The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
In the case of the American Constitution, the initial problem was to induce thirteen sovereign states to surrender their hard-won independence to a voluntary union, without excessive discord. Once the summary document was ratified by the states, designing a host of transition steps became the foremost next problem. The dominant need at that moment was to prevent a victory massacre. The new Union must not humble once-sovereign states into becoming mere minorities, as Montesquieu had predicted was the fate of Republics which grew too large. Nor must the states regret and then revoke their union as Madison feared after he had been forced to agree to so many compromises. As history unfolded, America soon endured several decades of romantic near-anarchy, followed by a Civil War, two World Wars, many economic and monetary upheavals, and eventually the unknown perils of globalization. When we finally looked around, we found our Constitution had survived two centuries, while everyone else's Republic lasted less than a decade. Some of its many flaws were anticipated by wise debate, others were only corrected when they started to cause trouble. Still, many tolerable flaws were never corrected.
Great innovations command attention to their theory, but final judgments rest on the outcome.
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Benjamin Franklin advised we leave some of the details to later generations, but one might think there are permissible limits to vagueness. The Constitution says very little about the Presidency and the Judicial Branch, nothing at all about the Federal Reserve, or the bureaucracy which has since grown to astounding size in all three branches. Political parties, gerrymandering, and immigration. Of course, the Constitution also says nothing about health care or computers or the environment; perhaps it shouldn't. Or perhaps an unmentioned difficult topic is better than a misguided one. Gouverneur Morris, who actually edited the language of the Constitution, denounced it utterly during the War of 1812 and probably was already feeling uncomfortable when he refused to participate in The Federalist Papers . Madison's two best friends, John Randolph, and George Mason, attended the Convention but refused to sign its conclusions, as Patrick Henry and Thomas Jefferson almost certainly would also have done. On the other hand, Alexander Hamilton and Robert Morris came to the Convention preferring a King to a President, but in time became enthusiasts for a republic. Just where John Dickinson stood, is very hard to say. Those who wrote the Constitution often showed less veneration for its theory, than subsequent generations have expressed for its results. Understanding very little of why the Constitution works, modern Americans are content that it does so, and are fiercely reluctant about changes. The European Union is now similarly inflexible about the Peace of Westphalia (1648), suggesting that innovative Constitutions may merely amount to courageous anticipations of radically changed circumstances.
President Franklin Roosevelt
One cornerstone of the Constitution illustrates the main point. After agreeing on the separation of powers, the Convention further agreed that each separated branch must be able to defend itself. In the case of the states, their power must be carefully reduced, then someone must recognize when to stop. If the states did it themselves, it would be ideal. Therefore, after removing a few powers for exclusive use by the national government, the distinctive features of neighboring states were left to competition between them. More distant states, acting in Congress but motivated to avoid decisions which might end up cramping their own style, could set the limits. The delicate balance of separated powers was severely upset in 1937 by President Franklin Roosevelt, whose Court-packing proposal was a power play to transfer control of commerce from the states to the Executive Branch. In spite of his winning a landslide electoral victory a few months earlier, Roosevelt was humiliated and severely rebuked by the overwhelming refusal of Congress to support him in this judicial matter. The proposal to permit him to add more U.S. Supreme Court justices, one by one until he achieved a majority, was never heard again.
Taxes Disproportionately
Although some of the same issues were raised by the Obama Presidency seventy years later, other more serious issues about the regulation of interstate commerce have been slowly growing for over a century. Enforcement of rough uniformity between the states rests on the ability of citizens to move their state of residence. If a state raises its taxes disproportionately or changes its regulation to the dissatisfaction of its residents, the affected residents head toward a more benign state. However, this threat was established in a day when it required a citizen to feel so aggrieved, he might angrily sell his farm and move his family in wagons to a distant region. People who felt as strongly as that was usually motivated by feelings of religious persecution since otherwise waiting a year or two for a new election might provide a more practical remedy. However, spanning the nation by railroads in the 19th Century was followed by trucks and autos in the 20th, and then the jet airplane. While moving residence to a different state is still not a trivial decision, it is now far more easily accomplished than in the day of James Madison. A large proportion of the American population can change states in less than an hour if they must, in spite of a myriad of entanglements like driver's licenses, school enrollments, and employment contracts. The upshot of this reduction in the transportation penalty is to diminish the power of states to tax and regulate as they please. States rights are weaker since the states have less popular mandate to resist federal control. It only remains for some state grievance to become great enough to test the present power balance; we will then be able to see how far we have come.
