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

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FRONT STUFF: Savings for a Rainy Day
Editorial material for book construction.

For a long time, Lifecycle HSAs would be mostly in some transition phase.

We've spent a lot of time on the 1980 version of Health Savings Accounts. It's already rolling along in action, with only a couple of suggested additions to make it better. But there are several other variations which would need some legislation, but could possibly take the basic idea into new directions.

Some ruminations about health financing, written while we wait for the Supreme Court to announce its decision on King v.Burwell.

One of the originators of Health Savings Accounts describes their advantages over existing health insurance. Improvements are suggested for the regular HSA. More dramatic cost improvement emerges from a lifetime HSA version, substituting whole-life approaches for pay-as-you-go. Most of this requires legislation, but could reduce health costs dramatically.

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First Year of Life and Tort Reform

The problems of paying for the healthcare costs of the first year of life are relatively small financially, but create large unexpected problems throughout heathcare payment design. According to CSS, the first year of life accounts for 3% of total lifetime costs, while all of childhood up to age 21 only totals 8%. By contrast, the Medicare age group accounts for 50% of costs. But the tail is wagging the dog.

With no prior history, pre-funding the 3% is out of the question, unless Congress permits transfers from others. Legally, that means the parents, but the parents are usually pretty young and impecunious themselves. All manner of matrimonial tangles can occur, but even in the life of a blissful young couple, paying off that heavy cost may take several years to work out. It is hard to believe this would not delay the next pregnancy or even sometimes put it out of the question. There is little question younger mothers have a much easier time of it than if they wait. The whole concept of a "valuable" baby was largely unknown seventy years ago. In my day as an intern, if a lady miscarried, well, just wait a couple of months and have another. The present generation of mothers are aghast at such callous attitudes, but that's why we once had so many orphanages, and have so few, today. The high cost of obstetrics must have something to do with it.

The employer-based system has some advantages, and one of them is to make family-plan health insurance a useful thing. Having now lived through two economic depressions, I can be pretty sure the present epidemic of fatherless children will subside somewhat as the economy recovers. But there is little doubt the traditional family structure has been permanently modified, so the residual of that experience will probably be felt in a decline of the popularity of family insurance. With only one poorly paid and overworked parent to support a pregnancy's cost, the burden of it is much increased.

Birth and death are the two medical costs which no one can completely evade. Hospitals understand this as well as anyone else. So, responding to the pressures of high hospital costs, the hospital financial officer inevitably shifts costs to surrogate markers for obstetrical and terminal illness care. You have to be careful, because if you shift it to indigents who will pay you nothing, you are cost-shifting yourself out of business. But if you can identify an isolate of insured obstetrical patients, shift away, and the employer will end up paying for it. So we see a tendency to put ultra-high prices on the services, drugs and equipment of the obstetrical unit, just in case somebody or some insurance, will pay for them. Within a DRG system which permits a 2% profit margin on inpatients, a hospital administrator has to do a lot of tap-dancing around the obstetrical issue, and many hospitals have just abandoned the service entirely.

And finally, the trial lawyers. The trial bar has treated each wave of healthcare reform like French soldiers at the Battle of the Somme -- a failure to win any skirmish could lead to extinction, if not extermination of all your family. Consequently, when lawyers hear of the concentration of malpractice lawsuits in obstetrics, they brace themselves for another charge of the tort reform Brigade. Any personal injury lawyer who reached this paragraph, needn't read more than five words to realize the bugle has blown, again. Slips and falls, and asbestos -- be hanged, those doctors are now after obstetrics. That's right, I am.

It took me many years of working in medical economics to realize how destructive malpractice suits against obstetricians can be. Although 80% of suits are won by the defendant, it certainly raises malpractice premiums to encounter a succession of nuisance suits which fail. It's been some time since I was active in the field, but at one time I was told 80% of obstetricians had been sued, and many annual premiums for their insurance were over $100,000 a year apiece. If that's no longer true I am sorry; but I have the impression it is still true. In Florida, recently, malpractice insurance premiums went over $200,000

The closest I have come to a conciliatory explanation, is this. Some years ago, a state law was passed and widely imitated, to the effect that a plaintiff for a child should be given extra years after the age of 21 for the statute of limitations to run. If the time to prepare a case for an insentient newborn is extended 25 years, it is probably not surprising that records will be lost by then, adverse witnesses will have died or lost their recollections, and so cases without living defence witnesses will be found. Impecunious and therefore judgment-proof defendants may become prosperous by 25 passing years. The doctor may have retired and thus lost a reason to avoid suing him. The patient may have become divorced and need the money. And so on. So I have a lawyerly proposal for a lawyerly issue. Malpractice insurance comes in two varieties, claims made, and occurrence. In both cases, the incident must have happened while the insurance was in force. In the occurrence policy, it does not matter when the claim was made. But in the claims made policy the insurance must still be in force when the claim is made, although the loophole may be closed by purchasing additional "tail" insurance.

