Philadelphia Reflections

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

5 Volumes

Tourist Trips: Philadelphia and the Quaker Colonies
The states of Pennsylvania, Delaware, and New Jersey all belonged to William Penn the Quaker in one way or another. New Jersey was first, Delaware the last. Penn was the largest private landholder in American history.

Regional Overview: The Sights of the City, Loosely Defined
Philadelphia,defined here as the Quaker region of three formerly Quaker states, contains an astonishing number of interesting places to visit. Three centuries of history leave their marks everywhere. Begin by understanding that William Penn was the largest private landholder in history, and he owned all of it.

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.

History: Philadelphia and the Quaker Colonies
Philadelphia and the Quaker Colonies

Nineteenth Century Philadelphia 1801-1928 (III)
At the beginning of our country Philadelphia was the central city in America.

Colonial Philadelphia (Pre- 1776)

It's surprising to most Americans to learn the American Revolution was not the beginning, but almost half-way through the European settlement. And before the Revolution, there were thousands of years of settlement by non-European tribes. We know more about non-European settlers than we did fifty years ago, but records are still very poor or non-existent, and not likely to catch up very rapidly. History will begin in 1492 for a very long time. Long before that, it isn't history, it's anthropology.

Unalienable Rights Before 1776

Magna Carta

In 1976, the bicentennial birthday celebration of the Declaration of Independence contained two major exhibits of its conceptual origins. Mr. H. Ross Perot of Texas loaned his copy of the 1215 Magna Carta, and the Proprietors of West Jersey loaned their 1677 original of William Penn's Concessions and Agreements to the colonists of New Jersey. The purpose of the exhibit was to emphasize the historical origins of the concepts within the Declaration, but even the language of the Concessions is remarkably similar, quite evidently lifted by Jefferson when he was writing. On one point, Penn had the better of Jefferson; he correctly wrote about inalienable rights, while somehow Jefferson gave us unalienable ones.

William Penn

The matter came up recently at a Socrates meeting of the Right Angle Club, where at least one member felt there was no such thing as a natural right, while others wavered. In discussing the rights which the Creator, William Penn and/or Thomas Jefferson may have given us, the various contexts must be held in mind. At the time of declaring our intention to sever relations with Britain's King, there was no Constitution to refer to as a source, and it was impolitic to assert the rights had been given by English kings, like King John. Therefore, the language cleverly short-cuts around the divine right of kings to make a direct connection between the Creator and the colonists. William Penn on the other hand, was a real estate promoter, offering enticements and assurances to prospective colonists who were naturally fearful of risking their lives in sailboats, only to face the possible tyranny of a vassal king who might be even worse than the anointed one. Not only did Penn renounce any suggestion of a Royal role for himself, but went to considerable length describing the legally binding concessions and agreements he was offering. The right of trial by jury, for example, became a right to be punished only by a jury of twelve of one's neighbors. He wasn't talking to lawyers, he was making important distinctions very clear to laymen. These were not rights given by a Divinity who could be trusted, nor something which grew out of Mother Nature. They were the personal promises of William Penn, in personal legal jeopardy of the English courts if he reneged on them. He even had a ready answer for those who discovered the religious language in legal documents -- the Quaker belief that, occasional appearances to the contrary notwithstanding, There is That of God, in every man.

H. Ross Perot

As a small sidelight of the Concessions document, it had long been housed in the little brick hut on Main Street in Burlington NJ, where the Proprietors of West Jersey keep their treasures. The obscurity of these papers was probably their best protection, but the risk of displaying them in Philadelphia at the centennial brought out the need to ensure them, hence to appraise their value. The figure of four million dollars was kicked around. Ross Perot might have felt comfortable with this sort of expense as the natural cost of being a rare book collector, but it seemed highly unnatural to Quakers. Sometime afterward, the Surveyor General, William Taylor, was awakened by a call from Burlington neighbors that someone was trying to break in the roof to steal contents of the Proprietorship building. The burglars were unaware that underneath the shingles, the roof was actually made of concrete a foot thick. So the perps were frustrated in their aims, but Bill Taylor was greatly troubled by the implications, actually unable to sleep at night worrying about what was in his custody. So, in time the State of New Jersey constructed a suitable archives building, and the valuable documents were transferred up to Trenton. Time will tell what the Soprano State does with such a valuable possession, but at least the Quakers can now sleep at night.

Houses of the Penn Family

Jordan Meetinghouse

The name Penn seems to be derived from the Welsh name for hill; hills are abundant in Wales. There is a reason to suppose the family was of royal descent. William's birthplace is now disputed, possibly in London near the Tower, possibly in Ireland at Sharry Estate, possibly the Church of All Hallows, Barking, England. Much better known and much-visited is Jordans, the place where he is buried in the simple buying ground of the Jordans Meeting House in Buckinghamshire, on a by-road running between Chalfont St. Peter and Beaconsfield. The present grave markers were added later since early Friends generally declined to have their names on tombstones. He lived most of his life and actually died in the family estate in Berkshire called Ruscombe where he had usually attended Friends Meeting in nearby Reading. At the time of his death, his fortunes were much reduced, having been betrayed by his steward Ford, and imprisoned for nine months.

{Slate Roof House}
Slate Roof House

When he lived in Philadelphia, William lived in the "Slate Roof House" on Second, between Chestnut and Walnut (a small park commemorates the building lot), and the Letitia Street House. His plans originally were to build a manor house where the Art Museum stands today, on Faire Mount, but somehow he changed his mind and moved to Pennsbury on the Delaware River near Trenton. This manor also did not survive, but its careful restoration is now well worth a visit.

{Horticultural Hall}
Horticultural Hall

William Penn had thirteen children, a circumstance adding much difficulty for genealogists. John Penn, the nephew of William's son Thomas, was the grandson who acted as Proprietary Agent and Governor prior to the American Revolution, although Thomas remained in London as a close friend of the King, and exercised firm control of the policies of the Proprietorship. John built a fine mansion on the Schuylkill called Lansdowne at the site of what was to become Horticultural Hall in the 1876 Centennial. About all that can now be visited is the glen on the estate, over which a bridge is still usable. It was here that he was apprehended by Revolutionaries, and taken to house arrest in New Jersey.

Solitude House

Lansdowne burned in the early 19th Century and pictures of it are hard to find. A smaller house of John Penn's, called Solitude, still stands near what is now the Zoo. John was arrested by rebel troops while living at Lansdowne and held prisoner at another house confusingly called Solitude, on the grounds of what became Union Forge, later the Union Forge Ironworks, subsequently the Taylor Iron and Steel Company. All of this is located in High Bridge, New Jersey, where subsequently five generations of the Taylor family lived until 1938. The Union Forge Heritage Association/Solitude House Museum welcomes visitors.

{Stoke Mansion}
Stoke Mansion

A different John Penn, who called himself John Penn of Stoke, inherited a much larger portion of the final payment for the Proprietorship lands in Pennsylvania in 1789 because he was the son rather than the nephew of Thomas Penn. Thomas had purchased the historic Manor House in Stoke Poges in England. Although this splendid palace dated back to 1066 and Elizabeth I had visited it, it was by 1790 so dilapidated that John Penn demolished three-quarters of it. In its place, he built a proper palace, called Stoke Park. The family fortunes seem to have declined after that, perhaps because of the extravagance of an estate he could not afford.

William Allen, Tory

William Allen

William Allen was once famous for his expensive carriage and a team of horses, at a time when there were only eighty carriages in the colony. He was born wealthy but personally made considerable sums in maritime trade, which in those days included a mild form of piracy called privateering. Taking his accumulated wealth, he invested heavily in colonial real estate. His urban ventures included the land under Independence Hall, and his lands in the hinterland included the present town of Easton. He was a tough businessman, providing "muscle" where needed in a colony dominated by pacifist Quakers. At one point, he imported a thousand muskets and ammunition for the use of settlers in the Lehigh Valley who had difficulties with the Indians and Connecticut invaders. Allentown is named after him.

Philadelphia Lawyer

It is difficult to apply present standards of judgment to Allen. William Penn had been given the colony on condition that he protect and maintain it. That was clearly a difficult challenge for a Quaker colony in the wilderness, surrounded by Indians, French and Spanish buccaneers, and neighboring colonies who were far from pacifist themselves. The system often amounted to giving land to subcontractors like Allen, on condition that they maintain law and order. Furthermore, Allen was quite obviously a person of parts. His credentials as Chief Justice were based on his attendance at the Inns of Court when almost all other lawyers were trained by local apprenticeships. His father in law was Andrew Hamilton, the famous "Philadelphia lawyer" who won the landmark case for Peter Zenger and later became the leader of the Pennsylvania Assembly and mentor to young Benjamin Franklin. His land-dispute services in the negotiations with Lord Baltimore were notable. In general, he was a continuing force for peace and stability, and no one held it against him that peace and stability suited his needs as a landlord and merchant. To him, the battle for independence was just another unsettling disturbance which prevented the colony from achieving its potential.

His daughter married John Penn, the grandson of William Penn, who was the local representative of the Proprietors and later the Governor. All in all, it is not surprising that he retreated to his home on Germantown Avenue, called Mt. Airy, when the revolution broke out. Unlike many other Tories who fled to Canada, he felt his past services would protect him if he remained quiet and secluded until the war was over. He didn't quite make it, dying in his mansion, in 1780.

Christ Church and Elfreths Alley

Elthreths Alley

The north side of Dock Creek (now, Dock Street) was lower than Society Hillside and somewhat swampy. The tendency to flood caused the north side to have smaller and less permanent buildings, and so it became the Colonial waterfront area remaining more commercial, and in parts, shabby, even during the 19th Century. Still further to the north, this was not the case, but the waterfront and food market patch more or less marooned Christ Church, now the single most graceful and elegant Colonial building still standing. This formerly commercial area is now called Old City, with many loft apartments mixed among surviving warehouse outlets, and of course the ethnic restaurants characteristic of such gentrified areas.

Christ Church

Elfreth's Alley, running for one block east and west between Second and Front (1st) Streets. Some of the histories of this street is obscure, so some of it is probably synthetic because nothing particularly historic happened there to create detailed records. Elfreth's Alley claims to be the oldest street in America, a claim that can be substantiated back to 1702. The street is filled with little "workers houses", presenting a solid front of buildings on both sides of the cobblestoned street. Most of the houses could vaguely be called "father, son and holy ghost houses", looking as though they consisted of three rooms on top of each other, although in fact most of them are larger. A moment's consideration shows that the street consists of many double houses, with three doorways in front. Each house had a door to the interior, and most of them have a third door opening to a shared tunnel between the two houses, leading to the back yards. These tunnels were called "easements", a term that has migrated from its earlier usage. Although William Penn envisioned large single estates in his "Greene Country Towne", he sold considerable land to people who remained in England as absentee landlords, who soon found that many small houses produced more rent than one or two big ones. One of the houses on Elfreth's Alley acts as a museum, with tours; there is an active civic association, and once a year in June there is a street fair.

Because the land was swampy and the neighborhood congested, Christ Church soon outgrew its backyard burial ground, and burying important people under slabs in the walkways and corridors. Visitors who do not come from that sort of religious background are typically uncomfortable walking over such graves, a quite common arrangement in European cathedrals. But eventually, it was necessary to go several blocks westward to create a "new" burial ground. Most of the famous names from the Revolutionary era, like Benjamin Franklin and four other signers of the Declaration of Independence are found on the tombstones at Fifth and Arch, just across the street from the Free Quaker meeting house, and opposite the Philadelphia Mint. On the remaining corner of Fifth and Arch is the Constitution Center which will open July 4, 2003. It can already be seen that its architecture clashes with the rest of the historic area, but it is fervently hoped that its programs will redeem it.


Society Hill and Old City, Image of America: Robert Morris Skaler Amazon

American Philosophical Society

Charles Wilson Peale (1741-1827)
The Artist in His Museum
1822, Oil on canvas
(The Joseph Harrison Jr. Collection)
Courtesy of the
Academy of Fine Arts

all of the red brick buildings on Independence Square look as though they were part of Independence Hall, but there is one exception. The building facing Fifth Street is Philosophical Hall, one of the four buildings of the American Philosophical Society. Right now, Philosophical Hall is used as a museum. It could be called the first museum in America, but not the oldest, because it had interruptions and different proprietorships. Charles Wilson Peale started his museum of curiosities there and then moved it to the second floor of Independence Hall, where he painted the famous portrait of himself holding up the curtain. In recent years, Philosophical Hall has again become a museum, holding treasures and curiosities belonging to the Philosophical Society itself. The docent is pleased to alternate between calling it America's new oldest museum, and America's oldest new museum. And, yes, the newell post has an Amity Button.

{American Philosophical Society building}
Philosophical Society

Patents were established by the Constitution when it was a piece of parchment lying on a table fifty feet away from here, and the early patent office required the submission of a working model of every application for patent. After a while, that got to be a lot of working models lying around, and many of the more interesting ones are on display in the museum. Like the model of Fitch's first steamboat or the gadget Jefferson used, to make simultaneous copies of documents he was writing. That's right near the Gilbert Stuart copy of Washington's portrait, and von Neumann's first algorithm to be stored in his stored program machine, or computer, and Neil Armstrong's speech on the moon, concerning one step for mankind and all. It's a splendid museum, full of the real stuff, in a handsome Georgian building with sparkling immaculate marble staircases.

John Fitch received a US Patent
for the Steamboat August 26, 1791

In the Eighteenth Century, Natural Philosophy was what we now call science. That's why PhDs get a degree of Doctor of Philosophy when they study chemistry and physics. The idea for forming a scientific society in America apparently originated with John Bartram. As so often happens, the originator couldn't quite get it established and had to call on Ben Franklin that impression of publicity, to get it off the ground. To be fair about it, Franklin was probably the more distinguished scientist of the two. To be even more fair about it, the organization struggled a bit until Thomas Jefferson (that's the one who was President of the United States) gave it a real publicity shove. During the depths of the 1930s depression, one of the members left it several million dollars with the stipulation that the investments should focus on common stock. Since buying stock in 1935 was widely regarded as about the stupidest thing an investor could do, this little episode reinforced a strong impression that membership in the APS is given to people who are very smart, not merely famous. The four buildings, the many fellowships, and the big endowment were largely made possible by this contraries investment decision.

There are eight hundred members, of whom 93 have won Nobel Prizes. Over the years, two hundred members have been awarded Nobel Prizes, but you must remember that the organization existed for 150 years before there was such a prize. Several U.S. Supreme Court justices are members and lots and lots of people who are famous. The docent comments that they look pretty much like everyone else. There's a rumor that Bill Gates turned down the offer of membership, so now we will just see. He's young enough to have several decades' opportunity to reconsider an offer, although the APS might just be old enough to lack interest in any second chances.

Philosophy Means Science in Philadelphia

American Philosophical Society Seal

In the age of the Enlightenment, science was called natural philosophy; that accounts for the present custom of awarding PhD. degrees in chemistry and botany. The sort of thing which interested Ralph Waldo Emerson was called moral philosophy, and you will have to visit some other place than the A.P.S. if that is what interests you. Roy E. Goodman is presently the Curator of Printed Material (some would say he was chief librarian) at the American Philosophical Society, founded in 1743 by Benjamin Franklin who was clearly the most eminent scientist of his day, having discovered and explained the nature of electricity.

{Roy E. Goodman}
Roy E. Goodman

Roy Goodman is descended from cowboys and rodeo stars, but in spite of that he gave an entertaining talk recently at the Right Angle Club about this society devoted to useful knowledge, this oldest publishing house and scholarly society in America, once the home of the U.S. Patent Office, and scientific library and museum. They have many rare items in their collection, but the unifying theme is not a rarity, but curiosity. You might say some of the items reflect the whimsy of Franklin, but it would be fairer to say it is an enduring monument to Franklin's universal curiosity about all things.
Nobel Prize Medal

There are about 900 members of APS, about 800 of them Americans, about 100 of them winners of a Nobel Prize. Let's just make a little list of a very few notables in the past and present membership. Start with the first four Presidents of the United States, add Alexander Hamilton and Lafayette, David Rittenhouse and Francis Hopkinson and you get the idea that Founding Fathers got in early. Robert Fulton, Lewis and Clark, Alexander Humboldt, John Marshall were early members, and more recent ones were Madame Curie,

French Philadelphia

Henry Wadsworth Longfellow

Since American relations with France are a little strained at the moment, it may not be completely welcome to hear it said that Philadelphia food is Creole. The reference is not to the several downtown French restaurants of outstanding quality, but to the two episodes when Philadelphia experienced waves of French immigration. The first of these was during the French and Indian War, when the Acadian French ("Cajun") were driven out of Nova Scotia, largely went to Louisiana and then were allowed to return. A lot of them stopped off in Philadelphia both going and coming. Henry Wadsworth Longfellow depicted, in his poem Evangeline, the tearful reunion of Evangeline and Gabriel in the hospital. And since for sixty years the Pennsylvania Hospital was the only hospital in the country, Longfellow had to put them here.

The second wave of French immigration was provoked by the guillotine in Paris, and the black revolution in French Haiti. Most people today are unaware that Talleyrand lived here, and LaRochefoucauld. The Duke of Orleans, future king of France, lived at 4th and Locust Streets, proposed to a (rich) Philadelphia lady, and was rejected by her father ("Sir, if you do not become king of France, you will be no match for her, and if you do become king, she will be no match for you.") Napoleon's brother Joseph lived at 9th and Spruce, and one of his marshals lived at 6th and Spruce. Really. Talleyrand had a deformed foot, and this somehow made him pals with Governor Morris who had a wooden leg. This friendship was part of the reason the Louisiana Purchase was possible, because they shared the favors of the same French lady, and had frequent occasion to meet. Both Franklin and Jefferson were ambassadors to France, it may be remembered, and for a while, Jefferson was quite a fan of the French Revolution, although the treatment of LaFayette by the French Revolutionaries did not exactly encourage that. The French treated Franklin like a God, but then so did Mozart and the King of England, and Franklin harbored many bitter memories of the French and Indian War all the while he was romancing the French into bankruptcy to pay for our revolution. The French refugees from Haiti brought Yellow Fever with them, and Dengue too, thus definitively terminating Philadelphia's hope of remaining the permanent capital of the nation.

It was during this Francophone period that Philadelphia cuisine acquired some characteristics which allow some food historians to call it Creole. Philadelphia Pepper Pot soup, for example, substituted tripe for terrapin. Those who know about these things say that many dishes now thought to be distinctly Philadelphian in fact had a French origin.

Market Street, East (3)

James Madison

But wait. At Ninth and Market Philadelphia had once built the White House or at least a mansion for the President of the United States. Secret deals between James Madison and Alexander Hamilton had agreed to move the nation's capital city to Virginia in return for nationalizing the states' Revolutionary War debts, although the circumstance which made it acceptable to the public had been the Yellow Fever epidemic. After that happened, no amount of logic or log-rolling was going to keep the government in this city. Philadelphia vainly built a very elaborate mansion for the President, but President Washington never occupied it, and it was converted to housing the University of Pennsylvania. That University eventually tore it down and replaced it with two somewhat more suitable buildings, meanwhile using the Walnut Street Theater and the Musical Fund Hall, at Ninth and Walnut and Ninth and Locust Streets respectively, for commencement exercises and the like. No one can be completely certain, but it is felt by many that 9th and Market was the general area where Benjamin Franklin had flown his famous kite. This definitely later was the site of Leary's second-hand bookstall, which had the remarkable history that it was once run by a former Philadelphia mayor. Ninth and Market Street is now the site of a Post Office on one corner and a vacant lot on the other. But let the imagination wander a little, and see Ben Franklin, The White House, the University of Pennsylvania, and a former mayor tending a bookstall.

There is a restoration of the house, the very house, where Thomas Jefferson wrote the Declaration of Independence at the corner of 7th and Market. Although hidden among the hulks of former department stores, some idea of the former elegance of the area is given by the description of stir raised by that rich young Virginian arriving in Philadelphia for the Continental Congress with his fancy carriage, team of horses, and several footmen. All of that colonial splendor has just about vanished in a sea of Victorian commercial architecture, which has in turn become merely a quaint relic. Over the front door of what was Lit's Department Store is still to be seen the mystifying motto, "Hats trimmed free of charge.", and today almost no one knows what that meant. At Sixth and Market, however, look out. The National Park Service brings colonial history crashing across Market Street, with tourists, a vista of Independence Hall, and lots of federal money. Dare we mention pork barrels? The whole subject of Independence National Park is so huge we must return to it several times, but just glance as you go through from City Hall to Penn's Landing.

Notice in particular the corner of Sixth and Market, where the real White House really stood. Robert Morris once had a mansion there, which Benedict Arnold occupied for a while after he was in charge of recovering Philadelphia from the British occupation, and subsequently both Washington and then John Adams lived there, as Presidents. Unfortunately, a fire took it away around 1830, and the remains were covered with trashy commercial buildings for decades, until the Park Service built a big public restroom there, now torn down. The current public furor about this site is truly remarkable, and the ample amounts of federal money our Senator has been able to obtain from the Appropriations committee on which he sits is probably a big factor in attracting interest. The main focus of dispute has to do with the fact that President Washington brought eight black slaves with him, and although he hastened to replace them with white indentured servants whose civil rights were probably no greater than slaves, the black slaves undoubtedly had to have lived somewhere. A search is on for the real, the true, the authentic slave quarters, as a suitable place for a public monument to their service to the country. The Park Service has a long reputation for defending scholarly standards, and its reluctance to accept archaeologically evidence of the slave quarters has brought down on their heads the furious response of the black community and the politicians seeking their favor. None of these latter groups can see any sense to quibbles about the precise location of Washington's outbuildings, just put up the monument, but for a while, it looked as though the scholars were determined to go down with their flags flying.

Several blocks further East, Market street comes to the brow of what was a cliff overlooking the Delaware, where the earliest settlers lived in temporary caves while they built houses. At the corner of Front and Market, from 1702 to 1883, stood the London Coffee House; during the Continental Congress, it was a place of high intrigue. The trolley lines once made a loop at the bottom of the hill at the river. Prior to that time, horse trolleys had to stop at the top of the hill at Front Street because the hill was too steep for them. At the lower level on the waterfront, there was a terminus for the ferry from New Jersey, bringing commuters, shoppers and farm produce from the Garden State. In time, a subway was built down Market Street, taking a sharp turn at the brow of the hill and heading off toward Frankford and the far northeastern parts of the city. The conjunction of the trolleys, the subway, and the ferries brought throngs of shoppers, mixing with other crowds emerging from three subways at 8th Street, still others from two train stations at 13th Street, and trolleys or buses at every one of the fourteen cross streets. This fourteen block strip was surely a great place to sell dry goods. But today, with the ferry terminal gone and the trolleys vanished, it is mainly a question whether the foot of the hill at the Delaware River is destined to become a museum or an amusement park.

The First and Oldest Hospital in America

South East Prospect of Pennsylvania Hospital

There is a painting of the region around 8th and Spruce Streets in the 1750s, depicting a pasture, with cows, and three or four buildings between 8th and 13th Streets. When the Pennsylvania Hospital moved there in 1755 from its temporary location in a house located a block from Independence Hall, there were complaints that it was now located so far out in the woods that it was difficult and dangerous to go there. Still another description of the area is evoked by the provision which the Penn family placed in the deed of gift of the land, strictly forbidding the use of the land as a tannery. Tanneries have always been notorious for giving off noxious odors, so most people wanted them to be somewhere else, anywhere else. In any event, the main activity of Penn's "green country town" at that time was concentrated closer to the Delaware River, and the nation's first hospital was definitely placed in the outskirts. Two blocks further West the almshouse was already in place, but not much else. We are told that Benjamin Franklin had flown his Famous Kite at 9th and Chestnut, using a barn there to store his materials. It might be recalled that the population of Philadelphia, although the second largest English-speaking city in the world, was only about twenty-five thousand inhabitants at the time of the Revolution, and in 1751 was even smaller.

In any event, the first and oldest hospital in America was built on 8th Street between Spruce and Pine, and the Eighteenth Century buildings on Pine Street still present a breathtaking view at any season, but particularly in May when the azaleas are in bloom, and fragrance from the flowering magnolias fills the evening atmosphere for blocks around. Although some people today mistake the Pennsylvania Hospital for a state hospital, it was founded in the reign of George II, decades before there was such a thing as the State of Pennsylvania. The Cornerstone was laid by Benjamin Franklin, with full Masonic rites. Most doctors regard a hospital as a mere workshop, but the affection with which many Pennsylvania physicians regarded their special hospital is indicated by the number who have requested that their ashes be buried in the garden.

