The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) 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.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay 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!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut 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.
Sixth and Walnut over to Broad and Sansom 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.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) 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.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
The Northeast portion of America is cold; most of its public concern traces back to high prices for fuel oil. The Southwest, however, is warm and more concerned with house prices and mortgages. Air conditioning has been the main source of the South's revival. This geographic split in attention will have a powerful effect on politicians in an election year. We can only hope the ambivalence cancels out and restrains legislative action until it is at least clear what the extent of the damage is. Meanwhile, don't do something, just stand there. A central question is whether there are too many houses in California, or too few. For decades, Westward migration outpaced housing construction, so California house prices have long been too high, mortgage lending too "innovative". While it is natural for western builders to feel there are now too many houses for sale in California, a case can be made that present noises are merely squawks as house prices settle to more reasonable levels. With luck, the West may just ride it out. But after adjustment for current emigration, an excessive number of housing units per capita might just warrant paradoxical solutions for California. Empty houses usually breed slums, that's pretty simple. But please, could someone explain securitized mortgages?
Other sorts of people should be pondering where the long slow decline of banks is going to lead. It makes a difference whether regular banking and investment banking will merge -- or have a collision. Much will depend on how well the two industries manage their massive computer systems; the heavy reliance of commercial banks on software vendors (rather than doing their own programming) is not an encouraging sign. The person who can fix their problems lives in India. Something is going to have to change in the way the Federal Reserve manages the money supply if money is largely borrowed abroad. Commercial lending migrates toward non-bank sources and eventually deprives the Fed of useful tools. Commercial banks, investment banks, and the Federal Reserve all have different sorts of risk. But when a complex system is placed under stress, it is the weakest link in the chain at that moment which breaks.
On St. Patrick's Day, 2008, Bear Stearns became insolvent and was given to J P Morgan. The Federal Reserve assumed all risks. Effectively, the fifth largest investment bank in America was nationalized for $2 a share, because no private bank would buy it at any price. A year earlier it was worth $170 a share, even one trading day earlier it sold for $26.
At the heart of this catastrophe were "repo's", or repurchase agreements. (They should not be confused with repossessions of cars and other hard goods bought on time, which are also called repo's.) Although most people had never heard of the high-finance version of repo's, the volume of these instruments had grown to $5 trillion by January 2005, presumably even several times larger than that when they caused the nationalization of Bear Stearns. Newsmedia accounts offered the guess that 16% of the resources of the whole financial sector were caught in open repo's when the music stopped. Repo's must be awfully good, or awfully bad.
J.P. Morgan
They were both of these things at once. Like so many innovations in the post-computer era, they offered a major cost saving to an inefficient transaction system but were so successful they overwhelmed the institutions which flocked to their reduced cost. The unanticipated difficulties might have been imagined, but they were not adequately guarded against. Essentially, these loans limited exposure to a few days, a feature that made them appear quite safe. Unfortunately, tons of these loans could expire simultaneously if a rumor got started and everyone held off using them for a week. With a run on a bank, at least people have to take action to withdraw their money; but with these things, simple inaction quickly led to massive cash shortages at the bank. Speeding up the loan process had made it cheaper, but made it vulnerable.
Hedge Fund
Consider the inefficient complexities of a bank loan. The bank wants collateral, perhaps 80% of the value of the loan. The ability of the borrower must be investigated, a clear title assured, and papers arranged for transfer in case of defaulted collateral. Lawyers must organize the agreements, and it all takes time, costs money. To go through all this for a one-week loan for anything less than huge transactions is simply not practical. So the idea was devised to sell the collateral to the lender at a discount, together with a repurchase agreement to buy it back at full price. For safety sake, the discount could be greater than the interest cost, and part of it returned if all went well. The collateral could be held by a third party, who essentially guaranteed the details while the collateral itself never moved. Bear Stearns had perfected these variations at such favorable prices they dominated the market for them with hedge funds; the margin for error narrowed when interest rates dropped, cash got scarce when investors got uncomfortable, the whole hedge fund industry was suddenly paralyzed, and everything connected to hedge funds was frozen secondarily. Much of this was handled automatically by computers, so huge volume made it impossible for anyone to know who might be insolvent. It seemed comparatively harmless to decline to play this game for a few days, but it was not harmless if most people decided to do so at the same time. The daily variations of interest rates and/or duration generate a ("Gaussian") normal distribution curve for the risk, predicting serious deviations will occur once every two centuries. But when events --even false rumors -- suddenly get everyone's attention at once, small daily fluctuations no longer bear much relationship to the frequency of violent fluctuations. Once-in-a-century events start to happen every few years. At those times, the public stops speaking with a million voices and shouts in unison. Quite often, there is no cataclysmic event to trigger it. Like the conversational babel of a dinner party, it can all stop at once for no particular reason.
