The musings of a Philadelphia Physician who has served the community for six decades

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(Front Stuff for Healthcare Payment Reform)

Healthcare Payment Reform:

Revising the Health Insurance Model

George Ross Fisher, M. D.

New Directions for Health Savings Accounts
Important differences exist between Health Savings Accounts, Flexible Spending Accounts, (and now) Lifetime Health Savings Accounts. Sometimes abbreviated as HSA, FSA, L-HSA, Congress should make it easier to switch between them. All three are superior to "pay as you go" health insurance now in use, largely unmodified by Obamacare. We here propose a new and far cheaper departure, resembling whole-life health insurance, as contrasted with term insurance. (

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Chapter One

Good Ol' Health Savings Accounts

In 1980, John McClaughry of Vermont and I collaborated on devising the Health Savings Account, which we called the Medical Savings Account. It was based on the tax-deductible IRA (Individual Retirement Account) which Senator Bill Roth of Delaware would bring out the following year, containing the additional feature of an extra tax deduction if funds were spent on health care. Since the higher the deductible, the lower the insurance premium should be, the requirement was added to carry a high-deductible health insurance plan, as extra protection if you use the medical deduction, otherwise a Roth IRA would be just as good. I persuaded the American Medical Association to endorse the plan, John Goodman of Texas wrote a popular book about HSA, and Bill Archer, the chairman of the House Ways and Means Subcommittee on Health, pushed a law through, enabling it. Today, it is reported that 12 million people have these accounts, mostly in states without mandatory coverage laws which would hamper them. They are popular in Indiana, but almost unknown in New York and California. The Affordable Care Act has probably helped sales of HSAs overall, but while all four "metal" plans have high deductibles, they are an expensive way to get high-deductible coverage. The Bronze plan is the cheapest, therefore the best choice for those who choose to go this way.

That's about as concise a description as I can make, since of course there is more to it. For example, there is an annual limit to deposits in the HSA of $3300 per person, and they terminate into regular HSAs when you get Medicare coverage, after which you supposedly have no further financial health needs. There are plenty of salesmen who will gladly supply other information. These plans are not exclusively attractive to rich people, but it is true that really poor people start with such small accounts that companies can't make a profit unless the client sticks with them a long time. If you possibly can, you should scrape together one $3300 maximum payment to get started.

Although such an amount might make some poor people gasp with disbelief, a full payment of $3300 a year from age 25 to age 65 would total $132,000; that's the highest you can go. By contrast, the cheapest ACA (Obamacare) plan would total $240,000. That's before government subsidy, but there is no reason why the HSA couldn't be subsidized, too. We are later planning to make you dizzy with numbers, but a fair summary is that HSA is the cheapest health plan you can possibly find, if the government would allow a level playing field. The government bluffed for fifty years with Medicare deficit financing, and some people expect them to try it again. Other people point out that Medicare was financed after we had won some wars, but now we seem to be losing wars.

Let's just skip away from that. If the concern is that health care is too expensive, why in the world wouldn't everyone favor the cheapest plan around? Part of the answer, politics aside, is that young people have comparatively little illness cost, while old folks have a lot. Since Medicare skims off the most expensive segment of the population, young people tend to be indifferent to health, while middle-aged people get terrified at early signs of disease, and want insurance protection. It takes a few years for reality to balance the books.

Maybe Even Better: Lifetime HSAs

Briefly Outlined: Lifetime Health Savings Accounts

Health Savings Accounts are a big improvement over traditional health insurance, and this book stands behind them -- as is, without major adjustments. Their secret "economy" lies in keeping just about everyone from spending insurance money less carefully than he would spend his own. No one washes a rental car, as the saying goes. But when you let the individual keep those savings, millions of HSA owners find ways to save about 30% of average healthcare costs. HSAs provide an incentive for the consumer to shop more carefully, and consumers certainly seem to respond. The effect is magnified by the Health Savings Accounts (and their debit cards) being almost entirely used for out-patients, where an effective shopper can wangle as much as a 30% reduction. Inpatient costs, on the other hand, are severely constrained by using payment by diagnosis (DRG) to pay for the big items covered under the Catastrophic Health Policy. DRGs are a feature Medicare started for hospital reimbursement, and are not imposed by Health Savings Accounts. Nevertheless, Medicare contributes half of hospital revenue, so DRG use is very effective in suppressing the patient's hospital inpatient costs. There are problems, but escalating inpatient cost is not one of them. Office and outpatient costs are not constrained, but patients acquire market power to resist cost inflation, if they will use that power.

In spite of a highly praised record in about 12 million policies, it has since developed in my mind that Lifetime Health Insurance might be even better. Lifetime Health Savings Accounts (L-HSA) would differ from ordinary HSA in two major ways, and the first is obvious from the name. In addition to meeting each medical cost as it comes along, or at most managing each year's health costs, the lifetime Health Savings Account would try to project whole lifetimes of medical costs and make much greater use of compound income on invested reserves. The concept seeks new ways to finance the whole bundle more efficiently, and one of them is that health expenses are increasingly crowded toward the end of life, preceded by many years of good health to build up reserves. Since the expanded proposal requires major legislation to make it work, it is presented here in concept form only, for Congress to think about and possibly modify extensively. This proposal does not claim to be ready for immediate implementation. It is presented here to promote the necessary legal (and attitudinal) changes first needed to implement its value. As a first step, let's add another proposal.

Proposal 7b. Hospitals Should be Required to Accept the DRG method of payment for inpatients from any Insurer, although the rates should be negotiable based on a percentage surcharge to Medicare rates.

Lifetime Health Savings Accounts, beside being lifetime rather than annual, are unique in a second way : they overfund their goal at first, counting on mid-course corrections to whittle down toward the somewhat secondary goal of precision, which amounts to, "spending your last dime, on the last day of your life". To avoid surprising people with a funding shortfall after they are retired, we encourage some deliberate over-estimates, to be cut down later. For the same reason, it is important to have an attractive way for subscribers to spend surpluses, to blunt any suspicions the surpluses might be confiscated when they surface. An acknowledged goal of ending with more money than you need, somewhat runs against the grain, and is only feasible if surpluses are replaced with pleasing alternatives.

Saving for yourself within individual accounts is more tolerable than saving for impersonal groups within pooled insurance. Once more, the menace of rising health costs at the end of life induces more tolerance of pooling in older people, whereas small early contributions compound more visibly if pooling is delayed. The overall design of Lifetime HSAs is to save more than seems needed, but provide generous alternative spending options, particularly the advantage of pooling later in life. Because it may be difficult to distinguish whether underfunded accounts were due to bad luck or improvidence, the ability to "buy in" to a series of single-premium steps, creates penalties for tardy payment, as well as incentives to pool them. This point should become clear after a few examples.

Smoothing Out the Curve.

There is a considerable difference between individual bad luck with health costs, and mismatches between average costs of different age groups. Let's explain. An individual can have a bad auto accident and run up big bills; as much as possible, the age group should smooth out health costs by pooling within the age cohort to pay the bill. On the other hand, compound investment income follows one curve, while illnesses predominate in bulges of a different curve. It isn't bad luck that concentrates obstetrical and child care costs into a certain age range, it is biology which does it. No amount of pooling within the age cohort can smooth out such a systemic cost bulge, so the reproductive age group will have to borrow money (collectively) from the non-reproductive ones. With a little thought, it can be seen that subsidies between age groups are actually more nearly fair, than subsidies based on marital status or gender preference, or even employers, who tend to hire different age groups in different industries, and can accordingly game their health costs in various ways. On the other hand, if interest-free borrowing between age cohorts is permitted, there must be some agency or special court to prevent that particular feature from being gamed. All of these complexities are vexing because they introduce bureaucracy where none existed; it is a consequence of using individual ownership of accounts to attract deposits. which nevertheless must occasionally be pooled.

Escrowed Subaccounts.

Both Obamacare and Health Savings Accounts are presently expected to terminate when Medicare begins, at roughly age 65. Nevertheless, we are talking about lifetime coverage, we have a rough calculation of the cost ($325,000) and the Medicare data is the most accurate set, against which to make validity comparisons. We want to start with $325,000 at the expected date of death, spend some of it in roughly 20 installments, and see how much is left for the earlier years of an average life. Then, we repeat the process in layers down to age 25, and hope the remainder comes out close to zero. There are several things missing from this, most notably how to get the money out of the fund, but let's start with this much, in isolation for the Medicare age bracket, age 65-85. We are going to assume you make a single-premium payment at age 65, that both life expectancy and inflation in the future increase in a predictable manner, and that changes in health and health care eventually reduce healthcare costs, not increase them. Not everyone would agree to that last assumption, but this is not the place to argue the point.

We know the average cost of Medicare per year ($10,900); we know how many years the beneficiaries are in the age group (18). Therefore we know how much of the $325,000 to set aside for Medicare ($196,200), and can calculate what a single premium at age 65 would have to be, in order to cover it. We thus know how much all the working-age groups combined as age 25 to 65 (60% of the population) have to set aside for their own health care costs when they reach Medicare age($196,000 apiece), and by subtraction how much is left for their own healthcare within age 25 to 65 ($128,800). Shifts in the age composition of the population will produce very large changes in total national costs, but should by themselves not change the average individual costs. What they will do is increase the proportion of the population on Medicare, thereby paradoxically making both Obamacare and Health Savings Accounts relatively less expensive. Obamacare can calculate its future costs with the information provided so far. But the Health Savings Account must still adjust its future costs for whatever Income is produced by investments.We don't yet know is how much each working person must contribute each year, because we haven't yet made an assumption about the interest rate they must produce. Let's construct a table of the outcome of what seem like reasonably possible income results. There are four relevant outcomes to consider at each level: the high, the low, and the average. Plus, a comparison with what Obamacare would cost. But there are two costs: the cost from age 25 to 64, and the cost from 65-85, advancing slowly toward a future life expectancy of 91-93.


Comparison of Annual Costs (est.)

Personal Payments, Age 25-64

Health Savings Account............................................vs......................Affordable Care Act




Personal Payments, Age 25-83

Health Savings Account..........................vs..............................Medicare

10%...............6%...................2% .................Payroll tax...................Premiums......................Debt

45.00x40... .250.00x40......1400.00x40 ........ 1320.00x40...........2640.00x18.................(2725.00x18)


Comparison of Lifetime Costs (est.)

Lifetime Health Savings Account............vs................Medicare alone.

..............$40,000(1800-56,000)............................$196,200 plus 196,000 in debt.

Total Cost per Individual, median estimate.


Lifetime Health Savings Account............vs................Affordable Care alone.

...............$40,000 (1800-56,000)............................$288,000

Total Cost per Individual, median estimate.


Lifetime HSA plus Medicare............vs................Affordable Care plus Medicare

.........$40,000 (1800-56,000)............................$484,000 plus 196,000 in debt.

Total Cost per Individual, median estimate.


Accumulating the Necessary Money for Lifetime Healthcare

Because it's easier to explain, let's begin at the far end of the process, the day after death, and look backward. This proposal isn't a Medicare proposal, but the most extensive health data come from Medicare, so the reader quickly gets acquainted with the situation by starting with Medicare.

At present costs, statisticians currently estimate average lifetime healthcare costs at about $325,000; we later discuss the weaknesses of that estimate, but it's the best we have. Women have about 10% higher lifetime health costs than men. Roughly speaking, the average individual somehow has to accumulate that much money , in order to spend that much by the time of death. People over 65 (that is, those on Medicare) spend at least half of that $325,000, but just what should be counted is a matter of argument (see below.)

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. Congress can certainly change that, but if eligible, anyone could start an account tomorrow. And hypothetically, if anyone could live to his 65th birthday without spending an of the account without spending anything, a prudent investor will have accumulated $132,000 on his 65th birthday. If he is paid investment income on the deposits, he could have much more. Please hold your questions, until we finish outlining the plan.

If you deposit $80,000 compounded at 10% tax-free on your 65th birthday, you will have $325,000 on your 86th birthday, and we guess the average life expectancy where things will eventually flatten out will then be about 91. But you would have to be lucky in everything: a very favorable investment climate for the right ten-year period, plus a favorable health situation which avoided expensive illnesses just at the age when they would begin to threaten. Using a goal of $60,000 and assuming an interest rate of 7% is considerably easier to achieve, but the limitation which you might reach first is the $3300 yearly contribution rate, and you might be forced to pay all medical expenses out of pocket in order to make the investment fund stretch. Someone who sells his business at age 63 might have the cash, but he has trouble squeezing in the necessary nest egg before he reaches the present age for termination when Medicare begins. It's conceivable that many people would be able to do this, but it seems pointless to squeeze through a narrow window, and much better if the window were enlarged to permit lump-sum deposits up to, say, $60,000. 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 are already behind you, 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 contribution limits that almost stretch far enough, but make people fearful that health or financial problems may strike them at just the wrong moment. To repeat: $40,000 will suffice if you are lucky, while $60,000 is much safer. But unfortunately it is harder to squeeze $60,000 through the yearly contribution limit. If Congress develops a serious interest in lifetime insurance, the yearly contribution limit should be revisited.

The simplified goal is therefore to accumulate $60,000 in savings by the 65th birthday, based on a rough assumption that savings get a lot harder when earned income stops. With current law, you would have to start maximum annual depositing of $3300 by your 50th birthday, to reach $60,000 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 income returns until age 65. Many more frugal people might skin by with this; It 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 it, and have something left to share with the less fortunate. But to repeat once again, that compares very favorably with the $325,000 which is often cited as a lifetime cost.

Starting with the Medicare example. Notice that forty years of maximum contributions, would contribute 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, or as much as the full $1000 per year. 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 be tragic, compared with the present cost of health insurance. I have my 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 a 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. 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 seriously. They are mainly intended to remind the reader of the perfectly enormous power of compound interest. Let's go forward with some equally amazing investment discoveries which are more recent.

Buy-and-hold Index Fund Investing. John Bogle of Philadelphia invented and popularized index funds; quite an achievement for a man wearing a heart transplant for fifteen years. His first discovery was that if you buy the whole stock market and hold it, your portfolio will do about as well as the portfolio of an expert stock-picker, and better than at least half of the experts who earnestly try to tell a good one from a bad one. When the broker shares some of the economies of scale with the client, costs go down, and you reach a point where the assistance of an expert adds only questionable value. Such index funds do vary in their returns, and the difference between 0.25% commission and 0.06% is noticeable. But the difference between $7 trades and $300 trades is simply absurd. If an index fund is composed of the stocks of American companies in the same proportions as the stock market, investing in an American index fund is the same as investing in America. Investing in a total world index is comprehensive in a different sense, but I incline to the idea that we owe a part of this success to an American tax exemption, so Americans ought to climb aboard the lifeboat with the rest of the nation. If you do, there is reason to argue you will manage an effort-free 10% return on your money. But remember, high corporate taxes have driven many American corporations to Ireland, Cayman Islands and other tax havens. If this gets out of hand, it may be necessary to use world index funds.

Professor Roger Ibbotson of Yale has produced a Classic Yearbook, compiling the historical returns of the major forms of investment, from 1923 to 2014, and Morningstar shows signs of continuing these yearbooks indefinitely into the future. Covering nearly a century of experience, this data is the most reliable source of historical experience with a bearing on predicting future results. But of course it isn't infallible. Since various asset classes quite narrowly followed long term trends for many decades, most readers would agree with Ibbotson that they probably have some predictive value. Looking back over a century, it is remarkable what tiny blips were created by major cataclysms like the 1929 and 2008 crashes, two World Wars and several smaller ones, and at least one episode of dangerous inflation. All of these events, plus several severe recessions and the invention of the computer, seemed like earth-movers at the time, but in retrospect scarcely affected the long-run relative values of various asset classes. Unfortunately, many of John Bogle's insights were not available for long stretches of this experience, so data is not available for precisely the mixtures we wish had been collected. For example, it seems safe to conclude that Treasury bills will closely follow inflation, and that stocks will do better than bonds. But somewhat surprisingly, small stocks (less than a billion dollars) have consistently done 20% better than the large stocks which you are more likely to have heard of. It raises a question whether large stocks might be too big for their own good.

