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.
Banks have long operated in a dual system of regulation, state and federal, which permits some shifting back and forth between regulators. Mergers sometimes confuse matters further, and a system of one-bank holding companies adds to the stew. Local banks, waving the red shirt of domination by Wall Street at their state legislatures, have resisted interstate banking in a wide variety of ways. Sometimes a customer finds that funds transfer between two branches of the same bank must be treated as out-of-state action, and so on. Inevitably there is a certain amount of dealing by subsidiaries which are not recorded on the books of the home bank of a bank conglomerate in ways prescribed by the subsidiary's regulator, or not recorded at all. Equally inevitable is the accusation of off-the-books illegality by competitors, politicians, or the merely captious. Fine points of these legal and accounting arguments must be left to experts, peer review, and courts. Muttering Enron at every opportunity, accusers may be right that some of these arrangements have stepped over the line; partisans in Congress and the legislatures, on the other hand, may be correct that existing law is bad law. This is not a good place to debate either point.
Credit Crunch
It does seem appropriate to notice that banking has long been massively inefficient and that much of this inefficiency has been imposed by regulators. Regulators represent the public, more or less, and the public is rightly nervous about stewardship of its assets. Dual regulation offers refuge from the ancient fear of confiscation by the sovereign and is worth a certain amount of inefficiency if it works. But it does create loopholes, and it does impair transparency. In the case of the credit crunch of 2007, it sequestered bad debt in off-the-books ways, perhaps creating tax avoidance, but mainly creating distrust among counterparties. In those days of awful turmoil, no one knew what was going on, multi-billion dollar losses were being confessed by premier institutions, so transactions were delayed, avoided, or rejected. Transactions with anybody. When the time comes to reconsider regulations, it should be emphasized that by far the most damaging component of the whole mess was lack of transparency. Once more, a massive computer programming effort is entirely capable of restoring transparency to the existing regulatory structure, highly pigglety though it may be. After we achieve transparency we might consider achieving efficient transparency, and after that perhaps ponder fairness in transparency. When a trader calls another and asks to buy a zillion shares, the happy recipient of the call likes to glance up at his screen to see what the other fellow is worth, before he shouts, "You got it!"
What the Federal Reserve might well call the highest priority calls for respect, as well. Ever since we began the century-long transition from a gold standard for money, there has been a concern that the Fed might not be able to determine how much money, or credit, or liquidity -- is actually in existence. We have reached a point in this process where the Fed has largely stopped trying to measure monetary aggregates, and merely adjusts its tools to keep the money supply sailing between the rocks of inflation and recession; if neither rock is in sight, the amount of money is about right. That system has served us for eighteen years, long enough to spark hope that it can be permanent. But when a rocky shore does make an appearance, the Captain of the ship must know how much slack he has, and how reliable his sonar. For huge sums to be obscured within bank subsidiaries or delayed marking to market, is to increase the chance we will run up on the rocks when it might have been avoided. He too needs transparency, but he also needs prompt obedience to his orders. The rest of us passengers are rightly concerned when he appears before Congress and admits he is not sure what the situation is. As long as that is the case, fairness -- and dogma -- be damned.
Taking a step backward, the whole credit crunch has brought to the world's attention that real estate transactions are both immense, and immensely inefficient; a great deal of money is to be made if any step in the chain can be streamlined. Therefore, real estate agents, real estate lawyers, title insurance, surveyors, advertisers, inspectors and everyone else who makes a living from real estate sales -- can expect to be drawn into an annoying process of inspecting the premises, promises, kickbacks, referral fees and marketing costs of a whole expensive process, first blasted open to inspection by implementation defects while computerizing the mortgage step. It appears to be high time for it.
The difference between what eventually happened to East Jersey and West Jersey after three hundred years illustrates the difference between an outstanding lawyer like William Penn, and the ordinary run of lawyers. Because we focus here on a title to land in real estate transactions, a three-paragraph historical synopsis is necessary. If you've wondered why you need to buy title insurance when you buy a house, read on.
Four years after his restoration to the throne in 1660, King Charles II got his brother the Duke of York to conquer New Netherlands by first granting him the land. New Netherlands extended from the Connecticut River to the Delaware River. He added that it was up to the brother to conquer it from the Dutch, who had been in disputed possession since 1614. By much the same pass-the-buck process, the Duke of York then conditionally subdivided that part of it which is now called New Jersey, jointly to Sir George Carteret and John, Lord Berkeley -- who promptly delegated the actual fighting to one Colonel Nicholls. The Jersey name derives from an island in the British Channel, where Carteret had once provided a haven from Cromwell for the exiled Charles and James. Nicholls defeated the Dutch on February 10, 1665, although later Dutch attempts at reconquest caused royal clouding of the Berkeley/Carteret titles, with the ultimate result that Berkeley sold his share to a Quaker Edmund Byllinge, and Carteret lost his right to govern but not his right to own, his half of the land.