For two hundred years, beginning with the first American resident physician Jacob Ehrenzeller, the interns and residents were paid no salary, so they had to live on the grounds. An Internet was just that, interned within the four walls for at least two years. Because the resident physicians had no money, they stayed in the hospital at night and on weekends, playing cards and swapping stories. The hospital was home for them, as it was for the student nurses, likewise unpaid but more strictly confined and supervised. This penury seemed acceptable because the patients were mostly charity ward patients, otherwise unable to pay for their own care. Ehrenzeller finished his medical apprenticeship and went to practice for many decades in the farm country of Chester County, but gradually upper-class Philadelphia moved from 4th Street westward to and beyond the hospital, and two of the richest men in American history, Morris and Biddle, had houses within a block of the hospital, although Morris never lived in his house, having more pressing matters in debtor's prison. Therefore, later resident physicians at the hospital had the potential of setting up a private practice in the area and becoming society doctors as well as academically prominent ones. Being a charity hospital in a rich neighborhood created the potential for volunteer work by the town aristocrats and large bequests for charity. The British housed their wounded in the hospital during the Revolutionary War and shot deserters against the red brick wall of the small cemetery to the north. A century later, there were a couple of dozen rooms for private patients in the hospital for the convenience of the doctors and the neighbors, but everyone else was a charity patient. And a century after that, the hospital still did not have an accounting department to collect bills and tended to regard people who asked for a bill as a nuisance. Benjamin Franklin is regarded as the Founder of the hospital, and his autobiography famously describes how he fast-talked the legislature into matching the donations of the public, not mentioning to them that he had already collected enough promises to see the project through. This seems in character; Franklin's biographer Edmond Morgan summed up that, "Franklin doesn't tell us everything, but what he does tell us, is straight." The idea for the hospital was that of Dr. Thomas Bond, whose house is now a bed and breakfast on Second Street, but it was characteristic of Franklin to be the secretary of the first board of managers of the hospital. In Quaker tradition, the clerk of a meeting is the person who really runs the show. It thus comes about that the minutes of the founding board were recorded in Franklin's own handwriting, among them the purpose of the institution, which is to care for the Sick Poor, and if there is room, for Those Who can pay. This tradition and this method of operation continued until the advent in 1965 of Medicare when charity care was displaced by concepts which the nation had decided were better. The Pennsylvania Hospital was not only the first hospital but for many decades it was the only hospital in America. Its traditions, sometimes quaint and sometimes glorious, cast a long shadow on American medicine.


America's First Hospital: The Pennsylvania Hospital 1751-1841 William Henry Williams Ph.D. ISBN-10: 0910702020 Amazon

Nation's First Hospital, 1751-2016

{Pennsylvania Hospital}
Pennsylvania Hospital

As commonly stated in medical history circles, the history of the Pennsylvania Hospital is the history of American medicine. The beautiful old original building, with additions attached, still stands where it did in 1755, a great credit to Samuel Rhoads the builder and designer of it. The colonial building on Pine Street stopped housing 150 patients around 1980, supposedly at the demand of the Fire Marshall, although its perpetual fire insurance policy still owes the hospital several thousand dollars a year as an unspent premium dividend. There may have been one small fire during two centuries of use, but its true fire hazard would be difficult to assert. It was just out of date. The original patient areas consisted of long open wards, with forty or so beds lined up behind fluted columns, in four sections on two floors. The pharmacy was on the first floor, the lunatics in the basement, and the operating rooms on the third floor under a domed skylight. It was entirely serviceable in 1948 when I arrived as an intern doctor. Individual privacy was limited to what a curtain between the beds would provide, but on the other hand, it was possible for one nurse to stand at the end of the award and recognize any distress among forty patients immediately. In this trade-off between delicacy and utility, the utility was certain to be preferred by the Quaker founders. Visitors were essentially excluded, and if a patient recovered enough to be unnaturally curious about neighboring patients, well, he had probably recovered enough to go home.

Located between two large rivers, South Philadelphia up to ten blocks away was essentially a swamp until the Civil War. So, there were seasonal epidemics of malaria, yellow fever, typhoid, and poliomyelitis at the hospital until the early twentieth century. Philadelphia was a port city, so sailors brought in cases of venereal disease, scurvy, even an occasional case of anthrax or leprosy. During the Industrial Revolution of the nineteenth century, tuberculosis, rheumatic fever, and diphtheria were part of clinical practice. But underlying the ebb and flow of environmental effects, there was a steady population of illness which did not change a great deal from 1776 to 1948. These patients were all poor, because the rules in Benjamin Franklin's handwriting restricted service to the "sick poor, and only if there is room, for those who can pay." In 1948 there was a poor box for those who might feel grateful, but no credit manager or official payment office. The matter had been considered, but the cost of collection was considered greater than the likely revenue. When Mr. Daniel Gill was offered the position as the hospital's first credit manager, it was suggested that he be given a tenth of what he collected. To his lifelong regret, Dan Gill regretted that he refused an offer that he had felt he could not afford to accept.

So, the wards were filled with victims of the diseases of poverty, punctuated by occasional epidemics of whatever was prevalent. And a second constant feature of the patients was their medical condition forced them to be housed in bed. For centuries, physicians dreaded the news that a new patient was being admitted with "dead legs".

Keeping Lunaticks Off the Streets

One of the functions for America's first hospital was proposed by Benjamin Franklin and Thomas Bond to be the humane treatment of Lunaticks, who would otherwise be wandering the streets of Philadelphia. Nearly three hundred years later, it is possible to look back on the topic and see an uncertain history.

Essentially, the pendulum swings between a humane goal of bringing these poor victims inside, out of the weather, on the one hand, and getting them out of those snake pits so they can enjoy the benefits of being part of the community, on the other. Every couple of decades, the disadvantages of one approach attract attention, and public opinion demands the opposite. Even the era of effective treatment, which began with Thorazine in 1960, has not relieved the central difficulty, because these people often or usually rebel and stop taking their pills; it is not clear that forcing them to take pills is any greater denial of liberty than forcing them to live in a small room. In 2006 and for the prior five years, a grizzly, disheveled old man who talks to himself has pulled old cardboard around him and slept on the steam grate across the street from the Pennsylvania Hospital. Occasionally, someone summons a passing patrol car which sometimes does and sometimes does not, haul him away.

In March 1765, a remarkably neat and tidy sailor was admitted to the Hospital as insane, and was kept among the other insane patients in the basement rooms. He wandered out, however, and was chased around until he took refuge in the glass cupola that still adorns the roof of the East wing, facing Eighth Street. It was obvious that he would soon have to come down to eat, but the Quakers who ran the hospital at that time would have none of it; they didn't starve their patients. So a mattress was passed up to him, and regular meals. Nothing much could be done about the cold, which must have been pretty severe, but the patient was allowed to remain in the cupola until 1774 when he died. Nine years of room service in the cupola.

In 1790, the wife of Stephen Girard, the richest man in America, became insane and was admitted. The hospital felt she could go home in a couple of months, but her husband insisted that she stay. She died there, twenty-five years later. At today's rates, comparatively few people could afford that approach, even if the ethical issues could be settled. However, for over a century a great many people were essentially domiciled in the chronic psychiatric unit at Market and 44th Streets

For fifty years after that, a subacute psychiatric unit was maintained at 49th and Market, but ultimately the Federal Government found a smokescreen of confusion, sufficient to hide the awkward political backlash. One by one, the huge human warehouses at Byberry, Philadelphia General Hospital, Bellevue in New York and similar places, went out of business. The public wouldn't stand for "snake pits", even Medicare couldn't afford to put millions of insane people into luxury hotels like 49th and Market. And even though there were a few hundred or even a few thousand families that could afford to pay for humane domiciliary care, they had to be sacrificed. A government medical system, essentially run as a political pork barrel, can not afford to permit the continued existence of a visible rebuke by a two-class system.

So, now we're giving these people the benefit of integration into community life, right?

Carpenters Hall

{Carpenters Hall}
Carpenters Hall

The birthplace of our nation is both smaller than you would expect and larger. The fire marshall now says no more than 83 people may rent it for a sit-down affair, or 103 for a stand-up gathering. However, the internal partitions have been removed from what was once a center-hall building with a meeting room on either side; it now is a large open room in the form of a Greek cross. At the time of the revolution, Benjamin Franklin's Library Company occupied the second floor, so the First Continental Congress had to find a way to do its work in the side rooms of the first floor, to the side of the center hall. There were 53 delegates, and presumably some staff and visitors.

That sounds rather crowded, but it was nevertheless the largest rentable public space in the city. John Adams arrived early for the convention, conniving with several other early arrivals at the City Tavern. Adams made the following notation in his diary: Monday. At ten the delegates all met at the City Tavern and walked to the Carpenters' Hall, where they took a view of the room, and of the chamber where is an excellent library; there is also a long entry where gentlemen may walk, and a convenient chamber opposite to the library. The general cry was, that this was a good room, and the question was put, whether we were satisfied with this room? and it passed in the affirmative." Alternative places to meet would have been in churches, which presented awkwardness, or in the State House (Independence Hall) which was then under the control of Tories.

{Continental Congress}
Continental Congress

France and the rebellious colonies was a complicated one, with intrigue and mistrust at every turn. One interesting episode had to do with Franklin's library on the second floor. The French ministry had sent over a spy, to size up the colonists before the French risked too much on them. So, the spy was led up to the library and allowed to overhear some bellicose conversations going on downstairs -- thoroughly stage-managed for the benefit of the "hidden" French visitor.

The Carpenters Company was a guild of what we would now call builders and architects, and architects continue to use it. The first floor usually displays a few Windsor chairs dating to the Continental Congress, covered with a rich black patina that really lets you know what a patina was. Upstairs, the staff quarters are now, well, a little on the elegant side so you can't visit. The guild was formed in 1724, and fifty years later had just completed its building, in time for its historic role in 1774.

{Elfreth's Alley}
Elfreth's Alley

With the whole continent available for building, it is still not entirely clear why Colonial Philadelphia crowded itself into half a square mile, with crowded little row houses on crowded little alleys. But that's the way it was, now visible in the location of Carpenters' Hall down a little cobbled alley, in the center of a block. Elfreth's Alley gives you the same feeling, and perhaps Camac, Mole, and Latimer Streets. Carpenters' is a lovely little place, with lots of interesting features, but the main interest lies in what took place there. For that, you have to read a few books.

Dr. Cadwalader's Hat

{Dr. Thomas Cadwalader}
Dr. Thomas Cadwalader

The early Quakers disapproved of having their pictures painted, even refused to have their names on their tombstones. Consequently, relatively few portraits of early Quakers can be found, and it might, therefore, seem surprising to see a picture of Dr. Thomas Cadwalader hanging on the wall at the Pennsylvania Hospital. A plaque relates that it was donated by a descendant in 1895. Another descendant recently explained that the branch of the family which continued to be Quaker spells the name, Cadwallader. Dr. Cadwalader of the painting, famous for presiding over Philadelphia's uproar about the Tea Act, was then selected to hear out the tea rioters because of his reputation for fairness and remains famous even today for his unvarying courtesy.

{Pennsylvania Hospital}
Pennsylvania Hospital

In one of the editions of Some Account of the Pennsylvania Hospital, I believe the one by Morton, there is a story about him. It seems there was a sailor in a bar on Eighth Street, who announced to the assemblage that he was going to go out the swinging doors of the taproom and shoot the first man he met. So out he went, and the first man he met was Dr. Cadwalader. The kindly old gentleman smiled, took off his hat, and said, "Good Morning, Sir". And so, as the story goes, the sailor proceeded to shoot the second man he met. A more precise rendition of this story comes down in the Cadwalader family that the event in the story really took place in Center Square, where City Hall now stands, but which in colonial times was a favored place for hunting. A man named Brulumann was walking in the park with a gun, which Dr. Cadwalader took as a sign of a hunter. In fact, Brulumann was despondent and had decided to kill himself, but lacking the courage to do so, had decided to kill the next man he met and then be hanged for murder. Dr. Cadwalader's courteous greeting, doffing his hat and all, befuddled Brulumann who went into Center House Tavern and killed someone else; he was indeed hanged for the deed.

I was standing at the foot of the staircase of the Pennsylvania Hospital, chatting to a young woman who from her tailored suit was obviously an administrator. I pointed out the Amity Button, and told her its story, along with the story of Jack Gallagher, whom I knew well, bouncing an empty beer keg all the way down to the Great Court from the top floor in the 1930s, which was then being used as housing for the resident physicians. Since the young woman administrator was obviously beginning to regard me like the Ancient Mariner, I thought one last story about courtesy was in order. So I told her about Dr. Cadwalader and the shooting.

"Well," she said, "The moral of that story obviously is that you should always wear a hat." There then is no point to further conversation, I left.


Israel Pemberton, Ben Franklin satire l

Ralph Pemberton was an English Quaker well before 1650; he may have been a Quaker before William Penn was one. As an old man, he accompanied his son Phineas to Pennsylvania in 1682. They established a farm on the banks of Delaware in Bucks County called Grove Place, and Phineas soon became one of the chief men in the colony. In the next generation, Israel Pemberton became one of the best educated, richest merchants in the colony. But it was Israel's son also called Israel, who earned the title of King of the Quakers. He was one of the founding Managers of the Pennsylvania Hospital along with Benjamin Franklin and one of his brothers, James Pemberton, and was a generous philanthropist and leader of a number of other civic organizations. Just exactly what provoked his famous political disputes with Franklin is not clear, but he was a leading friend of the Indians, whom Franklin never much liked. Israel Pemberton strongly and effectively argued William Penn's policy of friendship with the Indians, particularly insisting that sales of land to colonists should be prevented until there was a clear agreement with the Indians about the ownership. Unfortunately, pressures built up as Europeans immigrated faster than this policy could accommodate smoothly, and Franklin mostly sided with the impatient immigrants -- and squatters. This disagreement came to a head in 1756 when Pemberton negotiated a treaty of peace with the Indians at a conference at Easton. Although this treaty seemed to settle matters, it came against a background of the descendants of William Penn abandoning Quakerism. They, however, remained the proprietary owners of the Province with a more narrow focus on speeding up land sales to maximize their investment. Much of the internal dynamics of these quarrels before the Revolutionary War remain unclear and possibly somewhat misrepresented.

Shenandoah Valley

When the Revolution came, Pemberton viewed it with disfavor, mostly for pacifist rather than purely Tory reasons. Feelings ran high since the Pembertons were influential citizens with the potential to dissuade wavering neighbors, which made it difficult to tolerate them as invisible bystanders. However that may be, the three Pemberton brothers and twenty other wealthy and influential Quakers were arrested and, without hearing or trial, thrown in the back of an oxcart and sent into exile in Virginia for eight months. Their journey was a curious one, along a trail up the Schuylkill to the ford at Pottstown, and then down the Shenandoah Valley, an area in which they were well known and highly respected, greeted with great sympathy as they traveled. Isaac's brother John, who had spent several years as a missionary, died during this exile.

John Clifford Pemberton

In some ways, the most curiously notable Pemberton was John Clifford Pemberton, who applied to West Point on his own initiative and was appointed by Andrew Jackson who had been a friend of his father. In itself, it is curious that so combative a person and so vigorous an enemy of the Indians -- as Jackson certainly was -- would have Quaker friendships. But he did not misjudge John Clifford, who became a diligent professional warrior for his country in a number of military incidents with the Indians, the Mexicans, and the Canadians, rising to the rank of captain in the regular Army at the opening of the Civil War. In spite of personal efforts by General Winfield Scott to dissuade him, he resigned his commission and volunteered in the Confederate army. He was quickly promoted to major, then a brigadier general and eventually to Lieutenant General. As such, he was the commanding Confederate officer at the fifty-day siege of Vicksburg where he was finally forced to surrender to Grant's army. In a prisoner exchange, he was returned to the Confederate side, which they had no openings for Lieutenant Generals. He resigned and re-enlisted as a common soldier, but was quickly promoted to the rank of Colonel, in charge of the artillery at the final siege of Richmond. After the war, he became a farmer in Warrenton, Virginia, but was visiting at the family home in Penllyn when he died in 1881. John Clifford Pemberton, the highest-ranking general on the grounds, lies buried in Laurel Hill cemetery right next to Israel Pemberton. In some sort of triumph of the South, he here out-ranks George Gordon Meade, the hero of Gettysburg. Just how his pacifist family reconciled itself to his heroism can only be imagined.

The Jews in Colonial Philadelphia

Haym Salomon

The word Sephardi is derived from the Hebrew word for Spain, where Jews were a prominent part of the Arab community for several hundred years. The Christian monarchs Ferdinand and Isabella, regarding the Sephardim as pro-Arab, drove them out of Spain and Portugal in 1492. They scattered widely, and only a small portion eventually got to the Western hemisphere. It is also helpful to know that Askenazic is the Hebrew word for German since this other main branch of the religion did not emigrate to America until later in the Nineteenth century in response to the suppression following the 1848 Revolutions. There are some important differences in liturgy, and occasional episodes of bad feeling between the two Jewish groups, some of it kept alive by issues arising in Israel. Historically, the Sephardim have had a greater tendency to assimilate in local cultures, both generally and particularly in Philadelphia. However, the most prominent Jew in the American Revolutionary War was Haym Salomon, who was born in Poland.

On leaving Spain, many Sephardim had gone to Amsterdam, and from there to the Dutch colonies hat accounts for their presence in the Delaware Bay as part of the Dutch settlements which preceded William Penn's arrival. The British conquest of the Dutch accounts for their subsequent local disappearance. However, it paradoxically also accounts for an influx from Curacao and other Caribbean Dutch colonies conquered by the British, usually favoring New York as a place to settle. Presumably, Sephardic feelings about the English were cautious at best. When the British occupied New York in the early days of the American Revolution, many Sephardim fled to Philadelphia, but largely returned to New York after the end of the Revolution. There was thus a double process of filtering out those who were unsympathetic with the British, and those who were attracted by seeing what Philadelphia represented.

Records were poorly kept in those days, and in civil wars, there are often reasons to be vague about your sympathies and activities. We know that Haym Salomon came to Philadelphia in 1774, grew very rich in association with Robert Morris, but died in poverty after a few years, now lying in an unmarked grave. It is a little unclear how he became rich, although all merchants involved in shipping did a little privateering, often described as piracy by the victims. It is also unclear how he became suddenly poor, although speculators in currency and land often make serious misjudgments. Robert Morris is himself a prime example.

The matter becomes of greater interest when Haym Salomon is sometimes referred to as one of the main financiers of the Revolution. Partly because of the ease of counterfeiting with the primitive printing technology of the time, the British had forbidden the use of paper money in the colonies as part of the Townshend Acts. While understandable, it caused great pain to unbalanced trade partners, and metal coins quickly migrated back to England, almost paralyzing colonial economies for lack of cash to transact local business. It probably caused a different sort of a pain to Benjamin Franklin, who derived much of his income from printing the currency of New Jersey. In particular, it kept cargoes trapped in port for lack of payment, which the annoyed British merchants mistook as an implementation of John Dickinson's proposal for deliberate "non-importation". In any event, Jewish merchants and bankers were well situated to find ways around currency blockages, sometimes using precious gems as substitutes for specie, and utilizing informal family networks scattered around the world. In civil wars, guns have to be bought and paid for, legalities get swept aside. There is said to be evidence that our ambassador to France, Benjamin Franklin, utilized Salomon to translate the French loans he had negotiated into the munitions which colonials needed. There is incidentally reason to believe that the Rothschild family established its great wealth by similar commodity dealings at the time of the Battle of Waterloo.

Just what it was that went so drastically wrong for Haym Salomon at the conclusion of our war for independence has not yet been made clear, perhaps never will be. He may have been caught in the uproar over the worthless Continental currency, his ships may have been captured, or he may have been trapped by the land speculation which ruined Robert Morris. But those were rough, tough times. We have the word of those who should know, that Salomon's service was essential to our achievement of Independence.

Shrine of Historical Restoration

Silas Weir Mitchell

There are only a half-dozen wooden houses in Philadelphia, a consequence of laws passed after a disastrous colonial firestorm. Silas Weir Mitchell wrote a novel called "The Red City", referring to all the red brick houses in Philadelphia, particularly those along the bank of the Delaware River, greeting visitors arriving by sail. People who know about these things say only Dublin, Ireland has more redbrick colonial and Federalist houses still standing. You have to care about these things to preserve them; recently I heard that New Brunswick in New Jersey had a very large patch of Eighteenth Century and Federalist houses still standing fifty years ago. No one seemed to care, so they crumbled.

{Charles Peterson}
Charles Peterson

But Charlie Peterson cared, and Judge Edwin O. Lewis cared, too. Peterson and Lewis are now gone, but these two were the idea men behind the historical restoration of Philadelphia, for which Mayor Dilworth and Senator Joe Clark generally get most credit. The Edwin O. Lewis fountain was recently torn down to make room for a gigantic visitors center, sic transit Gloria Mundi, but he alone had the force of personality, wit, imagination and drive to make Peterson's vision come to pass.

{The Adams Manison}
The Adams Mansion

You are expected to be self-effacing if you work for the Park Service, but Charlie had a way of winning arguments and bringing people around to his visions. He thinks big. Back in the days when the Park Service was strictly a management team for the National Parks in the West, Charlie persuaded the service that if they developed some parks in the Eastern part of the country, there might be more congressmen willing to vote funds for their projects. And that, in essence, was the driving slogan of the restoration of Williamsburg, Virginia, and the Skyline Drive. Lots of very rich people joined into these celebrations of the past, but it was Charlie who gave them the courage to hold their cultural opinions. And that was particularly true of the midwesterners with French names living in Midwestern states with French names, mostly unaware until he told them so, that it was the French coming down from Canada that opened up that region long before Lewis and Clark set out.

Charlie had an interesting time making the Adams Farmhouse in Quincy Mass . into a part of the national heritage; it's now the Adams Mansion. But it is Society Hill of Philadelphia that collectively got up off its unimaginative back, meanwhile becoming a national monument, and a silent monument to Charlie Peterson. In the Quaker view, the worship of buildings is idolatry. If you go to the right place and knock on the right door, you will find that Charlie had the imagination to take all that junk out of the dumpster, work out the provenance, label, and display exhibits of the architectural history of the area, starting a whole industry of house restorers who now have a template against which to match their un-provenanced dumpster relics. Who but Charlie would have held cocktail receptions to look at the salvaged crockery found in old Philadelphia privies, and even though thoroughly washed up, had the combination of quiet wit and brazenness to make the events a rollicking success. The Architectural Fragments Museum is something you are sure to talk about if you know enough to visit it and providing they will let you in...

No doubt the museum of shutters, nails, and doorknobs had its origin in his mind as a result of creating HABS, the Historic American Building Survey, in Washington thirty years earlier. The first and largest of its kind, this collection of photographs and measured drawings of practically every building in America with historical significance was started by him in 1933 with WPA money and unemployed architectural talent in the great economic depression of that time. It's worth a visit if they will let you in, which is not guaranteed, either. Put that name down Charles E. Peterson, the father of American architectural preservation and restoration.

America in 1767

{dekalb exhibition}
Johann de Kalb

Baron Johann de Kalb was to die a hero of the American Revolution in 1780, but in 1767 he was a spy for France, scouting out potential French opportunities in America. He made the following report to the French minister of foreign affairs, duc de Choiseul:

"Everywhere there are children swarming like broods of ducks, large fertile farms, flourishing industries, and harborsbarely able to hold the and fishing and Merchant Fleets

"Whatever may be done in London," judged de Kalb, "this country is growing too powerful to be much longer governed at such a distance."

- as cited by Walter A. MacDougall, Freedom Just Around the Corner


Freedom Just Around the Corner: A New American History: 1585-1828: Walter A. McDougall ISBN-13: 978-0060197896 Amazon

Benjamin Franklin: Chronology

{Ben Franklin on the cover of Time magazine}
Ben Franklin on the cover of Time magazine

January 17, 1706 Born in Boston, the thirteenth child of a candle maker; only went through 2nd Grade, Apprenticed to his brother as a printer, ran away to Philadelphia age 17 .
1723 Arrived in Philadelphia penniless, readily found work as a printer.

1725-26 First trip to England. Researched printing equipment, but probably lived a riotous life.

1726-1748 Returned to Philadelphia to found his own print shop and bookstore. Wrote and printed Poor Richard's Almanack organized local tradesmen into the Junto, formed partnerships with sixty printers throughout the colonies, obtained the print business of local governments, became postmaster. Able to retire at the age of 42 by selling his business for 18 annual payments, which offered him comfort and ease for considerably longer than his life expectancy.


1751 Helped found Pennsylvania Hospital. Entered the legislature.

1751-1757 Active in legislature, rising to leadership during the French and Indian War, Pontiac's Rebellion and the uprising of the Paxtang Boys.

1754Took a noteworthy carriage trip to the Albany Conference, accompanied by fellow delegates Proprietor Penn and Isaac Norris at which he proposed unification of the thirteen colonies to fight against the French. Composed the first political cartoon "Join or Die" for that purpose. Notes for the trip on the blank pages of "Poor Richard's Almanac", now at Rosenbach Museum. The other delegates rejected the plan.

1757-1762 Second time in England. Acted as representative of both Pennsylvania and Massachusetts. After his electoral defeat, he returned to England for a total of eighteen years, suggesting hidden British sympathies may have been present. .

1762-1764 Returned to Pennsylvania Legislature, where his unpopular agitation for replacing the Penn Proprietors with direct Royal government led to his electoral defeat and the end of his elective career. The defeated but determined Quaker party sent him to England to lobby against the Penn family and for the rule of Pennsylvania by the King.

