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
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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.
If lowering taxes is inflationary, how can it be that several financial columnists refer to buying low priced
China Man
Chinese imports as"importing deflation"? It would seem, in both cases, that consumers end up with more money in their pockets, so both cases must be inflationary. To answer that twister, you also need to consider where the inflationary new money comes from.
chinese labor
When the government lowers its revenue by lowering taxes, it creates a deficit which is paid for by issuing bonds. That's inflationary until the bonds are paid off. If the bonds are ever paid off, the amount of money in circulation then returns to its original level. The public has effectively given itself a loan by lowering taxes, so after a temporary spell of inflation, there is no permanent effect on circulating money at all. By contrast, when Chinese workers agree to work for lower wages than Americans, that causes inflation for the American economy because Americans have more spending power left over. How they spend it is their business; the bonanza may surface as a stock market bubble or a real estate bubble, a credit card bubble or a spectacular Christmas shopping season. But gradually the extra money seeps out into the economy as extra wealth of some sort. Whether you describe it as real added wealth or just inflation, maybe a quibble -- but it clearly is not deflation.
Chinese wages
But when a successful financier, betting his own money on his analysis, says that America is "importing Chinese deflation", it's likely he says something important, however imprecise technically. In this case, it would seem to be an observation that the globalization method of creating inflation minimizes some of the usual consequences of inflation. Since the low prices of Chinese products are mainly due to low Chinese wages, they discourage wage demands in this country, even in industries which do not compete against imports. That's politically important, even though there are many more consumers than manufacturing workers, and the nation as a whole is better off for the globalization. In short, inflation is not invariably a bad thing.
Now, just think of the problems that create for the Chairman of the Federal Reserve, who is charged with maintaining level prices, and defines our whole currency system on doing whatever it takes -- to avoid inflation.
Dealing with a topic as complicated as the causes of the 2007 financial crisis, it's quite possible for two viewpoints to be entirely in agreement, until abruptly coming to different conclusions. In this paper, we consider the relative merits of blaming government housing subsidies in various forms, relative to blaming the unanticipated effects of the computer revolution. The subsidy argument has just been succinctly and effectively argued by a lawyer, Peter J. Wallison. Agreeing with every word he writes, I nevertheless hold the perspective that the disruptive effects of the computer revolution were equally responsible, if not more so. Politics versus technology, choose your poison.
Federal Reserve
Mr. Wallison served as a lawyer in the financial loins of Washington, and thus has the perspective of a Reaganite who sees government as the main problem; with the significant distinction that his proposals for solution also lie in government corrective action, particularly "covered bonds" and step-wise privatization of the Federal Housing Authority (FHA). While agreeing with both reform proposals, my concern here is about too little general recognition in the analysis of how vulnerable the banking system has become, to revolutions made possible by even primitive computers of the 1960s. Such revolutions soon grew many times magnified by the inexpensive high-speed internet. If that analysis is correct, it predicts mere legislative action for the housing industry will prove inadequate; banking has taken a radical new direction.
Mr. Wallison's argument in the January 3, 2011 edition of the Wall Street Journal is admirably succinct. He points out the New Deal Federal Reserve deliberately suppressed interest rates to the benefit of the housing industry, but made a significant exception for the Savings and Loans. (It was forced to abandon that approach by the innovation of money market funds, in turn, made feasible by the widespread adoption of the IBM 360 computer.) When the collapsed, that segment of the market was awarded to the GSEs (Fannie and Freddy Mac, insured by FHA). In 1992, Congress imposed the goal of promoting "affordable housing" on the GSEs, which is to say the subsidization of "subprime" (i.e. high risk) mortgages. By 2007, half of all mortgages were subprime, and by September 7, 2008, Fan and Fred were insolvent, effectively replaced by the Federal Reserve (i.e. the taxpayers) as the final guarantor against national insolvency. It will take a decade to restore the economy from its present setback, but Mr. Wallison's proposals do indeed have some chance of eventually leading to a viable economy. He proposes the threshold for "jumbo" mortgages be reduced by $50,000 every six months until mortgages are effectively privatized. And he also suggests we create a pool of mortgage assets as security for a bond issue, thus privatizing existing mortgages in the way Europeans describe as a "covered bond" system. Go ahead, do it; it might work, and nothing else is on offer.