William Penn
At this point William Penn entered the picture as one of three Quaker trustees for Byllinge, who had gambling debts. A tenth of this share was given to John Fenwick, the 1675 settler of Salem, to settle his part of the disputes with Byllinge; the rest of it constituted what was to become the oldest American stockholder corporation, The Proprietors of West Jersey. The arrangement up to this point was firmly settled for the southern half of New Jersey by a Quintipartite Deed of July 12, 1676, , signed by the three Quaker trustees plus Byllinge and Fenwick. Aside from establishing the Proprietorship, the main point of this deed was the separation of West Jersey from East Jersey (the Carteret part) by a North-South line which still persists as the upper border of Burlington County. The right to govern this land was fully restored in 1680 by a Confirmatory Grant from James, probably after considerable lobbying in London by William Penn.
Presumably in pursuit of this final confirmation, Penn had negotiated a hundred-page agreement with prospective settlers which outlined his plans for governing, called the Concessions and Agreements of March 14, 1677, . Although its original purpose was mainly a real estate marketing tool, this landmark document seems not only to have persuaded the Duke of York but so shaped the thinking of the English colonies that many of its features are readily recognized in the American Constitution of 1787.
The line dividing West and East NJ
The land mass between the North and South Rivers (Hudson and Delaware) only came completely and legally into the hands of Quakers in 1681. At that time Carteret's widow, Lady Elizabeth, sold the northern half (East Jersey) to twelve Quaker proprietors, while the southern half (West Jersey) was already held by thirty-two other Quaker proprietors under the effective leadership of William Penn. It is somewhat uncertain who orchestrated this final consolidation, but there is a strong presumption that it was Penn. Since the main purpose of these business proprietorships was to sell land to immigrants, it was vital to minimize land disputes with accurate records and accurate surveying. With a history behind them of fifteen years of bickering, everybody concerned was surely ready for some peaceful organization. Both groups of proprietors, East and West, found it useful to delegate authority to a council of nine executive proprietors, whose main agent under the circumstances was logically the Surveyor General. For the next three hundred years, the surveyor generals were the men running things in New Jersey. The right of the Proprietors to govern was revoked by Queen Anne in 1702, but their land rights remain undisturbed to the present day, notwithstanding the intervening transfer of national power to the United States of America in 1776-83. Underneath all of this hustling and arranging, with exquisite attention to details, seems to be found the hand of William Penn. Almost immediately after New Jersey was packaged and delivered, King Charles paid off his family debt by turning over the far larger combined land mass of Pennsylvania and Delaware to William Penn, urging him to make himself a vassal king in the process. The Quaker instantly declined such a thing, but the power continues to reside in the final Royal Charter. It's only a conjecture, but it might help explain the strange acquaintance between a dissolute king and an abstemious Quaker to notice that the New Jersey tour de force astoundingly demonstrates how Penn was a man who really could be trusted to get complicated things done with dispatch.
Today, for practical purposes it all amounts to a company named Taylor, Wiseman, and Taylor; but we are getting a little ahead of ourselves. To go back to 1684 a surveyed line was clearly needed between the two proprietorships, as declared by the following resolution:
"Award we do hereby declare, that [the line] shall run from ye north side of ye mouth or Inlet of ye beach of little Egg Harbor north northwest and fifty minutes more westerly according to natural position and not according to ye magnet whose variation is nine degrees westward."
To clarify those quaint words, the survey was not to make the mistake made in the layout of Philadelphia, whose streets had intended to be true north and south but by using Magnetic North are actually twelve degrees off from that. Another important point is probably unclear to modern readers, who know the town of Egg Harbor on the mainland of Barnegat Bay but are largely unaware that the "beach of Egg Harbor" was what we now call Long Beach Island, on the east side of Barnegat Bay. The southern anchor of The Line was in what we now call Beach Haven, on the north side of the inlet, although beach erosion has put the southern anchor about two miles out to sea, locating a temporary marker in Beach Haven. Hardly anyone seems to be aware of it, but reread the sentence and observe the meaning is actually quite clear. The intent of the northern end of The Line (? the Delaware Water Gap ?) is buried in the obscurity of compass markings, but comes out slightly above Trenton on the Delaware River, extending beyond the river into Pennsylvania until it reached the river again in a crook on the far side of the Delaware Water Gap. Word of mouth has it that William Penn wanted to have both sides of the river although this triangle of Pennsylvania was eventually surrendered. It seems fair to say, the line was roughly intended to run from the Beach Haven ocean inlet to the Delaware Water Gap.