1764-1775 Third British visit. Although unsuccessful in his lobbying, his fame as a scientist made him welcome among the famous members of the Enlightenment, like Hume, Adam Smith, Mozart. Meanwhile, the colonies became considerably more rebellious than he was. His blunder with the publication of some letters gave the British Ministry an opportunity to humiliate and disgrace him in public, probably as a warning to the mutinous New England leaders. It irreconcilably alienated Franklin, who sulked, then packed up and joined the Continental Congress the day he arrived back home.

March, 1775-October, 1776 Brief but fateful return to America. Decisions were made in London to put down the colonists by as much force as necessary. Meanwhile, Franklin persuaded the Continental Congress they must declare independence from England if they expected help from the French.

July 4, 1776, Independence is declared within days after the arrival of a massive British fleet in New York harbor. Franklin dispatched to France to secure the assistance he was confident he could get.

1777-1785 France. Franklin served admirably as American ambassador, his wit and charm persuading the French to overextend themselves with ships, supplies, and money, and very likely contributing to the French Revolution by popularizing the American one.

1785-1790 Returning as a national hero for his final five years of life, Franklin loaned his personal influence to the constitutional convention, became President of Pennsylvania, worked for the abolition of slavery.

April 17, 1790 Died, probably of complications associated with kidney stones.

Charles Peterson and Amity Buttons

{Charles Peterson}
Charles Peterson

Charles Peterson, the famous architectural historian and preservationist, died just before his 98th birthday on August 19, 2004. It is to him we largely owe the redevelopment of Society Hill, and the design of the Independence National Park, as well as a host of restorations from the Adams Mansion of Quincy, Massachusetts, to the early French settlements along the Mississippi. He conceived of many national historic preservation projects, the most notable of which is the Historic American Buildings Survey (HASB) of the Department of the Interior.

The Adams Mansion

While he was most notable for large visions and huge projects, he also had a keen appreciation for fastidious accuracy in small matters, of which the Amity Button would be a vivid example. In the surviving Colonial buildings of Philadelphia, it is common to find a plain ivory coat button nailed to the top of the newel post of the main staircase. There's one in Independence Hall, another in the grand staircase of the Pennsylvania Hospital, and there is one in Charlie Peterson's own home, the one where he was the first Society Hill gentrification pioneer, a house originally built by Stephen Girard around 3rd and Spruce.

The Free Quaker
Meeting House

There is a strong tradition in Philadelphia that these strange buttons are Amity Buttons, nailed there by the Quaker builder at the moment when the new owner had fully settled his construction debt, symbolizing the amity between a willing buyer and a willing seller. Countless visitors to Society Hill have been shown these curious buttons, and it always seems to produce a warm glow of appreciation for the discovery. If you have one of these in your own house, you can be very proud.

Unfortunately, Charlie Peterson couldn't find any evidence for the truth of this fable, and you can be sure he subjected the matter to a totally dedicated search. You might think there would be some notations in the deeds, or in the correspondence of the day, or in the literature of the times. You would think that someone who repeats this tale would be able to relate where he got it, and that would lead to some letters in an attic, and that if you work hard enough, you will find it. But when the button matter came up, Mr. Peterson would suddenly become grim-lipped and sad, and repeat the mantra that there is no evidence to support the story. He even awarded prizes to architectural students for essays on newel posts, banisters, and stair rails, but no student essay ever turned up any authentication of the Amity Button story. Absence of evidence is of course not the same as evidence of absence, so it is remotely possible that the story will someday be vindicated.

Indeed, you have to believe there was something or other to start the story. Victor Failmetzger and his wife, who have a notable reputation for authenticating old house parts, relate that in Colonial Virginia it was common to have hollow newel posts on the stairway, and occasionally to find the deed to the house secreted in one of them. So the search goes on.

In fact, it always seemed likely that Charles Peterson very much wanted to believe the fable was true. But until some evidence turned up, he was going to go to his grave with the declaration that there existed no evidence for it.

Sacred Places at Risk

Old St. Joe's

When William Penn invited all religions to enjoy the freedom of Pennsylvania, he created a home for the first churches in America of many existing religions, and furthermore the founding mother churches for many new religions. Regardless of the local congregation, there is obviously a strong wish to preserve the oldest churches of the Presbyterian, Methodist, United Brethren, African Methodist Episcopal, Baptist, Mennonite, and many other denominations. While the founding church of Roman Catholicism was obviously not in Philadelphia, St. Josephs at 3rd and Willing was for many decades the only place in the American colonies where the Catholic Mass could be openly performed. The towering genius of William Penn lay in the combination of an almost saintly wish to spread religious toleration, combined with what must have been a sure recognition that the motive of Charles II in giving him the land, was to get rid of all those dissenters from England.

Philadelphia now has a thousand church structures within the city limits, and more than a thousand in the suburbs. However, many church buildings find themselves stranded by the migration of local ethnic groups to other locations, and a decision must be made whether to demolish a relic or sell it to a new population who have moved into the old neighborhood with a new religion. There is still greater discomfort with selling an old church to a commercial enterprise, but even that happens. The resulting bewilderment and dissension among the surviving parishioners is easy to imagine as they face these choices, or fail to face them, and it is readily imagined that the establishment in 1989 of Partners for Sacred Places filled a very important need.

First Presbyterian Church

The Executive Director, Robert Jaeger, recently described to the Right Angle Club how the Partners operate. First of all, the Constitutional separation of church and state makes it difficult to seek funding or even advice from the Federal government. Pennsylvania has been less hesitant than most states in this regard, but even here the issue of fund-raising is a central issue. One only has to look at the Aztec and Mayan religious sites in Mexico to grasp that there are circumstances when the parishioners of a religion may have completely died out, but their monuments justify state assistance. Private, nondenominational philanthropy seems the easiest route for a society to take, in avoiding the obvious political and legal entanglements of seeming to assist one denomination more than others.

And then there are architectural issues;, can the building be saved at a reasonable cost, is it truly a unique or outstanding piece of art, can a reconstruction go ahead in an incremental way, are the necessary stone or other materials any longer obtainable, do the workman skills exist? In addition to these issues which are commonly presented to a congregation, there are issues they probably have never considered. As congregants move from center-city to the suburbs, they become commuters to church, largely out of touch with the local community and its activities. A survey conducted by the Partners suggests that 81% of the activity which takes place in church buildings on weekdays is conducted by and for non-members of the church; if the two groups lose touch with each other, opportunities are missed, and eventually there may be unnecessary friction. On the other hand, those non-religious activities probably escape the legal prohibitions against government assistance, and may suit themselves as vehicles for indirect government support. The approach has so much promise that Partners for Sacred Places has devised a computer program on their website which provides a way for congregations to assess their assets, and their problems. In fact, the organization conducts extensive training programs for church preservation, and has been forced by the size of the demand to exclude churches that are clearly failing beyond reasonable hope of recovery by their church membership.

The Partnership was originally founded by consolidation of the New York and Philadelphia organizations, to make a stronger national effort. But now things are going the other way. New chapters are springing up in Texas and California. Partners for Sacred Places is obviously proving to be a good idea, effectively managed.

Powel House, Huzzah!

Elizabeth Powel

If George Washington were still alive he would no doubt be a Republican, but the term Republican Court actually has nothing to do with R's and D's. It was a scheme deliberately cooked up by Washington and Madison to enlist support by the new government's important ladies for a modified version of a European royal court, to make thirteen colonies into a cohesive nation. A most remarkable thing about it was its frank imitation of the royal courts, something only the Father of His Country could pull off in former colonies which had just fought an eight-year war to be rid of the monarchy. It is one more great testimony to the faith of Americans in George Washington; but it also testifies to the power of enthusiastic women, once they agree on a project. Chief among the leaders in this court was Elizabeth Powel, along with her niece living around the corner on Spruce Street, Anne Willing Bingham. Recently, the Peale Society of the Academy of Fine Arts held a candlelight dinner in Mrs. Powel's magnificent second-floor dining room, while scholars of the history of the Republican Court told assembled notables of Philadelphia what had once been what, during the first ten years of the Republic.

Dining Room

Members of the early Congress were largely the same men as the founding fathers of the Constitutional Convention, hand-picked by Washington and Madison to persuade the legislatures of their colonial states to give up state sovereignty, for a unified nation. There was the difference that now they brought their wives to live in Philadelphia during sessions of Congress. Those women wanted to know each other and wanted to have something exciting to do together in the largest city in the nation. Their husbands knew well how politically useful it was to be socially acquainted in this way, so everybody liked the idea of suddenly becoming nationally connected. The initial idea proved unworkable. Martha Washington was supposed to become Lady Washington, reigning over weekly receptions.

In Our Cups

But Martha, unfortunately, wasn't up to the task, and Anne Bingham whose rich husband had taken her on lengthy tours of European royal courts, moved right in and took charge of this project. Besides her cousin Elizabeth Powel, notable members of this social whirl were the two daughters of Chief Justice Benjamin Chew, Alexander Hamilton's wife, and various members of the Shippen and Willing families. Members of the family of Lord Sterling of New Jersey, Charles Carroll of Carrolton, Maryland, Cadwaladers of various sorts, and a number of other names famous from then until even today joined their affiliations with ladies from other states through parties and even some weddings. John Adams was particularly awestruck by the poise and beauty of Anne Bingham, although Abigail Adams may not have been quite so infatuated. It was a dizzy whirl, with dinner parties the central activity just as they are in Philadelphia even today. Country bumpkins had to learn how to dress, to talk and to eat with the right spoon and keep their elbows off the table; those who could tactfully show them what was what were friends for life. Centuries later, Emily Post made a fortune writing books about these rules.

Republican Court

In those days, they even had their war cry, which was to raise a glass and shout back "Huzzah" in response to the proposer of a toast, who had raised his glass starting the warcry. It wasn't "Skol" or "Cheers" or "Here, here" if you knew what was what; it was "Huzzah". Most fashionable dinners had at least twenty courses, but the ladies didn't eat them. It was a whispered instruction among the ladies that they should eat before the dinner, so they could gracefully decline to gobble up goodies, and spend their time in gay conversation or waiting to be asked to dance. Drinking and eating, especially drinking, was for the men at the party, although naturally the many courses of the banquet were put in front of the ladies to be airily ignored. When George Washington was present as he often was, or even La Rochfoucault himself, it was important to remember every spoken word.

And, you know, it worked. When these important people went back home, they took the customs of the Republican Court with them. The American diplomatic corps found the equivalent of minor-league training for their efforts on behalf of the country abroad. Politics was easier if you personally knew your adversaries as well as your allies. The persistence of the same family names in the Social Register, the lists of The Four Hundred and other compilations of high society show that Anne Bingham and Elizabeth Powel did indeed know what they were doing, and for that matter, so did George Washington. If anyone else had been at the top of this heap, Thomas Jefferson stood ready to attack with all his might.

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But he and even Patrick Henry didn't dare attack Washington. The aristocrats of Old Europe probably did sneer at this amateur effort, and in some circles still, do. But the inability of absolutely any other group of nations, whether European, Asian or South American, to unite peacefully is a thumb in the eye of anyone who mocks George Washington's little Philadelphia creation. And to think it all began right here, right here in the Powel House, right here in the dining room on the second floor. For that, folks, one thunderous "Huzzah!"


A Portrait of Elizabeth Willing Powell: 1743-1830 David W. Maxey ISBN-13: 978-0871699640 Amazon

What Happened in Philadelphia on July 4, 1776?

Spirit of 76'

The American colonies were growing too big, too fast, and the British Empire had too many international distractions, to have smooth relationships across three thousand miles of ocean, using uncertain communications available in the late Eighteenth century. Friction and misunderstanding were inevitable without far more statesmanship than either side thought was necessary. So, when the Continental Congress dispatched George Washington to Boston with troops to defend rebellious Massachusetts at Lexington, Concord, and Bunker Hill, it was hard for the British to believe the colonists were merely helping out one of their distressed neighbors. It seemed in London that the thirteen colonies had united, formed not only an army but a government, and gone to war. In December 1775 England passed the Prohibitory Act, essentially declaring war, and organized a huge invasion fleet to put down the rebellion. It now seems hard to understand the first notice the Americans had of this huge over-reaction was a private letter to Robert Morris from one of his agents in March 1776; no warnings, no negotiations, no attempt to investigate problems and correct them. The British just sent a fleet to settle this problem, whatever it was. It's all very well to say the Americans should have known they were playing with fire. They didn't see it that way; they were being self-reliant, responding to attack. In June 1776 British patrol frigates were skirmishing in the Delaware River; late in the month, British troops landed on Staten Island. The American reaction to all this was a muddle of confusion. A few were delighted, most of the rest were amazed or appalled.

Although the deeper strategic origins of the American Revolution are subtle, complex, and controversial, there is far less muddle about what happened on July 2, 1776, publicly proclaimed two days later. Adopting a resolution written by Richard Henry Lee of Virginia, the Thirteen Colonies stated they had now clarified their goals in the controversy with the British monarchy. For a year before that, the Continental Congress had been corresponding with each other and meeting in Carpenters Hall with the goal of achieving representation in the British parliament -- "No taxation without representation". The model for most of them was based on the Whig agitation for Ireland -- for a local parliament within a larger commonwealth. But the passing of the British Navy in Halifax, Nova Scotia, and then the actual appearance of seven hundred British warships in American waters showed that not only was Parliamentary representation out of the question, but King George III was going to play rough with upstarts. The new goal was no longer just representation, it was independence. If we were going to resist a military occupation at the risk of being hanged as traitors, we might as well do it for something substantial. The meeting had a number of Scotch-Irish Princeton graduates, whose basic loyalty to England had long been divided. Pacifist Pennsylvania, chief among the wavering hold-outs, was mostly won over by its own Benjamin Franklin, who was optimistic the French would help us. Even so, both Robert Morris and John Dickinson refused to sign the Declaration; Franklin persuaded both to abstain by absence, which created a majority of the Pennsylvania delegation in favor. That's a pretty slim majority for a crucial decision. Franklin was soon dispatched back to Paris to make an alliance; Washington was dispatched to hold off that British army in the meantime. Jefferson was designated to write a proclamation, which even after editing is still pretty unreadable beyond the first couple of sentences. Meeting adjourned. This brief account may not qualify as a serious examination of the causes of the American Revolution, but it comes close to the way it seemed to the colonist in the street.

Colonist's Complaint

The rebels then spent eight years convincing the British they were serious and have been independent ever since. But, just a minute, here. Reflect on the fact that fighting had been going on for a year in Massachusetts, and that Lord Howe's fleet had set sail a month before the Declaration, actually landing on Staten Island at just about the same time as the Fourth of July. Add the fact that only John Hancock actually signed the document on July 4th, and some of the signers even waited until September. You can sort of see why John Adams never got over the idea that Thomas Jefferson had a big nerve implying the whole Revolution was his idea. What's more, there's a viewpoint that New England subsequently had to endure a President from Virginia for thirty-two of the first thirty-six years of the new nation because loud talk from New England still made the rest of the country nervous. Philadelphia may have been the cradle of Independence, but that was not because it was a colony hot for war, dragging others along with it. Rather, it was the largest city in the colonies, centrally located. It had a strong pacifist tradition, and it had the most to lose from a pillaging enemy war machine. When Independence was finally declared the goal, many of Philadelphia's leading citizens moved to Canada.

New England had started hostilities and was about to be subdued by overwhelming force. The Canadians were not going to come to their aid, because they were French, and Catholic, and enough said. What New England and the Scotch-Irish needed were WASP allies, stretching for two thousand miles to the South. By far the largest colony was Virginia, which included what is now Kentucky and West Virginia; it even had some legal claims for vastly larger territory. Virginia was incensed about its powerlessness against British mercantilism, especially the tobacco trade. The rest of the English colonies had plenty of assorted grievances against George III, and almost all of them could see that America was rapidly outgrowing dependency on the British homeland, without a sign that Parliament was ever going to surrender home rule to them. It was perhaps unfortunate New Englanders were so impulsive, but it looked as though a military confrontation with the Crown was inevitably coming. Without support, New England was likely to be torched, as Rome once subdued Carthage.

And the last hope for an alternative of flattery and diplomacy, for guile and subtlety, had stepped off the boat a year earlier. Benjamin Franklin, our fabulous man in London, arrived with the news he had finally had it "up to here" with the British ministry. He was a man who quietly made things happen, carefully selecting his arguments from amongst many he had in mind. In retrospect, we can see that he held the idea of Anglo-Saxon world domination as far back as the Albany Conference of 1745, and could even look forward to America outgrowing England in the 19th Century. His behavior at the Constitutional Convention of 1787 strongly suggests he never completely gave up that long-term dream. Just as Edmund Burke never gave up the idea of Reconciliation with the Colonies, Benjamin Franklin never quite gave up the idea of Reconciliation with England. While John Dickinson and Robert Morris resisted the idea of Independence down to the last moment, Franklin took a much longer view. For the time being, it was necessary to defeat the British, and for that, we needed the help of the French. In 1750, America joined with the British to toss out the French. And then in 1776, we joined the French to toss out the British. Franklin didn't always get his way. But Franklin was always steering the ship.

Philadelphia in '76

Spirit of '76

Although the origins of the American Revolution are subtle and complex, even historically controversial, we have more or less united in the idea that we "declared" our independence from Britain on July 4, 1776. We then spent eight years convincing the British we were serious and have been independent ever since. Reflect, however, on the fact that fighting had been going on for a year in Massachusetts, and that Lord Howe's fleet had set sail a month before the Declaration, actually landing on Staten Island at just about the same time as the Fourth of July. Add to that the fact that only John Hancock actually signed the document on July 4th, and some of the signers waited until September. You can sort of see why John Adams never got over the idea that Thomas Jefferson had quite a nerve implying the whole thing was his idea. What's more, New England subsequently had to live with a President from Virginia for thirty-two of the first thirty-six years of the new nation. Philadelphia may have been the cradle of Independence, but that was not because it was a colony hot for war, dragging the others along with it. It was the largest city in the colonies, centrally located. It had a strong pacifist tradition, and it had the most to lose from a pillaging enemy war machine.

New England was in the position of having started hostilities, and about to be subdued by overwhelming force. The Canadians were not going to come to their aid, because they were French, and Catholic, and enough said. What the New Englanders wanted was WASP allies, stretching for two thousand miles to the South. By far the largest colony was Virginia, which included what is now Kentucky and West Virginia; it even had some legal claims for vastly larger territory. The rest of the English colonies had plenty of assorted grievances against George III, and almost all of them could see that America was rapidly outgrowing the dependency on the British homeland, without any sign that Parliament was ever going to surrender home rule to them. Perhaps it was unfortunate that New Englanders were so impulsive, but it looked as though a confrontation with the Crown was inevitably coming, and without support, New England was likely to be subdued like Carthage.

And then, the last hope for flattery and diplomacy, for guile and subtlety, stepped off the boat. Benjamin Franklin, our fabulous man in London, had it "up to here" with the British ministry. He finally was saying what others had been thinking. It was now, or never.

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July 4, 1776: Patients in the Pennsylvania Hospital on Independence Day

According to the records of the Pennsylvania Hospital, the following 48 persons were patients in the hospital on July 4, 1776:

Richard Brinkinshire (Admitted 11/15/1775) John Ridgeway (Admitted 12/26/1775)
James Chartier (Admitted 1/6/1776) patient (Admitted 1/6/1776)
patient (Admitted 1/20/1776) patient (Admitted 1/20/1776)
Mary Yell (Admitted 2/7/1776l) John Beckworth (Admitted 2/7/1776)
Bart. McCarty (Admitted 2/10/1776) John King (Admitted 2/10/1776)
Robert Alden (Admitted 2/17/1776) William Patterson (Admitted 3/6/1776)
Elizabeth Hanna (Admitted 3/9/1776) John McMahon (Admitted 3/13/1776)
Mary Burgess (Admitted 3/23/1776) Mary Anderson (Admitted 4/10/1776)
John Hatfield (Admitted 4/15/1776) Eliza Haighn (Admitted 4/17/1776)
Charles Whitford (Admitted 4/24/1776) patient (Admitted 5/8/1776)
Susanna Carrington (Admitted 5/8/1776) patient (Admitted 5/8/1776)
William Johnson (Admitted 5/13/1776) Lazarus Chesterfield (Admitted 5/22/1776)
Mary Spieckel (Admitted 5/22/1776l) William Edwards (Admitted 5/22/1776)
patient (Admitted 5/23/1776, Lunatic) Jane White (Admitted 5/25/1776)
Charles McGillop (Admitted 5/29/1776) ---Fitzgerald (Admitted 6/1/1776)
Michael Rowe (Admitted 6/6/1776) patient (Admitted 6/6/1776)
John Hughes (Admitted 6/12/1776) Joseph Smith (Admitted 6/15/1776)
Esther Munro Lunda (Admitted 6/15/1776) Mathew Coope (Admitted 6/19/1776)
Anne Patterson (Admitted 6/19/1776) Thomas Savoury (Admitted 6/20/1776)
Rebecca Winter (Admitted 6/26/1776) Elizabeth Manning (Admitted 6/26/1776)
Negro (Admitted 6/24/1776) Elex. Scanvay (Admitted 6/24/1776)
Fanny Stewart (Admitted 6/24/1776) Peter Barber (Admitted 6/29/1776)
Catherine Campbell (Admitted 6/29/1776) Ann McGlauklin (Admitted 7/3/1776)
Elizabeth Lindsay (Admitted 7/3/1776) Ann Jones (Admitted 7/3/1776)

The records indicate the following diseases were the reason for admission of those patients. Although in Colonial times there was no medical delicacy to avoid offending readers, present privacy standards require that we strip the diagnoses from the name of the patient and list them independently. There is some overlap, sometimes making it difficult to judge which disorder caused the admission.

The following physicians were elected at the Managers Meeting dated 5/13/1776:

Increased Potential for Retirement Villages

Pennsylvania Hospital, Nation's First Hospital, 1751

Healthcare institutions may well have mission statements, but the main force visibly shaping hospital mission is third-party reimbursement. One must be sympathetic with institutions which really prefer their own mission to the pressures from third parties, particularly when the "second party" -- the patient -- also likes the original mission better. Teaching hospitals surely would prefer to concentrate on streamlining tertiary care, retirement villages on enriching the lives of elderly residents, etc. And they could probably make a better case for what they prefer than third-parties can. When one-size-fits-all health insurance is imposed on institutions which must survive by internal cost shifting therefore, insurance mandates invisibly prevail. It is not always strictly a matter of "Who pays the piper calls the tune", as it is "Who pays the most can run the place."

Considering these invisible forces of control at work, it seems highly desirable to search for situations in which the incentives of the third-party do not run parallel to the incentives of the provider community. In the case of government third-parties, the goals of the agency may not even be parallel to the will of Congress. The public clearly prefers to pay for private rooms and private duty nurses if it can afford to, but those are mainly relics of the past. Doctors used to work out of offices in their homes, but you seldom see that, now. There once were twenty hospitals in Philadelphia which were owned, paid for and operated by churches, but now at most, the church name is a relic on the front door surviving from a former era. If these changes were a response to public preference it would be another thing, but they are usually not even traceable to a written mandate which might be appealed. So it becomes all the harder to defy a mandate which grew out of the hospital's surmise as to what the third party would probably prefer. Perhaps some examples of social pressures at work would be useful.

It happens my own first office experience was in the home of an older doctor on vacation. The location of that family residence was a careful triangulation of convenience, expense, distance to the hospital, and the preferences of the patients. It was a grand experience to put aside the breakfast coffee, walk into the next room, and see the first patient of the day. Or to interrupt office hours for an emergency in the neighborhood for less than an hour and to have your excuses readily accepted by the waiting patients upon return. My colleagues had explained the financial advantages of sharing a roof and heating system with a tax-deductible business. But my accountant explained that the Internal Revenue Service didn't like offices in the house, and would surely audit any doctor silly if he persisted. So I spent fifty years in an office across the street from the hospital, commuting and seeing patients who had to commute to see me; the extra expenses of parking and the rest of that arrangement are easy to imagine. True, it was easier to visit the hospital patients, and nice to eat lunch with other doctors in the hospital cafeteria. But all of these decisions were not my own first choice. I never got a letter from the IRS or heard a murmur from them, but I always believed I was responding to their mandate. When an IRS agent finally wandered into my office as a patient, he admitted the IRS prejudice but said he believed it grew out of fear the business expenses reported would really be the expenses of a hobby, not a business.