Proposal: That a new form of "tail" insurance be devised for children and obstetrics, which covers economic damages but not "Pain and Suffering". Comment: the great majority of awards are not for economic damages, because that is generally covered by health insurance. The majority of spectacular awards are for pain and suffering, which cannot be measured, denied or remedied.

Proposal: That insurance companies be encouraged to cost-shift obstetrics to other departments of a general hospital, to the extent possible.

Summary of HSA Proposals

Some of the following proposals merely restore Health Savings accounts to theirstatus quo ante before the Affordable Care Act, some of them improve deficiencies in HSA which have surfaced in thirty years, and the more ambitious ones seek equal footing between lifetime coverage and conventional one-year term health insurance. Inclusion of proposals on this list should not be taken to endorse a public sector approach over a private sector one. They are offered piecemeal because of potentially different committee jurisdictions. It has long been a question whether health insurance should be considered a health matter or an insurance matter, and the question is complicated by the Tenth Amendment. We propose consideration of some special bond issues, which further complicate jurisdiction. The central role of investment income in reducing premiums might introduce a further complication.

The proposals generally omit mention of their purposes, most of which are self-evident. However, each is followed by a citation number within the body of the book, where a fuller argument can usually be found.

Proposals related to the Tenth Constitutional Amendment:

Proposals related to both classical (i.e. one-year term) Health Savings Accounts, and the proposed new Lifetime variety:

Proposal 1a: Congress should extend comparable subsidies to the poor for Health Savings Accounts as for other health insurance.(2687)

Proposal 2a: Subscribers to Flexible Spending Accounts (FSA) should be permitted to roll over unspent balances into HSAs from year to year.(2693)

Proposal 7b: Permit Catastrophic Health Coverage premiums to be paid by Health Savings Accounts.

Comment:This would suffice to correct a 70-year injustice in the differential tax deduction solely based on the nature of employment.(2720)

Proposal: The client retains the right to designate or re-assign the management of his account, at any time and for any reason. Within the account, the client retains the right to designate or assign the investments as he chooses, so long as the balance in the account exceeds ten thousand dollars of value.Transfer fees shall not be charged on accounts which have been with the present management company for longer than a year.

Proposal 13c: Congress should create and fund a permanent Health Savings Account Agency. It should have overseers representing subscribers and providers of these instruments, with power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcomittee of Ways and Means periodically. It should have extensive access to the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations about the size and scope of inter-subscriber loan activity. At first, it might conduct the loan activity itself, with an eye toward eventually overseeing a commercial vendor.(2718)

Proposals related to HSA Deposits, Contributions, Transfers:

Proposal 12d: Current law permits an individual to deposit $3300 per year in a Health Savings Account, starting at age 25, and ending when Medicare coverage appears. Probably that amount is more than most young people can afford, so it would help if the rules were relaxed to roll-over that entitlement to later years, spreading the entire $132,000 over the forty-year time period at the discretion of the subscriber.(2742, 2718)

Proposal 12j: Congress is urged to permit pooling (at interest) between the accounts of an age cohort in surplus, and age cohorts in deficit status, because of divergences between revenue and medical withdrawals at different ages.(2735)

Proposal 22c Congress should state the principle that necessary Health Savings Account reserves should be somewhat overestimated at all times, linked to the incentive that individual non-medical uses of surpluses should be permitted at times when they are generally unneeded for health purposes.(2733)

Proposal 13b: Congress should reserve decisions to itself for changing the lifetime contribution level, and review final appeals from contract terms which seem to threaten imminent major adjustment to the general public lifestyle.(2718)

Proposal 13a: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should substitute a lifetime limit of $132,000, with annual deposit limits sufficiently adjustable to bring accounts at their present age, up to what they would have been if $3300 annually had been deposited since age 25.(2718)

Proposal 7a: Waive the annual limit to HSA contributions for contributions which bring the account balance to less than the average for the subscriber's age cohort. While resistance to this provision might focus on class distinctions, the subsequent benefit to Medicare and/or Medicaid funding might ultimately be so large as to overcome it.(2720)

Proposal 4b: Once a deductible has been established along the lines of Proposal 4a, the upper limits of Health Savings Accounts deposits should periodically be adjusted to cover audited cost plus a reasonable markup for: (1) outpatient care, and (2) the premium of Catastrophic coverage for an average lifetime from birth to death. Care should be taken to avoid creating incentives to move patients in either direction. This overall limit should be divided, not over an entire lifetime, but over the working age from 20 to 65.(????)

