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.
News reports began to surface that big business was talking to Democrats in the White House
about major revisions in the national health delivery system. That in itself was news, because big business normally forbids its employees to talk with regulators, and does not commonly welcome any new regulations. But the Clinton Administration was looking for political allies, while the business community was willing to examine proposals to lighten the burden of employer-based health insurance. The discussions soon probed whether a common system might reduce government costs of Medicare and Medicaid, and simultaneously reduce the costs of employer-paid health insurance. For years, big business had been suspicious that the health community had somehow forced employers to pay an unfairly large share of other people's health costs, through some arcane manipulation of hospital cost accounting. Their term was cost shifting.
The administrators of government programs believed the same thing was happening to them. Since the only group left to benefit were uninsured, the arithmetic was somehow wrong. A 7% population group, most of whom are young and healthy, could not account for annual premium jumps far in excess of the cost of living, occasionally as much as 30% in one year. In both governmental and business minds, the main beneficiaries of cost-shifting must be the hospitals themselves, and the doctors who control them. Somehow, it seems not to have occurred to them that this news was brought to them by their fiscal agents, the health insurance companies, and was therefore likely slanted to avoid attention to middle-man costs. Whenever major negotiations are to be held, CEOs and top politicians take over to make the deals, necessarily basing their judgments on filtered information. Since this is a familiar situation, they employ high-priced consultants.
Clark Havighurst
The five hundred secret members of Mrs. Clinton's task force were willing to listen to the ideas of anyone who had political clout, especially staff members of Congressional committee chairmen. But these people had been struggling with the problem for fifty years to no avail, so the emphasis had to be on change, on big new ideas. Universities and think tanks were especially welcome to comment, and
Clark Havighurst was particularly influential. But there had to be some kind of track record, some practical experience on which to base such an enormous national initiative. The best available model was the Health Maintenance Organization (HMO), whose most famous proponent was Paul Ellwood, a former midwestern pediatric neurologist who had gravitated into health insurance consulting. Ellwood had a vacation home in Jackson Hole, Wyoming, where he then gathered the non-government component of this movement into his front parlor. Insurance companies, human resources officials, academics, and in later stages the news media, were given the Word, an opportunity to criticize, and an opportunity to have their views coordinated with the government group in Washington. There was a rough division of labor, establishing general regions of dominance; but ultimately, the two components intended to fit together in a unified health system for the whole country, bar none. The business community began to see that inevitably, in that case, the final overarching decisions would be made in Congress.
The present state of healthcare legislation is, to put it delicately, immature. Both Health Savings Accounts and the Affordable Care Act are the law of the land, but the Obama Administration defiantly slipped in some regulations, and quietly slipped in others, which have no precise authorization in the law. Everything may claim to be mandatory, but until enforcement begins, neither enforcement nor appeal to the Supreme Court about constitutionality seems completely feasible. When no one has been injured, no one has "standing" in the eyes of the courts.
Funding the Deductible. For example, every one of the governmental "metal" plans has at least a $1250 front-end deductible, going up to $6300 for full coverage. Meanwhile, non-government health insurance is rapidly replacing copay with high deductibles, too. (Co-pay is the main cause of supplemental insurance, a doubling of administrative burden.) Unless a person is eligible for the subsidy, this mandatory large deductible makes the insurance hard to use unless the individual has saved up some cash for his deductible, somewhere else. So why not provide a tax incentive to have the deductible in escrow? At the moment, Health Savings Accounts are the only feasible approach to this goal, but that does not exactly mean they have been authorized to do so since double coverage is more or less frowned upon. The deductible means nothing until you get sick, so Obamacare gave itself a few years to figure this out, but the public is apparently in jeopardy if it tries to invent a workaround. It begins to look as though the voters may not give the originators of this plan enough time in office to see this as a problem they must address. So, if this is going to be everybody's problem, why not see if the Health Savings Account can offer to do it. By doing so, the individual apparently must drop his existing insurance, so go figure.
By accident or by design,
All Obamacare policy choices have high deductibles.
The Bronze Plan is Cheapest
People who have no illnesses, naturally have little present concern with ambiguities in health insurance. But health insurance will matter as soon as illness appears. Therefore, the present state of limbo will increasingly be of concern to more people. Seemingly, there is a race between the three branches of government to start an action. Either a compromise must be reached between the Executive and Legislative branches, or else the Courts will be forced to intervene by some injured person. Curiously, the only Justice to express displeasure with the present Constitution is Ruth Ginsburg, whose two cancers make her likely to be the next Justice to retire.
