So much for expecting foreigners to help us. They remain grateful to America for winning World War II, but that was seventy years ago. Forget about reserve currencies, a declining surplus of gold bars, the Marshall Plan, Truman Plan, and all that. After seventy years of thanking us, foreigners quite rightly expect us to pay for our own health care without monetary subsidies from them. Or protectionist trade policies, either.
To begin with healthcare basics, lifetime medical costs over the past century have progressively migrated toward the end of life, and the end of life has itself moved later. Lifetime earnings remain concentrated near the middle of life, so a gap widens. Collectively, the population accumulates wealth during its working years, spending its savings for healthcare after it retires. If lifetime health costs could be pre-paid and funneled into savings, with the savings professionally invested, a large proportion of medical costs might be paid out of investment income. It could be called the difference between pre-payment, and insurance, except whole life insurance, employs the same principle. Considerably expanded, this insight could markedly reduce the cost of healthcare, making it more affordable without changing it. Because medical care is undisrupted, the hidden cost of disrupting it might vanish, too. It creates what the Japanese call a virtuous cycle. (It wouldn't hurt to read this last paragraph a second time.)
If lifetime health costs could be pre-paid and funneled into savings, with the savings professionally invested, a large proportion of medical costs might be paid out of investment income.
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The average American healthcare costs we are discussing are in the neighborhood of $10,000 a year, surely somewhat less for younger peopleFootnote . They are about double that for the last year of life, somewhat less than that for the first year of life. Medicare is about 50% paid for by subscribers, 50% subsidized by additions to the national debt. Ignoring inflation and tax effects, the net average real lifetime health cost at such rates would be at most $800,000, of which $400,000 would be additions to the national debt. Remember, projecting healthcare costs seventy years in advance is a very hazy business. We certainly hope these projections prove to be a gross over-estimate, but to remain on the safe side the proposal here is to make a lifetime investment to cover only the first and last years of life because the heavy costs of birth and death affect 100% of the population. The projected cost of these two benefits would be $30,000, from which $15,000 could possibly be subtracted as the national debt, or else subtracted as double-counting the cost-shifted expenses of indigents. Meanwhile, removal of the first-and-last year costs would reduce annual costs by about 4%, or $30,000 lifetime. So it seems safe to start with a $ 15,000-lifetime goal, which could be achieved by investing $8 at birth at 7% tax-free return. That's right, eight bucks. Different assumptions produce different answers; the only purpose of the example is to demonstrate easy feasibility of the approach. Multiply the initial contribution by five or ten times, and you reach the same conclusion.
Scientific advances during the last century greatly changed the shape of two curves, of lifetime income and lifetime medical expenses; future advances will surely do the same. The life expectancy of Americans roughly lengthened by thirty years and continues to increase. The logic of compound interest demands that money at 7% will double in ten years; the longer you live, the more times it will double; that's pretty old stuff. What is new and unique is the way adding three extra doublings helps the virtuous cycle, maybe changes it significantly, because 2,4,8,16,32 keeps getting a lot bigger at the far end. Three more doublings make the difference between 32 and 256, and that's a drastic difference.
But, whoa, on the other hand, the longer you keep money in a bank, the more opportunity there is for financial crashes, inflation, "moral hazard", mismanagement, changes in political philosophy, wars and a thousand other things. Eighty years is a long time from now; who says the money will be there when you need it? And even if all the 19th Century nightmares are merely pipe dreams, an awful lot of Americans remain mistrustful of financial institutions. Presidents Jefferson, Jackson, Van Buren and an equal number of nearly-successful candidates for president were even in favor of abolishing banks. A large and possibly growing number of Americans distrust the Federal Reserve, and with some reason. After all, a dollar in 1913 when the Federal Reserve was founded, is now worth a penny. Pause for a moment, reader. You have now heard both sides of the argument, the opportunity and the risk. Everything from here on details. At some point in the next century, investing a few dollars at birth will generate enough income to pay for both being born and dying, the two medical conditions which are 100% certain. It might even generate enough to pay for lifetime medical care, and more, but that isn't the point. What matters is for us to have the wit, and the courage, to take advantage of something which sort of crept up on us.
Footnote The data used here are rounded-off and approximated 2011 data obtained from HHS reports. It is intended that a later edition of this book will contain an appendix of actual 2013 statistics, the last year before the Affordable Care Act became operational.
The calculations in Chapter Four are intended to simplify and clarify, they are not intended to make the reader throw his hands up in despair. Nor are they intended for the unusually math-adept reader, because the numbers are rounded off, and sometimes circumstances required the use of different years of data sources. They are merely examples, to illustrate in numerical form what must necessarily be uncertain predictions of the future. When we say that women have 10% more medical costs in a lifetime than men do, we stand by the statement that women cost a little more than men, but do not expect anyone to accept that it will be precisely a 10% difference for the next sixty years. Most of the calculations involving compound income projections resulted from the use of a compound interest calculating computer program, kindly written by my oldest son, George Ross Fisher IV, who got a degree in that sort of thing from MIT. Any mistakes in using it are my own. (Those who wish to check out the matters, can use the same program on a home computer by entering WWW.Philadelphia-Reflections.com/blog/xxx.htm. Most of the underlying data come from CMS at xxxx)
Accumulating the Necessary Money for Lifetime Healthcare
Medicare.Because it's easier to explain, let's begin at the far end of the process, the day after the death of a hypothetical average person, and look backward. This proposal didn't start out as a Medicare proposal, but the accumulation of unpaid Medicare debt has become so alarming that substituting Health Savings Accounts for Medicare could fast become one relatively painless national priority that seems to have no other solution, whether painless or not. In addition, most factual community health data comes from Medicare, so the reader quickly gets acquainted with the concepts by starting there. And so, while the Medicare situation is fraught with political obstacles, we might have to risk it. While the debt overhang from earlier years is so threatening that Health Savings Accounts cannot be confidently promised to rescue Medicare by itself, perhaps the Savings Account idea could at least put a stop to going deeper into debt. Even a stopgap would have to get started pretty soon, but there is still a chance it could appreciably reduce the indebtedness after the recession is over.
