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.
Someday, books will be written about who discovered what, and sold what, to make S & P futures suddenly go up and down 300 points in ten minutes on August 17, 2007, soon followed by violent volatility in many other markets. Confusion reigned for a few days, but within a week there was general agreement about the difficulty: the "spread" of interest rates between risky loans and very safe ones had been too narrow for months, and was reverting back to normal. Risk had been mispriced; a risky loan was just as risky as it ever was, as everyone should have realized. If the risky borrower was unwilling to pay higher interest rates, why would any lender bother with him? Since this had been obvious all along, why had lenders temporarily believed otherwise, charging rates scarcely higher for dodgy loans than for well-secured ones?
Alan Greenspan
Alan Greenspan (in 1996) had called this question a conundrum, but it's getting easier to understand. The emergence of prosperity in one decade among 200 million impoverished Chinese had resulted in wealth which found its way into international markets, much like a gold rush or the discovery of oil. Sudden huge wealth often cannot be easily assimilated, hence was available to loan at cheaper rates. The globalization of world finance has vastly improved the speed of markets to absorb money gluts, but in this case, had the unfortunate effect of spreading it out into less sophisticated corners of the world economy. It particularly affected residential mortgages, which proved to be the weakest link in the chain of lending and borrowing. Ten years of low-interest rates pushed up the prices of existing homes, tempting builders to overcharge for new construction, and inexperienced buyers to pay those inflated prices with cheap mortgages. Between them, Congress and the banks had devised ways to exploit this situation, making the collapse worse when it came. The interest on home mortgages was preferentially tax deductible, so it became the favorite way to borrow. Banks made it easier to refinance at a lower rate as the spread gradually narrowed. To make it even easier, reverse mortgages converted home ownership into an ATM machine with tax deductibility. Because home prices were steadily rising, banks were willing to reduce down payments, on the assumption that home equity would soon rise to represent the amount formerly required as a down payment. As it would have, perhaps, if homeowners had not promptly drained it out the back door of reverse mortgages. Second homes became a cheaper way to have a vacation; steadily rising prices encouraged outright speculation, called flipping. Congress reinsured mortgages, eventually most of them, through FNMA, and then pressured Fannie Mae to insist on spreading the joys of home ownership to people who could not afford the no-down-payment houses they were romanced into buying. Investment banks offered to buy the mortgages from the local originating banks in order to package them into securitized bundles, which thus deprived the originating banks of any incentive to reject eager buyers, no matter how dubious their credit standing. What is more, this process provided a conduit for spreading bad credit risk into the equity markets, including the equity of the banking system itself, and creating the temptation for hedge funds to start runs on the banks in novel forms. There once was a time when customers lined up at the back door to make withdrawals in a bank run. Since investment banks obtain their deposits by borrowing wholesale, they simplified the process of starting a bank run when the speculative process reversed. Which it did on August 17, 2007, possibly not spontaneously, but certainly inevitably.
Home mortgages were once loans for thirty years; even now, they extend for many years. Homeowners stay in one house for an average of seven years. For legal reasons going back two hundred years, they are non-recourse loans, meaning the house alone is at risk to the mortgage lender, who may normally not pursue the homeowner for assets other than the foreclosure, even if the other assets are considerable. In a housing bubble, this creates a special hazard for lenders during the inevitable decline of house prices back to normal. As house prices fall, as they should and will, many homeowners will find it is cheaper to walk away from a foreclosure than to pay off the mortgage. It has been calculated that potentially as many as 50% of mortgages might eventually find themselves in this squeeze. The situation differs from a car loan, for example. Every new car is worth 20% less than the sale price, immediately after the sale. But this does not tempt car buyers to walk away from their loan, because the car loan is a recourse loan. The uncomfortable prospect is that financial reverses alone might not be the reason homeowners submit to foreclosure. If this particular antisocial behavior loses its stigma, a very large proportion of mortgages could be foreclosed on owners who are perfectly able to pay them off.
Barney Frank and Chris Dodd
For all these reasons, house prices are the main bubble in an economy overstimulated by cheap money, and mortgage financing is at the root of a banking crisis. The banking system itself is precarious because it too responded to the temptation of abundant credit at abnormally low-interest rates. The process took the form of over-leveraging in order to magnify profits in a competitive market. Greed was not the only motivation; corporate raiders in the form of Private Equity could swoop down on any company unwise enough to accumulate internal cash. The new owner would then substitute debt for cash, and the prudent company (under new management, of course) was no better off than if it had itself over-leveraged. The Federal Reserve limits commercial banks to loaning thirteen times their stockholder equity, but investment banks had the foolhardiness to borrow thirty times equity. A decline of only three percent in the value of their loans wipes them out. The Federal Reserve Bank of New York, by the way, is leveraged at over a hundred times its equity. The Fed can print money to pay its debts, of course, but the result is a falling value of the dollar in international exchange and ultimately, world inflation. No one predicts the half-way point in this decline to be sooner than two years, which means a recession lasting at least four years. The first two efforts of public officials to halt the decline, the purchase of toxic debt and direct lending to banks, have been abandoned as failures, and the Barney Frank/ Chris Dodd offer for Congress to repurchase mortgages was simply pathetic, with only two hundred responses when over two million were anticipated. If the public loses faith in the ability of the government to do anything about the matter, prices can be expected to overshoot on the downside, not just return to normal. House prices do need to decline, but slowly enough to avoid a panic. And American banks and businesses need to reduce the extent of their borrowing, but without measures which impair the ability of new businesses to make loans, or the ability of shaky businesses like the Detroit auto industry, to survive.
In closing, a word is needed to explain why the foreclosure of $100 billion of California and Florida bungalows should threaten a collapse in the trillions. Economists have fallen into the habit of equating interest rates with risk; the more risk, the higher the interest rates become. That's true, but the risk is not the only factor affecting interest rates. Since they are essentially the rent paid for the use of someone else's money, interest rates respond to the supply of money interest rates, just as supply and demand of rental housing affect rents. The flood of liquidity from developing countries into the world economy pushed interest rates down, but somehow that was taken to imply that risk had decreased. When interest rates go up again, for whatever reason, the money will effectively evaporate. The best example of this relationship is in the bond market. When interest rates go up, the principal value of existing bonds declines. With interest rates of 5% as an example, bond prices go up and down twenty times as much as the interest rate, but in the opposite direction. To repeat: when general interest rates rise, money in the economy disappears about twenty times as fast. That's a succinct description of what started to happen, when the prevailing risk premium returned to its normal higher level, on August 17, 2007.