Black Swan
The mathematics of this matter could be taught to a tenth-grade math class. It starts to get beyond everybody's anticipation however when two such Black Swan events happen at the same time. In this case, an unanticipated pause for a few days bumped into the rule that non-bank institutions must mark their portfolios to the market every day. But for days at a time in this crisis, there could be no trading in certain issues; there was no market to mark to. How then can you demonstrate your solvency -- what might your competitors be hiding during these unannounced market holidays? And, since banks are in the same pickle but aren't required to mark to market, how can you trust them to pay bills? When you see European banks, who must obey new rules called Basel II, go bankrupt and get nationalized, how can you be sure American banks, who needn't obey Basel II until 2009, are any safer bet?
Progress is progress, but how much of it can we cope with?
Foreward: Written as Obamacare is beginning implementation amidst considerable resistance, the following paper offers an alternative proposal which is perhaps no less sweeping, but includes much more reform of the existing system than does Obamacare, and much more emphasis on the use of competition and individual responsibility. It is divided into three sections, I: Correcting Non-Cost Issues, II: Correcting the Cost Problem, III: Forestalling Unfortunate Side-Effects.
I: Correcting Non-Cost Issues
The Uninsured. Gail Wilensky, who once ran Medicare, recently commented about Obamacare, "It isn't reforming at all, it is merely coverage extension." Unfortunately, even though it seems to promise universal coverage by mandating it, the GAO estimates that over thirty million people will remain uninsured after Obamacare is fully implemented. Indeed, it is very difficult to see how to include illegal aliens (11 million), the mentally retarded or impaired (8 million), and those in jail (7 million) within one big program which adjusts to the situation of the rest of the American community. The proposal here is to revise downward the idea of universal coverage, to whatever extent the usual form of health insurance is unsuitable for these three (and possibly other) groups. Their special health needs are not easily adaptable to conventional health insurance and would be better served by specialized healthcare programs, structured with their particular problems at the center of the design.
Pre-existing Conditions The American public has become convinced that sick people have only two choices, Mandatory Insurance with compulsory community rates (i.e. Obamacare), or go without insurance. As a matter of fact, every textbook of insurance will list at least three ways of coping with "impaired risks." The industry terms are "Assigned-risk Pools", and Joint Underwriting Associations (JUA). One highly successful model exists for fire insurance, called the Fair Plan. A new insurance company was formed by selling stock to existing fire insurers, which sells fire insurance at standard rates, but only to someone who has been rejected by an ordinary fire insurance company. This form of impaired risk management was the preferred vehicle of the Pennsylvania fire insurance industry because the stock ownership enables the owners to take a tax reduction for losses. Somewhat to their surprise, the Fair Plan proved to be counter-cyclic in a cyclic industry, and actually produced a profit (for the insurance company owners) during economic downturns. An additional source of revenue was provided when other states than Pennsylvania requested to be included. Fire insurance is not the same as health insurance, but they are similar enough to appear workable for managing bad risks with a medical Fair Plan, which deserves at least a pilot study.
Under Obamacare, the problem of pre-existing conditions is solved by individual subsidies, an endless prospect, and by forcing those who do not want insurance to pay the bill for it. The main resistance to a JUA will probably be found among dominant health insurance companies, who have enjoyed near-monopoly status for many decades. Sharing risk is unattractive to them: when there is hardly anyone to share it with, and while historical "sweetheart" arrangements still remain ensconced. To the extent that a JUA would force readjustments, Ms. Wilensky would certainly not lack topics for revision.
