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2-Institutions and Informal Power vs. Religious Power
Religious power can be seen in various ways; here, we refer to the power to command obedience. Disobedience usually has some religious punishment, the power to send someone to hell for disobedience, or the power to extend or deny communion. To a certain degree these punishments are enumerated in advance and agreed-to specifically, and to a certain degree are revealed in retrospect under a blanket agreement to obey if you join. They are semi-contracts. And to a certain degree are revealed in retrospect, as in the power of Reverend Jones to command an entire colony to commit suicide likely was.
The point of no return is at the moment of joining the religion and resembles a contract freely given. Baptism at birth is involuntary and thought by some to go too far. So some religions like the Pennsylvania Amish give the joiner a second chance to reconsider, whereas certain Moslem sects regard the decision to join as final. There are many variations, which bothered the founders of the American Constitution as too much to handle when your goal was unification. and they probably correctly wished they could have found a workable inclusion for slavery. Except for occasional exceptions, joining a religion was the point before and after which the implied contract was considered final. It was the point before which the quid was in existence for the pro quo. Borderline cases would have to be settled by a Judge, or else by a court of Equity. Notice: the default was institutional, usually governmental because by definition it was retrospective, defined by the prior act of accepting citizenship. But if you went beyond that, two systems were unified by a general belief in God. When you are dealing with a large number of dissenters, this system is a little weaker in theory than it was in 1789.
About half of the labeled food products in a typical supermarket are designated Kosher, displaying a "K". That seems remarkable when only about 1 million American Jews are observant or Orthodox, thus eating only Kosher food for religious reasons. So, the Chemical Heritage Foundation recently decided it would be interesting to examine the definition and details of the Kosher designation, which presumably has some chemical basis. The CHF was right about the interest in the topic; attendance at the auditorium was packed. The following is entirely derived from what was discussed there.
One might have carelessly supposed that a religious designation of food products would have an exclusively religious basis, probably related to preparing the product according to a religiously defined method or ceremony. That's essentially true, but what is unexpected is that the choice of food to be included or excluded must obey a strict and extensive set of rules. The basis for the rules is found in the Old Testament, but specifics have been evolved by designated Rabbis, rather like the way the interpretation of the U. S. Constitution is left to the U.S. Supreme Court, and has considerably evolved in the process. An examination of these evolved rules is what leads other denominations of Jews to avoid the issue or even to decline to endorse it. That makes it rather awkward for chemists to understand the Kosher process in strictly chemical terms. For a perhaps extreme example, hard cheese but not soft cheese is strictly forbidden within Kosher rules. That's because the rules state that eating meat is fine, eating cheese is fine, but six hours must elapse between eating either one. What's forbidden, then, is a mixture of meat and dairy. Hard cheese is produced by exposing soft cheese to rennin, or rennet. Rennin is produced from the stomach of cows, so the interaction is deemed to be simultaneous rather than separated by more than six hours. It certainly is true that a chemical reaction between two ingredients is difficult to imagine if it is anything but a simultaneous contact between the two. So, chemists would have to agree that hard cheese involves less than a six-hour separation between meat and dairy. But most chemists would regard this interpretation to be somewhat strained; to punish people for disregarding it seems excessive. Whatever disagreement there may be is not based on the facts, but on the importance to be attached to them.
Similarly, most chemists would resist the idea that a chemical product derived from two different sources differs in any way at all. The most important example of this issue is glycerine, a common food additive. A fat consists of three fatty acids attached to glycerin; pure glycerin is produced by separating the fatty acids from it, and in any event, the fatty acids of pigs and cows are also chemically identical, at least in the view of chemists. Glycerin derived from pig fat thus seems to chemists to differ in no meaningful way at all from glycerine derived from cow fat. To those in charge of Kosher rule making, however, the difference in the source is vital, needing to be searched out in minute detail. Since Coca-Cola contains traces of glycerin, and the Coca-Cola manufacturer wished to have a Kosher label, the company somehow had to satisfy the Rabbinical demand that the sources and processing steps of the glycerin be identified in minute detail. Coca-Cola contains a secret ingredient which some believe is essential for the true Coke taste; the company was not going to reveal its processes. Somehow, this quarrel was resolved privately, although it is not easy for outsiders to imagine how it could be.
And so on. There may, of course, exist many Kosher rules which make perfect sense; the speakers did not go into that. What remains of general interest is the question why so many non-Orthodox Jews, in fact so many people who are not Jewish in any sense, insist on eating only food with a Kosher label. At the conference, it was explained that many people who have been told they are lactose-intolerant, or allergic to some protein, become fanatic in their fear of contact with such chemicals. That is, as a matter of fact, a common observation in many doctors' offices. These people seem to have developed the idea that they can trust the Orthodox rabbis to be even more fanatic than they are if anything more rigid and unyielding in their pursuit of particular exclusions. While that has driven many Jews away from Orthodoxy into other religious directions, it has served to reassure the health fanatics. The food manufacturers don't particularly care about the social features; if that "K" sells the product, they want to have it.
On hearing of these issues, one of my Jewish friends suggested an extension to Jewish kitchens. It was his view that if a real estate agent shows you a house with two or more ovens, two or more stoves, or even two or more kitchens, it probably had a Jewish owner at some time in the past. Multiple kitchen arrangements are much less likely to reflect an owner who likes to entertain a lot, than an owner who has been told of the six-hour mandatory wait between eating both meat and dairy, and has persuaded himself this rule extends to the separation of stoves. There's no great harm in any of these beliefs, of course, unless it is somehow represented that they improve the health of the believer, which would drag a highly reluctant Food and Drug Commissioner into a dispute he can't win, no matter how he rules.
Whatever the complete truth of all these suppositions, they lead the casual reader to let his thoughts meander. There's a similarity here to a great many other prohibitions and adherence, tenaciously adhered to, resulting in elections won and lost, provoking scorn heaped on non-believers. And even to totally unrelated legislation getting derailed because legislative representatives were unwise enough to take a stand on this one. Pro or con.
Clinton Health Plan: Promises Broken?
GEORGE ROSS FISHER
AEJ March 1994, Vol. 22, No. 1
There is growing recognition the Clinton health plan bears little resemblance to the Clinton health speeches. I intend to respond to the program chairmanâ€™s instruction to discuss the Clinton plan, as leaked in a 250- pages documents to Democratic leaders. But, I must state this: just as the leaked Clinton plan bears no resemblance to the Clinton speeches, it is also likely the Clinton plan is only a tool, not a blueprint, for the Clinton strategy. The written Clinton plan reads like a deal-making machine. It is filled with quid pro quo, with veiled threats for non-cooperation, and with hints of possible rewards for interest groups who fall in line. Many proposals are made, but in politics, it is, of course, not necessary to push all of them with equal vigor, or any vigor at all.
Distorting the National Incentive System
A number of large corporations have been unsuccessful competitors in recent years, chief among them is the auto industry. Unless failing firms reduce surplus capacity, corporate raiders will reduce it for them. The chief response has been to offer early retirement to older workers.
Because health insurance in America has an unfortunate linkage to employment, it has been common to promise to pay the health insurance premiums for early retirees until they reach Medicare age. The promise is, of course, a blank check, and fair accounting of it nearly wiped out the net worth of many large but essentially failing businesses.
The Clinton proposal would lift this burden from the back of the industrial failures to keep them alive a little longer. The rest of the population will pay for this in one way or another, depending on how the other deals are made. Of one thing you can be sure: every man, women, and child are not going to smoke 16 packs of cigarettes daily to pay for it with tobacco taxes. And, if you suppose $234 billions of waste, fraud, and inefficiency can be wrung out of Medicare, you can have it on the word of the worldâ€™s chief Medicare hater, me, such an idea is either fanciful or demagoguery, depending on your political party.
