Nearly one year after congress passed the Medicare and prescription drug plan, both sides are still debating its supposed benefits, or detriments. Unfortunately, many of the people who will be affected by the Medicare changes still don’t know where to turn.

What follows is an initial analysis of what will happen January 1, 2006.

Our conclusion:

Regardless of whatever else you’re hearing, the Medicare Part “D” prescription drug plan has many loopholes that are harmful to seniors with low to moderate incomes.

The Analysis:

First, you will pay a monthly insurance premium of $35 per month, or $420 for the year.

Secondly, the first $225 you spend will make up your deductible

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It wasn’t too many years ago when the hot trend in the physician world was the purchase of medical practices by hospitals. The theory was that not only would the hospitals benefit by an influx of referrals, the physicians would not have the headache of managing their practice and therefore earn more and work less.

Unfortunately, this rosy scenario has not always worked out and, as a result, many doctors are terminating their contracts with the hospitals. This has forced the physicians to re-establish their practices. For most doctors, maintaining their customer base isn’t a problem, as most patients will follow them back into private practice. The main issue is practice management in general, and financing in particular.

Although the physician may have no trouble getting financing for capital expenditures, a more ongoing problem is how to pay expenses and overhead incurred during the 60 to 90 days it takes to get paid from third party payors. As doctors and other providers are getting financially squeezed because of pressures reduce costs, the need for funding becomes greater. Even the most efficiently run practices need short term working capital as their businesses grow, and as a result of this need, healthcare financing companies have sprung up to provide medical receivables funding.

Even though the largest asset of most providers is their accounts receivable, most banks won’t lend money on that asset. Loan officers often lack the specialized knowledge of the healthcare claim billing and collection process. Because there can be a significant difference between the expected amount to be paid versus the face amount of the billings, banks are leery of using it as collateral. In a medical factoring situation, the funding company purchases the outstanding receivables of the practice, thereby assuming an ownership position in the receivables. Because the ownership of the receivable has changed, the practice also passes along the credit risk to the funding source.

ADVANTAGES OF RECEIVABLES FUNDING

* There is no monthly debt service because the funding is not a loan.

* It is an off-balance sheet transaction since the client is selling an asset.

* The client can receive fresh cash weekly, thus providing a manageable flow of funds.

* Because the only asset that is encumbered is the receivables, the healthcare firm can pursue other types of financing concurrent to this program.

* Factor fees tend to be much less than paying a billing company.

* No personal guarantees are required. The factoring company is more interested in the credit of the payor.

THE FUNDING PROCESS

1. The provider completes a client application and submits it to the funding source along with a due diligence fee. The due diligence fee helps the funding source defray costs of researching and analyzing the practice’s billing methods and procedures and to verify that the net collectible billing is accurately reflected on the firm’s books.

2. The funding source sends out a Letter of Intent, which specifies what can be done for the healthcare provider.

3. After receipt of the signed Letter of Intent, the funding source draws up a Purchase and Sales Contract for the client. This contract specifies the fees to be charged and the advance rate to the provider.

4. The funding source performs final due diligence, and provides reports to the client’s management as to the integrity of the billing and collection system.

5. The factor advances 70%-80% of the net collectible receivables to the client’s bank account.

6. When the invoice is paid to the factor, the remaining amount (invoice total less the advance less the factor fee) is wired to the customer’s account.

The factoring of medical receivables is a relatively new industry, but is also rapidly growing. It can provide much-needed working capital to providers for meeting expenses, making investments and taking advantage of early payment discounts.

Kent Harlan has been a CPA since 1984 and has provided consulting, accounting
and financial services to several industries. He is the owner of Ozarks Capital Funding, LLC,
a Springfield, MO based company offering financing in the areas of accounts receivable factoring,
equipment leasing, asset based lending, and healthcare provider financing.
website: http://www.ocflink.com

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California this week took a bold step. Not into the great unknown mind you, but rather into the great already known. Their Assembly approved yet another experiment to once again show the failures of top down, socialist bureaucracies when it approved a bill that would mandate state issued health insurance for everyone man woman and child in the state. Yes, as though we need another failed social experiment stemming from modern liberalism’s embrace of centralized authority and government control. Sure it could be an excellent lesson for not only the liberals of California but the entire nation as well but not one that is necessary.

These elected officials have shown that history and economics certainly are not their strong suits and that serious attention to these subjects must be added to the curriculum of California schools.

But in a state that already knows the pain that letting people have “free” access to their healthcare system this maneuver is a stunning display of colossal ignorance. Hospitals, in parts of the state, are already under the stress of providing “free” healthcare for innumerable illegal aliens who don’t pay their bills.

And on even a national scale have we not seen what happens when money is confiscated from workers to pay the bills or others? Social Security and Medicare, both of which are on the fast track to insolvency, that were to be glittering gems of the socialist welfare state are perfect lessons. And heck, let’s not forget about Welfare itself which actually needed to be “reformed” in order to start getting slackers off the rolls and is still highly abused.

And let us not forget that such power grabs raise serious Constitutional issues. Two I can think of off the top of my head are the law’s restriction on the freedom to contract (prohibited under Article I, Section 10) and also the prohibition on the restriction of liberty without “due process” (Amendment XIV).

In fact this entire law smacks of a case called Allgeyer v. Louisiana (1897) in which the State of Louisiana attempted to pass a law to restrict whom their citizens could contract with for - you guessed it! Insurance!

That law was struck down.

Here we have another case where the liberty of citizens and their right to contract is clearly being infringed. And there certainly should be a legal case brought against the State for this egregious offense.

Oh, but it gets better. Proponents of the measure claim that covering all Californians would cost no more than it currently costs to cover only a portion of them. Isn’t that what they always claim? Uh, hello! How about addressing the Constitutionality of this plan first! So much for Stare decisis if it were to be upheld!

After that then maybe we can address how the plan also means increasing taxes to the tune of an 8% payroll tax on workers and another 3% in actual personal income taxes in order to make sure people pay in and the fund has money according to the Lewin Group. In essence they are looking at slapping working Californians with an effective 11% tax increase! Wow! 11% of a working Californian’s income would be required to pay for health insurance under this great state run plan? My wife and I pay roughly half that rate for our top-notch private insurance!

But that’s ok. Let’s see how long this asinine attempt at communal living lasts before the system bankrupts itself, politicians enter full hyper-whine mode about how taxes have to be raised (again) to cover the costs and send the state of California even further down the road to destruction.

Maybe we should start bussing in all the homeless and poor people from around the country just to expedite the process. Right now California is basically begging the nation’s poor, destitute and homeless to flock across their borders for a freebie that they will never see a bill for. Who could resist that deal! As people seeking the perks of being a citizen of the People’s Republic of California flood in, and the productive flee we will be left to watch what happens and point and laugh at the silliness.

So I say GO WEST! There’s gold once again in them thar hills! Except this time the “gold” is more of the same from the liberal left - government handouts of other people’s money. You know, what they often refer to a “free” [insert program here] that liberals and their constituents salivate over.

We can only wonder if this plan actually becomes law, how long it will be before Californians are flocking to Mexico or, God forbid, Canada to receive healthcare.

J.J. Jackson is the owner and Lead Editor of American Conservative Politics - The Land of the Free (http://www.thelandofthefree.net) and American Conservative Daily (http://www.americanconservativedaily.com) He is also the owner of American Infidel T-shirts (http://www.cafepress.com/americaneagle04)

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