A piggy-bank for Millennials. Whatever someone may think of Obamacare, the front-end deductibles provide a pretty substantial incentive to maintain at least $1250 per person cash reserve somewhere, and an HSA would be just a wonderful place to keep it. If that is somehow blocked, an IRA would be almost as satisfactory. If Congress addresses the matter, an IRA could later add a feature to roll over the deductible from such IRAs to HSAs. If the individual avoids spending what is in the HSA, it eventually will revert to an IRA on attaining Medicare eligibility, anyway. Calculating a 10% investment return, age 25, and assuming no medical expenses, it might then have grown to $51,000 taxable, or somewhat less if lower interest rates are assumed. For someone who stays healthy, its minimum distribution as an IRA at age 65 would start paying a taxable retirement income of over $775 a year. That's pretty good for an investment of $1250. Obviously, everybody older than 25 gets less, but in no case does anyone get less than the $1250 he/she put in, just to cover a possible deductible. The issue of the high investment return is taken up in Section Four. As will then be seen, there are two issues: whether such a return can be safe and consistent; and whether hidden fees will undermine the return.
It's true you can't spend the same money twice. If the fund is depleted by spending for a deductible, it must be promptly and fully replaced to keep the fund growing. However, Aetna studied and GAO confirmed, that only 50% of enrollees in employer-sponsored HRAs withdrew any of their funds (which might have been used for outpatient as well as high-deductible purposes). Apparently, these clients were more anxious to preserve the tax shelter, than to protect their health, which is a slant I hadn't considered. This was true, even though the employers' efforts to enhance the compound income were not particularly strenuous. In a sense, it is a flattering sidelight on the frugality of many Americans. But the power of compound interest lies in re-investing the profits, so reasonably prompt restoration of the enhanced principal would not materially reduce the final outcome, just so long as internal profits remained untouched. It would be fairly simple to impose this requirement, creating a distinction between "balance" and "available balance", but doing things for people's own good, is always a questionable adventure.
We mentioned earlier, Roger G. Ibbotson, Professor of Finance at Yale School of Management has published a book with Rex A. Sinquefield called Stocks, Bonds, Bills and Inflation. It's a book of data, displaying the return of each major investment class since 1926, the first year enough data was available. A diversified portfolio of small stocks would have returned 12.5% from 1926 to 2014, about ninety years. A portfolio of large American companies would have returned 10.2% through a period including two major stock market crashes, a dozen small crashes, one or two World Wars hot and cold, and half a dozen smaller wars involving the USA. And even including one nuclear war, except it wasn't dropped on us. The total combined American stock market experience, large, medium and small, is not displayed by Ibbotson but can be estimated as roughly yielding about 11% total return. Past experience is not a guarantee of future performance, but it's the best predictor anyone can use. The supply of small-cap stocks is probably a limiting factor. As we will see, your money earns 11%, but that isn't necessarily how much its owner will earn. But inflation throughout the period remained close to 3%. In this sense, the income net of inflation was never higher than 9%, so we have to presume 9% sets a theoretical limit to what can be achieved by passive investment, even after heroic efforts to reduce middle-man costs. Most of our estimates are based on 6.5%, and most investment managers produce less than that. Nevertheless, very substantial program gains are possible in every tenth of a percentage point which can be further squeezed out. The next candidate for streamlining cost is the Catastrophic insurance premium.
Catastrophic insurance has not been popular for many decades, so presumably, there is room for competition to reduce premiums, marketing costs, profit margins, and other conventional competitive tools. The reimbursement to hospitals has suffered from favoritism directed toward some of its client corporation groups, who indirectly force Catastrophic to absorb some of their costs. And finally, there is likely to be overlapping provision for the same costs in a year-to-year system, which might be wrung out by five-year, ten-year or even lifetime policies. One can see potential economies on every side, but they will not come easily. In the long run, a perfect system might generate the revenue equivalent of 10.5% as a top limit instead of 9%. As everybody came up to speed, the potential is there for easily managing what might now be borderline achievable results. In fifteen years, that is. In the meantime, we will have to be satisfied with less ambitious projections for our present approach of term insurance.
