PHILADELPHIA REFLECTIONS
The musings of a Philadelphia Physician who has served the community for six decades

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HSA BOOK
An originator of Health Savings Accounts describes their advantages over existing health insurance. Several improvements are suggested for the regular HSA. A more dramatic cost improvement emerges from a lifetime HSA version, which substitutes whole-life approaches for pay-as-you-go. This newer version requires legislation, but could reduce health costs dramatically.

Reflections on Impending Obamacare
Reform was surely needed to remove distortions imposed on medical care by its financing. The next big questions are what the Affordable Care Act really reforms; and, whether the result will be affordable for the whole nation. Here are some proposals, just in case.

Health Savings Accounts, Regular, and Lifetime
We explain the distinction between Health Savings Accounts, Flexible Spending Accounts, and Lifetime Health Savings Accounts. Sometimes abbreviated as HSA, FSA, and L-HSA. Congress should make it easier to switch between them. All three are superior to "pay as you go", health insurance now in common use, only slightly modified by Obamacare. It's like term life insurance compared to whole-life. (www.philadelphia-reflections.com/topic/262.htm)

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Disadvantages of Lifetime Health Care

So, right off, what are the disadvantages of lifetime coverage? They would seem to be:

1. At the moment, persons receiving Medicare are excluded from starting Health Savings Accounts. During the debate about Obamacare, seniors were therefore remarkably uninterested in a topic which didn't affect them. Very few seem to realize that Medicare is 50% subsidized by the federal taxpayer, and therefore few realize they are quite right to be uneasy Medicare might be "robbed" to pay for Obamacare. No politician is comfortable discussing this issue, for fear his party will be blamed for injuring a perfectly blissful status quo. Naturally, everybody likes the idea of buying a dollar for fifty cents, and everybody likes to imagine payroll deductions and premiums create an impregnable entitlement. The sad truth is the 50% subsidy, paid for by borrowing from foreigners, practically guarantees Medicare will be eyed as a victim, using the "fairness" argument. Seniors on Medicare, of which I am one, should be immediately in favor of a proposal which forestalls such pressure. Unfortunately, right now every one of them is looking toward the sunset, gambling on outliving a threat which isn't going away.

2. The computer revolution, which makes lifetime health insurance even imaginable, has severely impacted the investment community. It is still difficult to foresee which branch of the existing financial community would be natural allies, or natural enemies, of Health Savings Accounts. A remarkably large segment of the investment community already has HSAs for their personal affairs, and the banking community sees a chance that Bank Debit Cards could displace the huge industry of insurance claims processing. Meanwhile, insurers remain uncertain whether HSAs are a new revenue source, or a threat to existing lines of business. The Dodd Frank legislation is so large and complex it confuses everyone about net winners and losers. Investment advisors have been hit hard by the recession, and are forced to charge $250 per trade when their competitors charge $7.50 for the same service. Just about everybody in the HSA business is uncertain whether HSAs are insurance policies with an attached savings account, or whether they are are investment vehicles with stop-loss insurance attached. It takes time for HSAs to achieve profitable size, so industry leadership hangs back to see what they look like when bigger.

3. There are lots of small advantages, but one big disadvantage. The transition from one system to another takes a long time, perhaps a lifetime for some.

How can we navigate a transition that might take a century to complete?

The answer to the long transition period lies in providing more than one method to close the transition gaps. Start from both ends, and find one or more methods to break into the middle. If lifetime insurance saves money, use some of it to overfund parts of the system as an incentive. When you find people are gaming the system, drop the feature which permits it. If some goal is accepted to speed up the transition, calculate what it is worth to accomplish it, and limit the feature as the transition speeds up. The method proposed in the ****previous**** chapter will certainly work out, but a newborn baby will be a Medicare recipient before children's insurance is complete for everyone. The rest of us have already lost some years for compounding, while some of us are already on Medicare and are, as they say, entitled. Therefore, we propose two additional ways of getting to the goal. Reducing the cost of healthcare is one, to be taken up in Chapter ****. That one works for everyone's finances at any age.

The other method, which suits people of working age, is the present topic. It has two possible solutions, the issuance of special revenue bonds, and offering inducements for dropping Medicare. In the present environment, just using Medicare as a transfer vehicle is unthinkably unwise, politically. Reducing Medicare can only be brought up as a voluntary exchange, long into the future when the financial attractiveness of the HSA approach is so well established it has no political downside. It can be used to pay for non-medical retirement costs after HSAs demonstrate they can comfortably cover medical ones. At that point, it would no longer have the stigma of "robbing" Medicare, but might be politically acceptable as making some use of unspendable double coverage.

Special Bond Sales. The safer approach is therefore to issue bonds to smooth out bumps in what is in some respects an equity investment. To match present cultural patterns, it should be recognized that working parents now fully assume the medical costs for their children, but have only a moral liability for the medical costs of their retired parents. Therefore, our culture might accept bond indentures with similar structure, but in one of the cases resist an identical bond issuance which differs significantly from accepted local patterns. In fact, it is difficult to imagine enacting any proposal which does not generally respect societal patterns. An important feature would be to start HSAs at an early age, adding as much as 26 years to the duration available for compounding. At 10%, that would be almost four doublings of the investment, and a fairly good start toward the initial goal of $80,000 in the account by age 65, while still starting with relatively small investments in childhood. True, a bond issue would have interest to pay, but since the interest payment stays within a family it might be designed to seem less burdensome than taxes. It is a curiosity that U.S. Treasury bonds are entirely general obligations, unlike state bonds. There may be a good reason why federal bonds for specific projects are agency bonds, but someone else will have to explain it. The two purposes for which special bond issues might be considered are: respect for society's wishes with regard to parent/child discipline, divorce and illegitimacy issues; and to smooth out gaps in coverage necessitated by nonlinear relationships between revenue and expenses at different ages.

Proposal 8a :Congress should authorize special limited-use bond issues (or Federal agency bond issues) for two Health Savings Account purposes: to fund accounts in transitional stage because of their late age at enrollment toward attaining self-sustaining status; and to create a permanent bridge between age groups which are in chronic deficit and age groups which are in permanent surplus, to the extent that such age disparities remain in balance. In both of these cases, it is calculated the accounts will eventually come into permanent balance after full transition has taken place within current demographic trends.

Comment: With the passage of time, it should be possible to identify age groups (for example, the first five years of enrollment) which will eventually come into balance with other age groups which permanently generate a surplus. Knowing aggregate lifetime coverage will itself bring these two groups into permanent balance, it is sensible to borrow from one and loan to the other during early transitions, at minimal interest rates. Having provided for eventual coverage of these secular risks, it becomes more reasonable to extend favorable rates to them during early transition. When the slots are fully loaded, so to speak, there will always be secular fund imbalance between age groups, where market rates are always needed to cover the overall plan design. The intent of these two interest rate levels is to distinguish between a transitional phase which is temporary, leading to an equilibrium loan imbalance which is a natural part of the design.