Since every investment activity requires a certain amount of cash to conduct its business, it would seem prudent to invest in small long-term mixtures of Treasury Bill indexes and indexes of common stock, made up of either America's or the entire world's list of corporations. After experience accumulates, the amount of liquid cash required will become better known, and after that, it should gradually emerge what proportion of longer-term bonds (if any) are desirable to provide for stability. And after that, it might be possible for a huge immortal fund to consider including timber forests and other extremely illiquid assets, in a manner popularized by Swenson at Yale. In time, the precisely optimum proportions should become more obvious, but at first it may be necessary to depend on the judgment of seasoned investment advisors. The reader is invited to review Ibbotson's handbook for himself, but what emerges is a strong suggestion that a 90/10 mixture of common stock to Treasury bills would be a good place to begin, and the mixture of stocks should reflect the mixture of corporations in existence. After extensive experience, commercial index funds have learned they can count on a steady inflow of new funds, and substitute that new cash for cash in the portfolio. Running one of these funds is not child's play, even though individual stock-picking is being superseded. The only reason for investing amateurs to play with such numbers is to get a feel for what size of total return could be expected. The reader is invited to study Ibbotson's yearbook, and see for himself whether he agrees that a 10% total return seems safe to bank on, but that a permanent staff devoted to management of the fund is imperative. Best of all might be to invest in several private funds, and reward the ones that do best for you. To go just a little further, Congress might even consider whether a management which produces less than 8% long-run return is eligible to be replaced. The take-away points are that the better funds can and should produce total returns which are superior to what an ordinary citizen can produce for himself. And, that there is no point to getting into this, unless Congress establishes -- and monitors -- policies which deliver on the promise.

Well, where does that get us? According to the Congressional Budget Office, Medicare currently spends about $500 billion a year, or 3% of the gross domestic product, paying for 50 million persons over age 65. If we expect a fund yielding 10% to pay for it, the fund must contain $5 trillion dollars. (By the way, that's about twice as large as the largest mutual fund in existence, so it is not possible to know everything about its problems in advance. It certainly would require hundreds, if not thousands, of employees, several large buildings, and considerable planning we won't go into. It probably should not be located in Washington DC, which is already outgrowing its transportation capability, and lacks a pool of talent in the required fields of expertise. That level of detail is beyond the scope of this book.)

But from this alone it can be estimated that our 350 million citizens would have to contribute, or have contributed for them, about $1500 a year just to pay for a year's worth of Medicare coverage. That's unreasonable, so let's say at the very most the 175 million of working age (25-75) would on average contribute $4000 a year during their working lives if they are employed, which at least 25% wouldn't be. Since we are proposing compound income instead of "pay as you go", it's a relief to calculate this contribution would total $700,000 at the 65th birthday, or $500,000 more than is needed for Medicare. Therefore, if we reduce or stop deducting their Medicare premiums from Social Security, the old folks would get increased income, and there ought to be enough extra money left to pay for healthcare from birth to age 65. That's our theory in a nutshell. We can then turn to our critics, who assume 10% income return is too generous, or $4000 a year is too burdensome, or that some decimal point is misplaced. Fine. We are still left with the challenge that this approach would pay for a big chunk of lifetime medical care, even if it might not pay for it all. That's our war cry, and that's all we claim.

There are seven times as many working people as retired ones, but if we wait too long, that ratio will probably get more unfavorable. There will certainly be adjustments equal to inflation, and maybe increases due to the rising costs of improved medical care. And that's just for the last 20 years of life; we must find the money to pay for healthcare from birth to 65 as well. And longevity is increasing; the fastest growing age group in America consists of people older than a hundred. There's no need to go on with this, the conclusion was always clear. We are never going to pay for this unless we get some new sources of revenue. Reducing medical costs is fine, but turning out the lights won't be enough. We need more net revenue, and I don't mean taxes, which merely shift revenue from the private sector into the public one.

The power of compounding is brought out by starting really young, possibly even at birth. At 10%, money doubles in seven years; at 7%, it doubles in ten. In 65 years there are eight doublings at 10%, six doublings at 7%. Working backwards from $80,000 at age 65, you need to start with only $60 at birth with 10% working for you, or $600 at birth with 7%. All of Medicare for $60, now that's really a bargain, and $600 is still a trivial price for a retirement with unlimited health care. For illustration, we take it in two jumps, from birth to 65, and then 65 to death. And to be truthful, there is a deceptiveness about the cost of Medicare, because we are so heavily indebted already, and must find some way to pay off the debt. (See below).
Think back on what has already been said, and is already mostly self-evident. We started by showing it would be comparatively painless to assemble $80,000 by the 65th birthday, and that much money on average, would likely pay for Medicare. Remember, Medicare is spending $10,000 a year on the average Medicare recipient, for roughly 20 years, or roughly $200,000 during a 20-year lifetime after 65. We estimate compounding will add more revenue, roughly matching the costs of robust stragglers who live from 85 to 91. We assume a fair number of them will be healthy during most of the extra longevity, with terminal care costs merely shifted to 91 instead of 85. We started at age 65 with 65 years of health costs already paid, we paid down the estimated costs of twenty years, and the interest on the remainder pays five more. We get there with money left over, we haven't collected the premiums from Medicare, and we still have to pay for that last year of life, except we let Medicare calculate the average cost from the people who decline this gamble, and the fund reimburses the hospital or whatever, for average terminal care costs during what is now known to have been the last year of life. If the money from fund surplus isn't enough, the agency can look at raiding the payroll deduction pool. And there can always be recourse to liberalizing or restricting enrollments, to age groups which experience shows will either enhance or restrict the growth of the fund, as predictions come closer to actual costs. And finally, the last recourse is to have the patient pay for some of his own costs, himself, by re-instituting Medicare premiums. Those who feel that paying for all of healthcare with investment income was always a pipe-dream, will feel vindicated. But all this book ever claimed was it would reduce these costs by an unknowable amount, which is nevertheless a worthwhile ton of money.

Whoops, Medicare is Subsidized. A major explanation for this astounding bargain can be traced to a 50% subsidy of Medicare by the Federal government, which is then borrowed from foreigners with no serious provision for ever paying it back. Medicare is :
about half paid for by recipients,
about a quarter paid for by payroll deductions from younger working people, and
about a quarter paid for by premium payments from Medicare beneficiaries, collected by reducing their Social Security checks.

A quarter paid in advance, a quarter paid at the time of service, and half of it a subsidy from the taxpayers at large. No wonder it is popular; everybody likes to get a dollar for fifty cents.

So I'm sorry but if you want to pay your bills, it might easily cost $80,000 on your 65th birthday, based on the assumption that you want to pay the nation's debts. And to go back further, it will take $200 a year, starting on your 25th birthday, even making the rather optimistic estimate of 10% return, so you might as well call it $500, just to be safe from other rounding errors, and to allow enough time for hesitation about doing such a radical thing. No one says you have to do it my way, but this is how you reach a rough approximation of what it will cost, to do what has to be done, including paying off our debts.

That's indeed how much it will cost if you do it all by raising revenue. You can also do some of it by cutting costs, where fortunately we are well along on the good ol' American way to do things. No one else has the money to do it our way, so everyone else tries to cut costs by turning out the lightbulbs. But without anyone saying a word, notice how we have united in what the rest of the world thinks is madness. Starting about fifty years ago, we began pouring outlandish amounts of money into medical research. In fifty years, we have extended life expectancy by thirty years, through eliminating dozens of diseases, and the cost of caring for them. Just think of the money we have saved in the treatment of tuberculosis alone, by tearing down all those TB hospitals which were seen in every city during my student days. Infectious diseases, particularly typhoid and syphilis, consumed much of the time of a medical student, and much of the budget of every municipality. One of my professors once said we only had two big challenges left: cancer and arteriosclerosis. He was optimistic, because we still have cancer. And the three main mental disorders, schizophrenia, Alzheimers and manic-depressive disorder. But add five more to that list, and do it in twenty years. After that, our main problem will no longer be a matter of dying too soon. Our main problem will be, to outlive our incomes. Financially, these are the same two problems, except one is paying for Social Security and the other is paying for Medicare.

Consider for just a moment, how difficult it is to say how much medical care costs. Remember, a dollar in 1913 is now worth a penny, and a dollar today is very likely to be worth only a penny in 2114. We long ago went off the gold standard, and money is only a computer notation. Looking back over the past century, it is remarkable how smoothly we glided along, deliberately inflating the currency 2% a year, and listening to assurances that this was the optimum way to handle monetary aggregates.

But we now have more than a million people over the age of 100. They got cough drops as a baby for a penny, and now hardly blink when a bottle of cough medicine costs several dollars. But instead of that, they are likely to get an antibiotic which was not even invented in 1913, cost perhaps forty dollars when it was invented, and now can be bought for less than a dollar. If they got pneumonia in 1935, they probably died of it, no matter how much was spent for the 1935 medicine, so how do you figure that? Or someone who got tuberculosis and spent five years in a sanatorium, who today would be given fifty dollars worth of antibiotics. The problems a statistician is faced with are impossibly daunting.

The current practice, which reaches the calculation of $325,000 for lifetime medical costs, is to take today's health costs and today's health predictions, and adjust the average health care experience for it, both backwards and forwards. Every step of this process can be defended in detail. But the fact is average lifetime health cost of someone born today is only the wildest of guesses, no matter what kind of insurance he has, or who happens to be President of the United States. The cost of drugs and equipment go through a cycle of high at first, then cheaper, then they vanish as useless. But adjusting the overall cost of materials and services when only a faint guess can be made about healthcare content, can be utterly hopeless, or it can be quite precise. Unfortunately, even its probable future precision is a wild guess. It's a wonderful century to be living in, unless you are a healthcare analyst. The only safe way to make a prediction is to make a guess that is too high, and count on public gratitude that it wasn't much higher than you predicted. But to guarantee a particular average outcome, which an insurance actuary is asked to do, will be impossible for quite a few decades.


However, it is a fact of life that someone who could only afford $100 a year is likely to be so unsophisticated he could not invest at optimum returns. Nevertheless, it would only require an escrowed deposit of $100 per year from age 25 to age 65, in order to pay the anticipated cost of Medicare for the rest of his life. Even escrowing the full amount without added income would give him Medicare for life. Therefore, he might thus buy himself out of Medicare for $40,000 if the goverment. Since we propose compound investment of total market index funds, tax exempt if you spend it on health care, it can be shown that $40,000 will get you from age 65 to a life expectancy of 86 -- with a fund of $325,000 if you never get sick, but more likely spending the $325,000. by the day you die. These numbers are only back-of-the envelope estimates, but they seem to justify the guess that annual contributions far less than a typical health insurance premium, perhaps $1000 a year (from age 25 to 65) could more than cover average lifetime medical costs in an HSA. I wouldn't advise sixty or eighty years of advance planning on autopilot, because too many things can happen to inflation, to medical care, and to the stock market. But the general approach is to start with 'way more funding than you think you need, and whittle it down as you get closer to the events in question. To do that, someone has to set up a monitoring system of the whole nation's health costs, and using Hadoop and Big Data, tell us what mid-course adjustments must be made. It would seem like a prudent thing to monitor the accumulations of deposits, income and administrative costs, as well. I oversimplify, of course, but general concept is pretty simple, once you understand that plenty of safety padding is built in, and that any surpluses belong to the voting public, who will soon discover they have many competitors for it.

That's enough introduction to a basically simple idea

Of course, of course

But the investment may need some explaining

the finance the whole smooth transition to it at any age by "buying in" at lifetime average costs from that age forward, rather than covering one year at a time out of funds that happen to be in your account. And secondly, it pools several average lifetimes into one virtual pool, thus capturing eighty years of inflation, and at least staying even with it. That's putting it succinctly, and I will try to make it more understandable later, because the first obstacle is to reassure the reader that this is not magic, nor is it hocus-pocus. Quite naturally, a newcomer to this idea asks the suspicious question, "Where does all this money come from?" That's a polite way of saying, "You're not stealing it from someone else, are you?"

The thrust of this proposal is to correct a defect in the original design of health insurance, commonly called "Pay as you go." When your bills are paid by Medicare, let us say, very little of that payment originates with this year's premium, from you or from anyone else your age. The payments for bills of an octogenarian mostly come from premiums contributed this year by people many years younger than he is. During all those intervening years, very little interest or investment income is made on the deposits, because the deposits more or less instantly become someone else's payments. Although the younger person is sort of loaning the money, it doesn't remain idle long enough to give him any return on it. If he took that money and invested it in the stock market, he could make a lot of money. But that's idle chatter, because there isn't anything to give him. He'll probably tell you he doesn't mind because it's legal and patriotic, and furthermore he is scared of losing money in the stock market, maybe even regards investing as a form of gambling. Regardless, utilizing frozen virtual deposits is what generates the "extra" money for Health Savings Accounts.

We are proposing a way to capture some, maybe not the maximum, of the income lost, by depositing it in a Health Savings Account in the private sector in his own name. It gets a tax deduction, because it may only be spent on his own health care. It can be used for buy-and-hold investments because it may not be withdrawn for years. If you take our advice, you will buy total U.S. market index funds at less than 0.25% commission, and otherwise forget about investing. You will thus be investing in the whole United States economy, which is about as safe as things can get. Be consoled that any money possibly lost in the ups and downs of the market, is money the depositor would otherwise not get at all. Present law limits deposits to $3300 yearly. A careful investor should make close to 10%, or $330 total return, and brokerage fees should be less than $10. In addition to being a careful investor, it is important to be a careful patient. A famous surgeon once remarked that the only reason to buy health insurance is to keep the hospital from fleecing you. Experience with several million Health Savings Accounts shows that becoming a careful shopper will save, on average, 30% a year. All of these savings are side benefits to lifetime HSAs, which should save a bundle more. Since we propose to give it back in the form of lower premiums on health insurance, a buyer doesn't have to get sick to get his hands on it. This proposal isn't really a way to make money, it is a way to stop losing money, by correcting a defect in health insurance. It's also a way to invest on behalf of people who never invest, so they may need time to get used to it.

That last point may raise another question: why not just do it all for everybody, like whole-life life insurance? First, because the revenue accumulates gradually in the private sector, while the expenditures are often made in the public sector. Secondly, young people have little health cost; older people tend to have a lot of health cost. To be fair, you have to talk about averages at different ages. Secondly, Americans have resoundingly declared they don't want the government to own voting control of the nation's business. There's even a question whether they want the government involved in health care, but at the moment, about half of them would agree to that. We don't want the feds to own stock or control business. We don't want the feds to run stock brokerages, or investment advisory firms. That's fine, but it has a price. If you are going to take advantage of compound investment income to pay a substantial part of your health care costs, you are asking the private sector to get involved, and have to do it outside of some boundary between public and private sectors. Furthermore, our whole monetary system is based on the assumption that government interest rates will be lower than private industry pays, and banks pay somewhere in between. Violating that assumption would be too shattering to consider. The take-home message is that if someone doesn't want to participate, he doesn't have to. If he wants to pay exorbitant fees to a broker, we can't stop him.