In the case of the American Constitution, the initial problem was to induce thirteen sovereign states to surrender their hard-won independence to a voluntary union, without excessive discord. Once the summary document was ratified by the states, designing a host of transition steps became the foremost next problem. The dominant need at that moment was to prevent a victory massacre. The new Union must not humble once-sovereign states into becoming mere minorities, as Montesquieu had predicted was the fate of Republics which grew too large. Nor must the states regret and then revoke their union as Madison feared after he had been forced to agree to so many compromises. As history unfolded, America soon endured several decades of romantic near-anarchy, followed by a Civil War, two World Wars, many economic and monetary upheavals, and eventually the unknown perils of globalization. When we finally looked around, we found our Constitution had survived two centuries, while everyone else's Republic lasted less than a decade. Some of its many flaws were anticipated by wise debate, others were only corrected when they started to cause trouble. Still, many tolerable flaws were never corrected.
Great innovations command attention to their theory, but final judgments rest on the outcome.
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Benjamin Franklin advised we leave some of the details to later generations, but one might think there are permissible limits to vagueness. The Constitution says very little about the Presidency and the Judicial Branch, nothing at all about the Federal Reserve, or the bureaucracy which has since grown to astounding size in all three branches. Political parties, gerrymandering, and immigration. Of course, the Constitution also says nothing about health care or computers or the environment; perhaps it shouldn't. Or perhaps an unmentioned difficult topic is better than a misguided one. Gouverneur Morris, who actually edited the language of the Constitution, denounced it utterly during the War of 1812 and probably was already feeling uncomfortable when he refused to participate in The Federalist Papers . Madison's two best friends, John Randolph, and George Mason, attended the Convention but refused to sign its conclusions, as Patrick Henry and Thomas Jefferson almost certainly would also have done. On the other hand, Alexander Hamilton and Robert Morris came to the Convention preferring a King to a President, but in time became enthusiasts for a republic. Just where John Dickinson stood, is very hard to say. Those who wrote the Constitution often showed less veneration for its theory, than subsequent generations have expressed for its results. Understanding very little of why the Constitution works, modern Americans are content that it does so, and are fiercely reluctant about changes. The European Union is now similarly inflexible about the Peace of Westphalia (1648), suggesting that innovative Constitutions may merely amount to courageous anticipations of radically changed circumstances.
President Franklin Roosevelt
One cornerstone of the Constitution illustrates the main point. After agreeing on the separation of powers, the Convention further agreed that each separated branch must be able to defend itself. In the case of the states, their power must be carefully reduced, then someone must recognize when to stop. If the states did it themselves, it would be ideal. Therefore, after removing a few powers for exclusive use by the national government, the distinctive features of neighboring states were left to competition between them. More distant states, acting in Congress but motivated to avoid decisions which might end up cramping their own style, could set the limits. The delicate balance of separated powers was severely upset in 1937 by President Franklin Roosevelt, whose Court-packing proposal was a power play to transfer control of commerce from the states to the Executive Branch. In spite of his winning a landslide electoral victory a few months earlier, Roosevelt was humiliated and severely rebuked by the overwhelming refusal of Congress to support him in this judicial matter. The proposal to permit him to add more U.S. Supreme Court justices, one by one until he achieved a majority, was never heard again.
Taxes Disproportionately
Although some of the same issues were raised by the Obama Presidency seventy years later, other more serious issues about the regulation of interstate commerce have been slowly growing for over a century. Enforcement of rough uniformity between the states rests on the ability of citizens to move their state of residence. If a state raises its taxes disproportionately or changes its regulation to the dissatisfaction of its residents, the affected residents head toward a more benign state. However, this threat was established in a day when it required a citizen to feel so aggrieved, he might angrily sell his farm and move his family in wagons to a distant region. People who felt as strongly as that was usually motivated by feelings of religious persecution since otherwise waiting a year or two for a new election might provide a more practical remedy. However, spanning the nation by railroads in the 19th Century was followed by trucks and autos in the 20th, and then the jet airplane. While moving residence to a different state is still not a trivial decision, it is now far more easily accomplished than in the day of James Madison. A large proportion of the American population can change states in less than an hour if they must, in spite of a myriad of entanglements like driver's licenses, school enrollments, and employment contracts. The upshot of this reduction in the transportation penalty is to diminish the power of states to tax and regulate as they please. States rights are weaker since the states have less popular mandate to resist federal control. It only remains for some state grievance to become great enough to test the present power balance; we will then be able to see how far we have come.
High Gasoline Taxes of Europe
Since it was primarily the automobile which challenged states rights and states powers, it is natural to suppose some state politicians have already pondered what to do about the auto. The extraordinarily high gasoline taxes of Europe have been explained away for a century as an effort to reduce state expenditures for highways. But they might easily be motivated by a wish to retard invading armies or to restrain import imbalances without rude diplomatic conversations. But they also might, might possibly, respond to legislative hostility to the automobile, with its unwelcome threat to hanging on to local populations, banking reserves, and political power.
It helps to remember the British colonies of North America were once a maritime coastal settlement. The thirteen original states had only recently been coastal provinces, well aware of obstructions to trade which nations impose on each other. Consequently, they could readily design effective restraints to mercantilism within the new Union. Two centuries later, repeated interstate quarrels provided fresh viewpoints on old international problems. As globalization currently becomes the central revolution in trade affairs of a changing world, America is no beginner in managing the intrigues of international commerce. Or to conciliating nation states, formerly well served by nation-state principles of the Treaty of Westphalia, but this makes them all the more reluctant to give some of them up.
There are a few other ideas about the cost of medical care, which I would say are widely held, but the truth of which seems dubious. In fact, I would characterize them as misconceptions. If misconceptions are held long enough, they eventually work their way into the tax code.
Is Preventive Medicine Always and Everywhere Less Expensive?
As heads nod vigorously in support of prevention, please notice in general usage it suggests several different things. The overall implication is that small interventions for everyone are less expensive to society; less expensive, that is than large expenses for the few who get the disease. That is clearly not invariably the case, and unfortunately, in a compulsory insurance world, it may seldom be the case. The point is not that preventive care is a bad thing, because it is often a very good thing, even by far the very best thing. It's just not necessarily cheaper.