IBM 360 Computer
Meanwhile take a look at banks; we seemingly can't get along without them. But other institutions are undermining them, with cheaper products made possible by computers. For two centuries, banks transformed short-term borrowing into long-term loans; no one else could do it. It's a simple idea, and it works, that a constant or even rising pool level can be maintained by a steady inflow of short-term deposits. But it is risky; the risk is that some event will precipitate a sudden rush of withdrawals, a run on the bank. Sooner or later, the law of averages catches up. The risk is real, it happens every few years. A price in the form of interest must be imposed to maintain reserves against occasional bank runs, and collectively the whole nation must maintain a central "bank", charging interest to maintain reserves against simultaneous runs on multiple banks. No device has ever been created for a nation to protect against a universal bank panic, which is as effective as placing the risk in the hands of private bankers who can expect to be stripped and shorn if things get out of control. Robert Morris demonstrated this point in 1779, and the nation seemingly must re-learn it every few decades. The IBM 360 computer made it possible to transform short-term into long-term in greater volume and lower cost by allowing banks to get bigger; but it could also perform the short-long transformation in cheaper ways than depository banks do, and from there the bank-competitive process we know as securitization has gone on to commercial credits, auto loans, credit cards, high-velocity stock trading, and mortgage-backed securities. These approaches are often cheaper and more convenient than the trusty old banking system and Credit Default Swaps show its power isn't exhausted; any legislation to prohibit CDS is sure to to be circumvented. Insurance is also on the edge of being threatened. An industrial revolution of this magnitude takes decades of tweaks to become stabilized, but it will suffice for now, if we can establish reasonable protections against the risk shifted into the securitization or investment banking arena. As risk shifts, remuneration for accepting risk must shift as well. This new system for
generating capital must not be starved because depository bankers resist the loss of their share of profitability; politics will have much to answer for if that happens.
Most likely, the main obstacles to getting this system fixed will come from overseas. Fifty years of disillusionment with the United Nations will make nations, the United States chief among them, resist loss of sovereignty in something so vital as finance. But that's for the future. For nearly a century, the past has been disrupted by idle notions of the fairness of coerced redistribution, in ways Mr. Wallison has succinctly described. But meanwhile we almost willfully ignore technological upheavals which everyone welcomed but no one fully anticipated.
This-here speaker at the Right Angle Club began a discussion of the "Fiscal Cliff" razzle-dazzle of 2012, by changing his mind about the causes of the financial crash of 2007. Originally, it seemed as though globalizing 500 million Chinese out of poverty had destabilized the exuberant American mortgage market by flooding it with cheap credit. Supplanting that idea, or perhaps only supplementing it, must now be added the overextension of national debt itself to a point of bringing national borrowing to a halt.
Early in the Eighteenth century the Dutch and English had monetized national assets through a system of national borrowing formalized by Necker in Europe, and Robert Morris and Alexander Hamilton in America. Aside from a handful, no one could understand what they were talking about. Try reading that sentence a second time.
It amounted to guaranteeing all the private credit in the banking, investment, and commerce systems, with a national debt (in the form of Treasury bonds) which monetized all the assets of the whole nation. That action more or less doubled their value, just as any bank loan is seemingly owned by two people at the same time. Carried to an extreme, it might imply that America could turn Guam and Hawaii over to China if we defaulted on our debt. That was never actually intended to happen, and it never has, because all nations now fear the deflation which could result from triggering a massive exchange of national assets. The nebulous issue of "National Sovereignty" interferes with territorial transfers by any means other than war. If one nation defaults against a second nation which is afraid to go to war, it is just the stronger nation's hard luck about the debts it has chosen to support unless a transfer of assets actually happens. The Treaty of Versailles did transfer assets to the victors, and set off World War II, although it is considered bad manners to mention it. That's a simplified view of our international financial system, which admittedly skirts uncertainty about how much national debt is too much.
In fact, no one knows how much is too much until everyone runs for the exits. Now that politicians have control of computers and "big data", a modern description places the blame on Alan Greenspan the former Chairman of the Federal Reserve. For eighteen years Greenspan produced delicious world prosperity by steadily increasing American national debt faster than the American economy was growing. Sooner or later this approach was going to uncover how much was currently too much Federal debt. With silver and gold removed from the equation, one could see that default would certainly loom whenever the size of the debt became so large it could never be serviced by the Gross Domestic Product (GDP), and possibly sooner than that, if enough people could guess what was coming. This reality might be obscured temporarily by reducing interest rates, modifying international trade balances, and inflation. When the stars were in alignment however, the system just had to collapse and start over. Because it happened gradually, perhaps it would unwind gradually. In 2007 what happened was that everybody tried to get out the door at the same time. Essentially, our two political parties made opposite assessments: the party of Hamilton -- Republicans -- announced this system was doomed, while Democrats --the party of Andrew Jackson -- announced they could stave off disaster by making the rich Republicans pay for it. Both parties were partly right but essentially wrong, and the Democrats hired a better magician.