Income Tax Reform. Representatives of large major corporations have twice disrupted Federal health proposals at the last moment, after a long period of lobbying as a supposed friend of reform. To that extent, they are friends of conservative forces in medical care. Nevertheless, it is now well past time to demand that their income tax preference devised by Henry Kaiser during World War II be eliminated. The employer gets a tax deduction, and their labor force escapes federal taxation for the gift of health insurance outside the pay packet. Meanwhile, the self-insured and uninsured are asked to pay for health insurance with after-tax income. In summary, the favored arrangements of their insurers with hospitals lead to a preposterous result (which would continue under Obamacare) that the people least able to afford high costs are the ones required to subsidize the people with the best jobs. This situation has three possible solutions: eliminate the tax preference of employed persons, or give the same to the rest of the country. Since there is little likelihood that this situation will be self - correcting, the obvious third choice is to cut the exemption in half and give the same to the rest of the population. No one needs to give Congress a lesson in such compromises, so obviously, progress will require a public uproar.
Interstate Health Insurance Competition The amateurish introduction of Obamacare's health insurance exchanges poisoned public opinion; it may now be even harder to address the political problem they tried to solve with computers. Tracing back to Constitutional restraints on Federal activities, health insurance has always been regulated by states. As a consequence of growing scope and complexity, many states had to choose between multiple small health insurance companies displaying vigorous competition, and a single large-but-effective monopoly in each state. To exaggerate, the result verged on fifty monopolies exhibiting monopolistic behavior.
Instead of devising a Constitutional work-around, Obamacare devised computer solutions to basically political difficulties, using computer subcontractors. It is possible some legislative designers understood the model of the New York Stock Exchange, which permits an interstate exchange to perform the single function of conducting competitive financial transactions between buyers and sellers of corporations which are themselves state regulated. They may have observed that computers superseded manual systems at the stock exchanges, so they took a short-cut. Integration would have required insurance experts and computer implementers to work together, preferably under one roof. A one-step version of this two-step idea might have transformed fifty local monopolies into a system of competitive interstate pricing. But this would have been and continues to be, a daunting time-consuming political process requiring very considerable negotiation with deep skepticism about advice from industry experts with axes to grind. As it now stands, any benefits will prove just as delayed by rushing computer solutions first, as by making the computer system the mathematical statement of a negotiated design. Indeed, negotiations among pseudo-cooperative partners commonly prove more filled with traps and smoke-screens when linked to other objectives, than if the exchange idea had been selected as the single, otherwise unencumbered, goal. It might have taken several election cycles, but the outcome would have been more acceptable.
II: Correcting the Cost Problem
Health Savings Accounts Unless Obamacare regulations somehow cripple the idea, there is nothing right now to keep anyone from starting a Health Savings Account and gather tax-sheltered income for the inevitable rainy day. Everyone should do so, regardless of any other insurance they may have, and right away.
However, Health Savings Accounts once assumed the need would terminate when the individual enrolled in Medicare. The turbulent arrival of Obamacare now raises concern that Medicare will be stripped in order to pay for Obamacare. Since the "single payer" system is the fall-back or possibly even the goal of Obamacare, its final goal is also redefined as lifetime coverage. Whatever the path, it becomes important to project what it might cost. The additional compound interest feature of Health Savings Accounts creates the possibility that HSA is the only approach which could succeed or at least be the first to reach achievability. The steady conquest of disease by Science, the steady increase in productivity by Commerce, the expiration of patent protection, and the relentless tendency of expensive illness to concentrate near the last year of life -- all suggest a feasible lifetime approach is likely within the next sixty years. The best path to feasibility is not speculative borrowing, but inducing the upper 50% of the population by income to overfund their HSAs, by allowing some acceptable ways to spend the unspent surplus. Over time, financial goals should become more precise, and deliberate surplus progressively lessened. As a matter of fact, considerably more than half the population could afford this approach right now, an extension to the rest of the population faces resistance which is more psychological than financial.
In the meantime, individuals need reinsurance. Competitive and political obstacles to high-deductible reinsurance are numerous, but almost all forms of traditional (formerly first-dollar) insurance are arriving at high deductibles by themselves. If that takes too long, individuals with funded HSAs are driven to become over-insured rather than re-insured, by distorting traditional insurance into reinsurance. That is a wasteful approach. Elimination of co-payments (and secondary or tertiary insurance to cover it) with no proven cost-restraining ability, would greatly accelerate the trend to high front-end deductibles, and that trend should be encouraged. Other foreseeable issues would be the sudden appearance of an expensive treatment which greatly prolongs life. Since everyone ultimately dies, this might transform a steady rise in lifetime health costs into two distinct bulges, which is more expensive than one bigger terminal bulge. At the present time, however, new cures for disease merely push back the inevitable average terminal care costs, to a later age. Another way for the future to confound predictions is for the cost of labor to rise more sharply than the Gross Domestic Product since medical care is labor intensive. Finally, life-sustaining organs could become enhanced more than life-enhancing organs, giving us an epidemic of blind people in wheelchairs in place of the charming wits and sages we imagine for our future. None of this is within the control of insurance reform, so we may just have to wait and see. Meanwhile, it would help a great deal for the information-gathering to begin steps toward the goal of continuous monitoring of costs, and projections of future moving cost trends. A universal HSA program will be slowed more because it is new, than because it is impossible.