High Gasoline Taxes of Europe
Since it was primarily the automobile which challenged states rights and states powers, it is natural to suppose some state politicians have already pondered what to do about the auto. The extraordinarily high gasoline taxes of Europe have been explained away for a century as an effort to reduce state expenditures for highways. But they might easily be motivated by a wish to retard invading armies or to restrain import imbalances without rude diplomatic conversations. But they also might, might possibly, respond to legislative hostility to the automobile, with its unwelcome threat to hanging on to local populations, banking reserves, and political power.
It helps to remember the British colonies of North America were once a maritime coastal settlement. The thirteen original states had only recently been coastal provinces, well aware of obstructions to trade which nations impose on each other. Consequently, they could readily design effective restraints to mercantilism within the new Union. Two centuries later, repeated interstate quarrels provided fresh viewpoints on old international problems. As globalization currently becomes the central revolution in trade affairs of a changing world, America is no beginner in managing the intrigues of international commerce. Or to conciliating nation states, formerly well served by nation-state principles of the Treaty of Westphalia, but this makes them all the more reluctant to give some of them up.
In recent years, Congress has taken to producing laws of great complexity, sometimes thousands of pages long. This is particularly notable in the Obama administration but can be viewed as a non-partisan tendency throughout the Twentieth century, starting with Teddy Roosevelt and Woodrow Wilson. As part of the phenomenon, the workload of Congress has increased to the point where the Legislative branch is particularly weakened by its traditional procedures. The Executive branch has responded greatly enlarging itself, able to create most of the Law through regulation after the law is passed; and the Legislative branch reacts by creating excessive detail in later laws. This recipe for self-defeat has come to be called "micromanagement" by business theorists, who tend to view "command and control" as a solution. As long as the Constitution stands, that approach will not be allowed to work. It is not the purpose of this book to redesign government, or even to discuss it in detail. However, it is wise to remember that even good proposals are undermined by the change of circumstance. Unwisely freezing details when not truly necessary could defeat the main goal, which is to pay a large share of health costs with compound investment income.
The main goal is to pay a large share of health costs with compound investment income.
The main concern is this: our present or future systems of managing the currency may not permit compound interest to compound faster than inflation. That can't be blamed on the Health Care system, but it would certainly injure health care. At the present moment, long-term U.S. Treasury bonds pay 2%, but inflation reduces the value of the bond by more than that, perhaps 3%. Income tax reduces the value by perhaps 0.5%. The graduated income tax already makes it useless for the top quarter of the population to buy Treasury bonds, to say nothing of the top 1% of the population. Whatever the outlook for bonds, insurance companies must keep a large bond portfolio to pay claims. Whatever the outlook for stocks, a large stock portfolio is necessary to stay ahead of inflation. The public must not force its managers to ignore these rules in order to match the investment results of others.
Congress has responded to unrelated pressures by trying to collect the same taxes from a loophole-less tax code, primarily for the purpose of lowering the rates on the top bracket. Whatever the outcome of this struggle, it dramatizes that the usefulness of investing in bonds can readily be destroyed by modifying the tax code, by the stroke of a pen, as it were. You certainly would not want your lifetime health insurance to be risked by that sort of thing happening, sometime in the next eighty years, so you do not want the government to be too tightly in control of your investment portfolio. You may love your government, but its agenda is not necessarily in harmony with that of an insurance company.
Legislative extremes probably won't happen, because of the historic sensitivity of Americans to taxation. But inflation could be equally destructive, and control of that lies in the hands of an un-elected committee at the Federal Reserve. Much of this power was unintended, created by going off the gold standard, and then replacing it with the power of the Federal Reserve to issue (or, not issue) vast amounts of currency in response to "targeting" inflation at 2%. Since a casual observer has trouble seeing much of a match between 2% and the actual amount of currency issued, the Federal Reserve Chairman has been given wide latitude in adjusting interest rates for his own purposes. The outcome for present purposes is that a fifty-year history of this system would have allowed the following statement: "You could withdraw 4% a year from an investment fund, indefinitely, and still have the same amount remaining in the fund." In the past year, however, the following analysis emerged from David C. Patterson, the CEO of a very large investment fund: "A draw of 3% a year at any time since 1926 would only have resulted in a steady purchasing power 60% of the time." Whether this attack on a fundamental investing maxim was caused by inflation, going off the gold standard, or the actions of the Federal Reserve, it is a lesson that interest rates cannot be predicted eighty years in advance, within the boundaries of what experienced financiers considered safe enough to depend on.
