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Philadelphia Reflections

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

271 Topics

Introduction: Health and Retirement Savings Accounts. As Is, Right Now.
New topic 2016-03-08 22:42:53 description

Future Directions for Health Savings Accounts
New topic 2016-03-29 20:37:09 description

Health and Retirement Savings Accounts: Current Issues and Possible Remedies
If you read it fast, this is a one-page, five-minute summary of Health Savings Accounts.

Terse Verse: Thomas C. Howes (10)
Poetry is a form of literature that uses imaginative and creative words in a compressed form to express idea.

Right Angle Club: 2016
In progress.

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In Conclusion: No Tree Grows to the Sky

In conclusion, let me set boundaries for whatever hopes this book might arouse. In the first place, HSAs are tax-exempt. The hidden significance is the government will tend to oppose expanding its concepts to other purposes, since Treasury will want to retain as much as it can in the taxable category. This tax exemption is limited to health costs, just as Senator Roth's other qualified retirement programs were limited to paying for retirements. That exposes it to accusations of being a tax dodge perhaps, but it's intentionally limited to health and retirement. Moreover, the added "escrow feature" additionally restrains the individual himself from diverting the tax exemption to unintended purposes. So it's constrained, in two directions. I think that's a good thing, keeping too many people from climbing aboard the lifeboat, and sinking it.

Secondly, no amount of tinkering is likely to make HRSAs cover all health and all retirement costs. One or the other perhaps, but not both. The mathematics of health care and its consequence, extended longevity, simply will not stretch that far. By ignoring all the internal steps, forgetting about transition costs and all the rest, total cost is more than total revenue. After applying some strategies, the shortfall has been concentrated into retirement. The conclusion is health costs can be covered, maybe, but retirement costs can't. Adding Social Security, a constrained retirement might be possible, but this is the point where any shortfall was designed to emerge. If your retirement plans revolve around HRSAs, you had better plan to supplement them with other sources. And if you then must plan to mix sources, you are always going to need a common fund, and therefore the individual fund must continue as a place to derive funds for a common purpose and possibly extended tax relief for funds of differing size, rather than a communal paradise. Everybody better keep on planning to work longer, to pinch pennies, and earn some outside income. It isn't going to result in everyone living the life of a character in a Jane Austen novel. That's not to say it's nothing to pay for all of health care and some of retirement. It would actually be a great achievement. But even that only becomes possible if everything works exactly as planned. And if it won't, don't count on paradise, work toward it.

Bill Roth of Delaware and Bill Archer of Texas made HRSA politically possible, and John Bogle of Pennsylvania made it financially conceivable with passive investing. Dale Yamamoto the actuary devised the system for measuring medical costs at different ages, and my son George then established the probable feasibility of a lifetime financing. My family, including Miriam, Margaret, Stuart and Janice, applied the "No prophet in your own valley" approach, and picked every nit. John McClaughry lurked in Vermont, fearful to see how I would make a mess of his one-liners. God bless you, every one.

In closing, let's restate the argument:

1. Where does the extra money come from? From investing rather than borrowing the healthcare money. That doubles the effective result.

2. Where did the seed money come from? Initially, from HSA tax exemption, and reduced healthcare expenses. Subsequently, from reduced investment costs, and the fact that both lifetime health costs and compound interest follow J-shaped curves, allowing unused early deposits to accumulate until needed later in life, accelerating toward the time they are used. In recent years, the public discovery that unused funds turn into an IRA at age 65, has led to extra depositing within legal limits. (I propose the same incentive system for Medicare.)

3. Isn't this too complex for the average person? Not since the introduction of low-cost "passive" investing.

4. Aren't interest rates too low to accomplish much? Yes, so this increases the attractiveness of long-term, low-cost, total market, index-fund investing.

5. Aren't fees too high? Often, they are. Stick to funds with a trillion or more invested, and cost of less than a tenth of a percent.

6. I'm afraid to be a pioneer. You aren't a pioneer. Nearly twenty million people have HSAs already. You need to worry about waiting too long to start, because you are dealing with J-shaped curves. If you never get sick, you can spend the enhanced money on retirement living.