At present, Catastrophic coverage is required for the HSA to receive income tax exemption, but the linked Catastrophic insurance is itself not tax-exempt. The lack of a tax exemption for Catastrophic coverage adds about 30% to the cost of an HSA. The tax exemption itself is less than that but is magnified by investing the savings. To extend HSA into the over-65 age group, therefore, requires beginning the HSA before age 65, and after that age requires lifetime Catastrophic insurance for an actuarial average duration of 18 years, using after-tax premiums. Obviously, making the Catastrophic policy tax-exempt would considerably reduce the cost of switching Medicare recipients to Health Savings Accounts, and so we heartily recommend it. The loss of revenue to the Treasury would be overwhelmingly exceeded by the value of eliminating the foreign debt load.
Proposal: Congress should remove the prohibition of paying the premiums of Catastrophic coverage linked to Health Savings Accounts, and rescind the termination of Health Savings Account enrollments at age 65, as the Law reads today.
Until people on Medicare are permitted the option to switch to Health Savings Accounts, and possibly as long as Catastrophic health insurance is treated unfavorably for the tax exemption of Catastrophic Health Insurance, we conceptually split lifetime HSA into two parts. (Single-premium exchange for Medicare, in return for forgiveness of premiums and rebate of payroll taxes, is linked, but treated separately). In the meantime, it is important to remember not to count the $80,000 single-premium twice as a cost. Most subscribers would want to pre-pay the discounted Medicare single premium (of $80,000) by making a small addition to their HSA at an earlier age and holding it in escrow gathering tax-exempt income until needed. If pre-payment begins at an early age, Medicare escrow cash costs could be quite modest (as little as $205 a year, starting at age 25 @10% per year). Even when we show all the costs, excluding double payments but adding 18 years of Catastrophic insurance premiums, using an HSA at conservative rates like 4% would reduce effective Medicare cost by 75%. Greater returns would, of course, make it far cheaper than that. To pay down the existing debt back to 1965, would require access to data on how much the remaining debt really amounts to. At present, it is at least growing rapidly by addition of 50% of annual Medicare costs; and an unknown amount by compounding from earlier years, minus whatever might have expired or been paid off. Realistically, the amount of debt service is probably going to depend on our national ability to pay it down, regardless of its written terms. The same is indeed likely to be true of subsidies for the poor. Ultimately, both of these payment decisions are political, limited by the ability to pay. Because of the long time periods, the present surprisingly modest interest rates could convert this impending disaster into at least a sustainable cost. The outcome of these intersections is that the terms and benefits largely become a matter of political choices.
Replacing Medicare With Something Better. When Health Savings Accounts were first devised, it never seemed likely that Medicare might be supplanted. However, Medicare has grown both highly popular and severely under-funded. The rules should be modified to permit someone who has health insurance through an employer to develop a Health Savings Account which the funds but does not use while he is of working age. The funds would then build up, enabling him to buy out of Medicare on his 65th birthday or thereabout, with a single-premium exchange with Medicare, at present prices exchanging about $100,000 funded by the forgiveness of Medicare premiums and some portion of payroll deductions from the past, which he has already paid. The subscriber would also have to purchase Catastrophic coverage, which we would hope Congress would accord the same tax advantage as is given to employed people. If this approach proved popular, it might supply extra funds for loaning to HSA subscribers in the outlier category. While there is no thought of phasing out Medicare against the subscribers' will, Congress would certainly be relieved to have subscribers drop out of a program which must now be 50% subsidized.
Proposal: The present closing age for HSA enrollments at the onset of Medicare should be extended a few years older. And single-premium buy-outs of Medicare coverage, including the possible return of payroll deductions where indicated, should be permitted as an option.
Single-premium Medicare. Congress can certainly change that, especially during the transition period, at least anyone under age 65 could start an account tomorrow and fund it up to date. Hypothetically, if anyone could live to his 65th birthday without spending any of the accounts, a prudent investor would have accumulated $132,000 in pure deposits on his 65th birthday. He only needs $80,000 to fund Medicare as a single-payment at age 65, however, so he can afford to get sick a little. If he starts depositing into the account later than age 25, he has already paid for Medicare somewhat, with payroll taxes. That could be considered partial payment toward reduction of the Medicare debt. Please hold your questions, until we finish outlining the plan.
When Health Savings Accounts were first devised, it never seemed likely that Medicare might be supplanted. However, Medicare has grown both highly popular and severely under-funded. The rules should be modified to permit someone who has health insurance through an employer to develop a Health Savings Account which the funds but does not use while he is of working age. The funds would then build up, enabling him to buy out of Medicare on his 65th birthday or thereabout, with a single-premium exchange with Medicare, at present prices exchanging about $100,000 funded by the forgiveness of Medicare premiums and some portion of payroll deductions from the past. He would have to purchase Catastrophic coverage. If this approach proved popular, it might supply extra funds for loaning to HSA subscribers in the outlier category. While there is no thought of phasing out Medicare against the subscribers' will, Congress would certainly be relieved to have subscribers drop out of a program which must be 50% subsidized.
Proposal: The present closing age for HSA enrollments at the onset of Medicare should be extended a few years older. And single-premium buy-outs of Medicare coverage, including the possible return of payroll deductions where indicated, should be permitted as an option.
can certainly change that, especially during the transition period, at least anyone under age 65 could start an account tomorrow and fund it up to date. Hypothetically, if anyone could live to his 65th birthday without spending any of the accounts, a prudent investor would have accumulated $132,000 in pure deposits on his 65th birthday. He only needs $80,000 to fund Medicare as a single-payment at age 65, however, so he can afford to get sick a little. If he starts later than age 25, he has already paid for Medicare somewhat, with payroll taxes. That could be considered payment toward reduction of the Medicare debt. Please hold your questions, until we finish outlining the plan.
