George R. Fisher, III, M.D.

Obituary

George R. Fisher, III, M.D.

Age: 97 of Philadelphia, formerly of Haddonfield Dr George Fisher III

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.

Perpetual Fire Insurance

Many of the a older houses in Philadelphia still have Plaques to the front wall, usually between two windows on the second story. These are the symbols of colonial fire companies, signifying that this particular house had paid its dues to a particular company and was entitled to its services if it ever had a fire. There are two exceptions to this rule, one showing four hands gripping wrists (the fireman's "carry" technique), which was the symbol of Franklin's fire insurance company, otherwise known as the "Contributionship". The other shows a Green Tree, the symbol of a competitor fire insurance company which found a business opportunity in ensuring houses with a tree on the property, something the Contributionship declined to cover. These fire insurance companies are the only survivors of a type called "perpetual" fire insurance. Since the Contributionship is the oldest fire company in America, while the Green Tree company was fairly recently involved a controversy with its directors some of the most prominent people in the City they generate highly interesting histories, as organizations.

But in many ways, the more interesting feature about them is their unique business plan, which contains some important lessons for the rest of the insurance industry, particularly health insurance. Since health insurance is now one of the great unsolved problems of national life, it is perhaps worth a little trouble to understand perpetual insurance as a concept. It isn't that hard, so stick with it.

A fire insurance company has to figure out each year's risk of fires and set a premium large enough to pay for that risk, but not so large as to drive away business. If there's some unspent money left over at the end of the year, that profit belongs to the company. When Ben Franklin was starting the first fire insurance, he had no way of guessing what the risk was going to be, so he guessed far on the high side. So as to keep from scaring away his customers, the agreement was that any surplus would be applied to the following years, invested in the meantime. After a while, the investment income was enough to pay for the fires, plus enough to pay a dividend and to return the whole investment if the home-owner wanted to move to another house. Here was perpetual fire insurance. A returnable, lump-sum investment paid for the fire insurance, paid a nice dividend, and you got your money back if you wanted it. Its most extreme example was the policy taken out by thePennsylvania Hospital during colonial times, which still pays about 15,000 annual dividend, plus they have had fire insurance for two centuries from an investment which seems trivial in retrospect. Why doesn't everyone have perpetual fire insurance? Why is it now a quaint little forgotten idea that almost no one knows about?

the 1929 crash

There are conspiracy theories, of course, that greedy insurance companies prefer to sell you a more expensive product that is more profitable for them; forget that line of argument. A more plausible criticism is that the managers of perpetual insurance have to take a long-term view of risk. The perpetual companies are reluctant to insure a house that has any significant chance of having a fire, ever. Philadelphia long ago prohibited wooden structures, however, and the building codes have become progressively more strict. Another source of customer reluctance grew out of the 1929 crash, which destroyed for generations the confidence of the public, and for that matter the board of directors, in the safety of long term investments. If the investments become too timid, they will generate a reduced return, and inflation of the cost of replacing a burned-down building may slowly pull ahead of the investment income which is supposed to cover it. The tax laws will inevitably change over a period of time which describes itself as perpetual, and somehow or other the investment safety may become impaired by politics.

A more subtle risk is inherent in the nature of building materials. If you have a stone house, you expect to have your fire insurance restore you to a stone house. But houses were built of the stone when a stone was locally abundant, and cheap. Nowadays, it gets harder and more expensive to find and transport suitable stone, and much harder to find a skilled stone mason. One of the reasons you hire an architect is to direct you to the newer, more modern materials and techniques, and away from obsolete, expensive materials of the past. In summary, therefore, the managers of the company must establish a set of predictions about the perpetual risk of your house burning down, and the perpetual cost of replacing it. If they guess too low, the money you invested will eventually run out, and you will be left with a perpetual promise, but no money in the treasury to pay for it. All of this woeful, fearful whimpering, however, must be set against a two hundred year history of a simply glorious investment opportunity. You have to trust your company to be smart and, to be honest. Who trusts anyone, any more?

Health Maintenance Organizations, Reconsidered

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Paul Elwood

Paul Ellwood once enjoyed the title of Father of the HMO, while the captains of industry who came so close to pushing HMOs down the nation's unwilling throat remain invisible, quite willing to let Bill and Hillary twist in the wind for the near-miss. In the fifteen years since the Plan was dropped by Congress, 10,000 major employers coerced their employees into HMOs; endured much greater employee resistance than anticipated; and watched in dismay as administrative costs ate up the savings. The National Business Coalition for Health has been transformed from its intended role into an information system for encouraging, testing and swapping experience about minor enhancements and tweakings. Much ado about, well, less than was hoped for. But in spite of all that, let me state right here that it would only take one fundamental change to make the HMO model into a popular and desirable system.

