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.
Philadelphia Reflections is a history of the area around Philadelphia, PA
... William Penn's Quaker Colonies
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
In 1965, Lyndon Johnson diverted the (then) rapidly accumulating reserves of Social Security to support his new Medicare program for the sick elderly, along with Medicaid for the sick poor. It was a time of post-war prosperity, the country was sympathetic to the successor to the assassinated John Kennedy, and might well have agreed that the accounting trick Johnson employed was entirely justified. Unfortunately, he was making a huge financial commitment against major political opposition and felt that it was necessary to employ smoke and mirrors to accomplish a worthy goal. His lack of forthrightness however now puts his image in a bad light, when an unexpected demographic event occurred, clearly demonstrating he went beyond his mandate. The totally unforeseen event was that the unusually large generation of baby boomers collectively decided to have fewer children. The "bulge in the python" created the approaching deficit for funding retirements of baby boomers, which the boomers bitterly resent. In spite of that unusually large generation regularly making contributions of 12.4% of income toward providing for its golden years, they now approach the time to spend what they discover really isn't there. President Johnson's accounting trick, called a "unified" budget, was accomplished by describing Medicare and Medicaid as amendments to the Social Security Act. Title 18 was Medicare, Title 19 was Medicaid. Incidentally, those seeking to amend the two medical programs later have thus been destined to be confused for decades by discovering congressional oversight, lies not in the Health committees but in subcommittees of the Ways and Means and Finance Committees. The public shrugged it all off as meaningless congressional quaintness.
A major difference in the way the two medical entitlement programs are financed can if you wish to be similarly traced to quaintness in the former Kerr-Mills and King-Anderson bills, but cynics may imagine more substantial motives. Medicare is entirely a federal program, while Medicaid is nearly half financed by state taxes, while entirely administered by state governments. Federal oversight of the way its share of the money is spent was indeed provided by the enabling legislation. But states have always gone their own way in Medicaid, emitting vast clouds of offended belligerence at the least sign of federal "interference". The central unspoken issue is a recognition that if one state is significantly more generous to the poor than a nearby state, busloads of poor folks might rapidly migrate to take advantage of it. As they migrate in, employers might migrate out rather than pay higher state taxes inevitably generated by new poverty imports. State governments are happy to get the federal Medicaid money, but why must they spend it on poor people?
Whether states express this motive, they have this incentive. Either way, few exceptions are seen to a progressive diversion of federal funds for the hospital and physician costs of the poor, which is what the law intended, into something not intended, payment for nursing homes. In Pennsylvania, for example, less than 2% of the Medicaid budget is now used to reimburse physicians although reimbursement was originally quite adequate. Hospitals now uniformly complain: Medicaid reimbursements have driven away private philanthropy but pay 20% less than the cost of providing care. Indeed, the incentive to provide famous cutting-edge care is blunted for fear of attracting more Medicaid patients who would seek it. Although nursing homes are the main beneficiary of this diversion of funds, they too are funded below a level which would attract out-of-state migrants. This whirlpool of dissatisfaction has evolved during a period of wide-spread surpluses in state budgets. Total funding of the Medicaid program by the federal government is much desired by the states, but likely would not help the poor much; it would help the uninsured. What is most needed here is administrative discipline, and beyond that legislature discipline; an elusive wish since 1790.
State governors have recently taken to urging universal health insurance, but note that insurance is the only industry expressly designated (by the McCarran Ferguson Act) to have state rather than federal regulation. As a consequence, the health insurance industry is deeply intertwined in state politics. The term "Single payer system" is viewed with suspicion by the states as meaning consolidated federal administration, just as the opposite term "Socialized Medicine" alludes to supplanting professional with political control. Patients and doctors use these terms, everyone else is mainly concerned with the money. At 16% of the Gross Domestic Product, it is quite a lot. Naturally, insurance companies deplore that so many people do not own their insurance products, but it is hard to see why anyone else would feel that way.
For example, trial lawyers who even have a candidate for President, seem not to perceive a threat to their business model in total government control of healthcare; they are probably quite wrong. No one in the big industry appears to realize that health costs are progressively narrowing down to the first year of life and the last year; employers have been trapped by a tax abatement into paying for something which in time will scarcely affect their employees. When they do realize it they will surely try to escape their present posture of paying for the whole system with intergenerational transfers. Union leaders do not seem concerned that the coming bankruptcy of Ford and General Motors will probably be blamed on their notoriously generous health insurance benefits. Democratic politicians who were scarcely born when Lyndon fleeced the boomers do not seem to be concerned that the sixties generation loves to make a fuss. Although everyone acknowledges that total coverage leads to higher costs, and higher costs lead to rationing, few people seem to act on this knowledge. Residents of Blue states have scarcely heard of Health Savings Accounts, and if Pete Stark, the current chair of the Health Subcommittee of the House Ways and Means Committee, has his way they never will. But thirteen million people in states colored red on the political map have enrolled in HSAs, in spite of numerous obstacles which Blue politicians placed in their way. No one who wants to pay for drug costs with medical research funds seems to notice that life expectancy in America has increased by nearly twenty years in the same half-century that Russian life expectancy has shortened. Doesn't anyone want a cure for cancer or Alzheimer's Disease?
Twenty years after their Health Proposal was withdrawn from Congress in 1994, the Clintons can thank their lucky stars they withdrew it. One thing is clear; the Obama health insurance mandate followed a surprisingly similar early trajectory, beginning with a protracted flurry of publicity and astonishing promises that never materialized. But the Clinton plan was quietly sabotaged without much explanation before it got this far, nowadays almost pretending the subject had never been mentioned. In both cases, a President had proposed an adventure which the American public didn't want to undertake, but only one of them backed off.
As of this writing, the Affordable Care Act is a law actually in force, even though the party in opposition is determined to eliminate it as soon as it regains control, whereas the other party acts determined to conceal its real content for as long as it can. From its behavior, the Obama administration seems willing to provoke a Supreme Court contest, rather than conciliate a retreat. It seems unlikely the public will abandon its Constitution in order to preserve a health insurance plan, particularly when the President is running out of time to make it successful. Even if he could rescue a failing program, both foreign affairs and the financial crisis seem more urgently in need of his time and attention. We like to see signs of competitiveness in our President, but accomplishing what the Clintons, Harry Truman, and Theodore Roosevelt could not accomplish, does not strike most people as sufficiently useful. Some cynics feel his real strategy amounts to what they call in football, "playing for the breaks". Wait until your opponent makes a mistake. This book is written in the hope that both parties are as confused as they seem, remaining open to new ideas rather than rigidly following a playbook. Somewhere along a newer path, we might reset our compass to eliminating the disease as the route to reducing disease costs, instead of tinkering with insurance while we watch costs go up. For thousands of years, the elimination of disease has been an impossible dream. Not any more.