Let's turn to a natural question which has somewhat more substance: If the bulk of the money generated by this system comes from the improved investment performance of the private sector compared with the public sector, how about the seed money? After all, if the seed money used to be lost in the cracks between young people who contribute and old folks who spend, it is gone none the less. You can't spend money twice. That's true enough, but we are comparing two curves with different shapes, revenue and expense. Both curves start at zero and end with zero, but if you subtract the expense curve from the revenue curve, you will get a lot of bumps, because the shapes of the two complex curves are different. Some bumps can be predicted, but for the most part they are generated by unexpected medical expenses and unexpected investment happenings. For this reason, it seems best not to go on autopilot, but to create a transition agency to make mid-course corrections, and if necessary to arrange for transfers and loans between age groups. There should be plenty of money after a while, but during the transition there may be occasional cash shortages. Once a comfortable cushion is established, the uses for a permanent agency can be re-examined. As a general principle however, new enrollments to the plan should be young working people who generate a cash surplus, while older people who consume funds can be enrolled as the cash balance justifies. When the balance grows to a comfortable level, enrollments can be unlimited. This differential enrollment approach should make use of the expected reluctance of many people to take a chance on something new. On the other hand, there are people who will try to game the system with adverse selection.

There is one last point about inflation. Because the Federal Reserve adopted inflation targeting long ago, our currency has an intentional goal of 2% inflation per year. This slow but steady attrition explains why a dollar in 1913 (when the Fed was founded) is now worth a penny. Rather than bemoan this policy, lifetime health insurance takes advantage of it. If someone invests a dollar as a child, that investment will pay for nearly a hundred dollars worth of medical care if he lives a normal life expectancy before he has his terminal illness. Of course, the cost of medical care will go up, too. But if substantially all of medical care is eventually paid for with this sort of investment, inflation pressures on medical care can be differentially controlled. The wisdom of doing so deliberately, is above my pay grade. But it should be monitored,

It was my intention to write a critique of the Affordable Care Act, followed by a proposal for what to put in its place. That's about what emerges if you read the first four chapters of this book. John McClaughry of Vermont and I were the originators of the Health Savings Account in 1980, and original HSA still seems superior to the proposals so far enacted into law and regulation. It is true there is awkwardness in the 1787 Constitutional limitations of the Federal structure of government, but the ERISA (Employee Retirement Income Security Act of 1974) demonstrated the Constitution was probably flexible enough to form a workable platform for interstate medical standards, and the medical needs of national corporations. The Supreme Court had assured us the Constitution is not a suicide pact, but no collision has arisen to justify the conclusion that modern medical requirements are in serious conflict with essential Constitutional exclusions. The essential strategy employed by ERISA was to establish pensions and healthcare plans as freestanding corporations, independent of the employer.

While waiting for the Obama Administration to demonstrate why they believed present structures justified increased medical costs, or increased regulation, I had thought of seven or eight possible improvements to the act, during the three decades after Bill Archer of the House Ways and Means Committee got Health Savings Accounts enacted into Law. However, none of them changed the nature of the issues. The most radical idea to occur to me was not to right wrongs or overturn injustices. Chiefly, the idea grabbed me that Health Savings Accounts might readily become lifetime insurance, and save a great deal of money without injuring medical care in the slightest. That is, individually owned and thus portable polices, might well generate long-term compound investment income. Because of medical science and a thirty-year extension of life expectancy (and hence, investment compounding) the potential new revenue is enormous.

The Affordable Care Act and this revised new Health Savings Account could both be viewed as responding to the 1787 Constitution's lodging of health insurance regulation inside the fifty states. Furthermore, The Constitution rather definitely excludes healthcare from federal regulation, reinforces the point with the Tenth Amendment; and the McCarran Ferguson Act is implacably explicit a third time. This creates difficulties for interstate businesses, and for people who get new jobs in new states. Many smaller states do not have a large enough population to support more than one health insurance company, thus creating monopolies in many states, and consequent resentment of monopoly behavior.
In a sense, Obamacare attempts to solve the difficulty by fragmenting national health insurance, whereas lifetime Health Savings Accounts would solve it by consolidating yearly fragments into a single, portable, policy owned by the individual. Industrial corporations once solved the same difficulty by permitting the corporation to select its "home state" for incorporation. Lifetime HSAs solve it by letting the individual select a managing organization, and indirectly if he chooses, select a home state for its regulatory climate.

While this idea had initial appeal to me, it was soon pressed forward by discovering that computer-driven innovations in the investment world had made lifetime coverage far easier, less chancy, and considerably more financially attractive, than coverage in annual slices. Added to recent astonishing increases in life expectancy, internally compounded investment income came pretty close to paying for lifetime health costs. That comes about, because compound interest grows most near its ending, roughly matching healthcare costs, and our increased longevity comes from living long at the end, not merely on average. You could never be sure of that, because the science of medical care is constantly evolving and you don't know where it will go.

The one thing you can be certain of, is that restructuring health insurance in this way results in a considerable reduction of health insurance premiums. They might skyrocket, or they might largely disappear, but in any event they will be a lot cheaper than using any other method of paying for them. No doubt critics will find large numbers of nits to pick. But no matter what else turns up, it is going to be pretty hard to match the cost reduction, which ten minutes of simple math can demonstrate. In fact, the great obstacles to an effective system, like "job lock" and "pre-existing conditions" present no obstacle at all to lifetime HSA, and thus stand exposed as artificial creations of existing health insurance, modeled on term life insurance. Just change to a more natural system, already tested for a century as whole-life insurance, and such technical problems simply vanish. Even slow adoption, based on public wariness about a new idea, is an advantage. A change this massive really ought to be adopted slowly and tentatively, so we don't cause chaos by blundering ahead into unexplored territory. If we do it, let's do it on purpose.

Thus the original idea of modestly improving the original Health Savings Accounts, continues to stand on its own two feet. It's what I would offer right away as a supplement to the Affordable Care Act, or to ERISA plans, simply providing comfortable little ways for individual subscribers to ease from annual HSAs into parts, or all, of lifetime HSAs. Right now, anybody under 65 can start an HSA, and any insurance company can offer a product containing little variations of the idea. Any one of the fifty states can change its regulations to make itself attractive as a "home state", as James Madison originally envisioned when he described the laboratories of the states.

And if someone finds a fatal flaw, why shouldn't I thank him, rather than try to bluff past him. So, right off, what are the disadvantages of lifetime coverage? They would seem to be:

1. At the moment, persons receiving Medicare are excluded from starting Health Savings Accounts. During the debate about Obamacare, seniors were therefore remarkably uninterested in a topic which didn't affect them. Very few seem to realize that Medicare is 50% subsidized by the federal taxpayer, and therefore few realize they are quite right to be uneasy Medicare might be "robbed" to pay for Obamacare. No politician is comfortable discussing this issue, for fear his party will be blamed for injuring a perfectly blissful status quo. Naturally, everybody likes the idea of buying a dollar for fifty cents, and everybody likes to imagine payroll deductions and premiums create an impregnable entitlement. The sad truth is the 50% subsidy, paid for by borrowing from foreigners, practically guarantees Medicare will be eyed as a victim, using the "fairness" argument. Seniors on Medicare, of which I am one, should be immediately in favor of a proposal which forestalls such pressure. Unfortunately, right now every one of them is looking toward the sunset, counting on not outliving a threat which isn't going away.

2. The computer revolution, which makes lifetime health insurance even imaginable, has already severely impacted the investment community. It is still difficult to foresee which branch of the existing financial community would be natural allies, or natural enemies, of Health Savings Accounts. A remarkably large segment of the investment community already has HSAs for their personal affairs, and the banking community sees a chance that Bank Debit Cards could displace the huge industry of insurance claims processing. Meanwhile, the insurance industry is uncertain whether HSAs are a new revenue source, or a threat to existing lines of business. Meanwhile, the Dodd Frank legislation confuses everyone about winners and losers. Investment advisors have been hit hard by the recession, and are forced to charge $250 per trade when their competitors charge $7.50 for the same service. Just about everybody in the HSA business is uncertain whether HSAs are insurance policies with an attached savings account, or whether they are are investment vehicles with stop-loss insurance attached. It takes time for HSAs to achieve profitable size, so industry leadership hangs back to see what they look like when bigger.

3. There are lots of small advantages, but one big disadvantage. The transition from one system to another takes a long time, perhaps a lifetime for some.

How can we navigate a transition that might take a century to complete?

The answer to the long transition period lies in providing more than one method to close the transition gaps. Start from both ends, and find one or more methods to break into the middle. If lifetime insurance saves money, use some of it to overfund parts of the system as an incentive. When you find people are gaming the system, drop the feature which permits it. If the goal is accepted to speed up the transition, calculate what it is worth to accomplish it, and limit the feature as the transition speeds up. The method proposed in the previous chapter will certainly work out, but a newborn baby will be a Medicare recipient before children's insurance is complete for everyone. The rest of us have already lost some years for compounding, while some of us are already on Medicare and are, as they say, entitled. Therefore, we propose two other ways of getting to the goal. Reducing the cost of healthcare is one, to be taken up in Chapter Six. That one works for everyone's finances at any age.

The other method, which suits people of working age, is the present topic. It has two possible solutions, the issuance of special bonds, and as an inducement for dropping Medicare. In the present environment, using Medicare as a transfer vehicle is unthinkably unwise, politically. It can only be brought up as a voluntary exchange, long in the future when the financial attractiveness of the HSA approach is so well established it has no political downside, and can be used to pay for non-medical retirement costs after HSAs can comfortably cover medical ones. At that point, it would no longer have the stigma of "robbing" Medicare, but might be acceptable as making use of unspendable double coverage.

The safer approach is therefore to issue bonds to smooth out the bumps in what is essentially an equity investment; that's something to do with only the utmost care, and as rarely as possible. To match present cultural patterns, it must be recognized that working parents now fully assume the medical costs for their children, but only have a contingent liability for the medical costs of their retired parents. Therefore, our culture would probably readily accept bond indentures with similar structure, and resist bond issuance which differs significantly. In fact, it is a little difficult to imagine how we could devise any proposal which does not generally follow this pattern. An important feature would be to start the HSA at a very early age, adding as much as 26 years to the duration available for compounding. At 10%, that would be almost four doublings of the investment, and a fairly good start toward the initial goal of $40,000 in the account by age 65, but starting with relatively small investments. True, a bond issue would have interest to pay, but since the interest payment stays within the family it might be made less burdensome than taxes. As a practical demonstration of the superiority of equity investing, its invisible psychological value cannot be overstated. If our nation intends to rely increasingly on investment rather than salaries, it must increase its experience with sensible risks. Whether we like the idea or not, we are collectively taking long strides toward a rentier culture, where our main hope of advancement lies in greater willingness to understand and accept the reasons for market volatility. One of the features of even this attenuated risk-taking, is to recognize that some people will start their investing at the bottom of a dip, while others will start at the top of a peak. The long-term result will smooth it out, but some people are destined to make more profit in an equity market, than others. And some people are destined by the timing of their illnesses to end up with less money in the account than others, too. It may not seem fair, but tampering with investment cycles will not improve it. By establishing a system of buy-ins, both as a transition step and for late-comers, the opportunity of market-timing is created. Almost nothing is more discredited as an investment strategy than market-timing by amateurs, but it probably cannot be avoided here, and will probably exaggerate the differences in account size achieved by members of the same age cohort. Somehow, the attitude must be made general, that nobody would make anything at all in the accounts if we returned to annual premiums; all money in these accounts is "found" money. The books almost certainly will not balance completely at all stages, so it becomes a political question whether to forgive the difference (as Lyndon Johnson did in 1965), or to define it as a subsidy (as Barack Obama seems to be planning for his start-up insurance system.) Perhaps in accounting for residual medical costs, a way can be found to equalize outcomes, but it seems very unwise to tamper directly with such large amounts which are mainly responding to inherent volatility.

There are several other serious matters. They will be briefly noted, and then an omnibus solution presented, the IIOO. Let's answer one inevitable jibe immediately: How can poor folks afford this? Answer: They have to be subsidized, that's all, just as they are in every other proposal including Obamacare. It's important to face this, because neglecting it is the route by which every deficit has been incurred, every budget unbalanced. The term generally applied is, rationing. People who spend other people's money characteristically have higher than average health costs, but on the other hand Health Savings Accounts have proved to reduce costs by 30%. When both factors operate at the same time, result are not reliably predicted, but can be monitored. Miscalculations are usually paid for by debts, dropped options and dropped amenities. A politically appointed board would be wise to refuse the assignment to address this, unless contingency instructions are clear, and remain out of their hands. The group responsible for constraining unofficial solutions should be the same one responsible for paying the national debt, since the incentive is the same. When Congress eventually decides how to put a ceiling on the national debt, effective answers to this related issue may become more apparent.

Most of the transition problems (shifting from one-year coverage to lifetime coverage) have to do with whether you are a child, whether your children are gone and forgotten, or whether you are supporting everybody else in your family. As the old saying goes, how you stand depends on where you sit. The unique borrowing problem here, is complete transition takes so long that groups will differ significantly on whether to unify forward (child to grandparent) or backward (grandparent to child), until the bright idea occurs to borrow as a child and borrow a time as a grandparent, depending on what your situation is. The benefits of invested premiums are otherwise obvious to all groups, but the arrangements must be as flexible as possible. Since shifting payment from youth to old age could potentially affect compound investment return for sixty or eighty years, the savings potential to younger people is even more enticing. Don't forget the possibility a third generation might intervene -- their own children, as well as their parents and grandchildren. Since the modern use of index funds puts on the table the potential of diversified investment, without stock-picking, at ten percent interest -- issues like this simply must be explored. America seems to need increased fertility, and the compound income might make it possible, but if it is not carefully examined, it might act as an inducement for women to delay their first child even longer than they presently do. As long as you don't get overwhelmed by too many transition issues at once, almost any such intergenerational problem would likely be eased by generating more revenue. At ten percent, money compounds to double itself every seven years, and the resulting sums can boggle the mind. But if they are not planned for, the extra money will induce people to act like a deer frozen in the headlights.

Making ten or twelve percent on safe investments may seem impossible to those who have recently lost thirty percent on the stock market, and of course it is not guaranteed. That is why lifetime health insurance cannot be presented as guaranteeing payments for future services; only fixed-income securities (bonds) can do that, and even they, mostly don't succeed in real terms, or net of inflation. Lifetime health insurance only promises to supply a major portion of future health costs, and has little hope of doing more except by deliberately overfunding the accounts. We are decades into a fiat currency without semblance of backing by monetary metals, and must feel our way. However, the bright side of our new finance system is that transaction costs are steadily declining for reasonably safe passive investing. Professor Ibbotson has demonstrated that total market averages have been remarkably steady for asset classes over the past eighty years, and probably will safely remain so for another century, unless someone devises another Treaty of Versailles. When you invest in the total domestic stock market of America, your investment is guaranteed by the full faith and credit of America, just as surely as if you invested in U.S. Treasury Bonds. In view of the present uncertainties of the Federal Reserve unwinding Quantitative Easing, these are only relative matters, but they are the best anyone can offer.

Still another question comes from people who rightly believe there is no free lunch: Where does the extra money come from? A fast answer is that it comes from correcting a blunder of long standing, called the "pay as you go" system. To some extent, this problem began with the original Blue Cross plans of the 1920s, but it was elevated to its present stature by the Medicare and Medicaid proposals of 1965. By the pay/go approach, this year's premium money is spent for this year's sick people, not the people who paid the premiums. That ruse helped get the program started, but it means current unspent premium money is quickly gone, and thus it means no compound interest or investment income is generated by rather huge revenue collections in the future. Since health expenses rise with advancing age, a great deal of floating premium money might be invested for many decades, if only it had not already been spent. Actual projections are surprisingly large, but I would prefer that others announce their calculations, employing the motto of "Underpromise, but over-perform."