Now, the news of the early retiree swindle was leaked to the press by a Democrat spokesman, so we can hope the real Clinton strategy is to broadcast the promise but try to make it look as though Republicans in the Senate were the ones who killed it. If it should unluckily pass, there will be highly undesirable consequences. Chief among them, of course, is the incentive of rewarding failing businesses by taxing successful ones. Successful growing businesses, to underline the point, are not retiring people early, they are trying to hire extra employees.
The second incredible consequence of the early retiree deal is to cripple the stated goal of the program, which was to ensure the uninsured. You would think the program would lower insurance premiums for people who are typically uninsured; unfortunately, the proposal is to balloon such premium by 500 percent.
To understand the issue, you need to know two things. First, most people without health insurance are young. Second, health insurance for young people is cheap, unless tinkered with. The Clintons tinker, all right, using something called â€œcommunity rating.â€ Community rating is charging everybody the same premium, in spite of knowing the true cost for a person age 25 is only 20 percent of the true cost of someone aged 55.
Where in the world did this idea of community rating come from? Let me tell you. First and foremost, it reduces the cost to the government of picking up the early retirees. It is beyond my resources to calculate the relative cost of the two items overall (young uninsured versus middle-aged retirees from mismanaged businesses); but, it looks likely mismanagement costs the country more, even in the short run.
You might as well know some more. Until recently, the dominant form of health insurance was Blue Cross, and Blue Cross always used community rating. I suspect they were responding to union negotiations which tend to offset health insurance fringe benefits against hourly wages in the â€œpay packetâ€. It does not matter; Blue Cross dominated the scene with community premiums. Eventually their competitors, notably the HMOâ€™s learned how to enroll younger subscribers selectively and take the resulting profit for themselves. First, the Blues were left with sicker older subscribers and got in so much financial trouble their premiums had to skyrocket, causing them to spinal again into still more loss of business. And second, states like New York, Massachusetts, and Vermont got themselves into trouble by passing a mandatory community rating law, which was nicknamed in the legislative corridors the Blue Cross Rescue Lawâ€.
Under this new law, the New York insurance department set the premium for a 30-year-old at $7800 per year for a family plan. Keep that figure in mind when you learn the Clinton plan proposes a national premium of $4200. I guarantee any state government with a disparity like that is willing to suspend disbelief if their dream is to redistribute costs to other states, particularly to young people in some other state. Young people better look out for their interests.
Yuppies do seem to be waking up. It is a universal truism among Yuppies to expect to be cheated by Social Security when they get to the right age. So, it should be a fairly easy belief, however attractive the Clinton health plan may be for their parents, that it too will all go up in smoke for baby boomers when the time comes. Mr. Clinton minimizes the cost and asks Yuppies to think ahead. It will be most unfortunate for his plan politically if they do.
What young people need is a credible guarantee. It would be even nicer if their guarantee could be put away at compound interest and actually reduce the lifetime cost. Time prevents a digression to the Health IRA proposal, which would do just that. What is central to an economic discussion to Health IR proposal, which would do just that. What is central to an economic discussion is the principle of necessary private ownership of policies. What is true of Social Security is also true of the health scheme the federal government simply cannot invest money. Senator Moynihan of New York once blew the whistle on the way purchasing U.S. government bonds for Social Security Trust Funds merely underwrites the federal deficit. The U.S. government can scarcely be expected to buy bonds of foreign governments. And, if it bought a trillion dollars' worth of common stock, we would quickly have the Communist ideal of government owning the means of production.
Government is inherently incapable of being an investor on behalf of its citizens. Although the government puts a spin on it, we are necessarily facing another â€œpay as you goâ€ plan in the Clinton health proposal. Even â€œpay as you goâ€ might be tolerable if it were based on present value accounting, net of inflation. Such accounting is improbable since the Clintons are already forced to pay for present health care in one scheme by postulating future reductions ($200 billion from Medicare) in another.
Let us return from investment digression. Young people are to believe community rating is designed to spread the risk of the unfortunate sick. It is not. Like â€œpay as you goâ€, it is intended to make young people subsidize the payoff of major corporations for making management blunders, and politicians who court their support.
The nature of required support is becoming clearer. For the past six months, the medical community has watched a remarkable onslaught of demands from insurance companies for them to participate in the price and utilization control system known as â€œmanaged careâ€. The insurance companies are careful to explain they are only responding to intense pressure from employers. The force of that was brought home to me when I recently addressed the Chamber of Commerce of Philadelphia. In a day-long symposium on health care, the representative of the hospital and I were excluded from the room while the chairman of the meeting lectured the corporate benefits managers for two hours. Who started this rumpus, which is obviously timed to coincide with the Clinton health speeches?
Well, obviously, I do not know. But, Joseph Califano would certainly be on my short list of suspects, because the auto and steel industries have been so outspoken for so long. And, they needed a trusted insider in the Clinton campaign. Potentially, however, there is grim pleasure in imagining how angry steel and auto moguls will be when nasty gridlocked Congress deletes the early retirement deal in a House-Senate conference committee closed session.
Individual Rather than Company Ownership of the Policy
For quaint historical reasons, those conference committees on health will be made up of the leadership of the Senate Finance Committee and the House Ways on Means Committee, the supreme court of national taxation. Now, Sherlock Holmes noticed it was particularly a dog did not bark, and the Clinton proposal has one big omission, too. He does not touch the $48 billion annual tax entitlement of wages paid in the form of health insurance premiums. Even without the revenue loss, this is the heart of the artificial crisis which President Clinton proposes to solve.
As you know, it got started when Henry Kaiser offered fringe benefits as a way around wartime wage controls, and the War Production Board felt income taxation would expose them as disguised wages. Regardless of history, the tax-exempt feature of employer-paid health insurance premiums is the main, or possibly sole, reason employer-basing is the main form of American health coverage. Consequently, along with getting divorced by a working spouse, it is the main reason losing your job means losing your health insurance.
For years, the Census Bureau found roughly 37 million people lacking health insurance every time they conducted a spot check. It took a while before they asked the longitudinal question of how long the individual had been without coverage. It took a while before they asked the longitudinal question of how long the individual had been without coverage. It turns out 28 million of the 37 million can be accounted for as partial persons, constituted out of a pool of 68 million who lack insurance for an average of four months during a two-year period. Leaving aside the quibble that treatment for most medical conditions can be deferred four months, it emerges our problem is not what we thought it was. More or less, permanent lack of coverage is found in 9 million people, most of whom could probably be fit into Medicaid. The rest, having a far more pervasive if a less severe problem, could be cured of their difficulty if the employer turned over the ownership of the health policy to the individual employee, never mind who paid for it.
What is the slogan to be derived from this? Must break the link between health insurance and employment. In my opinion, we do not need to rearrange health care to do it. Just declare as of the signing of this Act, health insurance belongs to and can move with the person it covers. Never mind who writes the premium check.
Speaking of national tax policy, the contentious 1993 budget bill, passed by only one vote, purported to contain $250 billion in expenditure cuts; $50 billion, or 20 percent of that, was to come from reducing Medicare, and $42 billion was from reductions in hospital expenditures. Well, guess what. Hospitals will immediately react to those federal revenue losses by raising prices to the other clients in the hospital, mostly paid for by employer group health insurance. In this way, a $50 billion cut in expenditures is instantly transformed into a $ 50 billion tax on business.
Now, the Clinton health plan proposes to pay for several hundred billion in new programs by a new $238 billion cut in Medicare and Medicaid. To the extent this is not just â€œfantasyâ€ in Senator Moynihanâ€™s phrase, it will effectively be a new round of taxes on business. More likely, the Medicare squeeze-process has already been pushed past the point where the Medicare program can survive if it is seriously extended. Since the collapse of Medicare is more than any political party could survive, the absolutely certain outcome is a larger deficit, or more taxes, or both.