So, in the meantime, we take things in a different direction, based on the whole-life insurance model. But one point may not be so clear: the Savings Account part of HSA is already lifetime, in the sense of rolling over and accumulating after-tax income for the rest of life. So for that matter, Catastrophic high-deductible insurance would be an easy next step, requiring only some adjustment of the present unfortunate tendency to assume an equivalence between "mandatory" and "exclusively mandatory". Money is money, and the courts will have to decide what sort of entirely fungible money is satisfactory for meeting minimum, maximum or any other coverage requirements. Since the "metals" plans all have high deductibles, but also have unduly high premiums, it seems likely the idea was to force insurance premiums to cover the subsidies for the uninsured. Such confusions of language and intent are ordinarily corrected by technical amendments. At age 66, right as it now is, every HSA turns into an IRA for retirement purposes. But up until age 65, it can be used for medical expenses, getting a second tax deduction. We are close enough so that changes to enable a whole-life approach are imaginable, but not yet feasible.
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.
Four ways should be mentioned: Debit cards for outpatient care, Diagnosis pre-payment for hospital care, Transfers from escrow, and Gifts for specified purposes. The comments which follow apply to regular, old, single-year HSAs. The multi-year variety has more similarity to insurance than to retail banking and probably would favor the "cash balance" approach used to withdraw money from whole-life insurance. In the long run, that would probably lead to lower costs, but actual retail experience does produce a different culture.
Special Debit Cards, from the Health Savings Account, for Outpatient care and Insurance Deductibles. Bank debit cards are cheaper than Credit cards, because unpaid credit card payments are a loan, whereas the money is already in the bank for a debit card. It could be argued credit cards are a little safer than debit cards, because "possession is nine points of the law". Sometimes pressure has to be applied to banks or they won't accept debit cards with small balances. Somehow, the banks must be made to see that you start with a small account and only later build up to a big one. So it's probably fair, for them to insist on some proof 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. Even better would be a family account with a $6000 deductible, which probably gets to the $10,000 threshold in less than two years. That's difficult for little children and poor people, however, so some way ought to be devised to have family accounts for children. At the moment, you just have to shop around, that's all. Unfortunately, the tendency of banks to merge into bigger entities headquartered in another city leads to powerlessness at the local level.
After negotiating that hurdle, you should pay your medical outpatient bills with the debit card, although we advise paying out of some other account when you can, so the balance can more quickly build up to a level where the bank allows more latitude. Remember this: the only practical difference between a Health Savings Account and an ordinary IRA, is that medical expenses are tax-exempted when paid with money proven to come from an HSA. Both debit and credit cards are tax-sheltered for deposits, and both (in normal economic times) internally generate income, un-taxed. If you can scrape together $6000, you are completely covered from Obamacare deductibles, and since co-payment plans are to be avoided, an HSA with Catastrophic Bronze plan is your present 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. The bronze plan is thus easier to get, but harder and more expensive to use, and carries a political risk of changing rules with political motives. Another curiosity is that big banks tend to be more customer-friendly than small ones, although that may well be temporary. The tendency of traditional HSAs would be to act like banks: checking accounts with reinsurance in the background for emergencies. The multi-year approach would probably behave like insurance with occasional withdrawal privileges, very likely treating cash withdrawals as a nuisance which increases costs. Their experience is with "cash balances" which are somewhat smaller than true balances, and a preference for big-ticket hospital payments.
There are some other important things to say about outpatient vs. inpatient care, but first, it seems best to describe how inpatient care is envisioned to work in this system, before returning to the tension between one-year and multi-year approaches. Increasing ease of use might create the problem of making it a little too easy to spend money foolishly.
Payment by Diagnosis Bundles, for Inpatient care. In 1983 a law was included as a largely unnoticed section of the annual Budget Reconciliation Act, which nevertheless later proved to have a huge effect on the hospital financing arrangement. The proposal was to stop paying for Medicare inpatients on the basis of a bill for itemized services, but rather to pay a lump sum based on each patient's elaborated diagnosis. The argument was accepted that most cases of a given diagnosis were pretty much the same, so small variations soon average out. Such a casual approach to the complexity was justified by arguing any patient sick enough to be in a hospital bed, was too overwhelmed by his frightening situation to dispute what was done to him. Market mechanisms, in short, were futile is situations with such imbalances of power. Consequently, why waste money on accounting systems to arrive at prices which were actually arbitrary.
This overly simple argument prevailed in a Congress desperate about relentless cost increases. Misgivings that the hospital accounting system was a large part of its administrative information system, were brushed aside. To the extent such objections were valid, they could be addressed later. In retrospect, it can be seen the administrative and medical parts of a hospital act largely independently of each other, communicating through prices as a sort of abbreviated language. The administrative mission of bottom-line efficiency thus became even more insulated from those who saw patient satisfaction as far more important. In fact, the unresisted expedient emerged, for prices of the DRG ( diagnosis "related" groupings) to migrate toward a 2% profit margin on the bottom line, no matter how delicate the medical issues happened to be. You might suppose anyone could see a 2% profit margin was unsustainable during a 2% inflation, but normal hospital behavior is to seek uncomplaining workarounds.