A second relevant experience occurred when I was a resident physician. A staff physician at the hospital had a heart attack, and the Chief of Medicine asked me to take a few days off to tend to the problems in the stricken doctor's practice. His home and office were in the midst of a row-house district of town. When I arrived, the office was empty of patients, but the nurse was waiting with an umbrella. "Before we see the office patients, we must make rounds to see the bedridden patients at home." To my amazement, within a three-block radius of his office, there were nearly twenty patients in hospital beds at home. Some of them had oxygen tents, several of them had intravenous fluids dripping into their arms. The nurse told me that she drew blood for pickup by a laboratory and that with a little argument a portable x-ray machine could be brought to the home. At the foot of each bed was a hospital chart, all up-to-date with notes and reports. It might not be possible to run such a show in many other neighborhoods, but the city row house neighborhood was ideal. Or, not ideal perhaps, because there must have been many problems. But it was clear why Blue Cross had slow progress making sales to the people accustomed to this arrangement. And it even made clear why patients were content with open twenty-bed wards in a hospital, for at least ten years after Medicare would have gladly paid for a semi-private room. No private duty nurses, however, it might set an unwise example.

Two things are at work, here. Things happen to medical care which is undesirable, so someone needs to complain about them, and complainers must be provided with a place to appeal. The reverse is also true; good things which ought to happen, don't happen. So in addition to providing an appeals system, we somehow have to provide a wise and unbiased ombudsman to suggest what new initiatives ought to be undertaken. And the two functions, negative and positive, need to commune with each other. Parenthetically, since everybody gets involved in health care to some degree, adversary roles must be filled in this process, containing representatives of patients and also providers (both institutional and individual), as well as guardians of the purse. Since the process quickly becomes unwieldy, it needs to be associated with a special committee of Congress and needs to be able to summon both witnesses and experts. An annual convention in some pleasant spot might enhance the concept.

Institutions are another matter since quite often the personal opinions of the spokesman are constrained by the incentives of the institution. It must be made clear to them which opinion is desired.

Institutions choose their location for other considerations, chief among which is cheap land, but the location near public transportation is another factor. Whatever the thought process underlying it, nursing homes and retirement villages are almost always in the far suburbs. A related problem is a vexing difficulty for a center-city hospital to find a nearby nursing home for convalescents. These annoyances are protracted by the licensing rules in a round-about way. When a corporation is formed, typically a lawyer with a yellow pad asks two questions: "What are you going to name this organization?", and then, "What is its purpose?". Presumably, he then completes some forms and files the necessary applications. The stated purpose may well have other uses, but it defines the sort of license needed, and eventually either match or does not match the rules some third-party reimbursement agency has laid down for what sort of institution is eligible for reimbursement. After that, the system becomes much more rigid than it needs to be. As long as the institution remains defined as a hospital it will be paid by the third-party, and without that designation, it won't. Effectively, the state licensing board acquires the power to shut off the revenue of some institution which displeases it. But what displeases it (let's say, mice in the kitchen) usually bears a scant relationship to whether or not the institution is capable of performing additional tasks. It does not take long for these issues to get blurred and forgotten; the retirement village can't receive hospital reimbursement because it doesn't have a hospital license. A hospital license would permit it to do a lot of things it doesn't want to do. While the general idea is sound enough, the rigidity it imposes is excessive, particularly when you consider the penumbra of reluctance it provokes from employees. Obviously, the interpretations vary greatly between jurisdictions. It leads to hospitals which may perform heart transplantations but may not run a day-care center for the children of their employees.

There are many simple solutions to this simple problem, but because so much of it is buried in-laws, it would probably require a special court to be appointed to oversee it. How busy that court would be would depend on how vigorously competitors would resist it, which would probably vary with the region.

In any event, Society has a legitimate interest in preserving the quality of care, but it does not fulfill that duty by transferring it to reimbursement agencies. During wars, surgery is satisfactorily performed in tents, for an extreme example of how expendable much oversight can be. Another principle would be to ease impediments to overlaps of functions between institutions, particularly including the backward sharing of component services and records toward the lower-level institution. Since such sharing is often observed to occur without objection within vertically integrated institutions, there is every indication it is both desirable and feasible between competitors.

Going much farther back to the town meeting form of oversight, the most radical departure from present custom would be to encourage a shift of the center of care from inpatient hospitals toward retirement villages. The simplest definition of the center of care would be the location of primary physician offices, and the most important step would be to discourage mandatory links between referring physicians and particular acute care hospitals. Doctors left to themselves will locate where the patients are, and increasingly it is possible to see a shift of patients requiring chronic disease management and terminal care into the retirement village. The tendency of doctors and laboratories to cluster around hospitals impedes this natural shifting together. If doctors shift their offices and are allowed a choice, laboratories and x-rays will soon follow them. Before Medicare, the center of care was found near the high-rent districts of cities. In London it was Harley Street, in Philadelphia it was Spruce Street. As reimbursement changed, it shifted toward the hospital campus, where the parking problem is also solved. Nowadays, early discharge and reimbursement shifts have made it unattractive for a primary care physician to visit his patients in the hospital, so hospitalist and emergency room specialties are flourishing, with computerization feebly bridging interruptions to the continuity of care. The primary care physician would find the retirement village solves the parking problem; pharmacies and laboratory pick-up are often already in place, and non-surgical specialists would soon follow primary care physicians. Patient transportation, at present crippled by expensive municipal monopolies, would be greatly eased by such shifts of medical interaction. The ultimate shift of the center of care would be for the more mobile younger population of suburbs to shift allegiances toward the retirement village location, a change mostly affecting pediatricians. It would take some time, and it would always be a partial migration. However, the infirmaries of retirement villages offer convenience and comfort near home.

The most effective force maintaining standards for this level of care, have no doubt of it, is the ease with which friends within the community drop in for visits. They have time for it, especially to and from the dining room, and all of them keep a watchful eye on how they would likely be treated there themselves when their turn comes. In retirement communities, client consensus is a powerful force. What is lacking is a willing sharing of reimbursement with acute care hospitals. Therefore, the idea of brief hospitalization followed by longer recovery near home is now only realistically available to the affluent. But their choices show the way, as they always did before third-party insurance dominated the scene. For a while, little children may think it is funny to get their shots at the old folks home, but they will soon get over it.

Critical Number for Retirement Planning

Retirement Plan

There is scarcely any need to list the uncertainties of planning for retirement. To make a precise number, you would have to know how long you expect to live, how much you need to spend, how much cash flow is assured, how much your stock portfolio will be worth, what the rate of inflation will be, and so forth, and so forth. When you get done listing all the things you have to know, the general tendency is to assume the task is impossible. It's hard, but it isn't impossible if you know a single number: the average growth rate you need to achieve, if you are going to be in exactly the same financial position on your 100th birthday, as you are today. In my own case, the answer is 1.5%. I have arranged my own affairs in such a way that if my stock portfolio maintains a 1.5% growth rate until I reach my 100th birthday, it should be worth the same as it is today, on that happy occasion in the future. So, having the magic number of 1.5%, let's work with it. By the way, that's net, net -- net of inflation , net of taxes.

Inflation is supposed to be targeted by the Federal Reserve at 2% per year. It wouldn't be wise to count on that, but taken at face value, I can still break even if the nominal portfolio growth rate averages 3.5%, a conservative figure net of taxes. Remember however, you have to pay taxes on any taxable investment expenses. If you sell appreciated stock to have cash for portfolio re-balancing, you probably must pay capital gains taxes, if you take a lot of dividend income you will have to pay standard income taxes on it, if you get a new investment advisor who charges a lot you will probably have to pay him extra for his alleged expertise. In other words, if you get careless in your investment choices, you could find it will require an increased average growth rate, possibly one that is impossible to achieve. But that's your problem, which in my case is 1.5% plus actual inflation, plus investment carelessness about advisors and taxes. Or personal carelessness about housing costs, travel, fancy automobiles, or fancy friends. it means I could achieve a more likely growth rate of 4.5% a year, keep it up until I'm a hundred, and still be approximately where I am today. It seems achievable.

In fact, as you grow older it is less important to preserve every bit of your assets for the inheritance tax bite on the day you happen to die; particularly since inheritance taxes can go as high as 50%, and you can tell yourself you are spending fifty-cent dollars. Estate tax issues are not today's topic, however. For retirement planning, you could take the ancient advice to "spend your last dollar on the day you die." To entertain this illusion for a moment, you can see how much extra you could afford to spend, by dividing your assets by your life expectancy. You can consider that your safety net, but many people would have to consider it a reality, so this is the rough calculation. If you can't afford to retire on that amount, you probably can't afford to retire. This last calculation gets pretty inaccurate unless you are within five, or at most ten, years of retirement.

So all you need for scaring yourself, or sinking back into complacency, is to calculate that growth factor. Please remember the assumptions you made, in compiling it. Essentially, you total up a year's expenses and a year's income; and subtract to determine how much you are saving, or drawing down your reserves. It seems best to list all of the expenses and income on scratch paper, since at first you will want to go over the whole list to see if the year you picked was truly representative. The first step is to purify the list of one-time or odd-ball expenses and income. The second step is to pick out the expenses which are truly frivolous, which you would quickly eliminate in an emergency of some sort; what are the core expenses, what is truly frivolous, and what is desirable but expendable in a pinch. On the income side, there are pensions and annuities which assure you of cash flow, no matter what. There may be a job you plan to quit, or a pension which won't start for a few years. These are the tools you can use, but the main thing is to get that number, the amount could easily be saving, or the amount you must draw down your assets. Notice that we are essentially ignoring how much your assets happen to be, disregarding whether they happen to be a lucky high number, or an ominously small one. Your goal is to see how much you are either adding to them or subtracting from them; the purpose is to try to project where that will go in the future. In addition, you might also project the gain in your portfolio, but it would require several years to be certain about that, and for now we can get along without it.

Now, project that net gain (or loss) to your hundredth birthday. You may live longer than that, but it isn't likely; and you might live less than that, but you won't care if there is money left over for your estate. You might use a computer program to do it, but computers work by a process of "iteration", which means doing the same calculation, over and over again. For this simple purpose, it will suffice to do it with a pencil and paper, because the chances are good that you can project some future events which will interrupt the smooth flow of estimating one year's income from investment, and adding it to the running total. You soon get to 100, even using the crudest arithmetic, and you soon arrive at the net annual gain or loss in your portfolio at age 100, assuming the present rate of growth. If you do this for a few years, your projection will get more and more precise. You now take this number and re-calculate it with a differing growth rate of the portfolio. Start with 6%, and calculate up and down, 8%, then 4%, then 10%, then 2%, then 12%, etc. You vary the growth rate in a systematic way, and watch to see what growth rate of your portfolio will leave you at age 100, with exactly what you have, today. That's the magic number you want to get, the gross break-even growth rate. If it's a positive number, it tells you what growth you have to achieve in your portfolio, and if it's a negative number, it tells you how much you could afford to squander, you lucky person, over and above your present standard of living.

But now you have to see what could upset your applecart, like inflation. Our Federal Reserve has an announced target of 2% inflation, per year. If that happens, which I rather doubt, I need to add 2% to my 1.5%, getting a "real" target of 3.5% growth in my portfolio per year. That's an approximation of how much my portfolio has to grow, just to stay where it is. In my opinion it's achievable, but events may prove otherwise. Investments which promise less than 3.5% are for me not likely to seem safe, they are losers. Investments which pay more than 3.5% are likely to generate funds I cannot live to spend, so they will only generate inheritance costs approaching 50%. So in that happy case, I could consider giving some away, to my heirs, or charities, or whatnot. On the other hand, some young fellow who is projected to need a portfolio growth of 20%, had better consider getting an extra job, or cutting down his expenses--because the history of investments shows that 20% is either totally unachievable, or else involves so much risk that you better not gamble on it.

There's one other thing you can do if you are old, or sick. You can divide what you have by the number of years in your life expectancy, and spend it down. The goal is to spend the last dollar on the last day of your life. I hope everyone understands how unlikely you are to pull that stunt off, but sometimes it has to be considered. Somewhat more realistic is to adjust your life expectancy in this calculation, from 100 down to whatever age seems more likely. And maybe you have to reduce your lifestyle. Otherwise, your best salvation is not from an investment advisor, but from a social worker.

Try it out. Estimate your required net portfolio growth rate, and then add in "what if". What if the stock market collapses, what if inflation goes to 25%, what if social security gets reduced or increased, what if you suddenly acquire a new dependent. The older you are, and the longer you accumulate your own personal financial data, the more accurate the calculation will be. But at any age and in almost any financial circumstances, fixing your attention on that single number will be a North Star, to navigate by.

Friends Lifecare at Home

Over thirty Quaker retirement villages scatter through America, more than twenty in the suburbs of Philadelphia -- "under the care of the Yearly Meeting", as their expression has it. But for some people, community living seems unattractive. It does not speak to their condition.

For one thing, it may not be affordable.

Friends Lifecare

Or the style of may seem too fancy, or too plain, for some tastes regardless of cost. The increasing emotional rigidity of growing older is a factor; by the time people get to be seventy-five, they had better make this decision or forget it. Plenty of people are hale and hearty at ninety, but they establish pretty firm ideas about the sort of person they want for neighbors while they are still in the workforce. Quite often it's just a habit, people have lived in their home for several generations and cannot imagine another neighborhood, lifestyle, or environment. This is home, and they intend to die there.

So, to address this need, or market, a group of Quakers conceived of a retirement village without walls. Live in your own home and someone will come to oversee things, will know what to do if there is an emergency, and may eventually make the decision for you that you absolutely must go somewhere else. All of this is wrapped within an insurance vehicle, to recognize the fixed incomes of retired people, the inevitability of terminal illnesses, and the occasional risk of monumental medical expenses. At present, about 1600 people in Philadelphia are enrolled in the unique plan of Friends Lifecare at Home, making it one of the largest retirement communities in the country. The organization receives universal praise for its imaginative responses, as well as the dependability and high quality of the people it sends out to the homes of subscribers. Friends Lifecare is a pioneer, and it is gradually weeding out the ideas that didn't work and adding new features that were not originally contemplated. One of its greatest challenges is the need to adapt to unexpected and uncontrollable changes in the Medicare program. Slashes in the Medicare program could bankrupt Friends Lifecare, and even sudden windfalls like the Medicare Drug Benefit create management problems. There can be no doubt that one element of trust exists for which there is no substitute; Philadelphians know that the invisible support of the community and its Quaker core is behind them. If anyone can possibly preserve a moral commitment to the elderly, it will be the Quakers.

Ultimately, the commitment is not so much to 1600 subscribers as to the notion of finding out what works. Life expectancy has extended by three additional years, during the past ten; that's a joy, but it's a problem to finance. The optimum size of the organization is also an unsettled question. Although this program is relatively large by comparison with individual retirement villages, it may not be large enough to have spare capacity to cope with influenza epidemics or record-breaking spells of bad weather. Since it's the only one of its kind, it is vexed by the popularity in ever-widening geographic areas. It must grow to some reasonable size in one area before it can spread its resources to another. By the same reasoning, it must have a reasonable number of prosperous subscribers if it is to accept even a limited number of poor ones.

The idea of creating a seamless partnership with the residential-type retirement villages is certainly attractive, but Friends Lifecare must be careful to avoid becoming too much of a life raft for other people's problems. When the resale price of residential housing rises in a housing bubble, people wish to cling to a rising investment. During the same economic period, the entry and rental price of residential villages also rise. With a great many uncertainties that are specific to this pioneering effort, it is hard to know what policies to develop to insulate the lifecare environment from speculation in the mortgage and housing markets. Or, right now, high-rise apartment development. All of this creates a need for clear minds in the governance, determined to see and acknowledge difficult reality. If anyone can do it, Quakers can.

Designated Lifetime Funds

{Social Security}
Social Security

Except for Social Security, most retirement funds are not required to be tax-sheltered ("Federally Qualified"), but one would be foolish not to take advantage of the option where possible. Ordinarily, just about every other form of saving must first net out federal taxes. The debts of state governments ("municipal bonds") are free of federal but not state taxes, but reflect that benefit by paying a lower interest rate; any overall advantage must be calculated individually, and quite often it is non-existent. Mandatory taxable income, more-or-less mandatory tax-exempt income, and optional; that's your choice, except for the decision to put them in a federally qualified pension fund. Most people just throw the ownership certificates into a safe-deposit box and forget them. This article suggests you create three funds, whether in a lock-box or brokerage account and mentally rename them by overall purpose. There's not much you can do about tax status, but you have a little latitude about how and when you spend the money. It can make a certain amount of difference because increasingly it is true that investment performance is affected by taxes and fees. Friends, neighbors, and classmates may tell dazzling stories about astonishing investment luck, but if you want to have the best performance in your social circle over the very long haul, you would be well advised to focus on taxes, transaction costs, and fees. Especially fees.

Saving Bonds

When Grandpa gives a brand-new grandchild a hundred dollars, it can be spent on a new rattle or it can be invested. Rattles usually win, but occasionally it gets invested; what it's worth when the newborn finally dies will mostly depend on two things: how old he is when he dies, and how young he was when he started the investment. To make it easy to calculate, let's assume a life expectancy of 85 years, and an interest rate of 7%; that seems to imply a value of $40,000 at the time of death. That seems to imply a value of zero if he dies without spending any of it, and value somewhere around $30,000 if he pays current income taxes. But if he pays $100 a year for the lock-box, he will only have $20,000 left after expenses. And if he pays fees for his checking account, or receives only nominal interest for a savings account, he may end up with nothing at all. Since that's the usual outcome of most cases of Grandfather gifts, perhaps the choice of a rattle isn't so reprehensible. The whole investment process is too expensive to bother with until the sum involved is several thousand dollars. At fifty times the hundred dollar gift we started with, the investment is $5000, and its final result is a retirement fund of two million dollars. Yes, the arithmetic can be argued with, and yes, lots of things can go wrong in 85 years. Maybe a one-million dollar benefit is more likely, but no one can dispute that it's a pretty easy way to die a millionaire instead of a paper.

All right, that's your Contingency Fund. It's taxable, but almost everyone can start it pretty young and forget about it for long periods of time.

Tax Fund

The Tax Exempt Fund gets created when you start to work, even for a few days as a teenager. Several percents of your earnings will be withheld for the Social Security program, which requires that you apply for a Social Security number. If you wish, you can start depositing up to a set limit of your earnings as a tax-exempt fund for retirement, currently called an IRA or a 401-k fund. Your income taxes for the current year will be tax-sheltered, up to the amount taxed on the amount you contribute. It's a good thing to get one of these funds started as soon as you are legally able to do it, so the mechanics are completed while the amounts are still small. The suggested funds are the ones with the smallest administrative costs, which will probably be no-load index funds; if the fund you choose has more than a trillion dollars under its control, you are probably reasonably safe. Try to keep depositing automatically, right up to the maximum amount allowed by the law, right up to the day you die if they will let you, and select the option of automatically re-investing any dividends. Until these vehicles were created, just about the only tax-exempt investments anyone could buy were tax-exempt municipal bonds and life insurance. Both of these vehicles have some major disadvantages; the IRA and 401-k mechanisms allow you to apply the tax exemption to just about any investment you choose, so they are just as good as anything you can buy, plus having the advantage of being tax sheltered. If anyone proposes investments other than IRA/401-k before you exhaust the limits of these, that person has some serious explaining to do; at the very least get a second opinion. It will be a rare person under the age of forty, perhaps an entertainer or professional athlete, who has money left to invest after fully exhausting the tax exemptions. That's because the typical young person takes on the burden of buying a house or paying for private education for children, and there just isn't enough money to go around.

Life Insurance

Life Insurance is a comparatively poor investment, and it is an even worse investment if it is purchased without investigation or comparison shopping. Some insurance companies, like Northwestern Mutual, have considerably better results than the average, and some other very large, very famous "leading" life insurance companies have pretty inferior results. Life insurance does provide some tax exemption, however, which varies a little between states as a result of the McCarran Fergusson Act of 1945. However, the legislation does produce tricky features, like tax-exempting either the owner or the beneficiary of the policy, but not both. The entire first-year premium is ordinarily paid to the salesman as a commission, and sometimes the commissions continue for life. But that is only part of the incentive which the life insurance salesman has for selling excess coverage. The other incentive is worth serious pondering: the main source of life insurance profits derives from a large number of clients who pay premiums for a while and then drop the policy without collecting on it. The deplorable national statistics on temporary job loss, personal bankruptcies, and divorce carry implications of considerable weight for the purchase of life insurance; investment is limited to what you happen to have, but life insurance is based on projections of what you hope to have, or what you fear.

Ternary Operator and the IIF function

The standard PHP If statement can be reduced by the ternary operator, which is described in the PHP manual Comparison Operators. The IIF function puts the ternary operator into a function.

Ternary Operator

conditional ? if_true : if_not_true;

is the same as

if (conditional)

IIF Function

To return the result of the ternary operator

function iif($expression, $returntrue, $returnfalse = '') {
    return ($expression ? $returntrue : $returnfalse);

Reflections on Immortality

Notions of Immortality

When we are children, we have childish notions of immortality. Perhaps we still nourish them for lack of replacement, busying our thoughts with premature death, instead. Most of us forget the dreams of robbing candy stores or marrying a princess, and never bother to replace them. After all, everyone has to die, don't they?

So put it this way: we now have semi-realistic plans to end our lives with a thirty-year paid vacation, but what can be said about a fifty-year paid vacation, or even a hundred? Life itself is degraded by seventy years of loafing, as those who could afford it will tell you. All notions of purpose to life eventually disappear. No longer defining ourselves as soldiers and housewives; we're just cats, dogs and lice. And all our yesteryears have lighted fools the way to welcome death. As that day approaches, it will be marked by waves of awesome but fruitless literature. The Calvinist worship of work gets the last laugh of the comedy.

Subsequent generations of would-be hedonists have certainly given Calvin a hard time. Harder, in a way, than dunkings and pillories. Perhaps harder even than burning at the stake, because Calvinists had the audacity to get rich and comfortable by their effrontery. Perhaps poor and comfortable is better, and comfortable is the real goal, as Quakers were executed for advising. Once you get over the ambition to be King, what else is there?

Stretching Out Your Retirement Savings

{Benjamin Franklin}
Benjamin Franklin

Benjamin Franklin was able to retire from the printing business at the age of 42. His partners bought him out in eighteen yearly installments. In the Eighteenth century, it was unusual to live past the age of 60, so Ben felt pretty well fixed. Unfortunately for this planning, he lived to be 82, so when he did reach the age of 60 he was forced to look around for postmasterships and other ways to survive, for what proved to be 22 more years.

This is the other side of a coin; on one side is written, "Protect your family in case you die young". On the opposite side is written, "Be careful not to outlive your savings", relying on the old Quaker maxim that the best way to have enough--is to have a little too much. For centuries, life insurance was sold to people who mainly feared the first, commonest, possibility, but never completely addressed the opposite contingency, which was growing steadily commoner. Annuity insurance ordinarily is sold for a fixed number of years, so insurance commissioners ordinarily require what is most probable. Unfortunately, this response shifts the risk of guessing wrong onto the subscribers' shoulders. Since science has unexpectedly lengthened average life expectancy (by thirty years since 1900, or by five years in the last ten), experience rather like Ben Franklin's has become a commonplace, but rather poor business judgment. The business remains solvent only as long as the decision to drop the policy is later than the life expectancy.

Retirement Saving Debt

There may exist insurance policies to address this issue, but few companies offer it. We will briefly describe this sort of policy, in case it becomes more widely available, but it is primarily described here to illustrate the issues to consider. If you can get it for a reasonable price, or if you can get it at all, the outline of the policy would be to set a premium and promise to pay 6% for the rest of your life. Underneath the promise is the reality of paying 6% for eighteen years as a non-taxable return of principal. Following that, you don't need to get a postmastership, you are paid a taxable 6% until you die. Presumably, the insurance company has actuaries to help with the math, so the company makes money if you live less than your life expectancy, and loses money if you live longer. If life expectancy suddenly extends much longer (let's imagine a cure for cancer appears), the insurance company is going to go broke. That's why insurance commissioners are uncomfortable with the concept, even though it is obvious how desirable it might be. So that's why annuity insurance typically states a fixed number of guaranteed years and expects the subscriber to shoulder outlier risk.

Any insurance has an administrative cost, so everyone must consider some non-insurance solution to the whole problem. Therefore, we propose you re-examine the old saw about "never dip into principal". If you don't have enough money, you can't do very much except depending on the government, your family, or your fairy godmother to help you out, although it must be obvious that all Americans would be wise to consider retiring five or ten years later than they hoped. Very likely, the government is going to have a difficult time sustaining even the present tax exemption of retirement funds, medical insurance, and social security. Those are called entitlements, but if the government eventually can't afford them, it won't matter what you call them. If entitlements keep getting extended, we can expect our nation to resemble the ancient Chinese and Indian nations -- able to build palaces in their golden era, but eventually crumbling into a gigantic slum in centuries afterward. So please, if you are able to do it, try to keep gainfully employed for a few extra years. If you do it (and some people can't) you may be able to realize the American Dream.

{Inheritance Tax}
Inheritance Tax

The traditional American dream was to accumulate enough money to live off the income from it indefinitely, never touching principal, and then exposing the principal to destructive estate taxes after you finally die. Unless you are unusually wealthy, there isn't much left for the next generation after estate and inheritance taxes and expenses. It's a little inefficient to accumulate more than you actually need, but the government gravitates toward the least painful methods of collecting taxes. By confiscating this safety surplus, however, it declares that "Every ship (generation) must sail on its own bottom." And therefore it must acknowledge responsibility for what inheritances ordinarily pay for, like charity and good works. But there remains a quirk to this.