And even if that does not work, am I being extreme in saying it will endanger the health of the nation?
Bringing Welfare recipients into the Workforce
There is one legitimate social argument for risking massive disruptions of a good medical system. Every welfare program has the same difficulty that the person who leaves welfare may then be worse off financially, even though he takes some low-paying job. In our system, Medicaid medical coverage is an important asset for the welfare recipient, particularly pregnancy coverage for young women. A young person's taking marginal jobs may gain a sense of pride, but marginal jobs seldom give out health insurance. It thus appears attractive â€œto break the chains of welfareâ€ by giving subsidized health insurance to young persons in low-paying jobs.
People who use this argument usually refuse to accept identical logic with regard to repealing the minimum wage laws so their sincerity may be open to challenge. However, the main problem created for health care reform is equalizing the discrepancy which forces the benefits package of the new insurance to match that of Medicaid, unless the choice is to make Medicaid coverage worse. Generous benefits packages delight doctors, of course, but using a politically correct benefit package for Medicaid makes the whole Clinton scheme too expensive for governors and legislatures even consider.
By this circuitous route, we get to the idea of merging Medicaid with the mainstream of health insurance. Once merged, legislatures do not have to pay for fixing the Medicaid mess, a business will. Business leaders may now imagine they have an inexpensive bargain since they already pay taxes which go toward Medicaid costs. A small price to pay for getting rid of the early retiree burden, no doubt.
Business leaders are so utterly wrong about the future size of this welfare cost, it is not acceptable to let them stew in their own juices. The country cannot afford to let them ruin their companies that way.
Rather than digress into political solutions at this convention of economists, it seems better to propose the legitimate social and economic goal of reducing the barrier for welfare-leavers only. Or some extra benefits for welfare leavers could center o pregnancy coverage, the main medical issue which would affect employment choices (as drug abuse and AIDS, aimed at hopeless cases, probably would not).
Risk Pooling, Reinsurance, and Alliances
The problem of uninsurability for medical reasons positively cries out for some form of risk pooling. Medium-sized business probably would be well served by reinsurance, while small business groups and individuals might be better served by assigned risk pools or joint underwriting. Although these approaches are thoroughly understood and tested within the insurance industry, the Clintons heard about them from Alain Enthoven but propose something quite different.
The contrivance is called an alliance; it is really a forced merger of insurance companies, with a political board of directors and an enormous bureaucracy. Since the solutions to the uninsurability issue are so straight-forward and time-tested, one has to suspect the true main purpose of the alliance is to supervise price controls.
There is a saying among manipulators that the way to hide something is to put it in the next-to-last paragraph, which careless people often do not read. At approximately that point in the Clinton, Health Proposal is a description of the transition plan-how the country is to get from here to there. It centers on the risk pooling idea, acknowledging to Alain Enthoven it has been considered. Perhaps a way can be devised to get into the transitional stage and never go any further. The first Tuesday in November 1994 seems like an appropriate time to start a mid-course correction.
Redefining the Concept of a Hospital
The Clinton plan proposes to transform hospitals from revenue centers to cost centers of â€œalliances,â€ using the Kaiser model, we presume. Unfortunately, the rest of the country does not have the luxury of choosing where to place hospitals which fit into the Kaiser system of doing business, avoiding other areas less adaptable to that system. Many hospitals are run by churches, many are the solitary facility in a region. Anyway, the long-term trends seem to lead in other directions.
Hospital care is moving from the center of cities to the suburbs, where it is cheaper to be but where the service mode is different. Patients with educated families and bathrooms on the ground floor can go home early, often the day after surgery; social isolates in walk-up flats need a bed in the hospital for a week. Meanwhile, continuing care retirement centers in more centripetal areas are rapidly coming to provide post-operative care â€œat homeâ€ in their infirmaries. These all seem desirable evolutions but it is uncertain where they will lead. Five-hundred-thousand senior citizens now live in a retirement village with infirmaries, but how far that trend will go, and what part of the urban landscape they will occupy in unclear. If you believe in market solutions, you will let this sort itself out. If you believe in central planning, you will have those consumer committees in health care alliances decide it for the country.
Copayment and Supplemental Insurance
Finally, I come to a technical blunder in the Clinton plan which could easily slip past. Almost everyone agrees partial payment by the patient is desirable, and the Rand Corporation showed evidence it could reduce overall health costs about 30 percent. The Clinton plan provides for a 20 percent patient copayment for all services.
However, patient copayment comes in a variety of forms. I want to leave you with the opinion that all copayment is a good thing, except the 20 percent coinsurance variety, which is a bad thing, or at least a delusion.
Visualize an individualâ€™s annual health cost as a rectangle. You can shave off a part for the patient to pay from any of the four sides. At the front, you have what is known as a deductible-and it is a good thing because it reduces the administrative cost of petty claims. At the back, is balance-billing, which serves as a safety valve for luxury demands and helps adjust imbalances between premium collection and inflation or technology advances. Balance billing is a second good way to involve the patient in his costs.
But, shaving 20 percent off the longitudinal side is a dumb idea. It doubles the administrative expense. It is only a great favorite of insurance marketing departments because it reduces the premium exactly 20 percent, whereas it requires an actuary to tell how much the other types of copayment are worth.
However, there is that darned supplemental insurance, the â€œ65-specialâ€ or whatnot. It can be purchased for, guess what, 20 percent of the cost of the main policy, and you are, thus, back to total insurance without any patient copayment at all. You also then have two insurance policies instead of one, with any patient copayment at all. You also then have two insurance policies instead of one, with double overhead and double confusion. I can understand how people on a fixed income wish to budget their medical costs. I hate to forbid anything by law which does not hurt someone else. And yet, it is quite clear the purchase of supplemental insurance to cover cash obligations will utterly defeat the cost-consciousness of patient and provider.
So, as this health care debate goes on and on, remember something. Do not outlaw supplement insurance; outlaw 20 percent coinsurance provisions in the main policy. But, do it without damaging front-end deductibles, or back-end balance billing.
For a while, there was a great air of mystery about why President Obama was in such a hurry to get his healthcare bill through the Democrat-dominated House of Representatives, after passage by a Democrat-majority Senate. There were to be no amendments, and in front of television several thousand pages were dumped on the desks of Congressmen with no amendments permitted, under orders to call a vote within a day. Just read Jacob Hacker's book The Road to Nowhere about the Clinton Plan for Health of ten years earlier, and since Hacker was a campaign advisor for Obama, make a strong guess that Obama was following the same plan -- but encountered a sudden twist. Everybody in the House and Senate had been encouraged to submit his best ideas, so inevitably the House and Senate versions differed so much they had to go to a House-Senate conference committee, also dominated by Democrats. As related by Hacker, the plan was for the President to appear before the conference committee, pick the cherries out of both puddings, and emerge with his health bill. The rest would be discarded as useful camouflage.
Unfortunately, the Senate bill passed but Senator Kennedy died, and to general amazement, a Republican Senator (Scott Brown) was elected to take his seat in Massachusetts. Senator Byrd of West Virginia died soon thereafter, and the ability of the Senate to defeat a filibuster was destroyed while the health bill was half-way through the plan. Since an amended bill would have to be resubmitted to the Senate, it would never pass. So an identical copy of the Senate bill was hammered through the House of Representatives, avoiding the need for a conference committee, and thus avoiding certain defeat in the Senate. So the Obama bill is really the Senate version, containing much baggage which was originally intended to be dropped. And failing to contain some nuggets which would have come from the House bill, which might have made the final product make more sense. Soon afterwards, the House of Representatives suddenly elected sixty-some Tea Party stalwarts, making it absolutely certain that Obama was just going to have to live with the 450 sections of the Senate bill, because these hootin', hollering Congressmen quite naturally supposed that their districts had sent them to Congress to defeat Obamacare, anyway they could. Rather than accept the voters' mandate that Obamacare just wouldn't do, an effort was made to portray the new Republican Congressmen as mindless obstructionists. Which is exactly what they thought the voters wanted them to be. When the Supreme Court then put its foot on the federal government telling the states to take the uninsured into Medicaid, this lesson in what the Tenth Amendment says, was soon followed by the utter failure of the computer programs for the Electronic Insurance Exchanges, and nobody could see what their health plan looked like (or cost), to say nothing of being unable to buy it if they wanted to. Although Section 1251 of the Affordable Care Act assures that everyone could keep his old plan if he preferred it, millions of letters were sent to subscribers who couldn't buy one of the new plans for computer reasons, that their old plans were canceled, while the President confused everybody by repeating the mantra that they could keep their old plans.