Take for example a tetanus toxoid booster, which ten years ago cost less than a dollar for the material. Recently in preparation for a vacation trip, I was charged $85 dollars by my corner drugstore, just for the material. If you do the math, $85.00 times millions of Americans is a far greater sum than the present aggregate cost of Americans actually contracting tetanus, especially following the advice to have a booster shot every ten years. This becomes more certain if one adds in the cost of administration. The vaccine is quite effective, Americans had almost no cases in the Far Eastern Theater in World War II. The British who did not vaccinate routinely had large numbers of often fatal cases. Furthermore, even if the tetanus patient survives, the disease is hideously painful. Is it better to immunize routinely? Yes, it is. Is it cheaper? I'm not entirely sure, because I have no access to the production costs of tetanus toxoid. But it certainly seems likely it isn't cheaper. Malpractice costs, which are a different issue entirely, complicate this opinion.
Better, yes. Cheaper? No.
Preventive Medicine
Something, probably malpractice liability, has transformed an effective preventive procedure from clearly cost-effective to -- probably not cheaper for a nation which no longer has horses on the streets, but still has horses on farms and ranches. This is presently mostly a malpractice liability problem for the vaccine maker, not a preventive care issue. Take another well-known example. In the case of smallpox vaccination, it is now clearly more expensive to vaccinate everyone in the world than to treat the few actual cases. The waffle currently being employed is to limit vaccination to countries where there are still a few cases, hoping thereby to eradicate the disease from the planet.
Over and over, an examination of individual vaccinations shows the answer to be: better, yes, cheaper, no; with the ultimate answer depending on accounting tricks in the calculation of cost, cost inflation because of third-party payment, and related perplexities. To be measured about it, excessive profitability of some preventive measures could act as a stimulant for finally calling off prevention, by taking on a briefly more expensive campaign to achieve final eradication. Somewhere in this issue is the whisper that "natural" gene diversity of any sort must never be totally eliminated, a viewpoint which even the diversity philosopher William James never openly extended to include virulent diseases.
Routine cervical Pap tests, routine annual physical examinations, routine colonoscopies and a host of other routines are in general open to questioning as to cost-effectiveness. The issue is likely to increase rather than go away. Much of the current denunciation of "Cadillac" health insurance plans focus on the elaborate prevention programs enjoyed by Wall Street executives, college professors, industrial unions, and other privileged health insurance classes. A more useful approach to a borderline issue might focus on removing such items from health insurance benefit packages, particularly those whose cost is subsidized, either directly or by income tax deductions. Those preventive measures which demonstrate cost-effectiveness can have their subsidy restored, or be grouped together into a category which must compete for eligible access to limited funds.
The inference is strong that unrestrained substitution of community prevention for patient treatment escalates costs rather considerably, and -- at the least -- needs to demonstrate more cost-effectiveness before subsidy is extended. While self-interest is a possibility if only physicians are consulted, total reliance on bean-counters could eliminate benevolent judgment entirely. Community cost effectiveness is a ratio, and both sides must be fairly argued. Don't forget many people quietly recognize the need for gigantic cost-shifting between age groups. Spending money on young workers to pay for shots is one way to shift the cost of elderly illness, backward to the employer they no longer work for. It can be a pretty expensive way to do it.
In the final analysis, without some form of patient participation in the cost, this issue is probably unsolvable. To launch a host of double-blind clinical trials to find out the truth will lead to answers of some sort, which will quickly be undermined by price/cost confusion, leading to increasingly futile regulation. Including preventive costs in the deductible at least allows public participation in the decisions and true balance to begin; which is to say, even universal preventive care admiration cannot be adequately assessed except in the presence of a substantial open market for the product.
Much "preventive" care is really "early detection" or "early management". That's entirely different. When the goal changes so subtly, it is often not possible to judge what is worthwhile, except by placing some price on pain and suffering. The abuse by the trial bar of the monetization of pain and suffering in the malpractice field, ought to be a gentle reminder of that. Preventive colonoscopy has clearly caused a decline in deaths from colon cancer; that's a medical judgment and a transitional one. Whether the cost of catching those cancers early was cost-effective is largely a matter of colonoscopy cost, and on digging into it, will be found to be as much an anesthesia issue as a colonoscopist one. In any event, it is not one where the opinion of insurance reviewers should be decisive. If the litigation industry moves to make an omission of prevention a new source of action, it will surely be a sign it is a past time, to caution the public about the direction of things.
Outpatient is Not Necessarily Cheaper Than Inpatient For the Same Problem. Medicare provides half of the hospital revenue; the other half is often dragged into a uniform approach. The reimbursement mostly has nothing to do with the itemized bills hospitals send and may have little to do with production costs. The DRG (Diagnosis-Related Groups) system for reimbursing hospitals for inpatients is thus not directly based on specific costs in the inpatient area. It is related to clustered diagnoses lumped into a DRG group, and then assumes overpayments will eventually balance underpayments within individual hospitals.
That last point, depending on the Law of Large Numbers, is questionable, and especially so in small hospitals. When two million diagnoses are condensed into 200 Diagnosis groups, group uniformity just has to be uneven. Reimbursement means repayment, but this interposed step often interferes with that definition. Someone in the past fifty years discovered the reimbursement step was an excellent choke point. Manipulating the reimbursement rates without changing the service is a handy place to choose winners and losers; it's largely out of sight of the people who would recognize it for what it is. Furthermore, for various DRG groups, or for all of them, it becomes possible to construct a fairly tight rationing system for inpatient costs.
The degree to which actual production costs match a particular DRG reimbursement rate is blurred by inevitable imprecision in the DRG code construction. It is impossible to squash a couple of million diagnoses into two hundred code numbers without imprecision. It works both ways, of course. The coders back at the hospital will seek weaknesses out, experimentally. A grossly generalized code is placed in the hands of hospital employees, resulting in a system which suits both sides of the transaction, but is one which ought to be abolished, on both sides, by computerizing the process. At least, computers could avoid the issue of mistranslating the doctors' English into code.