The Health Savings Accounts uniquely provide a way to circumvent the problems created by "pay as you go," mainly making it possible to gather compound investment income on the unused premiums of young people, no matter how long it takes them to get sick and use the funds. Lifetime HSA also eliminates the issue of "pre-existing conditions", since all costs are calculated into the premiums; and thus it also eliminates gaming the system by those who delay the purchase of the insurance policy. These last two features of lifetime HSA require up-to-the-minute cost data, whereas the compound investment of idle premiums in an HSA terminating at age 65 probably does not. Either way, compound investment income is an intrinsic and unique feature, which has the great advantage of already having the sanction of law. Individually owned HSAs are portable, as employer-based insurance is not, and offer equal tax exemption.
Health Savings Accounts are disadvantaged by a general lack of discount arrangements with hospitals, long arranged for Blue Cross organizations and grudgingly given to newcomer competitors. HSAs lack a large sales force and are sometimes neglected by salesmen of high-deductible insurance, as well as exploited by debit card agencies with unnecessary fees, and investment advisors with excessive fees. All of these things are based on competitive resistance and are not inherent in the insurance plan. More effort should be made to ease them.
Compound Investment Income. Most people, strongly conditioned not to believe in any "free lunch", underestimate the power of compound interest, and fail to appreciate its tendency to accelerate over time. 2,4,8, 16, 32, 64, 128, 256, 512. The big gains are toward the end, while sickness costs get higher as we age; there's a fortunate match of timing. Luckily for illustration, money at 7% interest will double in ten years. Therefore, a dollar at birth is worth $512 at age 90. And it is slow to start; which means if you wait until your 40th birthday, it only costs $16 to catch up and have the same $512 by age 90. Another fact: the average healthcare cost of the last year of life is at present about $5000. That's less than most horror stories would have it, and this low average is explainable by the fact that many people just drop dead without any cost. Let's do some calculating.
Since current regulations permit a maximum $2500 contribution to an HSA, a deposit only once at birth and none subsequently, would find $1,250,000 in the account, surely enough to cover almost any health catastrophe. Depositing $2500 into the account every year from birth to death at age 90 would produce an unimaginably larger result, well beyond any reasonable expectation of average escalation of healthcare costs. Depositing nothing until age 40 and then depositing the $2500 would result in a death benefit at age 90 of only $80,000, but still 16 times the present average cost of the last year of life. Contributing a total of $2500 over twenty years would achieve the same result at twelve or fifteen dollars a year, but would actually encounter resistance from the investment people, who would object to handling such small amounts. But that's a welcome problem, indeed. If all you are worried about is the cost of the last year of life, get an HSA and stop worrying. Unfortunately, our government isn't investing at 7%, it is borrowing at 4%. That's the way we transform a $2500 deposit in an HSA into paying a bill that costs the government at least $10,000. The source of it: using the 1965 expedient of "pay as you go", which means today premiums immediately go to pay for the debts of the past, leaving nothing to invest. And with a retiring baby boom larger than the working generation, the government borrows from foreigners to make up the shortfall.
What's To Be Done With This? Simply paying for the last year of life is as simple as buying insurance to pay for your coffin. We can surely do better than that, but first, we need a transfer vehicle. The fact that Medicare is paying for just about everyone's death means we can transfer the money to Medicare to reimburse them for what they have already paid. They can accordingly reduce the payroll deductions and Medicare premiums by a comparable amount in advance, as an inducement for anyone who agrees and has enough money in his account. We can also use the "accordion" principle and pay for more years prior to death if there is money for it. Even using some of it to pay off the entitlement debt is better than not generating any income at all; only the Chinese benefit from the present approach. Don't forget that "the beneficiary" is really a constant stream of successive people. Although one is now dead, his successor is alive and will do other things once the government threatens to take some away.