Other substantial sources of reserves exist, nevertheless. Health Savings Accounts now in operation are reporting 30% savings; since it is unlikely this record can be maintained with inpatients, who are generally older, overall savings may well turn out to be closer to 15%. Inflation helped a lot to pay off the original startup costs of 1965, but at least nominally it is true the debt has been paid. We are now free to invest that old transition cost, so to speak, but there is considerable squeamishness about the public sector acquiring equity in the private sector, so Treasury bonds are about the only public sector investment the public will allow. Investment experts are however almost unanimous in feeling that equities provide greater long-term income (see graphs by Ibbottson) and security against inflation. On the other hand, if private individuals invest in common equity with index funds, much less resistance is encountered. Any way you look at it some investment income is better than no income, and for long-term investment, equity is better. For political purposes, it would seem best to restrict investments to U.S. companies, and index funds are less controversial ("gambling with my money") for most small investors than actively managed funds because the savings mostly come from investment expenses. Fifty percent of investors would do better than average, fifty percent would do worse, but not much worse, because total index diversification is at a maximum. Meanwhile, compound interest would be at work, and most people would be astonished to learn how large the long-term appreciation would grow. Tax-free, diversified, and long-term.

Finally the question arises: how can you tell whether income from this source would equal the terminal care costs of fifty years from now? You don't, of course you don't. But this transfer and invest scheme would generate a whole lot of money that presently isn't being generated. If it isn't enough, we will have to do something in addition to it. The monitor and mid-course correction system is expected to detect that more money is required to balance the books, and therefore more money will have to be invested in the Health Savings Accounts. If savings are insufficient, either subsidies or borrowing will have to be resorted to. Experts sometimes will be wrong, so revenue should be raised somewhat higher than the experts think we need. And if it all goes wrong, if we have an atomic war or an expensive cure for cancer, there is always the national debt. Which is where we were to begin with, isn't it?. The extra risk is zero, but the total risk is unchanged.

Independent and Impartial Oversight Organization. (IIOO)After reviewing the complexities, it seems best to create an oversight body with more time and expertise than can be expected of elected representatives. However, Congress must make it clear that it retains ultimate authority to break from normal routine, occasionally concentrating its attention on conflicts between expert opinion and public opinion.

Working backwards, a mixed public/private system needs an official backer of last resort, a function which cannot be delegated, and an experienced crisis management team in place with the authority to act within defined limits, most of the time. The last resort has to be the full credit of the United States, just as it unfortunately now is with Medicare. What's mainly needed is a sort of Federal Reserve in the very narrow sense of an independent management team, under the direct governance of a Board whose composition is half public, half private. To be useful, it needs a monitoring authority provided by a mandate from Congress, a comparatively limited amount of regulatory authority of its own, intentionally limited by adequate board representation from all stakeholders. It needs to know what is going on, and it needs general authority and trust to act in an emergency. Many proposals may require a system of mid-course corrections particularly in the first decade of operation, at the same time the Board must not usurp Congressional authority.

Congress, on the other hand, must have the restraint of private oversight by technical experts who can appeal to the public, to make very certain it does not feel it has a new

CHAPTER FOUR: Proposals to Extend Regular
Health Savings Accounts

Improvements in Regular Health Savings Accounts: Introduction.

Health Savings Accounts have always been a good idea since their enactment in 1996 and reaffirmation by Congress in 2003. But they could be vastly improved by six simple amendments, plus one moderately complicated one, to be described shortly. Right now, without such new legislation, they produce roughly 30% savings (for an estimated 12 million subscribers) by providing subscribers an incentive, to use insurance frugally for medical expenses and keep the savings for themselves. That's by contrast with regular health insurance which actually encourages more health spending, as the only available way to get something back for the money. Alone of the options available in American health insurance, HSAs invest "unused" premiums and credits them to the subscriber. Ultimately, it rolls over any surplus to a regular IRA retirement account, at age 65 or whenever Medicare supplants it.

It is mandatory to link HSAs to high-deductible insurance for big medical expenses (so-called "re-insurance"), whereas the Affordable Care Act aims at the same goal by placing a "cap on out-of-pocket expense", in addition to the deductible limit. The approaches are not completely comparable, however, because the cap approach forces the basic insurance to re-absorb such costs, while a high deductible approach actually pays the bill. It is not clear whether there is any resulting cost difference to the subscriber, on this feature. However, the overall net cost is appreciably less for HSAs than traditional health insurance, while with the "metals" plans of the Affordable Care Act, the price differential is even wider because of the subsidies it extends. It is too early to judge whether these subsidies will have to be cut back to maintain solvency.

Traditional insurance requires the complexity of filling out and processing millions of claim forms, whereas the HSA approach has generally been to use a bank debit card for small expenses. For large hospital costs, each high-deductible plan has its own approach, but generally seeks to apply Medicare's DRG approach where the hospital will agree to it. DRG stands for Diagnosis-Related Groups, paying by the diagnosis rather than itemized charges.

{top quote}
The higher the deductible, the lower the premium. {bottom quote}
Small-cost Items Are Expensive to Process
Alone among insurance alternatives, HSAs permit the growing number who remain fairly healthy during their working years, to transfer any remaining surplus from unused insurance into an ordinary IRA at age 65, where they help finance retirement. Essentially, this means the restriction to use them for medical purposes is lifted. Thus, they can reward healthy people who live too long, just as surely as other people who seem to spend most of their time in a doctor's office. Better stated, the real distinction is between the (shrinking) number who develop serious illnesses while young. And the (growing) number who delay developing serious illnesses until they are elderly.

Before we plunge into the weeds of compound interest, notice the feature which started the idea: high deductibles. The higher the deductible, the lower the premium -- in any kind of insurance. Several decades ago, there was once sold an extreme illustration, of a twenty-five thousand dollar deductible health insurance. Its premium was a hundred dollars a year. That dramatizes the idea, but it was never very popular. Insurance is seldom purchased, as they say; it is sold. There can't be much profit in a hundred-dollar premium.

Reform Proposals for Regular Health Savings Accounts

If they are so attractive, why doesn't everyone choose HSAs for their health coverage? Legalistically, although deposits into an HSA are tax deductible, the high-deductible reinsurance portion must come from after-tax income. That is, the law specifies, HSAs are not permitted to pay the premiums of health insurance, even though high-deductible insurance is required as a condition for buying an HSA. In practice, the insurance portion is denied a tax deduction unless it is purchased separately by the subscriber's employer . No reason has been advanced for this strange unfairness, but the only party visibly gaining by it would be its insurance competitors, who mostly sell conventional large-group insurance through the Human Relations departments of big-business sponsors.

{top quote}
A 35% Federal Corporate Tax Reduction, plus State Tax. {bottom quote}
Understanding Big Business
Probably a more satisfying explanation is that maximum American corporate taxes (state and federal) are stated to be the highest in the world, varying from 15% to 48%, depending on the state of domicile and the size of the earnings. The number of employees is quite unrelated to either the earnings or the state, so the tax deduction for health insurance is also unrelated to those factors, probably more related to the type of business. Generally, corporate behavior is more influenced by differences between competitors than absolute costs. Let's take the average employee health insurance premium as published by the government to be somewhat more than $5000. Let's say the employer has 10,000 employees and pays $50 million a year for the insurance, with a business deduction of $25 million reduction in taxes. Quite often, an employee is asked to pay 30-50% of the cost, sometimes not. Economists are unanimous in the opinion that employees eventually pay all of an insurance benefit themselves, through gradual reduction in take-home pay. If the corporation is profitable, it is very likely the cost of insurance is reduced at least 40% by tax abatement and an unknown amount by the employee absorption of the cost into his paycheck. In good years, it would not seem impossible for an employer to calculate he pays nothing at all for the insurance. It is safe to say that in a high-tax state with many employees contributing, the employer cost is very little. Even if he fails to make a profit on the transaction, he certainly becomes less sensitive to the rising cost of health insurance. This cannot be a useful ingredient in the battle over health costs. In fact, it even creates a motive to be indifferent to high corporate tax rates, which might even lead to a worse effect on the economy than rising health costs. A major employer thus is faced with some major ambiguities in his stance on these public issues, and very likely feels pressure to resist the idea of even opening up the issue for discussion.

(Proposal #1) We therefore suggest this unfair differential could be most easily remedied by providing HSA owners the option of paying the mandated insurance premium of catastrophic high-deductible insurance in two steps: first to the HSA, which is itself tax-exempt, and secondarily transferred by the HSA to the re-insurance company without hindrance or tax. Whether this change could be made by regulation, or would require legislation is not clear, because reasons behind the existence of this discriminatory prohibition are not entirely clear. Treasury's revenue loss from extending a tax exemption to unemployed people must of course be very small. And since now the Affordable Care Act contains almost no policy without a high deductible, there begins to be legal standing at the Supreme Court for those who are forced by law to pay differentially higher premiums for it.

{top quote}
1. Tax deduction.
2. FSA/HSA RollOver
3. Direct Pay
4. Obstetric cost
5 Inpatients=DRG, Outpatients=HSA 6..Un-disable Catastrophic Insurance {bottom quote}
Six Small Changes

(Proposal #2)Meanwhile, enrollment in HSAs would be immensely stimulated by permitting Flexible Spending Accounts to roll over unspent balances into HSAs from year to year. Some other small but questionable features of FSA are discussed separately in For now it is important to realize they are not the same thing, but they could, and should, be combined by permitting rollovers of the employee's own money to Health Savings Accounts. In the cases where the employer provides the money, his permission is of course required. But it should not be overruled by a rule that has adverse cost consequences.

(Proposal #3) The electronic insurance exchanges proposed by the Affordable Care Act were perhaps begun too ambitiously, but it continues to seem like a good idea to reduce administrative costs by direct marketing of insurance plans, direct premium payments, and direct payment of claims to providers. When such features are implemented, they should of course be extended to Health Savings Accounts. As discussed later, small-balance accounts of any sort are an expensive nuisance for banks and investment companies. Perhaps freezing withdrawals until the accounts reach $10,000 would accomplish this, as would the issuance of discounted bonds in lieu of opening accounts until they reach a minimum size. Brokerage houses which issue super-low-cost index funds might consider issuing single-purpose bonds to buy them on a sort of "lay-away plan". The whole issue of reducing administrative costs might need to be deferred until interest rates return to normal levels, and the transition from teller windows to electronic banking is more complete.

(Proposal #4) Because of societal conflict over who is responsible for obstetrical costs, the father, mother or child, there is some uncertainty in health insurance about the same matters. However, if obstetrics and child care costs could be clarified as joint investments by the parents and the child, it might clear the way for Health Savings Accounts to add an additional 26 years to the duration of internal compounding for HSA reserves of all three persons. More professional legal consultation might be advisable, but the intent is to make a change of ownership cast a long but inexpensive benefit through distant enhancement of HSA value for whoever eventually uses it. The child will usually outlive the parents, eventually narrowing the scope of the adjustment. This change alone might make small single-premium gifts at birth more attractive to people who had never before considered them. With additional 26 years to compound, discounted lifetime health costs at birth could be in the astonishing range of a hundred dollars. Narrowing the scope to a bond with limited transferability might also help. In the long run, we can expect health costs to narrow down to the first and last years of life. Early recognition of this trend might reduce the cost of migrating to it.

(Proposal #5)The linkage of Health Savings Accounts to a high-deductible insurance creates a logical division of payments, into using bank debit cards to pay only outpatient costs, but the high-deductible insurance to pay only inpatient costs, especially where pre-payment can be based on diagnosis. Since hospitals may well differ, this matter should be clarified in regulations. There is also the problem of emergency room payments, which are often switched to inpatient costs if the accident victim is later admitted to the hospital. Remarkably, this often lowers the payment.

One of the great muddles of present healthcare payment, is the translation of Diagnosis-Related Groups (DRG) into indemnity equivalents. The present tendency to collapse many medically unrelated disorders into the same "diagnosis-related" code, should be reversed. The DRG code should be completely revised, utilizing the SNOMED code rather than ICDA, then reconnecting them to indemnity equivalents. At the very least, this would reduce the number of "all other" diagnoses, which are not diagnoses at all. It is suggested that each basic DRG payment should be uniform nationwide, but subsequently adjusted to the individual institution, through audited direct and indirect overhead supplements. This might reduce the reluctance to post base prices on the Internet for competitive reasons, thus expanding their detail without significant cost, and facilitating prompt "pre-payment".

(Proposal #6) Add some stripped-down Catastrophic Plans to the "Metals" Plans of ACA. For mysterious reasons, Catastrophic health insurance is one of the options for the Affordable Care Act, but is limited to persons under the age of 30, unless they are hardship cases. There may be some conflict between the authors of the legislation and the authors of the regulation, which will require Supreme Court interpretation of the intent of Congress. To use even the cheapest plan available, the Bronze Plan, adds considerable premium expense, and therefore reduces the amount available for producing investment income. At one time, $25,000 deductible policies were available for a $100 annual premium, although that was decades ago. Nevertheless, they illustrate the principle that the higher the deductible, the lower the premium can be. That intention may be in conflict with some other intention.

(Proposal # 7) Segmental, Single-Premium, Advance Payments for Lifetime Health Savings Accounts (L-HSA)

Unlike the first six proposals which are almost self-explanatory, the seventh proposal would provide spectacular cost savings, but at a price of considerable rearrangement, and probably incremental introduction. The first six, fairly simple, proposals would greatly enhance existing Health Savings Accounts and make them able to compete with the awkwardness which has been patched into one-year term health insurance, over the past century. If Lifetime Healthcare Savings Accounts begin to demonstrate attractiveness, demand will rise for enhanced features which may require further preparation and debate.

{top quote}
Lifetime Health Savings Accounts: Biggest cost reduction, greatest disruptiveness. {bottom quote}
...and one big one.
In the next chapter, we speculate about some of the potential for using HSAs to reduce Medicare indebtedness, finance retirements, and essentially pay for all healthcare with investment income, if the reader can believe such a thing, which sounds almost too good to be true. It is certainly too ambitious to undertake without careful study and adversary debate. Most of the problems which bedazzle the viewer, relate to the century-long transition period imposed by everybody being of a different age at the beginning of the transition. Our solution is to have multiple solutions, some more suitable for different age groups than others. To this end, our illustrations adopt the convention of imagining single-premium policies, beginning at the start of each natural age period with a different single payment to cover all of the healthcare within the segment, and possibly the rest of the life. Segmentation makes it possible to split lifetime coverage into several layers for transition and illustration purposes. But it is not imagined that very many people would elect single-premium as an actual payment mechanism. As one example, Medicare is not included in the Affordable Care Act at all, but it remains necessary to demonstrate the effect of its isolation, on the economics of the rest of the same life.

Children, From Birth to Age 26

It's hard, nowadays, to know what age to select as dividing childhood from working adults. The age transition is slowly getting older, at least in the public mind. According to the Wall Street Journal, quoting William Kremer of BBC, the following was a quote from the Venetian Ambassador to England in 1500:"The English keep their children at home until the age of seven or nine at the utmost, then put them out, both males and females, to hard service in the houses of other people, binding them generally for another seven or nine years. Everyone, however rich he may be, sends away his children into the houses of others, whilst he in return, receives those of strangers into his own." In the 14th Century, Florentine merchant Paolo of Certaldo advised: "If you have a son that does nothing good, deliver him at once into the hands of a merchant who will send him to another country, or send him yourself to one of your close friends. Nothing else can be done. While he remains with you, he will not mend his ways."