John, Lord Berkeley
For its time, the survey of The Line was also a significant engineering achievement. The general plan was to lay out the course of the line in the wilderness until it hit a big boulder or anything else that was large and heavy. This became a marker along a line of 150 markers which could be used for local surveys and boundaries. After several less accurate attempts, the West/East line was surveyed by John Lawrence in 1743 and stands as the Official Province Division Line. A few years ago, a group of volunteers tried to locate all of the original markers and found 55 of them. The historical project took ten years.
All of the deeds of property in the State of New Jersey still depend on the original survey and the meticulous notes kept by the Surveyors General of these two Quaker organizations, without whose private records every title to every property would be clouded. With the passage of time, and especially the warfare of the Revolution, other copies of the surveys have disappeared. So, without the need to get ugly about it, these soft-spoken courteous folks retain a form of power it would be hard to match with sticks and stones, guns, threats or legalisms -- the only surviving record of everyone's title to his land. There is little reason to inquire further why these Proprietorships durably survived the revolution which overthrew King George III, and why no one has seen fit to enter the serious challenge to their claim of owning the whole state except for what they had already specifically sold.
Let's go back to a point made earlier. In all the complexities of the English Royal Court and uncertainties of uncharted wilderness, how did a little band of Quakers find themselves with uncontested ownership of a whole American colony? Some of the chaos of the age probably helped. King Charles unleashed his brother's armies in 1664. Also in 1664, Parliament passed the Second Conventicle Act, which provided that not more than five persons were permitted to worship together otherwise than according to the established ritual of the Anglican Church of England. This act might be described as an improvement on the First Conventicle Act of Queen Elizabeth, which provided that no one at all could so worship. However, this prohibition was so extreme it was ignored, whereas the Second Conventicle probably had some popular support. It thus can be imagined why Quakers were suddenly interested in leaving England, and not hard to understand how young William Penn was propelled into leadership by successfully overturning that Act in the Haymarket Case. Penn was both the defendant in the case and the defense lawyer, inventing the common law principle of jury nullification that has so confounded tyranny ever since. To go on with events current at the time, the Great Plague took place in 1665, making London an undesirable place for anybody to live. And finally, George Fox, the founder of Quakerism, took a journey to the new world in 1672, noting that the place now called Burlington, New Jersey was "a bravest country". Taken altogether, it is not hard to suspect this group of fairly wealthy, fairly well-educated people developed a collective resolve to buy up the pieces, assemble the parcel, and go away to live on it. Their organization into monthly local meetings, quarterly regional meetings, and annual national meetings was surely great assistance. From what we know of the broader vision of William Penn, it is fair to speculate his enthusiasm for this communications network first suggested by George Fox, or at least he's having a pretty quick recognition how it would assist the emigration venture.
George Carteret
George Carteret's widow was the last to sell out her land parcel to the East Jersey Proprietors, presumably drawn from the 1400 immigrants who had arrived in Burlington on five or six ships between 1678 and 1681. In particular, the ship Kent sailed from the Thames in 1677, bearing 230 Quakers, half from Yorkshire, the other half from London settling further south in West Jersey. Before that, Lord Berkeley had sold his half for a thousand pounds to John Fenwick and Edward Billynge, who arrived in Salem on the ship Griffin in 1674. These two soon fell out, with Fenwick taking a tenth of the land and settling around Salem. Billynge got into unspecified difficulties, probably gambling, and turned his property over to his three main creditors, William Penn, Gawen Lawrie, and Nicholas Lucas, who assembled the Proprietorship of West Jersey. Penn's remarkable talent for leadership again emerged in his statement of "Concessions and Agreements" with the Indians and new inhabitants. In another place, we discuss the reasons for thinking this document created the effective basis of the U.S. Constitution. By infusing it with the unspoken word of compromise, Penn created the main model explaining why the ratification of the Constitution remains the only time in history when thirteen independent nations voluntarily gave up sovereignty for the purpose of creating a larger vision -- which then held together for two centuries. But the voluntary union of East and West Jersey certainly has a claim to being earlier, although its claim to sovereignty is weaker.
Perhaps so, but since their interest in power was weaker, their achievement in peaceful negotiation with a secretly Catholic King was surely much greater. If some small group of religious dissidents should today emerge as having quietly and systematically bought up an entire state, however legally, the word conspiracy would be on every tongue. In this case, however, the reaction was peaceful consensus.
The CEO of Safeway Stores recently offered his company's preventive approaches as an example of what the nation can do to reduce health costs. He's undoubtedly sincere, but quite wrong; Safeway just shifted costs to Medicare. This is only one of several ways, major ways, cost-shifting is misleading us. Let's explain.