If someone makes a single deposit of $80,000 on his/her 65th birthday, there will accumulate $190,000 in the account over 18 years, the present life expectancy if he spends nothing for health and invests at 5%; and $190,000 is what the average person costs Medicare in a lifetime. Since the average person spends $190,000 during 18 years on Medicare, enough money will accumulate in Medicare to pay its expenses, and after some shifting-around, this should make Medicare solvent, in the sense that at least the debt isn't getting bigger because of him. Furthermore, index funds should be returning 10-12% over the long haul, so there should be some firm discussions with the intermediaries about some degree of dis-intermediation. Please don't do the arithmetic and discover that only $40,000 is needed. That seems plausible, but that's wrong because the costs remain the same , and previously the government has been borrowing half the money from foreigners. In effect, the subscribers have been paying the government in fifty-cent dollars. There has been an exchange of one form of revenue for another, so the required revenue actually does demand $80,000 for a single deposit stripped of payroll deductions and perhaps premiums. An end would put to further borrowing, but the previous debt remains to be paid. I have no way of knowing how much that amounts to, but it is lots. All government bonds are general obligations, mixed together, and access to Medicare reports back to 1965 is not easily available. What we can more confidently predict is the limit that young working people can afford to put aside for the sole purpose of paying off the Medicare debts of an earlier generation. If there are other proposals for paying off this foreign debt, they have not been widely voiced. And the debt is still rapidly growing.
They would have to set aside an average of $850 per year (from age 25 to 64) to achieve $247,000 on the 65th birthday, assuming a 5% compound investment income and relatively little sickness. This might seem like an adequate average, but occasional individuals with chronic illnesses would easily exceed it in health expenditures. It is not easy to estimate the size and frequency of such occurrence in the future, so someone must be designated to watch this balance and institute mid-course adjustments. As an example, simple heart transplants costing $200,000 are already being discussed. To some unknown extent, the cap on out-of-pocket expenses would have to be adjusted to pass these cost over-runs indirectly through the Catastrophic insurance. Insurance does greatly facilitate sharing of outlier expenses, but usually requires a time lag whenever new ones appear.
It does not require much political experience to know that taxpayers greatly resent paying debts that benefitted earlier generations. They complain, but complaining does not pay off the debts of the past. To double required deposits in order to pay off past debts, as well as using forgiveness of payroll deductions and premiums, would require an additional $120,000 per year escrow, for each year's debt accumulation. At present, roughly $ 5300 per beneficiary, per year, is being borrowed, and there are roughly twice as many current beneficiaries as people in the tax-paying group, but only 18 years, as compared with 40 years as a prospective beneficiary. So that comes to liquidating roughly $1300 a year of debt to balance the two populations or $2600 a year to gain a year. That's for whatever the debt happens to be, which surely someone can calculate. To accomplish it, one would have to project an average of % income return. That's definitely the outer limit of what is possible, and it probably over-reaches a little. Therefore, to be safe, one would have to assume some other sources of income, a change in the demographic patterns, or an adjustment with the creditor. Assuming inflation will increase expenses equally with inflation seems possible. And it also seems about as likely that medical expenses will go down, as that they go up. You would have to be pretty lucky for all these factors to fall in line over an 80-year lifetime. So, although Medical
It is this calculation, however rough, which has made me change my mind. It was my original supposition that multi-year premium investment would only apply up to age 65, and that would be followed by Medicare. In other words, it should only be implemented as a less expensive substitute for the Affordable Care Act. It seemed to me the average politician would be very reluctant to agitate retirees by proposing a plan to eliminate Medicare. They would feel threatened, the opposing party would fan the flames of their fears, and the result would be a high likelihood of undermining the whole idea for any age group, for many years. Better to take the safer route of avoiding Medicare, and confining the proposal to working people, where its economics are overwhelmingly favorable.
But when the calculations show how close this proposal under optimistic projections would come to failure, and when nothing remotely close to it has been proposed by anyone, the opportunity runs the risk of passing us by. So, I changed my mind. The moment of opportunity is too fleeting, and the consequences of missing it entirely are too close, to worry about the political disadvantage of doing the right thing. The transition to a pre-funded lifetime system will take a long time to get mature, and the political obstacle course preceding it is a daunting one.
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So we guess the average life expectancy where things will eventually flatten out will then be about 91. (Be careful, most life expectancy figures are for life expectancy at birth.) But you would have to be lucky in everything: a very favorable investment climate for the right ten-year period, plus a favorable health situation which avoided expensive illnesses just at the age when they would begin to threaten. Using a lower goal of $60,000 and a lower interest rate of 7% is considerably easier to achieve, but the limitation which might be reached first is the $3300 yearly contribution rate, and someone might be forced to pay all medical expenses out of pocket in order to make the investment fund stretch. The individual who came up short would still be considerably ahead, but we are using a precise match of revenue and expense, to simplify the examples. Someone who sells his business at age 63 might have the cash, but still, have trouble because of the $3300 per year limit. It seems pointless to squeeze through a narrow window, and much better if the window were enlarged to permit lump-sum deposits up to a $ 132,000-lifetime limit. With that sort of cushion, plus a stretch of reasonably good health at the right time of life, it would become considerably safer to take the risks. At age 65, a lifetime of health costs is already in the past, but the curve of health expenses starts to curve up at age 50, at a time when college expenses for children may be persisting, and the house isn't quite paid for. It seems a pity to cripple a good idea with pointless contribution limits that almost stretch far enough, but leave people fearful. If Congress develops a serious interest in lifetime insurance, the yearly contribution limit should be revisited.
The simplified goal is, therefore, to accumulate $60,000 in savings by the 65th birthday, remembering that savings get a lot harder when earned income stops. With the current law, you would have to start maximum annual depositing of $3300 by your 50th birthday, to reach $60,000 by age 65, and you would still need generous internal compounding to make it. But notice how easily $100-200 a year would also get you there, starting at age 25 (see below) and less optimistic investment income returns until age 65. Many more frugal people might skin by with looser rules; It could rather easily be subsidized for poor people and hardship cases. If you are going to cover lifetime health costs instead of just Medicare, many more will need $80,000 to do it and have something left to share with the less fortunate. But to repeat once again, that still compares very favorably with the $325,000 which is often cited as a lifetime cost.
Starting with the Medicare example. Notice that forty years of maximum contributions would amount to far more than the necessary $40-80,000 by age 65. We haven't forgotten that the individual is at risk for other illnesses in the meantime, so in effect what we need is an
individual escrow fund for lifetime funding intended (at first) only to replace Medicare coverage. (We are examining lifetime coverage, piece by piece, trying to accommodate an extended transition period.) Depending on a lot of factors, that goal could cost as little as $100 a year deposited for forty years, or as much as the full $1000 per year. It all depends on what income you receive on the deposits in the interval. In a moment, we will show that 10% return is not impossible, but it is also true that a contribution of $1000 per year would not seem tragic, compared with the present cost of health insurance (now averaging over $6000 a year). I have unrelated doubts about the current $325,000 estimate of average lifetime health costs, but that is what is commonly stated. For the moment, consider these numbers as providing a ballpark worksheet for multi-year funding, using an example familiar to everyone, but not necessarily easy to understand after one quick reading.