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HMO

There's an underlying truism about all effective cost-saving measures in a service industry: regardless of whether you eliminate waste or cut into essentials, you have got to fire a whole lot of people. If you fire the loafers, the quality of your product is improved; if you fire the productive workers, the product is injured. The third choice is to streamline your production methods; you may maintain high quality in spite of firing some good people. But no matter how you go about it, if you are successful, it will be the result of putting good managers in charge. The American Academy of Actuaries once calculated waste in the American healthcare system to be 30%, but in spite of opportunities of that magnitude, the present design of HMOs cannot seem to do more than barely break even. And that is in spite of wide-spread dissatisfaction with denials of care, inconvenient service, and increased paperwork. There's a tragedy here. The alternative model has already been tested, shown to reduce costs, and produced the general satisfaction of both patients and physicians.

Kaiser physicians

That model was the original one, called the Foundation for Medical Care, devised in Stockton and Sacramento California in the 1950s. The Foundations were expressly created to compete with Kaiser-Permanente, both for patient satisfaction and cost-effectiveness, so judging their success is simply a matter of getting out the records and submitting them to impartial evaluation. The Foundation movement was brought to a dead stop by the legislation which enabled the present employer-based version of HMO, as well as an unfortunate Supreme Court Decision (Maricopa) whose evidence was never put on trial, but based on a motion for summary judgment. The central underlying difference between an HMO and a Foundation is that an HMO is run by an insurance company, while the Foundations were formed and controlled by the physicians who worked for them. While it might be argued that circumstances have changed in the last thirty years, it still seems reasonable to suppose that physician-run HMOs remain superior to the present insurance company-run variety. The reason for this confidence is the benchmark of Kaiser-Permanente, whose only difference is that Kaiser physicians are paid salaries, and a few of the affiliates own hospitals. Kaiser systems are at present having a serious struggle in competition with an insurance company owned HMOs. Some years, some branches of Kaiser are profitable, sometimes they lose money. The triumphant flag that Foundations waved in their heyday was, "We beat Kaiser."

So where is the problem? Actually, there are two. The Foundations were usually although not invariably set up as non-profit corporations because of squeamishness of the doctors about the appearance of self-dealing. That eliminated both insurance profit and incentive to interfere with payments, although it naturally displeased commercial insurance companies. Since I can name at least two HMO operators who rewarded their CEOs with more than a billion dollars each, you can understand the displeasure with the non-profit competition. The other resistance came from hospitals. The Foundation system of utilization review put a weapon in the hands of the attending physicians in their eternal tension with hospital administrators, giving the administrators little choice but to do what the physicians wanted. Essentially, what the physicians wanted was for hospital quality to be maintained while any cost cuts affected hospital revenue before they affected physician revenue. The predictably unfortunate consequences for the hospital were held in check by opening staff privileges to physicians who were not participants in the Foundation. Their vigilance and competitive power were on the side of the administrator, for the benefit of their own patients in the common hospital. Kaiser, by contrast, usually found that owning closed-staff hospitals was itself a major headache.

A hidden advantage to shifting control of healthcare to physicians is that the system acquires the management talents of the staff physicians, essentially without charge. The plain fact is that most physicians hate administrative work, and it comes closer to the facts to say that physicians abandoned management chores than to say they were deprived of them. And just in case it needs restating, it is easier to teach management to a physician than to teach medicine to administrators. While there may be some initial fumbling, physicians are the logical group to be in charge of the management of a medical system, and indeed most lay people suppose they are already in charge. Unlike the situation just after World War II, physicians would now have much more enthusiasm for administration. Not only are their own incomes suffering, but they see their product beginning to disintegrate. And it has not escaped their attention that most large-hospital administrators are paid more than a million dollars a year. No doubt physician income would be enhanced by shifting from HMO to Foundation, but less than you might suppose. Physicians are a censorious lot.