If Ben Franklin's partners had arranged to invest the money until he needed it, they could at least have afforded to finance two or three extra years. After inflation and expenses have eaten away at your retirement income, your principal may not generate enough income to last forever, but it is still big enough to pay for several years of retirement, which may in fact be longer than you are destined to live. Remember two things: 1) a principal sum, big enough to support you indefinitely, must be roughly eighteen times your yearly expenses. If it is only big enough to support you for fifteen years, it will seem too small until you realize you are probably actually going to live, say, five years. And 2) as far as leaving an inheritance to your children is concerned, there is a realistic probability that the government will consume most of the estate before it ever gets to the kids. These fundamental truths are presently obscured by the Federal Reserve artificially forcing interest rates to less than 1%. But if you can just hold out for a few years, it seems entirely likely that interest rates will return to 6% (meaning your principal will once again produce eighteen equal installments). But such a return of interest rates to normal levels will force the government to pay a comparable amount as interest on its bond debts (meaning it will get hungrier to escalate your estate taxes.) This isn't nearly as satisfactory a solution to the life expectancy quandary as retiring five years later than you once expected to, but you can't say we didn't warn you.

And as for what happened to Ben Franklin, you can read his will. He died a very rich man as a result of shrewd investments, later in his life. Ben left eight or nine houses, several thousand acres in several states, a gold-handled cane, and a portrait of the King of France surrounded by hundreds of diamonds. But it would not seem wise for the rest of us to count on accumulating that much new wealth, after attaining the age of sixty. The way things are going, once you attain your life expectancy, everyone should have some non-insurance plan for supporting himself for two or three extra years.

Quakers and Idolatry

Philadelphia's Quaker Meetinghouse

There are about forty thousand bodies buried in Philadelphia's Quaker Meetinghouse grounds at Fourth and Arch Streets, which contain only two tombstones. The yellow fever epidemics of the era account for much of that, but it's nevertheless a striking portrayal of early Quaker aversion to anything resembling idolatry. It underlines this attitude by sharp contrast with more recent uproars about desecrating statues of Confederate generals in public spaces of the Old South, which even Robert E. Lee objected to constructing. They led plausibly to erecting and then defacing Union generals in Northern states as well; since it seemed natural for statue-desecration to evolve into an equal-opportunity demonstrations. A little primitive perhaps, but even-handed.

The Fourth Crusade

Worshiping graven images has a long history. You needn't be a public-statue expert to remember the terracotta Chinese soldiers are two thousand years old, and the Egyptian pyramids are even older. The chariot horses over the Brandenburg Gate make a stronger illustration of the idea, intertwined over the shorter length of Western civilization. Although carvings might be older, we also have a reasonably accurate history of the bronze statues of these horses. The technique evolved with different proportions of copper and tin, with other metals sometimes added, but the underlying idea is to make a hollow bronze statue, giving the appearance of a much heavier solid bronze one, apparently originating in the Greek islands off the coast of Turkey in the second Century. There were in fact two such statues, with different subsequent histories. The Fourth Crusade was the one where Western European Christian Crusaders invaded Constantinople the main eastern Christian capital, never getting to the Holy Land. Even if they started with good intentions, Christians were content to carry off Christian booty, including the bronze horses. One set was sent to Venice and the other set got to the Christians in Southern France.

Frederick the Great

Frederick the Great put one set in the center of Berlin. In time, Napoleon took both statues to Paris, but later returned them. The one in Berlin, or perhaps copies of it eventually came to symbolize Nazi Germany, but later Checkpoint Charlie. The details of these conquests and adventures are not not of much consequence today, leaving only the central point that someone conquered someone else, and God must love the victor. The main point became victory, dogmas have been forgotten. Only the Quakers seem to be willing to mention another main point: Thousands of people died for these statues, but very few tourists could now tell you why. The Quakers reached a conclusion we might reconsider. Pulverize all statues and churches, thus saving the world from future grief. Since the Quakers also were first to free the slaves but later mostly disapproved of the Civil War, the irony was not lost on them. But most of their grandchildren reversed the assessment. It's too early to say how another generation will be persuaded to feel.

General Lucius Clay

During the War against Nazi Germany, my uncle was General Lucius Clay's room-mate, and the two of them were appointed to oversee de-Nazification of the defeated Germans by a third Pennsylvania Dutchman, Dwight Eisenhower. The concept was devised by Henry Morgenthau, then Secretary of the Treasury, in a famous letter urging a program to make Germany into an agricultural nation "for a thousand years". Accordingly, my father's brother oversaw the public burning of tons of postage stamps containing swastikas, plus every photograph of Adolph Hitler the Army could locate, along with similar symbols of the Third Reich. Nearly eighty years have passed since then -- essentially two generations, but it still remains illegal to possess such documents. Evidently, a sense of vengefulness so regularly outlasts its provocation, that passing the grievance on to children is usually hard to justify.

New York Times: Splendid Idea for Old Age

The New York Times devoted an entire issue of its Sunday News of the Week in Review on April 7, 2019, to variations of the theme that "Elderly People Have Surplus Spare Time." Although I have several personal connections with the editors of the Times by marriage, and other connections to the newspaper through Columbia's College of Physicians and Surgeons, I seldom agree with its New Yorkerish hunt for evil from greedy enemies. But this particular attack struck me as right on the mark. Sympathy with downtrodden unions has led to commercial forces preferring fragile cheap products needing to be replaced when broken, discouraging home repairing and the ultimately of the population's ability to repair. At the same time, a lot of old folks have time on their hands and limited opportunities to supplement their retirement income, even ultimately leading to the disappearance of the needed skills to make simple repairs. The Times doesn't suggest the two unfortunate curable ends of the Industrial Revolution could cancel each other out, but it seems to me they might fit if coaxed.

Apple seems to be the biggest offender, substituting unnecessary cheap electrical connectors for successive versions of expensive machinery. When you need to replace a thousand-dollar computer for its broken ten-cent plastic connector, the commercial motive is obvious to the consumer, and pretty annoying, too. A broken plastic connector isn't worth its twenty-dollar markup, but the expensive computer would justify its connector markup, which ultimately becomes a one-dollar markup for a Chinese imitator. The situation in the computer industry was explained to me in person by Michael Dell. When he had his nineteenth birthday, his mother gave him an expensive IBM portable computer. He took it to his bedroom with a screwdriver and found that not a single component was actually manufactured by IBM. He wrote each individual manufacturer for prices and discovered he could make an imitation (but identical) computer, selling it profitably and ultimately driving IBM out of the portable computer business. Substituting Chinese names for Michael Dell you get quite a different story, which paints quite a different description, about excessive markups by greedy Americans. Nevertheless, the moral I draw is the ultimately self-defeating nature of excessive markups, for commercial unfair motives. Smaaart when you reveal them to friends, but unwise, in the long run.

But buried in all this petty maneuvering is a solid truth. We once had a population which took woodshop in the seventh grade and metal shop in the eighth. for boys. And the girls were learning how to cook and sew in separate rooms. This system needs a little updating, but the point is that these abbreviated courses were adequate to teach the essentials of home repairing to whole generations of the population. You wouldn't need to buck the unions, who proved able to destroy the whole vocational school system of fresh competitors, in order to restore simple home repair to the whole population. The old retired folk could repair the broken plastic widgets in their simple lives. The ladies could cook a little instead of continuing plastic-wrapped dinners they now have more than enough time to play around with. Hardware stores would reappear to satisfy the need for widgets. And the retirees wouldn/t need to sit around for lack of simple things to do. It's a brilliant idea, even if it did come from the New York Times.


Last Year of life insurance is life insurance, paid after the death of the subscriber. Proceeds are paid to a health insurance company, reimbursing medical expenses incurred during the final year of the subscriber's life. The ultimate effect is either to reduce the premiums of health insurance or permit an expansion of its benefits.

The overall cost of health insurance is not changed by changing the form of premium collection. Indeed another layer of administration is required. What purpose can it serve to pay part of your premium to company A rather than company B? There are five answers.

1. Non-Randomly Distributed Risks. Non-random disease like AIDS is destructive to the system of employer-based health insurance. It is obvious that HIV infection is overrepresented in the entertainment and design industries, and overrepresented in New York City, San Francisco, and urban centers generally. Serval HMOs have been destroyed by a succession of AIDs cases, and all insurance companies are considering ways to avoid adverse risk selection inherent in a certain business, to limit coverage of the condition within the benefits package, or to withdraw from business in high-risk areas. These are understandable but undesirable trends; far better to submerge AIDS among other fatal illnesses, since almost all fatal illnesses are characteristically expensive, and no one can escape having one.

2. Catastrophic Coverage. To define a form of catastrophic health insurance which largely excludes chronic and custodial costs. (Prior to 1987, it might have been considered a disadvantage to create a separation of expensive acute diseases from chronic ones. However, experience with the Bowen catastrophic health proposal showed that political pressure groups will put custodial care reimbursement ahead of acute illness if the two are combined. Experience in England is similar.)

3. Insurability. To create a reasonably inexpensive way for people to guarantee their fatal-illness insurability during the twenty or more years before stable permanent employment achieves for them the informal guarantees of employer-based health insurance.

4. Continuity of Coverage. To create inexpensive, portable, and possibly paid-up insurance against a major portion of the risk of getting severely ill during a period of temporary unemployment. And to reduce the reluctance of new employers, who are not in a position to evaluate health problems, to hire them. Further, to segregate from lesser health matters that portion of post-employment health costs which an employer might. be willing to obligate himself to cover on the grounds that the illness began during the period of employment.

5. Pre-Funding. By isolated underwriting of a fatal illness, to begin the process of converting a pay-as-you-go health insurance system into a pre-funded one. It is possible this can only be achieved step-by-step. In any event, successful implementation of an important component would advance general understanding of the value of pre-funding.

As far as the mechanism of implementation is concerned, the concept of last-year-of life insurance involves a treaty between two parties: life insurance which pays retrospectively, and the health insurance or other agency which pays at the time of service. Life insurance can be either private or employer-paid, but if employer-paid must be term insurance to constitute a business expense in the eyes of the Internal Revenue Service. The Association could usefully work for a relaxation of this requirement since it would be revenue-neutral for the government to permit a portion of health insurance premiums which are presently tax-exempted to be applied to this purpose.

Probably the easiest illustration of the principle would be for an individual who had ample life insurance to direct that a portion of benefits be set aside for the purpose, something which every subscriber has a right to do. A standard clause might evolve to the effect that all expenses which any health insurance company had incurred in the last year of the subscriber's life would be reimbursed, provided the health insurance company could demonstrate it had reduced its premiums appropriately in recognition of this forthcoming reimbursement. This example is only a preliminary version of what is needed, however. It might serve as a transitional tool, but most individuals would be uncomfortable about the unpredictable impact on their life insurance. Many people are overinsured, but few of them feel they need no insurance. Many people are overinsured, but few of them feel they need no insurance at all. Dr. Crandall's suggestion of designating a specified portion of life insurance to cover the deductible portion of very high-deductible health insurance )ie excess major medical) is superior in approach and should be urged by the Association.

For the last-year approach to be successful, it requires the additional step pf actuarially examining costs and determining both the risk and the appropriate health insurance premium reduction. Health insurance companies would have to compete with each other in offering such a service benefit, and subscribers would have to feel the proposal was an attractive one. Obviously, Medicare is the main health insurance third party, whose cooperation would make or break the idea. Since Medicare Part B pays itself 75% of its own true premium costs, Medicare ought to be very interested in anything which might reduce premiums.

For Medicare, therefore, the issue reduces itself to exploring what incentives HCFA could offer the public in return for being allowed to shift fatal-illness costs to other funding sources. By all odds, the most popular inducement would be the provision of nursing-home costs, which the debate on catastrophic health insurance clearly demonstrated was beyond the government's current means. Negotiation goes two ways: if Medicare wants to get out of fatal-illness costs, let them offer nursing-home benefits instead. Conversely, if the public wants nursing home coverage, they must begin to contribute toward it when they are young enough to have the compound interest at work for a very long time. To the five points made at the beginning of this paper, is now added a sixth, the trade-off between dying young and living too long. Both are tragedies, but nobody suffers both of them. Unless Medicare is abolished, it is the only mechanism available for combining the two risks into one funding mechanism. If the final individual choice is reserved to age 65, even prudent suspiciousness of the profligacy of sovereign of states might be mitigated somewhat.

The proposal would be that at age 65, the individual choose whether he wishes to commit his last-year life insurance to acquire a nursing-home benefit, or whether he prefers to leave it to his estate.

Most of the advantages of last-year insurance, such as permanent insurability, portability and the ability to exchange a tangible insurance asset for some other coverage, are dependent on having last-year insurance assume the form of prefunded cash value life insurance. Unfortunately, such insurance would have to be privately purchased under present federal tax laws, because life insurance may currently only be treated as a business expense if it is term insurance. (Self-employed persons, of course, already purchase health insurance with after-tax dollars, and would have no tax disincentive to substitute cash value life insurance for health insurance.)

One useful feature would nevertheless persist even using term insurance: the submerging of AIDS into a general risk class of fatal illnesses. Except in a few industries or cities, the epidemic is not yet of sufficient extent to justify radical rearrangement of insurance. The epidemic could spread significantly into the heterosexual, non-drug addicted, community. At pandemic extremes, even spread-the-risk approaches might fail to prevent a collapse of the insurance mechanism. However, assuming the disease stabilized within a manageable corridor of prevalence, it might be possible to hold the insurance mechanism intact through the principle of shifting HIV risk from individual employer groups to a far larger pool; and last-year-of-life coverage is suggested as a possible option.

IN SUMMARY, the Association is urged to study last-year life insurance, including some estimation of the difficulties and political opposition which it might encounter. It is not necessary to advocate this idea actively at the present time, but merely to make certain we could live with its ramifications as an alternative held in reserve.

The contingencies which might require its advocacy are threatened of the destruction of health insurers by AIDS, or a political approach to imposed restriction of the health system.

Dr. Donald Crandall, Chairman

Council of Medical Services

American Medical Association

Chicago, Illinois 60610

Dear Don,

Thanks so much for the courteous reception which you and the Council gave to me on Sunday. Let me summarize my recollection of the conversation:

The last year of life concept includes almost any system of reimbursing health costs through the life insurance mechanism. As the idea takes shape in response to audience reaction, it now has three configurations. 1) The use of existing employer group term life insurance as a mechanism for community rating AIDS or similar industry-specific health conditions, which would otherwise be disruptive to health insurers. 2) The use of cash-value life insurance as a first step introducing pre-funding to health insurance, and making it portable between employers. To do this through employers might require liberalization of the tax code, a project which Metropolitan is surprisingly optimistic about achieving. 3) The trade-off insurance benefits with Medicare in return for a long-term care concession.

The six main information gaps which I can identify are:

1. What has the average terminal illness cost? Does it vary significantly by age group?

2. What proportion of deaths is over and under age 65? Over and under age 18, where they begin to relate to employer groups?

3. Is it possible that fatal-illness costs are inflating at a rate significantly different from other healthcare costs?

4. How completely do 365 days include the majority of terminal illness costs? Would some other time period be superior?

5. What are the legal impediments?

6. What are the political impediments which become predictable when you see that the proposal creates a disadvantage for some interested group? How can the proposal be restructured to minimize such resistance?

As you requested, I will work up some proposals for a simplified notification procedure between the life health carriers which includes some safeguards against double-counting and double-dealing.

Sincerely yours,

George Ross Fisher, M.D.

First Two, and Last Two, Years of Life

Before we get too deep into slicing average lives into average medical partitions, the reader should remember there is another way of viewing health care. Declaring we simply can't pay for everything because there are limited resources, we imply we agree on life's priorities when we really don't.

If this were a contest on TV, no two people might rank priorities the same way. But physicians would come closer. Reflecting common professional experience, most of them would give a special place to the first two years of life, and the last two. Health care costs concentrate there, and special reverence is paid to the patients. The rest of life has long quiet periods, but just about everyone is seeing or trying to see a doctor, during their first two and last two years. If we really must ration care, these are the years to be spared. These are the four years of maximum helplessness. We must keep it in mind. Special consideration is in order.

Last Year of Life Insurance

Last year of life insurance is life insurance, retrospectively paid after the death of the subscribers to his health insurance company. Although theoretically reimbursement could be made for actual individual expenditures, it is a more powerful idea to reimburse in the amount of the calculated average last-year costs of the community. It could loosely be said this approach constitutes 100% reinsurance of a selected peril, in order to suggest possible variations, such as 105% reinsurance (to transfer administration costs), 80% reinsurance (to encourage case management ), etc.

The last-year-of-life concept should be regarded as a tool for coping with certain problems inherent in the system of basing health insurance on employer groups. Employer-related health insurance is tax-favored, reduces marketing costs, and almost eliminates risk to the insurers; it is far easier to modify such a system than to reform it. However:

Non-random perils like AIDS may cause insurers to withdraw from ensuring particular companies or even whole industries.

Employees who retire early for reasons of health may find themselves unable to obtain health insurance after the COBRA protection period.

There is presently no method available for young people to guarantee their insurability before they enter permanent employment, or for employees of any age to guarantee their insurability in the event of company insolvency.

The risk of losing insurability is present in every change of employment; job immobility is created when fear of health insurance problems is on the employee's mind. Early retirement may be rejected for fear of exposure to loss of health coverage between the time of retirement and the onset of Medicare coverage.

Serious dilemmas for corporate funding of post-retirement health benefits have been created by a fear that voluntary pre-funding such obligations may create cash targets for corporate raiders. An employee has no legal rights to the prefunded reserve even though he may have legal claims for the eventual benefit obligations

Consequently, the most conservative present estimate of unfunded post-retirement health insurance obligation is $100 billion, and it may be four times that.

Since last-year-of-life insurance is life insurance, it might be provided as either term insurance or cash-value insurance. Although cash-value insurance has obvious advantages for the problems listed above, it would not enjoy the same tax-sheltering which term insurance would have, and consequently would require legislative relief to be fully effective. However, term insurance might well offer some relief for the AIDS problem.

Insurers are leaving the Washington DC area because of prohibitions against screening for AIDS, and Massachusetts also has a law against testing. The obvious first resort of an insurer is to withdraw from covering companies involved in the arts, design, theater, etc, and this tendency is paralleled by rapidly increasing detox and rehab costs for cocaine abuse, which have led to harsh exclusions for psychiatric care. The point is that employer-based insurance seldom includes a premium provision for risk, and if a particular peril cannot be excluded then a general class of service or a particular sort of employer is excluded as a proxy for it.

In this particular instance, it is proposed that insurers explore the willingness of their group markets to shift coverage of last-year costs from company-specific to community-rated premiums while continuing to be experience-rated for all other perils. If the various trade-offs were favorable, then insurers might be willing to discontinue offering last-year coverage except through the community-rated life insurance route. At present, the experience is probably insufficient to judge whether a market-driven voluntary approach would be effective. In the event, most companies proved willing to adopt the approach but insurers feared non-compliant competitors who saw an opportunity to steal business, then the public-interest need for legislation to protect the health insurance industry from disruption by the AIDS problem would have to be debated. For those who dislike compulsory solutions, it is exasperating to discover that the insurance industry generally prefers to be compelled by law since to move ahead in a cooperative manner is to invite anti-trust action.

In this particular instance, it is proposed that insurers explore the willingness of their group markets to shift coverage of last-year costs from company-specific to community-rated premiums while continuing to be experience-rated for all other perils. If the various trade-offs were favorable, then insurers might be willing to discontinue offering last-year coverage except through the community-rated life insurance route. At present, the experience is probably insufficient to judge whether a market-driven voluntary approach would be effective. In the event, most companies proved willing to adopt the approach but insurers feared non-compliant competitors who saw an opportunity to steal business, then the public-interest need for legislation to protect the health insurance industry from disruption by the AIDS problem would have to be debated. For those who dislike compulsory solutions, it is exasperating to discover that the insurance industry generally prefers to be compelled by law since to move ahead in a cooperative manner is to invite anti-trust action.

The preceding, or "term-insurance" approach has the advantage of gathering useful information about the last-year concept without requiring extra tax sheltering or even the formality of separate policies or insurance subsidiaries. It could be retrospectively tested on paper without much cost or any risk, and it might be held ready as a potentially useful tool for the eventuality of the AIDS epidemic provoking serious disruption of health insurance. However, much more important benefits might grow out of the cash-value life insurance or refunded, approach to last-year-of-life coss. Since last-year expenses come at the end of a 70+ year life expectancy, the opportunity for compound interest to work is at a maximum.

Under this approach, the initiative would lie with life insurers, who would be induced to include a standard beneficiary clause in their policies. That clause would assign the community-average last-year health cost reimbursement to any health insurance company which had assumed those costs and had previously provided the beneficiary with appropriate consideration for making the assignments. (At the moment, the various secondary adjustments between employer, employee, health insurer, and tax collector can be left to the marketplace to work out. If no one makes an adequate offer, the beneficiary simply has some life insurance).

The cost of such insurance might turn out to be fairly modest. Although average last year-of-life health costs might be guessed to approach $20,000 per death, the comparatively low death rate before the age of 65 means that an average life insurance policy of less than $5000 (with proceeds exhausted at 65) could conservatively be guessed to cover that need. After age 65, every person can reasonably expect Medicare to have a last-year obligation. Using a 65 investment assumption, the present value of such policy would be $250 at birth; a 3% assumption would only be $500 and would allow general inflation the economy to be ignored. (The $5000 figure would seem to allow generous room for potential innate health-care cost inflation, inasmuch as last-year coverage does not require any provision for recovery from one formerly-fatal condition only to die later of a second fatal condition, which is the main cause of "innate" health cost inflation.) Presumably, the best protection against future health cost escalation is to purchase more insurance than is thought to be needed, expecting any surplus to flow into the estate. Even taking a conservative view of the health-cost escalation problem, its possible to imagine premium costs of $100 per year during thirty years of working life.

Although the marketplace could be expected to determine how much reduction in health insurance premium would be accorded for the lifting of last-year risks, the main value of this coverage would appear in the case of someone who was uninsurable (? ie unemployable?) without it, or who would have been afraid to switch jobs without it. When individuals sustain periods of loss of income, the possession of this insurance might be regarded as a form of catastrophic health coverage, which for the temporarily unemployed might be an absolute minimum coverage. The reasoning is that this type of coverage can be switched on or off; a treaty of assignment need only be signed if the individual finds it advantageous to use it, and is later revocable at will. The policy, in short, is his not his employer's but can be made to coordinate with employer benefits.

Medicaid programs are rather dubious candidates for this approach but even they might be induced to be more generous with last-year coverage (probably under either a term-insurance or waiver-of-premium approach) than they have typically been with full health insurance, the becaused potential for abuse is eliminated.

Finally, the relationship with Medicare needs to be explored with HCFA. After all, Medicare is the main health insurers of fetal illness costs. Far from ever escaping these costs, Medicare has a major concern that it may also have to assume long-term custodial and nursing home costs. Far from ever escaping these costs, Medicare has a major concern that it may also have to assume long-term custodial and nursing home costs. In this matter, Nature provides a certain trade-off. Dying young and outliving your income are both tragedies, but few people have both of them. There is a need to consider ways of transferring costs between the two largely-exclusive problems. The aggregate community cost of fatal illness after age 65 is much heavier than it is up to age 65; possibly $20,000 average coverage would be necessary. Since compound interest would have longer to operate, however, the premiums or present-value costs would not necessarily be proportionately larger. A premium of $40 (1988 dollars) could be imagined; there is no reason why premiums could not be inflation-adjusted on a yearly basis as an alternative to making overly conservative interest-rate assumptions.

The proposal is to explore with HCFA he attractiveness to them of providing some degree of long-term care coverage in return for surrender to them at age 65 of paid-up life insurance adequate to cover fatal-illness costs.

QUESTION: If the health insurer agrees to lower his premium, and subsequently pays the last year costs for the subscriber, how can he be assured the life insurance will eventually reimburse him?

Since health insurance is mostly in employer groups, covering only expenses n the current year, the health insurer can limit his concern to the current year. The health insurance annually needs a slip of paper guaranteeing payment by a life insurer, in the event of client death. Three main methods are available, each with implications about who owns and controls the process:

One method is to follow the reinsurance model strictly; the employer pays the health insurer, who then pays a life insurer for "reinsurance". In this case, the health insurer controls the process, which is almost invisible to the employer an employee.

Where the employer already has a group life insurance benefit, he might well wish to send the check directly to the life company for a somewhat larger benefit(simultaneously reducing the payments to health insurer). While this approach gives control to the employer, it also gives him the headache of negotiating the premium adjustments.

Both of two foregoing approaches would be administratively very convenient, but neither one provides the employee with portability between employers, bridging of episodic gaps in employment, etc. For the employee to take advantage of portability, carriers other than the company carrier must be utilized. The employer's health carrier would then need yearly slips of paper from a number of life carriers, most easily obtainable as part of the yearly premium billing process for the life insurance. Such a paper would amount to a rebate coupon, issued by the life insurers, honored by the health insurer.