Henry Clay
It will take months or even years to be certain just what strategy was pursued. It would appear the Democrats chose to repeat the performance of the Obamacare legislation, eliminating national debate by eliminating the Congressional committee system of examining details in advance of a vote. Given one day to digest two thousand pages prepared by the Executive branch, no time was allowed for public opinion to form about Obamacare. In the case of the fiscal cliff episode, Congress was given less than one day to consider 150 pages allegedly prepared the day prior to the vote. Some will admire the skill of the executive branch in orchestrating this secret maneuver, but eventually, it must become apparent that policy decisions have been transferred from the legislative to the executive branch of government. Perhaps the Congressional Republicans are as stupid as the Democrats portray them to be, but it is also possible that a decision has been made to tempt the Democratic leaders into repeating this performance several times until eventually, the public is ready to consider impeachment for it. No matter what the strategy, we are now threatened with imagining some moment when gun barrels come level and live rounds slide home. We may pass up the opportunity to criticize Henry Clay for concentrating undue power in the Speaker of the House, or to uncover the way Harry Reid was persuaded to surrender Senate power to the Executive; both miscalculations are fast becoming irrelevant in the flurry of events. We came close to borrowing too much, exceeding our means to pay it back, that's all. A New York Times editorial economist feels we can "grow" our way out of this flirtation with danger, and we all certainly hope so.
Seemingly, there are only two ways to cope with over-borrowing, once we step over the invisible line. A nation may cheat its citizens with inflation, or it may cheat foreign citizens by defaulting on their currency. We are indebted to Rogoff and Reinhart for pointing out there is no difference between inflation and default except the identity of the cheated creditor; so most politicians prefer to cheat foreigners. Either way, cheating makes deadly enemies. Two centuries ago, Alexander Hamilton suggested a third way out of the problem, which we would today call "growth". But here, cheating is pretty easy: If the limit is some ratio of debt to GDP, find a way to increase nominal GDP.
Shale Gas and Argentina
The most astonishing current example of the power of "growth", is shale gas. It may not be totally clean, but it is cleaner than oil or coal, and far cheaper. We suddenly have so much of it the price of energy is artificially lowered, and we talk, not merely of energy independence, but of restoring the balance of international payments by exporting it. Germany is constructing steel mills to utilize iron ingots made in America with gas instead of coal. Pittsburgh was once the center of steel production because that's where the coal was, the most expensive ingredient to transport. Suddenly it is now apparently cheaper to transport the energy source to wherever you find limestone and iron ore. JP Morgan got rich the other way, transporting limestone and iron ore to Pittsburgh, where the coal was. Russia now finds it has lost its leverage over Eastern Europe's energy supply, and the Arabs (?Iranians?) will no longer have a monopoly to provide the wealth supporting Middle-Eastern mischief. China may lose interest in Africa. And in America we may develop the courage to rid ourselves of the corn subsidies for gasoline; cutting the wind and sunlight fumbles also emerge as obvious ways to cut the deficit. That's what we mean by growth. It's so powerful it makes action by any American President seem trivial by comparison.
Presumably, President Obama does not welcome being upstaged by an economic force he doggedly resisted. He may seek ways to imply it was his idea all along. When that happens, rest assured that everyone else is then a fracker. But there is another alternative Presidential path, which in extreme form is emerging in Argentina without much media attention. In short, Argentina discovered signs of oil deposits but was unable to exploit them. A European oil company was enticed to develop the oil reserves at its own expense, and effectively did so in expectation of reward from the resulting oil sales. Suddenly, the Kirchner government expropriated the oil company, paying for it with Argentine bonds. The ink was scarcely dry before the Argentine government abruptly turned around and offered to buy back the bonds for 24 cents on the dollar. And unless someone is willing to send gunboats, the previous owners of the oil company are just out of luck. Appeals to the UN are futile; because on the one-nation, one-vote principle, there are more expropriator votes in the UN than potential victims. The only thing visible which could save capitalism in South America from the revolution in shale gas competition. Presumably, Argentina has lots of shale gas, but who will lend them the money to frack it?
To summarize what was just said, we noted the evidence that a single deposit of about $55 in a Health Savings Account in 1923 would have grown to more than $300,000, today in the year 2014 because the economy achieved 10% return, not 6.5%. Therefore, with a turn of language, if the Account had invested $100 in an index fund of large-cap American corporate stock at a conservative 6.5% interest rate, it might have narrowly reached $6000 at age 50, which is re-invested on the 65th birthday, would have been valued at $325,000 at the age of 93, the conjectured longevity 50 years from now. No matter how the data is re-arranged, lifetime subsidy costs of $100 can be managed for the needy, the ingenuity of our scientists, and the vicissitudes of world finance-- within that 4% margin. We expect that subsidies of $100 at birth would be politically acceptable, and the other numbers, while stretched and rounded, could be pushed closer to 10% return. Much depends on returns to 2114 equalling the returns from 1923 to 2014, as reported by Ibbotson. At least In the past, $55 could have pre-paid a whole lifetime of medical care, at the year 2000 prices, which include annual 3% inflation. An individual can gamble with such odds, a government cannot. So one of the beauties of this proposal is the hidden incentive it contains, to make participation voluntary, and remain that way. No matter what flaws are detected and deplored, this approach would save a huge chunk of health care costs, even if they might not be stretchable enough to cover all of it.
And if something does go wrong, where does that leave us? Well, the government would have to find a way to bail us out, because the health of the public is "too big to fail" if anything is. That's why a responsible monitoring agency is essential, with a bailout provision. Congress must retain the right to revert to a bailout position, which might include the prohibition to use it without a national referendum or a national congressional election.