Let's begin with brief mentions of the Clinton Plan because it apparently set the original pattern. At its center was a national blueprint for Managed Care, called HMO (Health Management Organizations.) Leaders of large business, already intrigued by the notion of constraining national healthcare costs by clever management of the health insurance they provided their employees, had originally played along with the Clinton administration. As did their reluctant agents, the large-group health insurance companies. Together, Big Business and Big Insurance had previously taken a step away from state-regulated Blue Cross systems toward a nationally regulated ERISA system, in order to cross state lines more comfortably. Insurers were also having problems with their turf: the hospitals and the unions. Originally, hospitals had once, ninety years ago, joined with business to form locally based health insurance, often with small business and charitable foundations in the lead. However, insurance and the federal government eventually dominated (but underfunded) the health payment scene, with everybody unrealistically expecting business to pick up escalating costs that business could no longer control. And while business had to get along with its unions, it was disquieting to business leaders to find so much union influence infiltrating nonprofit insurance leadership. Hence they were uneasy to find so much interest in unionizing hospitals, so much involvement in partisan politics. Furthermore, the old actors were uneasy with the new actors looking for control, hence the subtle change of "medical care" into "health care", as a way of wig-wagging new allegiances. Finding a hospital-centered model increasingly worrisome, leaders of business had been briefly intrigued by the concept of shifting the control center to HMOs, which seemed to act more like businesses, and thus might be a better buffer with the feds. One of the main problems with dragging out major reforms over decades is that old alliances grow stale, old promises become invalid when new combatants join the battle. Gradually a number of disillusioned businesses quietly withdrew their support from the original Clinton proposal as they learned more of its new realities. In the view of the business and insurance world, national politics of some sort would soon cripple a complex HMO idea that needs good management, most of all. If the rest of the "health" world didn't feel it retained any debts to the pioneers of pre-paid health insurance, well, big business had other things to do.
Congressmen understood the general direction of this mixed message and, at least as defined by "HMO", the floor leaders of the Clinton Plan found they no longer had the votes to pass the health bill. The Clinton Administration yielded and let Big Business go it's a way. Businesses then undertook the HMO project themselves, only to get burnt fingers when they discovered the HMO concept, without a physician or patient enthusiasm, was doomed to failure no matter who co-sponsored it. The public, even their own employees, resented the regimentation of HMO systems, except perhaps for union political machines on the Atlantic and Pacific coasts. To the interior of the country, the enduring California image of HMOs was not an asset.
Unfortunately, Democrats also escaped learning from Clinton cares flaws by failing to pass it. Most importantly, liberal leaders never quite grasped the message the public was sending back to them: The public's healthcare and its governance belong to us -- not to our employers, nor to our elected politicians. If some group wants to pay our bills for us, Americans would pocket the money. But ownership, transferring real ownership of healthcare to the public sector, had never been considered a serious option by a very large segment of the population. Local control was the main reason healthcare had lagged behind the rest of the economy in the shift from state to federal regulation. The debate was still about healthcare, but it might easily switch to a debate about the Constitution, which the Constitution was not likely to lose.
Powers not granted to the federal government...., are reserved to the States or the people.
Tenth Amendment: What Part Don't You Understand?
By 2008 under President Barack Obama, we had got used to the rise of foreign economies, but all economies narrowly escaped ruin. Probably because of the "Silo" effect on a full-time politician, our President seemed to think health insurance coverage was a bigger issue than the shaky economy. The biggest connection the rest of the public could see, between healthcare and the recession, was the cost of healthcare itself; even that was a stretch. Our uniquely American system was visibly successful in prolonging longevity in both our own country and indirectly in the rest of the world, but it seemed to require rising costs to sustain it. Many people, here and abroad, we're still catching up with increased health and longevity, but the American majority who had already achieved it had gone on to be worried about its insupportable cost. Because of his race, President Obama naturally appealed to the "catch-up" group; and because of their livelihoods, physicians were uncomfortable about complaining about costs. On the other hand, it is surprising to find a politician of President Obama's stature making the blunder of urging further immigration at a moment when it seemed questionable whether we could afford health "catch-up" for the population we already had. Physicians, who quite naturally favor more health care, were disillusioned early by the rationing device of Sustainable Growth Factor (SGR), now turned into a crude political blackmail scheme, one whose threat was discredited by Congress regularly postponing adjustments of frozen fees, year by year for decades. (To explain, SGR was an unrealistic cap on physician reimbursement which had reached the point of annually threatening a 26% cut in net physician reimbursement added to roughly 50% overhead costs. The prospect of shifting more control of Medicine to Washington was not enhanced by each year getting sympathetic treatment from Congressmen about SGR, but never getting it repealed. It was "like Lucy and the football".) The instinct for a compromise finally seemed to evaporate among physicians, when the Affordable Care Act was pushed through in one day without allowing amendments, in plain view of millions of citizens watching on television. A House of Representatives was forced to do a politician's bidding, suddenly acting like a South American dictator. For many physicians, America became a banana republic on that day.
The Tenth Amendment could suddenly be recited by people more characteristically excited by professional football. If there was to be the talk of amending the Constitution, perhaps it was the part about Congress making its own rules, which needed changing. State governments, ordinarily regarded as the weakest part of our political system, became a White Hope. Congress itself had become more polarized than at any time in the preceding fifty years. Not to mention the fragile condition of foreign affairs or the bewildering tangles of international monetary policy, it looked to be high time to ditch this health thing of Obama's.