It is essential to keep paperwork simple for an estimated premium of about $100 a year for a term an $400 a year for cash-value life insurance (of course, only$100 of either would be transferred to the health insurer). Consequently, insurance management would want to look into bulk communication: "Dear Health Insurer, Our records show the following clients have exclusively assigned the average last-year health benefit to your company for deaths which might occur during the period between A and B. Yours Truly, Life Insuror"

Because of the problem of differing premium dates, the insurance industry might further wish to agree on a calendar or other standardized year definition for this type of coverage. The administrative issue can be stated in the plainest possible term: the extra administrative cost of this approach is the price of portability.

QUESTION: No underlying health insurance.

Although an individual with cash-value life coverage could borrow against it to pay health costs, terminal or otherwise, the issue has been raised as to how someone would employ the life insurance mechanism if he did not have any underlying health insurance, but did have term life insurance. Alternatives would be:

He could purchase health insurance with a front-end deductible equal to the face value of the life insurance. MONY sells a $25,000 deductible policy for about $200 a year family premium, with a $1,000 top limit. Such a combination would protect for more than just terminal illness, but it would not protect against more than one heavy cost. For what would presumably be a very low extra premium, he would need another reinsurance policy to cover multiple illnesses. Such reinsurance might have two parts: one part to cover the remote possibility of exceeding the deductible more than once, and another part to cover the deductible on what proved to have been a non-fatal illness. This degree of coverage goes considerably beyond the last illness concept and would naturally cost more.

The main problem with this life-insurance-to-pay-off-the-high-deductible approach is that it presumes the beneficiary would pay his bills in cash and contains no way to spread the risk. Therefore, everyone ends up either overinsured or underinsured. A smaller issue is that he would pay full charges without a way to negotiate volume discounts at hospitals. Taken together, this approach would be unnecessarily expensive.

An approach more narrowly related to the cost of terminal illness would be for the life insurer to pay last-year costs, large and small, but only reduce the net death benefit to the estate by the average community terminal illness cost rather than the actual case-by-case expense. Once the average rate had been established, it would become possible to tailor the insurance coverage, leaving a suitable margin for year-to-year inflation and other contingencies.

The degree to which carriers could pool claims data in arriving at the average cost is an anti-trust question; the definition of a covered expense is purely a question of practicality within claims administration. However, differences of opinion about the feasibility of different coverages might make data sharing less practical.

QUESTION: What if there are multiple carriers involved?

On examination, this question relates mainly to carelessness, misunderstanding or incompetence on the part of the subscriber. Even if the individual has multiple life insurance carriers, he would be foolish to execute a last-year beneficiary clause with more than one of them. Consequently, no such clause should be permitted unless it defines the primary carrier for last-year purposes as that carrier with the earliest date of execution of such a clause which is still valid at the time of death.

With regard to multiple health carriers, the life carrier would generally take the position that he is only going to pay so much, and the health carriers can work it out among themselves. The reasonable division of the award would be in proportion to the degree the health insurers had paid out the actual health costs. No doubt there would be instances of multiple health insurance coverages of someone who dropped dead with no medical costs at all. If the reimbursement were on the basis of average community costs, lawyers for the health companies would no doubt exercise their imaginations in court, but the life insurer would be serene, and the situation would soon clarify itself with case law.

It is somewhat more difficult to contend with the possibility that the life insurance clause would authorize payment of actual individual costs, only to discover that the beneficiary had over insured himself with multiple health carriers, without coordination of benefits clauses. The life carrier would thus be in a poor position to know just what the actual payments by the two contending health insurers had been, and how much overlap or legitimacy there was to them. It follows that the subscriber who requests that individual actual reimbursements rather than average community ones be made, must also be required to specify whether he wants all carriers reimbursed, or only the primary, or only the largest, payor. With the life carrier thus immunized, it becomes the responsibility of health carriers not to reduce their premiums or make other concessions to the subscriber in return for a last-year treaty unless the subscriber can satisfy them that their agreement meshes with the life clauses, or that the subscriber agrees to the coordination of benefits.

Pot Belly

In a love song written by T.S. Eliot, the character named J. Alfred Prufrock complains that as he grows old, he wears the bottom of his trousers rolled. College freshmen who encounter this line are apt to glide over it, uncomprehending, but the allusion will eventually grow clearer. The old man tends to find his legs have apparently grown shorter because he has to roll up his pants to keep them from dragging on the ground. Although the cartilages in his knees, hips and the lower spine may have compressed a little, the shortened legs are more apparent than real. The pants seem longer because his belt line has dropped. Dropped below his pot belly, that is.

No medical textbook that I know contains much discussion of pot bellies, even though they are almost universal, and universally noticed. The muscles of the belly wall relax, allowing the guts to bulge forward over the pubic bone.

{top quote}
Even doctors don't know enough about this disorder of old age {bottom quote}

The aging lungs tend to enlarge, pushing the guts downward. The spine bends forward, and of course, the fat tends to increase inside the abdominal cavity. If there has not been too much weight gain, the pot belly tends to flatten out when its owner lies down on his back; if the weight has been gained, the pot sticks up like a pregnancy, obscuring the lower edge of the rib cage, bulging out at the sides. Normally, a young person's abdomen is described as "scaphoid" or hollowed out like the inside of a rowboat. A skinny young woman has wider flaring hip bones, exaggerating this scaphoid appearance, and making the waist narrower by allowing the guts to drop down into the larger pelvic cavity. Younger people are more active, with more muscle tone holding things together somewhat better.

Anyway, when the older person rolls over in bed, the innards of the belly cavity get squashed against the mattress. The old man's prostate leads to a fuller bladder, which means he gets up earlier when he rolls over it and gets up a lot earlier if he is overweight and has more pot belly. Or it may be the upper stomach that gets squashed, forcing the acid stomach contents up the esophagus and resulting in heartburn, burping, and even cough or hoarseness if the acid gets up into the throat and back down the windpipe. With weight gain, the pressure of lying prone can press against the main leg veins as they cross the brim of the pelvis, resulting in swollen ankles. Since the large intestines are coiled and kinked, external pressure against them causes a minor degree of obstruction which can be experienced as constipation or sometimes bowel urgency. Since the bowels contain a fair amount of gas, pressure on them causes small gas bubbles to merge into larger bubbles, with resulting flatulence which can reach startling proportions in the early morning hours. For all these reasons, people with pot bellies tend to sleep on their backs, causing a lot of snoring. If they snort and waken, they may have night time insomnia, daytime drowsiness. One sure sign of this is that the bed partner flees to a separate bedroom.

Victims of this affliction may, if they choose, imitate Scarlett O'Hara in that famous scene in Gone With the Wind with the slave girls pulling a tight corset even more painfully tight, but corsets are currently out of fashion. Or they can take purple pills to correct the heartburn, or regular laxatives for some of the other problems. In general, however, leg-lifting exercises strengthen the belly wall muscles (abs, I believe they are called), and losing weight by eating less does the rest. Losing weight is never easy, but in this case, a few pounds can make big differences in belly circumference, as measured by the belt size. Nothing will shrink the enlarged lungs pushing down, however, and arthritis of the spine may maintain the forward stoop. Very few older people are complete without some signs of this common affliction. Even so athletic a person as the ramrod-straight George Washington developed just a little pot. And Benjamin Franklin, of course, had a hopeless case.

Lifetime Health Savings Accounts:How Much is Enough?

The Duchess of Windsor was reported to say, a woman can never be too rich or too thin. Perhaps, but with insurance you state -- in advance -- how much insurance you can buy, best not expect more. In healthcare, it's my hunch something drastic would have to change before the American public voted an assessment for more than $3300 per person, for every working year from age 26 to age 65. In fact, if it went much higher, many people would probably look for a way to escape the burden. Perhaps we could supplement 3% per year, the historical rate of inflation for the past century. That's fair because although it would reach $10,000 at age 65 instead of $3300, everything else would have readjusted to give it the same financial impact. Similarly, asking people 26-65 to pay for all ages is more palatable if it's arranged as your own childhood and retirement to be supported.

Excluded: Past debts and Custodial Care. In any event, any payments for past debts, for health or otherwise are not envisioned in the following plan. The term "fixed income" reminds our debt and equity obey different rules, and the premise is the income supplement of this calculation will be based on equity, common stock. Furthermore, we know the National Debt, but how much of it once paid for health services, is fuzzy. When I started this analysis, I really never dreamed all of the current healthcare costs might be covered by investment income from common stocks, and it's going to take some experience to be sure even that is reasonable. It allows us to take a stance: if it won't pay current costs, at least it will pay for some of them. If it more than pays for them, annual deposits should be reduced, never confiscated. To avoid circumvention by changing definitions, it might be well to state custodial care costs are not included, either, because they are treated as retirement income.

Medicare. Making it easier to explain, let's begin at the far end of the process, the day after death, looking backward. This proposal didn't initially include a Medicare proposal, but the accumulation of its unpaid debt has become so alarming, considering Medicare within Health Savings Accounts could fast become a national priority having no other solution. In addition, most factual health data come from Medicare, so the reader gets accustomed to hearing about it. So, while the Medicare situation is fraught with political obstacles, we might have to risk them. While debt overhang from earlier years continues to grow, Health Savings Accounts cannot be confidently promised to rescue Medicare by itself. But perhaps at least the Savings Account discussion could put a stop to going deeper into debt. Even a stopgap would have to get started pretty soon, but there is also a chance an improving economy might partially reduce the indebtedness.

Medicare-HSA Overlaps. At present, Catastrophic coverage is required for Health Savings Accounts, but its premiums are not tax-exempt. To extend HSA for the life expectancy, therefore, requires an additional average of 18 years of after-tax premiums. We have split lifetime HSA into two parts at age 65 and assume a single-premium ($80,000) exchange for Medicare, possibly traded for partial forgiveness of premiums and rebate of payroll taxes. It is important not to count the $80,000 twice if it assumed to be self-financed. One quarter from payroll taxes, one quarter from premiums, and a half from the $80,000 which used to be from the taxpayers. If pre-payment begins at an early age, Medicare costs might be quite modest after growth from income. Even when we show all the costs, including double payments, using an HSA at conservative rates like 4% will reduce the Medicare cost by 75%. Better performance depends heavily on approaching 12.7% by passive but hard-boiled investing. To pay down the existing debt back to 1965 is not contemplated by this proposal. At present, it grows by 50% of annual costs by addition; and an unknown amount by compounding. The amount of debt service is probably going to depend on the national ability to pay it down, regardless of its written terms. The same is likely to be true of subsidies for the poor. Ultimately, both of these decisions are political, limited by the ability to pay. Because of the long time periods, comparatively modest interest rates could convert this impending disaster into a manageable cost, but it should not be contemplated until net investment returns approach 12.7 %. The outcome of these intersections is that the terms and benefits become largely a matter of political choice. That has been true for a long time, yet no effective corrections have been made. It is perhaps unbecoming of a citizen to say so, but the political system needs some steps taken to increase its sense of urgency.

Disintermediation of Investment Returns. By this reasoning, the rescue of Medicare depends on the political choice to do it, and the avoidance of a collision with the financial industry. Without a solution to the Medicare problem, a solution to paying for healthcare at younger ages becomes quite feasible, but it would be useless. Conversely, solving Medicare would be possible if the problems of younger people were ignored, but that is equally unlikely. To solve healthcare financing for all ages depends on introducing some new feature, and the easiest solution to imagine is to raise effective net interest rates. Interest rates are unusually low at present, and the Federal Reserve probably feels it would be dangerous to raise them. However, that's the easy part, because interest rates are certain to rise, eventually. What's much harder to envision is to flow the improved rates and the transaction-cost efficiencies through the financial system without wrecking it. What's hard to imagine is not hard to seem feasible, however. It is to take investments averaging 12.7%, flowing 10% past the intermediaries to the investor; and keeping it up for a century. Disintermediation, so to speak.

Rationalizing Fragmented Payments The transition to a solvent system could be greatly eased by the present premiums and payroll deductions, which are largely age-distributed, and can, therefore, be forgiven in a graduated manner for late-comers to the program. Most redistribution of high-cost cases should be handled through the catastrophic insurance, which is well suited for invisible and tax-free redistribution. Because of hospital internal cost-shifting, inpatients are overpriced, rapidly heading toward underpricing. This distortion of prices is achieved by squeezing inpatient prices with the DRG to shift costs and overpricing to hospital outpatients. In the long run, distorting prices has the effect of raising them. This will more immediately affect the relative costs of Catastrophic and Health Savings Accounts and should be more carefully monitored, with an eye toward re-achieving equilibrium.

Dual Reimbursement Systems are Better Than One At present costs, statisticians estimate average lifetime healthcare costs at about $325,000 in the year 2000 dollars; we could discuss the weaknesses of that estimate, but it's the best that can be produced. Women experience about 10% higher lifetime health costs than men. Roughly speaking, how much the average individual somehow has to accumulate, eventually has to equal how much he spends by the time of death. At this point, we must work around one of the advantages of having separate individual accounts. On the one hand, individual accounts create an incentive to spend wisely, but it is also true that pooled insurance accounts make cost-sharing easier, almost invisible, and (for some) tax-free. Therefore, linking Health Savings Accounts with Catastrophic insurance provides a way to pool heavy outlier expenses, while the incentive for careful money management resides in the outpatient costs most commonly employed (together with a special bank debit card) to pay outpatient costs. Such expenses are much more suitable for bargain-hunting anyway because dreadfully sick people in a hospital are in no position to bargain or resist.

Internal Borrowing. Furthermore, there is a significant difference between mismatches of aggregate revenue-to-expenses of an entire age group, and outliers within the same age cohort, the latter much likelier to be due to chance. To put it another way, somebody has to pay these debts, and the plan has been designed to break even as an entirety. Surely we must have a plan about who should pay them when enough revenue is not yet present in a new account. Surely some groups are always in surplus, other groups are always in arrears; the two should be matched, at low or zero interest rates. Borrowing between sick outliers and lucky good people within the same age cohort should pay modest interest rates, and borrowing between different cohorts for things characteristic of the age (pregnancy, for example) should pay none. Unfortunately, some people may abuse such opportunities, and interest must then be charged. Until the frequency of such things can be established, this function of loan banking should be part of the function of the oversight body. When it's limits become clearer, it might be delegated to a bank, or even privatized. While it is unnecessary to predict the last dime to be spent on the last day of life, incentives should be identified by the managing organization, separating structural cash shortages from abusive ones. Much of this sort of thing is eliminated by encouraging people to over-deposit in their accounts, possibly paying some medical bills with after-tax money in order to build them up. Such incentives must be contrived if they do not appear spontaneously. User groups can be very helpful in such situations. People over 65 (that is, those on Medicare) spend at least half of that $ 325,000-lifetime cash turnover, but just what should be counted as their own debt, can be a matter of argument (see below.)

Proposal 10: Current law permits an individual to deposit $3300 per year in a Health Savings Account, starting at age 25, and ending when Medicare coverage appears. Probably that amount is more than most young people can afford, so it would help if the rules were relaxed to roll-over that entitlement to later years, spreading the entire $132,000 over the forty-year time period at the discretion of the subscriber.

Bifurcated Health Savings Accounts. When Health Savings Accounts were first devised, it never seemed likely that Medicare might be supplanted. However, Medicare has grown both highly popular and severely under-funded, probably running at a large loss. The rules should be modified to permit someone who has health insurance through an employer to develop a Health Savings Account which the funds but does not spend while he is of working age. The funds would then build up, enabling him to buy out Medicare on his 65th birthday or thereabout, with a single-premium exchange at present prices, (exchanging about $100,000 funded by the forgiveness of Medicare premiums and some portion of payroll deductions from the past). He would have to purchase Catastrophic coverage at special rates. If this approach proved popular, it might supply extra funds for loaning to HSA subscribers in the outlier category. While there is no thought of phasing out Medicare against the subscribers' will, Congress would certainly be relieved to have subscribers drop out of a program which must be 50% subsidized.

Proposal 11: The present closing age for HSA enrollments at the onset of Medicare should be extended a few years older. And single-premium buy-outs of Medicare coverage, including the possible return of payroll deductions where indicated, should be permitted as an option.

Proposal 12: Congress should create and fund a permanent Health Savings Account Agency. It should have members representing subscribers and providers of these instruments, with the power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcommittee of Ways and Means periodically. It should be involved with the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations concerning the size and scope of this activity.

Single-Premium Medicare, age 65 Hypothetically, if anyone could live to his 65th birthday without spending any of the accounts, a prudent investor would have accumulated $132,000 in pure deposits on his 65th birthday. He only needs $80,000 to fund Medicare as a single-payment at age 65, however, so he can even afford to get sick a little. If he starts later than age 25, he has already paid for Medicare somewhat, with payroll taxes. That could be considered payment toward reduction of the Medicare debt.

If someone makes a single deposit of $80,000 on his/her 65th birthday, there will accumulate $190,000 in the account over the next 18 years, the present life expectancy if he spends nothing for health and invests at 5%; and $190,000 is what the average person costs Medicare in a lifetime. Since the average person spends $190,000 during 18 years on Medicare, enough money will accumulate in Medicare to pay its expenses, and after some shifting-around, this should make Medicare solvent, in the sense that at least the debt isn't getting bigger because of him. Furthermore, index funds should be returning 10-12% over the long haul, so there should be some firm discussions with the intermediaries about some degree of dis-intermediation. Please don't do the arithmetic and discover that only $40,000 is needed. That seems plausible, but that's wrong because the costs remain the same , and previously the government has been borrowing half the money from foreigners. In effect, the subscribers have been paying the government in fifty-cent dollars, while claiming the program is entirely self-funded. There has been an exchange of one form of revenue for another, so the required revenue actually does demand $80,000 for a single deposit stripped of payroll deductions and perhaps premiums. An end would be put to further borrowing, but the previous debt remains to be paid. I have no way of knowing how much that amounts to, but it is lots. All government bonds are general obligations, mixed together, while access to Medicare reports back to 1965 is not easily available. What we can more confidently predict is the limit young working people can afford for the sole purpose of paying off the Medicare debts of the earlier generation. If there are other proposals for paying off this foreign debt, they have not been widely voiced. And the debt is still rapidly growing.

Escrow the Single Premium A young subscriber would have to set aside an average of $850 per year (from age 25 to 64) to achieve $247,000 on his 65th birthday, assuming a 5% compound investment income and relatively little sickness. This might seem like an adequate average, but occasional individuals with chronic illnesses would easily exceed it in health expenditures. Assuming a 10% return, he would have to contribute $550 yearly. It is not easy to estimate the size and frequency of expensive occurrences in the future, so someone must be designated to watch this balance and institute mid-course adjustments. As an example, simple heart transplants costing $200,000 are already being discussed. To some unknown extent, the cap on out-of-pocket expenses would have to be adjusted to pass these cost over-runs indirectly through the Catastrophic insurance. Insurance does greatly facilitate sharing of outlier expenses, but usually requires a time lag whenever new ones appear.

It does not require much political experience to know taxpayers greatly resent paying debts that benefitted earlier generations. They complain, but complaining does not pay off the debts of the past. To double required deposits in order to pay off past debts, as well as using forgiveness of payroll deductions and premiums, would require an additional $120,000 per year escrow, for each year's debt accumulation. At present, roughly $ 5300 per beneficiary, per year, is being borrowed, and there are roughly twice as many current beneficiaries as people in the tax-paying group, but for only 18 years, as compared with 40 years as a prospective beneficiary. So that comes to liquidating roughly $1300 a year of debt to balance the two populations or $2600 a year to gain a year. That's for whatever the debt happens to be, which surely someone can calculate. To accomplish it, one would have to project an average of ??% income return. That's definitely the outer limit of what is possible, and it probably over-reaches a little. Therefore, to be safe, one would have to assume some other sources of income, a change in the demographic patterns, or an adjustment with the creditor. Assuming inflation will increase expenses equally with inflation seems a possibility. And it also seems about as likely that medical expenses will go down, as that they go up. You would have to be pretty lucky for all these factors to fall in line over an 80-year lifetime.

Medicare: Optional, Mandatory, or Third Rail? It is this calculation, however rough, which has made me change my mind. It was my original supposition that multi-year premium investment would only apply up to age 65, and that would be followed by Medicare. In other words, it should only be implemented as a less expensive substitute for the Affordable Care Act. It seemed to me the average politician would be very reluctant to agitate retirees by proposing a plan to eliminate Medicare. They would feel threatened, the opposing party would fan the flames of their fears, and the result would be a high likelihood of undermining the whole idea for any age group, for many years. Better to take the safer route of avoiding Medicare, and confining the proposal to working people, where its economics are overwhelmingly favorable.

But when the calculations show how close this proposal under optimistic projections would come to failure, and when nothing remotely close to it has been proposed by anyone, the opportunity runs the risk of passing us by. So, I changed my mind. The moment of opportunity is too fleeting, and the consequences of missing it entirely are too close, to worry about the political disadvantages of doing the right thing. The transition to a pre-funded lifetime system will take a long time to get mature, and the political obstacle course preceding it is a daunting one. However, there is another way of saying all this, which is perhaps more persuasive that Medicare must be changed. It begins to look as though the unfunded and accumulated debts of Medicare are such a drag on our system of government, that very little can be accomplished by anyone, until this central problem is addressed. In that sense, our problem is not the uninsured or the illegal immigrants, or an expensive insurance system. Our problem has become Medicare underfunding, and our second problem is that everyone loves Medicare.

The "simplified" goal is therefore for everyone to accumulate $80,000 in savings by the 65th birthday, remembering that savings get a lot harder when earned income stops and definitely remembering that people approaching retirement are not likely to part readily with $80,000. With the current law, you would have to start maximum annual depositing in an HSA of $3300 by your 52nd birthday, to reach $80,000 by age 65, and you would still need 10% internal compounding to make it. With a 5% return, you would have to start at age 48. But notice how easily $200 a year would also get you there, starting at age 25 (see below) but it immediately gets questionable to assume $700 a year deposit for a 25 yr-old receiving 5% returns. We are definitely reaching a point where the ideas proposed in this book will no longer bail us out of our Medicare debt. Because -- the most optimistic of these projections are achieved by assuming there will be no contributions at all from people aged 25-65, for their own healthcare, babies, contraceptives and whatever. Many frugal people might skin by with looser rules; But the universal goals of the past are just that, the goals of the past. If we are going to cover lifetime health costs instead of just Medicare, many more will need $80,000 to do it and have something left to share with the less fortunate. But to repeat, that still compares very favorably with the $325,000 which is often cited as a lifetime cost. Unfortunately, that just isn't enough, the Chinese will have to wait for repayment. This book was not written to propose a change in Medicare, but in writing it I do not see how we get out of our healthcare mess without addressing Medicare. If politicians can be persuaded of that, at least we will no longer need to invent reasons for urgency.

Starting with the Medicare example. Notice that forty years of maximum contributions would amount to far more than the necessary $40-80,000 by age 65. We haven't forgotten that the individual is at risk for other illnesses in the meantime, so in effect what we need is an individual escrow fund for lifetime funding intended (at first) only to replace Medicare coverage. (We are examining lifetime coverage, piece by piece, trying to accommodate an extended transition period.) Depending on a lot of factors, that goal could cost as little as $100 a year deposited for forty years at high-interest rates, or as much as the full $1000 per year with low rates. It all depends on what income you receive on the deposits in the interval. In a moment, we will show that 10% return is not impossible, but it is also true that a contribution of $1000 per year would not seem tragic, compared with the present cost of health insurance (now averaging over $6000 a year). I have unrelated doubts about the current $325,000 estimate of average lifetime health costs, but that is what is commonly stated. For the moment, consider these numbers as providing a ballpark worksheet for multi-year funding, using an example familiar to everyone, but not necessarily easy to understand after one quick reading.

The Cost of Pre-funding Medicare. Rates of 10% compound income return would reduce the required contribution to $100 per year from age 25 to 65, but if the income were only 2% would require $700 contributed per year, and at 5% would require $300 per year. Remember, we are here only talking of funding Medicare, as a tangible national example, Obviously, a higher return would provide affordability to many more people than lesser returns. Let's take the issues separately, but don't take these preliminary numbers too literally. They are mainly intended to alert the reader to the enormous power of compound interest. Let's go forward with some equally amazing investment discoveries which are more recent, and vindicated less by logic than empirical results.

The Future of Individual Equity Index Funds ("Passive investing") As a New Gold Standard

Joseph Schumpeter's famous slogan "Destructive Innovation" fails to mention an important feature: sometimes, the cost of destruction can be greater than the profits from the innovation. The destructive effect makes its appearance early when the innovator is likely to have the insufficient startup capital to overcome a stagnant but politically powerful existing alternative. A suspicion arises that undeveloped markets, lacking "national champions", might actually have an advantaged location to perfect and exploit an innovation.