Quite soon, employers of more than fifty employees were given a two-year delay in mandated switch-over, echoing the experience which had caused the Clinton Health Plan to be withdrawn a decade earlier, and arousing the suspicion that Big Business was again going to pull out. Individuals were given no such reprieve and naturally were upset about it. Just about every newly offered plan contained a far larger deductible than most people had ever seen and a higher premium than they had ever paid. What made it affordable was the government subsidy, which the computer mess made it difficult to measure. Very few had read the 450 sections of the new law of the Land, and if they had, would have been highly disconcerted. Much of it was never intended to be enacted, but it was impossible to know which sections they were, and so it was not reassuring to be told that the President intended not to implement such unidentified sections. With our troops retreating in Afghanistan and Iraq, and both Syria and Russia conducting acts of war in defiance of us. And the economy still in a slump after five years of "recovery". And the Federal Reserve buying dud bonds by the trillions of dollars worth. And the rest of our allies in worse financial shape than we were -- incompetence was a word on every tongue, to defend against it by the Democrats, to denounce it by every Republican.
So that's where it stands, six months before the next election. In the meantime, I have been working on two projects for real reform of the healthcare system. The first is to improve on the Health Savings Accounts, which John McClaughry and I devised in 1980. The proposal is that since anyone and everyone can start an account, it is universal by definition, portable between jobs, tax-deductible for everyone, and running about 30% cheaper than conventional insurance. I am proposing to expand the program by making Flexible Spending Accounts convertible to it and permitting it to pay the premiums for the deductible catastrophic insurance which is a condition for buying it. Doing so would extend the income tax deduction which you get if your employer buys insurance for you, to everyone. But all of that is without mentioning the astonishing amounts of money that would accumulate from investing the HSA in low-cost index funds of premium American stocks. Nothing is guaranteed, but the experience of the last century is that this approach would assure enough internal income to pay for the entire lifetime healthcare cost of most people who bought it young enough. If you are sixty-four years old, you may have missed most of your chance, but younger people could have quite a windfall. The transition from here to there is pretty technical, and I hope I have not over-simplified it.
The second theme I have pursued is to start listing the many simplifications and cost savings for American healthcare, which I have assembled in sixty years of practicing medicine. What I am suggesting is what real healthcare reform would look like, not just coverage extension. The Congressional Budget Office predicts that spending a trillion dollars will still leave us 30 million uninsured people under the Affordable Care Act. Instead of that, I propose we develop three specialized (and probably non-insurance) programs for 8 million people in jail, 8 million mentally impaired, and twelve million illegal immigrants. Forget about mandatory; if you want to help thirty million people, devise three specialized programs aimed at these three groups, and you have it. Meanwhile, a whole group of flaws was introduced into American health insurance during the last Depression of the 1930s, and they should be repaired. It is preposterous to use three insurance plans to pay for a medical service (80% primary, 20% secondary, plus Major Medical for outliers). First dollar coverage was designed to exploit the Henry Kaiser income tax deduction, which should have been repealed decades ago. Co-pay of 20% has no effect on utilization, and 50% co-pay would infuriate people; co-pay should be abolished. Service benefits mean you never know what your bill is, and never know how much it is going to be; costs escalate. Payment by diagnosis means it doesn't matter how long you stay in the hospital, or how many tests you have, the hospital gets paid the same; consequently, it is essentially a rationing device for inpatients, making hospitals charge emergency room and outpatient services astronomical amounts. And the whole thing has transformed the purpose of health insurance. Nowadays, the real reason to have health insurance is to keep the hospital from fleecing you. Which they have to do, to remain solvent. The list goes on and on, to the point where you have to concede that you can only do so much in a short time. You just have to hold back to keep from overturning the system.
Byron S. Comati, the Director of Strategic Planning and Analysis for SEPTA (Southeastern Pennsylvania Transportation Authority), kindly gave the Right Angle Club an inside look at the hopes and plans of SEPTA for the near (five-year) future. Students of large organizations favor a five or six-year planning cycle as both short enough to be realistic, and long enough to expect to see tangible response. If plans continuously readjust to fit the five-year horizon, the concept is that the organization will move forward on these stepping stones, even accounting for setbacks, disappointments, and surprises. Furthermore, a serious level of continuous planning puts an organization in a position to react when funding opportunities arise, such as the sudden demand of the Obama Administration that economic stimulus proposals be "shovel ready."
|The Silverline V|
So, SEPTA is currently promoting five major expansions, based on the emerging success of an earlier plan, the Silverliner V. Silverline is a set of 120 shiny new cars, built in Korea on the model of electrical multiple units, which are expected in Spring 2011 to replace 73 cars or units which were built in 1963. Obviously, 120 are more expensive than 73, but they are more flexible as well. And less wasteful; most commuters are familiar with the model of three seats abreast which unfortunately conflict with the social preferences of the public, tending to make the car seem crowded even though it is a third empty. When a misjudgment like this is made, it takes fifty years to replace it with something better. For example, there's currently a movement toward "Green construction", which is acknowledged to be "a little bit more expensive". The actual costs and savings of green construction have yet to become firmly agreed on, so there's an advantage to being conservative about what's new and trendy in things that take fifty years to wear out.
|Septa Regional Map|
Four of SEPTA's five major proposed projects are in the Pennsylvania suburbs. New Jersey has its own transportation authority, and Philadelphia is thus left to struggle with the much higher costs of urban reconstruction assigned to its declining industrial population. And left unmentioned is the six hundred pound gorilla of the transportation costs of new casinos. A great many people are violently opposed to legalized gambling, and even more upset by the idea of crime emerging in the neighborhoods of gambling enterprises. Even the politicians who enacted this legislation are uncomfortable to see the rather large expenditures which will eat into the net revenue from this development. Nevertheless, if you are running a transportation system, you have an obligation to plan for every large shift in transportation patterns, no matter what you might think of the wisdom of the venture. The alternative is to face an inevitable storm of criticism if casinos come about, but without any preparation having been made for the transportation consequences. At present, the public transportation plan for the casinos is to organize a light rail line along the Delaware waterfront, connecting to the rest of the city through a spur line west up Market Street; it may go to 30th Street Station, or it may stop at City Hall. That sounds a lot like the present Market-Frankford line, so expect some resistance when the cost estimates are revealed. Because all merchants want to have the station stops near them, and almost no residents want a lot of casino foot-traffic near their homes and schools, expect an outcry from those directions, as well. It would be nice to integrate this activity with something which would revive the river wards, but it seems a long stretch to connect with Wilmington on the south, or Trenton on the north.
The planned expansions in the suburban Pennsylvania counties will probably encounter less controversy, although it is the sorry fate of all transportation officials to endure some hostility and criticism for any changes whatever. Generally speaking, the four extensions follow a similar pattern of building along old or abandoned rail lines, following rather than leading the population migrations of the past. When you are organizing mass transit, there is a need to foresee with some certainty that there will be a net increase in commuters in the region under consideration. The one and two passenger automobile is a much more flexible instrument for adjusting to the growth of new development, schools, retail, and industry. Once the region has become established, there is room for an argument that transportation in larger bulk is cheaper, cleaner or whatever.