Average life expectancy is increasing at more than two years per decade, but of course, people eventually die. Since health care costs are heaviest in the last year or two of life, extending life will soon push nearly all those heavy terminal costs from employer-based insurance -- into Medicare. To die at age 64 costs Blue Cross a lot; but to die at 65 gets Medicare to pay for it. Either way, the cost is exactly the same, it doesn't save Society as a whole any money at all. Let's put it another way: dying at age 64 costs the employer and the employees, but dying at 65 costs the taxpayers. This means Medicare costs will surely rise, but in this case, it's a reason to rejoice.
Increasing longevity is constantly pushing more costs from employers to Medicare, and not just in Safeway; the prospect is that soon substantially all major sickness costs will shift into Medicare. (To explain the failure of most employer insurance premiums to fall comparably in response to this shift, one must look elsewhere). But just a minute. Medicare is 50% subsidized by the government, and the employer writes off half of the cost as a business expense. That ought to mean it doesn't make much difference to anyone involved, except for one thing. Some employers have two employees and some have two hundred thousand employees. The amount of tax write-off is multiplied by the number of employees, so some employers can only write off a little, while an occasional employer might even make a profit on using health insurance for calisthenics. Economists agree that fringe benefits eventually and proportionately come out of the pay packet, so ultimately the employed patient benefits from the reduced bill, his employer pays less, and the Medicare costs the taxpayers more.
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But instead of going down that trail, let's look at the second form of cost-shifting. Government payers and a few other monopolists are able to pay hospitals less than actual costs and get away with it. The worst offenders are state governors administering Medicaid, where the underpayment is roughly 30%, in spite of federal reimbursement to the states for most of it, at full price. The resulting profit is used for various state purposes, mainly nursing home reimbursement. For the most part, such diverted funds are used for purposes not easily eliminated, so it is unlikely there will be much cost reduction for the government if the scam is acknowledged and merely shifted to a different line in the ledger. To avoid bankruptcy, hospitals raise the rates for other health insurance plans -- and the uninsured. Employers are paying for most of it, so they stand to gain from reform, only to face higher state taxes as matters readjust. We have yet to learn where these costs will shift if the federal government takes over the costs of the uninsured; the current Obamacare plan is to shift 15 million uninsured persons to Medicaid. To a major degree, the federal government and its taxpayers are already paying for a lot of this uninsured cost, through the Medicaid shift. So its present dilemma is whether to continue to pay for it twice.
There's still a third cost-shift. In 1983, Medicare stopped reimbursing hospitals fee-for-service (itemized inpatient bills are still prepared but are meaningless fictions) and for thirty years has paid by the diagnosis, not the service, for inpatients. Consequently, per beneficiary inpatient costs have only risen 18% in five years, while outpatient costs have risen 47%. Costs are not the same as prices, which are even worse distorted. To a large extent, changes in costs are really changes in accounting practices, driving changes in actual practices. Skilled nursing and home care costs are rising even faster. When you hear fee-for-service payments attacked, it is this apparent overpayment of outpatient costs which is the source of the complaint. But to pay out-patient medical costs in any way other than fee-for-service would imply an almost unimaginable restructuring of the medical system, without any proof it would save money. It will be very interesting to learn what contorted proposal is about to emerge.
Medicare +6%
Medicaid -30%
Private Insured +32%
58% of Hospitals Lose Money
Not only do these shifts provoke inpatient nursing shortages, but they also start a war for patients between hospitals and office-based physicians. Hospitals are winning this war for business, but are losing money doing so. If the public ever demands a stop to loss-leaders, net insurance premiums will probably rise. The difference between a hospital which makes money and one which loses money is based on whether there is enough extra out-patient revenue to compensate for the hidden tax which the state effectively imposes on hospitals in order to pay for nursing homes. The obscurity of the present payment system is quite expensive, and the present beneficiaries of it are the Medicaid nursing homes. Obamacare essentially provides health insurance to 15 million uninsureds by the process of placing them on Medicaid, so the consequences are going to be an interesting juggling act to watch.
5-year Change:
Inpatient +18%
Outpatient +47%
5-Year Hospital Costs
Just notice, for example, that neither Medicare nor private health insurance pays below costs if you look at total national balances. Private insurers are paying hospitals 32% more than actual inpatient costs, while Medicare is paying 6% more than national cost. And yet 58% of hospitals are losing money. The magic in this formula lies in the losses incurred by state Medicaid but shifted to other payers. It could fairly be said we are just looking at a maldistribution of the uninsured, as a cost, and a maldistribution of non-inpatient revenues, as a profit, among the nation's hospitals. To what extent such maldistribution reflects uneven patient quality, as the loser hospitals claim, or provider inefficiency, as the winner hospitals would say, -- merely starts a distraction of attention which could last twenty years while we examine it.
