I'm also curious as to which Medicare HMO this was. Do you have anything you can share with us?
I would create a code that specifies it was "Medicare Bankruptcy" and not a patient Bankruptcy and then write them off. I wouldn't write them off as "Bad Debt" because it will look as if it was something the patient owed. You want to be able to distinguish that it was something that Medicare owed you.
As far as tax purposes, I would think you could use this which is why you need to create a special code then at the end of the year, you can run a report showing the write offs associated with "Medicare Bankruptcy."
We did not write off our claims just yet. There are about 3 companies that went under. They are in receivership. Once they are ready, then you can file a claim with the State. You might be able to get some money back. These are the three that I know of, Universal, Physicians United Plan (PUP) and Florida Healthcare Plus.