7. Is that all? By no means. If you want to bedazzle yourself, consider using leads and lags on a. First and Last-year of Life re-insurance, and b. Grandchildren Inheritance Transfers. There's also c. the possibility that science will eliminate some Medicare costs, so the money can then be transferred to retirement. I propose an automatic transfer of Medicare surplus to Social Security, as an incentive. These are all new ways to cope with transitions and to enhance investment income by prolonging its investment periods, but they probably require legislative confirmation.

It would appear both healthcare and compound interest follow J-shaped curves of slightly different shapes over time, sufficiently to encourage the idea that a little manipulation could make achievable, passive investment pay for all legitimate healthcare as we now know it. For example, a single fairy-godmother deposit at birth would rather easily cover the costs of first-year and last-year of life insurance, if interest rates return to a normal 6.5%. That could also be accomplished by saving $5-10 dollars per paycheck from Medicare withholding tax from age 25 to 65, provided the savings were continuously invested at 6.5%. Some might argue such estimated investment return is too high, while others might question whether future generations would be sufficiently frugal to continue the process. But most people would say the amounts estimated are small enough to adjust to such questions. Paying for all of retirement costs, however, is another order of magnitude.

Just as a lot of people warm to the idea of giving newborns an equal financial start, there is a lingering hope that at retirement, everyone might enjoy a more-or-less similar life of leisure. However, a little calculation of the two shows it would be far more difficult to achieve in the case of retirement. If we can agree on a hypothetical number, perhaps it would be debatable whether a hypothetical $20,000 a year might satisfy most ideas of an adequate pension, particularly when reminded this would amount to $40,000 a year for a retired couple. But then just look at what it would cost.

To achieve this goal, savings of $250,000 would be required at age 65. And to achieve that, several of our favorite strategies look a little marginal. We could transfer an increased Medicare withholding tax of $150 a month for forty years and invest it at 6.5%, at the conclusion of which we would have about $250,000. But the newspapers seem certain fifty percent of the population aged 50, have no liquid savings at all. Daunting though it may be, those might be accurate figures. They may well be rough estimates, but do not augur well for asking new hires at age 25 to put away $150 a month, and keep doing it for forty years. Nor does the fairy godmother approach sound like an easy approach. If we imagine an inheritance or a federal subsidy, it would require a lump-sum deposit of $3500 per person at birth to achieve an individual goal of $250,000 at age 65. Or a deposit of $18,000 at age 25, coming from similarly undefined sources. We might look for ways to stretch out the investment period, since it would look as though compound interest has a chance of growing faster than the cost of living. If that approach is tapped, it would require a transfer of $700 to a newborn, assuming a 90-year investment time could be manipulated out of thin air. Or $300 for 104 years, the present definition of a perpetuity (one lifetime of 84, plus 21 years). Or $150 for 111 years, hoping life expectancy to increase to 90 years looking one lifespan ahead. The trouble with such projections is not so much the dollar amount, which some would say could be inflated away, but the extended time period. All such extensions exceed the human lifetime, depend on someone-else to keep them up for someone, who has himself been dead for decades. It is possible to predict great advances in medicine, in computers, and in transportation. But I would not be willing to predict such advances in human nature.

So I would urge everyone to be satisfied with these suggestions for healthcare, looking elsewhere for help with luxury retirement.

Medicare Frugalness Incentive

Future Medicare costs are more predictable verbally than with data. Half a dozen diseases make up most of the cost of Medicare, and it can be predicted that research will eliminate some of them. Although at first the new cost of treatment will raise costs, eliminating the disease will eventually lower them. The last year of life will almost certainly remain expensive, because everyone will eventually die. In that sense, it is easier to predict continuing high costs for the last year of life, than for Medicare as a whole, except for scientific progress driving disease out of lower age groups into Medicare. In fact, enduring costs of the last year of life are about the only thing predictable about Medicare. So the old folks needn't worry; no one will seriously propose eliminating the program until the future becomes clearer.