The Cost of Pre-funding Medicare. Rates of 10% compound income return would reduce the required contribution to $100 per year from age 25 to 65, but if the income were only 2% would require $700 contributed per year, and at 5% would require $300 per year. Remember, we are here only talking of funding Medicare, as a tangible national example, Obviously, a higher return would provide affordability to many more people than lesser returns. Let's take the issues separately, but don't take these preliminary numbers too literally. They are mainly intended to alert the reader to the enormous power of compound interest. Let's go forward with some equally amazing investment discoveries which are more recent, and vindicated less by logic than empirical results.
Proposal: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should permit a lifetime limit of $132,000, with an annual limit sufficient to bring an account up to what it would have been if $3300 annually began at age 25.
If someone makes a single deposit of $80,000 on his/her 65th birthday, there will accumulate $190,000 in the account over 18 years, the present life expectancy if he spends nothing for health and invests at 5%; and $190,000 is what the average person costs Medicare in a lifetime. Since the average person spends $190,000 during 18 years on Medicare, enough money will accumulate in Medicare to pay its expenses, and after some shifting-around, this should make Medicare solvent, in the sense that at least the debt isn't getting bigger because of him. Furthermore, index funds should be returning 10-12% over the long haul, so there should be some firm discussions with the intermediaries about some degree of dis-intermediation. Please don't do the arithmetic and discover that only $40,000 is needed. That seems plausible, but that's wrong because the costs remain the same , and previously the government has been borrowing half the money from foreigners. In effect, the subscribers have been paying the government in fifty-cent dollars. There has been an exchange of one form of revenue for another, so the required revenue actually does demand $80,000 for a single deposit stripped of payroll deductions and perhaps premiums. An end would put to further borrowing, but the previous debt remains to be paid. I have no way of knowing how much that amounts to, but it is lots. All government bonds are general obligations, mixed together, and access to Medicare reports back to 1965 is not easily available. What we can more confidently predict is the limit that young working people can afford to put aside for the sole purpose of paying off the Medicare debts of an earlier generation. If there are other proposals for paying off this foreign debt, they have not been widely voiced. And the debt is still rapidly growing.
They would have to set aside an average of $850 per year (from age 25 to 64) to achieve $247,000 on the 65th birthday, assuming a 5% compound investment income and relatively little sickness. This might seem like an adequate average, but occasional individuals with chronic illnesses would easily exceed it in health expenditures. It is not easy to estimate the size and frequency of such occurrence in the future, so someone must be designated to watch this balance and institute mid-course adjustments. As an example, simple heart transplants costing $200,000 are already being discussed. To some unknown extent, the cap on out-of-pocket expenses would have to be adjusted to pass these cost over-runs indirectly through the Catastrophic insurance. Insurance does greatly facilitate sharing of outlier expenses, but usually requires a time lag whenever new ones appear.
It does not require much political experience to know that taxpayers greatly resent paying debts that benefitted earlier generations. They complain, but complaining does not pay off the debts of the past. To double required deposits in order to pay off past debts, as well as using forgiveness of payroll deductions and premiums, would require an additional $120,000 per year escrow, for each year's debt accumulation. At present, roughly $ 5300 per beneficiary, per year, is being borrowed, and there are roughly twice as many current beneficiaries as people in the tax-paying group, but only 18 years, as compared with 40 years as a prospective beneficiary. So that comes to liquidating roughly $1300 a year of debt to balance the two populations or $2600 a year to gain a year. That's for whatever the debt happens to be, which surely someone can calculate. To accomplish it, one would have to project an average of % income return. That's definitely the outer limit of what is possible, and it probably over-reaches a little. Therefore, to be safe, one would have to assume some other sources of income, a change in the demographic patterns, or an adjustment with the creditor. Assuming inflation will increase expenses equally with inflation seems possible. And it also seems about as likely that medical expenses will go down, as that they go up. You would have to be pretty lucky for all these factors to fall in line over an 80-year lifetime. So, although Medical
It is this calculation, however rough, which has made me change my mind. It was my original supposition that multi-year premium investment would only apply up to age 65, and that would be followed by Medicare. In other words, it should only be implemented as a less expensive substitute for the Affordable Care Act. It seemed to me the average politician would be very reluctant to agitate retirees by proposing a plan to eliminate Medicare. They would feel threatened, the opposing party would fan the flames of their fears, and the result would be a high likelihood of undermining the whole idea for any age group, for many years. Better to take the safer route of avoiding Medicare, and confining the proposal to working people, where its economics are overwhelmingly favorable.
But when the calculations show how close this proposal under optimistic projections would come to failure, and when nothing remotely close to it has been proposed by anyone, the opportunity runs the risk of passing us by. So, I changed my mind. The moment of opportunity is too fleeting, and the consequences of missing it entirely are too close, to worry about the political disadvantage of doing the right thing. The transition to a pre-funded lifetime system will take a long time to get mature, and the political obstacle course preceding it is a daunting one.
========================================>/p>
So we guess the average life expectancy where things will eventually flatten out will then be about 91. (Be careful, most life expectancy figures are for life expectancy at birth.) But you would have to be lucky in everything: a very favorable investment climate for the right ten-year period, plus a favorable health situation which avoided expensive illnesses just at the age when they would begin to threaten. Using a lower goal of $80,000 and a lower interest rate of 7% is considerably easier to achieve, but the limitation which might be reached first is the $3300 yearly contribution rate, and someone might be forced to pay all medical expenses out of pocket in order to make the investment fund stretch. The individual who came up short would still be considerably ahead, but we are using a precise match of revenue and expense, to simplify the examples. Someone who sells his business at age 63 might have the cash, but still, have trouble because of the $3300 per year limit. It seems pointless to squeeze through a narrow window, and much better if the window were enlarged to permit lump-sum deposits up to a $ 132,000-lifetime limit. With that sort of cushion, plus a stretch of reasonably good health at the right time of life, it would become considerably safer to take the risks. At age 65, a lifetime of health costs is already in the past, but the curve of health expenses starts to curve up at age 50, at a time when college expenses for children may be persisting, and the house isn't quite paid for. It seems a pity to cripple a good idea with pointless contribution limits that almost stretch far enough, but leave people fearful. If Congress develops a serious interest in lifetime insurance, the yearly contribution limit should be revisited.