Comment:As long as we maintain a predominantly employer-based healthcare system, there will be tension around the uneven income tax deduction. This disparity will continue, but the system should lean toward equalizing it. Efforts should be made to avoid applying medical costs to those who are too old or too young to be employed. It should be noted that constraining the premiums of catastrophic coverage must also extend the income tax deduction to equal that of employed persons. And it should be noted that some compound interest rate must be assumed for compound income from invested idle premiums, and subtracted from the annual deposit limit, as actually adjusted annually for experience. The approximate goal is to fund the lifetime care of beneficiaries (approximated as $350,000 lifetime cost. The preferred method of investment is passive investing in index funds of domestic large-cap common stock, with a small (10%) cash-flow component in cash or fixed income. And the goal is no more than 1.5% overhead attrition for insurance administration, resulting in no less than 8.5% average total return on standard indices. If these standards cannot be achieved, the portfolio management should be put out to bid.

Proposals related to Catastrophic (High-deductible) Health Insurance:

Proposal 999: Congress should be asked to commission a computer program to translate English discharge diagnoses into SNOMED code. Suggested format: a search engine where English variants of discharge diagnoses are entered, and a SNOMED code number returned, along the lines of entering common phrases into Google and receiving file location numbers in return, except returning the SNOMED code equivalent. If the code is not found, the computer accepts a manual entry by a trained person. verified by an expert over the Internet to become officially entered in a master list which is periodically circulated. The search program and its supplements should be produced on DVD disks to be used on hospital record room computers and other professional users. It should provide "hooks" so the Snomed codes and patient identification can be transferred electronically to related programs, such as payment codes and billing.(2634)

Proposal 7a: Congress should remove all upper age limits to opening Health Savings Accounts, and mandate linkage to HSA for all health insurance with front-end deductibles of more than $250 annually unless subsidies are substituted.(2712)

Proposal 7b: Permit Catastrophic Health Coverage premiums to be paid by Health Savings Accounts. This would suffice to correct a 70-year injustice in the differential tax deduction solely based on the nature of employment. Congress should add a new Catastrophic health insurance option, which covers at least 105% (net of inflation) of the cost of inpatient hospitalizations (to the extent prices reflect true costs) but which utilizes the revised variant of DRG to produce the same result. The new Catastrophic policy also covers outpatient costs above the level of a high deductible (with a cap on cash payments by the patient). Exceptions must be specified and approved. It is intended that highly similar outpatient items shall achieve identical prices for the same item used for inpatients, and that a RVS relative value system will be evolved for pricing inpatient items which have no outpatient use. When this system is deemed sufficiently perfected, it may be substituted, in whole or in part, for present DRG limitations, in no case taking longer than a year. (????)

Comment: The basic intent is to set inpatient charges by matching outpatient marketplace prices as much and as fast as possible within the DRG, meanwhile setting inpatient prices of unsuitable items, by relative-values to outpatient prices. Because it will take time to develop the technical underpinnings, the tactical transition is accomplished by starting with an arbitrary DRG and gradually substituting a DRG system suffused with market prices. Some residual arbitrariness must be expected, and some additional system for adjusting the border for changing patterns of scientific care must be provided during transition. Until similar items are priced similarly, it is probably unwise to make inpatient and outpatient prices totally independent of each other, since the system of care will continue to be warped by its financing. It is therefore prudent to set some relative limits to the degree they may be allowed to differ, as well as a limit to how long they may be constrained. (????)

Proposal 67c Permit the premiums of catastrophic insurance attached to HSAs to be tax deductible. Opponents of any tax-deductibility for any health insurance should remember that equal treatment is more important than tax revenue. Once equality is achieved, the tax deduction should be reduced by 25%, to achieve revenue neutrality.(2720)

Proposal 6p: Congress should permit the sale of excess ("Catastrophic") indemnity health insurance, without any service benefit provisions, with a deductible reasonably stretched to exclude most outpatient costs but include most inpatient ones. It may be necessary to resort to two deductibles (one for inpatients, one for outpatients) If future medical science should exclude a burdensome proportion of expensive outpatient procedures, the line may be adjusted downward to include most payment by DRG or its equivalent, even if outpatient; and exclude patient discretionary procedures, even if inpatient. Payment for emergency care should depend on whether the patient is admitted afterward. Reasonable limits should be set on ambulance costs, and some resolution of "nearest hospital" requirements when two hospitals are close together. (2684)