Accordingly, this book roused itself into print. Because, no matter what the final fate of Obamacare, it isn't really healthcare reform, it isn't even serious health insurance reform. One main reason it deserves to raise so much concern is the way polarization is spreading into other basic institutions. A real danger is we may spend so much money, and devote so much of our limited attention span to Obamacare, that we never will get around to some basic reform of health care. No matter how else it may be described, this book is about real reform of health care, including absolutely indisputable reform of the insurance part. But because of the political timetable, I came to feel that there was only half the time I needed to be complete. I cut off the bibliography, had to be satisfied with a mechanical index, and then with great regret, cut out at least half of the "inside baseball" describing the details of healthcare reforms -- as distinguished from Health Reform. Unless this book provokes less controversy than I anticipate, there won't be time to do much but answer it.
The accuracy of predicting future longevity, future health costs, and future stock markets -- is individually very low, so aggregated numbers can be (at least) equally misleading. However, they are the best available guides to the future. The purpose of deriving them (Mostly from CCS data) is to surmise whether it is safe to proceed with a trial of concepts. While the differences are great their direction is nevertheless pretty clear: Substituting the HSA would surely save a great deal of money, compared with Obamacare or Medicare. Why not substitute it for both Obamacare and Medicare? Transition costs are not estimated, and no doubt would be considerable, even if one plan replaced several others. Overall HSA cost is inversely related to investment income; three levels of income are presented, but a conservative conclusion is argued.
In short: HSA could just about replace both ASA plus Medicare, with a long transition period. But one must be more hesitant to suggest they can stretch to reducing accumulated Medicare debts from past spending. My guess is preventing more international debts is all we can promise. Someone else must figure out how to pay the existing debts. Why include Medicare, then, if predictions are sketchy? Two main reasons: my opinion is that funding Medicare is a worse problem than insuring younger people; it is not fixed, nothing else can be successfully fixed.
Second, it is such a political third rail of politics to talk of revising Medicare that someone with nothing personal to lose, like myself, must start the discussion. Some other funding source must probably be found to eliminate the existing Medicare debt, but there's not much risk of needing the money very soon. I am also a little apprehensive about the decline of existing Treasury bonds when interest rates rise because so many of them have been issued to cope with the recession. Any appreciable reduction of Medicare costs could accelerate a rise in bond interest rates, which would send the market price of existing bonds downward. Therefore, even a move in the right direction must include a reverse button, and be coordinated with the Federal Reserve. It is most unfortunate that Medicare is both more serious and more manageable, while at the same time it is so politically dangerous.
Paying to Replace Medicare and Debts with Health Savings Accounts. At least, savings to the consumer for the combined ASA and Medicare replacement would be returned to the subscriber as payroll-deductions and premiums-eliminated, (i.e., About half of the Medicare cost.) Savings from replacing Obamacare would be even greater, but from my viewpoint, such savings would all be poured into rescuing Medicare. That's ironic because it is the reverse of what the elderly are fearing. Even Obamacare advocates should welcome the elimination of Medicare because its losses are dragging everything else down. Unfortunately, this is not well understood by the public, who love Medicare. (Everybody loves to get a dollar for fifty cents.) Somebody has to say this can't last, and I guess I'm it.
To be confident Medicare's costs plus its debts would actually be manageable, the average subscriber would have to contribute about $1600 a year for 40 years to an escrow fund at 6% annual income. That's to achieve a total of $246,000 on his 65th birthday, paying his ordinary health debts from 25 to 65 with the other $1700 of his allowed Health Savings Account deposits, to pay average medical expenses for age 25-65. In my opinion, it can't be done.
You might subsidize poor people in the name of fairness, but this is how much you have to find, somewhere, to pay present costs. You might try raising the annual limits for deposits into Health Savings Accounts, but this would prove futile if too few people could afford to pay it. If you please, health expenses would then have to be cut enough to pay for the subsidies, unless the subsidies are cut to pay the health expenses. With that and a continuation of 6% return as long as the paying subscribers live and the fund remains solvent, we might make it. It is my hope that using private markets rather than Treasury rates, pay down of the debt can be accomplished with higher interest rates, but it is uncertain even this can be done. High rates like that are only likely to appear if inflation starts to gallop, or some other cataclysm intervenes, with the following result: the virtual value of the Medicare debt erodes, and the creditors lose much of their loan in real value. Some individuals might be able to manage their cost, but it's very hard to believe it could be an average performance for the whole nation. This is not an easy problem, and it becomes impossible if disillusioned Democrats block it.
And yet, the nation has already made it official it is going to spend nearly twice that amount, while only getting Obamacare in return. If the President is right about his side of it, then getting Medicare free in addition, is do-able by this Lifetime Health Savings Account alternative. If not, then both have to be scaled back. Big business is about the only hope, using a cut in corporate taxes as bait. This would be a big step since if they don't pay corporate taxes, they don't need a tax exemption for healthcare; they already have cut their tax bill.
Present law permits $3300 annual HSA deposits to age 65, or $132,000. With only 6% compounded interest income included to reduce the cost, Health Savings Accounts could only have a net lifetime out-of-pocket cost of $58,000, no matter what healthcare expenses are actually incurred. By my estimation, this is only half of enough. Sometime in the future, inflation will force this limit to be raised, and it should be linked to some external inflation measure like the Cost of Living Index, although a healthcare cost of living index would be closer to what is needed. Inclusion of tax exemption for the premium of catastrophic high-deductible policy which is required by law, would not only be more equitable but perhaps could provide both a superior COLA and an external measure of average Catastrophic premiums for marketplace judgments. It is probably undesirable to create an arbitrage opportunity between taxable and after-tax choices with infrequent, steep-step, changes in the deposit limits, so these limits should somehow be adjusted annually. Annual limits should be supplanted with lifetime limits whenever the account is depleted below a certain fraction of the buy-out price, which should be maintained and upgraded for this purpose. Since expenditures are limited to healthcare, a liberalization of this catch-up limit is urged.