The Bottom Line. The life insurance industry faces exactly the same problem, and if the life insurance industry has a solution, it hasn't made it public. What the life insurance industry surely has, is lobbyists. The solution they would devise doesn't necessarily address someone else's problem, but health insurance for the last year of life comes pretty close to what they do for funeral cost protection, so one could be confident they would be allies in any congressional manipulation of income tax upper brackets, to the disadvantage of investment funds. And the same thing could be said of the financial community. And the banking community, so one could be reasonably confident there would be plenty of allies against any overt congressional assault. That does leave the loopholes created in any plan by the unintended consequences of some other plan.
All in all, it seems the best strategy to begin with an investment fund which has already been authorized and given a tax exemption: the Health Savings Account. Put as much as you can in one and let it grow. Spend it for some health expenditure if you must, but anyone who puts in two thousand dollars at the birth of a grandchild is probably going to be glad he did, even though it might be left undeclared just how it would later be spent or disposed of. Walk a couple of blocks and open a debit card for the fund, and walk a few more blocks to a broker who can sell you a high-deductible health policy. Link these three features together when, and only when, some changed circumstances make it useful to link them in a single integrated system. If this direst of dire circumstances never comes about, you are no worse for leaving them independent. But if something bad does come about, you may possibly be motivated to change the basic arrangement, or even dissolve it and take your money out of it. Under really dire circumstances, your own ability to judge what is sensible is probably the best protection you can reserve for what is, at the best, a very dangerous world we live in. For far distant planning, it is necessary to rely on our form of government to produce leadership which can handle the problems.
The DRG system constrains hospital inpatient revenue so directly, that hospitals themselves constrain costs, although they generally seek ways to maintain revenue first. It never hurts to verify such impressions, but allowing a 2% profit margin while the Federal Reserve targets a 2% inflation, is probably already too severe. Since the only way to "upcode" this rationing system lies in admitting too many patients, the regulators designed a penalty system for "unnecessary" re-admissions. It largely had no effect. That is, patients who were re-admitted within 30 days, were generally found to need it, so after a time the penalty may even be repealed. Congress probably does not yet realize what a blunt instrument it has created. The DRG system is so draconian it probably incentivizes the hospital to constrain admissions of all kinds, since all admissions may be turning unprofitable. Consequently, the first step in reducing induced use, and charges, in the outpatient area would be to increase the profit margin to 4%, which is to say, 2% plus the inflation rate. We have already mentioned the need to discard the underlying ICDA code and replace it with a simplified SNOMED code, to improve its specificity and remove the upcoding temptation. Having done this, there would remain little reason to worry about inpatient costs; they are what they are, providing the cost accountants find a better way to handle indirect overhead.
This preamble may at first seem irrelevant, but its point is this: both the old employer-based system and the evolving Obamacare variant need to focus on the same problem which faces the Health Savings Account. Whether you overpay or underpay, the main cost distortion lies in the outpatient area. All three systems seem to agree that the use of high deductible insurance will solve the small-claims problem. But the history of health financing is that the medical system is entirely too willing to shape itself to the reimbursement climate. It may take some time, but it is highly predictable that medical practice will further evolve toward substituting outpatient care for inpatient care. The cost of shifting the locus of care is astronomical, and if we switch it back again it will be doubly astronomical. All of this cost should be attributed to the reimbursement rule-maker, not the provider or the patient.
Within the area we are discussing, higher than the deductible but lower than the inpatient cost, the ACA insurance approach tends to push up costs because internal cross-subsidy makes it appear cheaper, but it also makes it far easier to shift the cost of subsidies. Because by contrast, the HSA approach creates individual, not pooled, accounts, it is cheaper because the patient has the incentive of sharing the savings. But its lack of pooling makes it seem less benevolent for elective outpatient surgery, cancer chemotherapy, radiation therapy, and whatever else will be stimulated to migrate to this borderland between inpatient and outpatient. The stimulation will come from both the hospitals and the small-cost ambulatory areas, both being effectively excluded from alternatives. The managers of HSA need to anticipate this coming demand and facilitate it by pooling the funds to cross-subsidize it, struggling to consume much of the profits generated by shifting the locus of care from inpatient facilities and shifting volume profits from drugstores, pharmaceutical companies, and nursing homes. It isn't universally obvious how to do this. so the task must be assigned to someone.