As a practical demonstration of the superiority of equity investing over zero-sum fixed income, invisible psychological value cannot be overstated. If our nation intends for long longevities to rely increasingly on investments rather than salaries, it must broaden its experience with sensible risks. Whether we like the idea or not, we are collectively taking long strides toward a rentier culture, where our main hope of advancement lies in greater willingness to understand and buffer the reasons for market volatility. One of the features of even this attenuated risk-taking, is to recognize that a few people will start their investing at the bottom of a dip, while most will start at the top of a peak. The long-term result will smooth it out, but some people are destined by the luck of their birthday to make more profit in an equity market, than others. And some people are destined by the timing of their illnesses to end up with less money in the account than others, too. It may not seem fair, but tampering with investment cycles will not improve it. By establishing a system of buy-ins, both as a transition step and also for late-comers, the opportunity of market-timing is created. Almost nothing is more discredited as an investment strategy than market-timing by amateurs, but it probably cannot be completely avoided here, and will probably exaggerate the differences in account size achieved by members of the same age cohort. Somehow, the attitude must be made general, that nobody can make anything at all in the accounts if we return to annual premiums; all extra money in these accounts is "found" money. The books almost certainly will not balance completely at all stages, so it becomes a political question whether to forgive the difference (as Lyndon Johnson did in 1965), or to define it as a subsidy (as Barack Obama seems to be planning for his start-up insurance system.) Perhaps in accounting for residual medical costs at the end of life, a way can be found to equalize outcomes, but it seems unwise to tamper directly with such large amounts which are mainly responding to the world's inherent volatility.

There are several other serious matters. They will be briefly noted, and then an omnibus solution presented, the IIOO. Let's answer one inevitable jibe immediately: How can poor folks afford this? Answer: They have to be subsidized, that's all, just as they are in every other proposal including Obamacare. It's important to face this, because neglecting it is the route by which every deficit has been incurred, every budget unbalanced. People who spend other people's money for healthcare characteristically have higher than average health costs. But the novel discovery is Health Savings Accounts have generally proved to reduce costs by 30%. When both approaches operate at the same time, results are not reliably predicted, but can be monitored. Miscalculations usually result in debts, dropped options and dropped amenities. A politically appointed board would be wise to refuse an assignment to address this, unless contingency instructions are clear, and remain out of their hands. When Congress eventually discovers how to put a ceiling on the national debt, effective answers to this related issue may become more apparent.

Transition from Term Most transition problems (shifting from one-year coverage to lifetime coverage) have to do with whether you are a child, whether your children are gone and forgotten, or whether you are supporting everybody else in your family. As the saying goes, how you stand will depend on where you sit. The unique borrowing problem here, is complete transition takes so long, groups will differ significantly on whether to unify forward (child to grandparent) or backward (grandparent to child), until it can be worked out how to borrow as a child and borrow for a time as a grandparent, depending on particular situations. What's to be avoided is intergenerational borrowing as groups; we've tried that. The benefits of invested premiums are obvious to all groups, but the arrangements must be debated thoroughly in order to avoid just kicking the can down the road. Almost any arrangement would suffice for a brief transition, but this transition would take so long it would amount to a Constitutional Convention when it was over. The eventual goal is to place the cost burden largely on working people age 26-75, since that is the only age group in direct contact with the national economy. The tricky part is to utilize other age groups during the transition -- and then slowly work out of it. Don't forget a third generation will intervene -- their own children, as well as their parents and grandchildren. The whole construction is a job for actuaries, but the modern use of index funds puts on the table the potential of diversified investment, absolutely without stock-picking, at favorable rates of interest, allowing room for cyclicity of the economy. America seems to need increased fertility, and the compound income might make it possible, but if it is not carefully examined, it might act as an inducement for women to delay their first child even longer than they presently do. As long as you don't get overwhelmed by too many transition issues at once, almost any intergenerational problem would be eased by generating more revenue. At ten percent, money compounds to double itself every seven years, and the resulting sums can boggle the mind. But if they are not planned for, the extra money will either vanish or induce people to act like a deer frozen in the headlights.

Making ten or twelve percent on safe investments may seem impossible to those who have recently lost thirty percent on the stock market, and of course it is not guaranteed. That is why lifetime health insurance based on fixed income securities cannot be presented as guaranteeing payments for future services; only equity securities (stocks) can do that, and even they, mostly don't succeed in real terms, or net of inflation. Lifetime health insurance should only promise to supply a substantial portion of future health costs, and has little hope of doing so except for two possibilities. If the taxpayers would stand for it, you might deliberately overfund the accounts; since they won't, it is necessary to induce some to do it voluntarily, and shrug your shoulders at those who don't. That probably won't work, either, so we are left dependent on our scientists to reduce or eliminate medical costs. They are willing enough to try, but of course they can's guarantee. You can gamble on it's happening, or your can wait until it is a sure thing. We are decades into a fiat currency without semblance of backing by monetary metals, and must feel our way. However, the bright side of our present finance system is that transaction costs are steadily declining for reasonably safe passive investing. Professor Ibbotson has demonstrated that total market averages have been remarkably steady for asset classes over the past eighty years, and probably will safely remain so for another century, but that's another assumption which might go wrong. When you get down to it, you either go ahead or you don't. That's all. Investing in the total domestic stock market of America, the investment is guaranteed by the full faith and credit of America, just as surely as if invested in U.S. Treasury Bonds, and it pays a little better in return for its increased volatility.

Still another question comes from people who rightly believe there is no free lunch: Where does the extra money come from? A fast answer is that it comes from correcting a blunder of long standing, called the "pay as you go" system. To some extent, this problem began with the original Blue Cross plans of the 1920s, but it was elevated to its present stature by the Medicare and Medicaid proposals of 1965. By the pay/go approach, this year's premium money is spent for this year's sick people, not the people who paid the premiums. That ruse helped get the program started, but it means current unspent premium money is quickly gone, and thus it means no compound interest or investment income is generated by rather huge revenue collections in the future. Since health expenses rise with advancing age, a great deal of floating premium money might be invested for many decades, if only it had not already been spent. Actual projections are surprisingly large, but I would prefer that others announce their calculations, employing the motto of "Underpromise, but over-perform."

Other substantial sources of reserves exist, nevertheless. Health Savings Accounts now in operation are reporting 30% savings; since it is unlikely this record can be maintained with inpatients, who are generally older, overall savings may well turn out to be closer to 15%. Inflation helped a lot to pay off the original startup costs of 1965, but at least nominally it is true the debt has been paid. We are now free to invest that ancient transition cost, so to speak, as long as you don't try to spend the same money twice. But there is considerable squeamishness about the public sector acquiring equity in the private sector, so Treasury bonds are about the only public sector investment the public will easily allow. Investment experts are however almost unanimous in feeling that equities provide greater long-term income (see graphs by Ibbottson) and security against inflation. On the other hand, if private individuals invest in common equity with index funds, less resistance is encountered. Any way you look at it, some investment income is better than no income, and for long-term investment, equity is better. For political purposes, it would seem best to restrict investments to U.S. companies, and index funds are less controversial (i.e. "gambling with my money") for most small investors than actively managed funds, because the savings mostly come from reduced investment expenses. John Bogle is telling the world that 85% of most total return is diverted back to the financial industry, and this is one way to rebalance that. Fifty percent of investors would do better than average, fifty percent would do worse because of broad diversification, but not much worse, because total index diversification is fast approaching a maximum. Meanwhile, compound interest would be at work, and most people would be astonished to learn how large the long-term appreciation would grow. Tax-free, diversified, and long-term.

Finally the question arises: how can you tell whether income from this source would equal the terminal care costs of fifty years from now? You can't, of course you can't. But this transfer and invest scheme would generate a whole lot of money that presently isn't being generated. If it isn't enough, we will have to do something in addition. The monitor and mid-course correction system is expected to detect when more money is required to balance the books, and therefore more money will have to be invested in the Health Savings Accounts. If savings are insufficient, either subsidies or borrowing will have to be resorted to. Experts sometimes will be wrong, so revenue should be raised somewhat higher than the experts think we need. And if it all goes wrong, if we have an atomic war or an expensive cure for cancer, there is always the national debt. Which is where we began, isn't it?.