There is growing recognition the Clinton health plan bears little resemblance to the Clinton health speeches. I intend to respond to the program chairman’s instruction to discuss the Clinton plan, as leaked in a 250- pages documents to Democratic leaders. But, I must state this: just as the leaked Clinton plan bears no resemblance to the Clinton speeches, it is also likely the Clinton plan is only a tool, not a blueprint, for the Clinton strategy. The written Clinton plan reads like a deal-making machine. It is filled with quid pro quo, with veiled threats for non-cooperation, and with hints of possible rewards for interest groups who fall in line. Many proposals are made, but in politics, it is, of course, not necessary to push all of them with equal vigor, or any vigor at all.
Distorting the National Incentive System
A number of large corporations have been unsuccessful competitors in recent years, chief among them is the auto industry. Unless failing firms reduce surplus capacity, corporate raiders will reduce it for them. The chief response has been to offer early retirement to older workers.
Because health insurance in America has an unfortunate linkage to employment, it has been common to promise to pay the health insurance premiums for early retirees until they reach Medicare age. The promise is, of course, a blank check, and fair accounting of it nearly wiped out the net worth of many large but essentially failing businesses.
The Clinton proposal would lift this burden from the back of the industrial failures to keep them alive a little longer. The rest of the population will pay for this in one way or another, depending on how the other deals are made. Of one thing you can be sure: every man, women, and child are not going to smoke 16 packs of cigarettes daily to pay for it with tobacco taxes. And, if you suppose $234 billions of waste, fraud, and inefficiency can be wrung out of Medicare, you can have it on the word of the world’s chief Medicare hater, me, such an idea is either fanciful or demagoguery, depending on your political party.
Now, the news of the early retiree swindle was leaked to the press by a Democrat spokesman, so we can hope the real Clinton strategy is to broadcast the promise but try to make it look as though Republicans in the Senate were the ones who killed it. If it should unluckily pass, there will be highly undesirable consequences. Chief among them, of course, is the incentive of rewarding failing businesses by taxing successful ones. Successful growing businesses, to underline the point, are not retiring people early, they are trying to hire extra employees.
Intergenerational Equity
The second incredible consequence of the early retiree deal is to cripple the stated goal of the program, which was to ensure the uninsured. You would think the program would lower insurance premiums for people who are typically uninsured; unfortunately, the proposal is to balloon such premium by 500 percent.
To understand the issue, you need to know two things. First, most people without health insurance are young. Second, health insurance for young people is cheap, unless tinkered with. The Clintons tinker, all right, using something called “community rating.†Community rating is charging everybody the same premium, in spite of knowing the true cost for a person age 25 is only 20 percent of the true cost of someone aged 55.
Where in the world did this idea of community rating come from? Let me tell you. First and foremost, it reduces the cost to the government of picking up the early retirees. It is beyond my resources to calculate the relative cost of the two items overall (young uninsured versus middle-aged retirees from mismanaged businesses); but, it looks likely mismanagement costs the country more, even in the short run.
You might as well know some more. Until recently, the dominant form of health insurance was Blue Cross, and Blue Cross always used community rating. I suspect they were responding to union negotiations which tend to offset health insurance fringe benefits against hourly wages in the “pay packetâ€. It does not matter; Blue Cross dominated the scene with community premiums. Eventually their competitors, notably the HMO’s learned how to enroll younger subscribers selectively and take the resulting profit for themselves. First, the Blues were left with sicker older subscribers and got in so much financial trouble their premiums had to skyrocket, causing them to spinal again into still more loss of business. And second, states like New York, Massachusetts, and Vermont got themselves into trouble by passing a mandatory community rating law, which was nicknamed in the legislative corridors the Blue Cross Rescue Lawâ€.
Under this new law, the New York insurance department set the premium for a 30-year-old at $7800 per year for a family plan. Keep that figure in mind when you learn the Clinton plan proposes a national premium of $4200. I guarantee any state government with a disparity like that is willing to suspend disbelief if their dream is to redistribute costs to other states, particularly to young people in some other state. Young people better look out for their interests.
Yuppies do seem to be waking up. It is a universal truism among Yuppies to expect to be cheated by Social Security when they get to the right age. So, it should be a fairly easy belief, however attractive the Clinton health plan may be for their parents, that it too will all go up in smoke for baby boomers when the time comes. Mr. Clinton minimizes the cost and asks Yuppies to think ahead. It will be most unfortunate for his plan politically if they do.