Technical footnote: Two technical obstacles must be overcome before Foundations for Medical Care -- HMOs run by physicians -- can be restored to viability. For sixty years, insurance has been regulated by state governments as a result of the McCarran Ferguson Law. Large corporations doing interstate business have found it quite unworkable to comply with fifty different regulators and were given relief by a Federal law called ERISA. ERISA is so large and complex as a consequence of a large number of trade-off compromises, that for many years it was deemed impossible to amend it in any way. That gridlock was broken in 2006. The Supreme Court decision in State of Arizona v. Maricopa has always seemed dubious as a result of a 4-3 decision which lacked a majority at the time it was handed down, and in any event, never had a hearing on the evidence. The decision was based on a technicality related to a motion for summary judgment. With the passage of time and changing the membership of the Supreme Court, it is easily possible to imagine a reversal of this decision.

On a political level, the climate of opinion has also changed. Insurance companies, and quite possibly hospitals, might well resist. However, it is the business community which supplied the main political force for the present version of insurance company-controlled HMO. Since that model has proven to be a disappointment from the employer perspective, but the cost problem has become much worse, it may now be possible to persuade business to allow a competitive model to emerge.

TOAST TO E. DIGBY BALTZELL (1915-1996)

A TOAST TO E. DIGBY BALTZELL (1915-1996)

The Franklin Inn Club, Philadelphia

Annual Dinner, 15 January 2010

E. Digby Baltzell

I am grateful that our President, Deborah Goldstein, and the Board have given me this opportunity to make precedent -- tonight to strengthen the tradition of the Franklin Inn Club by raising a new toast, following our 18th century icon, Benjamin Franklin, and the 19th century men who founded the Inn, with a 20th century member. We are, after all well into the 21st century. It is my original privilege to honor a member and author who contributed strongly to American social thinking: E. Digby Baltzell.

Digby and WASPS Let me right away make two statements about Digby and WASPS. His name is associated with that acronym because it appeared in his book of 1964, THE PROTESTANT ESTABLISHMENT; ARISTOCRACY AND CASTE IN AMERICA. But contrary to a popular misconception, Digby did not invent the term WASP. I know, because a Jewish girlfriend from New York City used that term on me critically ("That's what we call people like you") in 1952. And there is good evidence that the term was in use as a put-down, like other American ethnoreligious slurs, two decades before Digby gave his term for White Anglo-Saxon Protestants scholarly standing in his book.

Secondly: however dear his idea was to him, Baltzell gave up on WASP aristocracy before his death. His subtitle had contained his aim: "Aristocracy and Caste in America." He was inspired by Tocqueville's attempt to save the French aristocracy from its own destruction by writing "Democracy in America" during the presidency of Andrew Jackson. Baltzell was concerned about his own aristocratic class. These were prep school and Ivy League educated people with family lineage, trust funds, and above all, what might be called Rooseveltian motivation. Either TR, Republican, or FDR, Democrat, party did not matter. Both Roosevelts had the aristocratic drive to excel: not only to lead but to assimilate other talents into leadership. That was the key to the matter: for a responsible aristocracy perpetuates itself by absorbing into ruling power new immigrant energy and multi-class talents, such as, in the 1930s, Fiorello LaGuardia, mayor of New York City, and Sidney Weinberg of Goldman Sachs.

An aristocracy is irresponsible, however, when it merely replicates its own ethnic and religious features. By protecting itself with clubbishness it ceases to be an aristocracy and rigidifies into a caste. Baltzell, 1964, feared that WASPS in the USA would let that happen, and wrote in the strong hope that they would not. But it was already happening. Looking back, we can see that the game was almost over.

Digby and Me Who was Digby Baltzell? He was born in Rittenhouse Square and grew up in Chestnut Hill to what he called an "impecuniously genteel" family. They sent him off to St. Paul's School in New Hampshire, an exclusive Episcopalian* boarding school formed in an English tradition. In his senior year, his alcoholic father was fired from his insurance company, and soon after died of a heart attack. For college, Digby could not afford Harvard, Yale, or Princeton, where all his classmates went but settled for the University of Pennsylvania. There he got himself through on scholarship, with various jobs such as ticket-taker, usher, and parking lot attendant at Franklin Field. He went on to get a Ph.D. at Columbia and came back to Penn, where he taught for the rest of his employed career.

I never met Digby personally because he died in 1996, the year that I joined the Inn. Yet I identify with the man I just described in some distinct ways. My own alcoholic father, a mellow, dear, and vulnerable man, lost his job as a stockbroker while I was in college. There, at Williams, I was a member of the same hard-drinking fraternity, St. Anthony Hall, as Baltzell had been at Penn. I'm not Episcopalian, but being a Scotch-Irish Presbyterian makes me categorically WASP. I feel like Digby did, that I have been a marginal member of the elite. I became an academic to try to figure out what the hell was going on around me. I have, like him, "an insider's heart and an outsider's mind." That has qualified me not to make a fortune, but to write books.