Independent and Impartial Oversight Organization. (IIOO)After reviewing the complexities, it seems best to create an oversight body with more time and expertise than can be expected of elected representatives. However, Congress must make it clear that it retains ultimate authority to break from normal routine, occasionally concentrating its attention on conflicts between expert opinion and public opinion.

Working backwards, a mixed public/private system needs an official backer of last resort, a function which cannot be delegated, and an experienced crisis management team in place with the authority to act within defined limits, most of the time. The last resort has to be the full credit of the United States, just as unfortunately it now is with Medicare. What's mainly needed is a sort of Federal Reserve in the very narrow sense of an independent management team, under the direct governance of a Board whose composition is half public, half private. To be useful, it needs a monitoring authority provided by a mandate from Congress, a comparatively limited amount of regulatory authority of its own, intentionally limited by adequate board representation from all stakeholders. The Board needs to know what is going on, and it needs general authority and trust to act in an emergency. Many proposals require a system of mid-course corrections particularly in the first decade of operation, at the same time the Board must not usurp Congressional authority.

Congress, on the other hand, must have the restraint of private oversight by technical experts who can appeal to the public, to make very certain it does not feel it has a new piggy bank. Corruption is one thing; misjudgments are quite another. Once in a while, we manage to construct such an agency.


Summary of HSA Proposals

Opinions will differ about which of the many proposals below are required to clear away legal obstacles, and which others merely confer competitive advantages to Health Savings Accounts. The list is definitely intended to clear away obstacles, but also includes arguments about several others, in case some would feel feel they are legitimate legal obstacles. For example, we propose some Federal bond issues, both because they require Congressional authorization, and because some might feel it is out of keeping with the role of government to be in the direct lending business. Mindful of the long contentious history of our nation's disputes about the role of government in banking, it thus seemed best to include the argument for special bond issues, even though there is no law prohibiting them. Furthermore, the peculiar absence of anything except general obligation bonds in the current list of Treasuries, suggests there may be some unspoken reason to avoid special-purpose bonds which has not been debated in recent years. When there are so many different ways to do things, it would be a pity to avoid what appears to be the best one, merely because it has not been recently debated. In summary, inclusion of a proposal on this list should not be taken to endorse a public sector approach over a private sector one. Tracing back to the Constitution, our laws have been a series of compromises, and some prohibitions do exist as a concession to something else, whose utility has since disappeared.

The proposals generally omit mention of their purposes, most of which are self-evident. However, each is followed by a citation number within the body of the book, where a fuller argument can usually be found.

Proposals related to the Tenth Constitutional Amendment:

Proposal 9a: Companies which manage health insurance products, particularly Health Savings Accounts, may select any state in which to be domiciled, but must then accept that state's regulations for corporate behavior and solvency. Such licensed corporations may sell their health insurance products in any other state; so long as individual products they sell in another state conform to the regulations of the state in which the insurance applies. Except for corporate solvency issues (where the stricter of the two states should prevail), conflicting regulations in the state of corporate domicile do not apply to the product.(2711)

Proposal 9b: Congress should mandate the licensing to sell health insurance to be widely inclusive of vendors and products, including Health Savings Accounts and Catastrophic Coverage, and be subject to corporate regulation in the state of corporate domicile. New products are subject to objection by the state in which the insurance applies. When there is conflict, appeal may be federal.(2611)

Proposals related to both regular (i.e. one-year term) Health Savings Accounts, and the proposed new Lifetime variety:

Proposal 1a: Congress should extend comparable subsidies to the poor for Health Savings Accounts as for other health insurance.(2687)

Proposal 2a: Subscribers to Flexible Spending Accounts (FSA) should be permitted to roll over unspent balances into HSAs from year to year.(2693)

Proposal 7b: Permit Catastrophic Health Coverage premiums to be paid by Health Savings Accounts.

Comment:This would suffice to correct a 70-year injustice in the differential tax deduction solely based on the nature of employment.(2720)

Proposal 13c: Congress should create and fund a permanent Health Savings Account Agency. It should have overseers representing subscribers and providers of these instruments, with power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcomittee of Ways and Means periodically. It should have extensive access to the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations about the size and scope of inter-subscriber loan activity. At first, it might conduct the loan activity itself, with an eye toward eventually overseeing a commercial vendor.(2718)

Proposals related to HSA Deposits, Contributions, Transfers:

Proposal 12d: Current law permits an individual to deposit $3300 per year in a Health Savings Account, starting at age 25, and ending when Medicare coverage appears. Probably that amount is more than most young people can afford, so it would help if the rules were relaxed to roll-over that entitlement to later years, spreading the entire $132,000 over the forty-year time period at the discretion of the subscriber.(2713, 2718)

Proposal 13a: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should substitute a lifetime limit of $132,000, with annual deposit limits sufficiently adjustable to bring accounts at their present age, up to what they would have been if $3300 annually had been deposited since age 25.(2718)

Proposal 7a: Waive the annual limit to HSA contributions for contributions which bring the account balance to less than the average for the subscriber's age cohort. While resistance to this provision might focus on class distinctions, the subsequent benefit to Medicare and/or Medicaid funding might ultimately be so large as to overcome it.(2720)

Proposal 13b: Congress should reserve decisions to itself for changing the lifetime contribution level, and review final appeals from contract terms which seem to threaten imminent major modification of the general public lifestyle.(2718)

Proposal 4b: Once a deductible has been established along the lines of Proposal 4a, the upper limits of Health Savings Accounts deposits should periodically be adjusted to cover audited cost plus a reasonable markup for: (1) outpatient care, and (2) the premium of Catastrophic coverage for an average lifetime from birth to death. Care should be taken to avoid creating incentives to move patients in either direction. This overall limit should be divided, not over an entire lifetime, but over the working age from 20 to 65.

Comment:As long as we maintain a predominantly employer-based healthcare system, there will be tension around the uneven income tax deduction. This disparity will continue, but the system should lean toward equalizing it. Efforts should be made to avoid applying medical costs to those who are too old or too young to be employed. It should be noted that constraining the premiums of catastrophic coverage must also extend the income tax deduction to equal that of employed persons. And it should be noted that some compound interest rate must be assumed for compound income from invested idle premiums, and subtracted from the annual deposit limit, as actually adjusted annually for experience. The approximate goal is to fund the lifetime care of beneficiaries (approximated as $350,000 lifetime cost, with approximately $200,000 of contributions, plus $150,000 of investment income. The preferred method of investment is passive investing in index funds of domestic large-cap common stock, with a small (10%) cash-flow component in cash or fixed income. And the goal is no more than 1.5% overhead attrition for insurance administration, resulting in no less than 8.5% average total return on standard indices. If these standards cannot be achieved, the portfolio management should be put out to bid.

Proposal 7a: Congress should remove all upper age limits to opening Health Savings Accounts, and mandate linkage to HSA for all health insurance with front-end deductibles of more than $250 annually unless subsidies are substituted.(2584)

Proposals related to Catastrophic (High-deductible) Health Insurance:

Proposal 7b: Permit Catastrophic Health Coverage premiums to be paid by Health Savings Accounts. This would suffice to correct a 70-year injustice in the differential tax deduction solely based on the nature of employment.(2720)

Proposal 4a: Congress should add a new Catastrophic health insurance option, which covers at least 105% (net of inflation) of the cost of inpatient hospitalizations (to the extent prices reflect true costs) but which utilizes the revised variant of DRG to produce the same result. The new Catastrophic policy also covers outpatient costs above the level of a high deductible (with a cap on cash payments by the patient). Exceptions must be specified and approved. It is intended that highly similar outpatient items shall achieve identical prices for the same item used for inpatients, and that a RVS relative value system will be evolved for pricing inpatient items which have no outpatient use. When this system is deemed sufficiently perfected, it may be substituted, in whole or in part, for present DRG limitations, in no case taking longer than a year.