Proposal 7f: Congress should periodically investigate whether a need for an intermediate insurance category of high-priced outpatient services has appeared. If so, hearing should be held with an eye to creating two or more deductibles as applying to different locations of care, since present practice assumes there are only two categories (inpatient and outpatient) and that prices segregate conveniently between them. It must be recognized that the nature of medical care is continually evolving, and this is a direction which may emerge.(2720)

Proposal 7g: Congress should hold hearings to devise a truly bare-bones indemnity catastrophic policy for adoption by HSA subscribers. It is time to reconsider the whole concept of first-dollar coverage, with service benefits, and to find ways to allow it to continue as an option, while preventing it from imposing itself on those who would be better served without it.(2720)

Proposals related to Diagnosis Related Groups (DRG)

Proposal 7e: Congress should set a reasonable time goal, and then mandate that the DRG be expanded and rewritten based on SNOmed, but then reduced to a DRG which is much larger than at present, and capable of easy expansion. As mentioned, the hospitals which are winners under the old system will identify themselves by opposing this, and they should be asked if they can suggest alternatives.(2720)

Proposal 3a: Congress should authorize a definitive study of whether the DRG system is more or less expensive overall than fee for service. If the two are close in cost, the DRG system should be phased out in favor of a relative-value system for fee for service billing . If DRG can be shown to be seriously more cost efficient, the present version should be gradually replaced by a hybrid variety, in which the codes for a majority of cases are covered by the contents within a small pamphlet, while the full national diagnostic relative value system is made available on a modified computer search engine program, which can be used to provide coding for the rest of cases on a small portable computer. Where even this is insufficient for extreme outriders, a national appeal system of experts should be devised for special cases, which are then added to the search engine. Using modern technology there should be no place for reimbursement for "all others".(????)

Comment: Every effort should be made to apply a modified DRG system to all cases where the patient has limited ability to make choices, and to exclude it from health care choices wherein a reasonable average person can make his own decisions. Generally speaking, the dividing line is admission to a hospital.

Proposal 17b. Tax-exempt Hospitals Should be Required to Accept the DRG method of payment for inpatients from any Insurer, but provided with some method of suggesting changes, although the rates should only be negotiable based on a percentage surcharge to Medicare rates. The DRG should be restructured, using reduced SNOMED code instead of enlarged ICDA code, and designed to be used as a search program on hospital computers rather than table look-ups, except for very common hospital diagnoses.(3229)

Proposals related to Investment Managers:

Proposal 7i: Managers of HSA investments should be qualified as fiduciaries under standard definitions, or make it clear to the customer that they are not. It must be recognized that the nature of investing is continually evolving, and this is one direction which may be emerging. The brokerage industry will oppose this, and they should be asked if they can suggest alternatives.(2720)

Proposal 7c: The subscriber must be permitted choice among managers of his HSA account, managers of his Catastrophic Health Insurance policy, and management of his investment account. However, no element of kick-back arrangement is permitted, and written assurances should be on file.(2720) A provision to this effect has proven necessary in the past. Whether this provision remains necessary will largely depend on passing Provisions 7b. and 7d. (2720)

Proposal 7b: Congress should impose transparency rules on fees and net returns for Health Savings Accounts, and if necessary impose a limit of double the fees available from the least expensive competitor.(2712)

Proposal 7j: A cost comparison and returns comparison of all managers of HSA, by location, should be annually published, at least on the Internet, or in some other way made available to the public. (2720)

Proposal 7h: Congress should require all managers of Health Savings Accounts to display to the customer, and publish to the world, quarterly, their average total returns, as compared with average net total returns to HSA subscribers,and to the individual subscriber if there is meaningful variation. If the difference between net and gross exceeds 1%, the manager should be required to complete a form explaining it. There are several trillion-dollar index funds who would find this proposal no hardship.

Proposals specific to lifetime Health Savings Accounts:
Proposal 17 a: Congress should authorize a new, lifetime, version of Health Savings Accounts, which includes annual rollover of accounts from any age, from cradle to grave, and conversion to an IRA at optional termination. Withdrawals from the account should be tax-deductible if paid for standard medical expenses through a special-purpose bank debit card, otherwise are taxable. Investments in this account are subject to special rules, designed to produce maximum safe passive total return , and limiting administrative overhead to a reasonable, competitive, amount. The account should be linked to a high-deductible catastrophic health insurance policy, with guaranteed renewal.(2606)

Comment:Lifetime Health Savings Accounts (L-HSA) would differ from ordinary HSA in two major ways; 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, which build up unused reserves and earn income on them. Since the expanded proposal requires major legislation to make it work, it must be 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. And frankly, a change this large in 18% of GDP is best phased in gradually, starting with those who are adventurous. By the time the most timid among us have joined up, the transition will have become routine. As a first step, let's add another proposal for the present Congress to consider:

Proposal 4c: A government agency should be appointed to oversee economic, financial, and medical trends, and be adequately funded to do so, particularly during the transition phases. It should be overseen by thirty prominent institutions in the involved fields, each of whom appoints one of twenty board members on a rotating basis, one each per institution, and ten seats remaining vacant for a year at all times. The creation of ten outside organizations whose seats are vacant on a rotating basis is designed to provide dissenting opinion, and to offer time to write books about their experiences. The public will trust experts, but only so long as the experts provide public transparency. The power to make fundamental changes, remains with Congress. (????)