This illustration is, again, mainly to show the reader the enormous power of compound interest, which most people under-appreciate, as well as the additional power added by extending life expectancy by thirty years this century, and the surprising boost of passive investment income to 10% by financial transaction technology. The weakest part of these projections comes in the $300,000 estimate of lifetime healthcare costs during the last 90 years. That's because the dollar has continuously inflated a 1913 penny into a 2014 dollar, and science has continuously improved medical care while eliminating many common diseases. If we must find blame, blame Science and the Federal Reserve. The two things which make any calculation possible at all, are the steadiness of inflation and the relentless progress of medical care. For that, give credit to -- Science and the Federal Reserve.
Blue Cross of Michigan and two federal agencies put their own data through a formula which creates a hypothetical average subscriber's cost for a lifetime at today's prices. All three agencies come out to a lifetime cost estimate of around $300,000. That's not what we actually spent because so much has changed, but at such a steady rate that justifies the assumption, it will continue for the next century. So, although the calculation comes closer to approximating the next century than what was seen in the last, it really provides no method to anticipate future changes in diseases or longevity, either. Inflation and investment returns are assumed to be level, and longevity is assumed to level off. So be warned.
The best use of this data is, measured by the same formula every year, arriving at some approximation of how "overall net medical payment inflation" emerges. That is not the same as "inflation of medical prices" since it includes the net of the cost of new and older treatments and the net effect of new treatments on longevity. Therefore, this calculation usefully measures how the medical industry copes with its cost, compared with national inflation, by substituting new treatments for old ones. Unlike most consumer items, Medicine copes with its costs by getting rid of them. Sometimes it reduces costs by substituting new treatments, net of eliminating old ones. It also assumes a dollar saved by curing disease is at least as good as a dollar saved by lowering prices, and sometimes a great deal better, which no one can measure. Our proposals therefore actually depend on steadily making mid-course corrections, so we must measure them.
Our innovative revenue source, the overall rate of return to stockholders of the nation's largest corporations, has also been amazingly steady at 10% for a century. National inflation has been just as non-volatile, and over long periods has averaged 3%., perhaps the two achievements are necessary for each other. Medical payments must grow less than a steady 10%, minus 3% inflation, before any profit could be applied to paying off debt, financing the lengthening retirement of retirees, or shared with patients including rent seekers. But if the profit margin proves significantly less than 10%, we might have to borrow until lenders call a halt. No one can safely say what the two margins (7% + 3%) will be in the coming century, but at least the risks are displayed in simple numbers. Parenthetically, the steadiness of industrial results (in contrast to the apparent unsteadiness of everything else) was achieved in spite of a gigantic shift from control by family partnerships to corporations. Small businesses (less than a billion dollars annual revenue) still constitute half of the American economy, however, and huge tectonic shifts are still possible. Globalization could change the whole environment, and the world still has too many atom bombs. American Medicine can escape international upheavals in only one way -- eliminate the disease. Otherwise, the fate of our medical care will largely reflect the fate of our economy. To repeat, it is vital to monitor where we are going.
Revenue growing at 10% will relentlessly grow faster than expenses at 3%. Our monetary system is constructed on the gradations of interest rates between the private sector and the public sector. It would be unwise to switch health care to the public sector and still expect returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, although it indirectly affects the value of the dollar. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings are possible, but only to the degree, we contain last century's medical cost inflation closer to 3% than to 10%. The simplest way to retain revenue at 10% growth is by anchoring the leaders within the private sector.
How Do You Withdraw Money From Lifetime Health Insurance?
Four ways should be mentioned: Debit cards for outpatient care, Diagnosis pre-payment for hospital care, Transfers from escrow, and Gifts for specified purposes.
Special Debit Cards, from the Health Savings Account, for Outpatient care.Bank debit cards are cheaper than Credit cards, because credit cards are a loan, while the money is already in the bank for a debit card. Some pressure has to be applied to banks or they won't accept debit cards with small balances. Somehow, the banks have to be made to see that you start with a small account and build up to a big one. So it's probably fair for them to insist on some proof that you will remain with them. The easiest way to handle this issue is to make the first deposit of $3300, the maximum you are allowed to deposit in one year. That's difficult for little children and poor people, however, so there must at least be some way to have family accounts for children. You just have to shop around, that's all.
After that, all you do is pay your medical outpatient bills with the debit card, but we advise paying out of some other account is you can, so that the amount builds up more quickly to a level where the bank teller quits bothering you. Remember this: the only difference between a Health Savings Account and an ordinary IRA for practical purposes, is that medical expenses are tax-exempt from an HSA. Both of them give you a deduction for deposits, and both collect income tax-free. If for some reason you do not expect a tax deduction, don't use the HSA, use something else like an IRA. Alternatively, if you can scrape together $6000, you are completely covered from deductibles, and co-payment plans are to be avoided, so then an HSA with Catastrophic Bronze plan is your best bet. If you have a bronze plan, you probably get some money back if you file a claim form, but those rules are still in flux at this writing. The expense of filing and collecting claims forms is one of the reasons the Bronze plan is more expensive, but that's their rule at present.