The overall outcome with Medicare is an average 2% profit margin on inpatients during a 2% national inflation. This is far too tight to expect it to come out precisely right for everybody. And in fact, inflation has averaged 3% for a century but is 1.6% right now. The Federal Reserve Chairman desperately tries to raise it, but it just won't go up. If you don't think this is a serious issue, just reflect that our gold-less currency is supported by a 2% inflation target which the Federal Reserve is proving unable to maintain.
For technical reasons, the same forced loss is not true of outpatient and emergency services, which usually use Chargemaster values. Emergency services are said to approximate 15% profit margins, and outpatient services, 30%. It is therefore difficult to believe anyone would start anywhere but the profit margin, and work backward to managing the institution. In consequence, the buyer's intermediary has stolen the pricing process from the seller. Without the need to communicate one word, prices rise to the level of available payment and then stop there. But let's not be too specific in our suspicions. Some incentive to direct patients to the emergency and outpatient areas must develop, and is acted upon in the pricing. It just doesn't have to be so confusing and so high-handed.
Any assumption by the public that outpatient care is cheaper than inpatient hospital care is likely to be quite misleading. Short of driving the hospital out of business, revenue in this system is whatever the insurance intermediary chooses to make it. There was a time when the intermediary was Blue Cross, and behind them, big business. Nowadays, it is Medicare, but Obamacare probably aspires to the turf.
Let's test the reasoning by using different data. Because hospital inpatient care is reimbursed at roughly 106% of overall cost, while hospital outpatient care is reimbursed at roughly 150%, hospitals are impelled to favor outpatient care, no matter which type of care happens to have the cheapest production cost, the best medical outcomes, or enjoys the greatest comforts. Instead, the rates and ratios are ultimately determined by magazine articles and newspaper editorials. At some level within the government, a political system responds to what it thinks is public opinion, vox populi est vox Dei. No matter what their personal feelings may be, hospital management encounters more quarrelsomeness on wages in the inpatient area, less resistance in the outpatient and home care programs. So, true costs must actually rise in the outpatient area, sooner or later, following the financial incentives. Personnel shortages follow, as does friction between hospitals and office-based physicians. The process is circular, but the origin of favoring outpatient care over inpatient care was primarily driven by some accountant reading a magazine article.
A highly similar attitude underlies the hubbub for salaried physicians rather than fee-for-service. It's a short-cut to a forty-hour week, and following that, to a doctor shortage. And following that, to enlarged medical school budgets. If anyone imagines that will save money, the reasoning is obscure.
Everybody can guess what it costs to wash a couple of sheets and buy a couple of TV dinners. Everyone fundamentally understands Society's need to transfer medical costs from the sick population to the well population. Nothing known about hotel prices justifies a 50% difference in price between inpatient and outpatient care, all else being equal. The room price mainly supports overhead costs which are unrelated to direct patient care, so those fixed costs are like migratory birds, settling to roost where it's quiet. Remember, it doesn't cost driving the system, it is now profit margins.
The Return of a Discharged Hospital Patient Within 30 Days is not Necessarily a Sign of Bad Care. Rather, it reflects the fact that hospital inpatient reimbursement is entirely based on the bulk number of admissions, not the sum of itemized ingredients. Having undermined fee for service, Medicare must resort to taxing the whole admission.
Early re-admission can, of course, be a sign of premature discharge or careless coordination with the home physician. But these issues are so remote from the basic reason for admission, that bulk punishment is unlikely to change the criticized behavior. That behavior may mean a convalescent center is convenient to a hospital, making it reasonable to move the patient without much loss of continuity of care; and treating his return to the acute facility becomes a matter of small consequence. It is also a matter of cost accounting; when you claim a hundred dollar hotel cost to be worth thousands of dollars, many distortions are inevitable. If a hospital essentially shuts down on weekends, for example, there actually might be better care available somewhere else.
Imposing a penalty for returns to the hospital post-discharge has certainly changed behavior, but it is far from clear whether institutions are better as a result. Without a detailed study of longitudinal effects and costs, this threat is no more than an untested experiment. Without access to accounting practices, doctors assume the penalty for a high re-admission rate merely affirms that hospital insurance reimbursement by DRG is solely dependent on the discharge diagnosis, therefore bears little relation to the quality of care. Given a particular diagnosis, reimbursement is totally independent of any other cost. When all you have is a hammer, everything looks like a nail to the DRG.
The legitimate reasons for re-admission to the hospital are many and varied. Collectively, they could well constitute a general attitude on the part of a particular hospital that it is reasonable to send many patients home a little early in order to achieve greater overall cost savings -- in spite of sustaining a few re-admissions. But this is somewhat beside the point. The insurance companies accept the fallacy that favoring readmission is the only way a hospital can increase reimbursement under a DRG system. This is merely a debater's trick of redefining the issue, from true cost to reimbursement amount. More or fewer tests, longer or shorter stays have no effect, but readmission can double reimbursement. Consequently, re-admission has been stigmatized as invariably signifying careless treatment, justifying a penalty reduction of overall reimbursement. This is high-handed, indeed. It would require a research project to determine which of the alleged motives is actually operational.
The Doughnut Hole: Deductibles versus Copayments. To understand why the doughnut hole is a good idea, you have to understand why copay is a flawed idea. In both cases, the purpose is to make the patient responsible for some of the cost in order to restrain abuse. As the expression goes, you want the patient to have some skin in the game. The question is how to do it; the doughnut has not been widely tried, but the copayment approach is very familiar: charge the patient 20% of the cost, in cash.
This co-pay idea finds great favor with management and labor in negotiations because the premium savings are immediately known. If the copayment is 10%, then employer cost will be decreased by 10%; if it is 50%, the cost is reduced by 50%. In midnight bargaining sessions, such simplicity is much appreciated. However, the doughnut hole was not devised to make negotiations simpler for group insurance, it was devised to inhibit reckless spending, theoretically unleashed once the initial deductible has been satisfied.
Health insurance companies also like both co-pay and doughnuts for questionable reasons. Both offer an opportunity to sell two insurance policies as two pieces of the same patient encounter, adding up to 100% coverage, but eliminating the patient's skin in the game. Doubling the marketing and administrative fees seems like an advantage only to an insurance intermediary, while it totally undermines the incentive of restraining patient overuse. In practice, having two insurances for every charge has led to mysterious delays in payment of the second one, even though they are often administered by the same company. Physicians and other providers hate the system, not only because it involves two insurance claims processes per claim, but because it often makes it impossible to calculate the residual after insurance, i.e., patient cash responsibility, until months after the service has been rendered. Patients often take this long silence to imply payment in full, and disputes with the provider are common. Long ago, older physicians warned the younger ones, "Always collect your fees while the tears are hot."