There is thus room to spare, here, as well as for increasing 6% return in the direction toward 10%. Since the investment scene is in flux, more experience may be necessary for better guidelines. Depending on the interest rate actually achieved, and the choice between maximum allowable, or less out-of-pocket, lifetime Health Savings Accounts could cost somewhere between 58 and 132 thousand dollars, lifetime total average, in the year 2014 dollars. The Medicare escrow part of that would be $10,000, and Catastrophic coverage for 58 years of Medicare life expectancy would add $58,000. The deposit costs for the Obamacare years 25-65 would themselves total $10,000, and estimated Catastrophic insurance would add $16,000, to a total lifetime cost of $26,000. If contributions are raised, there's room for it under the $3300 yearly limit. The hard question is whether we could get $3300 on average for forty years, and I'm not sure we can. Please note: HSA deposit costs should remain linked to the 40 working years 25-65, but investment income would be realized over the entire 58 years. For the purpose of extending interest income, HSA coverage could be extended another 40 years, but this would mostly be an illusion. Real wealth is only generated during the working years. Depositing extra money in an HSA is not entirely a bad thing, because if you deposit more than you need for medical care, you will get the excess back, multiplied by tax-free investing. However, if people can't afford to do it, they won't. Obviously, the same cannot be said of buying too much insurance, where the insurance company profits from those who drop their policies..
Compared With the Affordable Care Act. Now, compare: the cheapest bronze Obamacare cost (covering 60% of healthcare, age 26 to 65) is $288,000, accumulated and paid for over a 40-year span. Adding Medicare adds $95,400, made up of $23,800 of payroll deductions, $23,800 of premium collections, and $47,700 of debt, accumulated over 18 years, paid for over 40 working years. Obamacare followed by Medicare is what we are officially destined to get. Total average lifetime costs are thus projected to be $383,300, plus the 40% estimate of uncovered ACA costs under the Bronze plan. Considering different inflation assumptions and rounding errors, that's pretty close to the $325, 000 which was calculated by Michigan Blue Cross and confirmed by federal agencies, for year 2000. To repeat, this is what we will get unless it is changed. Restating the calculations in words, healthcare is, therefore, being treated as if it were entirely self-funded, generating no losses but also generating no income on the sequestered premiums. The hidden restatement would be: the present and projected healthcare system is running at a loss, it generates no net income on what ought to be very large reserves, and nothing is being done to make it break even, to say nothing of generating income.
This outcome makes me absolutely confident we can do better. The lifetime Health Savings Account would create immense savings, which by rough calculations would be somewhat less confidently stated to be savings of $190,000, in year 2014 dollars, per lifetime. Multiply that number times 340 million citizens, and you get a result in the trillions of dollars. It's pretty staggering to confess that even this much improvement may not be enough.
Medicare Advance Payments, Age 25-83 Under Two Systems (HSA Escrow vs. Medicare Costs)
Health Savings Account,Escrow Deposit............||||||...................................... Medicare Yearly Program Costs......................................
Limit per Individual, Exclusively used for Medicare Pre-payment: ($3300/yr x40= $132,000, realizing $1,460,000 at age 65 @10%.)............................
Lifetime HSA plus Medicare............vs................Affordable Care plus Medicare
.........$120,000 (1800-58,000)............................$484,000 plus 196,000 in debt.
................($166/mo}..........................................................................
Total Savings per Individual, median estimate: $190,000
All costs assuming age 25 to start depositing. Transition costs at later ages are not calculated.
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All right, Health Savings Accounts once appeared to be merely Christmas Savings Funds, helping people of modest means accumulate the money for their high "front-end" deductibles. The high-deductible design of health insurance paradoxically reduces the premiums of catastrophic health insurance policies. At least that's how they began; with higher deductibles on the claims, annual premiums could become lower, and the effective deductible gradually disappeared with contributions to the Christmas Fund. Subscribers to the savings accounts did run a small risk they might not deposit the full deductible before serious illness appeared, but the serious illness itself was otherwise fully covered. In fact, the effective deductible was reduced by whatever they had deposited but the premium did not rise; after a few years most of them had no out-of-pocket deductible left to pay, at all, and no extra premiums to pay for it.
So the first consequence to appear from Health Savings Accounts was first-dollar coverage without higher premiums. A small risk of small ongoing outpatient costs remained, but after a few more years even that was covered, again without raising premiums. Financial protection gradually increased with time, starting first with the worst disasters, working down to trivial ones, eventually to none at all. To repeat, without a rise in premiums, so gradually the whole package provided better coverage without increased premiums. That's why they got cheaper; the former insurance profit turned into a consumer investment. Wasteful spending was also restrained by subscribers protecting their investments, an impact which actually increases over time. With a little luck, or else starting young enough, it was possible to slide past the risky period of time, unaffected. That pretty much summarizes the medical part of the two-part plan to surpass "first dollar coverage" as fast and as cheaply as possible. The power of the Christmas Savings Fund was much greater than it appeared to be.
But after that, subscribers still had an increased cost of retirement income to worry about. It's an integral part of the medical issue because retirement costs inevitably rise with improved longevity. That's not hard to see, but if it's forty years away, it's easy to neglect. However, it becomes almost impossibly hard to get this result, if it's only two years away. That's called the "transitional problem"; everybody isn't twenty years old on the same day, and some people have simply lost their chance. Some people are already sixty-four, with variable amounts of savings. Since they can't arrange thirty years of retirement funding in a single year of saving, they have to fall back on the next-best approach. Which is to make the whole thing cost as little as possible, thereby reducing the number of people hurt by differences in age.
Fine, but how would all that theory enhance retirement income, except in pitiable amounts? What's been accomplished so far, has been accomplished collectively. The rest is up to the individual. Everyone can, for himself, make it less pitiable.
At 6.5% compounded quarterly, it's impossible to catch up with $400 at birth, with annual deposit limits of $3350 after age 59.
Be Frugal If You Must Spend From This Pocket. It's surely pitiable if you spend it as fast as you save it, but can build to a meaningful level in retirement if you just don't spend it. Our national leaders often say we don't spend enough. But they are talking about investing in factories, not spending on hula hoops. Nobody seriously sees any value in useless spending except a salesman. Frugality almost has to become a way of a person's life, because its impact consists of many small savings in accumulation, then multiplied by compound interest. For example, people have trained themselves to avoid paying cash for whatever insurance already covers. Here, many must deliberately re-learn to pay cash for small services, even if covered by insurance. That may sound like paying double for medical service, but its intention is to save the tax exemption for bigger things later. Let's examine that in detail, later.
Usually, premiums are set a little high to provide a margin of safety; a resulting surplus is diverted to reducing future premiums. If you think it through, the insurance company shifts its own risk onto future subscribers. (If the company goes broke, the remaining subscribers may find the risk shifted to former subscribers who dropped their policies.) Insurance companies call this a defined-term, or "term" insurance model because employer-based groups contain people of all ages, so a one-year term of insurance risk is safer for them in dealing with older subscribers. That's a good thing, by the way; you don't want your insurer to go broke.