Comment: The basic intent is to set inpatient charges by matching outpatient marketplace prices as much and as fast as possible within the DRG, meanwhile setting inpatient prices of unsuitable items, by relative-values to outpatient prices. Because it will take time to develop the technical underpinnings, the tactical transition is accomplished by starting with an arbitrary DRG and gradually substituting a DRG system suffused with market prices. Some residual arbitrariness must be expected, and some additional system for adjusting the border for changing patterns of scientific care must be provided during transition. Until similar items are priced similarly, it is probably unwise to make inpatient and outpatient prices totally independent of each other, since the system of care will continue to be warped by its financing. It is therefore prudent to set some relative limits to the degree they may be allowed to differ, as well as a limit to how long they may be constrained. (2634)

Proposal 6b: Congress should permit the sale of excess ("Catastrophic") indemnity health insurance, without service benefit provisions, with a deductible reasonably stretched to exclude most outpatient costs but include most inpatient ones. It may be necessary to resort to two deductibles (one for inpatients, one for outpatients) If future medical science should exclude a burdensome proportion of expensive outpatient procedures, the line may be adjusted downward to include most payment by DRG or its equivalent, even if outpatient; and exclude patient discretionary procedures, even if inpatient. Payment for emergency care should depend on whether the patient is admitted afterward. Reasonable limits should be set on ambulance costs, and some resolution of "nearest hospital" requirements when two hospitals are close together.

Proposal 7f: Congress should periodically investigate whether a need for an intermediate insurance category of high-priced outpatient services has appeared. If so, hearing should be held with an eye to creating two or more deductibles as applying to different locations of care, since present practice assumes there are only two categories (inpatient and outpatient) and that prices segregate conveniently between them. It must be recognized that the nature of medical care is continually evolving, and this is a direction which may emerge.(2720)

Proposal 7g: Congress should hold hearings to devise a truly bare-bones indemnity catastrophic policy for adoption by HSA subscribers. It is time to reconsider the whole concept of first-dollar coverage, with service benefits, and to find ways to allow it to continue as an option, while preventing it from imposing itself on those who would be better served without it.(2720)

Proposals related to Diagnosis Related Groups (DRG)

Proposal 7e: Congress should set a reasonable time goal, and then mandate that the DRG be expanded and rewritten based on SNOmed, but then reduced to a DRG which is much larger than at present, and capable of easy expansion. As mentioned, the hospitals which are winners under the old system will identify themselves by opposing this, and they should be asked if they can suggest alternatives.(2720)

Proposal 3a: Congress should authorize a definitive study of whether the DRG system is more or less expensive overall than fee for service. If the two are close in cost, the DRG system should be phased out in favor of a relative-value system for fee for service billing . If DRG can be shown to be seriously more cost efficient, the present version should be gradually replaced by a hybrid variety, in which the codes for a majority of cases are covered by the contents within a small pamphlet, while the full national diagnostic relative value system is made available on a modified computer search engine program, which can be used to provide coding for the rest of cases on a small portable computer. Where even this is insufficient for extreme outriders, a national appeal system of experts should be devised for special cases, which are then added to the search engine. Using modern technology there should be no place for reimbursement for "all others".(2634)

Comment: Every effort should be made to apply a modified DRG system to all cases where the patient has limited ability to make choices, and to exclude it from health care choices wherein a reasonable average person can make his own decisions. Generally speaking, the dividing line is admission to a hospital.

Proposal 17b. Tax-exempt Hospitals Should be Required to Accept the DRG method of payment for inpatients from any Insurer, but provided some method of suggesting changes, although the rates should only be negotiable based on a percentage surcharge to Medicare rates. The DRG should be restructured, using reduced SNOMED code instead of enlarged ICDA code, and designed to be used as a search program on hospital computers rather than table look-ups, except for very common hospital diagnoses.(2606)

Proposals related to Investment Managers:

Proposal 7i: Managers of HSA investments should be qualified as fiduciaries under standard definitions, or make it clear to the customer that they are not. It must be recognized that the nature of medical care is continually evolving, and this is one direction which may be emerging.(2720)

Proposal 7j: A cost comparison and returns comparison of all managers of HSA, by location, should be annually published, at least on the Internet, or in some other way made available to the public. Those who are wise in the ways of investing have no idea, of how innocent many people are.(2720)

Proposal 7c: The subscriber must be permitted choice among managers of his HSA account, managers of his Catastrophic Health Insurance policy, and management of his investment account. However, no element of kick-back arrangement is permitted, and written assurances should be on file.(2720) A provision to this effect has proven necessary in the past. Whether this provision remains necessary will largely depend on passing Provisions 7b. and 7d.

Proposal 7d: Limit eligible investment agents who handle HSAs to legally defined fiduciaries. Needless to say, the brokerage industry will oppose this, and they should be asked if they can suggest alternatives.(2720)

Proposal 7h: Congress should require all managers of Health Savings Accounts to display to the customer, and publish to the world, quarterly, their average total returns, as compared with average net total returns to HSA subscribers,and to the individual subscriber if there is meaningful variation. If the difference between net and gross exceeds 1%, the manager should be required to complete a form explaining it. There are several trillion-dollar funds who would find this proposal no hardship.

Proposal 27b: Congress should impose transparency rules on fees and net returns for Health Savings Accounts, and if necessary impose an absolute brokerage and management limit of double the fees available from the least expensive, legitimate, competitor.(2584)

Proposals specific to lifetime Health Savings Accounts:
Proposal 17 a: Congress should authorize a new, lifetime, version of Health Savings Accounts, which includes annual rollover of accounts from any age, from cradle to grave, and conversion to an IRA at optional termination. Withdrawals from the account should be tax-deductible if paid for standard medical expenses through a special-purpose bank debit card, otherwise are taxable. Investments in this account are subject to special rules, designed to produce maximum safe passive total return , and limiting administrative overhead to a reasonable, competitive, amount. The account should be linked to a high-deductible catastrophic health insurance policy, with guaranteed renewal.(2606)

Comment:Lifetime Health Savings Accounts (L-HSA) would differ from ordinary HSA in two major ways; the first is obvious from the name. In addition to meeting each medical cost as it comes along, or at most managing each year's health costs, the lifetime Health Savings Account would try to project whole lifetimes of medical costs and make much greater use of compound income on invested reserves. The concept seeks new ways to finance the whole bundle more efficiently, and one of them is that health expenses are increasingly crowded toward the end of life, preceded by many years of good health, which build up unused reserves and earn income on them. Since the expanded proposal requires major legislation to make it work, it must be presented here in concept form only, for Congress to think about and possibly modify extensively. This proposal does not claim to be ready for immediate implementation. It is presented here to promote the necessary legal (and attitudinal) changes first needed to implement its value. And frankly, a change this large in 18% of GDP is best phased in gradually, starting with those who are adventurous. By the time the most timid among us have joined up, the transition will have become routine. As a first step, let's add another proposal for the present Congress to consider:

Proposal 4c: A government agency should be appointed to oversee economic, financial, and medical trends, and be adequately funded to do so, particularly during the transition phases. It should be overseen by thirty prominent institutions in the involved fields, each of whom appoints one of twenty board members on a rotating basis, one each per institution, and ten seats remaining vacant for a year at all times. The creation of ten outside organizations whose seats are vacant on a rotating basis is designed to provide dissenting opinion, and to offer time to write books about their experiences. The public will trust experts, but only so long as the experts provide public transparency. The power to make fundamental changes, remains with Congress.