Digby and Us We all live in a time of social phenomena Digby never reckoned with -- of Bill Clinton as a white trash national leader; of John Kerry, a Catholic agnostic from St. Paul's School who lost the election of 2004 to G.W. Bush, a retrograde pseudo-Texan who had renounced his father's waspismo. Personalities that Baltzell might barely have imagined: Oprah Winfrey, a multicultural pop icon who is incidentally black; and the Afro-Saxon lawyer-intellectual whom we have chosen President of the United States, Barack Obama.

Baltzell finally gave up the attempt to invigorate his idea of a responsible ethnoreligious elite. He realized, and said, "what the Jews have done since World War II is the great untold story." And when he died he was preparing to undertake a book on the end of the Protestant establishment. He recognized that it had been replaced by a meritocracy based on professional performance, which, I think, is far more congruent to American social dynamics. I conclude that Baltzell's last and never completed project was an admission that his three books on the WASP establishment were a failed effort to firm up a transient power structure. I believe that Baltzell had been trying to implant in America a British notion of ruling class flavored with Tocquevillean nostalgia for a lost French aristocracy. Our nation has wholly different components from those, and he was bound to fail. Even as he struggled to make the point, he acknowledged the multi-cultural society around him, while expressing a vivid fear that multi-culturalism enshrined meant moral relativism, which would, in turn, mean an unworkable political system. On that last, he may yet prove correct. And he was surely astute in recognizing the importance in America of a professional meritocracy. If any of us, nonetheless, still yearns for an aristocracy of some kind, I would recommend Jefferson's idea of "a natural aristocracy based on talent and virtue."

Digby, although a connoisseur of clubs noted in the Social Register, never joined one, although often invited to do so. He criticized, among others, the Duquesne Club in Pittsburgh, the Links Club in New York, and the Philadelphia Club here for their obtuse and pointless exclusiveness.** But he chose to be a member of The Franklin Inn Club, and in his later years often came from home on Delancey Street to lunch among members. Our cultural, artistic, and literary atmosphere, we may dare feel, was comfortable for him. What he found here was perhaps an aristocracy without power, but a natural one in its components of talent and virtue. Sisters and brothers: let us toast Digby Baltzell -- an exemplar of our values, and an inspiration to us in the Twenty-First Century.

Theodore Friend

Theodore Friend Sr.

*To the rumor that Baltzell became a Roman Catholic before he died, a close living relative says no: he very much respected the Catholic Church, was interested in healing the breach with Episcopalians and may have attended some Catholic services. But nothing more.

**A Jewish friend, responding to my inquiries, tells me that he was admitted to The Union League in 1967, and about twenty years later became chair of the Admissions Committee. What percentage of members now are Jewish? He estimates five percent.

Sources:

Baltzell, THE PROTESTANT ESTABLISHMENT: ARISTOCRACY AND CASTE IN AMERICA , (1964)

PURITAN BOSTON AND QUAKER PHILADELPHIA, (1979)

THE PROTESTANT ESTABLISHMENT REVISITED, (1991)

Brief conversations with members of the Franklin Inn:

Daniel Hoffman, Nathan Sivin, and Arthur Solmssen.

Strange Interlude

Once a bill is signed by the President after enactment by both houses of Congress, it is normal procedure for the Executive branch to devise regulations (with the force of law) to implement its intent. Commonly, this process uncovers unintentional flaws in the statute, which is then returned to Congress for "technical" amendments. When there is a politically divided government however, suspicions can be instinctive in the Supreme Court that regulations or technical amendments might be written to conflict with the original will of Congress. Before matters get to that point, however, differences between House and Senate versions must be reconciled, and then identical reconciliations must be agreed by both houses. In the case of the Affordable Care Act, widely differing versions between the two houses were tolerated or even encouraged, but the House version was withdrawn in order to jam through an identical version of the Senate bill in its place. This did avoid the need for reconciliation. However, the maneuver was so hurried it required more than average corner-cutting, and potentially had to accept some un-removable booby traps in the surviving Senate version.