Maintaining the solvency of HSAs encounters two types of problems, endogenous and exogenous. Endogenous means the growth curves of revenue and cost are not two parallel straight lines. A person may have a pitiful amount of money in his own account to pay a bill, but his age group collectively may have huge reserves, on average. Furthermore, a young person may not have enough cash to pay a bill, even though his future accumulations should be more than ample. Both of these problems depend on how much illness is found in young people, and one would hope will progressively diminish. However, the expected shortfalls at all ages must be somehow calculated, and matched against expected surplus; after providing a margin for error, an amount calculated to cover net shortfalls at each age should be escrowed in a "taxation" account, and later returned to individual HSAs as they balance out. There will be administrative costs, but one would hope there would not be much interest or borrowing cost.
The goal would be to phase this process out, well before age 65, essentially returning the accounts to the same level of progress they would have achieved without the intervening disruption. My prediction is that most of this need will concentrate around pregnancy and neonatal care, with a low-level background cost of accidents and illnesses in other years. The general idea is to have each age cohort support itself, within the current year if possible, but borrowing against later years on a current-value basis, if necessary. Borrowing from other age cohorts should be seen as an emergency fallback only.
Whoever manages these "taxation" escrows would be well positioned to identify intergenerational anomalies, and therefore to manage the same sort of exogenous pressures. Such managers must look askance at all inter-generational appeals, but migrations from inpatient to outpatient must be matched by reducing the premiums of the catastrophic insurance and transfers to individual accounts. The catastrophic insurance stockholders will not cooperate without evidence of need, nor will pharmaceutical firms lower their prices without argument. Therefore, the managers of the "taxation" fund must establish adequate data resources, and negotiate small frequent changes rather that steep-step infrequent ones. To the extent this activity can stimulate anti-trust concerns, Congress might consider what issues there are, in advance.
On June 26, 2015, the United States Supreme Court handed down its opinion on King v. Burwell , essentially leaving the Affordable Care Act unchanged. Much will be written about this controversial opinion, but little of it would have to do with Health Savings Accounts.
If anyone is interested in my opinion about the contested language in the law, it is derived from reading Jacob S. Hacker's book about the passage of the Clinton Health Plan, called The Road to Nowhere . The plan as described by Hacker, was to plant deliberately conflicting proposals in the House and Senate bills, so the real proposal could remain concealed until the House-Senate conference committee meeting, where the versions meant to survive could be identified. The final result could thus be released when the press was absent, preferably on the eve of a holiday.
It didn't happen in the case of Hillary Clinton's plan (which was never fully released), while in the case of President Obama's Plan, it was suspended in mid-operation by the death of Senator Kennedy. But the Senate version had been passed by a friendly Senate, so the House was forced to vote on an identical bill, to avoid returning to a conference committee convened by a newly hostile Senate. This version of the story fits the known facts pretty well and is reinforced by Hacker's subsequent membership on the Obama election team. Unfortunately, the Supreme Court's later decision constitutes an endorsement of a parliamentary maneuver which ought to be forbidden. Let's now break off this conjecture, and return to Health Savings Accounts.
My original intent in 2014 was to offer Lifetime Health Savings Accounts (L-HSA) in such a way the two programs (ACA and HSA) could be negotiated into a compromise that both could live with. In time, they would eventually evolve into hybrids that both would be proud of, or else lead the voters to state a clear preference for either one to be exclusive after they had a taste of both. Offhand, I could see no value for either one to be declared mandatory if that would still leave 30 or so million people uninsured. "Mandatory" did not seem like a helpful word to use, and often it seemed harmful to someone. In applying a computer search engine to the Affordable Care Act, I was unable to find a single use of the word "mandatory". Looking back on it, its premise was flawed but its intent was felt to be benign, so perhaps face-saving boilerplate was called for.