It is tempting to consider whether lifetime healthcare costs could be covered by an extension of this idea. Not only present costs are incompletely available, but future costs and future investment returns are not predictable by anyone. The best that can be done is to overfund at first, extend in a deliberate manner, providing bailout avenues for both subscriber and government, and provide incentives to compensate for the overfunding. Seven percent projected income is perhaps generous and tax-sheltered, but still, must contemplate the possibility of a great deal of inflation in after-tax dollars. If it should not, more money will have to be deposited, and the subscribers must agree to that. Against that unpleasant eventuality, it should be a voluntary program, and thus slow to expand.
But therefore it must have enough reserves from the start, with latitude to use the surplus for non-medical purposes once the medical purpose is served. Perhaps something like the Federal Reserve should be considered to protect and regulate it -- public, but reasonably independent within a narrow mission mandate. The pressures to move authority entirely into the public sector, or into the private sector, should be somehow balanced to prevent either one from prevailing. At some times, the deductible will have to be shifted up or down, to keep it midway between the bulk of either outpatient or inpatient costs. Contributions will eventually have to be raised and lowered within broad bands. Alternatives will have to be found for approaches which are new or become obsolete. It is very clear that two insurance systems will have to run concurrently, one to invest and store the money, the other to pay the bills. They will need an umpire, especially if they are successful.
A Note About Investment Vehicles. In speaking of people of all ages and conditions, it must be assumed they are inexperienced, naive investors; some will chafe at this, emphasizing it is their money to do with as they please. There should be some appeal mechanism for this sort of person, but the best defense is good investment performance. Although Index Funds are relatively new, an equity index fund of U.S. stocks above a certain size should be both politically safest and reasonably profitable. The managers should have a certain discretion to use U.S. Treasury bonds, but nothing else without a formal appeal process. In view of the gigantic size, perhaps a few other options might be considered for those who demand them. The administrative costs of such a large fund should be quite low. The management should be aware that the investment advisory industry may not be completely pleased with this arrangement, so the opinion of experts should be treated carefully. The purpose of this fund is not to innovate financially, it is to pay medical bills efficiently, and with the minimum of public uproar.
III: Forestalling Unfortunate Side-Effects.
In the meantime, the Diagnosis-based payment system -- and the reaction of the hospitals to it -- has introduced a new dynamic. It usefully illustrates how far-reaching the unintended consequence of even a small reform can go, before it is even recognized as causing it.
Diagnosis-Related Groups (DRG) To change the subject, a budget reconciliation bill two decades ago slipped in a feature of paying hospitals one of two or three hundred flat rates (there are actually over a million possible diagnoses) for the whole hospitalization. It did not matter how long the patient remained in the hospital, nor how many tests or treatments he underwent -- same flat rate. In spite of efforts to look for "Episodes of Care", ambulatory medical care is not nearly so amenable to this rationing device. As a consequence, hospitals average a 2% profit on inpatient beds, 15% profit on accident rooms, and 30% profit on satellite clinics. Since most dual-use items have the same basic cost whether used for inpatients or outpatients, escalation of outpatient prices results in carrying some pretty fanciful prices over to itemized inpatients, for those items not covered by insurance.
The basic issue is severing connections between costs and prices, and exploiting the public's trust that some connection remains. This situation caused a notable surgeon to exclaim that the "only purpose of having health insurance is to keep the hospital from fleecing you." It is not clear to what extent discounts from inflated prices are used as a competitive weapon in the outpatient area, but the tightly controlled and overpriced ambulance arena suggests that practices bordering on antitrust violations may well exist in some regions. There seems to be the considerable exploration of the legal limits of the present system; medical school tuition is largely set by what the market will bear, and surpluses soon have a way of seeping out of the hospital system into the university's general finances. Colleges without medical schools are upset by this unequal financing mechanism. It is not clear how far this complexity is extending, but such unexplained disruption is bound to cause many eventual problems, return to cost-based pricing is an urgent need. The first step might be to require public disclosure of price/cost ratios in more relevant detail. To abandon cost-based pricing always invites governmental price controls.