The hospitals might have rebelled, or might have collapsed. Instead, they just accepted 2% for inpatients as additional administrative nonsense and set about adjusting the cost-accounting to aim for 15% profit margin on the Emergency Room, and 30% profit on outpatient services. Cost shifting of established cost accounting was difficult to achieve at first, so Emergency rooms were enlarged, and much-expanded outpatient facilities were built, requiring hospitals to purchase physician practices to keep them filled. The entire healthcare system was put under strain, and hardball became the game of the day. New lifesaving drugs were priced at $1000 per pill, less expensive institutions were merged out of existence, the office practice of medicine was in turmoil, and a year in business school could make someone a millionaire if he could appear calm in the midst of such confusion.
I tell this story to explain why, with great reluctance, I advise the management of Health Savings Accounts to base their inpatient payment system on some variation of Diagnosis Related Groups. It's a terrible system, designed for other purposes and adopted for hospital billing by Congressmen. It does protect the paying agency from being fleeced, once it gets past negotiated rebalancing of a reduced list of prices, aggregating toward a politically dictated bottom line. It chases everyone else out of attempting to understand it, with the consequence that a handful of people have brought hospitals dangerously close to quick destruction by a sudden change in the rules. Whatever it may call itself, it is a rationing system. And rationing invariably leads to shortages.
Resolving Tension Between The Two Payment Systems. Evidently, some shrewd thinking by some smart people have brought them to the ruthless conclusion that a two-class system of medical care is preferable to the way we were otherwise going. Rich people will have their way if their own health is at stake, and poor people will have their way if they exercise their votes. Both of these conclusions were correct, but they lead to Medieval monks retreating into monasteries. The cure for cancer and a few brain diseases might make monasteries unnecessary, and so would a drastic reduction in health care costs. Huge research budgets and major regimentation are big-government approaches, of willingness to accept some loss of freedom to achieve equality of outcome.
But we can't completely depend on either choice, so the remaining choice is to undermine a lot of recent culture change, by devolving back to leadership on the local level of small states and big cities. This is a small-government approach, willing to accept wider inequalities in order to find the freedom to act. Mostly using the licensing power, the competition will reappear if retirement villages and nursing homes are licensed to be hospitals. If not, nurses and pharmacists can be licensed as doctors. Some of this could become pretty brutal, and all of it leads to patchy results. But of its ability to restrain prices temporarily, there can be little doubt.
Escrow Subaccounts within HSA Accounts. Whether anything can restrain reckless spending of "found" money, is quite a different matter, however. It may be that supply and demand will balance, even if it takes generations. There is some satisfaction to be gained from watching reckless teenagers become penny-pinching millennials, but dismal reminders of improvidence will also be found in ninety-year-old millionaires marrying teen-aged blondes, further reinforced by watching the blondes run off with stable-boys. The net conclusion is that if certain portions of a Health Savings Account must be set aside for mandatory later expenses, then the money should be set aside within partitions, like an escrow account. Even that will have limits to its effectiveness, as I have noticed when trust-fund babies in my practice worked around the restraints their grandfather's lawyer took care to put in place.
Specified Gifts to be Encouraged. Only limited restraints on spending the client's own money can ever be justified, but certain types of gifts can still be better justified than others. One of them would be the special $6000 escrow fund for deductibles and caps on out-of-pocket spending. Particularly in the early transitional years, the fund's solvency may be threatened by leads and lags, where these escrow funds could save the day. Therefore, if someone accumulates large surpluses in his account by the fortuitous conjunction of events, he should be encouraged to consider donating a $6000 escrow to one of his grandchildren or other impecunious relatives. Quite often, a prudent gift to a grandchild can lighten the burdens of his parents or other members of the family. If they wish, any number of $6000 transfers to the escrow funds of others should be encouraged.
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 restore the patient to a position of negotiating individual item prices, or be fleeced if he doesn't. Not everybody enjoys haggling over prices, but 30% is just too much of a penalty to ignore.