However, diseases will surely be eliminated, longevity will increase, and the last year will be expensive. It seems rational to give Medicare recipients the same incentive to be frugal about spending which younger ones get from Health Savings Accounts: if your medical costs go down, we will transfer the savings into retirement funds which many of you badly need. In the case of Medicare beneficiaries, that probably means transferring them into current Social Security payments. Another purpose is also served, which is to make the offer while there are no surplus funds. It would serve the purpose of assuring the elderly that funds going into their medical care will be diverted to the consequences of good care, which is improved longevity. The consequences of not staking out this position in advance, might be, just might be, the diversion of funds into battleships, sugar subsidies and other worthy causes. And having been shown clean hands with this proposal, perhaps the seniors would calm down and consider other proposals about Medicare.

For example, how the books are kept. Medicare is funded by three sources, the wage tax on working people (3%) of their income, the premiums the old folks pay, and the subsidy from the general fund. However, the money is not put into a big Medicare pot, but rather designated to particular parts of the program. The fiction is maintained that hospitals are almost entirely funded by the wage withholding tax, more or less guaranteeing that the hospitals will be paid, no matter what, because the wage tax has already been collected as cash in hand. The rest of it is less certain subsidies and premiums, much of it borrowed from foreign nations. You can see the hospital lobbyist in this: hospitals get paid first, no matter what. And so far, it hasn't mattered much, because everyone got paid in full. But however meaningless, it represents a give-back which the hospitals would probably be reluctant to give up.

Since it represents a reason to resist reductions in Medicare funding by the federal government, it potentially stands in the road of gradually reducing Medicare funding for other purposes. Including shifts from medical care to retirement funding, let's say. And it serves no other purpose I know of.

Problems. Problems

Hospitals and doctors have a right to keep their account books, any way they please. The prices they charge, however, are a matter of negotiation with vendors. The case against mixing medical language into health insurance claims is clear enough; doing so adds considerable complexity and cost, without clear purpose in changing the price. It makes us do a lot of dumb things. A return to an indemnity system would increase payment efficiency. Subscribers pay the insurance companies premiums in cash; insurers pay the healthcare providers in cash. Cash in, cash out. Payments go out to vendors based on individual costs run up by individual subscribers. Premiums are split among individual subscribers as per capita shares of the total paid out. Research and charity should be accounted for separately, instead of being mixed into general patient care costs. A case for going slow, gradually phasing-out the present system, makes sense. What's the resistance?

Unwinding Cross-Subsidies. No strong argument is improved by exaggeration. Regardless of original intent, the main justification of a system designed to protect teaching and charity hospitals, has been research that extended average life expectancy by thirty years in a century. There are lots of nits to pick, but don't ever forget the baby you are going to throw out with the bathwater is what gave you thirty years longer to live. That outcome may have been unintentional -- many outcomes often are -- but a miracle of that magnitude should make us forgive quite a lot, indeed, it ought to make the whole world grateful,. But also unforeseen was a convoluted system costing ridiculous amounts of money, at a time we cannot afford it. Never mind it's the best there is; it could be better. Because it's the best there is, improvements should be American improvements, not imitations of how Otto Bismarck arranged things.

Today, and even more when this system was designed a century ago, there is considerable difference between the research and charity functions of different hospitals. Internal cross-subsidy hides the source of this, but it's fairly simple if you first subtract the different degrees of support the various hospitals receive from donations. Some hospitals do a lot of research and charity, others are located in different regions of differing composition. So a new layer of cross-subsidy was created to equalize the patient premiums for the same service, redistributing the "indirect overhead" costs to consumers to pay the bill. The result was the same health insurance premium, no matter which hospital you chose. To make sure everyone played fair with artificial numbers, the claims then passed through a medical process which we won't bother to describe. Over time, this just became the way things were done. I can remember having lunch with the board chairman of the local Blue Cross, who was also the board chairman of the largest hospital in Philadelphia, and I pointed this inter-hospital subsidy system out to him in 1970. He was astonished.

Since that time, Medicare has become the big gorilla for claims administration, essentially dictating methodology, although the methods have not changed much. What has changed is the composition of payments for research (now largely governmental), donations and charity (mostly much smaller), and administrative cost (which has gone out of sight.) How disruptive if would be to net out the overhead and pay it separately, is unclear to outsiders. I have the feeling hospital administrators are like a man holding a cat by the tail, afraid to let it go.

