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.
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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.
By this point, a patient reader of these reminiscences has probably learned quite enough about the Clinton Health Plan and its immediate aftermath. There is, of course, more to say, but except for political junkies, the topic doesn't warrant protracted dissection. It might be worth knowing the motivations of the insurance industry when they launched that bombardment of "Harry and Louise" television advertisements. Opinion within the insurance industry must certainly have been divided, however, and the main decision makers are probably all now retired. The Harry/Louise ad campaign is often given credit for the political assassination of the Clinton Plan, but that seems unlikely. The decisions about medical care were made without heeding the opinions of providers of medical care, so it would not be surprising to learn that decisions about insurance were made without completely candid discussion with insurance professionals.
In fact, grieving too much for the past may have led to looking too little at the future, which clearly contains a whole new set of facts. When the largest generation in history, the baby boomers, start to retire in 2012, those boomers own children will then be at peak earning power but will be a very small generation, too small to support their more numerous parents. Consequently, the 12.5% tax the current teenagers pay for retirement benefits will be too small to pay for their parents' health costs. It will be uncomfortable to increase that 12.5% by much. Thus, the Ponzi scheme we have run for eighty years will then be unable to conceal its facts with talk of trust funds and lock boxes. For nearly a century, Congress has spent the Social Security and Medicare tax surplus for non-medical purposes. They will have to stop doing that in less than ten years. Consequently, we can confidently expect the boomers to protest loudly: they contributed 12.5% of income during their whole working lives to support medical care, and now learn that nothing was saved for their own health care. Even more exasperating is that the second Bush administration did attempt to introduce legislation in 2006 to set aside some current surplus to reduce the impact of the coming crunch -- and Bush was howled down. It would thus appear to be the nature of current politics that this boomer health cost shortfall will not be seriously addressed until the crisis is actually upon us. Democrats will apparently stonewall the matter to avoid blame for designing and ballyhooing a welfare expedient of the 1930s that was swept under the rug during decades of affluence. Republicans will be determined not to be paymasters for a welfare scheme they had opposed from the beginning. So what will happen?
Government only has two options in funding programs where the money has already been spent; they can raise taxes or they can borrow money. By raising taxes, they risk precipitating an economic depression. By borrowing, they flirt with hyper-inflation of the sort that destroyed Germany and Austria in the 1920s. By adopting a little of both remedies, we wander into "stagflation", a term invented in the 1970s to describe a very unpleasant episode. Whatever the description, there seems a very strong likelihood of economic pain and political uproar. It sounds pretty unlikely the public will be in a mood for expensive additions to health insurance coverage.
All this is a preamble to impending cuts in the health budget. We must anticipate the only approach government ever uses for program reduction, the only arrow in the government quiver. It goes like this: first you cut a program budget by, say, ten percent and watch to see if anything bad happens. If nothing bad happens, cut it again. If something bad does happen during a series of cuts, deny that it did happen, and scramble around to patch up the damage. If possible governments restore some of the cuts when they go too far, but in Medicare whose unfunded deficit is in the trillions of dollars, that may not be possible. Try to get re-elected after you pull off one of these capers, and you begin to sense how dictators get into office. It really isn't comfortable to talk apocalypse this way, and one would certainly hope there is some flaw in the prediction. There could be other unexpected events in the meantime, deus ex machina, but a stock market crash, a thermonuclear war, or violent changes in the environmental temperature are all going to weaken the world economy, not make things better. This doomsday scenario seems almost certain to include some serious cost-cutting in the health financing system. Therefore, it is only common sense to examine what advance changes might be made in the health delivery system to minimize the damage to it.