What young people need is a credible guarantee. It would be even nicer if their guarantee could be put away at compound interest and actually reduce the lifetime cost. Time prevents a digression to the Health IRA proposal, which would do just that. What is central to an economic discussion to Health IR proposal, which would do just that. What is central to an economic discussion is the principle of necessary private ownership of policies. What is true of Social Security is also true of the health scheme the federal government simply cannot invest money. Senator Moynihan of New York once blew the whistle on the way purchasing U.S. government bonds for Social Security Trust Funds merely underwrites the federal deficit. The U.S. government can scarcely be expected to buy bonds of foreign governments. And, if it bought a trillion dollars' worth of common stock, we would quickly have the Communist ideal of government owning the means of production.
Government is inherently incapable of being an investor on behalf of its citizens. Although the government puts a spin on it, we are necessarily facing another “pay as you go†plan in the Clinton health proposal. Even “pay as you go†might be tolerable if it were based on present value accounting, net of inflation. Such accounting is improbable since the Clintons are already forced to pay for present health care in one scheme by postulating future reductions ($200 billion from Medicare) in another.
Let us return from investment digression. Young people are to believe community rating is designed to spread the risk of the unfortunate sick. It is not. Like “pay as you goâ€, it is intended to make young people subsidize the payoff of major corporations for making management blunders, and politicians who court their support.
The nature of required support is becoming clearer. For the past six months, the medical community has watched a remarkable onslaught of demands from insurance companies for them to participate in the price and utilization control system known as “managed careâ€. The insurance companies are careful to explain they are only responding to intense pressure from employers. The force of that was brought home to me when I recently addressed the Chamber of Commerce of Philadelphia. In a day-long symposium on health care, the representative of the hospital and I were excluded from the room while the chairman of the meeting lectured the corporate benefits managers for two hours. Who started this rumpus, which is obviously timed to coincide with the Clinton health speeches?
Well, obviously, I do not know. But, Joseph Califano would certainly be on my short list of suspects, because the auto and steel industries have been so outspoken for so long. And, they needed a trusted insider in the Clinton campaign. Potentially, however, there is grim pleasure in imagining how angry steel and auto moguls will be when nasty gridlocked Congress deletes the early retirement deal in a House-Senate conference committee closed session.
Individual Rather than Company Ownership of the Policy
For quaint historical reasons, those conference committees on health will be made up of the leadership of the Senate Finance Committee and the House Ways on Means Committee, the supreme court of national taxation. Now, Sherlock Holmes noticed it was particularly a dog did not bark, and the Clinton proposal has one big omission, too. He does not touch the $48 billion annual tax entitlement of wages paid in the form of health insurance premiums. Even without the revenue loss, this is the heart of the artificial crisis which President Clinton proposes to solve.
As you know, it got started when Henry Kaiser offered fringe benefits as a way around wartime wage controls, and the War Production Board felt income taxation would expose them as disguised wages. Regardless of history, the tax-exempt feature of employer-paid health insurance premiums is the main, or possibly sole, reason employer-basing is the main form of American health coverage. Consequently, along with getting divorced by a working spouse, it is the main reason losing your job means losing your health insurance.
For years, the Census Bureau found roughly 37 million people lacking health insurance every time they conducted a spot check. It took a while before they asked the longitudinal question of how long the individual had been without coverage. It took a while before they asked the longitudinal question of how long the individual had been without coverage. It turns out 28 million of the 37 million can be accounted for as partial persons, constituted out of a pool of 68 million who lack insurance for an average of four months during a two-year period. Leaving aside the quibble that treatment for most medical conditions can be deferred four months, it emerges our problem is not what we thought it was. More or less, permanent lack of coverage is found in 9 million people, most of whom could probably be fit into Medicaid. The rest, having a far more pervasive if a less severe problem, could be cured of their difficulty if the employer turned over the ownership of the health policy to the individual employee, never mind who paid for it.
What is the slogan to be derived from this? Must break the link between health insurance and employment. In my opinion, we do not need to rearrange health care to do it. Just declare as of the signing of this Act, health insurance belongs to and can move with the person it covers. Never mind who writes the premium check.
Cost Shifting
Speaking of national tax policy, the contentious 1993 budget bill, passed by only one vote, purported to contain $250 billion in expenditure cuts; $50 billion, or 20 percent of that, was to come from reducing Medicare, and $42 billion was from reductions in hospital expenditures. Well, guess what. Hospitals will immediately react to those federal revenue losses by raising prices to the other clients in the hospital, mostly paid for by employer group health insurance. In this way, a $50 billion cut in expenditures is instantly transformed into a $ 50 billion tax on business.
Now, the Clinton health plan proposes to pay for several hundred billion in new programs by a new $238 billion cut in Medicare and Medicaid. To the extent this is not just “fantasy†in Senator Moynihan’s phrase, it will effectively be a new round of taxes on business. More likely, the Medicare squeeze-process has already been pushed past the point where the Medicare program can survive if it is seriously extended. Since the collapse of Medicare is more than any political party could survive, the absolutely certain outcome is a larger deficit, or more taxes, or both.
