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ROBERTS
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The 1937 Supreme Court (Owen Roberts, for the majority) allowed Franklin Roosevelt's New Deal to place the federal government in charge of all American commerce, not merely interstate commerce as the "commerce" clause of the Constitution provides. Congress, however, soon exempted the insurance industry from that federal control by passing the McCarran Ferguson Act. States were thus put back in charge of insurance, and it's about the only commerce they are in charge of. Out of this peculiar political anomaly, grows the present uncomfortably deep penetration of the local insurance industry into state politics. And over time, the unanticipated deep penetration of state politics into insurance.
In return, state governments have conferred at least one favor on insurance lobbyists unwisely. If an insurance company fails, subscribers angrily find themselves stranded. The patchwork solution arises, of assigning the obligations of a failed company to its surviving competitors. With no immediately visible cost to the taxpayers, that seems to rescue the subscribers. But it removes any point to competition, eventually raises premium prices, and overall, broadcasts moral hazard. That is, it doesn't matter how badly they behave, their competitors will have to pay for their mistakes. Moral hazard is the most insidious form of political corruption because it is so seldom punished.
Politically inclined state insurance commissioners have other favors to extend. Malpractice companies work in an environment with a peculiarly long tail. (Translation: It's at least six years before the average case is finally settled and paid.) A brand new insurance company collects premiums for six years before paying out much for claims. True, with unrealistically low premiums they are destined to go bust in six years, but there's a free ride in the meantime, including an available punt in the stock market with unspent cash. Investment income during those six years is chancy, making survival a gamble after six years. Lately, the true finances can be obscured by "finite reinsurance", which guarantees to absorb heavy losses, but often neglects to announce how briefly it will do so. It's the job of the Insurance Commissioner to decide whether premiums are realistic, the job of the auditors to assure that the complexities are transparent, the job of the competitors to complain if premiums are too low, and the moral hazard for the Insurance Commissioner arises -- from knowing in the worst case it won't matter to the subscribers, the competitors will bear the cost. Since Insurance Commissioners are usually politically appointed young lawyers, competing insurance companies are actually in political competition, not economic competition. As we say in Pennsylvania, you must Pay To Play.
These seamy realities can unexpectedly exploit premium differentials between medical specialties. There are a lot of lawsuits against obstetricians, neurosurgeons, and orthopedists; consequently, the premiums for these specialties are quite high. Pediatricians and general practitioners have low premiums reflecting infrequent lawsuits. Now, it might be supposed a company seeking long-term profitability would prefer to ensure clients who don't get sued. But here and there you can be surprised to see a new company with great eagerness for high-risk clients, people who get sued a lot. This paradox rests on the quick accumulation of big-ticket premiums from a mere handful of clients. Competitors are prompted to suspect companies with that behavior are looking to accumulate as much premium revenue as possible during a six-year free ride, even lowering premiums somewhat to generate business. But if they misjudge the stock market during those six years, all the other competing companies will likely be forced to pay for the gamble.
Once in a while, the totally unexpected happens. For example, some years ago thirteen judges in one city went to jail for accepting bribes. The Republicans wouldn't appoint Democrat judges, and the Democrats wouldn't confirm Republican appointees to fill the vacancies. During this impasse, Congress happened to pass a law leap-frogging drug offender cases ahead of everything else on court dockets; the unanticipated consequence was an eight-year period without malpractice trials. It became a sort of judicial coiled spring. Insurance companies accumulated huge reserves, the politicians squeezed down the excessive premiums as "windfall profits", money was made and lost in the stock market, and when finally the judicial logjam was broken, the cases had to be paid. Guess what. There wasn't enough money to pay the claims, and premiums took a big jump. Doctors and lawyers bellowed at each other that it was the other profession's fault. In a sense, that wasn't fair either way, although come to think of it, most judges are lawyers. As are most legislators. And Insurance Commissioners. These particular lawyers may not have participated in the problem, but only they are in a position to fix it.
America's health care crisis may well be solved by curing all disease
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Dr. Fisher
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America seems determined to invest whatever it may cost to eliminate diseases through medical research. It's pretty hard to know which diseases will experience a miracle cure, and how soon. So it's difficult to make major changes in the system in anticipation of what we all hope for. But it's not so hard to predict what will happen if we are successful.