The central feature of the Savings Account has always revolved around the fact that youthful health care is usually cheap, while health care for the elderly is expensive. Many decades of tax-free compound interest at 6.5% would thus have been allowed to build up in some sort of escrow under both plans, until the age when healthcare really gets expensive. At that point, it would not matter which program it was assisting, and both sides would stop looking for a victory. By that time, I wouldn't be surprised if the deficits of the Medicare program had become so fearsome, and the debts of the program become so threatening, that both sides would be willing to consider modifications of Medicare. If not, subscribers to a buy-out had built up a six-figure retirement fund.
Medicare is already more than 50% subsidized by taxes and foreign borrowing, but the public scarcely knows it. I believe it is just a matter of time before the public realizes where it is going, but right now they see Medicare as getting a dollar's worth of healthcare for 50 cents if they think about it at all. I suspect it would take a full year or more of intense Congressional work to fill in the action details of a lifetime or lifecycle system, and maybe longer than that to re-direct public opinion. The proposal is voluntary, no politician dares to force it down anyone's throat. And the proposed incremental steps would also be voluntary. The investments would be in personal accounts, so no one could divert them for aircraft carriers. And the accounts would be lucrative, so no one needs to be afraid of their solvency.
Because compound interest on savings from the working years tends to rise after about age 45, a long period of Health Savings Accounts generates much more money than from a string of disconnected single years. Like the difference between term insurance and whole life insurance, you can't judge the improved investment of L-HSA by multiplying one C-HSA time your life expectancy, so it is a subtlety that two continuous programs would generate more funds than two separated ones.
Meanwhile, we have Classical Health Savings Accounts (C-HSA) which already have more than 15 million satisfied subscribers, steadily growing in number. Most of the Obamacare subscribers wouldn't want HSAs, and most of the HSA subscribers wouldn't consider the ACA plan, so total insured would increase. HSAs are described in the first chapter of this book, and in 35 years only about four or five improvements have come along, awaiting Congressional approval, but the bipartisan passage of them would calm the waters considerably. They need a tax deduction for the Catastrophic health insurance premiums, to make their owners just like everyone else. The easiest way to accomplish this is to extend permission for the Accounts themselves (which are tax-exempt) to purchase the catastrophic insurance which is required. Catastrophic health insurance is itself tangled in Obamacare regulations, which need to be revised, to deserve Presidential signature from any President. The annual deposit limits now need to be liberalized, and restated as total lifetime limits to account for the varying ages of new subscribers.
And new regulations need to accommodate the new phenomenon of passive investing, which is deservedly sweeping the nation, providing much lower transaction costs and higher average returns, which might be made still higher. Although HSAs are mostly self-administered, new investment managers are a little afraid of them, and well-established firms do not yet seem to recognize their enormous long-term potential. For these reasons, many early investors have been "savvy financial people", an image I am very anxious to see the change to "ordinary folks", without resulting in "high fees for rubes".
To return to the Supreme Court's King decision, the only version of HSA which is ready to go is the Classical one, which would still be improved by a few amendments, if the President is of a mind to cooperate. His own plan seems more or less in suspense, waiting for Big Business to emerge from its policy huddle, after two years of delay. Many tradeoffs and compromises can be envisioned for that coordination, of by far the biggest eligible group of subscribers. It is my commentary that employers' gift of health insurance in 1945 has long since been compensated for, by a corresponding drop in wages. So nothing but a tax exemption is left. The amount of money involved is so huge, it requires other issues to be brought into the discussion to avoid a stock market panic. It particularly needs to be emphasized that a loophole based on the corporate income tax rate is not at all -- not at all -- the same as an increase or decrease of corporate income at that rate. Getting a free lollipop at a 60% discount does not affect your company's income by 60%.
Nevertheless, the existence of fringe benefit tax dodges does create pressure to retain the high corporate taxes, and those taxes need to be reduced to keep our corporations from fleeing to tax havens abroad. My suggestion is to lower the corporate income tax in parallel with a comparable reduction of the employer tax dodge, a maneuver so delicate it ought to be overseen by the Federal Reserve, acting under a Congressional time limit. Such a proposal is so newsworthy it might well suck the air out of the room for Health Savings Accounts, and Obamacare, too. Everyone involved has an incentive to be cautious and reasonable, a difficult thing to be, during an election year. However, with prudence, breaking the logjam on the migration of American corporations to foreign locations could be the thing which suddenly gets everyone's attention.