The simplified goal is, therefore, to accumulate $80,000 in savings by the 65th birthday, remembering that savings get a lot harder when earned income stops. With the current law, you would have to start maximum annual depositing of $3300 by your 50th birthday, to reach $80,000 by age 65, and you would still need generous internal compounding to make it. But notice how easily $100-200 a year would also get you there, starting at age 25 (see below) and less optimistic investment income returns until age 65. Many more frugal people might skin by with looser rules; It could rather easily be subsidized for poor people and hardship cases. If you are going to cover lifetime health costs instead of just Medicare, many more will need $80,000 to do it and have something left to share with the less fortunate. But to repeat once again, that still compares very favorably with the $325,000 which is often cited as a lifetime cost.
Starting with the Medicare example. Notice that forty years of maximum contributions would amount to far more than the necessary $40-80,000 by age 65. We haven't forgotten that the individual is at risk for other illnesses in the meantime, so in effect what we need is an
individual escrow fund for lifetime funding intended (at first) only to replace Medicare coverage. (We are examining lifetime coverage, piece by piece, trying to accommodate an extended transition period.) Depending on a lot of factors, that goal could cost as little as $100 a year deposited for forty years, or as much as the full $1000 per year. It all depends on what income you receive on the deposits in the interval. In a moment, we will show that 10% return is not impossible, but it is also true that a contribution of $1000 per year would not seem tragic, compared with the present cost of health insurance (now averaging over $6000 a year). I have unrelated doubts about the current $325,000 estimate of average lifetime health costs, but that is what is commonly stated. For the moment, consider these numbers as providing a ballpark worksheet for multi-year funding, using an example familiar to everyone, but not necessarily easy to understand after one quick reading.
The Cost of Pre-funding Medicare. Rates of 10% compound income return would reduce the required contribution to $100 per year from age 25 to 65, but if the income were only 2% would require $700 contributed per year, and at 5% would require $300 per year. Remember, we are here only talking of funding Medicare, as a tangible national example, Obviously, a higher return would provide affordability to many more people than lesser returns. Let's take the issues separately, but don't take these preliminary numbers too literally. They are mainly intended to alert the reader to the enormous power of compound interest. Let's go forward with some equally amazing investment discoveries which are more recent, and vindicated less by logic than empirical results.
The transition is greatly eased by the premiums and payroll deductions, which are largely age-distributed, and can, therefore, be forgiven in a graduated manner for late-comers to the program. Most cost-redistribution of high-cost cases should be handled through the catastrophic insurance, which is well suited for invisible and tax-free redistribution. Because of hospital cost-shifting, inpatients are temporarily overpriced but are quickly becoming underpriced as a result of gaming the DRG to shift costs to outpatients. This will in time affect the relative costs of Catastrophic and Health Savings Accounts and should be carefully monitored for mid-course adjustments. This changing horizon of cost shifting almost demands the creation of a special department to keep track of it.
Proposal: Congress should create and fund a permanent Health Savings Account Agency. It should have members representing subscribers and providers of these instruments, with the power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcommittee of Ways and Means periodically. It should be involved with the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations about the size and scope of this activity.
Cost Sharing with Frugality.At present costs, statisticians estimate future healthcare costs of about $325,000 (in year 2000 dollars) for the average lifetime. We could discuss the weaknesses of that estimate, but even though it's breathtaking, it's the best guess available. Women experience about 10% higher lifetime health costs than men. Roughly speaking, how much the average individual somehow has to accumulate, eventually must equal what he spends by the time of death. The dying individual himself has little interest in what is left unpaid at his death, so Society must do it for him, in order to survive as a Society. At this point, we, unfortunately, must also work around one of the great advantages of having separate accounts.
On the one hand, individual accounts to create an incentive to spend wisely, but it is also true that pooled insurance accounts make cost-sharing easier, almost invisible, and tax-free. Cost sharing induces reckless spending of other people's money, individual accounts induce frugality with your own money. Therefore, linking Health Savings Accounts with Catastrophic insurance provides a way to pool heavy outlier expenses, while the incentive for careful money management remains in the outpatient costs most commonly employed (together with a special bank debit card) to pay outpatient costs. Such expenses are much more suitable for bargain-hunting anyway because dreadfully sick people in a hospital are in no position to bargain or resist.
But a cautionary reminder: linking individual accounts to frugality through the outpatients, as well as linking heedless spending to insurance through inpatients -- induces hospital administration to game the system you have devised. There's no doubt we have created a system which can be gamed by shifting medical care to the outpatient area, but we must expect the DRG to be attacked, in order to reverse the incentives, which run in the hundreds of billions of dollars. A well-informed monitoring system simply must be created and funded, if we ever expect the decision to hospitalize patients to rest on whether the patient needs to lie down, instead of on what kind of payment system we happen to fancy.
Standard Deviation within and between age cohorts.Furthermore, there is a distinction between a mismatch of revenue to expenses caused by chance within one age group and a mismatch between two age cohorts. To put it another way, somebody has to pay off these debts, and surely we must have a plan about who should pay them when revenue is not present in the account. Borrowing between subscribers within the same age cohort should pay modest interest rates, but borrowing between different cohorts for things characteristic of the age level (pregnancy, for example) should pay none. Unfortunately, people may abuse such opportunities, and interest must then be charged. Until the frequency of such things becomes better established, this function of loan banking policy should be part of the function of the oversight body. When its limits become clearer, it might be delegated to a bank, or even privatized, but the policy should be monitored by specialists who understand what is happening "on the ground". While it is unnecessary to predict the last dime to be spent on the last day of life, incentives should be understood by the managing organization, separating routine cash shortages from likely abusive ones. And looking at all such activity as potentially caused by payment design. Much of this sort of thing can be minimized by encouraging people to over-deposit in their accounts, possibly paying some medical bills with after-tax money in order to build the fund up. Such incentives must be contrived if they do not appear spontaneously. User groups can be very helpful in such situations. People over 65 (that is, those on Medicare) spend at least half of that $ 325,000-lifetime cash turnover, but just what should be counted as intentional overspending, can be a matter of argument.