And even if that does not work, am I being extreme in saying it will endanger the health of the nation?
Bringing Welfare recipients into the Workforce
There is one legitimate social argument for risking massive disruptions of a good medical system. Every welfare program has the same difficulty that the person who leaves welfare may then be worse off financially, even though he takes some low-paying job. In our system, Medicaid medical coverage is an important asset for the welfare recipient, particularly pregnancy coverage for young women. A young person's taking marginal jobs may gain a sense of pride, but marginal jobs seldom give out health insurance. It thus appears attractive “to break the chains of welfare†by giving subsidized health insurance to young persons in low-paying jobs.
People who use this argument usually refuse to accept identical logic with regard to repealing the minimum wage laws so their sincerity may be open to challenge. However, the main problem created for health care reform is equalizing the discrepancy which forces the benefits package of the new insurance to match that of Medicaid, unless the choice is to make Medicaid coverage worse. Generous benefits packages delight doctors, of course, but using a politically correct benefit package for Medicaid makes the whole Clinton scheme too expensive for governors and legislatures even consider.
By this circuitous route, we get to the idea of merging Medicaid with the mainstream of health insurance. Once merged, legislatures do not have to pay for fixing the Medicaid mess, a business will. Business leaders may now imagine they have an inexpensive bargain since they already pay taxes which go toward Medicaid costs. A small price to pay for getting rid of the early retiree burden, no doubt.
Business leaders are so utterly wrong about the future size of this welfare cost, it is not acceptable to let them stew in their own juices. The country cannot afford to let them ruin their companies that way.
Rather than digress into political solutions at this convention of economists, it seems better to propose the legitimate social and economic goal of reducing the barrier for welfare-leavers only. Or some extra benefits for welfare leavers could center o pregnancy coverage, the main medical issue which would affect employment choices (as drug abuse and AIDS, aimed at hopeless cases, probably would not).
Risk Pooling, Reinsurance, and Alliances
The problem of uninsurability for medical reasons positively cries out for some form of risk pooling. Medium-sized business probably would be well served by reinsurance, while small business groups and individuals might be better served by assigned risk pools or joint underwriting. Although these approaches are thoroughly understood and tested within the insurance industry, the Clintons heard about them from Alain Enthoven but propose something quite different.
The contrivance is called an alliance; it is really a forced merger of insurance companies, with a political board of directors and an enormous bureaucracy. Since the solutions to the uninsurability issue are so straight-forward and time-tested, one has to suspect the true main purpose of the alliance is to supervise price controls.
There is a saying among manipulators that the way to hide something is to put it in the next-to-last paragraph, which careless people often do not read. At approximately that point in the Clinton, Health Proposal is a description of the transition plan-how the country is to get from here to there. It centers on the risk pooling idea, acknowledging to Alain Enthoven it has been considered. Perhaps a way can be devised to get into the transitional stage and never go any further. The first Tuesday in November 1994 seems like an appropriate time to start a mid-course correction.
Redefining the Concept of a Hospital
The Clinton plan proposes to transform hospitals from revenue centers to cost centers of “alliances,†using the Kaiser model, we presume. Unfortunately, the rest of the country does not have the luxury of choosing where to place hospitals which fit into the Kaiser system of doing business, avoiding other areas less adaptable to that system. Many hospitals are run by churches, many are the solitary facility in a region. Anyway, the long-term trends seem to lead in other directions.
Hospital care is moving from the center of cities to the suburbs, where it is cheaper to be but where the service mode is different. Patients with educated families and bathrooms on the ground floor can go home early, often the day after surgery; social isolates in walk-up flats need a bed in the hospital for a week. Meanwhile, continuing care retirement centers in more centripetal areas are rapidly coming to provide post-operative care “at home†in their infirmaries. These all seem desirable evolutions but it is uncertain where they will lead. Five-hundred-thousand senior citizens now live in a retirement village with infirmaries, but how far that trend will go, and what part of the urban landscape they will occupy in unclear. If you believe in market solutions, you will let this sort itself out. If you believe in central planning, you will have those consumer committees in health care alliances decide it for the country.
Copayment and Supplemental Insurance
Finally, I come to a technical blunder in the Clinton plan which could easily slip past. Almost everyone agrees partial payment by the patient is desirable, and the Rand Corporation showed evidence it could reduce overall health costs about 30 percent. The Clinton plan provides for a 20 percent patient copayment for all services.
However, patient copayment comes in a variety of forms. I want to leave you with the opinion that all copayment is a good thing, except the 20 percent coinsurance variety, which is a bad thing, or at least a delusion.