Interest Rates, Investment Income, and Inflation When there is inflation, the value of money goes down, so you might expect interest rates -- the rental cost of money -- to go down, too. However, people anticipate higher prices, so lenders build a premium into the interest rate structure to compensate for the value of the money to be lower when it is repaid. That raises interest rates, and the Federal Reserve will generally raise them even higher to put a stop to inflation. So, buying and selling bonds is a zero-sum game, far riskier than it sounds. Consequently, there is a flight toward the common stock, thus raising its price. Meanwhile, inflation usually hurts business, tending to lower the stock prices. As a consequence of all these moving parts, long-term investors are urged to buy at a "fair" price and never sell, no matter what. Even that strategy fails for any given stock because somehow corporations seldom thrive for more than seventy-five years. So, the advice is to diversify into a basket of stocks, and the cheapest way to get that basket is to buy an index fund. In a sense, you can forget about the stock market and let someone else manage the index, for about 7 "basis points", that is, seven-hundredths of a percent. All of this explains the choice suggested for Health Savings Accounts of buying total market index funds. Limiting the universe to American stocks is based on a political hunch that it reduces the chances of harmful Congressional protectionism. Having said that, a Health Savings Account must raise cash from time to time, and to guard against forced selling in a down market, some average amount of U.S. Treasury bonds will have to be maintained. Ideally, the number of Treasuries would be small for young people, and grow as they get older, and therefore more likely to get sick. Pregnancy is the one universal cost risk for younger people, and they know better than anyone what the chances of that would be in their own case.
This approach is greatly strengthened by reference to the modern theory of a "natural" interest rate, to which the whole system has a tendency to revert, if only we knew what the natural rate is. It is not entirely constant, but over time it seems to be something like 2%. If we knew for certain what it was, we could set a goal for perpetuities like the Health Savings Account to be "2% plus inflation". Since inflation is targeted by the Federal Reserve as 2%, that would amount to an investment goal of 4%. If you can buy an American total market index fund consistently gaining at 4.007 % per year, you should buy and hold. If it rains less than that, it is either run by incompetents, or it is a bargain which will eventually revert to 4.007% and pay a bonus. If, on the other hand, it gains more than that, there exists a risk it will revert to the mean. That it is being run by a genius is sales hype to be ignored. We suggest buying into it in twenty yearly installments, which should balance out the ups and downs, so then you can forget about even this issue.
But don't count the same issue twice. In order to assure a 2% real return, it is necessary to obtain 4% in the real world of 2% inflation, and the compounded income of 4% accounts for both in equal measure. A compound income of 6%, however, is two-thirds inflation / one third "real", so artificially raising interest rates to control inflation can progressively overstate the requirement, and hence overdo the deflationary intent. Conversely, when the Federal Reserve fails to raise interest rates as Mr. Greenspan did, the result can be an inflationary bubble. The central flaw in adjusting prevailing rates to current natural rates is that we do not know precisely what the natural rate is. To go a step further for immediate purposes, we are also uncertain how much deviation there is between medical inflation and general inflation. As a result, the best we can expect is to make as much income on the deposits as we safely can, and continuously monitor whether the premium contributions to Health Savings Accounts might need to be adjusted. And the safest way to do that is to have two insurance systems side-by-side, one of them a pay-as-you-go conventional policy for basic needs during the working years, and a second one whose entire purpose is to over-fund the heavy expenses at the end of life and the retirement years, permitting any surpluses to be spent for non-medical purposes. With luck, the beneficiary might retain a choice between increased premiums, and increased (or decreased) benefits.
If these calculations are even approximately close, the financial savings would be several percents of GDP, a windfall so large that mid-course adjustments could be tolerated.
Competition With Hospitals, Not Necessarily Between Them It is comparatively effective for small hospitals to compete with each other, but as transportation improved they grew bigger and greatly expanded their market areas. At that point, they share with big banks the awkwardness of being too big to be permitted to fail. Exploiting this, they have more freedom to raise prices. As they become more efficient, the size which matters is their capacity to support a geographically wider community. It is mostly transportation feasibility which matters, so breaking up ambulance monopolies may hold part of the solution. Satellite clinics have many advantages, but price control is not one of them.