The Norristown extension follows the existing but underused rail connections to Reading. Route US 422 opened up the region formerly serving the anthracite industry, but now the clamor is rising that US 422 is impossibly crowded and needs to be supplemented with mass transit.
The Quakertown extension follows the rail route abandoned in 1980 to Bethlehem and Allentown, although the extension is only planned as far as Shelly, PA.
The Norristown high-speed extension responds to the almost total lack of public transportation to the King of Prussia shopping center, and will possibly replace the light rail connection to downtown Philadelphia.
And the Paoli extension follows the mainline Amtrak rails as far as Coatesville.
All of these expansions can expect to be greeted with huzzahs by developers, land speculators, and newsmedia, but resistance will inevitably be as fierce as it always is. Local business always fears an expansion of its competitors; the feeling is stronger in the suburbs than the city, but local business always resists and local politicians always follow their lead. To some extent, the suburbs have a point, since radial extensions are usually much cheaper to build than lateral or circumferential transportation media; bus routes are the favored pioneers in connecting one suburb with another. Therefore, the tendency in these present plans remains typical by threatening the suburbs with a need to travel toward the center hub, then take a reverse branch back in the general direction of where they started, in order to go a short distance to a shopping center or school system. The two main river systems around Philadelphia interfere with the construction of big "X" routes from the far distance in one direction to the far distance in the opposite direction. Euclidian geometry makes the circumferential route elongate as the square of the radius. And jealousies between the politicians in three states create rally foci for the special local interests which feel injured. Since it seems to be an established fact that the proportional contribution to mass transportation by the surrounding suburbs of Philadelphia is traditionally (and considerably) lower than the national average, a political reconciliation might do more for the finances of SEPTA than any federal stimulus package could do. For such reconciliation, a few lateral connections in the net might pacify the suburbs enough to justify the extra cost. Unfortunately, the main source of unjustified cost in regional mass transit is the high wage and benefit levels of the employees, a situation inherited from the old days when commuter rail was part of the stockholder-owned regional railroads. Just as featherbedding was the main cause of the destruction of the mainline railroads, health and pension benefits threaten the life of mass transit. In the old days, local governments acted as a megaphone for union demands. So the railroads just gave the commuter system to the local governments, and let them wrestle with the unions themselves. Since the survival of the urban region depends on conquering this financial drain, the problem must be gradually worn down. But it has been remarkable how long the region has been willing to flirt with bankruptcy rather than bite this bullet.
If anything, this friction threatens to get worse. In 2009, for the first time, a majority of union members in America -- work for the government, the one industry which thinks it cannot be destroyed by losing money. True, SEPTA is not exactly a government function, but it has enough in common with a government department to arouse suburban voters, who regularly refer to it as an arm of the urban political machine. SEPTA isn't too big to fail, but there exists little doubt that government at some level would probably try to bail it out if it did.
Amendment 1 Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble and to petition the government for a redress of grievances.
|The First Amendment|
Simplified histories of America often declare that other Western Hemisphere colonists mostly came to plunder and exploit; whereas English Protestant colonists came with families to settle, fleeing religious persecution. That's a considerable condensation of events covering three centuries, but it is true that before the Revolutionary War, eleven of the thirteen American colonies approximated the condition of having established religions. Massachusetts and Virginia, the earliest colonies, had by 1776 even reached the point of rebelliousness against their religious establishments. The three Quaker colonies (New Jersey, Pennsylvania, and Delaware) were late settlements, in existence less than a century before the Revolution, and still comfortable with the notion they were religious utopias. While differing in intensity all colonials respected the habits of thought and forms of speech, natural to utopians residing in a religious environment.
Once Martin Luther had let the Protestant genii out of its religious bottle, however, revisionist logic was pursued into its many corners. Ultimately, all Protestant questers found themselves confronting -- not religious dogmatism, but it's opposite -- the secularized eighteenth-century enlightenment. Comparatively few colonists were willing to acknowledge doubts openly about miracles and divinity. However, private doubts were sufficiently prevalent among colonial leaders to engender restlessness about the tyrannies and particularly the rigidities of the dominant religions. To this was added discomfort with self-serving political struggles observable among their preachers, and alarm about occasional wars and persecutions over arguably religious doctrines. Arriving quite late in this evolution of thought -- but not too late to experience a few bloody persecutions themselves -- the Quakers sought to purify their Utopia by eliminating preachers from their worship entirely. Thus, the most central and soon the most prosperous of the colonies made it respectable to criticize religious leaders in general for the many troubles it was believed they provoked.
|London Yearly Meeting|
In all wars, diplomatic arts and religious restraints get set aside as insufficient, if not altogether failures for an episode of utter barbarism. In the Revolution, some Quakers split from pacifism and became Free Quakers, many more drifted into Episcopalianism, never to return to pacifism. The Constitutional Convention of 1787 was eventually held in this persisting environment; the previous service in the War counted for something, and the great goal was to strengthen the central government -- for more effective regional defense. A great many leaders were Masons, holding that much can be accomplished by secular leadership, independent of religious reasonings. Neither Washington nor Madison revealed much of their religious positions, although Washington the church attender always declined communion; Franklin and probably Jefferson were at heart deists, believing that God might well exist, but had wound up the universe like a clock to let it run by itself. The New England Calvinist doctrines have since evolved as Unitarianism, which outsiders would say theologically is not greatly different from deism. Physically surrounding the Philadelphia convention was a predominantly Quaker attitude; entirely too often, preachers get you into trouble.
When the first Congress finally met under their new constitution, they immediately confronted over a hundred Constitutional amendments, mostly submitted from the frontier and fomented by Jefferson and Patrick Henry, demanding a bill of rights. The demand within these amendments was overwhelming that the newly-strengthened central government must not intrude into the rights of citizens. Recognizing the power of local community action, states rights must similarly be strengthened. Just where these rights came from was often couched in divine terms for lack of better proof that they were innate, or natural. From a modern perspective, these rights in fact often originated in what theologians call Enthusiasm; the belief that if enough people want something passionately enough, it must have a divine source. The newly minted politicians in the first Congress recognized something had to be done about this uproar. Congress formed a committee to consider matters and appointed as chairman -- James Madison. Obviously, the chief architect of the Constitution would not be thrilled to see his product twisted out of shape by a hundred amendments, but on the other hand, a man from Piedmont Virginia would be careful to placate the likes of Patrick Henry. The ultimate result was the Bill of Rights, and Madison packed considerably more than ten rights into the package, in order to preserve the cadence of the Ten Commandments. The First Amendment, for example, is really six rights, skillfully shaped together to sound more or less like one idea with illustrative examples. Overall freedom of thought comfortably might include freedom of speech (and the press), along with freedom of religion and assembly, and the right to petition for grievances. But what it actually says is that Congress shall not establish a national religion. Since eleven states really had approximated a single established religion, the clear intent was to prohibit a single national religion while tolerating unifications within the various states. Subsequent Supreme Courts have extended the Constitution to apply to the states as well, responding to a growing recognition that religious states had the potential to get so heated as to war with each other. No matter what their doctrines, it seemed wise to deprive organized religions of political power as a firm step toward giving the Constitution itself dominant power over the processes of political selection.
At first however it was pretty clear; one state's brand of religion was not to boss around the religion of another state. Eventually within one state, Virginia for example, the upstate Presbyterian ministers were not to push around the Episcopalian bishops of the Tidewater. Madison and Jefferson saw well enough where political uprisings tended to start in those days, in gathered church meetinghouses. In this way, an Amendment originally promoted to protect religions had evolved into a way to ease them out of political power. The idea of separation of church and state has grown increasingly stronger, to the point where most Americans would agree it defines a viable republic. No doubt, the spectacle of preachers exhorting the same nation in opposite directions during the Civil War, settled what was left of the argument.
