all know what will happen with huge demand and few suppliers - Canada style of insurance where you wait for years to get procedures done.

 

[NW-Bound]

When looking at whether profits are excessive (or not) you really need to look at returns rather than absolute numbers. Laymen and politicians often seem outraged that a company or industry makes billions but totally fail to consider the investments that need to be made to generate those earnings...

At a past megacorp, there was a lot of email circulating within the group regarding politics, just as happened elsewhere I am sure. There was a fellow who was indignant at the billions of profit that Exxon Mobil made. Though I was no advocate of XOM, I had to point out that that profit was made on a huge sale of X billions, and that XOM was a huge company with Y employees. I suggested that he also looked at a well-known high-tech company to see its higher profit margin and also the higher revenue number per employee. Why should he not express indignation at the high cost of the software products of this company?

Well, if a PhD in engineering could make that mistake, what can we expect from a common man in the street?