Health insurance will progressively seem less necessary, and that will prove particularly true for young and middle-aged people. Since our present system of health insurance is largely based on employer-based groups, employers can be expected to become particularly restless about paying for it. Long before all diseases of working people have been completely eliminated, some clumsy political intervention could well cause a stampede among employers -- for the exits.
Even if everyone in the unions and in government is circumspect about alarming the mullets, steady erosion of disease costs among workers will lead to a steady migration of costs to retirees. For practical purposes, that raises the possibility that essentially all medical costs will become the responsibility of Medicare. Since it is universally agreed that demographics will make Medicare expenses unbearable for the national budget in ten or fifteen years, a shift of even more expenses toward the retiree group would be even harder to deal with. It's pretty hard to wish for some particular solution to a problem, when no one has even made a plausible suggestion about it.
So let's focus on the problem which is most likely coming first. Employer-based health insurance, and even health insurance, in general, may well be a thing of the past -- reasonably soon. The main component of it which will not be eliminated is the cost of obstetrics, the cost of perpetuating the human race. The charges being made for this normal and essential process are so burdened with liability risks that it is tempting to blame them all on lawyers. Cost-shifting to other activities and other age groups, however, is also pretty likely. If the concentration of overhead costs on obstetrics goes beyond a certain point, however, I would predict we will see a migration of obstetrics out of the general hospital environment into specialized birthing centers. That's not entirely desirable, because all specialty care is safer when conducted within reach of the whole range of supporting specialties. But if the financial pressure gets great enough, we will surely see a migration back to the specialty hospitals so common in the early 20th Century, then abandoned in the middle of the same century.
Worker's Compensation is another carve-out which will relieve central anxiety of employers, and hence hasten their indifference to general health insurance for their employees. And scandals in the health insurance industry are just going to accelerate the dissolution of support which is inherent in medical progress. Anyone who reads the papers carefully can name at least three billionaires among the ranks of health insurance CEOs.
The pace of coming medical progress is hard to predict, so it is daunting to propose a solution to the problems it will create. That includes proposals which many people would like to advance, like universal health coverage. Patchwork makeshift for uninsured people seems timid and defective. But grandiose proposals for fundamental reform of the whole system are simply foolhardy, at a time when health insurance may well become an obsolete concept, and far greater problems could be made much worse.
Employer-group health insurance will surely decline because so many are dissatisfied with it.
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Dr. Fisher
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Preamble
It might take a hundred pages to describe America's dissatisfactions with its health insurance system, but we mean to limit the grousing to features which could usefully be changed. The present system served us well enough for sixty years, and we tip our hat to those who struggled during depressions and war years to cobble together some kind of health financing system, never claiming it would be perfect. For reasons that were sufficient at the time, we ended up with a dominant system which is employer-based and reflects that fact. In this book we skip the quaint history, going right to the advantages of gradually migrating to better systems, which surely means migrating away from employer group purchasing. An important word is gradual because we must fix this engine without turning the motor off.
Later on, we'll return to what's significantly awkward about employer group policies, but here let's summarize complaints in a paragraph. The predicament of employers, first, is that instead of pre-paying for health care which defines what it covers and how much the items will cost, employers now pay for "service benefits". That's merely a best-efforts description of the scope, while the associated prices no longer relate to either costs or the marketplace -- undefined scope and prices are blank-check health insurance indeed. Next, many employees feel they receive a poisoned pill. They get "job lock", where insurability is suddenly in doubt whenever they change employers. Even more, employees fear what might happen to their health care if the employer must suddenly reduce expenses. Third, being outside this system is no escape from it. Congressional tax preferences seem entirely unfair to anyone who doesn't get them. In fact, even those who do get tax breaks suspect hospital cost shifting merely taxes it back. Taken as a whole, employer group benefits are a third-party system twice removed: those paying the bills suspect their insurance vendor doesn't supervise enough. But employers are reluctant to pay insurance companies more money to supervise services because they know neither one of them can directly observe it. Economists mutter the insight that health benefits really aren't employer-stockholder money at all. The money belongs to employees in lieu of higher wages, so what right do employers have to constrain how it's spent? Both employers and employees view health benefits as a boomerang they can't even throw away without getting hurt. Fairness notwithstanding, the American Academy of Actuaries estimates the waste in the third-party arrangement is at least 30% more than people would pay with their own money; that's roughly what they get as a tax deduction. Finally, the uninsured don't complain about exclusion as bitterly as you might suppose; roughly half of them could afford to buy it. The country struggles to give health insurance to absolutely everyone, but a growing number of people absolutely don't want it. There's more to say, but this should get us started.