1. Spend it on medical care. Specially modified benefit packages are possible.
2. Spend less, but spend the savings on something else. The program should not be permitted to do this, but Congress should do it in the general budget.
3. Borrow it, and inflate it away on the books. But inflate the borrowings at some lower rate. The customary techniques of a banana republic.
4. Fail to collect the premiums/payroll deductions.
After 1., which is the essential purpose of the whole thing, the most attractive choice is 4. because a gradual transition is needed, with incentives offered only to those who choose to participate. However, borrowing may be necessary to transfer surplus revenue to age groups in deficiency.
Spending Health Savings Accounts. Spending Less. In earlier sections of this book, we have proposed everyone have an HSA, whether existing health insurance is continued or not. It's a way to have tax-exempt savings, and a particularly good vehicle for extending the Henry Kaiser tax exemption to everyone, if only Congress would permit spending for health insurance premiums out of the Accounts. To spend money out of an account we advise a cleaned-up DRG payment for hospital inpatients, and a simple plastic debit card for everything else. Credit cards cost twice as much like debit cards, and only banks can issue credit cards. Actual experience has shown that HSA cost 30% less than payment through conventional health insurance, primarily because they do not include "service benefits" and put the patient in a position to negotiate prices or be fleeced if he doesn't. Not everybody enjoys haggling over prices, but 30% is just too much to ignore.
No Medicare, no Medicare Premiums. We assume no one wants to pay medical expenses twice, and will, therefore, drop Medicare if investment income is captured in lifetime Health Savings Accounts. The major sources of revenue for Medicare at the present time fall into three categories: half are drawn from general tax revenues, a quarter come from a 6% payroll deduction among working-age people, and another quarter are premiums from retirees on Medicare. All three payments should disappear if Medicare does, too. Therefore, the benefit of dropping Medicare will differ in type and amount, related to the age of the individual. Eliminating the payroll deduction for a working-age person would still find him paying income taxes in part for the costs of the poor, as it would for retirees with sufficient income.
Retirees would pay no Medicare premiums. Their illnesses make up 85% of Medicare cost, but at present, they only contribute a quarter of Medicare revenue. However, after the transition period, they first contribute payroll taxes without receiving benefits, and then later in life pay premiums while they get benefits, to a total contribution of 50% toward their own costs. But the prosperous ones still contribute to the sick poor through their income taxes. There might be some quirks of unfairness in this approach, but its rough outline can be seen from the size of their aggregate contributions, in this scheme. At any one time during the transition, working-age and retirees would both benefit from about the same reduction of money, but the working-age people would eventually skip payments for twice as long. Invisibly, the government subsidy of 50% of Medicare costs would also disappear as beneficiaries dropped out, so the government gets its share of a windfall, in proportion to its former contributions to it. One would hope they would pay down the foreign debt with the windfall, but it is their choice. This whole system -- of one quarter, one quarter, and a half -- roughly approximates the present sources of Medicare funding and can be adjusted if inequity is discovered. For example, people over 85 probably cost more than they contribute. For the Medicare recipients as a group, however, it seems like an equitable exchange. This brings up the subject of intra- and extra-group borrowing.
Escrow and Non-escrow. When the books balance for a whole age group, the managers of a common fund shift things around without difficulty. However, the HSA concept is that each account is individually owned, so either a part of it is shifted to a common fund, or else frozen in the individual account (escrowed) until needed. It is unnecessary to go into detail about the various alternatives available, except to say that some funds must be escrowed for long-term use and other funds are available in the current year. Quite often it will be found that cash is flowing in for deposits, sufficient to take care of most of this need for shifting, but without experience in the funds flow it would be wise to have a contingency fund. For example, the over-85 group will need to keep most of its funds liquid for current expenses, while the group 65-75 might need to keep a larger amount frozen in their accounts for the use of the over-85s. In the early transition days, this sort of thing might be frequent.
The Poor. Since Obamacare, Medicaid and every other proposal for the poor involves subsidy, so does this one. But the investment account pays 10%, the cost of the subsidy is considerably reduced. HSA makes it cheaper to pay for the poor.
Why Should I Do It? Because it will save large amounts of money for both individuals and the government, without affecting or rationing health care at all. To the retiree, in particular, he gets the same care but stops paying premiums for it. In a sense, gradual adoption of this idea actually welcomes initial reluctance by many people hanging back, to see how the first-adopters make out. Medicare is well-run, and therefore most people do not realize how much it is subsidized; even so, everyone likes a dollar for fifty cents, so there will be some overt public resistance. When this confusion is overcome, there will still be the suspicion that government will somehow absorb most of the profit, so the government must be careful of its image, particularly at first. Medicare now serves two distinct functions: to pay the bills and to protect the consumer from overcharging by providers. Providers must also exercise prudent restraint. To address this question is not entirely hypothetical, in view of the merciless application of hospital cost-shifting between inpatients and outpatients, occasioned in turn by DRG underpayment by diagnosis, for inpatients. A citizens watchdog commission is also prudent. The owners of Health Savings Accounts might be given a certain amount of power to elect representatives and negotiate what seem to be excessive charges.