In employment-group health insurance, surplus or deficit is made up after a year or two of "experience rating", because final health insurance risk reaches an artificial end at age 65-66, with Medicare then shouldering the remaining healthcare risk. Unfortunately, the sharp pencils of the company groups tend to make the individual (non-group) policies serve as a sort of contingency-risk fund, although employers are generally unaware they are having this effect on people who do not share their tax exemption. Nevertheless, someday, current low-interest rates must go back up to normal levels, investment income once more becoming a meaningful gain; so look for investment income to return to normal for individual policies. There are myriad reasons behind the yield curve slope, which relentlessly defeat the convenience of any Federal Reserve Chairman who wishes to continue low rates. Call it supply and demand, for shorthand.
Individual ("non-group") insurance also contains people of many ages, but people using it are expected to know how old they are. Health Savings Accounts are always individual accounts, not pooled ones. (The required pooling of risk is situated within the catastrophic health insurance, attached to every savings account.) Individual unpooled accounts offer two advantages to younger people: of a longer time horizon to work out the leads and lags, plus some savings from not subsidizing older subscribers, as employer group policies tend to do. In an HSA you subsidize yourself at a later age, which is a whole lot different.
You do share your major health risks in the insurance part, but you don't share your individually compounded savings from frugality, in the savings account. Older working people might be wise to set aside some personal savings to supplement the one-year term health insurance, adjusting for the more frequent risk of a second sickness in older people. Because the Affordable Care Act mandates the deductible, it also mandates an "out of pocket limit" to recognize the risk of a second illness coming along too soon. So Health Savings Accounts usually do the same. That's safer but raises the cost. Furthermore, interest rates have been unusually low for nearly a decade, so banks have made a habit of paying lower cash dividends longer than rising earnings can justify. However, in spite of the superficial theory that Health Savings Accounts cannot accumulate much money for retirement, demand for them has been heavy and fairness has become balanced. At present, their aggregate deposits are already reported to be over $30 billion.
Deductibles vs. Copayments. This seems a good time to emphasize the good feature of a front-end deductible, compared with the uselessness of copayments (traditionally 20% of claims cost.) Both of them reduce premium levels, but for different purposes. Deductibles induce patient frugality, as we have noted.
The purpose behind the typical 80/20 co-pay is less obvious since it is only calculated after a claim is made, or let's say after a wasteful procedure has already been performed. Repeated studies have shown it has a little net effect on premiums or service usage. Instead, it is favored by negotiators who must make quick decisions in a bargaining session, because a 20% co-pay results in a 20% reduction of premium, a 40% co-pay would result in a 40% premium reduction, etc. Co-pay has the additional perverse effect of making a second supplemental insurance policy attractive to most subscribers, including a doubling of its insurance profit and overhead.
Consequently, we favor high "front-end" deductibles, but reject copayments from insurance design. And subscribers ought to do the same.
Perhaps not surprisingly, most new subscribers to HSA have been younger than age fifty, and forty percent have so far never made a single withdrawal from their accounts. It's hard to measure, but the aggregate small incentives of saving for retirement have resulted in 30% less spending for disease, so the size of account balances grows faster than expected in spite of the current recession. Ultimately there must be some surplus because competition will force at least some savings to be distributed to subscribers. Subscribers are nevertheless on the lookout for investments which pay more than ordinary bank savings accounts; stock index funds ("passive investing") are the most popular alternative. Please notice that all of these explorations grow out of the unusual feature that Health (and Retirement) Savings Accounts are the only available form of health insurance which surrenders all termination surplus directly to the consumer, rather than return it to him via the insurance company as lower premiums. In theory, the amounts should eventually seem to be about the same, but compound interest over the fifty-year interval spreads them apart. (See the graph, above.)
Portability in a Larger Sense, Leading to Hidden Cost savings. The fact that HSA accounts are proving financially attractive, is surely a sign they may contain some previously unsuspected advantages, in addition to just being portable between employers. Additional portability -- between only paying for health care and paying for retirement in addition -- is more smooth and natural than we expected. Improvements in longevity reflect improvements in health care and are the natural consequence of the population getting healthier. (The saving in one compartment, is a cost for the other, with compound interest exaggerating the difference.) Furthermore, there is a consequence more evident to physicians than to patients: if you get really sick, you won't need to worry much about retirement costs, so here too a saving in one is still a cost in the other but in reverse. By far the largest accelerator to the balance is to overfund it up to the legal limit. No attempt is made in this book to claim we know what future costs will be, except to point out -- whatever they are -- increasing longevity will clearly push costs into different compartments, some upward, and some downward. It seems certain flexibility between compartments will become more desirable over time and might save considerable money. The clause in Health and Retirement Savings Accounts that any leftover tax-exempt surplus transforms into an IRA (Individual Retirement Account) when Medicare eligibility is attained, is probably the forerunner of others. More potential flexibilities are explored in this book, and advocates of other systems are invited to add features to their favorite program. In other words, at age 65, a subscriber does lose a doubly tax-exempt HSA with a surplus, but gets back Medicare plus a regular Retirement Account (IRA) in return, unless middle-men eat up the float. It's logical it would save money, but the heartening discovery is, it actually does.
The Battlefield. The HSA derives a double tax deduction in the sense that whatever is spent on qualified health service is not taxed, neither when it is deposited nor when it is spent. That appears to be a major inducement for HSA subscribers to be frugal, and the longer it continues the more it accelerates. That's in itself the main reason not to tamper with the incentive since the alternative incentive is to employ brute force to hold prices down, a probably futile gesture of amateurish administrators. Since a few dollars saved while young, compounds into many more dollars later, the double exemption is often the best investment an average person can find. It is, to say the least, an attractive alternative investment vehicle, if not a windfall.
Splitting the healthcare product into two compartments (savings account and Catastrophic health insurance) has proved particularly suitable for saving within the account for out-patient costs. Price-shopping for cheaper medical expenses seems irrelevant to truly sick persons in a hospital bed, however. Spread-the-risk insurance was inevitable for disrobed patients, whatever the related temptation for overspending. It's important for customers to be convinced the spread-the-risk quality of insurance continues but is confined to circumstances where it has no real alternative. Those professions coming from different cultures who scoff at the self-restraint of physicians are in some danger of enraging doctors into behavior everyone will regret, encouraging behavior which is being resisted. Nevertheless, some degree of slippage is inevitably part of insurance. As soon as you spread the risk, for example, it gets harder to itemize the bill fairly.