It is clear enough who benefits from the present blank-check approach, and therefore who would resist change. You certainly do not want to constrain either research or charity. Research added thirty years to longevity, and using the charity patients for teaching purposes is diminishing but still appreciable. In my own opinion, the disparity in luxury, between patients who pay for luxury and patients who do not, is a main dilemma facing reform. We like to say fairness itself provides for equal treatment under the law, but whether payment was included in the transaction has always been skirted.

As the Affordable Care Act plays out, we get closer to examining whether we must reduce research costs in order to provide private luxury care for indigents. That's a political question, but it largely ignores how luxurious even our free services have become. We might rationalize it after research eliminated about ten particular diseases, but at the moment we can't afford to do it. One who remembers hospitals in the summer without air conditioning, and hospitals built low because elevators were expensive, may see things differently. To provide stripped-down care for everyone just to make it equal to indigent care, seems a highly improbable alternative, to just about everybody except politicians. But while no corporation could survive long without a small amount of internal cross-subsidy, times seem to have changed enough to permit stripping out a large part of research and charity costs, funding them separately and perhaps displaying them unmerged on the patient bills. If the public is to decide this, the public must get the facts straight.

In addition, I propose we improve and enlarge Health and Retirement Savings Accounts on its present term and indemnity basis, and spend the following two or three years debating how to switch the rest of life to a whole-life approach as an integrated lifetime system. The cost improvement of whole-life over term insurance is another important argument for consolidating the vertically fragmented payment system. But I'm not really sure it can be done yet, although it deserves investigation. I wish others would explain what they mean by a single-payer system, but I fear whole-life insurance is not the goal in mind. This book envisions three hundred million individual owners, whereas single-payer sounds like just the opposite, a government system which remains a government system, no matter what. To further this debate, the rest of this book is devoted to the pieces we might like to add to HRSA, and how to go about adding them. You may notice taking off your shoe and pounding the table with it, is not one of the recommended options.

* * * *

With this point, we move away from the first section of the book, describing, endorsing and explaining Health Savings and Retirement Accounts in their present form, adding only a few tweaks to bring them up to date. In itself Health Saving and Retirement Accounts are a great improvement over competitive systems, but they could be smoother and less expensive overall if the term of insurance risk were lifelong instead of mostly one-year. But until the whole-life insurance companies give it their blessing, I urge we hold back.

That means insurance might be improved if based on whole-life principles like most life insurance, although I invite life insurance experts to show me differently. Right now, tampering with Medicare is politically impossible, and insuring children presents special difficulties. With those two gaps unsolved, you just can't devise lifetime plans that will work, so earlier patches probably do get in our road justifiably. The success of whole-life life insurance shows it can be done, sort of, but would require great care and long planning. After wrestling with the issue for years, I have come to believe we should concentrate on what is now legal but not fully exploited in HRSA, while we spend several years planning together before taking additional major steps into the unknown. Therefore, if you are only focused on the immediate future, you can stop reading, right now, and get busy adopting HRSA. But if you would like to know how much better (and cheaper) the idea of individually owned health insurance could be, read on. The country needs to decide whether to make one major improvement and stop, or to keep going in an agreed-upon but difficult direction. Launching a thirty year war is simply not necessary.

Human Rights

{AMA Logo}
AMA Logo

ABOUT ten years ago, I first encountered the use of the term "Human Rights". Seated as a member of the House of Delegates of the American Medical Association, I was distracted when a late resolution was passed around for urgent consideration. Such resolutions require a super majority to be introduced as business of the House, either two thirds, or three quarters of the attendees, and a little speech by the author explaining the "reason for lateness". The resolution was a one-line request for endorsement of the concept of Human Rights by the American Medical Association. The stammering explanation for lateness (as distinguished from holding it over to the next meeting) was that it was self-evident that the Association would favor human rights and immediately place it on the "Consent Calendar" for approval without voting on it. Like everyone else in the room, I looked to my seatmate neighbor to ask what this was all about. No one knew, so the author was asked to explain. Well, it was about human rights, not animal rights or corporate rights, and was otherwise so self-evident it needed no further explanation. Just what was in the mind of others seated in that room I cannot say, but to me the resolution seemed like nonsense, whose author seemed very innocent and naive. In any event, the resolution was dismissed, the paper discarded, and we went on to the medical issues we were there to discuss.