No Medicare, no Medicare Premiums. We assume no one wants to pay medical expenses twice, and will, therefore, want to drop Medicare if investment income is captured in lifetime Health Savings Accounts. Such a change of attitude might take twenty or more years, however. 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 in time, but the 50% subsidy may actually block it. Therefore, the benefit available for dropping Medicare would 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 might pay no further Medicare premiums. Illnesses of the elderly make up 85% of Medicare cost, but at present only contribute a quarter of Medicare revenue. 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 graduated income taxes. There might be some quirks of unfairness in this approach, but its rough outline can be seen from the size of aggregate contributions. At any one time during a transition, working-age and retirees would both benefit from about the same reduction of money, but the original 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 might well 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 increasingly pays a larger share, so the cost of the subsidy is considerably reduced. HSA seemingly makes it somewhat 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, who 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 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. Much depends on allowing individuals to drop Medicare if they wish, rather than eliminating the choice, or even poisoning it with benefits reduction. 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 as a group 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 greatly 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 must not persist unless it becomes generally proportional to market prices. We have had entirely enough talk of ten-dollar aspirin tablets and $900 toilet seats; we need to understand how such 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 insist on. 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 both its theme and its reality, ultimately enforced by fear of a revival of recent government adventures into price control. Those who resist joining must 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 their 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 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.
That outline may not be more accurate, but it displays its assumptions better. Michigan Blue Cross has calculated we calculate lifetime costs and Obamacare costs by starting with lifetime average health costs of $325,000 and subtracting Medicare. Although Medicare is reported by CMS to have average costs of $11,000 a year, for which we prefer to assume a Health Savings Account "present value" cost of $80,000 on the 65th birthday (at a 6.5% interest rate). At the same 6.5% rate, a $3300 annual deposit from age 25 to 65 (the earning years) would total $132,000 of deposits. The striking fact is, however, that Medicare alone could be pre-paid by an escrow of $150 to $350 a year, from age 26 to 65, providing it can generate 8% compounded investment income. The entire staggering cost of Medicare would hardly add any expense, within a lifecare financing system. Preliminary goals for a hypothetical average person are: To accumulate $57, 000 in the Medicare escrow fund by the age of 65, to pay off the 25-year health costs of 2.0 children per couple as a gift to them, and to pay his own relatively modest average healthcare costs from 25-45, somewhat higher costs 45-65. The Medicare goal of $57,000 is what is estimated to be what is required for a single-deposit investment fund (paid on the 65th birthday) to pay the health costs for an average person aged 65-93,(a guessed-at future average longevity), with an estimated compound investment income continuing at 8%, also guessed. Inflation is ignored, assuming revenue and expenses will inflate at the same rate. Our average consumer will have to set aside $150-350 per year from age 25 to 65, and earn 8% compounded, to do it. Different contributions at different interest rates will produce different results. We defend 8% in a later chapter.
Those who disagree with the underlying assumptions should feel free to substitute their own assumptions. The interest rate of 8% is deliberately high, in order to make room for disagreements which are higher. The upper limit of life insurance ($132,000) is set to match the HSA contribution limits of 3300 times 40, becoming hypothetically the upper bound of revenue which can ever be anticipated, and from which $150-350 is escrowed for Medicare replacement. Anticipating two children per couple and full employment from 25 to 65, this revenue effectively covers one full lifetime, from cradle to grave. Childhood illnesses and elderly disabilities notwithstanding, this is all the revenue we allow ourselves in this particular example. Quite frankly, $3000 per year for age 26-65 is the weakest part of the estimation, because it is most dependent on the general state of the economy, the number of indigent immigrations we permit, and the competition of other worthy goals for the same resources.
Let us assume that an average person can start contributing to an H.S.A. at the age of 25, even though perhaps a quarter of the population at that age are burdened with college debts, etc. and cannot. We are well aware of the Pew Foundation poll that many of those under 30 are still living with their parents, and many others have college debts. The present ceiling of $3300 annual contribution is otherwise taken as the upper boundary of what is possible for the sake of example, and theoretical deficits have to be made up from whatever surplus is created by such maximums. To plunge ahead with the example, our average person sets aside $3300, starting at age 25 toward lifetime health costs. To simplify the example, he does so whether he can afford it or not, and what he can't supply himself is provided by a subsidy or a loan. Since present law prohibits spending from the H.S.A. for health insurance premiums (this should be reconsidered by Congress, by the way), an estimated premium of $300 for his own Catastrophic insurance is taken from the set-aside, and the remainder is placed in the H.S.A., paying an estimated 8% tax-free. Within this, he eventually needs to set aside a Dependent Escrow premium (remember, this example covers lifetime expenses, even though everyone has Medicare), which for twenty years (until age 45) is zero for Medicare and available for medical gifts to children. After that, it is exclusively used for Medicare, as explained in later sections.