Be Careful Who Your Subsidy Partners Are. Insurance companies and hospitals both share risks with clients, and boast it reduces premiums. Young people almost always have lower costs than older ones, so it's tempting to mix a few expensive old folks with a large number of young ones in group policies. However, the client doesn't usually consider the overall effect of his choosing either a particular insurer or a particular hospital. No matter how old he is, he should want to be mixed with a lot of young clients (except premature babies).
The Affordable Care Act seems to have overlooked the refinements of this homily; by striving to include all the uninsured, they managed to include a large number of newborns and specialty children's hospitals, who are effectively (however reluctantly) subsidized by the rest of the community. Employer groups trying to do the same thing, necessarily avoid most people under 25 years old, who were suddenly included in population-wide averages of uninsured, by the new law. Patients over 65 may be similarly under-represented. Furthermore, about twenty cancer hospitals have been exempted from DRG constraints. Regardless of how it got composed, the ACA found it was subsidizing more than it expected, and (because they were the subsidizers) premiums for good people consequently threatened to rise more than expected, even though sometimes enjoying incomes which exceed the uninsured.
Employer groups were thus cross subsidized, but to differing degrees; outcomes were hard to predict and smaller groups proved more agile than larger demographic subgroupings. Out of these unexpected aggregate costs, arose a need to subsidize employer groups unexpectedly, and explains some unlikely favoritism for prosperous political groups originally targeted for income redistribution. In most employer groups, young people subsidize older ones; that's definitely not the same as rich people subsidizing poor ones. The detailed extent of these problems will probably not emerge until after the November elections.
Hospitals differ in their costs for similar case-mixture reasons. If you don't need a big-city tertiary hospital, you need to ask why you should pay for it by secondarily cross-subsidizing its expensive clients. This may explain some of the surprising successes and failures of HMOs, private insurance companies, and other allegedly share-the-risk groupings. Small, agile and for-profit companies seem to maneuver more readily than big non-profit ones.
Cheaper. These and other mechanisms probably underlie the claim that HSAs are 30% cheaper. Because there are many small explanations rather than a few big ones, they will be harder to imitate. Such an accumulation, doubly tax-exempt, over a period of several decades aggregates to a surprising amount of compound interest. Money at 7% only takes ten years to double, for example. Most people would have difficulty finding a superior way to save for retirement, then by reflexly putting any spare cash into an HRSA. It's true you have to get sick to be entitled to the double deduction, and you may not survive severe illnesses with much savings. But the peace of mind of just knowing you have been covered by shrewd exertions of skillful management creates some cost-free benefit not to be scoffed at. Everybody needs a consolation in despair, and this one turns out to be powerful.
"Overfunding" the Account. Therefore, enlisting patient participation extends the argument for durably separating the account from the insurance. Indeed, it makes a significant argument for overfunding the account among young people, who badly need to hear it. "Overfunding" in this case means trying to spend as little of the account as you carelessly might spend. If a considerable number of people become so-minded, a relatively realistic market price can emerge for out-patient costs. This is America, after all. That's not so true of inpatient costs, but it nevertheless provides a relative-value base for even those costs -- with a few adjustments in the regulations related to major changes in the diagnosis code employed.
Summary. So that's how we see the simple change in the payment structure into a Christmas saving account transforms a device for helping poor people afford insurance, and adds to it an incentive for the patient to be frugal for his vulnerable old age. Instead of paying to borrow money, he is paid to save it. Pinch pennies for healthcare, in order to save dollars for retirement. And then multiply it by compound interest A mutually beneficial system actually reducing medical costs, is the underlying description. It does this by providing a pathway, and an investment vehicle, for deriving meaningful retirement insurance out of unused health insurance. (This boils down to a sterner message: if you abuse the healthcare system, your own retirement will suffer.) The demographic group may not suffer, but because it's individually owned, the careless individual may shoot himself in the foot.
Resistance to Disintermediation. But, it must be noted, since this can also transform health insurance from a cost center into a revenue center, it creates some uncomfortable resistance from the financial community (because it seems to them to be a zero-sum loss). The resistance is this: financial transaction costs have declined 70% in the past ten years, so the financial community is hurting, at least compared with the Gilded Age. After all, declining prices of anything are a major reason for profitability to fall. If, in addition to attrition in revenue, a formerly insignificant income for the subscriber (interest on the accounts) transforms into an important mechanism for building up a retirement fund in six figures lasting thirty years -- it starts trouble with its zero-sum counterparty. Subscribers begin asking uncomfortable questions and making cost comparisons, at a time when the financial community sees its own income under stress. Already, there is agitation in Congress to replace buyer-beware with fiduciary advisors. The subscribers will win because they have the votes, and control the flow of funds into accounts. But it may turn out to be a slow bloody battle, notwithstanding its far more dignified potential for transforming into an attractive opportunity for both sides.
The Source of Subscriber Sluggishness. When individuals compete with corporations (tax authorities and investment managers), it is usually a matter of youthful inexperience futilely competing with the experience and immortality of corporations. It seems to take a long time for young people to discover how much difference a steady, small interest rate can make to the process of converting small savings into big ones -- providing one starts early in life. Immortal corporations do have a more distant horizon and an indelible memory. But the immortality isn't as great as many think; for a glaring example, it's a comparatively rare corporation which stays in business for a hundred years. The greater advantage which a corporation has is it has been given a solitary legal mandate to make as much money as possible. The movies call that "greed" but a corporation either sticks to its business (making money) or falls out of that business, sometimes after being sued by its stockholders.
A large corporation can lose lots of money. Those who wish to penalize excessive profits should more logically favor elimination of corporate income taxes, allowing high profits and large losses both to fall upon richer individuals. The present system, allowing profits to go to stockholders at lower rates than corporate taxes would, encourages corporations to get bigger, less profitable, and to flee the country which started them. None of these outcomes is likely to appeal to populists. Since healthcare has grown to 16-18% of GDP, the present tax arrangement of health insurance probably exerts an appreciable drag on the economy.