Proposal 4d: New drugs and appliances are constantly being introduced, and are usually at their highest prices as they are first introduced. Insurance prices are set annually, after they can adjust to new items. No insurance should be required to cover items which were not priced into the premium, that is, within the first yearly premium cycle after the introduction of the item. Exceptions for epidemics and catastrophes may be excluded. (????)

Proposal 8a :Congress should authorize special limited-use bond issues (or Federal agency bond issues) for two Health Savings Account purposes: to fund accounts in transitional stage because of their late age at enrollment toward attaining self-sustaining status; and to create a permanent bridge between age groups which are in chronic deficit and age groups which are in permanent surplus, to the extent that such age disparities remain in balance. In both of these cases, it is calculated the accounts will eventually come into permanent balance after full transition has taken place within current demographic trends.(2734)

Comment: With the passage of time, it should be possible to identify age groups (for example, the first five years of enrollment) which will eventually come into balance with other age groups which permanently generate a surplus. Knowing aggregate lifetime coverage will itself bring these two groups into permanent balance, it is sensible to borrow from one and loan to the other during early transitions, at minimal interest rates. Having provided for eventual coverage of these secular risks, it becomes more reasonable to extend favorable rates to them during early transition. When the slots are fully loaded, so to speak, there will always be secular fund imbalance between age groups, where market rates are always needed to cover the overall plan design. The intent of these two interest rate levels is to distinguish between a transitional phase which is temporary, leading to an equilibrium loan imbalance which is a natural part of the design.

Proposal 12e: The present closing age for HSA contributions at the onset of Medicare should be extended a few years older, to allow for "catch ups". And single-premium buy-outs of Medicare coverage, including the possible return of payroll deductions where indicated, should be permitted as an option.(2742)

Proposal 12f: Congress should create and fund a permanent Health Savings Account Agency. It should have members representing subscribers and providers of these instruments, with power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcomittee of Ways and Means periodically. It should be involved with the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations concerning the size and scope of this activity.(2742)

Proposal 17c: Where two groups, by age or other distinguishing features, can be identified and matched, as permanently in revenue/expense deficit, or surplus, borrowing at reduced rates may be permitted between the two groups to the extent they consistently match. Borrowing for other purposes (such as transition costs) shall be by issuing special purpose bonds. These bonds may also be used to make multi-year intra-family gifts, such as parents for children, or children for elderly parents.(3229)

Proposal 17d: A reasonably small number of escrowed accounts within a funded account may be established for such purposes as may be necessary, particularly for transition and catastrophe funding. Where escrowed accounts are established, both parties to an agreement must sign, for the designation to be enforceable.(3229)

In fact, some enterprising insurance company could easily produce the same policy with a $100,000 deductible, which would reduce the premium still further, and improve an already good experience. That's what banks normally accomplish by maintaining a constant pool of funds coming in and going out, but essentially the rest of the pool is undisturbed. It's true a second major illness would wipe out the deductible, so the ACA approach of a top limit on out-of-pocket costs is preferable to reinsurance. You would have to have ten major illnesses to begin to doubt the wisdom of it, but people who have ten major illnesses are not likely to be worrying much about their pensions. This analysis quickly loses traction as medical disasters become unusually frequent, and gets into reinsurance issues. But the example is mainly offered to illustrate the destructive effect of brokerage fees, which must be minimized in any way available.

Proposal 2: Congress should permit associated Catastrophic health insurance to be paid, tax-exempt, into Health Savings Accounts, simultaneously eliminating the present tax exemption for employer-based insurance. (2687)

Proposal 1c: Employees who are presently offered Flexible Savings Accounts should be offered the option to roll over unspent year-end balances into a qualified Savings Account, particularly when the employee has contributed money toward the benefit. At the moment, depositing in a Health Savings Account is frowned upon, but an Individual Retirement Account (IRA) would be quite legal, and not greatly different in effect. (2693)