Health Savings Accounts are tax-exempt, and they can earn tax-free investment income. Except it isn't all it could be. Professor Ibbotson of Yale, the acknowledged expert in the long term results of investment classes, has regularly published data going back nearly a century. In spite of military and economic disasters of the worst sort, investment classes have remained remarkably steady throughout the past century and presumably will maintain the same relationships for some time to come. John Bogle of Philadelphia has translated that into index funds of investment classes, with negligible administrative costs. (Caution: Many index funds are sold with very high trading costs, typically in hidden charges when money is withdrawn. Be careful of your counterparty, particularly if he specifies the index fund, because he may limit it to one who gives kickbacks to him.) With this warning, there is a reasonably good chance of getting gross returns approaching 10% for investments in index funds of well-known American stocks, even though the typical HSA at present is yielding less. This investment income can grow to the point where it constitutes a fairly large part of the health revenue.
PIECES OF THE LIFETIME PIE
Instead of starting at birth and ending at death, this book reverses the process for financial reasons. For social and political purposes however, that may not be where further expanding the program can make the most difference. Let me explain. During the first two years of life, it seems likely excellent care would do the most enduring good. The same can be said of the last two years of life because they contain the highest proportion of mortal illness. But after the first two years, there are many decades before healthcare makes the same difference. The same is true of terminal care in reverse; it's preceded by decades of golf, bridge, and television. If we must concentrate expenditures, these four, bookend, years of a lifetime are where to do it most effectively.
There is also a big transition problem in alternative proposals, since voters will be of different ages, and the system must work without gaps. It will take decades to prove any of them have much effect. Concentrate in these four years, however, and changes will be both prompt and wide-spread, a politician's dream. Everybody has already been born, and for a long time to come, everybody will have a piece of his life behind him that he does not want to pay for. The time has passed when Lyndon Johnson could solve the transition problem by simply giving a gift of many years free coverage to most of the new entrants to his system. So, although it will probably spook a number of old folks just to hear the discussion, let's begin with Last Year of Life Coverage, where the data is most accurate. Two years may be a little safer. Next, for political reasons, we would jump to First Two Years of Life coverage. If it is planned to have anything permanent, these are the two minimum goals you would start with. In our wildest dreams, after we have cured just about everything, these are the two features which would remain. Both of those apply to 100% of Americans, and in one sense would be basic coverage. Other end-games are possible, like universal health insurance, or universal good health, or universally top-notch quality care for everybody. But only the year of birth and the year of death are universal and finite. Only these two would be essential to any other scheme of healthcare reform, and therefore teach us the most. If we had to retrench, these two would be the last to disappear. If any health insurance should be universal, these four years have the strongest medical arguments. Unfortunately, right now, they seem to have the least chance of political success. Therefore, it is likely that they will be voluntary and self-pay if they are adopted at all.
Footnote:That isn't quite the case however. Since third party (insurance) payers were placed in the middle of the transaction, and after electronic computers arrived, piles of individual payment data made analysis irresistible. That approach was repeatedly discredited when everyone with a computer found out that increasing the volume of useless data never improves its lack of relevance. The watchword of the 1960s became GIGO, garbage in, garbage out. Expanding the dataset with large volumes of medical data is nevertheless a dream lingering on, eventually running up against a new stone wall. It makes no economic sense to shift the clerical data-entry burden to a physician, the most expensive employee in the system. Although the Affordable Care Act mandates something close to that, it is safely predicted we will restrain the impulse when the cost is fully appreciated. Meanwhile, the utility of just applying more reasoning to aggregate data opened up the vista of a reversed health insurance system. In a sense, this book is a product of that line of thinking; more pieces of data contribute very little, but a new concept changes everything. Unfortunately, although a radical idea can be developed in six months, it may take decades to prove it had the predicted effect.
It was expedient to leave certain phrases in the Constitution intentionally vague, but the overall design is clear enough. Just as twenty-eight sovereign European nations now struggle to form a European Union, thirteen formerly sovereign American colonies once struggled to unify for the stronger defense at a reduced cost. Intentionally or not, that created a new and unique culture, reliant on the constant shifting of power among friendly rivals. Everybody was a recent frontiersman, trusting, but suspicious. It still takes newcomers a while to get used to it.
So the primary reason for uniting thirteen colonies was for a stronger defense. As even the three Quaker colonies of New Jersey, Pennsylvania and Delaware could see, if you are strong, others will leave you alone. In time, the unification of many inconsequential behaviors created a common culture of important ones; and in time that common culture strengthened defense. At first, it seemingly made little practical difference locally whether construction standards, legal standards, language and education standards and the like were unified or not. Except, that in the aggregate, it forged a common culture.