Proposal 4d: New drugs and appliances are constantly being introduced, and are usually at their highest prices as they are first introduced. Insurance prices are set annually, after they can adjust to new items. No insurance should be required to cover items which were not priced into the premium, that is, within the first yearly premium cycle after the introduction of the item. Exceptions for epidemics and catastrophes may be excluded.

Proposal 8a :Congress should authorize special limited-use bond issues (or Federal agency bond issues) for two Health Savings Account purposes: to fund accounts in transitional stage because of their late age at enrollment toward attaining self-sustaining status; and to create a permanent bridge between age groups which are in chronic deficit and age groups which are in permanent surplus, to the extent that such age disparities remain in balance. In both of these cases, it is calculated the accounts will eventually come into permanent balance after full transition has taken place within current demographic trends.(2734)

Comment: With the passage of time, it should be possible to identify age groups (for example, the first five years of enrollment) which will eventually come into balance with other age groups which permanently generate a surplus. Knowing aggregate lifetime coverage will itself bring these two groups into permanent balance, it is sensible to borrow from one and loan to the other during early transitions, at minimal interest rates. Having provided for eventual coverage of these secular risks, it becomes more reasonable to extend favorable rates to them during early transition. When the slots are fully loaded, so to speak, there will always be secular fund imbalance between age groups, where market rates are always needed to cover the overall plan design. The intent of these two interest rate levels is to distinguish between a transitional phase which is temporary, leading to an equilibrium loan imbalance which is a natural part of the design.

Proposal 12e: The present closing age for HSA contributions at the onset of Medicare should be extended a few years older, to allow for "catch ups". And single-premium buy-outs of Medicare coverage, including the possible return of payroll deductions where indicated, should be permitted as an option.(2713)

Proposal 12f: Congress should create and fund a permanent Health Savings Account Agency. It should have members representing subscribers and providers of these instruments, with power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcomittee of Ways and Means periodically. It should be involved with the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations concerning the size and scope of this activity.(2713)

Proposal 17c: Where two groups, by age or other distinguishing features, can be identified and matched, as permanently in revenue/expense deficit, or surplus, borrowing at reduced rates may be permitted between the two groups to the extent they consistently match. Borrowing for other purposes (such as transition costs) shall be by issuing special purpose bonds. These bonds may also be used to make multi-year intra-family gifts, such as parents for children, or children for elderly parents.(2606)

Proposal 17d: A reasonably small number of escrowed accounts within a funded account may be established for such purposes as may be necessary, particularly for transition and catastrophe funding. Where escrowed accounts are established, both parties to an agreement must sign, for the designation to be enforceable.(2606)

In fact, some enterprising insurance company could easily produce the same policy with a $100,000 deductible, which would reduce the premium still further, and improve an already good experience. That's what banks normally accomplish by maintaining a constant pool of funds coming in and going out, but essentially the rest of the pool is undisturbed. It's true a second major illness would wipe out the deductible, so the ACA approach of a top limit on out-of-pocket costs is preferable to reinsurance. You would have to have ten major illnesses to begin to doubt the wisdom of it, but people who have ten major illnesses are not likely to be worrying much about their pensions. This analysis quickly loses traction as medical disasters become unusually frequent, and gets into reinsurance issues. But the example is mainly offered to illustrate the destructive effect of brokerage fees, which must be minimized in any way available.


Epilogue: Where Does All This Money Come From?

Although this book promised, and I hope delivered, a detailed discussion of how Health Savings Accounts might work if Congress unleashed them, the original question remains. Where does so much money come from? Three hundred-fifty million Americans, times $350,000 apiece in lifetime medical costs, results in a number so large it requires a dictionary to be sure of pronouncing it correctly. Cutting it in half still suggests a financial dislocation of major proportions, so out of whose pocket would it come? Even if it's a win-win game, dumping that much money into the economy sounds pretty inflationary. These are not legitimate reasons to avoid it, but it seems hardly creditable that it could be done without someone noticing the difference. Where does it come from?

My original idea was that it resulted from using the "pay as you go" model, in which current premiums pay for current expenses. That is, the money from young healthy subscribers pays the bills of old, unhealthy, ones. By that reasoning, the original subscribers got a free ride and never paid for their healthcare. The debt has been carried forward among later subscribers, and although it is a debt which still remains to be paid, it seems very likely no one would ever collect it. Each generation makes it a little bigger by adding subscribers and running up hidden debt charges, but at least it is accounted for. However, no one seems to have done the math to show this accounts for what we gain by using Health Savings Accounts. And it's a little disconcerting there is so little resistance to continuing the borrowing game, as you might expect after fifty years, as some finite surplus fund approaches a point of exhaustion.

So let's look around for a huge, continuing, source of funds. And here's one: big business taxes. Governments love to tax big business, because big business raises very little squawk about it. As I sit on the sidelines listening to the big shots talk, I realize that large corporations really do not care what anything costs, including taxes. That is, they don't care as long as their competitors have to pay the same price. There are plenty of exceptions of course, but in general the dynamic at work is, what "everybody" has to pay, doesn't count. It's a little off the subject, but what taxes the French or other foreigners have to pay is beyond the control of American big business, except it isn't. The Fairness argument gets lots of exercise, translated into pressure on our own government to remain at the level of "international norms", introducing the issue into every international forum concerned with free trade. Now, at least, you're getting serious. We hear it said repeatedly that American corporate taxes are the highest in the developed world. Including state and local taxes, they are at least 60% of profits.

To get back to health care, let's stop repeating the old wheeze that Henry Kaiser used some personal lobbying to exclude fringe benefits from taxation of the pay packet, during the Second World War, sixty or seventy years ago. Let's notice instead that employers of 100,000 workers are giving health insurance to their employees, and paying for it with forty-cent dollars. Following that, the employee is escaping income tax on fringe benefits (healthcare insurance), and every economist will tell you the saving soon readjusts invisibly to the pay packet. Add the two together, and insist the employees have some "skin in the game", and you are not far from the conclusion the benevolence is cost-free.

Let's not quibble whether the health dollar is a dime or a quarter in real costs to the large employer. It is unassailably true that much or most of the cost of healthcare is actually borne by the federal government through diverting revenue from over-stated corporate taxes. For that reason, we watch in astonishment as big business lobbyists cooperate in this fleecing, and while a thoroughly anti-business political administration goes easy on them. But don't get mad; we have a lovely proposal for you both.

The recent chaos in Ireland graphically demonstrated it is possible to lower corporate taxes too rapidly. After the Irish lowered corporate taxes to 12.5%, English, Swedish and German corporations transferred their headquarters to Ireland in such numbers it created a severe housing shortage in Dublin, followed by a housing boom, followed by a banking crisis when the mortgages defaulted. But aside from this kind of awkwardness, I would be in favor of eliminating corporate taxes entirely. Corporations are double-taxed, once to the corporation and a second time to the shareholders. Entirely eliminating corporate taxes would be justified by the double-tax, except for the international disruption it would provoke.