This book asks the reader to trace complaints back to causes, and unite around objectives. The employer-based system stands in the road of other approaches, some of them quite attractive. We could rather easily work for a system where each person selects and owns an individual policy. Right now, workers participate in a group policy owned and selected by an employer. As a matter of fairness, employees ought to own and select their own health insurance, and it wouldn't be terribly hard to do. Even if you regard fairness as a loser's argument, the switch might be made so that much better products --currently blocked -- can flourish. The main focus of this early chapter is on some potential opportunities within individual ownership of health insurance, gained by employers surrendering ownership of group policies, one by one, on request by each employee. The first of the advantageous opportunities, the Health Savings Account, already exists after a long struggle. Other alternatives which follow might be even better, but experience with this one teaches some important lessons. Primarily, almost all variants require legislation, because the existing system has resorted to the government to enforce its bargains. Furthermore, sufficient public enthusiasm must emerge to persuade insurance executives that enough market exists to justify the development effort. Both Congress and the Insurance industry must be persuaded the public is behind them, and both are tough to convince. By far the best way to convince anyone of anything is to conduct demonstration projects, experiments if you will, capturing what works and discarding what doesn't.
Health Savings Accounts
Health Savings Accounts started in 1980 and by 2007 have slowly grown to ensure 13 million persons. Because of impediments in various state laws, the distribution of HSAs is uneven geographically (see Figure 1). Since the pattern closely resembles the red and blue maps of the 2004 presidential election results, observers have perhaps unfairly attributed HSA resistance to devious politics. That may be true in part, but the pattern more likely follows the distribution of laws intended to foster employer group insurance, and thus reflects concentrated industries, especially the steel, coal, and auto businesses. HSAs, therefore, tend to be legally hampered in areas of heavy union influence, although seemingly they should not injure unions or provoke their opposition, and unions may not be mainly at fault.
These HSA accounts have two components, the catastrophic health insurance policy, and the tax-sheltered savings fund. These two structures revolve around the familiar advantages of high-deductible insurance, which is considerably cheaper than fully inclusive insurance because it avoids the heavy processing costs of myriads of small claims which most people could afford to pay for in cash. That concentrates the coverage to high-cost claims which, although less common, present the dual catastrophe of often being unaffordable and almost always putting the beneficiary out of work. Almost everybody needs some kind of catastrophic protection, although the size of the deductible might vary among income levels. Secondly, to be attractive to young people and others without significant savings, the savings account feature was added, as a way of providing the funds to pay for small claims and deductibles, without losing the cost awareness of paying for services directly. This savings and insurance combination was made tax-exempt in an effort to enhance attractiveness in competition with the tax shelter now accorded to conventional health insurance provided by employers and covering the same range of services. The Health Savings Accounts, therefore, were a step in the direction of extending health cost tax exemption to everyone and shifting cost control decisions into the hands of the patient by awarding the savings to him. Permission to save unspent funds in the accounts from year to year created portability between jobs, and thus lifetime coverage. A final incentive, the ability, in theory, to strive for paid-up lifetime insurance, was thwarted in Congress by prohibiting the money in the accounts being spent on the premiums of the catastrophic insurance. It would be of some interest to know who in Congress promoted this prohibition, and what the reasoning was.