In the 20th Century, children were considered adults at 18, when they graduated from high school, then it became 21 or 22 corresponding to college graduation. And now it is 26, as set down by the rules of the Affordable Care Act, which probably has Graduate School in mind. Or, because of the recession, perhaps it reflects the current difficulty of even a 26 year-old to find employment. This is a book about medical financing, not sociology or anthropology, but it must be noted that the official age of the end of childhood tends to reflect the difference between taking advice from your family, and taking the advice of your classmates. In that sense, the education industry is crowding out the advice of the family, with resultant conflict during the period between nine and twenty six. It seems to be the main source of friction from ninth grade to the end of graduate school, and probably also hastens the decline of religion as an influence, since the teachings of school and the teachings of religion are sometimes in conflict. Religion may well play a central role in the coming revulsion against the education industry, judging by the undercurrents of teen-age rebellion. Underneath it all would appear to be dispute about the responsibility for paying the child's expenses, in collision with surrendering control of how expenses are to be spent. Just as there is growing rebellion about college expenses, medical care expenses will probably share in the coming rearrangements that appear inevitable. Finally, to get back to it, it is possible that age 26 will be lowered to a new point where parents really could be expected to pay the medical expenses of children, willingly. Meanwhile, the abrupt outwelling of sympathy for a sick person can be expected to blur these boundaries more than in other dependencies.

Admitting it is arbitrary, and mostly to maintain comparable statistics with the Affordable Care Act, we now define children as comprising the age group from birth to age 26, even though they may have risen to officer rank in the military forces, where many would be offended by the idea. For the same reasons, 26 is accepted as the age whose medical bills are "normally" considered the responsibility of parents, within the Health Savings Account system. We would like to recommend they be enrolled in an HSA at birth, with a single payment gifted by the parents at birth, sufficient to pay for all medical care to age 26, and including the option of including the child's own obstetrics in that calculation as well. That is what would be most convenient for insurance administration. Let's do some hypothetical math, along the line of what worked fairly well for somewhat older adults.


Grandparents Making a Gift of Lifetime Healthcare

Single Payments,($1000) at Birth; Longevity 85 yrs.

(Health Savings Account Must Achieve Growth to $10,850 at Age 26, $325,000 at Age 85.)

Interest Rate..........10%..............................7%............................3%.....

Achieved Age 26 $10,800.......................$5,000......................$2,100...........

Achieved Age 85 $3,000,000................$293,000..................$12,000...........


The purpose of this table is to illustrate that much might easily be achieved with a 10% return, but the same result cannot be confidently expected from lower returns. Lower returns are a definite possibility over an 26 year span of time. To achieve total health coverage with lower rates of prevailing return will almost certainly require more capital to be invested at the beginning, perhaps four times as much. A 3% return during a 3% inflation period, such as we have had for many years, would amount to standing still. Therefore, a gift of $1000 is going to stretch a great many budgets, so the best this approach can promise is to reduce, not eliminate, childhood health costs. Success can only be achieved by raising premiums later in life to make up the shortfall. It would take a skillful politician indeed to persuade half the population to stretch its budget this way, but we make the calculation in case politics demand it. Because this reproductive controversy would quickly degenerate into wrangles about which parent has what moral duty in the case of a divorce, this looks like an option which the affluent population should probably try, but government intervention in this direction is not easily foreseen.

One virtue in waiting for something to turn up, lies in the mathematical near-certainty that things will be much more favorable if the trend toward increased longevity persists. For both mathematical and biological reasons, the curves of revenue and expense are not parallel straight lines. The laws of compound interest which make childhood investing risky, also make investing by old folks easier. While almost ridiculous amounts of money accumulate at 10% in the eighties, even more ridiculous amounts are generated in the nineties. In the present example, 10% investing heads north of 3 million dollars at age 85, but comfortably exceeds 6 million at age 93. This mathematical pressure is made even greater if terminal care moves eight years later, without much more illness cost in the interval. The longest of long-term trends is for health costs to concentrate in the first year and last years of life: everyone is born, everyone dies. There's a gamble, of course. Living eight years longer may simply present the old geezers with eight additional years of medical costs, or eight more years in a nursing home.


Same Thing, With Longevity Increased to Age 93

Single Payments, ($1000) at Birth; Longevity 93 yrs.

(Health Savings Account Must Achieve Growth to $10,850 at Age 26, $325,00 (?) at Age 93.)

Interest Rate.........10%................................7%................................3%.....

Achieved Age 26 $10,800.........................$5,000........................$2,100..........

Achieved Age 93 $6,400,000..................$505,000....................$15,000...........


But at least an optional choice becomes necessary because obstetrics and neonatal care are presently included with the mother's health insurance, but sometimes not. A complicating issue with small-amount investing is that the amounts are ordinarily so small that managers of Health Savings Accounts rebel at the administrative overhead. On the other side of it, the generation of compound interest for 26 additional years significantly reduces the cost to the parents to the point almost anyone who achieves middle-class status could afford the single payment option. Generously estimating the lifetime average medical cost, of a child from birth to age 26, to be $10,000, it would take a payment of $925 to cover it all, at interest rates not likely to reappear soon. However, that same $925 would more than generate $4.9 million lifetime revenue to age 91. Assuming, at the other extreme, the mother's investing age to start at 26, her lifetime costs using present prices would be covered up to $412,000 to age 91.All of these suppositions are based on the strong hunch that the present Medicare deficits are unsustainable, not on any wish for them to be so.

When a child, who has been covered by a single payment at birth, reaches his 26th birthday, he finds his medical costs insured to the day of his death aged 91, but perhaps that was not the purpose of the gift. If the parents want the money back, they are probably entitled to it, since financial obligation only extended to age 26. Therefore it is important that some of the surplus in the fund should be transferable to the original donor as an option. The annual gift tax exclusion probably removes the tax consideration, although it is true that that the Account has carried an option to supplement it, throughout the 26 year interval, and therefore the Account might contain enough money to buy out the second policy. The tax implications are therefore uncertain; when they are clarified, the issue of splitting the policy may be clarified, as well. It would seem that the birth of the first child might be a good time to start the parent's policy, since the parent would want to have some coverage for the obstetrical costs, and therefore often be the owner of ordinary health insurance for that purpose.

One thing remains as an absolute: very few newborn children pay for their own delivery. As a normal thing, all health costs of a child up to age 26 are born by the parent, who either makes the child a gift, or loans him the money. Any changes in the law ought to follow the habits of society about this overlap of responsibility.

Childhood Coverage, A Summary. It remains attractive to search for ways to include childhood health costs in an HSA. The small-amounts administrative cost could be addressed by issuing an interest-bearing bond at birth, redeemable at age 26, and preferably redeemable by rolling it over into an adult policy. However, no presently foreseeable opportunity to issue 10% bonds with 26-year call protection is available; the bond market simply will not sustain it. If it did sometime sustain it, its repetition is uncertain. Single-premium insurance might be purchased by grandparents, but any government involvement would probably cause populist resentment. The only available non-subsidy method of funding this problem seems to be to borrow the money from later years when the revenue curve is more favorable.

Borrowing from a pool, especially if funded by unused surpluses which appear at death, might be acceptable as an interest-free return of a moral debt, but most sources are going to require the payment of interest on the loan, which defeats the investment purpose of the HSA. All in all, the best available interest-free loan equivalent would be to raise the cost from the individual's later account. After all, all childhood costs are paid by adults, as an interest-free loan to the next generation. When the child gets to be thirteen years old, the generosity may temporarily seem to have been foolish, but one that is eventually revised. Nevertheless, borrowing from yourself is only fair justice, and if the parents wish to give gifts, let them do it without coercion.

Reorganizing Health Care Payments, to Reduce Them (Lifetime Health Savings Accounts)

Lifetime Insurance: Deriving National Health Costs Indirectly.

It's been traditional to estimate future health care costs by listing the ingredients of cost, then adding them up. How many physicians do we need? How many hospitals? What diseases will have expensive cures, which ones will disappear entirely? And so on. For a century these questions have led to a single answer: It is impossible to foresee the volume or price of such ingredients, so it must be impossible to predict overall costs.

Footnote:That isn't quite the case however. Ever since third party payers were placed in the middle of the transaction, and particularly after electronic computers arrived, piles of payment data made analysis irresistible. That approach was soon discredited when everyone with a computer discovered increased volume of the wrong sort of data never compensates for its lack of relevance. The watchword became GIGO, garbage in, garbage out. Enlarging the dataset with large volumes of medical data is a dream lingering on, but eventually runs up against a new stone wall. It makes no sense to shift the clerical data-entry burden to a physician, the most expensive employee in the system. Although the Affordable Care Act mandates something along those lines, it is safe to predict it will restrain that impulse when the cost impact is fully appreciated. Meanwhile, the utility of applying more advanced mathematics to simple data, opened up a vista of revising the health insurance system. In a sense, this book is a product of that sort of thinking. Its difficulty is that a radical idea can be developed in six months, but it may take decades to judge if it had the intended effect.

Let's start with the final answer. In year 2000 dollars, the average American spends an average of $325,000 on health care in a lifetime. Women spend about 10% more than men. If we are to insure the whole lives of 340 million Americans, the cost to the nation would be trillions of dollars. That's 110,500 trillions, give or take a few trillion, or 110 of whatever is one step bigger than a trillion. These mind-boggling figures were developed by Michigan Blue Cross from its own data and confirmed by several federal agencies. It is entirely legitimate to be skeptical of these numbers, since the average lifetime they encompass involved a great many diseases we don't see any more, afflicting many people who would have been readily cured with present medications but which weren't yet invented, and involving predictions about the health costs of people who are still alive, destined to be treated with drugs we don't yet have.

The value of these calculations is considerable, nonetheless. They give us a technique which the statistical community has agreed is reasonable, and they tell us that lifetime insurance would require something like $300,000 per person. Future trends can be calculated, indicating whether costs are going up or down, and roughly by how much. When you consider they had to account for inflation, you begin to appreciate the achievement. A penny in 1913 money is claimed to be worth a dollar today, just for an illustration. Naturally, they assume a dollar today will be said to be worth 100 dollars in a century. Nevertheless, we have an accepted tool to estimate the general magnitude of health costs, and by how much they are changing. It's useful, even if its answers are appalling.

Indeed, at first the health insurance industry just skipped the computer details and invented "Risk Adjustment", essentially a process of just basing next year's premium on last year's results. If future medical care changed drastically, its payment system might be forced to change. But if health care didn't change much, the payment system wouldn't need to predict the future. That reasoning reflected the insurance industry's own history, where the marketing department eventually achieved dominance over the actuaries.

Insurance then underestimated how much the payment system could warp the medical one over a long period, because medical advances were slow to affect their true customers, who were businessmen in the human relations departments of large corporations. Reviewing an expedient system designed for short-term goals, because adding value went beyond the mandate, a shocked realization dawns: most current "reform" thinking is about how to change the medical system to fit an unrelated budget. Even more shocking is that the business customers discovered how the tax laws could let them buy health insurance with a forty-cent dollar.

Gradually we reach the point of rebellion; if it is legitimate for insurance executives to tell physicians how to practice medicine, it must be equally legitimate for physicians to re-design the payment system, so let's have a go at it.

Footnote: In the thirty years since I wrote The Hospital That Ate Chicago about medical costs, the newspapers report physician reimbursement has progressively diminished from 19%, to 7% of total "healthcare" costs, so perhaps it's legitimate for some other professions to answer a few cost questions, too.

As readers will gradually see, considerable extra money is already in the system, leaving the difficult problems of how to get it out and how to spread it around. This isn't snake oil, or a mirage. The beneficiaries would scarcely see much difference in medical care. But frankly, the insurance providers would have to make some wrenching changes. Since millions make their living from the present system, it is undoubtedly harder to design a new system which will seem harmless to them.

Medical care now costs 18% of Gross Domestic Product (GDP) and 18% is pretty surely crowding out other things we might prefer to buy. In a sense, the political beauty of the premium-investment proposal we are about to unfold, lies in its primary aim of cutting net costs by adding new revenue.

Lifetime Health Insurance: General Idea Behind the Proposal.

Let's get more specific than GDP, which is a pretty vague concept. A new primary goal of the Lifetime Health Savings Account proposal is to collect interest on idle insurance premiums, as has been done for decades whenever whole-life insurance replaces one-year "term" life insurance. If the recovered money flows to the management, it increases profits. If it goes to lower prices, the recovered money flows to the consumer. Since this tension always exists between the two counterparties, the final direction of funds-flow begins with subtle differences in the whole design of the insurance, made right at the beginning of the program.

The longer we wait to make drastic changes, the more difficult they become, and more proof of benefit will be demanded. In the proposed case of switching health insurance from term insurance to whole-life, almost a century of health insurance development is threatened. But remember, the past fifty years have seen plenty of dissatisfaction come to the surface, only to be dashed by a (generally correct) opinion that the gain was not worth the pain; the old system was working better than the proposed one. So this time, let's start in advance with establishing a monitor center where our control data is extensive -- the cost of terminal illness in the last year of life. It happens that every American has Medicare, and every American must some day die. It also happens that nearly everybody who dies, does so as a Medicare recipient. Not quite, but in a population of 350 million people, it's close enough for information needs. Conversely, in a population this large, enough people of younger ages will also die; so we could still extrapolate what difference our proposals are making to costs, for the beneficiary to have attained almost any age. At least then, the public could base its opinion on what is currently happening, and actually happening, instead of having to rely on the anguished pronouncements of political candidates.

Footnote: An experience forty years ago makes me quite serious about this monitoring issue. While I was on another mission, I discovered that Medicare and Social Security are on the same campus in Baltimore, with their computers a hundred yards apart. So I proposed to the chief statistician that the Medicare computers contained the date and coded diagnosis of every Medicare recipient who had, let's say, a particular operation for a particular cancer. Meanwhile, the Social Security computer contains the date of everybody's death, with the Social Security number linking the two data sets. So, why not shuffle one data set against the other, and produce a running report of how long people are living, on average, after receiving a particular treatment or operation. He merely smiled at the suggestion, and I correctly surmised he had no intention of following up on it. This time, I resolved to write a book about it, and see if that has more effect.


No matter what payment system we use, the accounting system has to be clear on a few facts. For example, who produces revenue, who gets subsidized? At least in the healthcare system, it is unwise to assume that everyone pays for what he spends. Even if he does, he may well pay at one age and receive subsidies at other ages.

Answering the revenue question starts out pretty easy, but quickly gets harder. Children under roughly age 25 are subsidized by their parents, and retirees over 65 are living on their pensions and savings. Working people, roughly between the age of 25 and 65, are paying for the entire medical system, directly or indirectly, even though the money comes from the employer, who controls the terms through health insurance family plans. Legally speaking, parents are making an untaxed gift to their children when they pay for the child's healthcare bills. But it often gets further muddled by divorce and orphaning, and divorce at least is getting pretty common. For our purposes here, it is unnecessary to get into biological and legal complexities, to make a broad statement: the whole medical system is in some way supported by people with a paycheck, who are therefore aged 25 to 65. That's the healthiest component of society, so it can be increasingly unstable to base healthcare costs on family values, in a divorce-prone society, further clouded by payment of insurance by employers. Because of the tax laws, employers intrude their wishes, and may sometimes act as pawns for labor unions. But even with all this intrusion, society seems to feel the parent or parents are the best overseers of the kind of healthcare to use for all three living generations, even though effective employer and government control is perilously close to the surface. To some extent, this may reflect the fact that every sick person could become dependent on the assistance of others, and to that extent needs their consent. An employer-based health insurance system may not be the best, so the looser the family control, the more unstable employer-basing may become. Nevertheless, it is also reasonably accurate to say the upper limit of health revenue is ultimately traceable to people 25 to 65, and is probably going to remain that way.