And then, look at what else it would do. If there were no corporate tax, there would remain no incentive to seek tax deductions. So there would be a lot of unemployment among corporate lobbyists in Washington, forcing them to move to state capitals to resist the renewed urge for state governments to raise corporate taxes. Which, as the Governors would soon declare, they could now well afford. However, the corporations can also move headquarters to Delaware or other states, restoring their incentive to resist higher taxes. While they were looking for new homes near state capitols, big business lobbyists might find time to consider the merits of Health Savings Accounts. Because in the past, they really had no incentive to reduce healthcare costs for their employees. But now they do.


CHAPTER THREE: Maybe Even Better: Lifetime HSAs

Briefly Outlined: Lifetime Health Savings Accounts

Health Savings Accounts are a big improvement over traditional health insurance, and this book stands behind them -- as is, without major adjustments. Their secret "economy" lies in restraining everyone from spending insurance money less carefully than anyone would spend his own. No one washes a rental car, as the saying goes. But when you do let the individual keep those savings, millions of HSA owners find ways to save about 30% of average healthcare costs. HSAs provide an incentive for the medical consumer to shop more carefully, and consumers certainly seem to respond. The effect is magnified by separating health payments into two components: individual accounts, which create an incentive to keep what you save by careful shopping, and catastrophic health insurance, which provides pooling between patients who have heavy expenses and those who don't. In practice, the Savings Accounts (and their debit cards) are almost entirely used for out-patients, where an effective shopper can wangle as much as a 30% reduction. Inpatient costs, on the other hand, affect patients too sick to argue about costs. This "free ride" is constrained by payment by diagnosis (DRG) for the big items covered under the Catastrophic Health Policy. DRGs ("Diagnosis Related Groups") are a feature Medicare started for hospital reimbursement, but with more precise coding would be ideal for the catastrophic insurance part of Health Savings Accounts. Nevertheless, Medicare contributes half of average hospital revenue, so it can effectively dictate the method of hospital reimbursement. There are problems, but escalating inpatient cost is not one of them. Office and outpatient costs are constrained by the new market power given the consumer to resist cost inflation. This summarizes Health Savings Accounts as currently used. But they could be better.

It has since developed in my mind that Lifetime Health Insurance might be even better for cost savings, if they added another major feature, copied from life insurance. It is, roughly, the difference between one-year term life insurance, and whole-life insurance, which requires multi-year coverage, even lifetime coverage. For those who don't understand, a one-year term insurance covers illnesses for a single year, and then has to be renegotiated. But a whole life policy looks at a lifetime of risk, overcharges young people for it, but invests the unused premium money for later years when the risks are greater. The client is frankly overcharged at first, but in the long run his lifetime insurance is far cheaper. In healthcare, that translates into lower cost to be continuously covered. It doesn't mean you must enroll at birth and remain insured until death; it means multi-year insurance which becomes cheaper, depending on the age you begin and the age you cash out -- usually at death but not necessarily. This is the new feature to lifetime accounts, and it can be easily calculated that the overall savings for everyone would be far greater than anyone is likely to guess.

Proposal 17 a: Congress should authorize a new, lifetime, version of Health Savings Accounts, which includes annual rollover of accounts from any age, from cradle to grave, and conversion to an IRA at optional termination. Withdrawals from the account should be tax-deductible if paid for standard medical expenses through a special-purpose bank debit card, otherwise are taxable. Investments in this account are subject to special rules, designed to produce maximum safe passive total return, and limiting administrative overhead to a reasonable, competitive, amount. The account should be linked to a high-deductible catastrophic health insurance policy, with guaranteed renewal.(2606)
Lifetime Health Savings Accounts (L-HSA) would differ from ordinary HSA in two major ways, and the first is obvious from the name. In addition to meeting each medical cost as it comes along, or at most managing each year's health costs, the lifetime Health Savings Account would try to project whole lifetimes of medical costs and make much greater use of compound income on invested reserves. The concept seeks new ways to finance the whole bundle more efficiently, and one of them is that health expenses are increasingly crowded toward the end of life, preceded by many years of good health, which build up unused reserves and earn income on them. Since the expanded proposal requires major legislation to make it work, it must be presented here in concept form only, for Congress to think about and possibly modify extensively. This proposal does not claim to be ready for immediate implementation. It is presented here to promote the necessary legal (and attitudinal) changes first needed to implement its value. And frankly, a change this large in 18% of GDP is best phased in gradually, starting with those who are adventurous. By the time the most timid among us have joined up, the transition will have become routine. As a first step, let's add another proposal for the present Congress to consider:

Proposal 17b. Tax-exempt Hospitals Should be Required to Accept the DRG method of payment for inpatients from any Insurer, although the rates should be negotiable based on a percentage surcharge to Medicare rates. The DRG should be restructured, using reduced SNOMED code instead of enlarged ICDA code, and intended to be used as a search program on hospital computers rather than table look-ups, except for very common hospital diagnoses.(2606)

Lifetime Health Savings Accounts, beside being lifetime rather than annual, are unique in a second way : they overfund their goal at first, counting on mid-course correctionsto whittle down toward the somewhat secondary goal of precision, which amounts to, "spending your last dime, on the last day of your life". To avoid surprising people with a funding shortfall after they are retired, we encourage deliberate over-estimates, to be cut down later. For the same reason, it is important to have an attractive way for subscribers to spend surpluses, to blunt suspicions the surpluses might be confiscated. An acknowledged goal of ending with more money than you need, runs somewhat against the grain, and is only feasible if surpluses can be replaced with pleasing alternatives.

Saving for yourself within individual accounts is much more tolerable than saving for impersonal groups within pooled insurance. Once more, the menace of rising health cost at the end of life induces more tolerance of pooling in older people, whereas small early contributions compound more visibly if pooling is delayed. Young people must be taught that it gets cheaper if you don't spend it. The overall design of Lifetime HSAs is to save more than seems needed, but provide generous alternative spending options, particularly the advantage of pooling later in life. Because it may be difficult to distinguish whether underfunded accounts were caused by bad luck or improvidence, the ability to "buy in" to a series of single-premium steps should create penalties for tardy payment, as well as incentive rewards for pooling them. This point should become clear after a few examples.

Proposal 17c: Where two groups, by age or other distinguishing features, can be identified and matched, as permanently in revenue/expense deficit, or surplus, borrowing at reduced rates may be permitted between the two groups to the extent they consistently match. Borrowing for other purposes (such as transition costs) shall be by issuing special purpose bonds. These bonds may also be used to make multi-year intra-family gifts, such as parents for children, or children for elderly parents.(2606)

Smoothing Out the Curve.

There is a considerable difference between individual bad luck with health costs, and mismatches between average costs of different age groups. Let's explain. An individual can have a bad auto accident and run up big bills; as much as possible, the age group should smooth out health costs by pooling within the age cohort to pay the bill. On the other hand, compound investment income follows one curve, while illnesses predominate in bulges on a different curve. It isn't bad luck that concentrates obstetrical and child care costs into a certain age range, it is biology which does it. No amount of pooling within the age cohort can smooth out such a systemic cost bulge, so the reproductive age group will have to borrow money (collectively) from the non-reproductive ones. With a little thought, it can be seen that subsidies between age groups are actually more nearly fair, than subsidies based on marital status or gender preference, or even employers, who tend to hire different age groups in different industries, and can accordingly game their health costs in various ways. On the other hand, if interest-free borrowing between age cohorts is permitted, there must be some agency or special court to safeguard that particular feature from being gamed. All of these complexities are vexing because they introduce bureaucracy where none existed; it is simply a consequence of using individual ownership of accounts to attract deposits. which nevertheless must occasionally be pooled, later. Because these borrowings are mainly intended to smooth out awkward features of the plan, every effort should be made to avoid charging interest on these loans. However, if gaming of the system is part of the result, interest may have to be charged.