Proposal AA (REJECTED): Congress yields to the temptation of 12% returns, which would make funding extremely easy. And further yields to to the temptation to become the re-insurer of last resort itself, counting on its power to print money. Centuries of experience have demonstrated that wars and black swan stock crashes will sweep such promises away. As Cicero pointed out, "In times of war, the Law falls silent."(2606) (REJECTED)
Proposal 12c Congress should state the principle that necessary Health Savings Account reserves should be somewhat overestimated at all times, linked to the incentive that individual non-medical uses of surpluses should be permitted at times when they are generally unneeded for health purposes.(2733)

Proposal 12d Congress should authorize the Executive Branch to raise the upper annual limit for deposits to Health Savings Accounts, whenever (and for such time as) average HSA reserves fall below a necessary level.(2733)

Proposal 13a: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should substitute a lifetime limit of $132,000, with annual deposit limits sufficiently adjustable to bring accounts at their present age, up to what they would have been if $3300 annually had been deposited since age 25. (2737)

Proposal 24 :Congress is urged to consider permitting employers to include catastrophic coverage as a fringe benefit, regardless of other modifications, and to continue coverage after terminations of employment, until it is no longer required. Employees without catastrophic coverage may purchase it independently, and carriers will be required to coordinate successive policies in such a way that the employee runs no added risk during transitions. (3230)
Proposal. The parties would agree that both Catastrophic Health Insurance and Health Savings Accounts, singly or jointly, become specifically allowable options under the Affordable Care Act without age or occupational limits, and that all other interfering language in the Act or its regulations be removed. In particular, uniform tax deductibility is conferred by permitting health insurance and/or Catastrophic back-up coverage to be purchased by, or through, Health Savings Accounts. (3221)

Congress and the Supreme Court are urged to view the Tenth Amendment as a compromise between big and small states which still enjoys wide support. Big states tend to desire uniformity on their own terms, while sparsely populated states reject uniformity to resist indirect big state control by way of central government.

Proposal 5: Congress is urged to permit the domicile and regulation of the business of health insurance corporations to be in state chosen by the corporation. But all health insurance should be freely sold interstate, leaving the insurance products additionally subject to regulation by the states where the client or his chosen agent is primarily located.(2611)

Proposal 9a: Companies which manage health insurance products, particularly Health Savings Accounts, may select any state in which to be domiciled, but must then accept that state's regulations for corporate behavior and solvency. Such licensed corporations may sell their health insurance products in any other state; so long as individual products they sell in another state conform to the regulations of the state in which the insurance applies. Except for corporate solvency issues (where the stricter of the two states should prevail), conflicting regulations in the state of corporate domicile need not apply to the product.(2711)

Proposal 9b: Congress should mandate the licensing to sell health insurance to be widely inclusive of vendors and products, including Health Savings Accounts and Catastrophic Coverage, and be subject to corporate regulation in the state of corporate domicile. New products are subject to objection by the state in which the insurance applies. When there is conflict, appeal may be federal.(2611)

Proposal: Congress should enable one voluntary transfer between the Health Savings Accounts of members of the same family, especially grandparents and grandchildren, and one transfer to a general pool for balances left over from the family transfer. Members of the grandparent generation who have no grandchildren may choose one substitute from outside the family.(3254)

Proposal: Congress should permit voluntary buy-outs from the Medicare program, which include consideration of returning payroll deductions, and fair accounting for premiums, copayments and benefits already paid for by age groups in transition.(3254)

FOREWORD, written June 28,2015

This book was originally based on a notion, on a dream if you will. A whole lifetime of healthcare might be purchased, for what now only covers a quarter of a half -- those scarcely-noticed payroll deductions for Medicare, listed on everybody's payroll stub. But then politics and Supreme Court decisions came along. Turning over each pebble on a new heap, it nevertheless seems that amount might still stretch to cover all of the nation's average lifetime costs, although payroll deductions wouldn't resemble the way to do it. Reducing prices by 28% of $350,000 is a ton of money, particularly when multiplied by 300 million people. Let's lower expectations by saying the new narrower proposal might only reduce prices by 14%. That would be $39,000 times 300 million, or twice the combined fortunes of Bill Gates and Warren Buffett. The $39,000 is a substantial amount for anybody, and $ 11.7 trillion is an astonishing aggregate for the nation. That's once in a lifetime, but it's still $140 billion a year.

I decided to ignore the 38% of historical costs which Obamacare covers (age 21 to 66) until its facts emerge. Just add the cost of the earning segment (21 to 66) to estimate whole lifetime costs. That does leave a gap of one third in the middle of life. If you don't know what the Affordable Care Act will eventually cost, you can't be confident what lifetime healthcare will cost. I'm confident lifetime Health Savings Accounts would cost much less. The Affordable Care Act has not yet convincingly described any cost reductions. But to be fair, neither do Health Savings Accounts. They reduce price by adding revenue.