For Quakers, the most wrenching, disheartening revelation came when they were themselves in unchallenged local control during the French and Indian War. The purest of motives and the most earnest desire to do the right thing provided no guidance for those in charge of the government when the French and Indians were scalping western settlers and burning their cabins. Yes, the Scotch-Irish settlers of the frontier had unwisely sold liquor and gunpowder to the Indians, and yes, the Quakers of the Eastern part of the state had sought to buffer their own safety from frontier violence by selling more westerly land to combative Celtic immigrant tribes. A similar strategy had worked well enough with the earlier German settlers, but reproachful history was not likely to pacify frontier Scots in the midst of a massacre. The Quaker government was expected to do what all governments are expected to do, protect their people right or wrong. To trace the social contract back to William Penn's friend John Locke was too bland for a religion which prided itself on plain speech. Non-violent pacifism just could not be reconciled with the duties of a government to protect its citizens. The even more comfortably remote Quakers of the London Yearly Meeting then indulged themselves in the luxury of consistent logic; a letter was dispatched to the bewildered Quaker Colonials. They must withdraw from participation in a government which levied war taxes. And they obeyed.
Although the frontier Scots were surely relieved to have non-Quakers assume control of their military duty, the western part of the state has still neither forgotten nor forgiven. In their eyes, Quakers were not fit to be in charge of anything. Quaker wealth, sophistication and education were irrelevant; only Presbyterians are fit to rule. A strong inclination toward pre-destination lurks in that idea. Once more, the attractiveness of clear separation of church and state is reinforced.
The French and Indian War in fact had turned out fairly well; most of its victories were located on the European side of the Ocean, anyway. But twenty years later the Revolutionary War turned into a reassertion of the British conquest of all of North America, not merely the part to the west of the Appalachian mountains. To Americans, this came in the form of a demand for taxes to help pay off the costs of a war which greatly benefitted them. The Quaker colonies did not fully sympathize with rebellion, but they had once given up control of a territory larger than England rather than pay war taxes, so they were resistant to both sides in the dispute. Many prosperous and educated Quakers solved their dilemma by fleeing to Canada, but the ardent Quaker proposal for dealing with a coercive British government was not at all impractical. John Dickinson, in particular, argued that since the British motives were economic, success was most likely to come from economic counter-pressure, adroitly leveraged by three thousand miles of intervening ocean. That was shrewd and potentially effective. But the Scots-Presbyterian position was simpler and more direct. If you want us to fight your war, you are going to have to fight to win. The Virginia Cavaliers were probably more likely to win a conventional war if put in charge, but the blunt and almost savage frontiersmen were ideally suited for what has come to be called guerrilla warfare. Washington was a leader, French money was welcome and Ben Franklin was a diplomat, but the clarion call to this particular battle was the voice of Patrick Henry. All in all, the issue of established religion was far more complicated than merely the affirmation of a right to free exercise of religious belief. What united all the colonies was a recognition that, using the church, an arm of the government was just as likely to cause trouble as conducting the state as an instrument of church interests. Eventually, considering how religious America was at the time, there was remarkably little resistance to the firm separation of Church and State in its Constitution.
Power may be conferred by governments, particularly when the public has an interest in the outcome. But usually, the power is pre-existing and self-evident. It is best identified in a contract, to make certain it is used in conflicts, but that is never absolutely necessary. The function of the judge is to decide if the power really exists and to decide a case within those bounds. In criminal law, the judge decides if the people really have enforcement power, and to enforce those bounds if they do. In civil cases, the judge looks for signs that the enforcement power is properly allied, since it is ordinarily applied by written contract, out of pre-existing sources.
Because civil disputes normally draw on defined pre-existing powers, those who resist any extension of Institutional powers often draw attention to this distinction to explain their preference.
|Dr. Randall Miller|
Dr. Randall Miller of St. Joseph's University recently gave the Union League an interesting insight into the non-military upheavals of America by Congress during the Civil War. (Parenthetically, Dr. Miller is the author of Encyclopedia of Greater Philadelphia, which may give him still greater prominence in these columns when it reaches print.) Lincoln and the military get most of the headlines, but the greatest nation-building activities were products of the Congress, not Abraham Lincoln directly; the President was too busy directing the war to take much lead in other matters. The Republican Party of that time was freshly created, still strong in its idealism around elements of the party platform which really meant something to them. Although Senators John Sherman of Ohio and William P. Fessenden of Maine are remembered by history, most of the activity was conducted by members of the Congress who had reached seniority in committees and hence mostly had died off by the end of the War. It seems like one of history's great unfairnesses that a remarkable transformation of the nation was accomplished by people who are now largely unknown.
So Lincoln gets much of the credit by default, and the idealism and grand plans are lost in the current view that the Civil War was about liberating the slaves. That was, of course, part of it, but the Civil War was in fact mostly fought about the Union, and the Whig principles essential to nation-building. And the transformation was the vision of party politicians in offices which we currently regard as being filled by party hacks in safe seats. That wasn't the case at all; these visionaries knew where they wanted the country to go, and cleverly designed a set of programs to make it happen. Lincoln wanted to win the war; these men wanted to have a new nation emerge, after the war.
It almost goes without saying that a Civil War over the secession of rebellious state governments from a Union created by the Constitution was going to weaken state power -- and strengthen Federal control -- if the Unionists won the war. That's what the Republicans wanted, and what the Southerners feared. But, strangely, both sides harbored warm feelings for the Constitution, wanting to preserve much of its essence. The Republicans, therefore, realized that many of the laws which were essential for winning the war, would lose their popularity and hence their force, once victory had been achieved. Reconstruction of the South, for example, was going to be unsustainable as soon as the huge Union Army was demobilized. The liberated slaves were unlikely to migrate to the western wilderness, and so the problems of racial readjustment were going to remain Southern problems for decades to come, without an army of occupation to maintain stability, law, and order. In fact, it was largely Southern whites who migrated to the far West, leaving the situation even more unstable back in the old Confederacy. How was a brave new nation to emerge from this mess?
War measures did help. There was no Federal currency until the War, and so a national system of greenbacks and war bonds helped to unify a vast and far-flung continent. The National Banks, fought over and feared for nearly a century, simply had to be created; all of these national rather than local symbols strengthened the national feeling. Putting 10% tax on state bonds was a pretty good indication that the congressional Republicans knew where they were driving things. The telegraph was of great value to wartime communication; it helped create a virtual community, with national news taking the place of local news.
Up until the Civil War, the main source of Federal income was derived from the sale of land; the new nation had a lot more land than gold. After the war, the nation found itself with taxation as the main source of income. The income tax was a step too far, of course, and it was repealed; but a system of national currency organized a system of national taxes which persisted. The country still had plenty of raw lands, but it was distributed by giving it to railroads in return for national transportation, and to land-grant colleges in return for greater uniformity of culture. Notice the hand of Congress, however. This land was to be surveyed land, not the land between this rock and that creek. Surveyors since the time of William Penn and George Washington were the agents of orderliness, law, and peaceful settlement of disputes. To that extent, surveyors broke up the reliance on local clans and territoriality; peace instead of conquest. The leaders of the North, the Republicans in Congress and the cabinet knew what they wanted; it was that the sacrifices of the war would find a reward in the peace that would follow and that reward would be a new nation.
Notice carefully the second section of the Thirteenth Amendment. The first section freed the slaves. The second section gave to the Federal government the charge of enforcing that liberty. The crafters of words and designers of rules, knew exactly where they wanted to go.