Proposal 17d: A reasonably small number of escrowed accounts within a funded account may be established for such purposes as may be necessary, particularly for transition and catastrophe funding. Where escrowed accounts are established, both parties to an agreement must sign, for the designation to be enforceable.(2606)

Escrowed Subaccounts.

Both Obamacare and Health Savings Accounts are presently expected to terminate when Medicare begins, at roughly age 65. Nevertheless, we are talking about lifetime coverage, where we have a rough calculation of the cost ($325,000) and the Medicare data is the most accurate set, against which to make validity comparisons. We want to start with $325,000 at the expected date of death, spend some of it in roughly 20 installments, and see how much is left for the earlier years of an average life. Then, we repeat the process in layers down to age 25, and hope the remainder comes out close to zero. There are several things missing from this, most notably how to get the money out of the fund, but let's start with this much, in isolation for the Medicare age bracket, age 65-85. We are going to assume you make a single-premium payment at age 65, that both life expectancy and inflation in the future will increase in a predictable manner, and that changes in health and health care eventually reduce healthcare costs, not increase them. Not everyone would agree to that last assumption, but this is not the place to argue the point.

We know the average cost of Medicare per year ($10,900); we know how many years the beneficiaries on average are in the age group (18). Therefore we know how much of the $325,000 to set aside for Medicare ($196,200), and can calculate how much a single premium at age 65 would have to be, in order to cover it. We thus know how much all the working-age groups combined as age 25 to 65 (60% of the population) must set aside for their own health care costs when they reach Medicare age($196,000 apiece), and by subtraction how much is left for their own healthcare within age 25 to 65 ($128,800). Shifts in the age composition of the population will produce very large changes in total national costs, but should by themselves not change the average individual costs. What they will do is increase the proportion of the population on Medicare, thereby paradoxically making both Obamacare and Health Savings Accounts relatively less expensive. Obamacare can calculate its future costs with the information provided so far. But the Health Savings Account must still adjust its future costs downward for whatever Income is produced by investments.We don't yet know is how much each working person must contribute each year, because we haven't, up to this point, yet offered an assumption about the interest rate they must produce. Let's construct a table of the outcome of what seem like reasonably possible income results. There are four relevant outcomes to consider at each level: the high, the low, and the average. Plus, a comparison with what Obamacare would cost. But there are two Medicare costs: the cost from age 25 to 64, and the cost from 65-85, advancing slowly toward a future life expectancy of 91-93. These two calculations are necessary for displaying the relative costs of Medicare and also Obamacare.

Lifetime HSA and Whole Life Insurance: A Basic Difference

A moment's thought about Lifetime Health Savings Accounts will immediately highlight an important difference. Life insurance has only one benefit claim, the death benefit. Once the flow of premiums begins, the only calculation for a life insurer is a comparison between the beneficiary and the average life expectancy for his age. Some sort of a match must be made when the policy begins; after that, the relationship is on autopilot. A rough match can be made between the two by utilizing bonds as an investment with fixed income, although the income rates when the bonds expire and have to be renewed might be significantly lower and cause a problem. In that case, bonds may not be as safe as they appear to be. And they carry a lower rate of return, reflecting the opinion they are safe. In the case of Health Savings Accounts, there is a constant problem of the beneficiary making withdrawals for outpatient care, so investment income must be somewhat higher in order to discourage frivolous withdrawals. The purpose of health insurance is to provide money for healthcare, however, so there will be a more or less constant drain on the investment reserves. The Law of Large Numbers will smooth this out, but a certain volatility is unavoidable, and a somewhat lowered investment return is implicit. Since the intention is to limit the Catastrophic health coverage to hospitalizations, the attrition to reserves should be limited to paying deductibles, but there is inevitably attrition. Since the Catastrophic Insurer is ordinarily an independent company, a greater amount of cooperation is essential for long-term coverage than is needed for one-year term policies. We can get more specific later, but for now the risks to be managed are outpatient costs, less frequent but larger inpatient deductibles, and what for now we can call "all other". All three must have reasonably independent reserves.

Overdrawn Claims. Since any client could be hit by a truck within a week of establishing an account, new customers present the biggest problem getting reserves established. A large front-end payment can be required, and eligibility for benefits can be delayed. Otherwise, established customers must fund and be compensated for the risk of early claims. Most organizations will probably elect some combination of the three approaches, with some combination of selecting which phase of the combined insurance should or should not subsidize the others, and how it should be repaid. Bond issues are a possibility.

Overestimated Reserves. In the long run, solvency will depend on deliberate over-reserving, gradually reduced as experience accumulates. The basic premise is that young people are comparatively healthy, whereas most of the heavy costs will appear as the client approaches and attains retirement, many years later. Compound investment income will grow over time. There may be periods when there is a mismatch between accumulating and invading the reserves, so there must be a provision for intergenerational borrowing and repayment, the size of which will be established at the onset. Every effort should be made to reduce these shortfalls by overestimating the need for them, based on archived statistics from the term-insurance era. Nevertheless, future shortfalls and future bubbles will be impossible to predict, so over-reserving must be seen as permanently necessary. The consequence of all this is a continuing need for some allowable non-medical use of surpluses, such as conversion to retirement accounts. The importance of this overlooked necessity, is very great.

Proposal 12c Congress should state the principle that necessary Health SavingsAccount reserves should be somewhat overestimated at all times, linked to the incentive that individual non-medical uses of surpluses should be permitted at times when they are generally unneeded for health purposes.

Underestimated Reserves. And almost of equal importance is the need to anticipate early when reserves are proving inadequate, in spite of every effort to overestimate them. Some sophisticated body of actuaries must be created to oversee the growth of reserves, mandating an increased contribution rate from the subscribers. Since many subscribers will find an increased contribution rate is a hardship, the oversight body must have the right to reduce benefits to uncooperative subscribers. That is, instead of reimbursing at 100% of cost, they may have to impose a rate of less than that. In order to perform this unpopular task, the oversight body must have access to better information than the public does, so they can impose small steps rather than big-steps. Under all these unpleasant circumstances, Congress should make the upper limit for contributions more flexible. At the moment, it is $3300 a year. However, while that amount now seems adequate enough, the figure is entirely arbitrary, probably set to prevent speculators from abusing the tax exemption. Therefore, if the upper limit is raised to address underestimated reserves, money might well be forthcoming to address the underestimate, which by then has proved to be no underestimate at all.

Proposal 12d Congress should authorize the Executive Branch to raise the upper annual limit for deposits to Health Savings Accounts, whenever (and for such time as) average HSA reserves fall below a necessary level.


