Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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A New Currency? Equity Savings Accounts.

Achieving Meaningful Volume Quickly But Tentatively

To explain the (index-fund) connection between gold standards, and Health Savings Accounts, passive investment can support entirely unrelated payment requirements. Index funds held in escrow would be tangible stores of value for unspecified future expenditures, earning substantial income from otherwise idle money, but taking up little storage space. At the other extreme, their collective prices might merely provide non-subjective price discovery to replace the subjectivity of central bankers on the honor system. Obviously, market-based prices are subject to occasional panics, but might serve for short-term experiments. A mixture of the two, some in escrow, some immediately salable, might serve both price discovery and as stores of value.

Medical expenditures are commonly stated to be nearly 18% of the gross domestic product (GDP). That's a lot of idle money, which if capitalized might give a meaningful boost to the national, or even total world economy, by expanding borrowing capacity. The experience with gold was you didn't need to match the entire money supply. Less than 20% provides adequate price discovery, even employing a useless metal like gold. Since passive investing is a by-product of computers, there has been too little experience to predict exactly where so much extra capital would take us, but there is every reason to foresee generally favorable results. Unfortunately, there is also every reason to fear some unexpected harm might pop up somewhere, to make us wish we hadn't done it. Therefore, widely watched experiment seems appropriate.


Health Savings Accounts seem highly desirable in themselves, particularly under the urgent circumstances of backing off from Obamacare and substituting Trumpcare, without exactly defining either one of them. HSA have been in existence for thirty years, have jumped through the numerous legislative hoops, and have been at least temporarily adopted by millions of people. Major businesses have apparently recognized this feature, and changed their earlier resistance to endorsement of voluntary trials within the health benefits system. People old enough to have Medicare are largely indifferent to this topic, because they believe their medical financing is secure, but even this group is beginning to perceive that better health has created much greater need for retirement reserves. Younger people for their part, have now received small accounts as an unexpected employer gift, and are asking each other what it's all about. The administrators of such accounts vary widely in competence, with health insurance companies cautiously steering people to account managers, and account managers steering customers to high-deductible insurance managers. It is the nature of things that commissions of some sort are paid for referrals of business, which in turn reduce the effective income of customers. The McCarran-Fergusson Act pushes in the direction of control by fifty states, while the Constitution places the currency in the hands of national government; it's only a guess which way things will fall.

Finally, the health financing crunch has added an element of urgency to a decision which would ordinarily take much longer. The casualties of the Civil War shifted sympathy away from states rights, but the health crisis forces re-examination of that decision. One glance at weekend traffic congestion around the nation's capitol convinces anyone that centralized control may be outgrowing its blood supply. United States congressmen are sleeping on cots in their offices rather than face the cost and strain of transcontinental commuting; this heart of centralized government has already become convinced that centralization has created big problems. Eventually, something must break this logjam, and devolution of powers to the states might be part of that solution. So, the problem is big, complex, and urgent. And the healthcare financing problem might well force a speedier resolution. The nation, however reluctantly, is about to address this issue at its roots, understands that any solution may go wrong, and probably is willing to tolerate some experimentation with fundamental structures like monetary standards, which would have international consequences. A monetary standard is so fundamental that experiments must be meaningfully large and inclusive, but they must also remain voluntary, in order to be modifiable or abandoned. The atmosphere of near-crisis is necessary even to come to a decision, and health financing happens to supply that ingredient.


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