Proposal: Current law permits an individual to deposit $3300 per year in a Health Savings Account, starting at age 25, and ending when Medicare coverage appears. Probably that amount is more than most young people can afford so it would help if the rules were relaxed to roll-over that entitlement to later years, spreading the entire $132,000 over the forty-year time period at the discretion of the subscriber.
The main purpose of fitting a small picture of health financing reform, into a big picture of health financing, or even into a bigger picture of national financing -- is to help judge whether the proposed reform is even remotely feasible. In constructing this assessment, our first task is to see whether healthcare as we project it can be self-sustaining. If not, we would have to look around for something else to subsidize it, because healthcare is not going to go away. We would have to shrink its ambitions, or else shrink the ambitions of something else, like abolishing the rich in order to subsidize the poor. Therefore, balancing the books in this context means showing how the health system can become self-sustaining.
Revenue Let's start with available revenue, which must ultimately come from people of working age. That is to ask, how much can people from age 26 to 65 afford to devote to healthcare? Their children are too young to contribute, and after they retire, the retirees are living on what they accumulated while they were working. Everybody hopes to save a little more than that, but what they have is probably best put in the category of retirement costs. Other derivative savings categories, like corporate income and government subsidies, either come directly from working people as taxes, or indirectly from organized charities, inheritances, and savings. Since 1965, aggregate foreign transfers have all been negative.
Painless Augmentation of Revenue. All budgets seem to start this way. Everybody's appetite seems bigger than his wallet. But few budget discussions begin with the proposal that we perpetually find new sources of revenue for two-thirds of projected expenses. That is, most organizations assume you have to borrow in order to meet your goals. Eventually, you find new sources of revenue, or else the debt service grows to a point it destroys the vision thing.
Substitute Investment for Debt. We presently regard the diverging curves of revenue and expense as a tragedy, when they could be turned around as good luck. The pay as you go system allowed employer-based health insurance to forget about the early costs of people who had not pre-paid them. In a sense, pay-go borrowed its capital costs and never expects to repay them. It may have assumed later generations would pay off the debts, but the later generations just continued the minute, and let it grow. Like all insurance companies, it rejoiced in the gift of protracted payment periods, growing out of unexpectedly extended longevity.
There's a tipping point in such developments: if the interest you earn on savings is greater than the interest paid to your creditors, your debt burden shrinks; if it's the reverse, you probably go broke. In the favorable case, the more longevity keeps extending, the cheaper it becomes to extend the debt. The health industry has permitted the insurance and finance industries to enjoy this windfall. It's time for the Health Industry to take possession of what it created, but you need not expect the insurance and finance industries to cooperate gracefully. As John Bogle so annoyingly pointed out, the finance industry has absorbed 85% of the income from investments. The insurance industry is allowed to charge 10% to collect healthcare bills. And big business finances the transfers by paying half of its inflated tax liability in taxes, while denying the same advantage to its foreign and small-business competitors. No one expects these three giant industries to roll over on command, but the government can be pressured to stay out of the road while the healthcare industry switches from being a debtor to being a creditor, hence avoiding bankruptcy in order to be rewarded for extending everyone's lifespan by thirty years. In short, by switching from pay/go to Health Savings Accounts. From debt-pay to pre-pay.
Substitute Independent Multi-year for Employer-based One-year Term Insurance. Since both the Clinton and the Obama health reform teams had extensive contact with business interests, there is little doubt they were well aware of two flaws in the employer system. It is not portable, leading to the campaign agitation about "job-lock"(Clinton), and it does not roll over from year to year, resulting in a furor about pre-existing conditions(Obama).
These are both manifestations of employer control, inherently consequences of employment mobility. It is unclear what combination of pressures impelled both administrations and their political associates to avoid the ERISA solution of shifting employer control to an independent insurance company, funded by employers. Perhaps it was fear of union domination of ERISA plans, perhaps it reflected resistance from non-profit insurance, perhaps something else. In any event, this resistance stands in the road of the many advantages of multi-year coverage, perhaps forcing attention to inferior solutions less directly distasteful to employers.
In any event, the lifetime cost of whole-life insurance is roughly a quarter of the cost for equivalent coverage in year to year term insurance. Furthermore, the term product is generally less attractive as a revocable product, hence even more expensive than it seems. It is certainly troubling to hear that term insurance would be unprofitable if fewer people dropped their policies. We would defer to insurance experts on the relative merits of different ways to extract cash from them for medical requirements. Using the cash balances is one way, reducing the terminal benefit is another. Nevertheless, the HRA experience is only half of the accounts have any yearly withdrawals at all, so perhaps the whole-life approach contributes only half as much as its final balance to paying for healthcare. If it eliminated the need to prohibit pre-existing conditions, it might save even more. Perhaps whole-life and term would have appeal to different age groups, so the ability to transfer should be protected. The need to create an information and research center for healthcare is evident in questions like this.
Where Should the Retail Outlets be Located? Health Savings Accounts can be regarded as insurance plans with a banking front end, or else regarded as Savings accounts with fail-safe insurance attached. Instead of a fight to the finish, it is exciting to envision one plan as part of existing insurance offices, and the other as part of brokerage houses. The resulting competition might quickly surface important advantages to different customer needs. It might also adjust more easily to shifts from inpatient care to outpatient, or different state regulatory postures. Some thought might also be given to facilitating foreign medical tourism.
Zero-sum (Painful) Augmentation of Revenue. For health insurance to cross the tipping point between a debtor and net creditor, it must receive a greater return on its investments. The investment community is struggling with a recession and a hostile regulatory climate and will resist a loss of margin unless it is accompanied by a considerable increase in sales volume. They are entitled to make their case but are not entitled to make their own facts. The government needs to assure that prices are more widely transparent, and cost-free transferability is easy. Fees for deposits, withdrawals and transfers should be both low and immune to kick-back arrangements. Fiduciary status should be encouraged if not mandatory. Competition in the sunshine should be the goal, so long as investment income is comfortably above the tipping point. Health Savings Accounts already report $22 billion in deposits, while potential volume is a hundred times that much. There is room here for all participants to prosper, and for optimum rules to emerge. Somebody without narrow boundaries should be empowered to watch, to prevent, and to enforce. With some imagination, the Constitutional quarrel between Federal and State regulation could be turned to advantage, not to obstruction.