The institutions which suggest themselves as possible hospital competitors are Retirement Communities (CCRC). Because land is cheaper, they tend to be built in the suburban and exurban rings around cities, but the elderly population is growing. Severe illness and disability tend to increase with advancing age, so they suggest themselves as concentration points for all medical care in their region. Almost all of them have infirmaries, many of them have rehabilitation and assisted care capacity. It would seem that what they mostly need is inexpensive ambulance service and a relaxation of regulations which inhibit overlap with lower-level hospital facilities. And, let it be emphasized, an extension of health insurance coverage to allow them to be reimbursed. If general practitioners and pediatricians began to locate offices on the grounds of a retirement community, specialists would soon follow, along with laboratory collection stations and x-rays. Over time, they could be expected to transport surgical patients to distant hospitals, and return them to the local infirmary for convalescence. Some would acquire hospital satellite clinics, but there are too many of them for a single type of development. It is vastly preferable for them to have unlimited hospital connections and unlimited access to their facilities. Their great contribution is potentially to compete with hospitals for certain services, which would be greatly inhibited by single limited franchise affiliations. If competition is encouraged at this level, it could make the usual sort of governmental wage and price control much less necessary. The fear of abusive pricing is one of the major inhibitors of generous health insurance, and it is in the long term self-interest of all health care providers to resist it.
The DRG system constrains hospital inpatient revenue so directly, that hospitals themselves constrain costs, although they generally seek ways to maintain revenue first. It never hurts to verify such impressions, but allowing a 2% profit margin while the Federal Reserve targets a 2% inflation, is probably already too severe. Since the only way to "upcode" this rationing system lies in admitting too many patients, the regulators designed a penalty system for "unnecessary" re-admissions. It largely had no effect. That is, patients who were re-admitted within 30 days, were generally found to need it, so after a time the penalty may even be repealed. Congress probably does not yet realize what a blunt instrument it has created. The DRG system is so draconian it probably incentivizes the hospital to constrain admissions of all kinds, since all admissions may be turning unprofitable. Consequently, the first step in reducing induced use, and charges, in the outpatient area would be to increase the profit margin to 4%, which is to say, 2% plus the inflation rate. We have already mentioned the need to discard the underlying ICDA code and replace it with a simplified SNOMED code, to improve its specificity and remove the upcoding temptation. Having done this, there would remain little reason to worry about inpatient costs; they are what they are, providing the cost accountants find a better way to handle indirect overhead.
This preamble may at first seem irrelevant, but its point is this: both the old employer-based system and the evolving Obamacare variant need to focus on the same problem which faces the Health Savings Account. Whether you overpay or underpay, the main cost distortion lies in the outpatient area. All three systems seem to agree that the use of high deductible insurance will solve the small-claims problem. But the history of health financing is that the medical system is entirely too willing to shape itself to the reimbursement climate. It may take some time, but it is highly predictable that medical practice will further evolve toward substituting outpatient care for inpatient care. The cost of shifting the locus of care is astronomical, and if we switch it back again it will be doubly astronomical. All of this cost should be attributed to the reimbursement rule-maker, not the provider or the patient.
Within the area we are discussing, higher than the deductible but lower than the inpatient cost, the ACA insurance approach tends to push up costs because internal cross-subsidy makes it appear cheaper, but it also makes it far easier to shift the cost of subsidies. Because by contrast, the HSA approach creates individual, not pooled, accounts, it is cheaper because the patient has the incentive of sharing the savings. But its lack of pooling makes it seem less benevolent for elective outpatient surgery, cancer chemotherapy, radiation therapy, and whatever else will be stimulated to migrate to this borderland between inpatient and outpatient. The stimulation will come from both the hospitals and the small-cost ambulatory areas, both being effectively excluded from alternatives. The managers of HSA need to anticipate this coming demand and facilitate it by pooling the funds to cross-subsidize it, struggling to consume much of the profits generated by shifting the locus of care from inpatient facilities and shifting volume profits from drugstores, pharmaceutical companies, and nursing homes. It isn't universally obvious how to do this. so the task must be assigned to someone.
Maintaining the solvency of HSAs encounters two types of problems, endogenous and exogenous. Endogenous means the growth curves of revenue and cost are not two parallel straight lines. A person may have a pitiful amount of money in his own account to pay a bill, but his age group collectively may have huge reserves, on average. Furthermore, a young person may not have enough cash to pay a bill, even though his future accumulations should be more than ample. Both of these problems depend on how much illness is found in young people, and one would hope will progressively diminish. However, the expected shortfalls at all ages must be somehow calculated, and matched against expected surplus; after providing a margin for error, an amount calculated to cover net shortfalls at each age should be escrowed in a "taxation" account, and later returned to individual HSAs as they balance out. There will be administrative costs, but one would hope there would not be much interest or borrowing cost.