My proposal amounts to suggesting that we put the doctors in charge of the cost-cutting. In accident rooms, battlefield medical stations, and even television war serials, the person in charge of sorting out the influx of unexpected casualties is said to be in triage. In triage there is one basic rule: put your best man in triage. If the security guard, the admissions clerk, or the night watchman directs the emergency down the wrong corridor, the ensuing blunders will cascade as the system struggles to get things back on track. We can expect objections to what I have to propose which will take the form of warnings about letting foxes watch the henhouse, but in general, the public already supposes the non-physicians will step aside for the doctors in an emergency. So the more open the discussion about command and control, the better, with ultimate faith that the public will support the common-sense approach of putting your best-trained person in charge.
For present purposes, the general proposal is that when drastic cuts in budget get imposed, it should be the physicians of the local community, not the administrators or the insurance executives or the local business leaders -- who should make the painful choices between what is essential and what can be sacrificed. This is most readily achieved by setting aside the Maricopa decision and clarifying the HMO enabling acts to the effect that it is not an antitrust violation for physicians professionally practicing in nominal competition to participate in the shared governance of health maintenance organizations. In other words, that HMOs such as the Maricopa Foundation need not fear antitrust action, using the experience of a dozen other Foundations for Medical Care as proof of the harmlessness
of the approach. It should not be necessary for these organizations to prove positive value, only to demonstrate lack of harmfulness. If they can be established and allowed to compete with insurance-dominated or employer-dominated HMOs, their worth can be established by success in the marketplace. Ultimately, the choice of governance form will thus be made by the patients, and the proposal should be a popular one.
It should also be popular with hospital administrators. They chafed at physician control thirty years ago, but that was before they encountered the far more brutal price negotiations of HMOs dominated by business and insurance. The consequent costly and disruptive wave of hospital mergers is defended by very few, although it would be interesting to examine dispassionate analysis. Probably no one adequately appreciated the threat that employer domination of these practice groups represented to hospital administrations. When hospitals confronted employer groups in serious hard price negotiations, hospitals came to the shocking realization that these people actually had the power to move large groups of people to a competitive hospital, and they certainly talked as though they were capable of doing it. The resulting panic of hospital mergers, consolidation into chains, and the emergence of for-profit competition by hospitals that had no thought of a charitable mission, has created a degree of cost and disorder that was not in the original plan. Hospitals in rural California who told their colleagues of the burdensome power of their staff doctors under doctor-run Foundations would now have to admit that a return to that environment would be a distinct relief.
And there might even be a reconsideration by business leaders. What physicians would bring to the table, what is now new and different, is the undeniable experience that dominating captive HMOs has not proved as useful to employers as they hoped it would be. The cost savings have been disappointing, the exploitation by insurance intermediaries, and the undeniable employee restlessness was not exactly anticipated. Running employee health projects is a large distracting time waster for C.E.O.s who have other goals and mandates to pursue. If employers keep a focus on their reason for involvement in employee health, hardly any of them could defend a posture of resisting the emergence of new choices which make a reasonable claim to reducing employee contentiousness, at a competitively lower cost.
And the government? Among the various unpleasant alternatives that Congress must consider, is the possibility to be discussed next that employers may want to pull out of employee health care entirely. Allowing competitive forms of ownership of existing arrangements might not seem too risky a step, compared with that prospect.
It has to be noticed that developing lifetime health insurance is hampered by the considerable pregnancy and newborn costs which intrude at the beginning of the earning period from ages eighteen to forty-five. Otherwise, there is a reasonably manageable medical cost at the end of life, potentially preceded by a long period of negligible medical costs where compounded interest could be at work. So the thought naturally arises we might somehow pay for pregnancies in some novel way, essentially borrowing those costs against the future. What's involved here?