It has long been a mystery why hospital bills take so long to go through the system; at one time, protracting the interest float seemed a plausible motive. However, the persistence of delayed processing during a period of near-zero interest rates makes this motive unlikely. It now occurs to me that the reimbursement of health insurance costs by the business employer is related to corporate tax payments, and hence to the quarterly tax system. Using the puzzling model of a monthly bank statement for online reporting would have some logic, but great confusion, attached to the bank statement approach for group payment utility. But in the end, I really do not understand why health insurance reimbursement or even reporting to the patient, should take so many months, and cause so much difficulty. Recently, the major insurance companies have started to imitate banks by putting the monthly statement continuously online on the Internet. If doctors find a way to be notified, the billing cycle could be speeded up considerably, and even the deplorable custom of demanding cash in advance may abate. The intermediaries probably won't do it, so it is a business opportunity for some software company, and a minor convenience for the group billing clerk.
So, the idea of a doughnut hole was born, after empirical observation about what was owed on two levels, one for small common claims, and another for big ones. Formerly, the patient either paid cash in full or was insured in full, so arriving at the Paradise of full coverage is purchased in cash within the first deductible. Unfortunately, once that last threshold was crossed, the sky became the limit. Some way really had to be found to distinguish between extravagant over-use, and the use of highly expensive drugs, particularly those still under patent protection. The idea was generated that if the two levels of the doughnut hole were calculated from actual claims data, there might often be a clear separation of minor illnesses from major ones. Since the patient would ordinarily be uncertain how far he was from triggering the doughnut hole, the restraint of abuse might carry over, even into areas where the facts were not as feared.
It is too early to judge the relative effectiveness of the two different patient-responsibility approaches, but it is not too early to watch politicians pander to confusion caused by an innovative but unfamiliar approach, while the insurance administrators simplify their own task by applying a general rule, instead of tailoring it to the service or drug. And by the way, the patients who complain so bitterly about a novel insurance innovation, are deprived by the donut hole of a way to maintain "first-dollar" coverage, which is a major cause of the cost inflations they also complain so much about. Some people think they can fix any problem just by loudly complaining about it. Perhaps, in a politicized situation, it works; but it doesn't fool anyone.
Plan Design. The insurance industry, particularly the actuaries working in that area, have long and sophisticated experience with the considerations leading to upper and lower limits, exclusions and exceptions. Legislative committees would be wise to solicit advice on these matters, which ordinarily have little political content. However, the advisers from the insurance world have an eye to bidding on later contracts to advise and administer these plans. They are not immune to the temptation to advise the inclusion of provisions which invisibly slant the contract toward a particular bidder, and failing that, they look for ways to make things easier, or more profitable, for whichever insurance company does get the contract. The doughnut hole is a recent example of these incentives in action; no member of any congressional committee was able to explain the doughnut for a television audience, so it was ridiculed. The outcome has been a race between politicians to see who could most quickly figure out a way to reduce the size of the hole. The idea that the size of the hole was intended to be an automatic adjustment to experience, seems to have been totally lost in the shuffle. Asking industry experts for advice is fine, but it would be well to ask for such advice from several other sources, too.
Fee-for-Service Billing. In recent years, a number of my colleagues have taken up the idea that fee-for-service billing is a bad thing, possibly the root of all evil. Just about everyone who says this, is himself working for a salary; and I suspect it is a pre-fabricated argument to justify that method of payment. The obvious retort is that if you do more work, you ought to be paid more. The pre-fabricated Q and A goes on to reply, this is how doctors "game" the system, by embroidering a little. I suppose that is occasionally the case, but the conversation seems so stereotyped, I take it to be a soft-spoken way of accusing me of being a crook, so I usually explode with some ill-considered counter-attack. My basic position is that the patient has considerable responsibility to act protectively on his own behalf. That is unfortunately often undermined by excessive or poorly-designed health insurance. Nobody washes a rental car, because that's considered to be the responsibility of the car rental agency. A more serious flaw in the argument that we should eliminate the fee for service, was taught me in Canada.
When Canada adopted socialized medicine, I was asked to go there by my medical society, to see what it was all about. That put me in conversation with a number of Canadian hospital administrators, and the conversation skipped around among common topics. Since I was interested in cost-accounting as the source of much of our problems, I asked how they managed. Well, as soon as paying for hospital care became a provincial responsibility, they stopped preparing itemized bills. Consequently, it immediately became impossible to tell how much anything cost. The administrator knew what he bought, and he paid the bills for the hospital. But how much was spent on gall bladder surgery or obstetrics, he wouldn't be in a position to know.
So I took up the same subject with the Canadian doctors, who reported the same problem in a different form. Given a choice of surgical treatment or a medical one for the same condition, they simply did not know which one was cheaper. After a while, the hospital charges were abandoned as a method of telling what costs more, and eventually, no effort was made to determine comparative prices at all. There's no sense in an American getting smug about this, because manipulation of the DRG soon divorced hospital billing charges from having any relation to underlying costs, and American doctors soon gave up any effort to use billing as a guide to treatment choices. We organize task forces to generate "typical" bills from time to time, but these standardized cost analyses are a crude and expensive substitute for the immediacy of a particular patient's bill.
My friends in the Legal Profession make a sort of similar complaint. The advent of cheap computers created the concept of "billable hours", in which some fictional average price is fixed to a two-minute phone consultation. In the old days, my friends tell me, they always would have a conference with the client, just before sending a bill. The client was asked how much he thought the services were worth to him, and often the figure was higher than the actual bill. In the cases where the conjectured price was lower, the attorney had an opportunity to explain the cleverness of his maneuvers, or the time-consuming effort required to develop the evidence. A senior attorney told me that never in his life did he send a bill for more than the client agreed to pay, and he was a happier man for it. Naturally, the bills were higher when the attorney won the case than when he lost it, which is definitely not the case when a hospital is unsuccessful in a cancer cure. Similarly, you might think bills would be higher if the patient lived than if he died, but income maximization always takes the higher choice. So the absence of this face-to-face discussion is a regrettable one in medical care, as well.