Imposed Self-control by Escrow Accounts. Young people constantly face the competing priority of consumption, and many never do learn to restrain it in order to accumulate larger savings. Others learn but too late, after several decades of potential doubling have been forever lost. Odysseus knew this but he also understood himself, so he had himself lashed to the mast of his ship while he sailed past the temptations. The shocking truth is that very small differences in interest rates, differences which some would have you believe are trivial, accelerate savings faster than most young people ever imagine. Taxing authorities and investment companies have already learned compound interest grows best over long stretches of time, and small differences in interest rate (as little as 0.1%) are quite sufficient if continued for a lifetime. This is a simple point, but so vital we must soon devote more time to the requirement of "escrow" accounts, perhaps more aptly termed "Siren Song Accounts". Call them to lose insurance or even credit default swaps if you please, but at least recognize they impose an opportunity cost.
True, many banks do offer Health Savings Accounts without either an attached health insurance policy or brokerage service. Both services are essential, but selecting insurance managers in these cases remains the customer's problem. You might think banks would have a similar response to the investment management of savings, except they have a complicated relationship with insurance companies they may not wish to disturb. By contrast, they also have a losing competition with investment banks, who have found cheaper ways to acquire large-sized investable funds by selling bonds and stock certificates. The time-honored method for banks to acquire funds is by dribs and drabs from the float of deposits -- quite an inefficient source, compared with $100 million bond sales. From time to time, as in the recent mortgage disaster, the government puts its thumb on the scales, and right now all banks are afraid to lose market share to competitors. Secret kickbacks may play some role in all this, so acquiring and integrating a whole company's operation seems a safer business alternative for them. One way or another, your account may be transferred to a different manager without your knowing it.
The conflicted outcome at present is for the potential HSA customer to discover which HSA vendor declines to make choices between insurance companies, but does look for ways to acquire the investment end of the business and overcharge for it, either directly or with kickbacks. In a curious twist, this pressure shifts to the customer to choose stock-pickers, whereas his best interest is usually served by choosing total-market index funds. Watch out for fees, however, which can upset any generalization about investment type. This situation can shift rapidly in the present environment since it would not be surprising for these financial behemoths to purchase market share indirectly, or else for failing stockpicker firms to sell themselves to banks of various descriptions. A much more productive approach for the small investor would be to look for a firm which will segregate accounts into "escrow, and non-escrow", leaving the choice of a high-deductible health insurer to the customer. Likewise, accounts could still be designated "captive, or self-selected", and leave the choice of investment management to the customer. It's true the average investor is often poorly equipped to make such choices but should have no difficulty in telling 1% from 8%, when (see below) the difference of one-tenth of a percent can result in a lifetime swing of $30,000. The importance of escrow accounts is described in the section which follows this one. Essentially, you can get a higher income if something forces you to shift short-term into a long-term investment.
The Importance of Small Differences in Interest Rates. To pay expenses in a stripped-down HSA, banks often charge for smallish balances, waived when the balance reaches their business break-even point, usually about $5000 per account. Similarly, investment latitude is often stratified, with larger accounts are given more choice of investments. Those are generally good arrangements because of their flexibility and elimination of conflicts of interest, but they impose some responsibility on the customer -- who must be willing to make security selections in return for possibly greater return. It's all quite understandable and suggests novel uses of the account. The best example before us is to "Overfund" it at the beginning, and use its surplus after compound interest, to supplement retirement income decades later; let's explain.
Improving the Retirement Benefit At present, the HSA law permits a maximum deposit of $3350 per year per person, with even higher limits for whole families. By constraining out-patient expenses or paying cash for them, the balance can thus build up to $5000 in less than two years, eliminating bank surcharges of roughly $50 a year by immediately reaching the waiver level. Since doing this also eliminates any remaining question whether the HSA will provide full coverage for hospital charges, it's pretty easy to endorse a $5000 investment which produces $50 a year tax-exempt income until Medicare kicks in, and then compounds it, adding more than 1% tax-free to its investment income. If the transaction then permits investment in total market indexes, paying off the investment was very wise. Let's now extend the frugal idea to more prosperous customers.
The Outer Limits of What is Possible. If an employee deposits the full limit of an HSA and makes no withdrawals from age 20 to age 65, his balance will be increased by $154,550. In fact, it should grow by more than that, possibly much more, if the income compounds. He can start with the present abnormally low-interest rate of 1%, and find annual maximum payments compound the balance to $196,225 in 45 years. With a more normal interest rate of 4%, this rises to $442,527. At 6.5% interest rate (which probably requires stock index investment to achieve), the result would be $959,760. Since the stock market for the past century has averaged 11% return, and inflation has averaged 3%, a net-of-inflation return of 8% is conceivable -- before taxes and expenses -- and so we'll set 8% as the theoretical maximum goal. $1,578,977 retirement account (at 8% net) is thus the utmost goal which is realistically achievable, adjusted for inflation. But the difference between roughly $908 thousand and $1.5 million ($650,000) is a difference still worth pondering since it identifies the maximum potential difference attributable to middle-man costs, and that's a lot. And if you think the bank is entitled to something, it probably can get compensated by compounding daily but paying compounding quarterly, and additionally by requiring deposits monthly but crediting them yearly. As far as inflation is concerned, these are uninflated numbers, both at deposit and withdrawal. That is to say, they are all in 2016 currency, and leave a generous potential profit for the manager.
Just squeezing out 6.6% instead of 6.5% makes for a final difference of $30,500, or roughly a fifth of the net (of medical outpatient expenses) deposited. Without resorting to insulting language, this large difference achieved by such a small income increment is a legitimate goal for technology improvements and management streamlining. The amount is seemingly within reach, and the consequences are worth it. So although the Standard and Poor 500 actually averaged 6.6%, and the modal return was even higher, we round it off to 6.5% in most of our illustrations. Several such small yield improvements can boost net returns by 1%, which makes an enormous difference in eventual yield after decades of compounding. That's particularly true in a compound yield curve which turns up at its far end. Since transaction costs have decreased by 70% in the past ten years, it definitely seems possible to extract an equal amount again by relentlessly pressing for it. It misjudges the public mood to say there is no room for improvement by educating the public. Right now, everybody involved would probably agree it is high time to increase the deposit limits, after several decades of their having remained stationary. That alone would significantly assist the transition from a nuisance to a central bulwark of retirement security. The financial industry wrongly misjudged this transformation to be trivial, so it's getting a little late to adjust it gracefully. Working out some examples from beginning to end, is very persuasive.