They did their work so well, that it begins to look as though the next few decades will display a crisis, created by going too far, too fast. In all these idealistic schemes, the state government is the enemy. State governments would interfere with Reconstruction; state governments would interfere with land grants and misuse their undisputed control of local law enforcement. State governments would introduce little strategies for restoring the power to tax and control, and to govern. State governments would slowly remember that the Constitution conferred only a few limited powers on the Federal government, and reserved all other powers to the states. The Constitution would never have achieved ratification without this explicit provision in the XII Amendment. And so, step by step, we have achieved some sort of goal by making the state governments into the weakest, most ineffectual, and yes the most corrupt parts of our national system. California, New York, New Jersey, and Michigan lead the way into what seems a certain disaster of enlisting municipal employees into political machines of the worst sort, and bankrupting the states that permit it. Massachusetts, Rhode Island, Maryland and West Virginia are not far behind.
Fanatics could persuade themselves that a solution readily lies in simply going all the way and eliminating state governments. But to do so would destroy James Madison's brilliant insight. The states place a limit on unlimited power from whatever source by offering the citizens a choice: if things get too bad, just move to a nearby state.
Everyone agrees there is a tangle about the rights and responsibilities which begin when childhood begins. We wish to avoid this issue as much as we can, but partitioning the costs of the average child requires stating some point or other, as its beginning.
Keeping the practicalities of paying for it in mind, we hope no one will object if we say childhood begins, the day you are born.
We next consider the healthcare costs of children, from birth until age 25, linked with the costs of the elderly, for a reason. One of the points made in this book as an arguable alternative to the present employer-based system is to keep it within your family, rather than tax other people as a class. However, although the system now claims to begin with the first full-time employment, a newborn provokes about $18,000 of medical expense including obstetrics before that, right from the beginning, before the child can even feed him or her self. Age 26 might be a reasonable place to begin self-support, not because of tax deduction, but since that's typically the age group with the lowest health costs. Even that starting age has its problems because the parents are not much more accustomed to managing finances than the child is. The central question remains the same. Who is to supply the $18,000?
The Progressive movement started the idea of "family plans" about a century ago, but Henry J. Kaiser is credited with noticing an employer's gift of the insurance would supply two tax deductions, the employer's and the employee's, during World War II. That "reduced" the cost of health insurance by at least 50% (for the employer and employee), but it made a married employee seem more expensive than unmarried ones, made healthcare seem a free cost to the recipients and therefore boosted its cost, introduced a religious note by discouraging multiple pregnancies, and was unfair to unemployed or self-employed persons who were excluded from getting the gift. It is impossible to determine how much this new twist distorted employment and medical prices, but by suspicion the unfairness was major. It surely prompted a response, and this is one. If a big business can get tax deductions for giving away healthcare, why can't everyone else?
So it is proposed -- hold your breath -- HSAs give the equivalent of $18,000 at the death of an older relative, to a newborn's HSA at birth. The average childbearing mother has 2.1 children, which works out to one grandchild per grandparent, and helps smooth out the cost of multiple children. Because births and deaths cannot be forced to coincide, some sort of fund has to be created to make all this come out fairly, but the result should equal a zero balance between two generations. And because everyone who is alive has somehow already paid his birth cost, there is less urgency to begin this feature at the onset of the program--it becomes a feature of the transition. And, going back to the pros and cons of including Medicare premiums in the compounding, the more surplus is generated, the shorter the transition period should become. Ultimately, of course, the cost of health insurance for the mother is reduced; but the main beneficiary of the transfer is whoever is now paying for the mother's health insurance. That would sometimes be the father, sometimes the employer, and sometimes the Affordable Care insurance.
A few children are cursed with horrendous medical bills, which quite often predict lifetime disabilities. For the most part, however, childhood medical costs are pretty small. It would seem to produce an < b>ideal configuration for insurance, leading to mostly small premiums, affording a lot of protection against a fearful risk which is nevertheless relatively uncommon. However, a newborn is unable to walk, talk or feed him or her self, beyond even mentioning his or her lack of savings. Parents are now expected to pay such bills, and when they are very large it is common for grandparents to help out. So it sort of fits the common situation to group the two dependent periods of life (childhood and old age) together, as a continuous loop skirting the income-producing period of life entirely. The underlying purpose is to shift overfunded money to an underfunded time, compensating the childhood cohort for the fact that compound interest appreciates very little during childhood, but very greatly toward the end of life. This configuration fairly shouts "risk pool" but requires legislative action because it is more a metaphor than legal reality. It serves to explain to people why we have struggled to close the loop for twenty or more years because what is true for children is definitely not true for Medicare, where the main costs congregate. To meet the disparity, we chose to employ patchwork solutions for a single generation, counting on the enhanced generosity of the public for disabled children to meet the major expense. This appearance contrasts sharply with the deceptively low average cost of ordinary childhood healthcare. The only danger is for this temporary expedient to become a career.
Please note the fiscal dilemma. Even if subsidies or gifts provided a $100 nest egg to start health savings account at birth, 2.5 doublings at 7% would only create a fund of $525 by age 25. That's not nearly enough to fund healthcare for individuals at risk of auto accidents and HIV while trying to pay for college, home mortgages or the like. By contrast, $100 a year for forty years might well pay for all of Medicare while retaining leverage of eight dollars out, for one dollar in. Adding $1400 a year for 20 more years would be much better, at 80 to one. For lucky people, $8127 might work, but its safety margin is too narrow for launching a lifetime medical system. The actual plan proposed is a complicated variant of this approach. As the reader will see, there will be ample funds available for a lump sum donation, once the system has closed the loop, because just 8.5 extra doublings from the beginning of lifetimes to the end of other lifetimes, without supplementation, should silence any remaining doubts, at 256 to one leverage.
Once it gets underway, the two-generation process is very simple, requiring only a few amendments to existing legislation. Extend the age limits of catastrophic high-deductible insurance down to the date of birth, and allow the premiums to compound up to the date of death or 104, the length of a perpetuity. After that, allow surplus Health Savings Accounts of the parents or grandparents to flow over to the HSAs of the child, and allow surplus funds of grandparents and designated others to be transferred (from the date of death of one, to the date of birth of the other) via the HSAs of both. Gifts of this sort might even become a popular item in obituaries, in lieu of flowers.
Springing such a radically different proposal on an unprepared public is potentially to provoke ribald rejection, so it's gradually introduced here as a challenge to provoke alternative proposals. At the moment, I don't see what they would be. We are combining the advantages of two systems, for the young and for the old, which separately they cannot achieve, except through the socially threatened but biologically inescapable, concept of "family".
The Right Angle Club was recently entertained by its rugby-playing, Kilimajaro-climbing member, John Wetzel, about his two-week stint teaching law students at the University of Vilnius. This ancient Lithuanian institution was founded in the 15th Century by Jesuits, and after a bumpy history of invasions and occupations has now re-established itself. It participates in Erasmus mobility, meaning it is one of 47 European universities which exchange credentials and permit students from any one of them to take courses in any other member of the association; evidently, similar mobility of faculty is also part of the concept. It sounds like a great idea, which American universities might well consider.
For reasons not entirely clear, 75% of the law students at Vilnius are female, and the whole local legal profession is similarly woman-dominated. John made several allusions to the general pulchritude of his students, which a class picture with him confirms. One striking feature of such a picture is how slim the ladies are; this is another European feature our own representatives might consider imitating. Since there are 2500 law students in a country of 3 million inhabitants, whose main industries are agricultural, balance is restored by only admitting 15% of the graduates to a passing grade on the bar examinations. It seems remarkable that studying law remains so popular under the circumstances, but it was explained that most of the graduates end up working for banks or government. Governments including our own frequently feel their laws don't apply to themselves.
|University of Vilnius|
If you think about it, a country which is attempting to convert from a Soviet colony to a member state of the European Community has a lot of loose ends to tie up. The title to a property is regularly clouded by the experience of confiscation by the government and then subsequently return to a free economy; if banks accept such collateral, there may well be a lot of legal work to be done to assure its security. Since the thirty-odd members of the European Community all have different legal systems in different languages, all banks and businesses which attempt to operate across borders require partners or consultants in law firms in many countries. While there is a continuous effort being made to establish some uniformity of laws in the various nations of the Community, it takes a fair amount of study just to know what the laws are and how they differ. Therefore, while a handful of lawyers are sufficient to appear in court in disputes and litigation, a great deal more legal background is required, just for businesses to know how they are expected to behave.