{Bill of Rights}
Bill of Rights
the committee to prepare the Bill of Rights, it is easily possible that he felt the same way about the ninety rights he decided to delete. The handful of rights which survived into the Bill of Rights seem to have been limited to preventing outrages (freedom of speech, assembly, petition for grievances, press, religion) which the British had committed during the Revolutionary War. The rest of the proposed rights would have to go through the process, one by one, of establishing that violations had indeed been numerous and notorious. By contrast in the recent construction of the Bill of Rights for the European Community, a far more relaxed attitude was in evidence. They are fifty pages long, including such things as the right to work half time when an employer wants you to work full time. The best I could say about that would be it is micro-management. The worst would be to imagine that a great many people who voted for it were displaying a deliberate intention to make the European Union unworkable, and that must have been at least a majority, if not a super-majority. Without more willingness to compromise than this, the EU seems doomed.

{Ghengis Kahn}
Ghengis Kahn

In fact, the whole concept of prosecution for human rights violation is too vague to be useful. When individuals commit outrageous crimes, the matter can normally be handled under the criminal code, with the offense defined and appropriate punishment described in advance. Murder and torture are not commonly affected by whether or not rights have been violated. On the other hand, offenses by component national states are usually regarded as acts of war; if Ghengis Kahn were accidentally admitted to the EU, the punishment would start with expulsion from the Union, and surely go on to war, essentially the same outcome. A nation which was able to deal with the Iroquois and the Comanche tribes surely has no nightmares about Nebraska electing Pol Pot as governor. The human rights advocates have simply got to make a more plausible case for revolutions in our criminal justice system, if they are to be taken seriously.

To Sum Up: Health and Retirement Savings Accounts: Immediately, and A Peek at Future Advances

As an earlier section has outlined, Health Savings Accounts were developed by John McClaughry and me in 1981, as a bare-bones health insurance scheme for financially struggling people. The package consisted of the cheapest insurance we could imagine (a high-deductible Catastrophic indemnity plan with no co-pay features), linked to what others have described as a tax-sheltered Christmas Savings Fund. What was the linkage supposed to accomplish? The Account linkage was originally intended for folks who must struggle to assemble the deductible portion of the insurance; so the package could then become the cheapest healthcare package we knew how to devise. As deposits in the account built up, the effective deductible fell to zero, but the premium of the insurance did not rise. At that point, you might describe it as "first-dollar coverage at a rock-bottom premium." It certainly compares well with so-called "Cadillac" plans, where the underlying motivation was to include as many benefits as possible, money no object, with someone else paying for it. If the government wanted to subsidize our plan to make it even cheaper, money for the bare-bones plan could be subsidized for seriously poor people, just as the Affordable Care Act does. HSA is itself absolutely the cheapest, but it isn't free, and additional features like charity must be accompanied by additional revenue from somewhere.

First-dollar coverage by any mechanism generates the danger of spending health money unwisely. That undesirable feature was neutralized by letting you keep what is left over at age 65, thereby generating retirement income. Retirement income is generally in short supply, and there may exist a future danger well-meaning attempts to supply generous retirements would destroy this incentive to be frugal, but right now it isn't a worry.

Other Incentives. One thing we didn't immediately verbalize was, making it a bargain additionally entices people to save, even when they are sort of inclined to consume. We didn't think to include regular paycheck withdrawals, but that's another common savings incentive with proven effectiveness. Having loose cash does seem to create a vague itch to spend. But the HSA specifies an invitation to save for health care, using any surplus for retirement, a much more tangible appeal. With that addition, it becomes a more attractive program, while possibly appealing to a larger segment of the population without reducing its appeal to the original ones. Our reaction was that everyone was complaining about high health costs, so the more people HRSA appealed to, the better.