We answer this particular problem in somewhat more detail by proposing a complete substitution of the ICDA coding system by SNODO coding, within revised Diagnosis Related Groupings,(if that is understandable, so far) followed by linkage of the helpless inpatient's diagnosis code to the same or similar ones for market-exposed outpatients. (Whew!) All of which is to say that DRG has been a very effective rationing tool, but it cannot persist unless it becomes related to market prices. We have had entirely enough talk of ten-dollar aspirin tablets and $900 toilet seats; we need to be talking about how those prices are arrived at. In the long run, however, medical providers are highly influenced by peer pressure so, again, mechanisms to achieve price transparency are what to strive for. These ideas are expanded in other sections of the book. An underlying theme is those market mechanisms will work best if something like the Professional Standards Review Organization (PSRO) is revived by self-interest among providers. Self-governance by peers should be its theme, ultimately enforced by fear of a revival of recent government adventures into price control. Those who resist joining should be free to take their chances on prices. Under such circumstances, it would be best to have multiple competing PSROs, for those dissatisfied with one, to transfer allegiance to another. And an appeal system, to appeal against local feuds through recourse to distant judges.
Deliberate Overfunding. Many temporary problems could be imagined, immediately simplified by collecting more money than is needed. Allowing the managers some slack eliminates the need for special insurance for epidemics, special insurance for floods and natural disasters, and the like. Listing all the potential problems would scare the wits out of everybody, but many potential problems will never arise, except the need to dispose of the extra funds. For that reason, it is important to have a legitimate alternative use for excess funds as an inducement to permit them. That might be payments for custodial care or just plain living expenses for retirement. But it must not be a surprise, or it will be wasted. Since we are next about to discuss doing essentially the same thing for everybody under 65, too, any surplus from those other programs can be used to fund deficits in Medicare. But Medicare is the end of the line, so its surpluses at death have accumulated over a lifetime, not just during the retiree health program.
Start by looking at what happens if you increase the interest rate from 5% to 12%, or if you lengthen life expectancy from age 65 to age 93. Stretch the limits to see what stress will do. For example, increasing the interest rate to the edge of believable gets your balance to a couple of million dollars amazingly quickly, while lengthening the time period (for that interest rate to work) even further enhances that gain. The combination of the two easily escalates the investment above twenty million. Because we are only trying to get to $350,000, reaching it suddenly seems believable.
The combination of extra time plus extra interest rate holds out a theoretical promise of paying for a lengthening lifetime of medical care, in spite of medical cost inflation. Present realities don't quite stretch that far, but finding some way to reach that level is not hard to imagine. In fact, it gets the calculation to giddy amounts so quickly it engenders suspicion, to which one answer is, we probably don't need anything like twenty million. The actuaries at Michigan Blue Cross, verified by the Medicare agency, estimate average lifetime health costs to be around $350,000 per lifetime. That's just a guess, of course, but increasing interest rates and life expectancy just a little could reach that minimum requirement. How do we go about it, and how far dare we go?
Some very credible theories sometimes disappoint us. Remember, our whole currency is based on the notion of the Federal Reserve "targeting" inflation at 2%, but in spite of spending trillions of dollars, they sometimes seem unable to achieve that target. We had better not count on schemes which require the Federal Reserve to target interest rates, because sometimes, they can't. On the other hand, if a vast army of smart people set about to nibble at various small increases in interest rates and longevity, perhaps they can make serious progress.
One person who does have practical control of the interest rate an investor receives is his own broker. For a full century, Rogen Ibbotson has published the returns on various investments, and they don't vary a great deal. Common stock produces a return of between 10% and 12.7% in spite of wars and depressions; if you stand back a few feet, the graph is pretty close to a straight line. If you search carefully, a number of brokerages offer Health Savings Accounts which produce no interest at all -- to the investor -- for the first ten years. Try earning 2% during inflation of 2%, and see what it gets you. In ten years, that approaches a haircut of nearly 100%, explained by the small size of the accounts, and by the fact that experienced customers who know better, just look for other vendors. Since the number of Health Savings Accounts has quickly grown to be more than ten million, it's time for some consumer protection. The prospective future size of these accounts should command much greater market power, quite soon. After all, passive investment should mainly involve the purchase of blocks of index funds, with annual fees of less than a tenth of a percent. Most of this haircutting is explained by the uncertainties of introducing the Affordable Care Act during a recession, and taking six years to get to the point of a Supreme Court Test to see if its regulations are legal and workable.