Instead of taxing each affected individual working person to subsidize his newborns and terminal care, the necessary subsidy could take place between three insurance plans, assuming the three costs to fall in separate insurances. Everyone owes a debt for being born, and everyone needs to save enough for getting old and dying. Society's benefits and costs of having children are not confined to those who have children. An unhealthy incentive to delay the first child has been created by paying for pregnancies this way, spreading the consequences to higher education and disrupted careers. Instead of regarding neonatal care as an expense of pregnancy (which we currently regard as part of the mother's health cost), just reverse matters, and include pregnancy costs as part of the baby's own debt for being born. Any move assigning pregnancy costs must somewhat fudge the transition cost of getting born without paying for it or even asking for it. Attitudes depend to some degree on whether people generally want children to help on the farm, to help care for their own old age, as entertainment or plaything, or accidentally. The theoretical fact is that pregnancy costs might be judged fairly split between the child and his parents if it were only practical to do it. Once those practicalities are addressed by covering the first and last years of life with entitlement, transfers become relatively easy. If we must have entitlements, birth and death are certainly inescapable ones.
Unfortunately, once the finance is made practical, other issues assume greater importance. Science is beginning to make single parenthood more feasible, while easy divorce makes multiple parenthood possible. Easy sharing of the costs could reasonably be resisted as a moral issue we never had, and now don't need. The longer you live, the more interest you earn on those first 26 years. But the longer you live, the more medically expensive you become, toward the other end of life. There is still a great deal of argument about what is a fair division, and much time will elapse before final resolution can be considered a settled matter. But ultimately, serious savings could occur from keeping the first and last years of life in mind as the only universal medical costs, extracting maximum savings as one argument for choosing accounting tricks to settle the pregnancy part of it. What would be left would be accidents and occasional health calamities, which paradoxically are the only parts of current health insurance which truly fit the current insurance model.
Let's give an example. Lifetime health expenses are said to be somewhere around $300,000. If you have $40,000 in a Health Savings Account on attaining the age of 65, you can passively achieve $300,000 by age 86 (which we hope is at least average life expectancy) by letting the HSA grow untouched. In this example, all other sources of health insurance revenue are available for other purposes -- they are the "profit" from using compound interest, but it is unnecessary for that to be exclusively the case. Now, the problem transforms into achieving $40,000 by age 65. That could be reached by investing $150 at birth, or $2400 at age 26. Both are achievable, neither is easy.
But it's nice to have some choice, which including the first 26 years will give you. You can even do it twice, once in the child's account, and secondly in your own. My guess is that about a third of people could spare $40,000 at age 65 right now, trading a single payment for Medicare for its present wobbly finances. With overlapping populations, 2/3 of people could afford to spare $75 from each parent of a newborn, or $150 for a single parent, in return for eliminating the obstetrical premium within their health insurance. Considering the problems of young parents, some might prefer to combine $150 with $4800 for both parents at age 26 into a financing package of $4950 spread over ten years, from 26 to 36. But notice it gets harder, the longer you wait. Finding $80,000 for both parents now aged 65 gets really hard to do, but at least the child is all paid up. If you wait, it gets pretty hard to do this without extending the retirement age to 70, sacrificing five of your thirty years of retirement, but reducing the amount you need to save by about a sixth. Nothing like these choices would be readily accepted. But the policy axiom remains: the younger you start, the easier it is to stretch the distance. And the more attractive it becomes to treat some or all obstetrical costs as the responsibility of the person getting born.
Before concluding this approach is impossible, try to remember it is quite unnecessary to make lifelong healthcare free to the last penny, although some will demand it. In fact, first-dollar coverage (i.e. making all healthcare seem free) is a big part of what got us into this mess. If we only achieve a quarter or a third of this promise, the national aggregate would amount to a stupendous amount of money. A more realistic goal might be to reduce projected medical costs by a third, offset another third with investment income, and pay a third in cash. All three of those approaches seem comfortably achievable.