The real game-changer was this: When a subscriber acquires Medicare coverage, anything left in the fund is automatically turned into a tax-exempt retirement fund, an IRA. As enrollments in HSAs began to boom, it was realized this provision created an unmatchable retirement fund whenever someone put extra money into the account. I wish I knew whose idea that was. So you might as well say the basic package has three parts: a high-deductible health insurance, a spill-over retirement fund, and a Christmas savings fund to multiply it with compound interest. It is a savings vehicle for two sequential stages of life, with the tax advantages of the first stage getting it on its feet. The separation of the account from its re-insurance, also separated the incentive to save from the desire to share the risk. Adding compound interest adds particular attractiveness for the later stages of life, because compounding takes a long time before it means much. It connects the two benefits end-to-end, lengthening the time for compound interest to become meaningful, as it might not if it waited for retirement to begin. We eventually realized the deductible-funding and retirement-funding Christmas savings account package was the most attractive investment vehicle most ordinary folks could find; beating it as a retirement fund was therefore nearly impossible.

Hence the overall strong incentive to save, sadly missing from every other form of health insurance. Experience shows this unique set of incentives to buy it were effective, so a 30% reduction in premiums for total health insurance began to be demonstrated among pioneer clients, not merely claimed in theory. The recognition of all these advantages led millions of frugal people to sign up without an expensive marketing effort. Everything seemed to fall in place, making us quite satisfied with the result. Even though mandated extension might have speeded up acceptance, slower adoption avoided the early catastrophes of taking on more than could be handled.

So that's where HSA stands today -- the best little health insurance idea available anywhere, unless someone monkeys with it. Even the remote possibility of getting very sick, very often, was covered by adding the feature of a top-limit to out-of-pocket costs, paid for by dipping into a small portion of savings generated by other features. Anyone who thinks of a better health insurance plan than this one, is welcome to offer it. Let's whisper a reminder: the policy is owned by the individual rather than his employer, so it doesn't suddenly stop when you change employers. To a different audience we could whisper, it could bring another feature closer to an end, the business of paying for Medicare with debts which have to be borrowed from foreigners. The Account gathers interest, instead of costing interest charges. The best part is: it induces the subscriber to hold back from using the account, saving it for more distant requirements, which otherwise come without warning. Paying for your old age is wonderful, but starting to save while young is vital, and more likely to work. Most plans now maintain an upper limit to the subscriber's out-of-pocket costs, protecting against a second illness with its second deductible. When we say, "That's all there is to it," we really mean that's all the advantages which have so far emerged. It's ready to be renamed HRSA, the Health (and Retirement) Savings Account.

Technical Amendments, Needed at Present.

Now, let's pick the nits, noticing how hard it gets to improve on it. If Congress could pass a few amendments, the following flaws could be more or less immediately repaired:

1. Full Tax-Deductibility. Attractive as it is, HSA still isn't fully tax-deductible like the health insurance many employed people are given at work. The savings and retirement portions are indeed tax-sheltered, but unlike some of its competitors, the high-deductible health insurance itself stands outside the funds (as what insurance experts might call re-insurance) and isn't covered. Employers get around this difficulty for their employees by buying it themselves and "giving" it to the employees. Without monkeying around with this rather dubious maneuver, we propose the premiums for the Catastrophic health portion of the HRSA might instantly become tax-exempt if the Savings Account paid the premium. That would appear cheaper to the Treasury, than proposing to make the whole package deductible. But the other parts are already tax-exempted.

To permit something like that would require a one-line amendment to the HSA enabling act, but would restore fairness to the system, and bring out how much cheaper the Health Savings Account really is. Making it cheaper means more people could afford to buy it, thus relieving the Treasury of the need to include those people under the Affordable Care Act. That compensates for some of the loss of revenue to the IRS of making the Catastrophic Health Insurance tax-exempt. Regardless of how the CBO scores this complexity, it should be remembered that poverty is not a lifelong condition for most poor people; after a temporary period of poverty, many if not most of them rise toward becoming full tax-payers. Equal treatment under the law is itself worth something; it could alternatively be provided by lowering the corporate income tax. But that's not self-evident, and politically hard to explain. If the Congressional Budget Office would extend its dynamic scoring to include retirement taxation on the HSA's eventual compound interest (instead of limiting its horizon to ten years), it would prove to be better to chose the alternative of letting the Accounts buy the re-insurance.