Footnote: For children, medical costs can usually be traced to some sort of gift or loan from the pool of working people. And in a general sense, the revenue which pays for Medicare beneficiaries is also indirectly derived from the pool of working people, in this case themselves at a younger age. In the case of divorce, should the new father or the actual father be assigned these costs? It might simplify things if childhood costs were assigned to the mother. This is the sort of issue we assign to judges in the Orphan's Court, but there is an even more perplexing issue: what do we do with the costs of a pregnancy, share it one way, two ways, or three? If there is a reimbursement, who should get it? Is that a cost to the child, leading to a debt to the mother, or is pregnancy a cost to the mother, unshared by the child? It was not so long ago that all pregnancy costs would have been legally assigned to the father. From the way things are going, it looks as though the insurance ought to regard pregnancy costs as a cost of the child, with a loan or gift coming from one or both natural parents. But in reality the legislature or the Congress will make the best decision it can, and tell the insurance company what they decided. In considering it, the Congress or Legislature might remember that insurance companies have generally preferred to use family-plan insurance, reimbursing whoever paid for the family insurance at the workplace; and thus it gets back to the employer, even though that is not a socially useful outcome.

Since we confess we are here trying to demonstrate how universal lifetime Health Savings Accounts might support the whole system, let's skip over the sensitive issues and temporarily agree to imposing the revenue limits of the maximum HSA deposits permitted under present law. Anyone 25 to 65 is permitted to contribute $3300 a year to a Health Savings Account. They are also permitted not to contribute that much, or even anything, but suppose for present purposes that everybody did. Ignoring any periods of illness or hardship, the average person is therefore permitted to contribute a maximum of $132,000 in a lifetime. Supppose for further example sake, there is no other source of medical revenue. Would that amount of money suffice to carry the entire nation's health costs, from cradle to grave? To that, the astounding but gratifying answer is a qualified Yes. So with that mildly reassuring news, let's look at the issues related to selecting a new HSA account.

Tax Exemption First of all, every bit of HSA deposits, both contributions and compound income. is tax-exempt to the individual owner. That immediately makes it possible for anyone to claim the discriminatory tax exemption for health costs which Henry Kaiser devised for employees of profitable corporations. True, unless it is contributed by an employer, employer deductions are still omitted, although that is a separate issue. Big solvent business employers can take a 60% corporate tax deduction in addition to what the rest of us non-employees have been denied for seventy years, by purchasing HSAs for employees. If the employer is already struggling to meet the payroll, of course he won't do it. Extending this deduction to HSAs makes employers more likely to offer them, although the present confused state of employer mandate under the ACA makes it uncertain. To a certain extent, it continues to be unfair to confer such a huge tax advantage to a corporation based on the number of employees it has, although even this feature can be overlooked during periods of high unemployment.

A related mathematical issue is that a deposit when you are young is much more valuable than the same deposit later. Since young people are relatively healthy, while older ones are relatively sick, a deposit by a young person has many decades to grow before it is used for health care. True, young people have colleges and cars and houses to compete for their savings, but just listen to this: If it were allowed by the fund managers, you could pay for a 90-year lifetime with a deposit of less than $100 at birth. The contrast is so staggering, that even raging hormones cannot compete with it in any rational analysis. Therefore, pay for administration and trivial medical expenses from some other account (in order to build this tax-sheltered one up), whenever you can do so without running up high interest charges. By the same reasoning, discounted tax-exempt bonds might lock it up until an investment manager would charge reasonable fees to manage it as a fair-sized HSA. But let's not exaggerate. The main financial differences between an HSA and an IRA, are that an HSA is tax-exempt when you withdraw it for health purposes, whereas the IRA has a top limit of $6000 (for persons over age 50, $5000 below that age), not $3300, for annual contributions. The big obstacle is that IRA contributions are limited by the amount of money paid by an employer in that year, something a newborn obviously cannot match. Therefore:

(Proposal 7a) Waive the limit to annual HSA contributions for underaged subscribers, for single-premium contributions of less than a thousand dollars. While resistance to this provision might focus on class distinctions, the subsequent benefit to Medicare and/or Medicaid might ultimately be so large as to overcome it.

Portable, without Job-lock. No matter where you move, or where you work, this fund moves with you. Or leave it where it is, and communicate by mail.

Individually owned and selected. If you don't like one advisor or his results, choose another.

Investment Control. Here, we advise caution. If you surrender control of investments, there is some danger the broker could select an investment that gives him a kickback. Although they should be, stock brokers are not fiduciaries. A common overcharge is excessive commission for liquidating withdrawals, which ought to be no more than $7.50 per trade. Your goal should be to get a 10% annual return, safely, before making withdrawals to pay medical expenses, which will be discussed separately. (Unless you control fees, or deal with a fiduciary, you will be lucky to net 1%) Even during an economic recession with negligible interest rates common stock total return is 5%, and a recession is an especially good time to buy stock and hold it, where 30-50% becomes conceivable. In a tax-exempt fund, ignore dividends. Buy and hold, is the thing, with no commissions above $10 a trade (either buy or especially on sell), highly diversified for safety, index funds of common stock. Either hold back a little cash for medical issues, or pay small medical bills with other funds. At least until you are sixty, try not to spend HSA money unless you have no other source of funds.No advice is absolute, but the reasoning behind this little homily appears in other sections of the book.

(Proposal 7b) Limit eligible investment agents who handle HSAs to legally defined fiduciaries. Needless to say, the brokerage industry will oppose this, and should be asked if they can suggest alternatives.

Pooling of funds. Pooling is what you only partially get with the present H.S.A as provided by present law. The law requires that an H.S.A. be accompanied by a high-deductible or "catastrophic" health insurance, which is expected to pool the experience of subscribers. But really suitable low-cost high-deductible policies are not provided by Obamacare. For cost comparisons, we initially pretend that you do not have Catastrophic re-insurance, although in real life and for the present, the best available alternative is the Bronze plan. For outpatient expenses, you are expected to pay out of your own funds, or else draw on the H.S.A. to cover them. When the law was written, the big expenses were hospital expenses, but the prepayment system enacted in 1983 limited their profitability, so hospitals have tended to shift from inpatient toward outpatient care where profits are more unconstrained. There was a time when fixing hernias and removing gall bladders as an outpatient was unheard of, but that has changed, so a pooling system for outpatient costs would be a desirable addition. There might be plenty of money in this approach which could be pooled, but a comfortable average will still be disrupted by an occasional high-cost outlier. For example, major auto accidents might run up a very high accident room cost which would not be covered, even though the average was well in surplus. A credit card would cover such eventualities, but their interest rates are high, and it might be better if investment houses provided loan funds for this purpose at lower cost. If you must borrow, liquidate the loan at the earliest possible moment.

Compound Investment Income. Here, we have the heart of the whole arrangement. It's not a bonus, it is the source of the new revenue to pay for burdensome health care expenses. Call it the Ben Franklin approach, that allowed him to retire at the age of 41 and live comfortably for another forty years. John Bogle's discovery of buy-and-hold index fund investing is safe and effortless. It makes it unnecessary to rely on a high-commission stock picker to achieve first-class results. So trust, but verify. If you are prudent, a cash deposit of $132,000 spread over 40 years, can pay for $325,000 of lifetime health care, the present national average. That's not exactly free, but it represents an average saving of $192,000, multiplied by 350 million people, which seems to mean $68 trillion in health revenue released for medical use. These back-of-the-envelope calculations are so dizzying that, pick all the nits you please, and the same conclusion would emerge. We'll return to that after going into more description of how the proposal should work.

Caution About Averaging. Remember, it does you no good at all to have $10 in your account and receive a bill for a $1000. That is just as true if the national average of HSAs contain $50,000, which unfortunately isn't yours. Money to pay your bill is in the system, but you can't get at it. The first thing to point out, is that the national curve of health accounts shows most expensive illness takes place after the age of 60, when chronic diseases and terminal disease makes an appearance, and where funds in HSAs ought to be ample. Therefore, you are cautioned to pay medical bills from any source of money you have, in order to avoid depletion of the HSA later in life, when it really ought to have money to spare. And within reason, even borrowing (short-term, and at low interest rates) is usually better than depleting the account for diseases that won't kill you soon. Since most high medical bills are caused by hospital care, the catastrophic insurance requirement was added. Ordinarily, that feature has been fortuitous, but the migration to outpatient surgery caused by DRG payment is threatening, and the inflation of normal outpatient prices, as well as monopoly new-drug pricing, threaten to upset the payment system before it can adjust. Short-term loans from a premium pool, or else a new layer of semi-catastrophic insurance inserted between the two existing classes appear to be a coming necessity. In the meantime, short-term borrowing at what we hope are bearable rates, seems to be the only available expedient.


Obamacare does not include Medicare recipients. However, it is a familiar topic, and its data are fairly accurately available in a unified form. So future Obamacare costs are readily understood by subtraction of Medicare costs from lifetime totals, and future changes can be more readily integrated. The average lifetime medical costs are roughly $325,000, as calculated by Michigan Blue Cross, who devised a system for adjusting costs to year 2000. The results have been verified by several Federal agencies, although the method includes diseases and treatment which we no longer see, and adjusts for inflation to a degree that is startling. Medicare data are more precise, but have the same trouble adjusting for the changes of half a century. By this method, we get the approximation of $209,000 for Medicare. By subtraction we get the data approximating what Obamacare would cover, slightly confounded by including the small costs of children. That is estimated by subtraction to be $116,000. The revenue to pay for these costs is assumed to come entirely from the working years of 25 to 65. In the examples which follow, the Health Savings Account data are the maximum annual allowable ($3350) multiplied by 40, representing the working years, so they represent the maximum contribution, adjusted for compound investment income at 6.5%, and paying for lifetime costs.The aggregate cash contribution is thus $134,000, which without being disturbed by withdrawals, at 6.5% would hypothetically grow to the astonishing figure of $3.2 million by age 93. A more conservative interest rate of 4% would reach nearly a million dollars. The conclusion immediately jumps out that there is plenty of money in the approach, with the main problem remaining, somehow to devise a way to get it out in adequate amounts when the average is adequate but an occasional outlier cost is extreme. In these examples, inflation in revenue is assumed to be equal to inflation in costs, an assumption which is admittedly arguable.

HSA and ACA BRONZE PLAN: A FIRST LOOK. Although a catastrophic high-deductible plan must be attached to a Health Savings Account, and the Affordable Care Act provides a catastrophic category, those plans are not available after age 30 except in hardship cases. Therefore, at the present writing it is necessary to select the plan with the highest deductible and the lowest premium, which happens to be the Bronze plan. "Lifetime" coverage with this, the cheapest ACA plan, would amount to $170,000, or $38,000 more than the most expensive HSA allowed by law. That's about a 22% difference. And furthermore, the bronze plan does not allow for internal investment income accumulation, which could amount to five times the actual premium revenue if held untouched until the end of projected life expectancy.

A more conservative analysis would end at age 65, because that is where the Affordable Care Act presently ends. Stopping the investment calculation at age 65 would lead to the same $170,000 for the bronze plan, compared with an adjusted price of HSA of $132,000, less a 6.5% gain of $xxxx, or $xxxx. To be fair about it, the gain would have to be adjusted for inflation, which at 2% would amount to $xxxx, a xx% difference. Let's make a more dramatic assertion: The difference between the most expensive HSA and the cheapest Bronze plan, would be $xxxx. In a minute we will discuss the reasoning applied to Medicare, but it will show that a deposit of $80,000 at the 65th birthday would pay for the entire average lifetime of twenty years as a Medicare recipient. In a manner of fast talking, you get a lifetime of Medicare coverage free, somehow buried within the HSA approach. That's an exaggeration, of course, but at a quick glance it could look that way. We haven't accounted for Medicare payroll deductions or premiums. Or government subsidies. And we haven't depleted the fund for the medical expenses it was designed to pay.

HSA AND MEDICARE. Medicare Part A (the hospital component) is free, and the system while generous, is pretty ramshackle. Furthermore, it isn't free, since it collects a payroll tax from working people, and collects premiums from the beneficiaries. Almost no one understands government accounting, but it has the unique feature that its debts are often described as assets. That is, transfers from another department are assets, so money which is borrowed, from the Chinese let's say, is placed in the general fund and transferred internally, so such debts are assets. And the annual report (available from CMS on the Internet) shows that 50% --half-- of the Medicare budget is such a transfer asset, otherwise known as a subsidy. Medicare is a popular program, because a fifty percent discount is always popular; everybody likes a fifty-cent dollar. Unfortunately, the elderly Medicare recipients perceived the Obamacare costs were underestimated, and became suspicious Medicare would be raided to pay for it. Therefore, every elected representative regards Medicare as the "third rail of politics" -- just touch it, and you're dead.

THE OUT-OF-POCKET CAP FUND. The Affordable Care Act contains two innovative insurance ideas for which it should be given full credit: the electronic health insurance exchanges which unfortunately caused such havoc from poor implementation, nevertheless have great potential for reducing marketing costs with direct marketing, and should be given full credit. And secondly, the cap on out-of-pocket payments is really a form of re-insurance without the cost of creating a re-insurance middleman. It is this which is the present focus. Three of the "metal" plans have deductibles of about $6000, and two of the plans have $6000 caps on out-of pocket cash expenses by the beneficiary. How these two features will be co-ordinated is not yet clear, and does not concern the present discussion.

The point which emerges is the original Health Savings Account was based on the concept of a high deductible, matched with enough money in the fund to pay it. Effectively, it provided first-dollar coverage without the cost-stimulating effect, and experience in the field showed it worked out that way. However, the forced match of HSA with one of the metal plans interfered to some unknown degree with the comfort of virtual first-dollar, and the cost reduction of a psychological high deductible. The premium is higher, because an increased volume of small claims is covered, and may be exploited. And an increased pay-out means less cash is available for investment. The result could be either higher costs or lower ones. And therefore, the idea arises of a single-payment fund of initially $6000, deposited at age 25 (Since that might well be a hardship for many young people, an additional feature is required). But the power of compound interest is such that this reserve would eventually become seriously overfunded. If the hypothetical client deposited $6000 at age 25, he would have accumulated $80,000 from this source alone. That's enough so that if it were paid to Medicare on the 65th birthday, it would pay for Medicare for the rest of the individual's life. But since it would not be needed from age 50 to age 65, further compounding (at the arbitrary rate of 6.5%) to $320,000 or some such amount, at age 65. Therefore, the following uses can be envisioned: ( 1.) Lifetime health insurance without premiums after 65. (2.) Since Medicare premiums would not be required, the Medicare premiums would not be required and should be waived. Money which flows in from earlier payroll deductions could be diverted to paying off the Chinese Medicare debt. (3.) We have glossed over this matter, but everyone was born at someone else's expense, and should pay off his debt for the first 25 years of his own life. (4.) If circumstances permit, the client should be able to transfer $6000 to other members of his family for the same funding as he got it. (5.) Surpluses might persist in exceptional circumstances, and the option to supplement his own retirement funds might be offered. Eventually, it seems inevitable that the premiums for "metal" plans would be reduced.

At the very least, one would hope that this dramatic example of the power of compound investment income would encourage wider use of the principle.

How Certain Numbers Were Derived

These are important numbers to know, but difficult for most people to understand what they mean. That will of course depend on how they are derived, a subject of much less interest to many people. Therefore, the more controversial numbers are discussed in this chapter, which the reader may skip if he chooses.


Most people in the past did not live as long as they do today, so the "average person" is a composite of older people who had illnesses as children which we seldom see today, plus some who may well live beyond recent expectations, but who live beyond the age of death of their parents. One surmises this tends to include among "average" some or many hypothetical people who had both more illnesses as children, and who will have more illnesses as retirees. This would lead to an average with more illness content than the future likely contains.