The practice of Medicine was certainly one of those occupations where it mattered very little whether we were a unified nation. Unification of medical care offered a few benefits, but mostly it didn't matter much, right up to 1920 or so. Even then I would offer the opinion, that unification of the several states (with consequent Free Trade) only made a big difference to health insurance, and still made little difference to the rest of medical care. In fact, there are still about fifteen states with too little population density to provide comfortable actuarial soundness for health insurance, as can readily be observed in the political behavior of their U.S. Senators. Although the number of low-population states gets smaller as the population grows, there are even so perhaps only ten big states where multiple health insurance companies can effectively compete within a single state border. Quite naturally the big-state insurers expect one day to eat up the small ones. By contrast, the nation as a whole, the gigantic population entity which Obamacare seeks to address, has far too many people spread out over far too large an area, to be confident we could unify them into one single program. Dividing the country into six or seven regions would be a much safer bet. That's the real message of the failure of the Computerized Insurance Exchanges -- far too much volume. And the coming failure of the Computerized Medical Record -- with too much complexity. With unlimited money, it can be done, because diseases are disappearing and computers are improving. But why struggle so hard?
It is at least fifteen years too early, and mostly serves the interest of insurance companies, if they can survive the experience. At the same time, we are at least fifteen years away from growing the smallest states to the point where we could decentralize. It's really a situation very similar to the one John Dickinson identified, James Madison briefly acknowledged, and where Benjamin Franklin improvised a solution. In their case, it was a bicameral legislature. In the case of medical care, it could be an administrative division of revenue from the expenditure. It could be the cure of a half-dozen chronic diseases. It could be six regional Obamacare. But creating one big national insurance company during a severe financial recession is something we will be lucky to survive.
Returning to the Constitutional Convention, an additional feature was added to the tentative 1787 document to respond to protests from small component states. They objected that whatever the big-state motives might be, small states would always be dominated by populous ones with more congressmen if a unicameral Legislature is made up of congressmen elected by the population. Pennsylvania had recently had a bad experience with a unicameral legislature. So a compromise bicameral legislature (with differing electoral composition in the two houses) was added to protect small-state freedoms from big domineering neighbors. Even after the Constitution was agreed to and signed, the states in ratifying it still insisted on a Bill of Rights, especially the Tenth Amendment, elevating certain citizen prerogatives above any form of political infringement, by any kind of a majority. These particular points were "rights"; individuals were even to be insulated from their own local state government. The larger the power of government, the less they trusted it.
John Dickinson of Delaware, the smallest state, soon made the essential point abundantly clear to a startled James Madison, when he pulled him aside in a corridor of Independence Hall, and uttered words to the effect of, "Do you want a Union, or don't you?", speaking on behalf of a coalition of small states. It was probably galling to Dickinson that Madison had never really considered the matter, and went about the Constitutional Convention airing the opinion that, of course, the big states would run things. Dickinson, who had been Governor of two states at once, had observed the effect of this attitude and wasn't going to have more of it.
Delegates
Benjamin Franklin, who for over 40 years had been working on a plan for a union of thirteen colonies (since 1745, long ago producing the first American political cartoon for the Albany Conference), devised the compromise. It was essentially a bicameral legislature -- with undiminished relative power in the Senate for small states. In this backroom negotiation, it was pretty clear Franklin held the support of two powerful but mostly silent big-state delegates, Robert Morris and George Washington. These were the three men of whom it could be said, the Revolution would never have been won without each of them. In 1787 they were still the dominant figures in diplomacy, finance, and the military. All three were deeply committed to a workable Union, each for somewhat different reasons. Now that a workable Union was finally within sight, parochial squabbles about states rights were not going to be allowed to destroy their dream of unity.
And so it comes about, they gave us a Federal government with a few enumerated powers, ruling a collection of state governments with regional power over everything else. And since big-state/small-state squabbles are unending, almost any other solution to some problem repeatedly, seemed preferable to disturbing what holds it all together. On the other hand, the Industrial Revolution was beginning at about the same time, and people who recognized the power of larger markets almost immediately set about attacking state-dominated arrangements, systematically weakening them for a century, and redoubling the attack during the Progressive era at the end of the 19th Century. Attacks on what seemed like an abuse of state power, the power to retain slavery, and later the power to perpetuate white racism, were claimed to justify this attrition of states rights. The ghost of the Civil War hung over all these arguments, restraining those who pushed them too far.