Proponents of this reform measure proceeded in their advocacy with the charming innocence of those who believed they had a splendid idea for the benefit of everyone. Anyone who resisted, must not understand the issue very well and needed only to have it explained in greater detail. This feeling was heightened by seeing groups oppose the HSA who would seemingly only stand to benefit from it. Since experience has shown that a third of those who enroll in HSAs have previously been uninsured, it would seem reasonable to expect the uninsured and those who work in their behalf, to support it. Sellers of individual health insurance were expected to recognize the enhanced commissions of selling lifetime portable insurance compared with the drudgery of flogging annual renewals. Insurance company risk was removed entirely except for the catastrophic coverage portion. Unions, who prize their ability to pressure health insurance companies on their members' behalf should welcome a role in advising members on the best choices for their money. Those who negotiate for higher wages and benefits would seemingly welcome the diminution of vague "service benefits" as a tool and the substitution of visible actual dollars into the accounts as a collective bargaining achievement. Union members individually would seem likely to carry their objections to managed care plans to the logical conclusion of reaping the rewards of cost containment for themselves, without impairing freedom to spend extra for luxuries if they please. One would have supposed union members would actively welcome the sort of insurance that gave them free choice of their doctor or hospital. Ultimately, you would suppose that union members would wish to lighten the burden of health costs of their employers if only to demand higher pay in return, or alternatively to preserve their jobs from the ravages of foreign competition. But alas, legislative experience has been quite different. Prohibiting the use of tax-sheltered accounts to pay health insurance premiums is an inexplicable clause inserted by opponents of the proposal. Prohibiting the use by employers of more than fifty employees was another. Limiting the number of people who could have these accounts to 750,000 was still another unaccountably restrictive Congressional feature. It is almost as though there was some strategy of inhibiting the spread of these policies, with the ultimate goal of calling for total elimination based on lack of interest. The original pioneers of this program, now twenty years older, trudge on in bafflement at resistance, but rather steadily enlisting new subscribers in the states where they are permitted by local law. One consequence would appear to be a resurgence of local state resistance to the interstate sale of health insurance.
In a certain way, other obstacles in the road of HSA accounts do contain some understandable logic. For the most part, they are the residuals of old state laws which once enhanced other projects with at least comprehensible goals. For example, mandatory benefits. Chiropractors, optometrists, physiotherapists and a host of other limited license practitioners fought long, hard, and expensively to lobby laws into existence mandating payment for their services as a condition for any health insurance in their state. These primarily outpatient groups see high deductible insurance as a way of raising the insurance threshold above the typical price of their services, thus excluding them from a federally subsidized system. Before ERISA was passed in 1973, special mandates were added in state legislatures by the hundreds each year. That led to interstate businesses going to Congress for relief from the need to satisfy varying requirements in fifty states. This difficulty was garrisoned by the McCarran Ferguson Act of 1945, which uniquely excludes the business of insurance from federal regulation. Just how we got here from the original antitrust dispute is hard to explain, but nevertheless, anyone can see that toppling this complicated structure would require a fierce political campaign. Therefore, by far the easiest pathway is to amend federal law to make it clear that conflicting state laws are pre-empted. Essentially, that is what ERISA accomplished, and when amendments are proposed, why employers regard ERISA as so untouchable.
Ratio of Prices to Underlying Audited Costs
Beginning this book with a discussion of the struggles of the Health Savings Account brings us to bang against what the reader will soon learn I consider the most intractable issue in American health care reform. It's an outward symptom of the issue which must be addressed if significant progress is to be made in health reform of any sort, and it won't be easy to address it. My plan is to defer analysis in depth until later, after first describing one by one how it blocks progress in every single promising proposal. Only when it seems likely the reader has become thoroughly fed up with it, will we attempt to lead through its very complicated analysis. Please be patient with a very brief introduction, first showing how destructive it is to Health Savings Accounts.
To be eligible for Medicare payment, every hospital must submit an audited Medicare Cost Report. That makes it public information, subject to the Freedom of Information Act (FOIA) of 1966, although rightly any competitive organization is uncomfortable about divulging business information. A significant item on the Medicare report is The Ratio of Posted Charges to Costs. That is, the audited costs are divided into posted charges of the same year. If a not-for-profit hospital just breaks even for the year, the ratio might be expected to be about 1.0. With the allowance of say 4% for bad debts, the ratio could be 1.04. Because Medicaid commonly underpays for its share, the ratio might have to be 1.20. But that reasoning gets you to the wrong conclusion; the ratio is commonly five or eight times greater than that. To make this idea more comprehensible, an electrocardiogram with costs of $25 carries a posted price of $380 in at least one hospital; that would create a Charge-to-Cost ratio of 15.02. Fifteen times its independently audited cost? There is considerable reluctance to defend or discuss this matter, so it, unfortunately, invites speculation, both fair and unfair.