Prices in the calculation have been adjusted to 2000 prices, slightly less than 2014. Furthermore, there has been a 2% inflation adjustment, which reflects that a dollar in 1913 is now worth a penny, so we expect the penny to be worth 0.0001 cents in 2114. It is hard for most people to wrap their heads around such calculations. There is a $25,000 lifetime difference between the sexes, but the highly hypothetical result is this statement: The Average Person Can Expect Lifetime Health Costs of $325,000. Since most assumptions lead to an overestimate of future real costs, this number is conservatively on the high side. Comparatively few people would think they can afford that much. That is, plenty of people are going to feel stretched to adjust their savings to that level of inflation. It's the best estimate anyone can make, but by itself alone it seems to justify organizing a government agency office to match average income with average expenses, and to make the ingredient data widely available to many others outside the government on the Internet, to maximize the recognition of serious errors, unexpected financial turmoil, the development of new treatments, and changes in disease patterns. Inevitably, these calculations will be applied to other nations for comparison, but that is a highly uncertain adventure.


Like Archimedes announcing he could move the World, if he had a long enough lever and a place to stand, accomplishing this little trick could arrive at impossible assumptions. Our basic assumption is that paying for your grandchildren is equivalent to having your parents pay for you, even though the dollar amounts are different. It's an intergenerational obligation, not a business contract, and you are just as entitled to share good luck as bad luck when the calculation is shaky at best. Since children's costs are relatively small, little damage is anticipated from taking present costs, adjusted for inflation, for both past and future.

Is it reasonable and/or politically possible to lump males and females together, when females include all the reproductive costs, and have a longer life expectancy? How do we apportion the pregnancy costs between mother and child, with or without including the father? What is fair to those who have no children? What costs do we include as truly medical? Sunglasses? Plastic Surgery? Toothpaste? Dentistry? The recent hubub about bioflavinoids threatens to convert what was mainly regarded as a fad, into a respectable therapy for allergy. When allergists and immunologists agree it is a fad, you don't pay for it; if substantially all of them think it is medically sound, pay for it. The opinion of the FDA informs the profession, it does not substitute for that opinion. Quite aside from cost issues, all of these issues affect the statistical ground rules, and may not have been treated identically among investigators. Unverifiable 90-year projections must be thoroughly standardized to be useful, and that's one committee I shall be glad to avoid, because I do not believe the improved accuracy is worth the dissention. When somebody discovers a cure for cancer or Alzheimers, rules may have to be revised, net of the cost of the treatment, and net of the increased longevity. Government accounting, private accounting, and non-profit accounting are three different schools of thought for three different goals; when a government borrows outside of its accounting environment to reimburse providers of care, misunderstandings of the "cost" consequences result, in the three definitions of medical costs. In short, only broad qualitative trends can be credible at the moment.


Some of the foregoing examples are lurid, and perhaps a little dramatized for effect. But the effect of compound investment income is so impressive, that there really is little question there is plenty of money to do just about everything which needs to be done in health financing. The problem, however, is how to get enough money to pay the right bills, at the right time. The temptation to steer the money into the wrong places has been present since Isaac and Esau, and while the pooling principle of insurance (and government) solves that problem, excessive use of that flexibility is what mainly got us into the present mess. The intrusion of government can be traced to the "pay as you go" system, which amounts to paying long-term debts with current cash flow. This money has been present right along, but political considerations created pressure to begin the government system, right away, and for everyone right away. The citizens are partly responsible, since they have taught politicians they must respond to people taking off their shoes and pounding the table with them. So, yes it's true that compound interest gives an advantage to frugal people, and to some extent to people who are already prosperous. But egalitarianism doesn't justify refusing to do what is in the general interest of everyone. We are currently in a pickle because we took egalitarian short-cuts in 1965, and have preferred to borrow money for healthcare, ending up paying many times what we need to pay, rather than yield to mathematical principles discovered by Euclid, or perhaps it was Archimedes.

But while Health Savings Accounts, individually owned and selected, have more investment flexibility to take advantage of the necessarily higher returns of the private sector, and the flexibility to choose superior investment techniques as they are invented, and the flexibility to adjust to personal circumstances rather than universal absolutes,-- they lack the flexibility to pool resources between different persons and times. Perhaps this flexibility could be extended to whole families, since there are shared perplexities of pregnancy, age group and divorce which must be addressed in a communal forum, and perhaps churches or clubs could fill that role. But in our system sooner or later you get mixed up with a lawyer, judge or investment advisor. And therefore must contend with moral hazard, and disloyal agents. By this time, I hope we have learned the weaknesses of that new branch of government, the government agencies. As Adlai Stevenson quipped, "It used to be said, that a fool and his money are soon parted. But nowadays -- it could happen to anyone."

So I recognize that although some people in a Health Savings Account system will have barrels of money, while others will be desperately in need, the fact that on average there is plenty of money to fund everybody isn't quite good enough. Somewhere a pooling arrangement must be created, and the fact that the people running it will be overcompensated must be shrugged off as inevitable. But since the people who trust it will be fleeced, they might as well be the ones to create or select it.


How Do I Pay My Bills With These Things?

To summarize what was just said, on the revenue side of the ledger, we noted the evidence that a single deposit of about $55 in a Health Savings Account in 1923 would have grown to more than $300,000, today in year 2014, because the economy achieved 10% return, not 6.5%. Therefore, with a turn of language, if the Account had invested $100 in an index fund of large-cap American corporate stock at a conservative 6.5% interest rate, it might have narrowly reached $6000 at age 50, which if re-invested on the 65th birthday, would have been valued at $325,000 at the age of 93, the conjectured longevity 50 years from now. No matter how the data is re-arranged, lifetime subsidy costs of $100 can be managed for the needy, the ingenuity of our scientists, and the vicissitudes of world finance-- within that 4% margin. We expect that subsidies of $100 at birth would be politically acceptable, and the other numbers, while stretched and rounded, could be pushed closer to 10% return. Much depends on returns to 2114 equalling the returns from 1923 to 2014, as reported by Ibbotson. At least In the past, $55 could have pre-paid a whole lifetime of medical care, at year 2000 prices, which include annual 3% inflation. An individual can gamble with such odds, a government cannot. So one of the beauties of this proposal is the hidden incentive it contains, to make participation voluntary, and remain that way. No matter what flaws are detected and deplored, this approach would save a huge chunk of health care costs, even if they might not be stretchable enough to cover all of it.

And if something does go wrong, where does that leave us? Well, the government would have to find a way to bail us out, because the health of the public is "too big to fail" if anything is. That's why a responsible monitoring agency is essential, with a bailout provision. Congress must retain the right to revert to a bailout position, which might include prohibition to use it without a national referendum, or a national congressional election.

This illustration is, again, mainly to show the reader the enormous power of compound interest, which most people under-appreciate, as well as the additional power added by extending life expectancy by thirty years this century, and the surprising boost of passive investment income to 10% by financial transaction technology. The weakest part of these projections comes in the $300,000 estimate of lifetime healthcare costs during the last 90 years. That's because the dollar has continuously inflated a 1913 penny into a 2014 dollar, and science has continuously improved medical care, while eliminating many common diseases. If we must find blame, blame Science and the Federal Reserve. The two things which make any calculation possible at all, are the steadiness of inflation and the relentless progress of medical care. For that, give credit to -- Science and the Federal Reserve.

Blue Cross of Michigan and two federal agencies put their own data through a formula which creates a hypothetical average subscriber's cost for a lifetime at today's prices. All three agencies come out to a lifetime cost estimate of around $300,000. That's not what we actually spent, because so much has changed, but at such a steady rate that justifies the assumption it will continue for the next century. So, although the calculation comes closer to approximating the next century than what was seen in the last, it really provides no method to anticipate future changes in diseases or longevity, either. Inflation and investment returns are assumed to be level, and longevity is assumed to level off. So be warned.

The best use of this data is, measuring by the same formula every year, arriving at some approximation of how "overall net medical payment inflation" emerges. That is not the same as "inflation of medical prices" since it includes the net of the cost of new and older treatments, and net effect of new treatments on longevity. Therefore, this calculation usefully measures how the medical industry copes with its cost, compared with national inflation, by substituting new treatments for old ones. Unlike most consumer items, Medicine copes with its costs by getting rid of them. Sometimes it reduces costs by substituting new treatments, net of eliminating old ones. It also assumes a dollar saved by curing disease is at least as good as a dollar saved by lowering prices, and sometimes a great deal better, which no one can measure. Our proposals therefore actually depend on steadily making mid-course corrections, so we must measure them.

Our innovative revenue source, the overall rate of return to stockholders of the nation's largest corporations, has also been amazingly steady at 10% for a century. National inflation has been just as non-volatile, and over long periods has averaged 3%., perhaps the two achievements are necessary for each other. Medical payments must grow less than a steady 10%, minus 3% inflation, before any profit could be applied to: paying off debt, financing the lengthening retirement of retirees, or shared with patients including rent seekers. But if the profit margin proves significantly less than 10%, we might have to borrow until lenders call a halt. No one can safely say what the two margins (7% + 3%) will be in the coming century, but at least the risks are displayed in simple numbers. Parenthetically, the steadiness of industrial results (in contrast to the apparent unsteadiness of everything else) was achieved in spite of a gigantic shift from control by family partnerships to corporations. Small businesses (less than a billion dollars annual revenue) still constitute half of the American economy, however, and huge tectonic shifts are still possible. Globalization could change the whole environment, and the world still has too many atom bombs. American Medicine can escape the international upheavals in only one way -- eliminate disease. Otherwise, the fate of of our medical care will largely reflect the fate of our economy. To repeat, it is vital to monitor where we are going.

Revenue growing at 10% will relentlessly grow faster than expenses at 3%. Our monetary system is constructed on the gradations of interest rates between the private sector and the public sector. It would be unwise to switch health care to the public sector and still expect returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, although it indirectly affects the value of the dollar. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings are possible, but only to the degree we contain last century's medical cost inflation closer to 3% than to 10%. The simplest way to retain revenue at 10% growth is by anchoring the leaders within the private sector.

How Do You Withdraw Money From Lifetime Health Insurance?

Four ways should be mentioned: Debit cards for outpatient care, Diagnosis pre-payment for hospital care, Transfers from escrow, and Gifts for specified purposes.

Special Debit Cards, from the Health Savings Account, for Outpatient care. Bank debit cards are cheaper than Credit cards, because unpaid credit card payments are a loan, whereas the money is already in the bank for a debit card. Some pressure has to be applied to banks or they won't accept debit cards with small balances. Somehow, the banks have to be made to see that you start with a small account and only later build up to a big one. So it's probably fair, for them to insist on some proof you will remain with them. The easiest way to handle this issue is to make the first deposit of $3300, the maximum you are allowed to deposit in one year. That's difficult for little children and poor people, however, so some way must be devised to have family accounts for children. At the moment, you just have to shop around, that's all.

After that, you should pay your medical outpatient bills with the debit card, although we advise paying out of some other account if you can, so the balance can more quickly build up to a level where the bank quits pestering you for more funds. Remember this: the only difference between a Health Savings Account and an ordinary IRA for practical purposes, is that medical expenses are tax-exempted, when paid with money from an HSA. Both of them give you a deduction for deposits, and both collect income without taxes. If you can scrape together $6000, you are completely covered from Obamacare deductibles, and since co-payment plans are to be avoided, an HSA with Catastrophic Bronze plan is your present best bet. If you have a bronze plan, you probably get some money back if you file a claim form, but those rules are still in flux at this writing. The expense of filing and collecting claims forms is one of the reasons the Bronze plan is more expensive, but that's their rule at present.

There are some other important things to say about outpatient vs. inpatient care, but it seems best to describe how inpatient care is envisioned to work in this system, before returning to the tension between the two. As will then become apparent, increasing the ease of use might create the problem of making it a little too easy to spend money.

Payment by Diagnosis Bundles, for Outpatient care. In 1983 a law was included as an unnoticed part of the annual Budget Reconciliation Act, which nevertheless later proved to have a huge effect on the health financing system. The proposal was to stop paying for Medicare patients on the basis of the itemized services each patient received as a bill, but to pay a single lump sum for the main diagnosis of each patient, using the argument that most cases of a given diagnosis were pretty much the same, and what variation there was, would soon average itself out after a few cases. Such a meat axe approach to complexity was justified by the argument that a patient sick enough to be in bed in a hospital, was too overwhelmed by his frightening situation and too uneducated in its issues, to be able to dispute what was done to him. Market mechanisms, in short, were futile is situations with such imbalances of information and power. Consequently, a great deal of money was being wasted on accounting systems to arrive at prices which were ultimately set in an arbitrary way.

This argument prevailed in Congress, which was becoming desperate about relentless cost increases in Medicare, even sweeping aside the grossly primitive details of a system defining the solvency of vital institutions. The misgivings from economists that the accounting system was a large part of the internal hospital administrative information system, were also treated like mutterings of pointy-heads. To the extent these objections were valid, they would probably lead to collapse of the experiment, so why worry about it. In fact, the expedient emerged that the prices of the DRG ( diagnosis "related" groupings) were simply revised to result in a 2% profit margin on the bottom line, no matter what the medical issues happened to be. It was a highly effective rationing system, not terribly far removed from a lump sum payment with a 2% markup, so live with it. Since the Federal Reserve targets 2% annual inflation, 2% profit is no real profit at all.

The hospitals might have rebelled, or might have collapsed. Instead, they accepted 2% for inpatients, and set about adjusting the subsidies, aiming for 15% profit margin on the Emergency Room, and 30% profit on outpatient services. Subsidies from such accounting were difficult to achieve at first, so Emergency rooms were enlarged, and much expanded outpatient facilities were built, requiring hospitals to purchase physician practices to keep them filled. The entire healthcare system was put under strain, and hardball was the game of the day. New lifesaving drugs were priced at $1000 per pill, institutions were merged out of existence, the office practice of medicine was in turmoil, and a year in business school could make you a millionaire if you could appear calm in the midst of confusion.

I tell this story to explain why, with great reluctance, I advise the managements of Health Savings Accounts to base their inpatient payment system on some variation of Diagnosis Related Groups. It's a terrible system, designed by rank amateurs, which results in distortions of a noble profession. But there is no other rational choice. It does protect the paying agency from being fleeced, once it gets past negotiation of a small list of prices which aggregate to a profitable bottom line. By protecting the payment system, it protects the patients from a chaotic price jungle which, unchecked, will rapidly destroy health care. If we experience more than 2% inflation, the destruction will be quicker.

Resolving Tension Between The Two Payment Systems. Evidently, some clear thinking by some smart people has brought them to the ruthless conclusion that a two-class system of medical care is preferable to the way we are otherwise going. Rich people will have their way if their own health is at stake, and poor people will have their way if they exercise their votes. Both of these conclusions are correct, but they lead to Medieval monks retreating into monasteries. The cure of cancer and a few brain diseases might make monasteries unnecessary, and so would a drastic reduction in health care costs. Huge research budgets and major regimentation are big-government approaches, of willingness to accept some loss of freedom to achieve equality of outcome.

But we can't completely depend on either choice, so the remaining choice is to undermine a lot of recent culture change, by devolving back to leadership on the local level of small states and big cities. This is a small-government approach, willing to accept wider inequalities in order to seek freedom to act. Mostly using the licensing power, competition will reappear if retirement villages and nursing homes are licensed to be hospitals. If not, nurses and pharmacists can be licensed as doctors. Some of this could become pretty brutal, and all of it leads to patchy results. But of its ability to restrain prices, there can be little doubt.

Escrow Subaccounts within HSA Accounts. Whether anything can restrain reckless spending of "found" money, is quite a different matter, however. It may be that supply and demand will balance, even if it takes generations. There is some hope to be gained from watching reckless teenagers become penny-pinching millenials, but there remain dismal reminders of improvidence to be found in ninety year-old millionaires marrying teen-aged blondes, further reinforced by watching the blondes run off with stable-boys. The net conclusion is that if certain portions of a Health Savings Account must be set aside for mandatory later expenses, then the money should be set aside within partitions, as an escrow account. Even that will have limits to its effectiveness, as I have noticed when trust-fund babies in my practice worked around the restraints their grandfather's lawyer took care to put in place.