That's the Theory. If Necessary, Settle for Less. The rest of this section is devoted to rearranging healthcare payments in ways which could -- regardless of rough predictions -- outdistance guesses about future health costs. When the mind-boggling effects are verified, skeptics are invited to cut them in half, or three quarters, and yet achieve roughly the same result. The purpose is not to construct a formula, but to demonstrate the power of an idea. Like all such proposals, this one has the power to turn us into children, playing with matches. By the way, borrowing money to pay bills will conversely only make the burden worse, as we experience with the current "Pay as you go" method. By reversing the borrowing approach we double the improvement from investment, in the sense we stop doing it one way and also start doing the other. In the days when health insurance started, there was no other way possible. The reversal of this system has only recently become plausible, because life expectancy has recently increased so much, and passive investing has put the innovation within most people's reach. The environment has indeed changed, but don't take matters further than the new situation warrants.
Average life expectancy is now 83 years, was 47 in the year 1900; it would not be surprising if life expectancy reached 93 in another 93 years. The main uncertainty lies in our individual future attainment of average life expectancy, which we will never know, but probably could guess with a 10% error. When the future is thus so uncertain, we can display several examples at different levels, in order to keep reminding the reader that precision is neither possible nor necessary, in order to reach many safe conclusions about the average future. Except for one unusual thing: this particular trick is likely to get even better in the future because people will live longer. Even so, it is better to do a conservative thing with a radical idea.
Reduced to essentials for this purpose, today's average newborn is going to have 9.3 opportunities to double his money at seven percent return and would have 13.3 doublings at ten percent. Notice the double-bump: as the interest rate increases, it doubles more often, as well as enjoying a higher rate. If you care, that's essentially why compound interest grows so unexpectedly fast. This double widening will account for some very surprising results, and it largely creeps up on us, unawares. Because we don't know the precise longevity ahead, and we don't know the interest rate achievable, there is a widening variance between any two estimates. So wide, in fact, it is pointless to achieve precision. Whatever it is, it's going to be a lot.
One Dollar: Lifetime Compound Interest, at Different Rates
Start with a newborn, and give him one dollar. At age 93, he should have between $200 (@7%) and $10,000 (@10%), entirely dependent on the interest rate. That's a big swing. What it suggests is we should work very hard to raise that interest rate, even just a little bit, no matter how we intend to use the money when we are 93, to pay off accumulated lifetime healthcare debts. Don't let anyone tell you it doesn't matter whether interest rates are 7% or 12.7%, because it matters a lot. And by the way, don't kid yourself that a credit card charge doesn't matter if it is 12% or 6%. Call it greed if that pleases you; these small differences are profoundly important.
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If that lesson has been absorbed, here's another:
In the last fifty or so years, American life expectancy has increased by thirty years. That's enough extra time for three extra doublings at seven percent, right? So, 2,4,8. Whatever amount of money the average person would have had when he died in 1900, is now expected to be eight times as much when he now dies thirty years later in life. And even if he loses half of it in some stock market crash, he will still retain four times as much as he formerly would have had, at the earlier death date. The reason increased longevity might rescue us from our own improvidence is the doubling rate starts soaring upward at about the time it gets extended by improved longevity. In particular, look at the family of curves. Its yield turns sharply upward for interest rates between 5% and 10%, and every extra tenth of a percent boosts it appreciably.
Now, hear this. In the past century, inflation has averaged 3%, and small-capitalization common stock averaged 12.7%, give or take 3%, or one standard deviation (One standard deviation includes 2/3 of all the variation in a year.) Some people advocate continuing with 3% inflation, many do not. The bottom line: many things have changed, in health, in longevity, and in stock market transaction costs. Those things may have seemed to change very little, but with the simple multipliers we have pointed out, conclusions become appreciably magnified. Meanwhile, the Federal Reserve Chairman says she is targeting an annual inflation rate of 2% of the money in circulation; the actual increase in the past century was 3%. If you do nothing at 3%, your money will be all gone in thirty-three years. If you stay in cash at 2%, it will take fifty years to be all gone.
But if you work at things just a little, you can take advantage of the progressive widening of two curves: three percent for inflation stays pretty flat, but seven percent for investment income starts to soar. Up to 7%, there is a reasonable choice between stocks and bonds; but if you need more than 7% you must invest in stocks. Future inflation and future stock returns may remain at 3 and 7, forever, or they may get tinkered with. But the 3% and 7% curves are getting further apart with every year of increasing longevity. Some people will get lucky or take inordinate risks, and for them, the 10% investment curve might widen from a 3% inflation curve, a whole lot faster. But every single tenth of a percent net improvement will cast a long shadow.
But never, ever forget the reverse: a 7% investment rate will grow vastly faster than 4% will, but if people allow this windfall to be taxed or swindled, the proposal you are reading will fall far short of its promise. Our economy operates between a relatively flat 3% and a sharply rising 4-5%. In other words, it wouldn't have to rise much above 3% inflation rate to be starting to spiral out of control. Our Federal Reserve is well aware of this, but the public isn't. A sudden international economic tidal wave could easily push inflation out of control, in our country just as much as Greece or Portugal. As developing nations grow more prosperous, our Federal Reserve controls a progressively smaller proportion of international currency. Therefore, we could do less to stem a crisis that we have done in the past.