The reason for introducing the charge to cost ratio at this point is to identify a vexing issue which
makes health insurance seem so essential, while simultaneously interfering with making affordable insurance available. A person even a wealthy one must have health insurance to protect himself against overcharging. Those who cannot easily afford health insurance look to high-deductible Health Savings Accounts because that makes insurance cheaper. Unfortunately, cash savings within the accounts can be quickly eaten up by even moderate exposure to huge price mark-ups. The attractiveness of these accounts is thus limited to those young healthy people who have no real health expenses, and to residents of those regions of the country where the practice of massive overcharging is uncommon. Without encumbering this narrative with too much detail, that is the explanation for the slow steady progress of HSAs and their peculiar geographical distribution. If a representative charge for an electrocardiogram is $40, HSAs are a bargain. But if an electrocardiogram costs $380, purchase of HSAs is mainly restricted to those who have no great need for electrocardiograms. The outlook for HSAs is not completely bleak, however. At some time and in some areas the mass of subscribers will grow to a size where they can force the hospitals to confer a discount. Using collective purchasing power and the threat of publicity or even lawsuit, certain local brokers of HSAs have worked out arrangements for their members to receive market prices for their outpatient services. The most effective argument with hospitals has been that HSA holders do not create bad debts in their co-insurance. Unpaid deductibles and copayments are now the largest sources of bad debts for most hospitals.
While focused on the hospital markup issue, let's engage in some unproven conjecture about it. Hospitals actually construct these inflated prices, but at first glance, they would seem to have no great motive to antagonize cash paying clients this way, or to injure poor people, or to drive outpatient work toward free-standing clinics and doctor's offices. As a matter of fact, there is a small incentive in the rare wealthy foreigner who pays full freight, and the Medicare inpatient loophole of charge reimbursement for "outliers", cases with unusual costs. However, regulators are struggling to close such loopholes and cash payments are rare. I remember one oriental dignitary, reputed to own 8% of his country's Gross Domestic Product, who pulled out a wad of hundred dollar bills to pay a hospital but totally befuddled the hospital clerk who didn't know what to do with real money. For every instance of this sort of thing, there are a hundred instances of hospital administrators genuinely distressed by their own mandate to collect seriously inflated bills from poor people.
Well, if hospital top management is conflicted by devising this practice, and mid-level employees are distressed to implement it, well, who else has a motive to continue this markup? The obvious suspects are two: health insurance companies and Medicaid agencies. Obviously, sellers of health insurance rejoice in a situation where even people without important need for health cost protection must nevertheless buy it to protect against gouging. Think of an insurance executive before his home television, watching Presidents of the United States searching for ways to make their product mandatory for every citizen, and weeping because it is unattainable. Yes, health insurance companies have incentive to favor high hospital posted prices, but still it is difficult to see why hospitals would cooperate. State Medicaid agencies might also develop a motive to increase their own Federal reimbursement, and have occasionally engaged in some questionable maneuvers to do so through the arcane formulas of federal-state cost sharing. What's more, state governments are often in a position to help hospitals who play nice. In a naughty world, some of that may go on, but massive conspiracy seems implausible. So, if those with potential incentives are unable to force compliance, why do hospitals do this? Why would they persist in something they privately deplore, silently biting their lips at the criticism it provokes?
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Locked Savings
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We have already discussed how relatively easy it would be to anticipate the average medical costs of everyone's last year of life, put the money into a securely locked piggy bank, and gather interest to help pay for that dreadful last year in the same way whole life insurance pays for funeral costs. One hard part is to keep Congress from dipping into the lockbox, or the Federal Reserve from robbing its real value by allowing inflation. However, if protecting the Lifetime Escrow can be presented as financing everyone's health into old age, the public might well rally to it. Any agitation necessary to defend the piggy bank might by itself be a boon to reminding the public what is at stake for them. By comparison, generating the funds might actually be the easy part.