True, about a fifth of the contribution to this scheme is provided by income tax reduction, but the line between public and private obligations to health care is already too blurred to hope for an agreement on the fairness issue. Just look at the combined state and federal tax contribution to the cost of group employer-based insurance, which probably approaches 60%. Still more important is the hidden contribution to increased longevity made by medical care. It seems hardly debatable that improving health was largely responsible for lengthening the time in retirement. The problem of outliving savings is pretty much a by-product of improving medical care; if you want one, you must cope with the other. For this reason alone, it seems entirely proper to include rising retirement costs as part of the cost of improving health care. If you want to solve the whole problem, however, you look for any solution and forget about assigning blame. Is there anyone reading this chapter who doesn't want to live an extra thirty years?
On March 16, 2016, the Chairman of the Subcommittee on Health, U.S. House of Representatives Committee on Ways and Means, held a hearing on Much-Needed Medicare Reforms. The Chairman of the Subcommittee, Rep. Pat Tiberi (R-OH) chaired the hearing, which included invited guests Robert Moffit, Senior Fellow of the Heritage Foundation, and Katherine Baicker, Harvard Professor of Health Economics. According to the Committee report, there was general agreement with Moffit's assessment that, "Of federal entitlements, Medicare presents the greatest challenge." Not the worst care, just the hardest to pay for, is what we presume he meant.
Essentially, Medicare is a modification of the Blue Cross/Blue Shield plans prior to 1965, anchoring the old employer-based systems into a cluster which was originally administered by Blue Cross; and to a great extent still is. The secondary insurance plans, to cover deductibles, copayments and uncovered charges became a central part of Blue Cross profitability in 1965. The sudden implementation of Lyndon Johnson's Medicare package caused so much administrative commotion at the time, that the final working product originally assembled by Ross Perot's group has approached subsequent changes with trepidation. The 2011 near-collapse of the Obamacare Insurance Exchanges stands as a repeat warning to bureaucrats to tinker with health insurance design -- with great caution, if not reluctance. Medicare has rightly been accused of providing too little advanced planning since its inception fifty years ago. But one of the important reasons was it was so stretched to administer what it had.
Although the passage of time has created a need for many changes, reform has been slow in appearing. Medicare has become the largest non-military source of deficits, has seen its prices soar, contains a poorly-recognized 50% subsidy which is often financed by foreign bond sales, incorporates bewildering complexity into its patient reports, discourages outsiders from suggesting or even acknowledging design flaws, is physically located (Baltimore) at some distance from Washington oversight. In spite of all this, the program is wildly popular with the voters, primarily because of the subsidy -- because it provides a dollar of care for fifty cents. In fact, the collection of payroll taxes from younger people is scarcely noticed, leaving only the premiums visible to its beneficiaries. It appears to them to be a dollar of care for fifteen cents. Among politicians, Medicare is the "Third Rail of Politics; just touch it, and you're dead."
Neither the Heritage Foundation nor Harvard is famous for restraining its criticism of other people, but at this hearing, their proposals were only hesitant and dubious. Although gigantic, stability-threatening deficits were the big elephant in the room, these institutions confined themselves to hesitant and relatively insignificant changes to a program which has had fifty-one years to think of something. The book you are reading is primarily about Health (and Retirement) Savings Accounts, but several of the technical tweaks proposed at this hearing about Medicare would cripple HSA approaches, so I must comment.
Simplifying Parts A and B into a single plan has an efficient sound to it but undermines a central concept of the Health Savings Account, the use of outpatient cash payments as a way of re-establishing market pricing. Part B isolates outpatient medical costs and could be the basis for a market-based system of pricing. Part A, on the other hand, concerns inpatients in a hospital bed, who have neither an interest in costs compared with the illness which threatens them nor the ability to shop around. If rationing is ever praise-worthy, this DRG arrangement is an excellent rationing tool. However, a great many of the services provided to inpatients, are also provided to outpatients. The main cost difference between inpatients and outpatients sometimes is whether the patient needs to be fed with a spoon. Those services which are unique to inpatients could easily be linked, by a relative value scale, with non-unique services. And thus secondarily linked to the market-based prices of outpatients. We are so close to a solution to the dichotomy, it's a pity to hear proposals which would make it more difficult.
Whether to use such market prices or to envelop them within a Diagnosis-Related Group for a hybrid price, is a technical issue. It depends on revising the diagnosis coding system to be more detailed and relevant to the problem; the ICDA system now in use was mainly a response to complaints from record librarians that no one was retrieving charts that way. That's true but irrelevant. What's needed is a code for physicians to describe the medical issue in the patient at hand, not one which describes the occurrence frequency of groupings. In spite of repeated revisions, ICDA still provokes disdain from physicians as aimed at diagnosis frequency, and not sufficiently concerned with diagnosis detail. The physician-developed code, SNODO, has been in use for a century, more recently brought up to date as SNOMed. Until the coding systems are reconciled, ignoring any consideration of frequency, there can be no relative value system for cost without years of effort; reimbursement assignments are a relatively trivial addition to a diagnosis. This whole process sounds complicated and it is, but most of the work has already been done. To combine Parts A and B may serve some administrative purposes, but the tail of insurance claim administration must stop wagging the dog of medical care because it exerts a powerful but unjustified control. Without medical care at its core, cost-neutral Medicare might be strangled more cheaply by just abolishing it.
Re-targeting Medicare Benefits to lower-income enrollees. I'm afraid you will find almost everyone on Medicare-- not just low-income people -- is on a fixed income, has no idea how long his retirement money will last, and has all day available to explain his difficulties to anyone who will listen.
Updating Medicare's eligibility to 67. I'm afraid you will find the uninsured time gap (between retirement and Medicare eligibility) will then widen. With that problem recognized, this last idea does merit some consideration, but it conflicts with proposals to permit a Medicare buyout at age 55. It is important to know what price is envisioned for the buyout. If it's the present Medicare premium, it's about fifteen cents on the dollar. If it includes the Medicare wage-withholding tax, there is reason to suppose that has already been spent. And if it includes the subsidy by the general fund, the Chinese are under the impression you already owe that, to them.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