Kenya seems to present examples of several of the issues. Regardless of whose idea it was, the British but Los Angeles Headquartered Qualcomm Corporation seems to have recognized the potential of electronic banking and hired IBM to develop the technology. Ignoring the British and American markets, they started the M-Pesa Corporation in Kenya and Tanzania, where they quickly assembled 15 million customers producing a 27% profit margin, in spite of a 10% rate of attrition by fraud. Competitors are experiencing similar mixtures of success and failure in India. After the kinks are worked out in Africa, Qualcomm presumably might then be in a position to exploit its experience toward defeating conventional banking competitors in the developed world. Its recent stock market decline may suggest fierce competition even in darkest Africa, or it may suggest an investment bargain. But it illustrates the changing issues within technology innovation.

According to reports, M-Pesa eliminates the cost of branch banks by combining the ideas underlying Bill-Pay and Pay-Pal. Others can do the same. Africa may have few strong banks but has millions of wireless telephones. The customers deposit money by phone by increasing the phone charges and then direct its payment by phone. Leverage is developed by outsiders depositing extra money to lend, and thus the basics of banking are assembled inexpensively. A charge to use the system is added, with a surcharge for paying the bills of non-members. The system attracts fraud, but apparently, there are enough honest people starved for banking services, that profits absorb the cost. Bitcoin employs different technology but many of the same concepts, so conventional branch banks are not the only competition. Unless they change ancient ways, somebody is eventually likely to upend conventional banks in developed nations, although it may not necessarily be Qualcomm.

So, many of the objections to substituting new currencies for higher-cost branch banking are surely going to be tested by some system, anyway. Branch banking has been successful for a long time, so it is not likely to collapse because of internal contradictions alone. Innovative competitors are going to have a rough time overturning a useful system, need not be addressed here, so we confine this overview to the peculiarities and specific advantages of a currency replacement by index funds. Are they here to stay?

Law of Perpetuities

It may be a surprise, but the concept of a Limiting Factor (the Law of Perpetuity) may once again intrude the U.S. Supreme Court into the Affordable Care Act. It may also be a little hard to follow, so pay attention to what would ordinarily be regarded as a dry subject.

The concept of a limiting factor makes modern law, and possibly modern economics, possible. Several centuries ago, well before the US Constitution was written, lawyers came to see that many things are only possible if you don't carry them too far. The operation of compound interest is an example. In ordinary human commerce, the tendency of compound interest to rise over time leads to an eightfold rise over one lifetime of 84 years (48 in 1901 to 84 in 2017). A 200-year lifetime would lead to even more rise, to the point where one dollar invested at birth at 7% would pay for the entire average medical cost of a lifetime of $350,000 expressed in the year 2000 dollars. But quite obviously, if some scientist discovered a drug which lengthened life that much, something in the law would have to be changed to hold the economic world together.

So, about three hundred years ago, some English judge laid down the Law of Perpetuity, stating that Trust Funds may not endure for more than one lifetime, plus 21 years. It's proved to be a useful limiting factor, not likely to be changed easily. Congress might feel empowered to change it, but too much of modern commerce revolves around this definition of perpetuity, for the public to permit tampering without huge uproar. Notice the flexible wording: 21 years plus one life expectancy. Changing life expectancy would not invalidate the law.

A century ago, life expectancy was thirty years shorter, five doublings at 7%. And now it is more than eight doublings or in effect (2,4,8,16,32,,64,128,-->)256 times the original number. But that doesn't matter, because the law only effectively states its limit is 2 doublings (four times as much) more than the life expectancy at birth. A century ago, that implied two hundred-fifty-fold increase more than the starting amount at birth, and today it implies a thousand times. Inflation chugs along at 3% simple interest in both cases, at a growth rate doubling in 24 years (72/3). That's three doublings at simple interest a century ago, versus four doublings today. The important present difference is the thousand-fold compounded gain, compared with only 256-fold compounded at 7% a century ago, a seven-hundred-fold difference in the base price. The problem we have nevertheless still threatened less than forces opposed to changing the Perpetuity age limits.

To summarize, compound interest on Medicare-linked investment has gained six or seven hundred-fold over inflation in a century, as a result of medical progress bumping against mathematical principles. This difference is not likely to change in the coming century, because longevity at birth would have to increase to age two hundred to overwhelm the judges into changing the age limits of such a fundamental law. If net Medicare-linked costs rise to approach that level, moreover, this revenue opportunity might disappear.

There is no reason to avoid exploiting this opportunity while it lasts. It presents a quick and dirty solution to the present urgent problem, which is to find alternative proposals for reforming transition to healthcare financing, in case the Affordable Care Act is suddenly repealed. At the present time, the opportunity to reduce the effective cost of transition lies in the gap between the average age of death and the Law of Perpetuity -- about twenty years. At 7%, that's two doublings or four-fold profitability. The question becomes whether to raise the term limit of the Health Savings Accounts above its present level of the age of Medicare attainment. The natural instinct would be to terminate the HSA at death, but the Perpetuity law would permit 21 years more. Since the life and health of the depositor has very little bearing on this subject, Congress has the opportunity to allow Trust funds to continue to earn investment interest after death, until either its Medicare funding debts are extinguished, or the birthdate of the deceased depositor reaches 104 and is terminated by the unchanged Law of Perpetuity. The effect of doing this would multiply the funds for the transition by 400%, and largely solve the problem if the Trust applied all funds to the debt incurred when offered the opportunity to choose. When we get to that subject, the transition is the big obstacle for three reasons: 1) There may not be enough money to do it. 2) The transition may take too long if it is constrained by available funds. 3) And the courts may find some reason to block it.

As a non-lawyer, I can see no technical reason why this could not be done, but some reason might be invented for political reasons. Unanticipated problems might arise, but under present law the challenge would probably come through the State courts, using the Tenth Amendment as a basis. If the adoption of the idea is voluntary with the States, or if demonstration projects are employed, a conflict between jurisdictions is very likely, and the U.S.Supreme Court would have to settle the conflict. This split approach might satisfy both State and Federal proponents enough to remove the obstacle, because the Wickard v. Fillmore decision still rankles after eighty years, and after much longer than that from the Civil War, memory of which still greatly affects the regional popularity of federalism.

Several other ways to pay for the transition costs, or shorten the transition time, will be offered in later chapters. But only this simple change is required early in the process, and so only this proposal will transform transition from a plan to a process. It has always bothered me for a complete transition to take nearly a century, during which interval there would be many changes of political control of Congress. In turn, those transitions offer a chance to smother central concepts in a welter of obfuscation. And that applies to all transitions, suggesting original planning should always be followed. To a certain degree, that has sometimes proved useful, but the transition in this particularly vexed case is going too far with it. So having major alternative approaches, and thus creating opportunities for later innovation, seems on balance a worth-while addition.

Nudging Medicare into Retirements

Let's go straight to Medicare. We plan to add to it, not eliminate it. To make things more palatable, the changes we make should be voluntary. First examine the premise that protracted longevity is a direct consequence of improved healthcare, and should be considered one of its legitimate costs. Therefore, there is no betrayal of the promise to pay for healthcare within expansion to include retirement costs in Medicare. The problem is not that retirement cost is legitimate, but that we never saw any means to pay for it. I'm suggesting success in healthcare has led to the possibility that future cures may save money. The cures will first cost money, but as a disease is conquered, the former cost of treating people can be converted into money to pay for their extended longevity. And by the way, patents will run out, the competition will lower prices. Somewhere in the future, prices will come down, and we might gradually find the money to pay for retirements. We don't know how long it will take, but the NIH is currently spending $33 billion a year, trying its best to make it happen.

Furthermore, transaction costs on Wall Street have fallen by 70% in ten years. Index funds have made successful stock market investing feasible for amateurs, so long as they don't pay their agents' too many fees for it. Interest rates on savings have become trivial, but the safety of common stocks has vastly increased. The bond market is a disaster, so it's to be avoided. Although the average citizen is scared to death of stocks, they are about all that is left. But that's enough if you are careful picking your agent. Where does the seed money come from? Well, it's called a wage withholding tax, it's 3% of earnings (half of which is often paid by employers), and the public has long since quit asking what is done with it. Without venturing into that quagmire, suffice it to say it is available if you can apply political muscle. And compound interest makes it grow into quite an appreciable sum in a reasonable period of time. Remember, the worker starts contributing it around age 25, and doesn't die until he is (on average) 84. For illustration, let's divert $400 to this purpose, and see how it would grow (tax-free) from his birth to death at age 90. These are assumptions for illustration, but longevity might well grow from 84 to 90 by the time it matters for most young people. In other places, we will go into how we got the estimate of 6.5% returns, and how to get started at birth.

The first graph shows several things, but the main one is that such a manageable diversion of $400 will lead to $ 206,276.82. That's almost enough to supply a pension of $20,000 a year, which would be $40,000 for a couple. In addition, it would pay for the last year of life, reducing costs for everybody, including the government, whose loans make up present shortfalls. Nice.


Now, the hard part. How do you start at birth, and earn 6.5%? In the first place, dividends are issued quarterly, and there is a considerable drop in income if you accept annual compounding. Secondly, 7% was selected for convenience in doing estimates in your head; the real interest rate is 6.5% and you won't get that without an argument, maybe without a law. Finally, we start at birth because we are projecting a contingency fund, not the real transfer. The first time around, this would have to be a government subsidy, after that it would generate itself. So, a more realistic curve would look like this, starting at age 25 and generating 6.5% returns:

We hope the graph brings home the enormous power of increasing the interest return by fractions of a percent (consequently, the power of eliminating transactions fees, one of which is to buy and never sell, and the other is the power to transfer your account to a different broker). Furthermore, the compound interest curve is J-shaped, so increasing the length of time for it to work is also critical. Almost all of these steps require Congressional cooperation.

Finally, we draw to your attention that the proceeds are supposedly used to pay the last year of life costs back to Medicare. In fact, we hope to tap this source for other projects, too. What's more, we are counting on this addition to create the same incentive for Medicare recipients to be frugal spenders, just as it seems to have done with Health Savings Accounts. We believe this was an important incentive, but you can't be sure. And finally, while a fund growing to the time of death generates much more money, if you start paying pensions at age 65, it will start to shrink.

What Is Our Final Goal?

The reader will have encountered much talk about interest rates in this book, but there are really two interest rates, public sector, and the private sector. Our economy is balanced on the steadiness of definitions. The definition of medical care has been steadily eroded by including new features, to the point where there is even an effort to re-name it "health care". Obviously, it is impossible to plan for paying the cost of something whose definition changes. Similarly, changing the definition of the private sector and public sector befuddles the discussion at one peculiar point. It is commonly said deflation is a spiral condition which is almost impossible to rescue. Why should that be? Are these unrelated issues, or is there a common theme?

Lord Maynard Keynes invented the discipline of macroeconomics, and eventually invented the idea of curing private-sector recessions by transferring funds from the public sector to the private one. Sometimes that works, and sometimes it doesn't. Even Keynes admitted there was a limit to what public-private transfers could do, a condition called deflation. Since public sector debt is entirely in fixed income securities of up to thirty years duration, it is difficult to reduce public debt. Therefore, when private-sector prices fall in a recession, they must not fall below the point where even more money shifts out of the private sector into the public sector, where higher interest rates are to be found, and a deflationary spiral begins.

Two more things. As interest rates go up, the value of bonds go down; that's simple enough but easy to forget. And the approaching danger of deflation is found in the ratio of GDP (Gross domestic product) to the national debt. By definition, a recession is threatened when GDP goes down or at least fails to go up. It must be qualified, however, by the size of the public sector to be used to rescue it, inversely represented by the size of the national debt. A few lucky countries have a small ratio of debt to GDP, perhaps 20%, while the dangerously unstable nations of southern Europe are running over 200%. The US ratio is now about 100%, roughly stating the public and private sectors to be about equal in size. But the point I am trying to make is that transferring large amounts of the health care industry to the public sector is invisibly reducing the borrowing power of the public sector, hence it is reducing the future power of the Federal Government to moderate a recession. At some unspecified point between 20% and 250%, nobody will lend more money to your public sector. Or if they will lend, they will demand a higher interest rate, which will reduce the value of existing government bonds. You have started a spiral, from which even Lord Keynes cannot rescue you.

The reader will thus perceive that privatization of health care, whether Medicare, Medicaid, or subsidized private programs, diminish the ratio of national debt to GDP and reduces the danger of deflation. Paradoxically, it thereby probably increases the ability of the Federal government to borrow for other purposes.

Commentary: Agency for Mid-Course Corrections

Among the many things we don't know about the future, is the average longevity eighty years from now. The whole-life insurance industry prospered when they sold policies assuming American longevity of 47 years in the year 1900, and it turns out to be 83 today, still growing fast. If longevity should get shorter, as it recently has in Russia, life insurance would go out of business. Since we can't rely on projections, we have to rely on early observations and make mid-course corrections.

President Lyndon Johnson both underestimated how much Medicare would cost, and how politically successful it would be. He was in no position to multiply 50 million Americans times $11,600 per year per person, times 22 years per person. That simple sentence tells you all you need to know about current Medicare costs, but who knew? Nor could he know how fast longevity would grow, or how fast the cost would rise. But we can monitor the trend, extrapolate, and revise the extrapolation. Medicare was a medical success, which had to be paid for; and President Johnson's successors might have found that out a little sooner, and changed course. If we must find fault, failure to readjust early would be my candidate.

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So, who is counting? {bottom quote}
Quis custodiet custodies?

For reasons obvious or not, the nation would be well served to create a monitoring agency for the guidance of future Congresses in charge of the type of Health Savings Accounts we already do have, and maybe some related issues. When we start envisioning lifetime coverage, it becomes even more vital to have a permanent agency to sort out what is happening. This is particularly important when the Branches of the Federal Government are divided between the two parties. Informally, the subcommittees of the Appropriations Committees have assumed much of the burden of overseeing agencies. They are the only Congressional Committees to review every program every year. However, the Agencies have grown to be the largest bureaucracies in the government, and tend to become jealous of their independence, as the Appropriation Committees grow too burdened to bother with them. It begins to look as though we need more Congressmen if we want Congress to maintain closer control of the agencies. Each Congressman now represents a million constituents, and simply cannot do all we would like him to do. As much as anything, we need a core group who worry about issues in advance and have the prestige and access to make their views be heard. Rather than design a blueprint, let's review some issues that such a body might explore.

Proposal 8: Health Savings Account Age Limits Should be Extended, from the Cradle to the Grave. A few extra years might be a minor improvement in special cases. The real benefit would be to create a continuous account, which could grow over long periods of apparent inactivity.

Proposal 9: Instead of annual contribution limits, the limit for HSA should extend over several years, or even be a lifetime limit. When deposits must be skipped for health or occupational reasons, there should be an opportunity to catch up. Athletes and similar occupations tend to concentrate on earning power in a few years.

Since the HSA is increasingly accustomed to augmented retirement income, thought should be given to extending the idea to amounts of money which could encourage that use. Furthermore, there are special circumstances, like a partial Medicare buyout, in which a limit to deposits forces a choice between two desirable uses for the same money. If the individual has the money for more than one purpose, it seems wrong to force a choice. For example, it's considerably safer to over-deposit more than you believe you will need, planning to return the excess. As a practical matter, the usual danger is overoptimistic revenue projection. Someone who sells his business at age 63 might have enough cash, but still, encounter trouble with the $3300 per year limit because he once needed the income to run the business. It seems pointless to squeeze through such a narrow window, and much better if the window were at least enlarged to permit lump-sum deposits up to a $ 132,000-lifetime limit. With that sort of cushion, plus a stretch of reasonably good health at the right time of life, it would become considerably safer to take risks. At age 65, a lifetime of health costs is already in the past, but the curve of health expenses starts to bend upward at age 50, at a time when college expenses for children may be persisting, and the house isn't quite paid for. It seems a pity to cripple a good idea with pointless contribution limits that almost stretch far enough, but leave people fearful. If Congress develops a serious interest in lifetime insurance, the yearly contribution limit should be revisited. The optional side use for retirement should be examined in parallel, including its potential for being gamed.

Revisited by whom? Someone should be empowered to travel, and talk to people in the field. Maybe hold hearings, maybe just interview. A simplified goal is, therefore, to accumulate $80,000 in savings by the 65th birthday, intending to make a single-premium buy-out. That clarifies costs, but is it practical on a large scale? Remember that savings get a lot harder when earned income stops. With the current law, you would have to wake up and start maximum annual depositing of $3300 by your 50th birthday, to reach $80,000 by age 65, and you would need generous internal compounding to make it. But notice how easily $100-200 a year would also get you there, starting at age 25 (see below), even justifying somewhat less optimistic investment income returns until age 65.

Many more frugal people might skin by with looser rules; It even could rather easily be subsidized for poor people and hardship cases. If you are going to cover lifetime health costs instead of just Medicare, many more will need $80,000 to do so and have something left to share with the less fortunate. But to repeat once again, that still compares favorably with the $325,000 often cited as a lifetime cost. That's all we care to promise in public, but secretly we know it may not be enough. The plain fact is, if longevity or inflation get out of hand, someone must have the authority to raise the contribution limits and to do that, there should be some research by a trusted house actuary.

Proposal 10: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should permit a lifetime limit of $132,000, with annual deposit limits adjustable to bring accounts at their present age, up to what they would have been if $3300 annually had been deposited since age 25.

Proposal 11: Congress should reserve decisions to itself for changing the lifetime contribution level, and review final appeals from contract terms which seem to threaten imminent major adjustment to the general public lifestyle.

The Cost of Pre-funding Medicare. Rates of 10% compound income return would reduce the required contribution to $100 per year from age 25 to 65, but if the income were only 2% would require $700 contributed per year, and at 5% would require $300 per year. Remember, we are here only talking of funding Medicare, as a tangible national example,

It is this calculation, however rough, which has made me change my mind. It was my original supposition that multi-year premium investments would only apply up to age 65, and that would be followed by Medicare. In other words, HSA should only be implemented as a less expensive substitute for the Affordable Care Act. It seemed to me the average politician would be very reluctant to agitate retirees by proposing a plan to eliminate Medicare. They would feel threatened, the opposing party would then fan the flames of their fears, and the result would have a high likelihood of undermining the whole idea for any age group, for many years. Better, I thought, to take the safer route of avoiding Medicare, and confining the proposal to working people, where its economics are overwhelmingly favorable.

But when the calculations show how close this proposal under cautious revenue projections could come to failure, and when nothing else remotely close to it has been proposed by anyone, the opportunity runs the risk of passing us by. So, I have changed my mind. The moment of opportunity is too fleeting, and the consequences of missing it entirely are too close, to worry about the political disadvantage of doing the right thing. The transition to a pre-funded lifetime system will take a long time to get mature, and the political obstacle course preceding it is a daunting one. At least we should allow it as a demonstration option, where some fears will prove unwarranted, while others can be corrected.

So we make the guess of the average life expectancy where things will eventually flatten out, will then be about 91. (Be careful, most census figures are for life expectancy-at-birth.) But many people would have to be lucky in all details: a favorable investment climate for the right ten-year periods, plus a favorable health situation which avoids expensive illnesses just at the age when they begin to threaten. Some life-saving scientific advances would be a big help, too. Using a lower goal of $80,000 and an interest rate of 7% is considerably easier to conjure, but the barrier which might be reached first is the $3300 yearly contribution limit. Some unfortunate individuals might be forced to pay all medical expenses out of pocket in order to make the investment fund stretch, even before the average becomes affected. The individual who came up short might still remain considerably ahead of where he would be without an HSA, but we are using a precise match of revenue and expense, to simplify the examples.

Someone who sells his house or business at age 63 might have the cash, but still, have trouble because of the $3300 per year deposit limit. It seems pointless to squeeze through a narrow window, and much better if the window were enlarged to permit lump-sum deposits up to a $ 132,000-lifetime limit, adjusted for inflation and compound income returns. With that sort of cushion, plus a stretch of reasonably good health at the right time of life, it would become considerably safer to take the risks. At age 65, a lifetime of health costs is nearly in the past, but the curve of health expenses starts to curve up at age 50, at a time when college expenses for children may be persisting, and the house isn't quite paid for. It seems a pity to cripple a good idea with pointless contribution limits that almost stretch far enough, but leave people fearful. If Congress develops a serious interest in lifetime insurance, the yearly contribution limit should be revisited.

The simplified goal is, therefore, to accumulate $80,000 in savings by the 65th birthday, remembering that savings get a lot harder when earned income stops. With the current law, you would have to start maximum annual depositing of $3300 by your 50th birthday, to reach $80,000 by age 65, and you would still need generous internal compounding to make it. But notice how easily $100-200 a year would also get you there, starting at age 25 (see below) and less optimistic investment income returns until age 65. Many more frugal people might skin by with looser rules; poor people and hardship cases could more easily be subsidized. If you are going to cover lifetime health costs instead of just Medicare, many more will need $80,000 to do it and have something left to share with the less fortunate. But to repeat once again, that still compares very favorably with the full $325,000 which is often cited as a lifetime cost. We have already imposed an extra $80,000 internal savings requirement in order to include Medicare; here is the place it would be a hardship. That's about as far as concentrated thought will carry you. It leads to the conclusion that it might be better to modularize Medicare and let the public pick and choose what it wants to buy its way out of.

The Cost of Pre-funding Medicare. Rates of 10% compound income return would reduce the required contribution to $100 per year from age 25 to 65, but if the investment income were only 2% would require $700 contributed per year, and at 5% would require $300 per year. Remember, we are here only talking of funding Medicare, as a well-understood national example, Obviously, a higher return would provide affordability to many more people than lesser returns. When $100 competes for the investment income from 10%, it's much easier than $300 competing for 5% income. Let's take the issues separately, but don't take preliminary numbers too literally. They are primarily intended to alert the reader to the enormous power of compound interest, and the big difference made by relatively small changes in it. Let's go forward with some equally amazing investment discoveries which are more recent, and vindicated less by logic than empirical results.

A transition from term insurance to pre-payment of Medicare is greatly eased by forgiving the premiums and payroll deductions, which are roughly age-distributed, and can, therefore, be forgiven in a graduated manner for late-comers to the program. Most cost-redistribution of high-cost outlier cases should be handled through the catastrophic insurance, which is well suited for invisible and tax-free redistribution. Because of hospital cost-shifting, inpatients are temporarily overpriced but are quickly becoming underpriced as a result of hospitals gaming the DRG to shift costs to outpatients. This will in time affect the relative costs of Catastrophic and Health Savings Accounts and must be carefully monitored for mid-course adjustments. This changing horizon of cost shifting reinforces the need to create a special agency to keep track of it. And to report its findings to Congress, who can consider the broader political implications, once they know the facts.

Proposal 12: Congress should create and fund a permanent Health Savings Account Agency. It should have members representing subscribers and providers of these instruments, with the power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcommittee of Ways and Means periodically. It should have extensive access to the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations about the size and scope of inter-subscriber loan activity. At first, it might conduct the loan activity itself, with an eye toward eventually overseeing a commercial vendor.

Cost Sharing with Frugality.At present costs, statisticians estimate future healthcare costs of about $325,000 (in year 2000 dollars) for the average lifetime. We could discuss the weaknesses of that estimate, but even though it's breathtaking, it's the best guess available. Women experience about 10% higher lifetime health costs than men. Roughly speaking, how much the average individual somehow has to accumulate, eventually must equal what he spends by the time of death. The dying individual himself has little interest in what is left unpaid at his death, so Society must do it for him, in order to survive as a Society. At this point, we, unfortunately, must also work around one of the great advantages of having separate accounts.

On the one hand, individual accounts to create an incentive to spend wisely, but it is also true that pooled insurance accounts make cost-sharing easier, almost invisible, and tax-free. Cost sharing induces reckless spending of other people's money, however, while individual accounts induce frugality with your own money. Therefore, linking Health Savings Accounts with Catastrophic insurance provides a way to pool heavy outlier expenses, while the incentive for careful money management remains in the outpatient costs most commonly employed (together with a special bank debit card) to pay outpatient costs. Such expenses are much more suitable for bargain-hunting anyway because dreadfully sick people in a hospital are in no position to argue or resist.

But a cautionary reminder: linking individual accounts to frugality through outpatients, as well as linking heedless spending to insurance through inpatients -- induces hospital administration to game the system we have here imagined. There's no doubt a system can be gamed by shifting medical care to the outpatient area, but we must expect the DRG to be attacked, in order to reverse such incentives, which run in the hundreds of billions of dollars. A well-informed monitoring system simply must be created and funded, if we ever expect the decision to hospitalize patients to rest on whether the patient needs to lie down, instead of on what kind of payment system we happen to fancy. At the same time, the present DRG coding system must be considerably improved to withstand being subverted. These are not tasks which congressmen typically enjoy, but they must be done within the legislative branch if we expect it to function.