Let's be clear about our role. It is to suggest four or five main ways to rearrange health financing, so enormous sums are available to reduce health costs. Once the money is available, only Congress can decide what to do with it. In fact, my prediction is anything else would be brushed aside as an amateur suggestion. Nevertheless, I have given the matter some thought, and offer my ideas. They begin with leaving the practice of medicine alone, on the grounds that the public will not support any major intrusion into what they consider their private affairs. And my suggestions end with the opinion a change such as I propose can only be done once in a century. So please get it right if you do it.
Starting Young, and Playing With Numbers. The power of compounding is brought out by starting really young, possibly even at birth with a gift from parents. At 10%, money doubles in seven years; at 7%, it doubles in ten. In 65 years there are eight doublings at 10%, six doublings at 7%. The real power of compounding comes at the end of the series. The last three doublings were added in the past century. It makes them eight times as valuable to us as to our grandparents. So, something slow, gradual and unnoticed, creeps up on us before opening an entirely new set of possibilities.
Eight times as valuable to us as to our grandparents.
Three doublings added.
We divide the roughly 85 years of life into three compartments: (1) Children from birth to age 25, whose health expenses are a debt they owe their parents. (2) Working people, from age 25 to 65, who essentially generate all the wealth of society. (3) And over 65, when working income ceases, and living costs are paid from savings generated earlier in life. There are forty years to earn, preceded by 25 years of being supported, and followed by 20 years of living on savings. That's why so much of this book pivots around ages 25, 65, and 85. If you learn it from your parents, you get a head start. If you must learn it for yourself, mostly it's all gone before you react.
Learn from your elders, get a Head Start.
If You Learn for Yourself, mostly it's gone.
Working backward from $80,000 at age 65, you need to start with only $200 at birth with 10% working for you or $1,000 at birth with 7%. What's the significance? If you make a lump-sum payment of $80,000 on your 65th birthday, the lump sum generates what we now assume is the lifetime average cost of Medicare. Translating $200 at birth into $80,000 in 65 years is definitely possible. Figuring out how to translate the money earned into what the average person will spend 65 years later, is too complicated to be precise, but we have learned you always underestimate the change in such a long period. We always underestimate the change, but the cost of it cannot exceed the money we will have. Paradoxically, that may be a little easier. Remember, the stock market averaged 12.7% during the past century, but here we only project a 10% return to an investor, therefore few would dispute results of this financial magnitude are a reasonable goal. I'm not entirely sure what we are predicting, but perhaps it is an invisible limit to the rate of inflation a viable economy can withstand. No gold or silver standard, but perhaps the velocity of money standard. Maintaining a future goal of 3% inflation during the next century, for example, seems entirely within the power of one person, the Chairman of the Federal Reserve. He may fail, and the world economy flies apart, but if it holds together, something like this velocity will have to continue, even if we all are commuting to Jupiter for lunch. The final conclusion would be unchanged: a comparatively minor investment at birth could be fairly comfortably projected to pay for average Medicare costs, half a century from now. You might even get all of Medicare for a single $200 payment; now that's really a bargain. Even $1100 (at 7%) is still a trivial price for retirement with unlimited health care. But remember, we are not promising to pay for it all, just some big chunk that presently isn't paid for. During major inflations such as Germany, Russia and China had, the individual nation disintegrates but eventually catches back up with the rest of the world. Our whole financial system seems to have been stabilized by some such notion for the past four or five centuries.
The Debts of Our Parents. We started by showing it would likely be feasible to assemble $80,000 by the 65th birthday, and that much money on average, would likely pay for Medicare because the relative values will not change unrecognizably in thirty years. Remember, Medicare is spending $11,000 a year on the average Medicare recipient, for roughly 20 years, or roughly $200,000 during a 20-year lifetime after 65. If you start with a nest egg, sickness will slowly wear it down. At the same time, you do make a certain return on your nest egg. The goal is to build the egg up when you are working, so you have something to spare between the interest you make on your nest egg, and the annual cost of the illness. Eventually, the sicknesses win the race, but your task was to stretch things out as long as you can. Eventually, a few people will have to resort to dipping into the last-year-of-life fund (see below), and if things go badly wrong maybe we can only pay fifty cents on the dollar. There is this contingency provision, but it will not be infinite.
Let's examine the concern, which isn't entirely fanciful. Since earning power starts to disappear around age 65, there will inevitably be some people who throw themselves on the mercy of Society with no hope of paying their substantial medical costs. My suggestion is we anticipate this contingency by initially excluding payment for healthcare in the last year of life, which as I have said many times, comes to everyone. Because nearly everyone who dies, is on Medicare, we have pretty good data about the cost of the last year of life. Setting aside the funds to pay for it would allow us to add the cost to our estate or insurance. For those who have somehow escaped pre-payment however, this remains the last final debt and a fairly substantial one. Segregating this debt as the last unpaid one, allows for the people who fall through the cracks, to fall through this one, last. Whether we make this deficit into an unfunded debt of society, or a pre-funded responsibility of a benign society's natural obligations to its citizens, or a debt of society to its medical institutions -- makes only a rhetorical difference. The problem has been concentrated in a single focus, where it can be dealt with as generously (or as tight-fisted), as we choose to appear in the eyes of the world. As envisioned, all other debts are paid before this one, so to some people, it will seem like a contribution to the Community Chest, while others will treat it like highway robbery by welshers and ne'er do wells. But at least we have provided for what we all acknowledge is inevitable.
We estimate compounding will add more revenue, roughly matching the costs of robust stragglers who live from 85 to 91. That is, the growing costs of the elderly are like a longer neck on a giraffe -- rather than a bigger belly on a hippopotamus. Average costs actually go down a little after 85. We assume a fair number of them will be healthy during most of the extra longevity, with heavy terminal care costs merely shifted to 91 instead of 85. We started at age 65, with 65 years of health costs already paid; we paid down the estimated costs of twenty years, and the interest on the remainder pays five more. We get there with money left over, we haven't diverted the premiums from Medicare, and we still have to pay for that last year of life. Except we let Medicare calculate the average cost from the people who decline this gamble, and the fund reimburses the hospital or whatever, for average terminal care costs -- during what is only then recognized to have been the last year of life. If the money from fund surplus isn't enough, the agency can look at raiding the Medicare payroll deduction pool. And there can always be recourse to liberalizing or restricting enrollments, to age groups which experience shows will either enhance or restrict the growth of the fund, as predictions come closer to actual costs. And finally, the last recourse is to have the patient pay for some of his own costs, himself, by re-instituting Medicare premiums. Those who feel, paying for all of the healthcare with investment income was always a pipe-dream, will feel vindicated. But all this book ever claimed was it would reduce these costs by an unknowable amount, which is nevertheless a worthwhile amount.