I'm overwhelmed. I'm thinking of a one-line poem by William Blake: "Enough or too much" " stragglers who live from 85 to 91." Sorry to be a burden, but soon to be 91 I can still go a couple of rounds without huffing and puffing. You remind me of Dr. Melvin Konner.... professor.... anthropologist..... physician.
Posted by: Martin   |   Sep 27, 2014 5:16 AM
I want to thank you for this wonderful resource. I find it fascinating. May I offer one correction? In the section "Rittenhouse Square Area" there is reference to the Van Rensselaer home at 18th and Walnut Streets and its having a brief fling as a club. I believe in 1942 to about 1974/5 the Penn Athletic Club was located in the mansion. The Penn AC was a good club, a good neighbor and a very good steward of the building - especially the interior. It's my understanding that very unfortunately later occupants gutted much of the very well-preserved original, or close to original, interiors. I suppose by today's standards the Van Rensselaer-Penn Athletic Club relationship could be described as a fairly long marriage. The City of Philadelphia played a large role in my life and that of my family, and your splendid website brings back many happy memories. For me and many others, however, there is also deep sadness concerning the decline of so much of the once great city and the loss of most of its once innumerable commercial institutions. Please keep-up your fine work. Your's is a first-class work.
Posted by: John D. Mealmaker   |   Aug 14, 2014 2:24 AM
Dr. Fisher, The name Philadelphia University was adopted in 1999, as you write, but the institution dates to 1884 and has been on School House Lane since the 1940s. It acquired the former properties of the Lankenau School and Ravenhill Academy, but it did not "merge" with either of them. I hope this helps when you update your site.
Posted by: David Breiner   |   Jun 11, 2014 10:05 PM
Hello Dr. Fisher, I was looking for an e-mail address and this is what I could find. I must tell you my Mother who you treated for years passed away last May. She was so ill with so many problems. I am sure you remember Peggy Marchesani. We often spoke of you and how much we missed you as our Dr. You also treated my daughter Michele who will be 40. I am living in the Doylestown area and have been seeing the Dr's there.. I just had my thyroid removed do to cancer. I have my fingers crossed they get the medicine right. I am not happy with my Endochronologist she refuses to give me Amour. I spoke with my Family Dr who said he will take care of it. I also discovered I have Hemachromatosisand two genetic components. I have a good Hematologist who is monitoring me closely. I must say you would find all of this challenging. Take care and I just wanted to convey this to you . You were way ahead of your time. Thank you, Joyce Gross
Posted by: Joyce Gross   |   Apr 4, 2014 2:06 AM
I come upon these articles from time to time and I always love them. Is the author still alive and available to talk with high school students? Larry Lawrence F. Filippone History Dept. The Lawrenceville School
Posted by: Lawrence Filippone   |   Mar 18, 2014 6:33 PM
Thank you for your articles, with a utilitarian interest, honestly, in your writing on the Wagner Free Institute of Science [partly at "...blog/1588.htm" - with being happy to post that url but the software here not allowing for the full address:)!] I am researching the Institute, partly for an upcoming (and non-paid) presentation and wanted to ask if I might use your article's reproduction for the Thomas Sully portrait of William Wagner, with full credit. Thanks very much for any assistance you can offer here. Josh Silver Philadelphia
Posted by: Josh Silver   |   Jun 2, 2013 1:39 PM
Thank you for your articles, with a utilitarian interest, honestly, in your writing on the Wagner Free Institute of Science [partly at "...blog/1588.htm" - with being happy to post that url but the software here not allowing for the full address:)!] I am researching the Institute, partly for an upcoming (and non-paid) presentation and wanted to ask if I might use your article's reproduction for the Thomas Sully portrait of William Wagner, with full credit. Thanks very much for any assistance you can offer here. Josh Silver Philadelphia
Posted by: Josh Silver   |   Jun 2, 2013 1:39 PM
George, Mary Laney passed away last November. I was one of her pall bearers. She had a bad last year. However, I am glad that you remembered her and her great work. I will post your report at St Christopher's and pass this along to her husband Earl. Best wishes Peter Hunt
Posted by: Peter Hunt   |   Mar 28, 2013 7:12 PM
Hello, my name is Martin. I came across [http://www.philadelphia-reflections.com/blog/1705.htm] and noticed a ton of great resources. I recently had the honor of becoming a part of a new non promotional project on AlcoholicCirrhosis.com. We decided to put together a brief guide about cirrhosis, and the dangers of drinking. We have received a lot of positive feedback and I wanted to suggest that we get listed on the above mentioned page under The National Institutes of Health. Let me know what you think and if you have any further requirements or suggestions.
Posted by: Martin   |   Jan 1, 2013 8:51 AM
I FIND THIS VERY INTERESTING, INDEED. I AM HOWEVER, SEARCHING FOR THE ANCESTOR WE HAVE BEEN TOLD WAS JOSEPH M. WILSON OF JORDAN TOWNSHIP IN WHITESIDE CO. IL USA. MY HUSBAND WAS ORPHANED AND WITH LITTLE CONTACT WITH HIS FATHERS SIDE OF THE FAMILY THE 9TH OF 10 SURVIVING CHILDREN SINCE ALL ARE DECEASED BUT, ONE). I HAVE HOPED TO FIND HIS CONNECTION AS TO THE STORIES RELATED BY SEVERAL OF HIS DECEASED RELATIVES THAT WE ARE CONNECTED TO THE WILSON MILL FAMILY HISTORY. OF JOSEPH AND FRANCES. MY HUSBAND WAS ALSO, FAMILY TO: GRANDFATHER RANSOM (ISABELLA)WILSON & HIS BROTHER WILLIAM; OF ELKHORN GROVE CARROLL CO. IL USA AND HIS SON JOSEPH WILSON(NANCY). I?WE( MY SONS AND NEPHEWS NEICES AND GRANDDAUGHTERS IN COLLEGE... WERE HOPING THAT NOW THAT I AM ON THE COMPUTER AND WITH YOUR HELP THRU THE GENELOGICAL SOCIETY TO YOUR ADDRESS WE MAY FIND THE FAMILY WE SEEK. MY LATE HUSBAND AND I DROVE PAST THE SITE OF THE FIELD WHERE JOSEPH AND FAANCES ARE BURIED , THE CEDARS ARE GONE AND IT IS NOW FIELD. I HAVE BEEN HOPING TO FIND THE LINK FOR OVER 30 FAMILY TO PAY TRIBUTE TO THOSE WHO HAVE GONE BEFORE AND PERSEVERED TO BRING US THE LIFE WHICH WE ENJOY AND SERVE, TODAY. I RECEIVED ONLY THIS WEEK BY A FLUKE AN EMAIL WITH PHOTOS FROM A 3RD COUSIN THAT FOUND MY EMAIL ON A COUSINS EMAIL ADDRESS AFTER INQUIRING AND INTRODUCING HIMSLEF: AND HE TOOK THE TIME TO SEND MANY PHOTOS AND HISTORY OF GRANDPARENTS AND FAMILY AS WE HAVE HAD NONE. WE STILL DON'T HAVE A PHOTO OF HIS MOTHER AND FATHER. WHAT I HAVE OF THE TREE, I AM ANXIOUS TO SHARE WITH FAMILY THAT IS SEEKING HISTORY, AS I STILL AM HOPEFUL TO FIND IT IN TIME FOR THE DEADLINE AUG. 30 TYPED AND DELIVERED TO MY MARTIN HOUSE MUSEUM WHERE I AM A MEMBER. MY HUSBAND WAS A MASTER MASON WHILE IN LODGE WITH THE COUPLE THAT DONATED THE HOUSE TO BE A MUSEUM. THANK YOU FOR YOUR TIME AND THE GRAT WORK YOU HAVE ALL DONE ON THIS HISTORY. WE WERE LIFE MEMBERS OF THE LUTHERAN CHURCH BUT , THERE IS NOT ONE IN OUR TOWN, SO I FOUND THE REFORMED CHURCH,OF WHICH, I AM VERY HAPPY TO BE A PART. THANK YOU .
Posted by: SUSAN WILSON   |   Aug 12, 2012 12:49 AM

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