Visualize an individual’s annual health cost as a rectangle. You can shave off a part for the patient to pay from any of the four sides. At the front, you have what is known as a deductible-and it is a good thing because it reduces the administrative cost of petty claims. At the back, is balance-billing, which serves as a safety valve for luxury demands and helps adjust imbalances between premium collection and inflation or technology advances. Balance billing is a second good way to involve the patient in his costs.
But, shaving 20 percent off the longitudinal side is a dumb idea. It doubles the administrative expense. It is only a great favorite of insurance marketing departments because it reduces the premium exactly 20 percent, whereas it requires an actuary to tell how much the other types of copayment are worth.
However, there is that darned supplemental insurance, the “65-special†or whatnot. It can be purchased for, guess what, 20 percent of the cost of the main policy, and you are, thus, back to total insurance without any patient copayment at all. You also then have two insurance policies instead of one, with any patient copayment at all. You also then have two insurance policies instead of one, with double overhead and double confusion. I can understand how people on a fixed income wish to budget their medical costs. I hate to forbid anything by law which does not hurt someone else. And yet, it is quite clear the purchase of supplemental insurance to cover cash obligations will utterly defeat the cost-consciousness of patient and provider.
So, as this health care debate goes on and on, remember something. Do not outlaw supplement insurance; outlaw 20 percent coinsurance provisions in the main policy. But, do it without damaging front-end deductibles, or back-end balance billing.
The 1975 annual meeting of the Association of foundations for Medical Care was, as usual, a provocative and informative forum for mutual exchange of ideas. An entire day was devoted to exploring the problems which need to be solved in order to get an Independent Practice Association off the ground and solvent. How do you attract subscribers? How do you enlist the support of physicians?
One disturbing problem was not resolved, however, and the failure even to discuss possible solutions seems even more disturbing to me. That problem is this: what mechanism will be devised to set fair medical fees if your IPA should be so successful that it enlists every physician and sells every subscriber? That is, how do you anticipate the problems of a monopoly? While it is understandable that the potential problems of success are swept aside at a time when the immediate problem is to achieve a viable toe hold, it would be tragic to allow the time of formative philosophy to pass without the setting of goals.
Our fees are now set by the marketplace. As Adam Smith remarked, if you charge too much you lose to your competitors, and if you charge too little you will go bankrupt. The price of everything, Adam Smith said, is therefore always fair and right in a freely competitive market place. The fees of an insurance mechanism are therefore also fair and right if they are "usual and customary". The strong implication of that little phrase is that somewhat a competitive market exists as a standard.
In Pennsylvania we are peculiarly in a position to see what happens when a good hearted idea like Blue Shield becomes so successful that the market place disappears. What happens when you destroy the marketplace is that fees are set by committees, later demand to be a majority of the committee, and eventually demand to exclude physicians from the committees entirely on the argument that the foxes should not be watching the hen house. Frustrated by skillful insistence on charter and by-laws, such customer groups then resort to a different approach: They apply political pressure on the Insurance Commissioner to deny permission for premium increases. This whole process can be summarized as substituting the political process for the market mechanism. There are, after all, more patients than doctors, and this distortion of the marketplace inevitably leads to downward pressure on fees. If you accept Adam Smith's dictum that fees set by the market mechanism must have been fair, it follows that this whole shift leads to fees which must be unfairly low.
Well what do we do about this? First, let us acknowledge one left-handed fairness to it. It is very noticeable that there is no movement at all for IPA's are concentrated in the medically overserved areas because they almost invariably develop as an opposite reaction to closed-panel group practices in their areas. The whole pre-API movement has a suspicious look about it of having no genuine concern about pre-payment, but rather the motivations of a consumer cooperative movement. It is hard to know what to think of this. It certainly does add a disincentive to practice in overserved areas, and probably causes a certain number of outraged physicians to migrate to underserved areas. However, to the extent that physicians are willing to accept less income in order to have the other advantages of living in the suburbs, it can be expected that the total cost to the overserved community will remain the same or rise if the physicians surplus is reduced. Therefore, in the long run, the effort of starting HMOs is self-defeating financially except for those consumer power groups who can take special opportunities for themselves. The other less forward consumers will find themselves with fewer physicians availability, at higher costs.
To return to the problem of preserving a market mechanism for the establishment of fees, several ideas seem worth considering:
1. Limit the market penetration of any group to 20% of the market in its area.
2. Require that no group may exceed a 10% market penetration unless at least four other groups are genuinely competing with it.
3. Identify one whole specialty of medicine as excluded from the "total" coverage of the insurance plan, and use this free-enterprise specialty as a reference group for fees of other specialties. The relative value system would expand from this base.
4. Never start an IPA unless a closed-panel program exists in the area.
There are a number of unpleasant or demonstrably ineffective measurer which could be tried.
5. Limit physician income to a "reasonable" level.
6. Deductible and coinsurance.
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.