Republican Senator Scott Brown

A situation of this complexity would be difficult under any circumstances. But the Senate required a supermajority of 60 to evade a filibuster of the reconciliation. The Democrats had a bare sixty, including some with deep reservations which could only be pacified by accepting unwelcome provisions. And, it included at least two Senators in poor health. Consequently, differing Obamacare bills had been passed while there was a safe Democratic majority in the House of Representatives, but only one-vote Democratic filibuster control in the Senate. Democratic Senator Edward Kennedy then died, and an elected Republican, Scott Brown, replaced him. With Democratic Senator Richard Byrd in poor health the original plan to cherry-pick a clever administration hybrid out of differing versions in front of the House-Senate conference committee, became unfeasible, if not dangerous. About the only option seemingly available to the Democratic floor leaders was to adopt one version or the other and then achieve consent for an identical bill from the other house. The Senate version was chosen to survive and be forced through the House in a matter of hours, even though almost no Congressman had read it; and this behavior was conducted under full television coverage by C-Span. Television viewers probably did not have enough information to understand why things were being handled so roughly, but it added to a public distaste for the brutal tactics they could readily observe the leadership had been applying. Although it has been useful to blame excessive partisanship for this mess, it would not be difficult to name a dozen majority leaders in the past who might have surmounted such difficulties with more instinctive ease.

Democratic Senator Richard Byrd

The Republicans were given no face-saving consideration in any of these matters and reacted with outrage. The obedient Democrats were humiliated by the public watching their abject subjugation. As one consequence, the November 2112 election administered a heavy defeat to the Democrats, while sending a large contingent of freshmen Republican Congressmen with what they considered to be a strong public mandate to disrupt or even repeal Obamacare. Most of these new Congressmen belonged to the "Tea Party", had little experience with the "inside baseball" of Congress, and found they disliked the environment. Many of them had the inclination to repeal this one Act, followed by resigning from Congress after a single two-year term. Their fury at discovering the legislative straight-jacket they were in, must have contributed greatly to the polarization which was already notable. Naturally, the White House bureaucrats destined to write the Obamacare regulations were watching, dismayed by the prospect of claiming controversial opinions to be the "will of Congress". At this writing, it seems likely at least some regulations will come under consideration by the U.S. Supreme Court, for failing to follow the intent of Congress, for following an unconstitutional intent, or for failing to implement statutory sections of the law at all. Therefore, it would not be surprising to find some regulations which were then written, contained some "booby traps" for the Supreme Court. All of this would seem to predict epic contests between Chief Justice Roberts and President Obama, both of them constitutional strategists.

Meanwhile, many Republicans and some Democrats are calling for the President to postpone implementation, ostensibly until the enrollment computers are fully functional, but really hoping to get past the November 2014 elections. The approaching State of the Union address might have been an opportunity to blow the trumpet of compromise. But Barack Obama has proved to be an unusually stubborn person, and the prospect of facing an opposition majority in Congress does not seem to bother him. If he chooses to tough it out, perhaps we can finally learn exactly what he had in mind for the Law. If it is of any consequence to him, he had managed to get this far without fully revealing what he was trying to achieve. Almost before Senators Kennedy and Byrd died, the Tea Party gained control of the House, and Obama was forced to work his own way out of a hodge-podge.

A major tactical part of this strange interlude grew out of what lawyers and courts call "Standing". The Supreme Court, in particular, is rigid in refusing to hear a case where no one has been injured. Anxious to avoid hypothetical arguments more properly the province of the Legislative Branch, the Court insists on hearing real cases of injury by one party against another. When a new law has not yet been completely implemented, there is likely to be an interval when no one can claim he has been injured by it. That is, no one at all has "Standing". As we will see in a minute, various state governments took the position that the law injured them by invading what the Constitution declared was the province of the several states. And therefore, the states had been injured by the law, even though no insurance policies had been issued. It will be noted the Court's decision in the case confined itself to this argument. Obviously, it reserves the right to take up the case a second time, after millions of people acquire standing, and the Court can choose which argument, by which person with Standing, it chooses to hear.

Good Ol' Health Savings Accounts .

Garlands of Unexpected Good Features. So the first part of a Health Savings Account is just that, a tax-exempt savings account, obtainable in the same way you get an IRA or a Roth IRA, although a few eligible outlets were slow to take ours up. And the second combined feature was to require a high-deductible, "catastrophic", stop-loss health insurance policy -- the higher the deductible, the cheaper the premium gets. Somewhat to our surprise, the idea had the greatest appeal to younger people, who immediately recognized the value of compound interest rather than simple interest, sooner than we guessed they would. So most of the early adopters are between the ages of 25 and 40, and most of the appeal has been in the savings accounts rather than the high deductible. They are wrong about that last part. You need both to make it work.