{top quote}
The issue is how to transfer $238,000 from individuals in one group, to another group. {bottom quote}

Quick calculation now follows. Average lifetime healthcare expenditure (in year 2001 dollars per person) is in the neighborhood of $350,000. That's the estimate of statisticians at Michigan Blue Cross, confirmed by Medicare. Medicare takes half of the annual cost, from birth to age 21 takes another 8%, and we don't know the cost of the unemployables of working age, but they are 10% of the population. So, the new segment we assigned ourselves, involves at least 68% of national health costs, and probably somewhat more. That represents the basis for saying the working population 21-66 must pay its own costs and somehow transfer at least 68% more to what we will call the dependent sector. At a minimum, that's 68% of $350,000 per lifetime, or $238,000. Don't take it too seriously, but that's the ballpark.

Endowment funds traditionally aim for 8% annual return (3% from inflation, 5% net). The stock market has averaged 12% gain for a century, so 4% isn't exactly missing, but its disappearance requires convoluted explanation, later in the book. Starting with those bits of information and adding a few more, just re-arranging payments would get to the same final result-- by spending one-third as much money. The cost of separating employer-based insurance from all the rest of it, exceeds my abilities, so it will have to dangle. How we got to that conclusion isn't rocket science, but it isn't obvious, either. So let's make the conclusion easier: you can make a ton of money doing what is suggested. Don't complain it isn't two tons, or only half a ton, it is what it is. You can put this data through a bigdata computer, or use a slide rule, but you are still dealing with predictions about the future, which will contain lots of uncertainty. Although it will not make healthcare free, it implies savings of about $38,000 per person, per lifetime. View that saving in two ways: it's only about $500 per person, per year. Or, viewed as a nation of 316 million inhabitants, it saves $150 billion per year. Skeptics could attack the math as exaggeration, and still get an answer in billions per year. Tons instead of billions would be even more accurate, just sound less precise.

Next might come nit-pickers. You can't get 8% investment income returns a year, unless this, or unless that. Very well, just say this is the top limit of what is possible as an average, using average investment advice. The Federal Reserve confidently promised to keep inflation at 2%, but actually experienced 3% over the past century. Chairman Bernanke tried his best to "target" inflation up to 2% but inflation just resisted going up that far, and it's pretty hard to get any agreement about why it resisted. Accuracy just isn't possible when you are predicting the economic future. That's why the unit of measurement is in tons. Tons of money. Who will save it and who will steal it, is much harder to predict.

Some doctors, deans, drug companies, financiers and politicians will always try to increase their spending to equal any available revenue. About forty percent of the public will line up at the same trough. All that is beyond my control. You won't find one word in the accompanying book to suggest I endorse such behavior. All I did was write a cook book. The cooking is up to you.

George Ross Fisher, MD


June 28, 2015

The Schools of School House Lane

{Union School founded in 1759}
Union School founded in 1759

The region of Philadelphia defined as Germantown is recorded by the last census as having about 50,000 inhabitants today, 40,000 of whom are of the black race. Germantown has always had an unusual concentration of schools of the highest quality, and here on one street alone there are four. School House Lane runs off to the West of Germantown Avenue, and was originally right at the center of town, the center of action during the Revolutionary War. The most historic of the schools, the Union School founded in 1759, changed its name to Germantown Academy, and more recently picked up and moved to new quarters in Fort Washington. George Washington sent his nephew there, and its building served as a hospital for the wounded in the Battle of Germantown. When Germantown Academy moved out of Germantown, the Pennsylvania School for the Deaf moved into the vacated quarters. This school had been originally founded in 1820, and is one of nearly a hundred special schools for the deaf in the United States, operating as a quasi-public institution for about 170 students. A remarkable thing about all schools for the deaf is the high IQ of their students. Perhaps deaf underachievers are somehow filtered out by the struggle to adapt before they apply for admission, or perhaps there is something about being deaf that makes you smart. In any event, the average SAT scores of students from PSD, like all schools for the deaf, are always in the very highest ranks among secondary schools.

More or less next door to it, fronting on Coulter Street, is the Germantown Friends School(GFS), which enjoys and deserves the reputation of the most intellectually rigorous school in the Philadelphia region. There is little question about the Quakerness of this school, founded in 1845, but relatively few of the students are now Quaker children. It's pretty expensive, and quite uncompromising about its academic standards, but if you want to be accepted by a famous University, this is the place that can boast the most achievement of that variety. By no means all of its graduates become teachers, but alumni of this school do tend to gravitate to the top of academia. That could eventually put them on college admission committees, of course, and perhaps the admission process promotes itself. There can be little doubt that if most of a given college's admission committee happened to play the tuba, that university would soon fill up with tuba players.