To summarize, on the revenue side of the ledger, we note the arithmetic that a single deposit of about $55 in a Health Savings Account in 1923 might have grown to about $350,000 by today, in the year 2015, because the stock market did achieve more than 10% return. There is considerable attractiveness to the alternative of extending HSA limits down to the age of birth, and up to the date of death. It's really up to Congress to do it. If the past century's market had grown at merely 6.5% instead of 10%, the $55 would now only be $18,000, so we would already be past the tipping point on rates. In plain language, by using a 10% example, $55 could have reached the sum now presently thought by statisticians -- to be the total health expenditure for a lifetime. But by accepting a 6.5% return, however, the same investment would have fallen short of enough money for the purpose. Like the municipalities that gambled on their pension fund returns, that sort of trap must be avoided. Things are not entirely hopeless, because 6.5% would remain adequate if our hypothetical newborn had started with $100, still within a conceivable range for subsidies. But the point to be made provides only a razor-thin margin between buying a Rolls Royce, and buying a motorbike. If you get it right on interest rates and longevity, the cost of the purchase is relatively insignificant. That's the central point of the first two graphs. For some people, it would inevitably lead to investing nothing at all, for personal reasons. Some of the poor will have to be subsidized, some of the timid will have to be prodded. This is more of a research problem than you would guess: a round-about approach is to eliminate the diseases which cost so much, choosing between research to do it, or rationing to do it. Right now we have a choice; if we delay, the only remaining choice would be rationing.
Commentary.This discussion is, again, mainly to show the reader the enormous power and complexity of compound interest, which most people under-appreciate, as well as the additional power added by extending life expectancy by thirty years this century, and the surprising boost of passive investment income toward 10% by financial transaction technology. Many conclusions can be drawn, including possibly the conclusion that this proposal leaves too narrow a margin of safety to pay for everything. The conclusion I prefer to reach is that this structure is almost good enough, but requires some additional innovation to be safe enough. That line of reasoning will be pursued in Chapter Fxxx.
Revenue growing at 10% will relentlessly grow faster than expenses at 3%. As experience has shown, it is next to impossible to switch health care to the public sector and still expect investment returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, but it indirectly affects the value of the dollar, greatly. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings in the healthcare system are possible, but only to the degree, we contain next century's medical cost inflation closer to 2% than to 10%. The simplest way to retain revenue at 10% growth is by anchoring the price leaders within the private sector. The hardest way to do it would be to try to achieve private sector profits, inside the public sector. This chapter describes a middle way. Better than alternatives, perhaps, but nothing miraculous. For the full whammy, you will have to read chapters Three and Four.
Cost, One of Two Basic Numbers. Blue Cross of Michigan and two federal agencies put their own data through a formula which created a hypothetical average subscriber's cost for a lifetime at today's prices. The agencies produced a lifetime cost estimate of around $300,000. That's not what we actually spent because so much of medical care has changed, but at such a steady rate that it justifies the assumption, it will continue into the next century. So, although the calculation comes closer to approximating the next century, than what was seen in the last century, it really provides no miraculous method to anticipate future changes in diseases or longevity, either. Inflation and investment returns are assumed to be level, and longevity is assumed to level off. So be warned. This proposal, particularly with merely an annual horizon, proposes a method to pay for a lot of otherwise unfunded medical care. The proposal to pay for all of it began to arise when its full revenue potential began to emerge, rather than the other way around. If the more ambitious second proposed project ever works in full, it must expect decades of transition. Perhaps that's just as well, considering the recent examples we have had of being in too big a hurry. Rather surprisingly, the remaining problem appears mainly a matter of 10-15% of revenue, but all such projection is fraught with uncertainty.
Revenue, The Other Problem. The foregoing describes where we got our number for future lifetime medical costs; someone else did it. Our other number is $132,000, which is our figure for average lifetime revenue devoted to healthcare. That's the current limit ($3300 per year of working life) which the Congress itself applied to deposits in Health Savings Accounts. No doubt, the number was envisioned as the absolute limit of what the average person could afford, and as such seems entirely plausible. You'd have to be rich to afford more than that, and if you weren't rich, you would struggle to afford so much. To summarize the process, the number was selected as the limit of what we can afford. If it turns out we can't afford it, this proposal must somehow be supplemented. The provision made for that predicament is we will then have to jettison one or two major expenses, the repayment of our foreign debts for past deficits in healthcare entitlements, or the privatization of Medicare. That would leave us considerably short of paying for lifetime health costs, but it might actually be more politically palatable. It's far better than sacrificing medical care quality, at least, which to me is an unthinkable alternative, just when we were coming within sight of eliminating the diseases which require so much of it.
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.