With regard to the catastrophic coverage, which spreads the risk, the more you deposit in the account, the higher is the deductible you can afford, so you save money going either up or down, but by going up, you get into a virtuous circle and the returns can be quite surprising. The industry term for this kind of insurance is "excess major medical", which the two of us wanted to avoid because of its implication it was somehow frivolous or unnecessary, when in fact it is central to the whole idea. Linked together, the two parts enhanced each other and produced results beyond the power of either, alone. The savings account was first envisioned to cover the deductible, but nowadays it also commonly attaches a special debit card to purchase relatively inexpensive outpatient and prescription costs without a lot of insurance processing and delay. That led to further administrative savings to the subscriber if he shopped frugally for optimum proportions of deductible insurance. Right now, it's a little uncertain what the current Administration will permit in the way of catastrophic health insurance, so, unfortunately, it is just about impossible to give concrete examples of what the ultimate cost will prove to be. But we do know that in the old days, a $25,000 deductible was available for $100 a year. Nowadays, a $1000 premium is more likely. When we get to explaining first year and last year of life insurance, it will become clear this premium can be appreciably reduced, once the marketing costs subside. We then got another surprise: a great many young people paid the deductible in cash, in order to preserve the compounding power of what they left in the account.

But while the savings account allowed someone to keep personal savings for himself, the insurance spreads the risk of an occasional heavy medical expense at what ought to be a bargain price for bare-bones insurance. You needn't spread any risk for small expenses because you control them yourself, but no one can afford some of those occasional whopper expenses. There's no reason why you couldn't set the deductible level yourself, weighing your own ability to withstand bigger risks. In practice, the actual savings were reported to approach 30% (compared with "First-dollar" health insurance), quite a pleasant additional surprise. Because of the younger age group of the early adopters, much of this saving was achieved in the out-patient area.

(Let's start using the present tense to talk about it, although right now it's hard to know what politics will permit.) So, hidden in this bland dual package are lower premiums, less administrative red tape, less moral hazard, but complete coverage. Right now, that's somewhat subject to change. It provides complete coverage in the sense that the insurance deductible can be covered by the savings account, but contains the option to be saved, invested or used for small outpatient expenses. Furthermore, the account carries over from year to year and employer to employer. So it eliminates job-lock, use-it-or-lose annoyances, and allows a healthy young person to save for his sickly old age.

In one deceptively simple feature, many of the drawbacks of conventional health insurance had been removed. The bank statement from the debit card can even do the bookkeeping. The first part of the two-part package, the savings account, creates portability between employers, opens up the possibility of compound interest on unused premiums, eliminates pre-existing conditions even as a concept, and creates a vehicle for transferring the value of being a "young invincible" forward into age ranges when the money really is likely to be needed for healthcare. Maybe some other features can be added later, but introducing an unfamiliar product is always greatly assisted by having it appear simple. The HSA only has two features, and yet they solve a dozen pre-existing problems.

To return to its history, nearly 15 million accounts have been opened, containing $24 billion. John McClaughry and I (neither of us received a penny for any part of this) were seeking a way to provide a tax exemption to match the one which employees of big business get when the employer buys insurance for them. That is, Henry Kaiser inspired us to do it, but at the last moment, someone slipped in a clause prohibiting the HSA from paying the premium. That alone remains undone, of the plan to restore tax equity to health insurance premiums. It should be reinstated. Although we got the general tax-free savings idea from Bill Roth, we did him one better by giving a deduction at both ends, provided only -- you must spend the money on healthcare to get the second tax relief. An additional novelty at that time was a high deductible, which permits a "share the risk" feature unique to all insurance, but invisibly limits it too expensive items, consequently hospital items. It wasn't the original idea, but it turns out you get spread-the-risk and limits to out-of-pocket patient costs in the same package. The absolute delight in discovering these features, one by one, is surely a major reason for such sales success without much marketing.