New Health Savings Accounts (N-HSA)
Because it increasingly seems so unlikely a notoriously stubborn President would ditch his health plan at this late date, I turned my attention to seeing what could be done with using Health Savings Accounts for what's left. Obamacare is likely to be subject to twists and turns until after the November 2016 elections, and this administration has a history of preferring to operate out of sight. Therefore, my revised plan was to avoid the subject as much as possible, except for one thing. The savings in a portion of the Account would continue to accumulate as a tax-exempt investment account, available for extra medical expenses until age 66 when it turns into a retirement account. That is, an N-HSA account could exist untouched for as many as 45 years (21-66) without catastrophic backup insurance, or else if agreeable, with a catastrophic policy coordinated with an Obamacare policy. The purpose of this part of the structure was to provide a haven for a long-term buildup of funds, with as few financial drains on it as possible, while it stays out of the way. On the other hand, money seems no good if you can't spend it, so it needs some contingency exists.
It is possible to summarize a great deal of thinking by stating that it mostly can't be done. The evolution in healthcare has not reached the point where people aged 21 to 66 could save enough to support the rest of the population while taking care of their own health. In fifteen years that might become possible, but not yet. Even then, an additional thirty million people who are unemployable (prisoners in custody, disabled people, and illegal immigrants) would probably topple the system without some major reductions in the cost of chronic diseases (diabetes, Alzheimers, arthritis, emphysema, kidney failure) which might well take another fifty years. So we temporarily set this attractive idea aside.
Except for one thing, paying for children under 21. The system devised was to overfund Medicare slightly, gather investment income for a combined 104 years, and transfer the result to a grandchild or pool of grandchildren to pay for 21 years of healthcare. The grandparent transfers the money at the death after 83 years of compounding, but the child receives a lump sum at birth and erodes it to near zero by the 21st birthday. This is how 104 years are available to the next generation to grow a contribution of $42 to $27,000 while staying within the limits of the Law of Perpetuities. To do this requires passive investing of a total-stock index averaging 6.5% net of 3% inflation. According to records by students of the subject, the total stock market has averaged 11% returns for a century, in spite of wars and depressions. Right now, the main obstacle to achieving this is the community of middle-men in the financial world. It the problem continues to be a stubborn one, I advise taking delivery on the stock index security, putting it in a safe deposit box, and opening it decades later.
One issue comes up, that this system could produce unlimited amounts of inflated money by escalating the initial single payment. But it cannot do so if the account balance starts from, or must go to, zero. If loopholes are discovered, additional points of zero balance could be imposed.
Medicare Backup Insurance. In the original planning of Health Savings Accounts, it never seemed likely we would lack places to spend money earmarked for healthcare. However, 45 years really is a long time to have your money locked out of reach. The other side of this coin is the spectacular result of long-term passive investing. Just to throw in a couple of examples, the investment of $1000 at age 21 would result in a fund of $16,000 at age 66, and an investment of $1000 a year, every year from 21-66, would accumulate a fund of $246,375 at age 66, quite a nice retirement fund. And if you were lucky enough to live frugally, from 66 to 83 the $16,000 would grow to $ 43,800, and the $246,000 would grow to $680,165. If you grow uneasy about Medicare solvency, these sums would be nice to have in the bank. In effect, they could serve the function of catastrophic self-insurance, without the insurance.
As a matter of fact, it would be nice to include a provision that the Health Savings Account could dispense with the expense of catastrophic insurance when it grows to a point equalling it. It would dramatize the subtle transformation, from an account for drugstore expenses, into a serious investment tool. That won't happen soon, and it won't happen to everyone, but it is a realistic goal.
Healthcare for Children. Now, that leads into an entirely different direction. One of the perpetual headaches of designing health care finance is the fact that newborn babies are expensive. Part of that is due to inordinate malpractice costs for obstetrics, partly it is due to expensive care being devoted to premature babies and Caesarian sections. But mainly it is due to the parents being young people without much savings. It's pretty hard to design a pre-funded health care plan for an individual who starts the second year of life with a $10,000 debt.