Since, as Justice Holmes remarked, the life of the law has not been logic, it has been experienced, it emerges that a great deal of effort must be expended to create the logic when there has been no preceding useful experience. The example is offered of American bankruptcy law, which did not exist until Robert Morris forced its creation. Morris had become an enormously wealthy man, and thus created an enormous tower of debts when his speculations failed, amounting to the then-staggering sum of $12 million of debt. They put him in debtors prison on Walnut Street, but that scarcely addressed the real problems of all those creditors tangled up in the mess. Lithuania is in a similar position, and although it has created a bankruptcy law for corporations, there is as yet no bankruptcy law covering individuals, and hence credit cards, etc. are difficult to establish.
There is a notable difference in attitudes between the eastern nations which were former members of the Soviet Union, and are intensely eager to learn more about the evolution of American law, and the more western parts of Europe, where disdain and hostility for American exceptionalism is presently dominant. A moment of reflection about this difference in a situation should make Americans more tolerant of western European problems. If the logic of law evolves out of the contemplation of experience, it may well be easier to begin without any usable experience, than to begin with centuries of experience which has to be re-examined. It must in fact be a wrenching experience, but one which has the potential to teach Americans a great many things we never had to cope with. The eventual outcome should be a healthy one, providing of course that we can keep our tempers, and acquire a little humility along the path.
|President George Washington|
"It is of infinite moment that you should properly estimate the immense value of your national union to your collective and individual happiness; that you should cherish a cordial, habitual and immovable attachment to it; accustoming yourselves to think and speak of it as of the palladium of your political safety and prosperity, watching for its preservation with jealous anxiety; discountenancing whatever may suggest even a suspicion that it can, in any event, be abandoned; and indignantly frowning upon the first dawning of any attempt to alienate any portion of our country from the rest, or to enfeeble the sacred ties which now link together the various parts."
Judged by his public and private writings, Franklin was a deist. That is, he believed God sort of wound up the Universe like a clock, then let it run by itself. Furthermore, the Constitution0 which he had a hand in writing, pretty clearly maintains a wide separation between church and state. Nevertheless, historians by the droves have identified a uniquely American culture, apparently based on some fiercely held convictions. We might just as well say America has a secular religion with prophets, and Benjamin Franklin was an early prophet. His enduring message for all time was: Honesty is the best policy.
By this he did not mean, as lawyers do, strict word precision, or as our military academies add, resolute avoidance of half-truths and double-talk. Ol' Ben never admitted who the mother of his illegitimate son was, and positively chortled at hoodwinking the Pennsylvania Assembly into matching private contributions for the nation's first hospital, which he secretly knew he already had in hand. Late in life, he set enduring standards for the American diplomatic service, which some have defined as a profession dedicated to lying for your Country. Not only was Franklin rather sly, he gleefully projected the image of slyness. In recent years, some historians have proposed his adventures with many women were just acting out a playful pose. Frankly, this suggestion is hard to accept.
|Poor Richard Almanack|
The author of Poor Richard's Almanack, aged 26 at the first edition, was a young man totally consumed with advancing himself in the world; at that stage, he defined himself as a businessman. Like J. Pierpont Morgan, who could thunder "I will never do business with a man I don't trust", Franklin had one set of principles for business and another for love. Or, if you please, one set for men, and another for women, who were thought to play by their own set of rules. Historians have struggled with this paradox or hypocrisy, but it would have seemed strange even to comment on it in Franklin's era, and a conflict is not suggested in eighty volumes of his life writings. Lord Byron, another famous philanderer of the day, stated the matter delicately as "Man's love is to man's life a thing apart; 'this woman's whole existence." And that was just the way it was, in their view.
Franklin, who as an escaped apprentice might well have been punished like a felon in Boston, came to the big town to make his fortune, found himself ina culture of Quakers. Boston Puritans might well have punished him severely, or at least stood by approvingly while his brother beat the daylights out of him. The Dutch in New York were well known as rough customers; just to the south in Delaware, the inhabitants were to maintain a whipping post for two hundred more years. But in Philadelphia, non-violence was eventually carried to the extreme of confining miscreants to solitude until they spontaneously perceived it really was better to behave. Poor Richard's little motto about the best policy was in fact just the Golden Rule, applied to business. Even today, anyone starting a business soon finds a discouraging number of people ready to cheat the businessman; it was even truer in colonial America. Somehow, if you enter the business world, it is to be assumed you are ready to defend yourself. Competitors have little respect if you fail to conduct business warily; even less if you complain and wiper. Although many women have conducted successful businesses, it is so to speak a man's world. Little Benny Franklin, fresh off the boat from Boston, watched with amazement as Quaker merchants and vendors conducted trade on the assumption the counterparty was honest, refused to bargain an openly set price, and avoided violence when cheated. At the same time, Franklin could not fail to notice that Philadelphia was prospering much more rapidly than Boston. After a business trip to England, he could see that London worked at the same disadvantage as Boston. Honesty, it would appear, makes you rich; cheating may sometimes work, but fairness gets you ahead more steadily.
In later years, Franklin shared rooms with John Adams, who became positively livid at the suggestion a person should be honest for any other motive than to be taken into Heaven. It was degrading, even dishonest, to be honest in order to get rich. There is no evidence that Franklin's reaction to this sermon was anything but contempt for the other man's intelligence. Although probably not directly related to this exchange, Franklin's assessment of Adams was "always an honest man, often a wise one, but sometimes and in some things, absolutely out of his senses." Ben Franklin was born in Puritan Boston, fled from it as soon as he could, and thereafter seldom regarded Puritans as having two feet on the ground.
It thus emerges that Benjamin Franklin who was certainly no pacifist, greatly admired Quakers. On the one hand, in desperation he organized Pennsylvania's first militia when in 1730 the Quaker Pennsylvania government refused to act against French and Spanish marauders in Delaware Bay, and in 1752 took the lead again in assisting the British against Fort Deliquesce during the French and Indian War while Quakers resigned from government rather than defend the state. He even volunteered to go to London to lobby against the Penn family. None the less, Franklin was completely converted to Quaker principles of doing business, perceiving a deep underlying truth to them. Honesty, as suggested by the Golden Rule, or fair trade as they say in commerce, is the key to prosperity. Honesty is not just good advice for a young man, it is a principle which brings prosperity to a whole nation, while readily suggesting a clear simple explanation of why it should. Don't you want to be rich? Plenty of other people want to be rich.
Unfortunately, many kings, barons, confidence men, bullies, cheaters, and tough guys have also become rich. Generations of immigrants have come to our shores with the idea that life is a zero-sum game. The way to get money is to take it from someone else. The way to lose money is to give a sucker an even break. But gradually, one generation after another learns the truth, as enunciated by Poor Richard, that everybody is better off if almost everybody tries to be honest.
Surely it is not too much to say that American adventurism in the rest of the world reflects exasperation that the rest don't get the point. Certain parts of Europe, and all of the Mideast, really doubt it will work for them. The Far East does seem to grasp the rudiments, although with inscrutability and all it's hard to be certain. It isn't even true that all Americans get the point, but we have a containment policy for them, based on the fragile belief that here we outnumber the zero-summers. You must be firm, but you must also be fair. The crippled old Franklin hobbled out the door of Independence Hall after the Constitutional Convention. A woman calling to him asked what sort of government had been given us. "A republic," he answered. "If you can keep it."
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