Balancing the Books. In this summing-up exercise, balanced books imply health industry self-sufficiency. Even if it is decided to unbalance them by, let's say, subsidies to the poor, the size of the subsidy should be measured against the size of the budget, and the size of the populations involved. Somebody or some agency must be charged with doing so, because health financing is very fluid.
As a first step, health savings Accounts at their most optimistic, fall $50-$80 thousand short of stretching $132 thousand into $350 thousand. That's a whole lot better than falling $200 thousand short, which is the present plan. Almost by definition, we don't believe it can be done by raising cash contributions, but it is sure one big step toward it. As data accumulates and the economy clears, we hope the figures will seem more favorable. As medical research progresses, we hope the overall costs will go down, but an expensive cure for cancer could blow that hope away.
We might expand the international trade of healthcare, both by sending Americans abroad where labor costs are lower and by importing foreign nationals for expensive forms of care, at a fee. For a long time, there was a weekly flight between the Netherlands and heart surgery in Texas, to the financial benefit of both countries. We have not made much effort in that direction, since that time. And finally, there has been very little progress in converting the infirmaries of retirement villages into low-intensity hospitals, an advance with considerable promise if helicopter transfers were facilitated and telemedicine advanced. Because of hospital zero-sum resistance, this trend would best begin in remote regions, and might even require some pilot studies. Finally, it would help a great deal if the retirement age spontaneously moved several years older. Perhaps to age 75. Beyond that, we are going to have to resort to subsidies and cost-cutting to balance the books. That's not the best solution, but it's all this approach can provide. By the way, that's not exactly peanuts. Try multiplying $100,000 times 340 million to see what an advance we have made on solving an apparently unsolvable problem.
If anyone is still listening, we seem to be forced to start experimenting with lifetime Health Savings Accounts. They have more promise, but less experience to back them up. Very likely, they might produce an additional lifetime $100,000 revenue, but they have one immediately important obstacle. We might very well find they cannot do what we want unless the nation is willing to surrender Medicare. No one needs to tell me the politicians regard that as political suicide, because almost no one is willing to face the fact we cannot pay for it, to the degree it is itself probably a bigger problem than the rest of the population's healthcare, and almost no one will face it. I won't repeat the mathematics here, but Medicare is 50% government subsidized. Think it over. Even I am forced by public opinion to soft-pedal the facts, hoping other people who have nothing to lose, will start to speak up.
Computers and the Regulation of Medicine.
George Ross Fisher, M.D.
I am going to take chance in this essay that I can hold the attention of the reader through a preamble of theory, before addressing the consequences for the practice of medicine. That seems necessary because I believe that the consequences are different from what most readers would intuitively expect and persuasion lies in first convincing the reader of the theory.
CLOSED AND OPEN SYSTEMS
There is a growing body of endeavor known as the Theory of System, which acknowledge that all events are consequences of pre-existing conditions (like the consequences of adding acid to bicarbonate in a beaker), and are thus “closed†systems. However, most events in biology and sociology are so complex that it is only possible to deal with them as “open†system, for which we substitute wisdom for scientific certainty. “Wisdom†is a set of traditions, maxims, opinions, and strategies which allow you to make predictions about the inevitable outcome of events within an open system. The teleological nature of human events was once referred to as Manifest Destiny, and realists like Talleyrand spoke of diplomacy as the art of manipulating the inevitable.
Example:
Wisdom has it that in your choice of a practice location, you should remember that “you can’t make money where it ain’t.â€
And now a conclusion about the computer revolution: Since computers increase the capacity to store and manipulate detail, the computer revolution increases the number of closed systems, and shifts the scope of wisdom in decision-making from traditional areas to new subject which was formerly incomprehensible.
HIERARCHIES
In dealing with open systems, managers and executives have evolved a basic strategy; they organize manageable subunits into hierarchies. Units are organized within departments, then organized within divisions, reporting to a policy-making body. Further, because the purpose of the organizational structure is to simplify management, each level of the hierarchy is oblivious to the techniques of the level below, and is only interested in the output of the level below.
Example:
The patient paying his bill is interested in the total amount that he has to write on the “bottom line,†which in his case is the dollar amount of the check he must write
The director of the x-ray department is concerned with a subtotal related to the x-ray department. The chief technician is concerned with individual studies. The dark-room attendant is only interested in pieces of film.
COMPUTER CONCLUSION: Primitive Computer Systems merely duplicate the pre-existing manual system. Their real power lies in the next step, which is to reorganize the reporting system. That is, they cause a reorganization of the hierarchy.
TRANSMISSION
The prediction is made that management system will be forced in the direction of a hierarchy of three: Those who are able to make decisions, those who cannot make decisions but are necessary for some task, and the computer. One function often seen in non-computer systems is simply to pass the information unchanged up to the line. There is little doubt this activity will vanish.
Example:
Robert McNamara (from Princeton via Ford Motors) was a computer expert who became Secretary of Defense under John Kennedy. By installing computers, McNamara was able to jump the Army reporting system (Sergeant to Captain to Secretary of Defense) and confront the generals with discoveries before the generals had received the news. We are told that the generals didn’t like it a bit. But can anyone doubt that Robert McNamara carefully filtered the data before h presented it to President Kennedy? The system of hierarchical reporting condenses the data to the next step up.
COMPUTER CONCLUSION: Many systems of management by delegation will soon be swept away by the computer revolution, and middle management will be the most threatened region. It will resist but it will lose.
MODIFICATION
Another function of delegated systems is to take raw information and reduce it to condensed form for the benefit of the next level upward. They do so by a process which is often a mystery to the next higher level, and hence a certain power is conferred on the lower subunit to modify the conclusion by modifying the system of manipulation. The method for controlling such activity is to produce a procedure manual which the next higher level must approve, but the inherent complexity which forced a delegated process to be created also obscures the power of the delegated subunit to modify the system.
COMPUTER CONCLUSION: Computer technology strictly defines and inflexibly follows defined procedures for steps in hierarchy. It thereby confers much stricter control power to the higher levels of hierarchy.