Volume control versus Price Control in Helpless Patients.We did know of a third automatic advantage, not fully exploited so far: it seems possible the hateful DRG system (with its codes restructured) could become a useful tool for dealing with a major flaw in the Medicare system. Professional peer review has become pretty good at controlling the volume of inpatient services, but prices still escape effective control. No amount of volume control can, alone, address the price issue. Controlling vital services for helpless people is a delicate matter.
Quite a few of those inpatient services match (or contain) identical items in the outpatient area. The outpatient area faces outside competition from other hospitals, drugstores or vendors, as the inpatients do not. Instead of letting helpless inpatients generate unlimited prices for the outpatients, why not let competition in the outpatient area define standards of prices for helpless inpatient captives? Outpatients and inpatients overlap in the ingredient components, considerably more than most people suppose. Inpatients may have higher overhead because of the need to supply their needs at all hours, but a standard extra markup around 10% ought to take care of that. No doubt some services are unique to the inpatient area, but a relative value scale is then easily constructed, whereby unique costs are linked to equal-cost services which are exposed to competition. Ultimately, provable relationships to market prices might even discipline big payers demanding unwarranted discounts. This last is a deal breaker, provoking suspicions of abused power by a fiduciary. The government in the form of Medicaid is often the worst offender, so we need not imagine laws alone will prevent discounts so long as law enforcement remains crippled. Every business school teaches that discounts below cost are the path to bankruptcy, but business schools have apparently not had enough experience with governments to suggest an effective remedy.

Other than two variations (double tax deductions, and incentives if used for health care), a Roth IRA would be nearly the same as an HSA, with independently purchased Catastrophic backup. We do need some workable standard for out-of-pocket limits, but the assured presence of low-cost, high-deductible insurance provides security for another needed feature :

Using individual accounts with year-to-year rollover , we could strengthen the notion of frugal young people pre-paying the healthcare costs of their own old age. To make that complete, we need permanent insurance, not term insurance.

For all we knew, there weren't any frugal young people, but we were certainly pleasantly surprised. And catastrophic insurance added the ability to share the opportunity of that feature -- subsidizing the poor at bearable prices. As we will shortly see, it also offers an incentive to save for retirement. Think of it: almost nobody can afford a million-dollar medical bill, but almost everybody can afford low premiums. Catastrophic coverage offers the only chance I know, of approaching both goals at once. And it offers the fall-back, that if you are lucky and don't get sick, you can use it for your retirement.

As the only physician in the room, I also pointed out another pretty gruesome fact: either people end their lives have a lot of sicknesses, or they end up paying for a protracted old age. Only infrequently, do real people encounter both problems. It can happen of course; breaking a hip after long confinement in bed would be an example.

People end their lives with sickness, or else they must pay for protracted old age. {bottom quote}

Still More Good Features. Including these self-canceling needs in a single package allowed some flexibility between them -- something badly needed for a century. We cannot go on passing a new regulation for every quirk of fate; a good program must allow some latitude. Extended longevity tends to be hereditary, and so separate policies (sickness care and long-term care) are more expensive individually than the two combined because the patient can out-guess an insurance company. Health Savings Accounts balance an incentive to save for one's own future health costs "at the front end" with reasonable cost limitations "at the time of later service", even though two time periods are decades apart. That's obviously superior to just increase the sickness subsidy at the back end, because, among other things, the patient will later have even more clues about his impending future. If cost reduction goes too far at either end, it amounts to an incentive to spend carelessly. Saving becomes fruitless.

A tax deduction is a tax deduction, but this one has two: An incentive to save, and a later option to spend the savings on either healthcare or retirement. That's nearly specific enough. Furthermore, it offers a choice between saving preferences -- you can have interest-bearing savings accounts, or you can invest in the stock market, or a mixture of both. The HSA automatically converts to a regular IRA (for retirement) at age 66 when Medicare appears; that should be optional for all health insurance, but isn't. The IRA up in Canada includes both front and back features, but in the United States the HSA is the only savings vehicle to have dual deductions, so it's more flexible. As the finances of Medicare become shaky, it may be time to provide additional alternatives. At least, we ought to consider extending age 66 to a lifetime coverage option.

This harnessing of two familiar approaches makes a deceptively simple package which ought to be considered in other environments, unconnected with medical care. In most public policy proposals, the deeper you dig, the more problems you turn up. In this one, we found the proposal already had hidden answers to most concerns we could discover. It's possible to fall in love with an idea that does that for you. It lets you sleep at night, secure in the knowledge you aren't mucking things up for people.

Yet another surprise. Overall, the Affordable Care Act has probably helped sales of HSAs, since all four "metal" plans of the ACA contain high deductibles, serving in a (rather over-priced) Catastrophic role. This may be a way of covering the bets in a confusing situation. The ACA is a needlessly expensive way to get high-deductible coverage because it pays for so many subsidies. Frankly, it baffles me why subsidies swamp the costs of Obamacare but are made unworkable for HSAs. Many of the details of the subsidies are obscure, including their constitutionality, so we have to set this aside for the moment.