But what about the first year of life, whose expenses have already been spent? (The term is loosely applied here to include pregnancy and post-partuum, plus pediatrics). The concepts are introduced of pre-funding terminal care, paying off the debts of getting born, and current-funding the long healthy stretch through most of life. The proposal is to merge it all after transition steps taking decades, fully recognizing that some people will have to pay twice for having been born, and some will never pay for having to die. Indeed, in any insurance plan, there is some unfairness in order to remove risk. First, get the terminal care fund established and funded, showing benefits in the first year or two as proof of the concept. Then, start collecting additional contributions to the terminal care fund for the moral debt each citizen has for his early childhood costs, and do it for perhaps ten years. Add this money to the terminal care fund, but make its finances as visible as if they were separate. Meanwhile, keep chipping away at the maternity and childhood costs of litigation. The first chip is to recognize that malpractice costs are disproportionately concentrated in this group, so the fund would greatly benefit from tort reform. Vaccine costs are also strongly influenced by liability costs. One subordinate goal is to present the cost of childhood as partly a score-card on progress in tort reform, broadly defined, ultimately rallying the public to restrain itself in the jury box. The mechanism would be to dramatize the disproportionate concentration of these costs by local and national aggregation, letting the news media speculate on the variation.
Finally, it should be said the Health Savings Accounts are a vastly more flexible way of paying for health care than using the service benefits approach, at a time of great flux in the system. These accounts are described in greater detail in subsequent sections, but the main advantage at this point is to translate fund transfers into money without service benefit attachments, to make unification and substitution more plausible.
To some degree, service benefits are in conflict with indemnity benefits, in a manner resembling the conflict between debt and equity in the banking sphere. The best one can hope for is to shift the location of the interface between service benefits and indemnity, bringing the friction out into public view, and equalizing the power of contending sponsors. Therefore, the best place to present the issues is to regard DRG diagnosis groups as service benefit subsets, and outpatient costs as aggregated indemnity. But one of the main mistakes of the DRG system was to extend it to every hospitalized inpatient. This is particularly important in situations where the diagnosis has no relationship to a particular length of stay or average cost level. Inpatient psychiatry should be paid for as if it were an outpatient service, and chronic diseases such as Alzheimer's disease should be excluded from DRG as well. Emergency room visits should also be separated into two groups, depending on whether the patient is subsequently admitted to the hospital.
We started by saying these issues should be chipped away, during the period when more pressing issues are being addressed head-on. The first and last years of life are disproportionately expensive, so they need special attention to cost reductions. But the list of other small issues is a long one, providing ample opportunity for trade-offs within ambiguous opportunities. The main goal of these new proposals is to redirect cost-shifting perceptions from something to escape if possible, into a vision of advancing sensible provision for your own risks at a different age. The notion of generating investment income is not a small part of the notion of prudent behavior.
After this short treat, of a long-term vision, we now return to more practical short-term proposals. The heart of them is the Health Savings Account, but several preliminary features must be explained in advance.
We propose the development of a lifetime health insurance product, for the main purpose of gathering investment income on the insurance premiums. It reduces the cost of health care by adding that new revenue source, which at the moment is simply lost. The longer compound interest is allowed to work, the more income will be produced, to the point where it can be imagined that this income source would more than cover the cost of health care. For the most part, it would really only cover a portion of the cost, but a very large one. If things are cheaper, more people can afford them, so the problems of the uninsured are eased. This system would take many years to make the transition to wide-spread coverage, so many features of the Affordable Care Act might be temporarily useful. Many people who resist Obamacare are unable to see an end to it. As a transition, Obamacare would become a success if some other program is a success, first.