Standard Deviation within and between age cohorts.Furthermore, there is an important distinction between a mismatch of revenue to expenses caused by chance within one age group and a revenue mismatch between two age cohorts. To put it another way, somebody has to pay off these debts, and we must have a plan about who should pay them when revenue is not present in the account. Borrowing between subscribers within the same age cohort should pay modest interest rates to forestall gaming, but borrowing between different cohorts for things characteristic of their age level (pregnancy, for example) should pay no interest if at all feasible. Unfortunately, people sometimes abuse such opportunities, and interest must then be charged. Until the frequency of such things becomes better established, this function of loan banking policy should be part of the function of the oversight body, rather than the executive agency, which tends to want to retain the function. When its limits become clearer, it might be delegated to a bank, or even privatized, but the policy must be monitored by specialists who understand what is happening "on the ground". While it is unnecessary to predict the last dime to be spent on the last day of life, incentives should be understood by the managing organization, separating routine cash shortages from likely abusive ones. And looking at all such activity as potentially having been caused by payment design. Much of this sort of thing can be minimized by encouraging people to over-deposit in their accounts, possibly paying some medical bills with after-tax money in order to build the fund up. Such incentives must be contrived if they do not appear spontaneously. User groups can be very helpful in such situations. People over 65 (that is, those on Medicare) spend at least half of that $ 325,000-lifetime cash turnover, but just what should be counted as careless overspending, can be a matter of argument.

Proposal 13: Current law permits an individual to deposit $3300 per year in a Health Savings Account, starting at age 25, and ending when Medicare coverage begins. Probably that amount is more than many young people can afford, so it would help if the rules were relaxed to roll-over leftover entitlements to later years, spreading the entire $132,000 over the forty-year time period at the discretion of the subscriber.

Finally, an observation. The classical Health Savings Account will save a big chunk of money, but who gets it will depend heavily on the health of individual subscribers because it is term insurance, year to year. Two concepts loom over it: (1) The nation may want to distribute the good and bad luck more evenly, and (2) It would be much easier to cut down an over-funded project than to supplement an under-funded one. If we can think of some ways to improve the product, we should start with as generous a benefits package as we can easily devise. Therefore, the rest of this book is devoted to making the returns more generous, and the outcome more predictable, sooner.

Grandpa Makes a Gift

A point which cannot be emphasized enough is that a Health Savings Account is just about the best way to invest, if you have given little thought to investing. The deposits are tax-deductible, and the withdrawals are tax-free if they are medical in nature. Even if they aren't medical, they can be anything at all after you reach 66. You probably ought to give a lot of thought and investigation to the particular agent you choose, because they aren't necessarily legal fiduciaries, no matter how friendly they may be. They have no obligation like a doctor or lawyer to put the client's interest ahead of their own, and they can later hire partners you don't care for, so make certain you can terminate the arrangement and switch to someone else without penalty.

Be careful to choose a representative carefully. But whether to choose an HSA, at any age and stage of advancement, always leads to the same answer: Yes, do it. That being the case, a certain number of HSA owners will find themselves with an account they don't know what to do with. There's almost always an exit strategy, although you may need professional advice to judge which one is best for you.

If you started your account near or after retirement, you may have the idea you will never have surplus funds. But if Congress can be persuaded to make it legal, one of your options might be to roll the surplus over to a grandchild or grandchild-like person. If this suits your situation, please notice that a newborn child has some special medical problems. In the first place, the first year of life is unusually expensive; in the aggregate, 3% of all medical expenses are spent on the first year of someone's life. To anticipate a little, 8% of health cost are spent before age 21, which is generally held to be the beginning of the earning period. Children are generally pretty robust, but when a child is sick, he is vulnerable to lasting disabilities of a very expensive sort, so you don't like to see a family cut corners on child care.

But newborns have no earning power, their future is in someone else's hands. The average woman has 2.1 children today, two women thus have 4.2. Four grandparents roughly have one apiece. The way the law of averages is working out, if every grandparent took care of the health costs of one grandchild, things would be close to solved. Things would have to be adjusted for the non-average case, but they would be close to being solved by adding one grandchild's cost to each average Medicare cost for the elderly.

In this case, however, the legal and political problems are greater than the financial ones, so it would suffice for a beginning, just to permit those who want to volunteer, to be permitted to leave unused leftovers in their HSA to children under the age of 21. If there is concern about dynasties and perpetuities, it might be left to the child's HSA, to be exhausted by age 21, or transferred to the HSA of a second child. The sum in question might be around $8000.

What Price Success?

One of the best ways to wreck a good plan, is to fail to provide for success. Most innovators spend so much anxiety over possible failure, they never get around to planning for the problems created by the plan's roaring success. So, let's voice some concerns about where the Lifetime Health Savings Accounts might stand if everything worked perfectly.

In the first place, there could be a conflict between the small investor's best interests. On the one hand, he will undoubtedly do better for himself by purchasing index funds than individual stocks. He gets diversification and low fees, supported by mountains of evidence that only a rare investor will do better with stock-picking and market-timing, no matter who is advising him. But if myriads of people do the same, index funds could overwhelm the market. Already, they represent several trillions of dollars and show no signs of slowing the pace of advancement. The proportion of stockholders who actually vote their shares will steadily shrink, and ultimately we can expect the few shares that are voted, to be in the hands of managers and insiders of the company. Now it is probably true that the average small investor knows so little of what is going on, that both he and the companies are better off if he doesn't exercise an uninformed vote. A more likely danger is imperfect agency on the part of the managers of the funds. Wall Street periodically circulates rumors of fund managers offering to vote the fund proxies, in return for the selection of their fund for the affected company's pension fund assets. It doesn't matter whether this is true, what matters is it is believed. Sooner or later, Congress will get wind of such rumors and pass inhibiting legislation. The nature of such regulation and/or legislation is ultimately to impair the value of the stock. The salaries of CEOs may go down, and some Wall Street predators may be thwarted, but overall return on investment will be lessened by the suspicion.

The bond market is much larger than the stock market because leverage is the basis for a great deal of profitability. No one knows what the optimum ratio of bonds to stocks should be. In 2007, the ratio of bank leverage was fifty to one, and few people complained it was too much. In the depths of the 1930 depression, it was far lower, and few people complained it was too low. In retrospect, fifty times is insanely high, while if you bought any stock at all in 1939, you probably made a ton of money. The herd instinct always seems to drive this relationship to extremes, but in fact, the optimum ratio will also go up and down with the times. Any law setting limits will be meaningless for long periods of time, and then suddenly be a serious impediment to the economy. The problem lies in the reality that bond trading is, with few exceptions, a zero-sum game. For you to win, someone else likely has to lose. By contrast, the stock market represents company ownership, and it is possible for both sides of a trade to be highly satisfied with their outcomes. It certainly isn't guaranteed, but the environment is more favorable for a passive investor. The long-run hazard lies in the possibility that nearly all investors will go to school and learn these aphorisms, thereby undermining the bond market except for insurance companies, banks and other long-term investors, who can hold a thirty-year bond to maturity. A flight from bonds would inevitably make their prices drop, followed by a shortage of bonds, which would then make their prices soar. Carried to an extreme, and protracted for a decade, a disturbance of this sort would cause the buy-and-hold stock investor to lose the faith, and ultimately to lose his shirt.

You have to feel sorry for the traditional stockbroker and investment advisor. The advent of the computer and of low-cost diversified funds have badly shaken what has long been an honorable and respectable profession. However, stockbrokers have resisted adopting the legal role of fiduciary, pledged to put the customer's interest ahead of his own. Most of the major stockbrokers started as private offices to handle the affairs of one rich family, who essentially didn't care about the fees and commissions. As a favor to rich friends, they enlarged the business and utilize economies of scale. In consequence, almost all stockbrokers could hope to get rich from trade secrets. With the advent of computers and high-speed trading, the broker trade became an investing profession, graduates of business schools and even mathematics majors from Ivy League Universities. The secret of success in that environment was volume, not trust-fund babies as friends and former classmates. Pension funds in particular aggregated a large number of obedient clients for them; the salary scale was still opulent, but the clientele was no longer their equals in sophistication.

As the brokerage house with walnut panels and oriental rugs began to fade away, the social level of the broker was no longer so important, and high fees interfered with maintaining high volume. It is only a matter of time before the personal financial manager discovers a small volume of potential clients, including trust-fund babies with some investment training of their own. The surviving financial advisors are only cogs in a big machine. In the meantime, be careful of whose advice you take, especially if he steers you away from index funds. There is a significant risk the advice is really coming from the sales manager, unloading the firm's inventory. The most lurid example is what has happened to 401(k) pension plans, where the investment return is heavily consumed by fees, altogether too often. It would certainly pay to browse through a book by Ibottson, containing all of the statistics you need about the last century. Since 1926, large-cap stocks have averaged 10% total return, while somewhat riskier small-capitalization stocks have averaged 12.5%. Your interview with an advisor can't be considered finished until you are told what the 15-year experience has been at that particular fund. Unless you are determined to get the data, you probably won't get it. Because of this behavior, the famous investor Warren Buffett tends not to buy stocks and bonds at all. He buys the whole company. The results of his investment fund, Berkshire Hathaway, are a rather close match to the returns which Ibottson reports.

Ok, ok, got that. But suppose everyone gets it? In that case, one would suppose the prices of common stocks would fall, and the prices of bonds would rise to a new level. At that point, the advice would be to buy funds which hold huge amounts of bonds of all maturities and hold them to maturity. Remember, investors in Health Savings Accounts would effectively be investing for the next sixty to eighty years. Someone must be found to change the composition of the portfolio rather drastically and to do so gradually enough to avoid convulsing the market. Panics are essentially what happens when everyone tries to get out the door at the same time. Are we to risk the entire savings of the nation for healthcare, based on that sort of opinion? It seems pretty clear to me that we have to trust someone, but it is not clear to me how we can assure ourselves that the person or persons with authority, will be sufficiently unaffected by politics -- to be trusted.

Which brings up the Federal Reserve. It would be hard to find a group of more serious people, generously infused with a strong sense of duty and fidelity. But strong differences of internal opinion regularly surface, not necessarily following a political ideology, as much as creating it. After all, some of this stuff is really hard. In the full century since the 1913 creation of the Fed, the dollar has declined a thousand percent, from the value of one dollar to the value of one penny. John Kenneth Galbraith, one of the wittiest civilized men on earth, loudly and earnestly advocated a deliberate 2% inflation in the value of the dollar. Well, we have it, and the dollar has completely severed its connection to gold and silver or any other commodity. The currency has now just become a computer entry when thousands of years of experience speak to the hazard of doing so.

When the dust settles, there remain two reasons why we should take such risks. The first is the rather good possibility we can indeed extricate ourselves from a looming health finance disaster, by taking this risk. The second is to reflect on the growing possibility that medical research can eliminate enough disease, and reduce the cost of caring for what is left, to give us the room to ease into sustainable finances. If that's our grand strategy, only America, using American bravado, could pull it off.

Lifetime Health Coverage, Summarized in Advance

We propose the development of a lifetime health insurance product, for the main purpose of gathering investment income on the insurance premiums. It reduces the cost of health care by adding that new revenue source, which at the moment is simply lost. The longer compound interest is allowed to work, the more income will be produced, to the point where it can be imagined that this income source would more than cover the cost of health care. For the most part, it would really only cover a portion of the cost, but a very large one. If things are cheaper, more people can afford them, so the problems of the uninsured are eased. This system would take many years to make the transition to wide-spread coverage, so many features of the Affordable Care Act might be temporarily useful. Many people who resist Obamacare are unable to see an end to it. As a transition, Obamacare would become a success if some other program is a success, first.

First, the law requires two things to be purchased at once: an investment account, and catastrophic health insurance. Deposits into the Account are tax-exempt. Withdrawals are restricted to health costs, not including the premiums of the catastrophic insurance, but the internal investment income on the deposits compounds tax-free. The framers of the enabling act apparently did not anticipate that many or most children would, under Obamacare, already have mandatory coverage on their parent's policies up to age 26, under their parents' policies, so the overlap is a little ambiguous. Apparently, however, there is no limitation to single health policy, so dual policies appear to be allowed. As long as the law requires money to be withdrawn from an Account only for health expenses, many people during the transition will find they already have health insurance, but not enough money in the account to cover the required minimum deductible. Unless they can make a deposit and see it grow, they will never be able to start an account. So, especially for children, the required deductible should match the amount in the account, not the other way around. It scarcely matters which it is, except the child rarely has control over the parent's policy, so the law should be amended to allow an HSA to be created without catastrophic coverage, until such time as some flexible minimum deductible is reached, even if it is necessary to prevent all withdrawals until the minimum is reached.

Perhaps this issue could be addressed for children with a single-payment deposit. It seems a great pity to prevent lifetime accounts which could be made for a nominal single payment, simply because the parent has a low-deductible policy and cannot or will not change it. Alternatively, it is an equal pity to require a child to have two other health insurance policies, when the reality is the healthiness of such children seldom requires even one policy. Since lifetime health coverage is within reach for a single payment of less than a thousand dollars, it is much easier to envision subsidies for the poor of that amount. Lifetime average health expenditures in the range of $300,000 are largely made up of inflation costs which reduce a dollar to the value of a penny, over an ensuing century. There are few ways for the poor to escape inflation, but this would be one of them.

That gets us to age 26 when employer-based insurance makes an appearance. Or makes a disappearance, replaced by Obamacare; we must wait to see what happens. Present law permits a deposit of a maximum of $3300 in the accounts, until retirement at age 65, when Medicare takes over. That could result in a deposit of $128,700 at age 65, which with 7% compound income within the account would amount to $610,000 total in the account, but an unknown amount subtracted for exceeding the insurance deductible. Since additional deposits are not permitted to people receiving Medicare benefits, $610, 000 will have to last for the duration of life expectancy, calculated to be age 90 by then. Assuming the same 7% return on investment, that amount is short of the $3 million single payment deposit which would be required (at age 65) to pay for average health costs to the end of that life at 2014 prices. And probably not nearly what year 3004 prices might become.

To achieve that, 10% compounded income would be necessary, both to reach the end of life, and to augment those deposits of $3300 yearly to $4.5 million, the point where they and their investment income would meet the need. Although Ibbotson's curve encourages the hope that 10% return might persist for a century, there is little doubt that long periods of 1% income would bankrupt the system, resulting in only $156,000 gross before illness expenses at age 65, and unguessable effects on medical costs after that. Large numbers of people would not even be able to afford annual $3300 deposits into their Accounts. But there are two ways out of this trap.

In the first place, no one claimed that 99% of future medical costs must be met by this approach. The claim is only that large amounts would be "found money", not found at present; don't be greedy, since not a penny of this money is being utilized at present. And secondly, it would be manifestly unfair for Medicare to continue to collect payroll taxes from one age group, and Medicare premiums from another, if the plan is for this individual to bear his own costs. Accordingly, these payments could partly be waived, and partly deposited directly into the Accounts rather than into the U.S. Treasury. The Treasury itself would be amply compensated by putting an end to the present 50% subsidy of Medicare costs by the taxpayer, assisted of course by foreign loans, mostly Chinese. There is a political risk, of course, that opposition politicians would encourage the elderly to believe that Medicare is about to be taken away from them. Almost everyone enjoys getting a dollar for fifty cents and is suspicious of claims that, otherwise, they will get a penny for a dollar. It would thus seem better timing to begin at the other end of the age spectrum, building up a constituency for compound interest, the Ibbotson curves, and Health Savings Accounts, and meanwhile waiting for competitive proposals to flop. It would take six months of intensive publicity to convince people who don't want to believe it, that Medicare is 50% taxpayer subsidized. It would take another six months to iron out all the unsuspected technical flaws in the proposal.

And it would take time to create a bipartisan think-tank, to collect the necessary data and make the necessary calculations. Perhaps some philanthropists will offer to do it privately, saving us from the criticisms of agencies like the Federal Reserve, which are accused of being less "independent" than they claim to be. The first step would be to put it somewhere other than Washington DC since there is no need to be seen as close to those who threaten your independence. The divergence between costs and revenues must be monitored and adjusted to; sudden changes in direction must be responded to.

CHAPTER TWO: Endgame: Shifting the Center of Care Toward Retirement Villages


Shifting the Center of Care toward Retirement Villages.

It would save money if the patients and doctors were closer together, and not using elaborate facilities when that is unnecessary.

Franklin Benefits the Pennsylvania Hospital

{Benjamin Franklin}
Benjamin Franklin

During the number of years I was in business as a stationer, printer, and postmaster, a great many small sums became due for books, advertisements, postage of letters, and other matters, which were not collected when, in 1757, I was sent by the Assembly to England as their agent, and by subsequent appointments continued there till 1775, when on my return, I was immediately engaged in the affairs of Congress and sent to France in 1776, where I remained nine years, not returning till 1785, and the said debts, not being demanded in such a length of time, are become in a manner obsolete, yet are nevertheless justly due. These, as they are stated in my great folio ledger E, I bequeath to the contributors to the Pennsylvania Hospital, hoping that those debtors, and the descendants of such as are deceased, who now, as I find, make some difficulty of satisfying such antiquated demands as just debts, may, however, be induced to pay or give them as charity to that excellent institution. I am sensible that much must inevitably be lost, but I hope something considerable may be recovered. It is possible, too, that some of the parties charged may have existing old, unsettled accounts against me; in which case the managers of the said hospital will allow and deduct the amount, or pay the balance if they find it against me.


A Medical History of Benjamin Fanklin: Troubled Water: Benjamin Samuel Abeshouse ASIN: B0069X8GFS Amazon

Phillips Curve

By the time of the Bretton Woods conference in 1945. even a hybrid precious metal standard had to be abandoned as too inflexible. President Nixon closed the "gold window" and Lyndon Johnson closed the "silver window". The virtual standard of inflation monitoring seemed to work for three decades, but the refinement of the Phillips Curve seems to be tottering us into a situation which may not be manageable. What now?

I grew up in Philadelphia and as a young boy I would rather play around historical buildings and learn a bit of history but the Park Ranges took a dim view of my probing nature, asking why couldn’t I go up the steps and see the bell that sat in the belfry of Independence Hall. Philadelphia Reflections gives me a better appreciation and deeper understanding of the City I always Loved.
Posted by: Robert M Hill   |   Aug 27, 2010 10:59 PM
Very interesting collection of stories.
Posted by: G4   |   May 15, 2006 1:55 PM

49 Blogs

Unalienable Rights Before 1776
Lawyers commonly say the Declaration of Independence "informs" the Constitution. But prior informing was performed by William Penn, the Roman Empire, and Hammurabi.

Houses of the Penn Family
Some idea of the social position of William Penn can be gathered from the houses of his family.

William Allen, Tory
History is written by the victors, so the rich Tory William Allen is largely forgotten. But he was Chief Justice, probably the richest man in the colony, the son in law of Andrew Hamilton and the father in law of John Penn, the Proprietor, and Governor.

Christ Church and Elfreths Alley
Two of our oldest and most charming tourist attractions are just across the street from each other.

American Philosophical Society
/>Charles Wilson Peale started his museum of curiosities here and then moved it to the second floor of Independence Hall, where he painted the famous portrait of himself holding up the curtain.
                    <p class= Philosophy Means Science in Philadelphia
At least until he met Madame Helvetius, Benjamin Franklin displayed little interest in moral philosophy. His interest was in science, which was called natural philosophy in the Eighteenth Century. The American Philosophical Society is America's oldest and most prestigious society of scientific scholars. If investing is a science, the APS is good at that, too.

French Philadelphia
The French and the English fought for centuries; colonies seeking independence played one against the other. Our cooking, clothing, and architecture went French when we favored France; traces of many periods still reflect that fact.

Market Street, East (3)
Philadelphia built a White House for George Washington at Ninth and Market, a block from the place Franklin once flew his kite.

The First and Oldest Hospital in America
The history of American medicine is the history of the Pennsylvania Hospital.

Nation's First Hospital, 1751-2016
The nation's oldest hospital changed more from 1948 to 2016 than it did from July 4. 1776 to 1948.

Keeping Lunaticks Off the Streets

Carpenters Hall
Carpenter's Hall now seems a little place, and it was chopped up into still smaller rooms at the time of the Continental CongressBut nevertheless it was the biggest rentable place in the largest town in the colonies, so 53 delegates crowded in and did their work.

Dr. Cadwalader's Hat
Sometimes it's hard for others to understand what makes Quakers tick.

One of the oldest, most prominent Quaker families contained a multitude of famous, rich, distinguished leaders. Many suffered imprisonment or exile for their pacifism, but one Pemberton is the highest-ranking wartime general buried in Laurel Hill Cemetery. He was a Confederate.

The Jews in Colonial Philadelphia
Sephardic Jews came to Philadelphia quite early as part of New Amsterdam, with a second influx when the British occupied New York. They seem to have played an important role in financing the Revolution.

Shrine of Historical Restoration
Charles Peterson sparked the restoration of Society Hill. In the course of fixing old houses the preservationist found a lot of things for a museum of professionally documented old house parts which now set standards for authentic colonial restoration everywhere in the country.

America in 1767
/>Baron de Kalb was a spy for France in 1767, correctly predicting that growing American strength would create opportunities for France to make trouble for England, there.
                    <p class= Benjamin Franklin: Chronology
Franklin retired at age 42, and spent the other half of his life in public service. Only fifteen years of that career was spent in America. His timing was good, however; he was here for the French and Indian War, the Declaration of Independence, and the Constitutional Convention.

Charles Peterson and Amity Buttons
Most of our really historic buildings have an ivory button nailed to the newel post, and there is the only word of mouth to explain why. America's most famous preservation architect tried very hard to document some proof but couldn't.

Sacred Places at Risk
Church structures don't migrate, but church members do. A volunteer organization in Philadelphia has formed, to help endangered congregations decide how to review their options and act on the best choice.

Powel House, Huzzah!
On 3rd Street in Philadelphia's Society Hill, stands the finest surviving Georgian House of what Washington and Madison called the Republican Court. A great many traditions of American high society were formed in the second-floor dining room of this house.

What Happened in Philadelphia on July 4, 1776?
There were about 30,000 residents, just a small town, but it was the second largest city in the English-speaking world. Aside from wagons, there were thirty wheeled vehicles. But this is the town where decisions were made.

Philadelphia in '76
American RevolutionaryThere were about 30,000 residents, the size of a small town, but it was the second largest city in the English-speaking world. Aside from wagons, there were thirty wheeled vehicles.

July 4, 1776: Patients in the Pennsylvania Hospital on Independence Day
Patients in Pennsylvania Hospital on Independence Day, 1776.

Increased Potential for Retirement Villages
Third-party insurance is blocking certain patient preferences, as demonstrated by what rich people prefer to do when they are sick.

Critical Number for Retirement Planning
There are a zillion factors involved in answering the common question: how much is enough to retire on. We propose that one number is central to any such analysis, for everybody. And it's reasonably easy to estimate.

Friends Lifecare at Home
Philadelphia Quakers run over twenty retirement communities for the elderly in their region. One of them is a virtual village, one without walls.

Designated Lifetime Funds
Nowadays, the government incentivizes most investment funds to be taxable, but curiously certain funds are forced to be tax-sheltered, while personal latitude exists for others. Since most people are eventually forced into having three types of funds anyway, some thought might be given to which purposes are most suitable.

Ternary Operator and the IIF function
Reduce the PHP If function and/or include it in a function

Reflections on Immortality

Stretching Out Your Retirement Savings
"Don't spend principal" is pretty good advice, except as retirement income starts to run low.

Quakers and Idolatry
Early Quakers were so opposed to idolatry, they wouldn"t allow tombstones.

New York Times: Splendid Idea for Old Age
New blog 2019-04-09 16:12:52 description

New blog 2018-10-24 20:34:13 description

First Two, and Last Two, Years of Life
Medically speaking, the four most eventful years of almost anybody's life.

Last Year of Life Insurance
New blog 2018-09-18 21:15:00 description

Pot Belly
It isn't just your weight that changes as you grow old, it's your shape.

Lifetime Health Savings Accounts:How Much is Enough?
There's an old Quaker saying: The way to be certain you have enough, is to have too much.

The Future of Individual Equity Index Funds ("Passive investing") As a New Gold Standard

Law of Perpetuities
New blog 2016-12-22 19:52:29 description

Nudging Medicare into Retirements
New blog 2016-05-25 19:36:02 description

What Is Our Final Goal?
Some final goals should be set, even if we don't know how to achieve them.

Commentary: Agency for Mid-Course Corrections
New blog 2014-09-24 23:43:43 description

Grandpa Makes a Gift
New blog 2015-04-29 19:54:18 description

What Price Success?
If everybody buys diversified stock funds, and never votes at the annual meeting, who owns and controls the company?

Lifetime Health Coverage, Summarized in Advance
Lifetime coverage cannot be envisioned without some changes in existing law. Most people need to see the goal before they will inconvenience themselves to get it.

CHAPTER TWO: Endgame: Shifting the Center of Care Toward Retirement Villages

Franklin Benefits the Pennsylvania Hospital
American RevolutionaryFranklin remembered the Pennsylvania Hospital in his will by giving them his bad debts.

Phillips Curve
The Phillips Curve appears to show an inverse relationship between unemployment and inflation. It was adopted as an adjuster for precious metals, whose fundamental purpose had been to avoid inflation. Skip intermediate steps and simply hold inflation to some constant level. However, the recent failure of inflation to respond to falling unemployment now suggests the two ingredients (inflation and unemployment) may sometimes operate independently. Confusion at a basic level is extreme.