Specified Gifts to be Encouraged. Only limited restraints on spending the client's own money can ever be justified, but certain types of gifts can still be better justified than others. One of them would be the special $6000 escrow fund for deductibles and caps on out-of-pocket spending. Particularly in the early transitional years, the fund's solvency may be threatened by leads and lags, where these escrow funds could save the day. Therefore, if someone accumulates large surpluses in his account by the fortuitous conjunction of events, he should be encouraged to consider donating a $6000 escrow to one of his grandchildren or other impecunious relatives. Quite often, a prudent gift to a grandchild can lighten the burdens of his parents or other members of the family. If they wish, any number of $6000 transfers to the escrow funds of others should be encouraged.

Spending Health Savings Accounts. Spending Less. In earlier sections of this book, we have proposed everyone have an HSA, whether existing health insurance is continued or not. It's a way to have tax-exempt savings, and a particularly good vehicle for extending the Henry Kaiser tax exemption to everyone, if only Congress would permit spending for health insurance premiums out of the Accounts. To spend money out of an account we advise a cleaned-up DRG payment for hospital inpatients, and a simple plastic debit card for everything else. Credit cards cost twice as much as debit cards, and only banks can issue credit cards. Actual experience has shown that HSA cost 30% less than payment through conventional health insurance, primarily because they do not include "service benefits" and put the patient in a position to negotiate prices, or be fleeced if he doesn't. Not everybody enjoys haggling over prices, but 30% is just too much to ignore.

No Medicare, no Medicare Premiums. We assume no one wants to pay medical expenses twice, and will therefore drop Medicare if investment income is captured in lifetime Health Savings Accounts. The major sources of revenue for Medicare at the present time fall into three categories: half are drawn from general tax revenues, a quarter come from a 6% payroll deduction among working-age people, and another quarter are premiums from retirees on Medicare. All three payments should disappear if Medicare does, too. Therefore, the benefit for dropping Medicare will differ in type and amount, related to the age of the individual. Eliminating the payroll deduction for a working age person would still find him paying income taxes in part for the costs of the poor, as it would for retirees with sufficient income.

Retirees would pay no Medicare premiums. Their illnesses make up 85% of Medicare cost, but at present they only contribute a quarter of Medicare revenue. However, after the transition period, they first contribute payroll taxes without receiving benefits, and then later in life pay premiums while they get benefits, to a total contribution of 50% toward their own costs. But the prosperous ones still contribute to the sick poor through their income taxes. There might be some quirks of unfairness in this approach, but its rough outline can be seen from the size of their aggregate contributions, in this scheme. At any one time during the transition, working-age and retirees would both benefit from about the same reduction of money, but the working age people would eventually skip payments for twice as long. Invisibly, the government subsidy of 50% of Medicare costs would also disappear as beneficiaries dropped out, so the government gets its share of a windfall, in proportion to its former contributions to it. One would hope they would pay down the foreign debt with the windfall, but it is their choice. This whole system -- of one quarter, one quarter, and half -- roughly approximates the present sources of Medicare funding, and can be adjusted if inequity is discovered. For example, people over 85 probably cost more than they contribute. For the Medicare recipients as a group, however, it seems like an equitable exchange. This brings up the subject of intra- and extra-group borrowing.

Escrow and Non-escrow. When the books balance for a whole age group, the managers of a common fund shift things around without difficulty. However, the HSA concept is that each account is individually owned, so either a part of it is shifted to a common fund, or else frozen in the individual account (escrowed) until needed. It is unnecessary to go into detail about the various alternatives available, except to say that some funds must be escrowed for long-term use and other funds are available in the current year. Quite often it will be found that cash is flowing in for deposits, sufficient to take care of most of this need for shifting, but without experience in the funds flow it would be wise to have a contingency fund. For example, the over-85 group will need to keep most of its funds liquid for current expenses, while the group 65-75 might need to keep a larger amount frozen in their accounts for the use of the over-85s. In the early transition days, this sort of thing might be frequent.

The Poor. Since Obamacare, Medicaid and every other proposal for the poor involves subsidy, so does this one. But the investment account pays 10%, the cost of the subsidy is considerably reduced. HSA makes it cheaper to pay for the poor.

Why Should I Do It? Because it will save large amounts of money for both individuals and the government, without affecting or rationing health care at all. To the retiree in particular, he gets the same care but stops paying premiums for it. In a sense, gradual adoption of this idea actually welcomes initial reluctance by many people hanging back, to see how the first-adopters make out. Medicare is well-run, and therefore most people do not realize how much it is subsidized; even so, everyone likes a dollar for fifty cents, so there will be some overt public resistance. When this confusion is overcome, there will still be suspicion that government will somehow absorb most of the profit, so government must be careful of its image, particularly at first. Medicare now serves two distinct functions: to pay the bills, and to protect the consumer from overcharging by providers. Providers must also exercise prudent restraint. To address this question is not entirely hypothetical, in view of the merciless application of hospital cost-shifting between inpatients and outpatients, occasioned in turn by DRG underpayment by diagnosis, for inpatients. A citizens watchdog commission is also prudent. The owners of Health Savings Accounts might be given a certain amount of power to elect representatives and negotiate what seem to be excessive charges.

We answer this particular problem in somewhat more detail by proposing a complete substitution of the ICDA coding system by SNODO coding, within revised Diagnosis Related Groupings,(if that is understandable, so far) followed by linkage of the helpless inpatient's diagnosis code to the same or similar ones for market-exposed outpatients.(Whew!) All of which is to say that DRG has been a very effective rationing tool, but it cannot persist unless it becomes related to market prices. We have had entirely enough talk of ten-dollar aspirin tablets and $900 toilet seats; we need to be talking about how those prices are arrived at. In the long run, however, medical providers are highly influenced by peer pressure so, again, mechanisms to achieve price transparency are what to strive for. These ideas are expanded in other sections of the book. An underlying theme is that market mechanisms will work best if something like the Professional Standards Review Organization (PSRO) is revived by self-interest among providers. Self-governance by peers should be its theme, ultimately enforced by fear of a revival of recent government adventures into price control. Those who resist joining, should be free to take their chances on prices. Under such circumstances, it would be best to have multiple competing PSROs, for those dissatisfied with one, to transfer allegiance to another. And an appeal system, to appeal against local feuds through recourse to distant judges.

Deliberate Overfunding. Many temporary problems could be imagined, immediately simplified by collecting more money than is needed. Allowing the managers some slack eliminates the need for special insurance for epidemics, special insurance for floods and natural disasters, and the like. Listing all the potential problems would scare the wits out of everybody, but many potential problems will never arise, except the need to dispose of the extra funds. For that reason, it is important to have a legitimate alternative use for excess funds as an inducement to permit them. That might be payments for custodial care, or just plain living expenses for retirement. But it must not be a surprise, or it will be wasted. Since we are next about to discuss doing essentially the same thing for everybody under 65, too, any surplus from those other programs can be used to fund deficits in Medicare. But Medicare is the end of the line, so its surpluses at death have accumulated over a lifetime, not just during the retiree health program.

That may not be more accurate, but it displays its assumptions better. Michigan Blue Cross has calculated we calculate lifetime costs and Obamacare costs by starting with lifetime average health costs of $325,000 and subtracting Medicare. Although Medicare is reported by CMS to have average costs of $xxxx, for which we prefer to assume a Health Savings Account "present value" cost of $80,000 on the 65th birthday (at a 6.5% interest rate). At the same 6.5% rate, a $3300 annual deposit from age 25 to 65 (the earning years) would total $132,000 of deposits. Preliminary goals for a hypothetical average person are: To accumulate $80,000 in the Medicare fund by the age of 65, to pay off the 25-year health costs of 2.0 children per couple as a gift to them, and to pay his own relatively modest average healthcare costs from 25-45, somewhat higher costs 45-65. The Medicare goal of $80,000 is what is estimated to be what is required for a single-deposit investment fund (paid on the 65th birthday) to pay the health costs for an average person aged 65-93,(a guessed-at future average longevity), with an estimated compound investment income of 4%, also guessed, but conservative. Inflation is ignored, assuming revenue and expenses will inflate at the same rate. Our average consumer will have to set aside $1250 per year from age 25 to 65, and earn 4% compounded, to do it.

Those who disagree with the underlying assumptions should feel free to substitute their own assumptions. The interest rate of 4% is deliberately low, in order to make room for disagreements which are higher. The upper limit is set to match the HSA contribution limits of 3300 times 40, becoming hypothetically the upper bound of revenue which can ever be anticipated. Anticipating two children per couple and full employment from 25 to 65, this revenue effectively covers one full lifetime, from cradle to grave. Childhood illnesses and elderly disabilities notwithstanding, this is all the revenue we allow ourselves in this example.

Let us assume that an average person can start contributing to an H.S.A. at the age of 25, even though perhaps a quarter of the population at that age are burdened with college debts, etc. and cannot. We are well aware of the Pew Foundation poll that xxxx% of those under 30 are still living with their parents, and that xxxx% have college debts. (Congress ought to examine this condition, which could apply at any age, and provide for make-up contributions later.) The present ceiling of $3300 annual contribution is otherwise taken as the upper boundary of what is possible for the sake of example, and theoretical deficits would have to be made up from the $68 trillion dollar surplus created by such legal maximums. To plunge ahead with the example, our average person sets aside $3300, starting at age 25 toward lifetime health costs. To simplify the example, he does so whether he can afford it or not, and what he can't supply himself is provided by a subsidy or a loan. Since present law prohibits spending from the H.S.A. for health insurance premiums (this should be reconsidered by Congress, by the way), an estimated premium of $300 for his own Catastrophic insurance is taken from the set-aside, and the remainder is placed in the H.S.A., paying an estimated 4% tax-free. Within this he eventually needs to set aside a Dependent Escrow premium (remember, this example covers lifetime expenses, even though everyone has Medicare), which for twenty years (until age 45) is zero for Medicare and available for medical gifts to Children, and after that is exclusively used for Medicare, both of which will be explained in later sections.

Health Savings Accounts are tax-exempt, and they can earn investment income. Except it isn't all it could be. Professor Ibbotson of Yale, the acknowledged expert in the long term results of investment classes, has regularly published data going back nearly a century. In spite of military and economic disasters of the worst sort, investment classes have remained remarkably steady throughout the past century, and presumably will maintain the same relationships for some time to come. John Bogle of Philadelphia has translated that into index funds of investment classes, with almost negligible administrative costs. (Caution: Many index funds are sold with very high trading costs, typically in charges when money is withdrawn. Be careful of your counterparty, particularly if he specifies the index fund, because he may limit it to one who gives kickbacks to him.) With this warning, there is a reasonably good chance of getting returns approaching 10% for investments in index funds of well-known American stocks, even though the typical HSA at present is yielding much less. This investment income can grow to the point where it constitutes a fairly large part of the health revenue.


Instead of starting at birth and ending at death, this book will reverse the process. Let me explain. There is a big transition problem in a proposal like this, since the readers will be of different ages, and the system must work without gaps. Everybody has already been born, and for a long time to come, everybody will have a piece of his life behind him that he does not want to pay for. The time is past when Lyndon Johnson could solve the transition problem by simply giving a gift of many years free coverage to most of the new entrants to his system. So, although it will probably spook a number of old folks just to hear the discussion, let's begin for completeness with the Last Year of Life Coverage, and end up with First year of Life coverage. Both of those apply to 100% of Americans in a theoretical sense, and in a sensible system would be the basic coverage. If any health insurance should be universal, these two have the strongest arguments. Unfortunately, they have the least chance of political success. Therefore, it is likely that they will be voluntary and self-pay if they are adopted at all.

I want to thank you for this wonderful resource. I find it fascinating. May I offer one correction? In the section "Rittenhouse Square Area" there is reference to the Van Rensselaer home at 18th and Walnut Streets and its having a brief fling as a club. I believe in 1942 to about 1974/5 the Penn Athletic Club was located in the mansion. The Penn AC was a good club, a good neighbor and a very good steward of the building - especially the interior. It's my understanding that very unfortunately later occupants gutted much of the very well-preserved original, or close to original, interiors. I suppose by today's standards the Van Rensselaer-Penn Athletic Club relationship could be described as a fairly long marriage. The City of Philadelphia played a large role in my life and that of my family, and your splendid website brings back many happy memories. For me and many others, however, there is also deep sadness concerning the decline of so much of the once great city and the loss of most of its once innumerable commercial institutions. Please keep-up your fine work. Your's is a first-class work.
Posted by: John D. Mealmaker   |   Aug 14, 2014 2:24 AM
Dr. Fisher, The name Philadelphia University was adopted in 1999, as you write, but the institution dates to 1884 and has been on School House Lane since the 1940s. It acquired the former properties of the Lankenau School and Ravenhill Academy, but it did not "merge" with either of them. I hope this helps when you update your site.
Posted by: David Breiner   |   Jun 11, 2014 10:05 PM
Hello Dr. Fisher, I was looking for an e-mail address and this is what I could find. I must tell you my Mother who you treated for years passed away last May. She was so ill with so many problems. I am sure you remember Peggy Marchesani. We often spoke of you and how much we missed you as our Dr. You also treated my daughter Michele who will be 40. I am living in the Doylestown area and have been seeing the Dr's there.. I just had my thyroid removed do to cancer. I have my fingers crossed they get the medicine right. I am not happy with my Endochronologist she refuses to give me Amour. I spoke with my Family Dr who said he will take care of it. I also discovered I have Hemachromatosisand two genetic components. I have a good Hematologist who is monitoring me closely. I must say you would find all of this challenging. Take care and I just wanted to convey this to you . You were way ahead of your time. Thank you, Joyce Gross
Posted by: Joyce Gross   |   Apr 4, 2014 2:06 AM
I come upon these articles from time to time and I always love them. Is the author still alive and available to talk with high school students? Larry Lawrence F. Filippone History Dept. The Lawrenceville School
Posted by: Lawrence Filippone   |   Mar 18, 2014 6:33 PM
Thank you for your articles, with a utilitarian interest, honestly, in your writing on the Wagner Free Institute of Science [partly at "" - with being happy to post that url but the software here not allowing for the full address:)!] I am researching the Institute, partly for an upcoming (and non-paid) presentation and wanted to ask if I might use your article's reproduction for the Thomas Sully portrait of William Wagner, with full credit. Thanks very much for any assistance you can offer here. Josh Silver Philadelphia
Posted by: Josh Silver   |   Jun 2, 2013 1:39 PM
Thank you for your articles, with a utilitarian interest, honestly, in your writing on the Wagner Free Institute of Science [partly at "" - with being happy to post that url but the software here not allowing for the full address:)!] I am researching the Institute, partly for an upcoming (and non-paid) presentation and wanted to ask if I might use your article's reproduction for the Thomas Sully portrait of William Wagner, with full credit. Thanks very much for any assistance you can offer here. Josh Silver Philadelphia
Posted by: Josh Silver   |   Jun 2, 2013 1:39 PM
George, Mary Laney passed away last November. I was one of her pall bearers. She had a bad last year. However, I am glad that you remembered her and her great work. I will post your report at St Christopher's and pass this along to her husband Earl. Best wishes Peter Hunt
Posted by: Peter Hunt   |   Mar 28, 2013 7:12 PM
Hello, my name is Martin. I came across [] and noticed a ton of great resources. I recently had the honor of becoming a part of a new non promotional project on We decided to put together a brief guide about cirrhosis, and the dangers of drinking. We have received a lot of positive feedback and I wanted to suggest that we get listed on the above mentioned page under The National Institutes of Health. Let me know what you think and if you have any further requirements or suggestions.
Posted by: Martin   |   Jan 1, 2013 8:51 AM
Posted by: SUSAN WILSON   |   Aug 12, 2012 12:49 AM

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