First, the law requires two things to be purchased at once: an investment account, and catastrophic health insurance. Deposits into the Account are tax-exempt. Withdrawals are restricted to health costs, not including the premiums of the catastrophic insurance, but the internal investment income on the deposits compounds tax-free. The framers of the enabling act apparently did not anticipate that many or most children would, under Obamacare, already have mandatory coverage on their parent's policies up to age 26, under their parents' policies, so the overlap is a little ambiguous. Apparently, however, there is no limitation to single health policy, so dual policies appear to be allowed. As long as the law requires money to be withdrawn from an Account only for health expenses, many people during the transition will find they already have health insurance, but not enough money in the account to cover the required minimum deductible. Unless they can make a deposit and see it grow, they will never be able to start an account. So, especially for children, the required deductible should match the amount in the account, not the other way around. It scarcely matters which it is, except the child rarely has control over the parent's policy, so the law should be amended to allow an HSA to be created without catastrophic coverage, until such time as some flexible minimum deductible is reached, even if it is necessary to prevent all withdrawals until the minimum is reached.
Perhaps this issue could be addressed for children with a single-payment deposit. It seems a great pity to prevent lifetime accounts which could be made for a nominal single payment, simply because the parent has a low-deductible policy and cannot or will not change it. Alternatively, it is an equal pity to require a child to have two other health insurance policies, when the reality is the healthiness of such children seldom requires even one policy. Since lifetime health coverage is within reach for a single payment of less than a thousand dollars, it is much easier to envision subsidies for the poor of that amount. Lifetime average health expenditures in the range of $300,000 are largely made up of inflation costs which reduce a dollar to the value of a penny, over an ensuing century. There are few ways for the poor to escape inflation, but this would be one of them.
That gets us to age 26 when employer-based insurance makes an appearance. Or makes a disappearance, replaced by Obamacare; we must wait to see what happens. Present law permits a deposit of a maximum of $3300 in the accounts, until retirement at age 65, when Medicare takes over. That could result in a deposit of $128,700 at age 65, which with 7% compound income within the account would amount to $610,000 total in the account, but an unknown amount subtracted for exceeding the insurance deductible. Since additional deposits are not permitted to people receiving Medicare benefits, $610, 000 will have to last for the duration of life expectancy, calculated to be age 90 by then. Assuming the same 7% return on investment, that amount is short of the $3 million single payment deposit which would be required (at age 65) to pay for average health costs to the end of that life at 2014 prices. And probably not nearly what year 3004 prices might become. To achieve that, 10% compounded income would be necessary, both to reach the end of life, and to augment those deposits of $3300 yearly to $4.5 million, the point where they and their investment income would meet the need. Although Ibbotson's curve encourages the hope that 10% return might persist for a century, there is little doubt that long periods of 1% income would bankrupt the system, resulting in only $156,000 gross before illness expenses at age 65, and unguessable effects on medical costs after that. Large numbers of people would not even be able to afford annual $3300 deposits into their Accounts. But there are two ways out of this trap.
In the first place, no one claimed that 99% of future medical costs must be met by this approach. The claim is only that large amounts would be "found money", not found at present; don't be greedy, since not a penny of this money is being utilized at present. And secondly, it would be manifestly unfair for Medicare to continue to collect payroll taxes from one age group, and Medicare premiums from another, if the plan is for this individual to bear his own costs. Accordingly, these payments could partly be waived, and partly deposited directly into the Accounts rather than into the U.S. Treasury. The Treasury itself would be amply compensated by putting an end to the present 50% subsidy of Medicare costs by the taxpayer, assisted of course by foreign loans, mostly Chinese. There is a political risk, of course, that opposition politicians would encourage the elderly to believe that Medicare is about to be taken away from them. Almost everyone enjoys getting a dollar for fifty cents and is suspicious of claims that, otherwise, they will get a penny for a dollar. It would thus seem better timing to begin at the other end of the age spectrum, building up a constituency for compound interest, the Ibbotson curves, and Health Savings Accounts, and meanwhile waiting for competitive proposals to flop. It would take six months of intensive publicity to convince people who don't want to believe it, that Medicare is 50% taxpayer subsidized. It would take another six months to iron out all the unsuspected technical flaws in the proposal.
And it would take time to create a bipartisan think-tank, to collect the necessary data and make the necessary calculations. Perhaps some philanthropists will offer to do it privately, saving us from the criticisms of agencies like the Federal Reserve, which are accused of being less "independent" than they claim to be. The first step would be to put it somewhere other than Washington DC since there is no need to be seen as close to those who threaten your independence. The divergence between costs and revenues must be monitored and adjusted to; sudden changes in direction must be responded to.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.