THE NEED TO KNOW
If for no better reason than to reduce programming costs, the computer process confers a new power to the lower levels of hierarchy. The higher level must now strictly define its reasons for asking for certain information. If it cannot demonstrate a need to know, it cannot justify the cost of knowing.
Example:
The PSRO, acting on behalf of the physician community, violently resists the inclusion of data elements in the reported tape sent to the Bureau of Quality Assurance. At the same time, it is anxious to acquire as much data as possible from units lower in the hierarchy, who in turn resist the process. It can be expected that this process will eventually settle out at roughly the best equilibrium for the community at large, although differing aggressiveness among the participants may cause temporary inequities. The weapons in the battle, which are at the disposal of the physicians are:
(1) Superior Claims on the decision-making process.
(2) The faith of the public in physicians as the most trustworthy custodians of their health privacy.
(3) A superior pool of talent, determination, and independent means committed to a vital issue.
COMPUTER CONCLUSION: If you have a good chance of being the winner in the reorganization of a hierarchy, it is better to participate to your utmost rather than hold back out of fear that someone else will be the winner, because only participants are winner.
NETWORK
We have spoken thus far of hierarchy as the only manageable approach to the complexity of open systems. A more general description would be “modularity†since modules can interact in a lateral direction as well as vertically. When they do, the result is a network of modules in three dimensions. Since computers increase the ability to cope with complexity, they increase the ability to work in three dimensions. Hierarchy is the last resort of manual management; just as three-dimensional chess is beyond the ability of people who are not even very expert at two-dimensional chess. In this sense, the computer revolution provides some hope for the American System, which presents hierarchy and naturally prefers networks when feasible. This is to some extent a philosophical preference and does not seem to be true of the Japanese social system, or the German mentality, or the Communist method. The natural American instinct for lateral equality is thus an ally in Medicine’s conflict with Government, but a hindrance when it encourages Nurse independence or unrealistic consumerism.
Whether lateral or vertical, the interaction of modules in a complex open system is the same: delegation of a method, the output from one module as the sole input to other modules, and resistance to the need to know.
COMPUTER CONCLUSION: The organization of modules into vertical hierarchies or horizontal networks is largely a political process, with three-dimensional networks as the last resort of compromise, and with strict vertical hierarchies as the last resort of inadequacy.
CONFIDENTIALITY
Complexity is itself a major defense of confidentiality; since computers reduce complexity, they also destroy the smoke screen. Computer System which stumbles ahead or is manipulated into breaches of confidentiality is certain to raise a great uproar about the need to know and the right to conceal. In the PSRO system, the issues balance between the duty of accountability and the patient’s right to privacy. When reduced to these terms the physician community has a clear advantage in the mind of the public, if the advantage can be effectively exploited. The latter can, however, be overturned by speedy pre-emption of the turf. it can be predicted that special pleaders will insist on accountability when all they really want is power and satisfaction of envy; it can fairly be predicted that some will weaken their claim to privacy by overextending its bounds.
Example: The system of peer review on Medicaid prescriptions in Pennsylvania has turned up a number of instances of patients who obtained multiple prescriptions for “controlled†drugs from multiple doctors, filled at multiple drug stores, probably for resale on the streets. When the doctors and pharmacists were notified, they were universally grateful and took steps to curtail the problem. However, the computer vendor learned of the problem (regardless of the fact that all reports are shredded after review) and persuaded the state government to institute a system of restricting problem patients to a single physician. It may now be impossible to dislodge this meat-ax reaction, in spite of the fact that the computer peer-review system is probably able to cope with the problem without invoking hierarchical power.
A Second Example: The United States Navy recently developed a system of computer protection so elaborate that they boasted of it in the newspapers. Two computer scientists read of it, and in a month’s, the time had broken into the system via telephone. The Navy was then agitated to read of its disarmament in other newspaper articles.
COMPUTER CONCLUSION: There is no present foreseeable technical method of protecting the confidentiality of computerized data, except by physical ownership and physical protection of the machine itself and all of its activity.
CONCLUSIONS
The most significant event in the Twentieth Century is the Computer Revolution, just as the Industrial Revolution was the major event of the Nineteenth Century. By the greatest good luck for medicine, the computer revolution is capable of solving the four major problems which now threaten the American Medical System.
1. THE FAILURE OF THE PRE-PAYMENT INSURANCE MECHANISM. The removal of cost restraints on the patient (and thus the provider) has had a predictable upward effect on costs. The overwhelmed system has reacted in a typical hierarchical manner: try to convert insurance companies into regulatory bodies, and if that fails, into rationing systems. The computer revolution (if we are agile) has the potential of drastically reducing the information costs which are now 40% of hospital and insurance company costs. It also has the ability to control utilization abuses, and expose power abuse to public decision.
2. THE VAST INCREASE IN PARAMEDICAL PERSONNEL. Middle management is most vulnerable to computer replacement, and middle management now costs 20% of the hospital dollar. Physicians in complex medical centers are most alarmed about this problem, which they can easily identify by comparing the hospital parking problem with what it was, twenty years ago. Surgeons are typically least concerned since their role at the center of procedures is least threatened by aspirants. But surgeons are hearing of “unnecessary†surgery, and even the small-town solo practitioner has to hire girls to fill out forms. The complexity of our system must be reduced, and computers can do it. The best way to thwart the claims of aspirants to power is to eliminate jobs.
3. THE EXPLOSION OF SCIENTIFIC INFORMATION. No one would wish to reduce the output of the research community, but ways must be found to organize and transmit the information without resort to fragmentation by sub-sub specialists. The computer is ideally suited to the problem.
THE MALPRACTICE CRISIS. Physicians are uncomfortable with the idea that peer review may soon become entangled in the malpractice system, as indeed it inevitably will. The matter comes down to biting the bullet, armed with a statistic. Surely consent for an arteriogram is more threatening if it is couched as “you might lose your leg†than if you are told, “you have one chance in five thousand†of such an occurrence. Realistic insurance premiums can be set when the risks are defined. Juries can be provided with realistic statistics on normal risks and normal expectation of benefits.
Through all of these four problems runs a common theme: The cost of medical care. The PSRO seems to be the last best hope of curtailing the cost threat to medicine, and so the PSRO can be expected to be the vehicle for the computer revolution’s resolution of the issue. Senator Bennett probably had no idea of what he was doing, but he did it, and the problem is now our problem.
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.