Whoops, Medicare is Subsidized. A major explanation for the astounding bargain in Medicare funding can be traced to a 50% subsidy of Medicare by the Federal government, which is then borrowed from foreigners with no serious provision forever paying it back. Medicare is: about half paid for by recipients, about a quarter paid for by payroll deductions from younger working people, and about a quarter paid for by premium payments from Medicare beneficiaries, collected by reducing their Social Security checks.
A quarter paid in advance, a quarter paid at the time of service, and half of it a subsidy from the taxpayers at large. No wonder Medicare is popular; everybody likes to get a dollar for fifty cents. But the Chinese might be astonished to hear Medicare described as self-funded, sort of ignoring the repayment of their loan.
America's Big Benevolent Gamble.
Billions for Research
So I'm sorry but if you want to pay your bills, it might cost more than $80,000 on your 65th birthday, based on the assumption that you do want to notice the nation's huge debts run up by your ancestors. And to go further, it will take at least $200 a year, starting on the average person's 25th birthday, even making what some people would say was an optimistic estimate of 10% return. So you might as well call it $500, just to be safe from other rounding errors, and to allow enough time for hesitation lag about doing such a radical thing. No one says you have to do it my way, but this is how you reach a rough approximation of what it will cost, to do what I think has to be done, including paying off our debts.
That's indeed how much it will cost if you do it all by raising revenue. You can also do some of it by cutting costs, where fortunately we are well along on a uniquely American way to do things. No one else has the money to do it our way, so everyone else tries to cut costs by turning out the light bulbs. But without saying a word, notice how we have united in what the rest of the world thinks is madness.
Americans Unite, Others Think It's Madness.
Eliminate Costs by Eliminating Disease
Starting about fifty years ago, we began pouring outlandish amounts of money into medical research. In fifty years, we extended life expectancy thirty years, through eliminating dozens of diseases, along with the cost of caring for them. Just think of the money saved in treating tuberculosis alone, tearing down those TB hospitals seen in every city during my student days. Infectious diseases, particularly typhoid and syphilis, consumed the time of a medical student, and much of the budget of every municipality. One of my professors said we had two challenges left: cancer and arteriosclerosis. He was an optimist because we still have cancer. And the three main mental disorders, schizophrenia, Alzheimer's and manic-depressive disorder. But add five more to that list, and cure them in twenty years. After that, our main problem would no longer be dying too soon. It would be, outliving our incomes. Financially, these are features of the same thing, except one pays for Social Security and the other pays for Medicare.
Consider a moment, how difficult it is to say how much medical care will cost. Remember, a dollar in 1913 is now called a penny, and today's dollar is very likely to be called only a penny in 2114. We long ago went off the gold standard, and money is only a computer notation. Looking back, it is remarkable how smoothly we glided along, deliberately inflating the currency 3% a year, and listening to assurances this was the optimum way to handle monetary aggregates. Even more remarkable still is to hear the Chairman of the Federal Reserve ruminating we don't have enough inflation. It took a thousand years to get used to metal coins, several centuries to get used to paper money, and almost a century to get used to being off the gold standard. The political task of convincing the whole world that inflation is a good thing sounds very close to starting a world-wide civil war.
But we now have more than a million people over the age of 100. They got cough drops as a baby for a penny, and now hardly blink when a bottle of cough medicine costs several dollars. But instead of that, they are likely to get an antibiotic which was not even invented in 1913, retail cost perhaps forty dollars when it was invented, and now can be bought for less than a dollar. If they got pneumonia in 1935, they probably died of it, no matter how much was spent for the 1935 medicine, so how do you figure that? Or someone who got tuberculosis and spent five years in a sanatorium, who today would be given fifty dollars worth of antibiotics. The problems a statistician is faced with are impossibly daunting.
The current practice, which reaches the calculation of $325,000 for lifetime medical costs, is to take today's health costs and today's health predictions, and adjust the average health care experience for it, both backward and forwards. Every step of this process can be defended in detail. But the fact is, average lifetime health cost of someone born today is only the wildest of guesses, no matter what kind of insurance is in force, or who happens to be President of the United States. The cost of drugs and equipment go through a cycle of high at first, then cheaper, then they vanish as useless. But adjusting the overall cost of materials and services when only a faint guess can be made about healthcare and disease content, can be utterly hopeless, or it can be quite precise. Unfortunately, even its probable degree of future precision is a wild guess. It's a wonderful century to be living in unless you are a healthcare analyst. The only safe way to make a prediction is to make a guess that is too high and count on public gratitude that it actually wasn't much higher than you predicted. But to guarantee a particular average outcome, which an insurance actuary is asked to do, will be impossible for quite a few decades.
So, here is a plan for paying for healthcare, which is nothing if not flexible. If we start running out of money too early, we just don't pay our foreign debt, that's all. Doing it overtly is probably to propose a change in our entire culture so it would be done by inflation, a dime on a dollar.
If that isn't enough, we inflate some more until we can stop running up foreign debt.
If that isn't enough, we cut costs, inflate some more, and reduce the quality of health care.
And if that isn't adequate, we put a stop to funding biological research, by letting foreigners try their luck at it. Americans would be particularly loathed to do that because it represents a confession we were wrong about our boast to put an end to the disease.
This four-step process is absolutely mind-boggling to me, absolutely unspeakable, although the Chairman of the Federal Reserve is able to hint around about it. To me, it is so repellant that absolutely no circumstances would allow me to endorse it, and my hope is that just the mention of it will be enough to stir up the newspapers and the Congress. Stir them up, that is, to take some of the harsher measures which are necessary to withstand such suggestions. Meanwhile, we have the satisfaction of generating some compound income on the premiums, which will make the direst eventuality, to be not quite as bad as otherwise.