{William Penn Charter School}
William Penn Charter School

Further West on School House Lane, is the William Penn Charter School. It's also Quaker, and while it doesn't work quite so hard at it as GFS does, it has plenty of social mission, a great deal more discipline, and plenty of competitive athletics. A minority of its students, also, are Quakers; but as a guess, most of its graduates are headed for disproportionate affluence anyway. The middle school is named for, and was donated by, the former chairman of Morgan Stanley back before Morgan Stanley sold itself to Dean Witter. This school was founded in 1689, and for a long time was located at 12th and Market Streets in Philadelphia, right where the famous PSFS building was built, the one that later converted to Lowe's Hotel .

Finally, near the crossing of Henry Avenue with Schoolhouse Lane, is the Philadelphia University. Since it was founded in 1999 it is the youngest of the schools on School House Lane, specializing in architecture and design, and seems headed for even broader curriculum. The University was formed by the merger of Ravenhill Academy for Girls, and the Philadelphia Textile School. The Textile School was itself formed during the 1876 Philadelphia Centennial, when local industrialists became concerned with how backward America seemed in its quality and design of textiles, compared with other nations which exhibited at that World's Fair. Next door, was once the home of William Weightman, a chemical manufacturer who was reputed to be the richest man in Pennsylvania. After his death, the rather grand estate became the site of the Ravenhill School for Girls, which was the school which could boast Grace Kelly for an alumna. That was natural enough, since she lived just around the corner on Henry Avenue and could walk to school. The contrast between the two ends of School House Lane, Henry Avenue on one end, and Germantown Avenue on the other, is just astounding.

So there you have School House Lane. A few short blocks with three distinguished preparatory schools and a university. Plus, the site of three other famous schools which have either moved or merged. You might think Germantown was the home of myriads of school teachers, but that isn't exactly so. It's hard to say just what this complex anomalous situation proves, except to voice the opinion that it is somehow at the heart of what Philadelphia really is.

Note, kind readers have also sent me the names of six more schools on Schoolhouse Lane. Some of them may only be name changes, but the list includes Parkway Day School, Sklar School, Philadelphia Textile and Science, Germantown Stevens Academy, Germantown Lutheran Academy, Greene Street Friends School. (See Comments.)

Here's the Deal

As this is written, trial balloons abound. The United States Supreme Court has held arguments about King v. Burwell and has had time to consider its verdict. Therefore, an announcement of its decision is awaited this month, possibly immediately. Rumor has it, the Court will declare the language of the Act states clearly that subsidies for healthcare to the poor shall only be issued by agencies created by the states. Since only a dozen states have created such agencies, it is generally felt the Act cannot be implemented, if it is to permit only health insurance which meets its standards to be issued. For some reason, the Act does not specifically mandate universal coverage, although it is hard to see what all the fuss was about, if that was not its intent. The last Congressional elections seemingly gave an overwhelming mandate disapproving the Act. In any event, Republicans are now in the majority in both houses of Congress, so it is just about inconceivable that the Act can be amended without Republican approval. If it is unworkable without amendment, and friendly amendment is in doubt, the default position would seem to be a "compromise" like the Magna Carta, in which the President yields to the Congress, with a highly disagreeable look on his face. But there could be other outcomes, and the Supreme Court is unlikely to miss an opportunity like this one, to triumph over the other two branches of government.

We thus have prepared a bargain to suggest, assuming a bargain is desirable.

Proposal. The parties would agree that both Catastrophic Health Insurance and Health Savings Accounts, singly or jointly, become specifically allowable options under the Affordable Care Act without age or occupational limits, and that all other interfering language in the Act or its regulations be removed. In particular, uniform tax deductibility is conferred by permitting health insurance and/or Catastrophic back-up coverage to be purchased by, or through, Health Savings Accounts.

(The amount of the front-end deductible would be left to the marketplace, adjustable no oftener than yearly, but may be subject to a general limit to out-of-pocket payments applying to all policies. All policies must meet a single solvency test, single definition of poverty limits, and single top coverage limit, but an appeal mechanism must be provided, etc. etc.).

Employers would be required to treat the gift of employee health benefits as simply an in-kind payment of wage costs, enjoying no special tax shelter.

(Employers and others are invited to submit alternative proposals to equalize healthcare taxation for everyone, within three months.)

I'm overwhelmed. I'm thinking of a one-line poem by William Blake: "Enough or too much" " stragglers who live from 85 to 91." Sorry to be a burden, but soon to be 91 I can still go a couple of rounds without huffing and puffing. You remind me of Dr. Melvin Konner.... professor.... anthropologist..... physician.
Posted by: Martin   |   Sep 27, 2014 5:16 AM
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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