2. A better Cost of Living Adjustment for HSA deposit limits. There is presently an annual limit of $3350 for deposits in Health Savings Accounts, whose limits have seldom been raised. This new COLA should be formalized into a continuing cost-of-living adjustment which is somehow related to the current rate of inflation in the economy, and perhaps takes account of the transition to HRSA by people over age 60. These late arrivals simply cannot catch up within the present deposit limits, even if they possess the savings to do so.

3. Age Limits for HSAs It is a quirk of compound interest (originally noticed by Aristotle) that effective interest rates increase with the duration of investment. Consequently, much or most of the revenue appears after forty years, and consequently the HSA gets progressively more valuable with advancing age. To put it another way, young people contribute more time for interest to grow, old people must contribute more money. At present, the HSA age limits are set to match employment, but the HSA will inevitably focus increasingly on funding retirement. Removing all age limits might go a little too far, but would substantially increase the amount of investment income generated, at almost no extra cost to the government. It might also supplement the platform for funding childhood health costs, a problem which stubbornly resists improvement. It might greatly enhance revenue for older subscribers, the surplus from which could be used at their death for grandchildren.

Extending the age limits would potentially also serve as a platform for re-adjusting dangerous imbalances in the healthcare financing system. We are fast approaching a demography of thirty years of childhood and education, followed by thirty years of working life, followed by thirty years of retirement. But substantially all of the revenue comes from the middle third, while the remaining two thirds of the population contain most of the health costs. To some extent, this is unavoidable, but the whole health financing system becomes a dangerously unbalanced transfer system for well people to subsidize sick ones. It is possible to foresee the beginnings of class warfare, based on age alone. Consequently, society would be well served to create the more stable system of subsidy between yourself as the donor and yourself as the beneficiary. The alternative is to continue the process of having one demographic group collectively subsidize two other groups of strangers who generate most of the cost. Eventually this might lead to the well people dumping the burdensome sick people. I hope I am unduly concerned, but to extend the age limits for individual self-financing seems a very cheap way to begin stepping out of that particular mud puddle.

As an aside, it's true the subscriber to a Health Savings Account is not fully covered in his first few years, until the account builds up to the deductible. At first, that was a concern, but it has proved largely unnecessary to provide for it among young healthy subscribers. Apparently, by the age hospital-level illness becomes common, ability to meet the deductible has mostly been achieved. Nor has it proved necessary to resort to sliding-scale deductibles hidden in the slogan, "the higher the deductible, the lower the premium" -- probably because conversely, lower premiums lead to more money to save. These features might be reviewed when self-selected frugal applicants taper off, since HSA enrollment has favored younger enrollees, so far. For the moment, sales incentives seem adequate; everything else may be indirectly changed by HSAs, but very little is directly changed.

Future Expansions.

How far these three short amendments would extend retirement solvency, is hard to predict into the future, but it would be considerable. Aside from any improvement never seeming like enough, it is almost impossible to guess the future timing of health costs, even if you can see them coming. But while the amendments might assure a comfortable future for Health and Retirement Savings Accounts, they do seem unlikely to address the full costs of retirement, which are usually undefined and often overly ambitious. So the problem for many, many afternoons' deliberation, would be to expand the potential of HSAs until they become objectionable for competing concerns. For that, I have four additional proposals which might work, but inevitably collide with professions who would be quick to suggest narrower limits. Let's describe them, while waiting to assess objections from those they would discomfit:

1. A re-insurance scheme (insurance company to insurance company), called First and Last Year-of-Life Re-Insurance.In the far distant future, health insurance will surely concentrate into the these two years, so we get our directions approximately right if we start there. It's superimposed on but untangles many cross-subsidies, and extends the duration of compounding within the present system. A ninety-year transition period for lifetime HSAs is too long and must be shortened somehow before whole-life can be feasible. In retrospect, it is difficult to understand how the insurance industry managed to establish whole-life insurance; certainly, it could not have been based on actual experience. The present proposal is a reinsurance system, invisibly supplementing present procedure-based payment systems but extending their duration of compound interest. In summary, a small escrowed sum at birth--possibly three hundred dollars-- grows undisturbed to astonishing size in eighty to a hundred years. At death, the fund would easily reimburse Medicare for its demonstrated expenses during the terminal year of life, essentially providing a quarter of Medicare at a total cost of three hundred dollars. A somewhat larger deposit, perhaps another hundred dollars, might also produce enough surplus after reimbursing Medicare, to take care of the first year of life of one grandchild or equivalent, although there appears to be so much surplus from last-year, that the two approaches could proceed from both ends at the same time, to shorten the transition. Available figures for obstetrical costs are not available, but the approach might be improved by considering obstetrics as a cost to the baby. The main problem with this transition issue is not its cost, but its extended duration.


By placing these funds in escrowed individual Health Accounts, a suspicion is addressed that the money might be spent on battleships or otherwise diverted during its long period out of sight. About a quarter of health costs would be replaced, and essentially removed; although the accordion principle might adjust it larger or smaller. Birth and death years are the two most expensive in human life. Almost no one pays his own costs for them. And they address 100% of the population. The Health Insurance Industry, now precariously balanced on questionable cost-shifting between demographic groups, would never be the same. Particularly since private industry would be expected to finance the reinsurance out of reduced revenue.

2. Medicare should be modularized but without basic change, so recipients can buy pieces they do not need, using the proceeds for retirement. Sometime during the next fifty years it can be predicted at least one of the five most expensive diseases (Alzheimers, diabetes, cancer, psychosis, and Parkinsons) will be inexpensively cured, once the initial cost increase is absorbed. We need a way to fine-tune the transfer of such medical savings into retirement income, understanding many competitors will hope to divert the windfall. Redirecting the Medicare withholding tax makes an excellent way to channel the funding, as would reductions of Medicare premiums. Scientifically, Medicare is eventually destined to shrink as we find cures, but funding the resulting longevity must have first call on the savings.

3, The investment component of Health Savings Accounts should be dis-intermediated.The stock market has produced--for a century--10%-11% long-term returns on large-cap stocks, 3% inflation, and less steadily 4-5% on bonds. The volatility is much less than most people imagine. Index funds of these entities should perform about the same, at far less cost, perhaps 0.1-0.3%. The days fast fade, when the public will surrender the present level of transfer costs, which now sometimes erode investor return to as low as 1%. The simpler system is "passive" investing with index funds, and its goal should be an average return to the retail customer of at least 6.5% after inflation and costs. The retail finance industry must re-examine who is at risk and who is rewarded for taking that risk.

4. The center of medical care should migrate from medical centers to shopping centers attached to retirement villages. Architects report it will always be cheaper to build horizontally than vertically. Since we seem destined to spend thirty years in retirement, and the principal occupation of retired people is taking care of their own medical needs -- the wrong people are doing the medical commuting. Teaching hospitals were located close to the poor, in order to use them for teaching material. But now "meds and eds" are fast becoming the principal occupations of high-rise cities. If there is ever a good time to place medical care closer to the patients, this is it.

And if ever there is a way to put the doctor back in charge of medical care, decentralization is the way to do it smoothly. We will always need tertiary care, but we don't need indirect overhead, skyscraper construction, or layers of administration. Even continuing education is becoming a revenue center. No one can claim the present centralization made things cheaper, and the disadvantages of medical silos certainly call the quality issue into question. The Supreme Court failed us in the Maricopa Decision; so let's see what Congress can do with reconciling the Sherman Act with the Hippocratic Oath.

A most interesting website, thank you. I really hope to visit Philadelphia one day, and I shall definitely consult your website. I came across this website after doing a search on Johannes Kelp / Kelpius. I had just listened to a song written about him called, 'Sighisoara' at ukuleleroadtrips.com. Sighisoara is the place J Kelpius left for Philadelphia with 40 followers. Best Regards
Posted by: Pamela   |   Aug 20, 2015 11:04 AM
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
Posted by: SUSAN WILSON   |   Aug 12, 2012 12:49 AM

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