One good motto is don't knock the competition, but we must comment on a few things. The Bronze plan is the cheapest, therefore the best choice for those who choose to go this way. But uncomplicated, plain, indemnity high-deductible, would be even cheaper if its status got clarified. The good part is, the current rapid spread of high deductibles suggests mandatory-coverage laws may, in time, slowly go away. At first, the ACA looked like a bundle of mandatory coverages, all made mandatory at once. But they may be learning a few basic lessons as they go. Mandatory benefits are an example of mixing fixed indemnity with service benefits, with the usual dangerous outcome. Like many dual-option systems, they create loopholes. The HSA seems to avoid this issue by effectively being two semi-independent plans, for two separate constituencies -- who are the same people at different ages. Once more, we didn't think of it, the features just emerged from the plan.

That's about as concise a summary of Health Savings Accounts as can be made without getting short of breath. But of course, there is more to it, particularly as it affects the poor. For example, there is an annual limit to deposits in the Health Savings Account of $3350 per person, and further deposits may not be added after age 65. They can be "rolled over" into regular HSAs when the individual gets Medicare coverage and supposedly has no further financial needs. So plenty of people have health care, but can barely support their retirement. These plans are absolutely not exclusively attractive to rich people, but it must be admitted, poor people start with such small accounts that companies can't operate profitably unless the client sticks with them for a long time. If people possibly can, they should scrape together at least one $3300 maximum payment to get a running start.

The problems of poor people can nevertheless be eased, within the limits of the plan's design. Since people will be of different ages when they start an HSA, it might be better to set lifetime limits, or possibly five-year limits, to deposits, rather than yearly ones. Some occupations have great volatility in earnings, and sometimes a health problem is the cause of it. To reduce gaming the system, perhaps the individual should be permitted to choose between yearly and multi-year limits, but not use both simultaneously. As long as the self-employed are discriminated against in tax exemptions, that point could certainly be modified. There remains only one major flaw, which we propose should be fixed:

Proposal 6: Congress should permit the individual's HSA-associated Catastrophic health insurance premiums to be paid, tax-exempt, by Health Savings Accounts, until such time as elimination of the present tax exemption for employer-based insurance is accomplished by other means.

Subsidies for the Poor? Here's my position. If poor people could get subsidies for HSA to the same degree the Affordable Care Act subsidizes them, Health Savings Accounts should prove at least as popular with poor people as the Administration plan. Mixing the private sector with the public one is always difficult. Why not make subsidies independent of the health programs? There is no point in having the poor suffer because someone prefers a different health system. Quite often, a subsidy program is mixed with a public program, in order to make its passage more attractive; that's not necessary.

Proposal 7:That health care subsidies be assigned to patients who need them, rather than attached specifically to one or another health system that happens to serve them.

Let's just skip away from all those digressions, and return to the poor in other sections. If the concern is, health care is too expensive, why in the world wouldn't everyone favor the cheapest plan around? Part of the answer, politics aside, is that young people have comparatively little illness cost, while old folks have a lot. Since Medicare, therefore, skims off the most expensive healthcare segment of the population, the fairness of any health subsidy program is difficult to assess. Evening out the tax deduction for the catastrophic portion equalizes the unfair tax deduction for self-employed and unemployed people. Perhaps the equality issue should be re-examined after each major revision since many moving parts get jostled, every time.

The government is going to have trouble affording the existing subsidy, so it may not endure, particularly at 400% of the current poverty level. But if we can subsidize one plan, we can subsidize the other, instead. The government would then be seen, and given credit for, saving a great deal -- by inducing destitute people to use HSA as an alternative option, equally subsidized by an independent subsidy agency. As for single-payer, the government for fifty years borrowed to continue Medicare deficit financing and got it to 50% universal subsidy without much notice. That's like boiling the frog too gradually to be noticed until it is too late. But suddenly expanding the 50% subsidy to the whole country at once, would definitely be noticed. Extending such levels to the whole country should anyway be buttressed with accurate cost data. Administrative cost savings are just a smoke screen. Total costs are the real cost. Other people also point out Medicare was financed after we had won some wars, but now we seem to be losing wars.

Philadelphia Reflections

The musings of a physician who served the community for over six decades

Obituary

George R. Fisher, III, M.D.

Perpetual Fire Insurance

Health Maintenance Organizations, Reconsidered

TOAST TO E. DIGBY BALTZELL (1915-1996)

Strange Interlude

Good Ol' Health Savings Accounts .