However, the driving force was industrialization, with enlarged businesses pushing back against the confinement of single-state regulation within a market that was larger than that. This restlessness with confining boundaries was in turn driven by railroads and the telegraph, improving communication and enlarging markets, which offered new opportunities to dominate state governments, and when necessary the political power weakens them. One by one, industries found ways to escape state regulation, although the insurance industry was the most resistant, whereas local tradesmen like physicians found it more congenial to side with state and local governments. The 1929 crash and the Franklin Roosevelt New Deal greatly accelerated this dichotomy, as did the two World Wars and the Progressive movement from Teddy Roosevelt to Woodrow Wilson. The Founding Fathers were said to have got what they wanted, which was a continuous tension between two forces, supporting both large and small governments; with neither of them completely winning the battle.
Insurance Monopoly
The medical profession further evolved from a small town trade into a prosperous profession during the 20th century, but the practice of medicine remained comfortably local. Even junior faculty members who move between medical schools quickly come to realize their national attitudes are somewhat out of touch with local realities. For doctors, state licensure and state regulation remained quite adequate, and state-regulated health insurance companies paid generously. State-limited health insurance companies had a somewhat less comfortable time of it, but the ferocity of state-limited insurance lobbying, as exemplified by the McCarran Ferguson Act, perpetuated it. The medical profession watched uneasily as the growth of employer-paid insurance extended the power of large employers over health insurance companies beyond state boundaries, and thus in turn over what had been medical profession's kingdom, the hospitals. And the medical profession also had to watch increasing congeniality with big government extend through businesses, unions and universities, fueled by overhead allowances of federal research grants and finally in 1965, federal health insurance programs. Nobody likes his regulator, but national organizations inevitably prefer a single regulator to fifty different ones. Furthermore, everybody could see that health care suddenly had lots of money, and naturally, everybody wanted some.
There is nothing naturally inter-state about medical care -- except health insurance.
It was all very well to pretend that health care was out-growing local-state regulation, but those on the inside could uneasily watch the federal/state competition for control, with the federal government repeatedly stacking the deck more in its own favor. Aside from federal program interventions, there is still nothing naturally inter-state about medical care -- except health insurance. Doctors, hospitals, and patients all tend to remain local, but insurance can easily cross state lines if regulation permits. Even in insurance, small states have difficulty maintaining actuarial stability, driving health insurance toward one-state monopolies. With a few big-state exceptions, even most health insurance companies prefer single-state monopoly status to federal regulation because it facilitates marketing. To praise the virtues of insurance competition is fine, but if sharing the local market means struggling for adequate risk reserves, nationwide regulation will inevitably lead to domination by a few big-state insurance companies. Small-state insurers would enjoy access to a national market; but blocked from it, they need to retain a local monopoly to survive. Fleeting thought might be given to Constitutional Amendment, but there are probably always going to be enough states which consider themselves small, to block the two-thirds requirement for Amendment. Imposing nationwide uniformity by force would possibly improve standards, but uniformity is increasing rather than decreasing, so the argument is not a strong one.
To be fair about it, there was not a strong case for state regulation, either. It could have been argued that uniformity and reduced administrative costs favored central regulation over-dispersed control, because of improved efficiency; and few would have argued about it. Until the ACA insurance exchanges crashed of their own weight around the ears of hapless creators, that is, unable to do what Amazon seems to do every day, and raising quite a few embarrassing recollections. Recollections of the mess the Sherman Antitrust Act inflicted on local medical charity in Maricopa County, Arizona. Recollections of the "Spruce Goose" airplane that Howard Hughes made so big it couldn't fly. Recollections of the gigantic traffic jam strangling the District of Columbia every weekend. And, reminders that 2500 pages of legislation remain to be converted into 20,000 pages of regulations which it would take a lifetime to understand. Suddenly, let's face it, retaining state regulation of health care, or not rocking the boat, gets a lot better press. It might even work better than the national kind, especially in an environment where no one expected a perfect solution, and just about everyone had heard of the Curse of Bigness. When we first discovered that use of health insurance added 10% to the cost of health care, it had seemed like an easy place to extract 2% of the Gross Domestic Product for better things, just by streamlining administration. But after the health exchange fiasco, some people begin to wonder if 10% is just what it costs to use insurance to pay for healthcare. If that is the case, perhaps we should look at other ways of paying our bills, not just a different regulator. Nobody would pay 10% just to have his bills paid, if he understood what he was doing.
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.