His parents barely climb out of a financial hole before the child himself is ready to have children. As we have seen in earlier paragraphs, some frugal grandparents end up with more healthcare money than they can spend on their own health. American mothers average 2.1 babies apiece, and with a little fumbling it can be seen, that figure averages one grandchild per grandparent. If aggregate health care for children 0-21 averages $29,000, Grandpa could give a child a very nice start on life by rolling over his surplus at age 83 to a grandchild at birth -- if the laws permit such a thing, particularly if no family connection exists. (We'll have to leave unorthodox family sexual preferences to the matrimonial lawyers to sort out. )
With ingenuity, an additional 21 years can be added to the period of compound interest, and we've already shown what a difference that can make in an 83 (or maybe 93) year lifespan. In case you missed the point, when Grandpa relieves the cost of healthcare for a grandchild, the benefit is indirectly felt by the child's parents, although that isn't invariably true. Right now, the cost of a child's healthcare is the responsibility of the parent, so it's relatively fair.
Payroll Deductions and Premiums for Medicare. With 300 million citizens, a lot of exceptional cases can arise, and the foregoing probably doesn't contain enough incentives to start a stampede for N-HSA. Accordingly, let's consider forgiving the Medicare payroll deduction, in whole or in part, as a legitimate spending outlet. And if that isn't enough, consider waiving Medicare premiums. Both of these are legitimate health costs, so no one is violating the purpose of a tax deduction for Health Savings Accounts. Each one of them covers about a quarter of Medicare costs, so the funds are ample. (The present average costs of Medicare are about $180,000 per lifetime).
And finally, there's your Social Security contribution. SS isn't a medical cost, but it's a retirement cost, and that's what N-HSA could turn into. Reducing any or all of these expenses will free up a comparable amount of spendable income. If all else fails, consider abating your income tax. Income tax isn't a health expense, but it is often the largest item in a retiree budget. Reducing income tax could displace other funds designated for health costs, and hence indirectly could sometimes be considered a health cost, itself. There are plenty of ways to create savings with the government, and all you probably really need is their permission to do it.
To repeat, the purpose of all this is to find a way to subsidize the health expenses of children, which in my view is the unsuspected stumbling block for all self-funded lifetime proposals. Even the tax-evasive employer-based system gets into a tangle over it.
Subsidies for the Poor. We must conclude by mentioning poor people. It's, of course, true you have to start with some money to earn income from it. What are you going to offer poor folks, when the country is already deeply in debt? Well, it's practically impossible to say what Obamacare is going to do for them, although it will surely do what it can. The possibility of double-subsidies is still present when the situation is as unstable as it is, and the economy is as fragile as it is. So this proposal prefers to delay the subsidy discussion until Obamacare is also on the table.
To facilitate that discussion, this plan has been forced to organize the subsidy money for poor folks to come out of the age group 21-66, who are effectively the only real creators of wealth in the whole system. That coincides with Obamacare, and cannot be effectively discussed without including it. However, once it is coordinated, the subsidy to poor people could be quite substantial as a result of being placed at the far end of the compound interest curve and given enough years to work in an escrow account. If came to a showdown, the subscriber could take delivery on an index fund certificate and put it in a bank lockbox until it was needed. I propose separating subsidies from all healthcare and funding them independently. Independent of the intermediaries of their grants, that is.
To summarize, we start with a regular Health Savings Account with obstructions removed. In return for allowing the HSA to remain in the background, gathering interest, the HSA effectively assists Medicare. Assisting Medicare could mean helping in a Medicare buy-out, or it could be used to help Social Security. Or it could recirculate through Grandpa, to help the coming generation. An option for Grandpa to make the choice would simplify administration, but possibly unbalance something else.
We knew this election was coming; we didn't know who was going to win it. Whether Hillary Clinton would replace the Affordable Care Act with her own plan, or whether Donald Trump would replace the ACA with a different plan, was far less certain. In either case, the many flaws in the Affordable Care Act would be addressed. One thing seems certain: the Affordable Care Act will start off 2017 with a bigger deficit than was expected. My previous four books on the subject were forced to assume the ACA was cost-neutral, offering proposals for lifetime health finance for every age group except age 26 to 65, the working years of life. This book mostly concentrates on that gap.
Cheaper. The core of this lifetime proposal is the Health Savings Account. It was devised by me and John McClaughry of Vermont in 1981, when John was Senior Policy Advisor in Ronald Reagan's White House and I was a Delegate to the American Medical Association's House of Delegates. It flourished after John Goodman of Texas wrote a book about it, Bill Archer of Texas pushed it through Congress, the American Academy of Actuaries found it saved 20-30% of the cost of more usual Health Insurance, the AMA endorsed it, and thirty million accounts were established by June 2015. It consisted of two ideas welded together: a high-deductible catastrophic health insurance policy, and a double tax-exempt Savings Account, acting as a sort of Christmas Savings Account for the deductible. It wasn't free, but it helped a poor man get coverage as cheaply as we could devise it. The individual patient or client owned his own account, so it had no "job lock" to hinder changing jobs. In that sense, it was patterned after Senator Bill Roth's IRA or Individual Retirement Account. A significant improvement followed the question of what to do with an unspent surplus which remained
in the HSA (Health Savings Account) if you turned 65 after being healthy and then got Medicare. The Law was changed to turn such surplus into an IRA.