The goal would be to phase this process out, well before age 65, essentially returning the accounts to the same level of progress they would have achieved without the intervening disruption. My prediction is that most of this need will concentrate around pregnancy and neonatal care, with a low-level background cost of accidents and illnesses in other years. The general idea is to have each age cohort support itself, within the current year if possible, but borrowing against later years on a current-value basis, if necessary. Borrowing from other age cohorts should be seen as an emergency fallback only.
Whoever manages these "taxation" escrows would be well positioned to identify intergenerational anomalies, and therefore to manage the same sort of exogenous pressures. Such managers must look askance at all inter-generational appeals, but migrations from inpatient to outpatient must be matched by reducing the premiums of the catastrophic insurance and transfers to individual accounts. The catastrophic insurance stockholders will not cooperate without evidence of need, nor will pharmaceutical firms lower their prices without argument. Therefore, the managers of the "taxation" fund must establish adequate data resources, and negotiate small frequent changes rather that steep-step infrequent ones. To the extent this activity can stimulate anti-trust concerns, Congress might consider what issues there are, in advance.
Newsmedia speak of medical "prices", the government speaks of medical "cost" -- what's the difference? Well, for fifteen years in my practice, and before that for thousands of years, prices and costs were nearly the same thing, or at least bore some relation to each other. The person who did the work set the price, and the person who paid the bill agreed to the price.
But out on the West coast they told us Henry J. Kaiser during World War II had expanded the idea of the Mayo Clinic into a pre-paid health system of clinics and pre-agreed patients, paying a set annual fee for all the care you could use in a year. By 1970 I was sent by my local medical society to see what this was all about. I learned a lot, including the main thing which made it so cheap rested on two government tax exemptions, one for the employer and a second one for the employee. They recruited doctors with the promise of relieving them of the business nuisances of medicine, plus instant practice-builders of employee groups of patients. Doctors in the neighborhood didn't like Kaiser at all, particularly after the Maricopa decision of the U.S. Supreme court made it an antitrust violation for doctors to do the same thing. For lawyers reading this, it is a particular irritant that this decision was 4-3 (not a majority), based without a trial of the facts, solely on upholding a motion of summary judgment.
Turning from historical legalities to practical economics, turning that is, from one doctor both doing the work and setting the price, into a third party with no doctors setting the price, the third party (the insurance company) paid its own reimbursement price. So not only did the physicians eventually lose control of pricing their own work, but that price rapidly drifted away from the audited cost in a capricious manner, responding to forces entirely unrelated to medical care. The accountants protested this lack of relationship between cost and price, and it was a legal requirement for hospitals to report (but not make public) the ratio of prices to cost. While the ratio was always high, it was also extremely variable. In effect, a fact demonstrated when the "diagnosis-related" system fixed inpatient costs by groups rather than individually, the disparity was only used to compete for out-patients with outside market prices. However, instead of forcing hospital prices down, it enticed drug companies to force prices up, often to absurd levels. Some hospitals negotiated discounts and applied them as invisible mark-ups to the uninsured patients. Cheap mortgages stimulated hospital building, and the situation spiraled out of control, as it does in any inflation. Nobody ever cured an inflation, except with brute force and lots of pain.
In our system, the money supply is governed by the Federal Reserve issuing and/or buying bonds. In so doing, it is issuing unheard-of amounts of debt for which there is no market, forcing interest rates down. Although the Japanese allow their central bank to buy common stock, Congress is adamant that buying ownership of corporations amounts to Communism with a demonstrated history of universal failure. Congress will probably never permit government take-over of corporation ownership, but Mr. Obama simply spent money beyond Congressional limitation and dared Congress not to pay the bill (and thus to ruin our national credit). Congress is not compelled to make a rational choice between inflation and government control of the private sector, but you can be certain it has been discussed.
I never took a course in economics but it seems to me, a couple of million individual citizens building up half-million dollar portfolios of indexed common stock might provide an adequate balance for three trillion dollars of excess debt. That is, holders of Health Savings Accounts would hold voting control of corporations, without the organization to abuse that power, and that power could never pass into foreign hands because it is contingent on American-based health care. Plenty of other regulations, good and bad, would have to be added for the system to become stable and tamper-proof, but it's a suggestion for debate and study of a possible solution to an entirely unrelated subject. One for which there has been an international shortage of fresh suggestions.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
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.