To keep track of how we are doing, the alternative I propose is to create a semi-permanent agency with adequate resources to oversee the transition and release honest white papers about how it is going, judge how it must be modified. After that, no doubt, a blue-ribbon oversight board must be appointed with power to suggest to Congress what needs to be modified. The blue-ribbon approach is to designate a couple of dozen private institutions to send one representative, and to rotate the appointees among a smaller board than the number of institutions which nominate one. Let's say, twenty positions among thirty institutions, rotating on a three-year cycle, to minimize overlap with Congressional elections. No doubt, that would produce an annual flood of half a dozen books a year by board members, agitating a process which is ultimately decided by elected Congressional representatives.
For thirty years this primitive HSA widened the band of lower-middle-class people able to afford their own healthcare. Another (shrinking) band of poor people with trouble paying full cost always remained, however, provoked by rapidly rising healthcare costs. For many people, the full cost was obscured by neglecting to fund the resulting retirement cost of improved longevity. For those with bare-bones coverage, however, the added cost was added cost. When retirement funds eventually ran out, distinctions didn't make much difference to people with other things on their minds. In both cases, added longevity was a serious hidden cost of improving healthcare, and those who didn't know what to do about it had that incentive not to notice. Linkage to employment crippled employer approaches, such as ERISA, whereas balancing the federal budget limited rising retirement subsidies to the poor. Using big data or little data, it is nearly impossible to see a way to keep such revenues and expenses in national balance over a period of a century from birth to death.
For those without outside support, HSA's were a sort of Christmas Savings Fund of reserves built up by young people, to pay for even anticipated future health costs. But that's not all they covered. By a quirk of the statute, any funds left over in an HSA at the time of joining Medicare, reverted to IRAs and could be spent for anything. Those who had considerable medical spending, however, probably had lessened longevity, whereas those with unusually robust health were the only group who actually had a mechanism for funding lengthened retirements. (In other sections, we discuss how some extra money was actually created by this system.) But even the Health Savings Account beneficiaries did not have an automatic total re-balancing system, except to the extent that individual savers collectively (and inadvertently) kept income and expense in aggregate balance. Similarly, any system yet to be devised in which a bureaucracy uses these funds as a piggy bank is doomed to political danger. The Federal Reserve is fairly successful at maintaining independence by the obscurity of behavior, but even it becomes visibly less independent of political pressure, year by year. It is a possibility politician will figure out how to get around the Fed, long before the public does.
Initial low costs and later heavy ones, combined, describes the cost curve pretty well, bending upward about age 55. It's also augmented by wasteful costs proving to be mostly small, handled more cheaply by the client than through a remote insurance company. Start with ensuring the most expensive items, try to pay the cheap ones, out of pocket. Deductibles might be flexible, and although some will always be too poor to afford them, younger people might have time enough to recover.
Co-pay was explored by HSA developers, but it never completely goes away until the costs are eliminated, mixing it relentlessly with high-cost (ie insured) charges and small ones in the deductible. Co-pay became either became a second insurance policy, which implied a separate administrative cost, or a bad debt for providers. Everybody, therefore, had both large claims and small ones at the same time, increasing overhead when it really served no cost-restraining purpose. Since the deductible served the accordion idea just as well, it seemed better to use it alone, not double its administrative cost. And then the idea struck that attaching it to a "Christmas Savings Fund" would allow young people to accumulate the missing deductible within the account, gathering interest in the process. Furthermore, once the amount of the deductible accumulated, the poor person who owned it had gradually assembled "first dollar coverage", but the premium for the deductible insurance would not be increased by it. In effect, the individual would then be self-insured for small medical costs, transferring this cost for the insurance company into a profit for the client. Later on, when Medicare took over heavy expenses for everyone, there might be money accumulated in the account which would instead help pay for retirement. As experience actually accumulated, the contrast between first-dollar insurance which encouraged frivolous spending, and the interest-bearing account which rewarded frugality, reduced the insurance cost by 20-30% and made certain the client (instead of the insurance company) got the benefit of the cost reduction. That summarized the original Health Savings Account. It was cheaper, discouraged frivolous spending (or permitted it with a minimum of investigation), offered costless first dollar coverage, and created a retirement savings vehicle which no other health insurance included. It even sorted the people with a lot of sickness from the ones who were lucky enough to need more retirement funding, and who eventually needed retirement funding -- the most.
As experience gradually accumulated, it became evident other desirable features were latent in a very simple-sounding system. As one form after another of government funding for the poor emerged from Washington, some of the theoretical objections to that approach made an actual appearance. The double insurance overhead implicit in co-payment, and the 80-20 split which did not put enough "skin in the game" to restrain spending exposed that larger amounts really did occasionally pinch some people. Some did actually drop their insurance. The idea that better health inevitably led to longer retirement, had never embraced the notion that life expectancy might increase, as it did, by thirty years. Indeed, some estimates place the retirement cost at five times the cost of the healthcare which provoked it. New drugs might make an occasional appearance, but no one expected new drugs and more luxurious hospitalizations to reach the point where they cost five times what an average year of retirement savings might produce. Retirement was continuous, sickness was episodic.
One way or another, health costs responded to the traditional health payment system by making its cost into a curse. An alternate system which envisioned paying at least half of these costs without rationing, could not be brushed aside, at least just had to be examined. The movement of 4 trillion dollars from stock-picking to index investing in a single year, got lots of attention, especially when it happened to several "passive" funds at a time when just about everything else was doing poorly. Inevitably, the money accumulating in Health Savings Accounts found its way into index accounts, and theory became the experience. Extrapolating into the future, even a modest shadow of such results would greatly help our health-care deficits. Combined with a century of future scientific progress eliminating disease costs, we might actually survive what was beginning to look like a well-intentioned blunder. For now, we'll leave the details to Congress and other policymakers. It may disappoint us somehow, or it might exceed our expectations. But when you start talking trillions of dollars, you know the idea has its own momentum. We haven't even started to test the potential of enlarging the idea.
So this book throws an idea on the table. Ever since the Bretton Woods conference, the elimination of the gold standard has been in the cards. There's a limited amount of gold on earth, and to substitute a committee opinion is equally unlikely to resist the political pressures on it. We need a substitute for gold which enlarges and contracts with the economies of the earth, which is internationally valuable and responds to local problems in an individualized manner. Why not explore the idea of using national total index funds as a monetary standard? If it doesn't work, there are several tons of gold buried in Fort Knox as a back-up.
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.