Retirement Funding. In correcting this oversight, the right thing was done for the wrong reason. Before anyone really understood Medicare was 50% underfunded, a retirement fund had been created. Since increased longevity was an inevitable consequence of better healthcare, it seemed natural for this "Medicare money" to pay for the extended retirement. It soon became apparent that retirement came at the same time as Medicare, and Medicare was thus underfunded. Even though the $3400 annual limit to Health Savings Account deposits was not enough to pay for soaring Medicare costs, it was not needed for that purpose for up to forty years. So augmented funds became available for healthcare at age 26 but had to be invested for fifty years or more until sickness made its appearance later in life. Emergencies might come up before then, but the Catastrophic health insurance took care of them. After many state laws mandating small-cost expenditures were amended, the high-deductible product took off, particularly in California and New York. Millions of policies were issued before anyone took the trouble to count them. When the Affordable Care Act made high-deductible insurance widely mandatory, Health Savings Plans took off like pursuit planes.
So, when competitive plans -- like HMOs, Preferred Provider Plans, First-dollar Coverage, Employer-sponsored plans, and a host of others -- started to encounter criticism, Health Savings Accounts became much more popular. Their flaws, instead of provoking consumer resistance, provoked demand for legislative relief. It was a mistake to limit ownership to people who were employed, or who were age 26 to 65; what good purpose did those age and employment restrictions serve? The advent of DRG payment limits to hospitalization and debit-card payment for outpatient services raised a question of the usefulness of insurance claims processing, which was certainly expensive. Prohibiting the HSA from purchasing the required catastrophic health insurance seemed to hamper unnecessarily a tax deduction which its competitors widely enjoyed. One or two amendments were all that would be needed to enhance sales considerably. People change jobs a lot; why would anyone want to prohibit dual coverage if someone wanted to pay for it, for his own personal reasons? The changes needed to enhance Health Savings Accounts were short and simple and could be enacted over a weekend. Why wait?
Improved Investment. Changes in the HSA Law to permit higher returns on invested deposits, are certain to provoke resistance but should be addressed very soon. If you are serious about replacing the old with the new, there are some zero-sum tradeoffs, especially within the finance industry. Go to the library or the internet, and look up the graphs of Professor Ibbotson of Yale about the performance of stocks and bonds for the past century. You will surely find the total stock market has risen at 9-11% for the past century, and what people describe as crashes and disasters seem like small wiggles in the line -- in retrospect. Some opportunities are better than others, but the main determinate of investing is the year you happen to have been born. In spite of these retrospective results, you will find very few investors who received half of that, but John Bogle and Burton Malkiel have demonstrated that random selection of stocks in a total market index fund beats expert active investors more than half the time, at a hundredth the cost. Bogle has something like 3 trillion dollars invested in his funds, and they have grown so fast he has trouble satisfying the demand. The average investor should be getting 5% on his money over the long run, and regulatory changes ought to aim for 7%. Money invested at 7% tax-free will double every ten years. With an average life expectancy approaching 90 years, that's ten doublings, or 512 times the initial investment in 90 years. And it still leaves 9-12% minus 7% (2-5%) for the finance industry.
But that's only half the problem. If you invest massive amounts of money for 90 years, there are plenty of cheerful brigands out there. Inflation is the main one -- it averages 3% a year -- because governments issue bonds, and enjoy low-interest rates. Federal Reserve and other central bankers are the nicest people in the whole world, mandated to preserve independence from the rest of the government. But they read newspapers and know who appoints whom. Bankers and brokers are also nice people, overvaluing rigidity because counterparties cheat when vigilance gets relaxed. One way or another, spreads should be narrowed.
The present system, plus stronger management, plus a few simple legislative amendments, would suffice to get us started with something workable, while we immediately roll up our sleeves and plan for a revolutionary future, better, system.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