As this chapter is being written, Obamacare has been struggling for three years to achieve its twin goals of reducing the cost of medical care, while improving its quality and scope. The public has long been skeptical that the two goals are incompatible. During those three years, we have achieved a cure for Hepatitis C. That cure will save millions of lives and eventually the costs will decline. In time, the public will be able to see the difference between the results of the two approaches. During that time, biological science has discovered the relationship between sleep and the circulation of spinal fluid through the brain, probably the greatest advance in physiology since Harvey discovered the circulation of blood in 1628. In another field, Joachim Frank has identified the function of the Ribosome, making strips of protein the way a zipper works, and very likely the step at the beginning of cellular life, operating at room temperature and without caustic chemicals. These three discoveries are surely less than 1% of the scientific advances of the last three years, giving promise of vast advances in the cheap production of protein drug therapies, saving of lives, and ultimately the extension of life expectancy at a lessened cost. During these past three years, what has Obamacare accomplished, at enormous cost, and widespread turmoil in the medical system?
As we approach the elections which will serve as a national judgment on Obamacare, it still remains difficult to say what it is. It clearly will raise costs, not lower them. It will extend a few subsidies to people who were uninsured, but the subsidies could have been extended without so much uproar. In any event, a number of people will have worse insurance after the dust settles. A regulation factory has been established, pumping out confusion, but changing comparatively little after three years of trying. It begins to seem incredible that there is so little to show for so much uproar, and there is room to doubt anything dramatic will emerge so late in the process. If the goal is to establish a regulation factory to shift control to the regulators, the public is quite right to ask what good will come of that; at the present rate of revelation, the eventual product will just be an expensive nuisance. So it seems fair to compare the final product with the Veterans Administration health system, which has been operating on a large scale for more than fifty years.
The Veteran's Administration health system is in the news, finally. Perhaps we should examine what is the matter with the VA, as at least a source of ideas about the forces which hem in any government health system. For example, whether it is a municipal, state or federal hospital system, it seems to be much better at constructing new buildings than maintaining them. Perhaps it is time to convene a study or a series of studies to address this discrete issue. Why is the system of control by budget relatively successful in an environment of designing and building a project, and so unsuccessful in running it?
Second, is there an inherent problem in setting the rules by the Congress or Legislature, instead of an appointed board of overseers? No doubt, there is an occasional abuse of power by a trustee of any organization, but lower-level administrators do not act as though this a big problem for them in private institutions. So what is it about governance by politicians which encourages the endless intrusion of politicians into the admissions, purchasing methods, hiring and disciplining processes of public hospitals? Does it make a problem to have control at the highest level be unified in a Congress or City Council, or is it the other way around, with too little authority vested in the operating divisions? Every administrator complains about staff physicians intruding into daily operations, but is it possible that the public institutions have gone too far in hierarchy, or else possibly not far enough? Most physicians hate administrative work, allowing a few tyrants to emerge, who do like it. When these would-be dictators are in administration because they are poor physicians, trouble is almost inevitable, and it cannot be improved by giving the power to nurses, pharmacists or other professionals who are normally lower in the pecking order than the professionals who now report to them. There is no good substitute for physician control, but what if all the physicians in a health system would rather quit than do administrative work? Maybe, just maybe, the private sector has something to teach us in this delicate issue.
To go on, politics may play the same disruptive role as professionals harnessed as administrators. Administrators detect and quickly resent a Union or American Legion official placed in a role which can disrupt the official power structure, just as if a pharmacist were appointed, or a nurse practitioner, or even an eminent neurosurgeon.
Finally, some new title should be applied to the type of corruption which is seen when union officials get their way in disrupting the day to day business of a health system. Quite recently, I was forced to hear the Director of local city Veterans Affairs say to an open meeting of strangers that he was totally and permanently disabled with a service-connected disability, and also working full time for $50,000 a year. Furthermore, he had recently declined an offer to work at a higher government level, at $200,000 a year -- plus, of course, his 100% permanent disability payments. There is more than a small chance he was making some exaggerated boasts, but even so, it is appalling to hear such indiscrete remarks being offered, without the slightest sign that he recognized the revulsion such remarks made on his audience. It seemed obvious to all of us that he heard such remarks so constantly, that he regarded such politics (new word needed) as reflecting a normal, legal and desirable state of affairs. If Obamacare contemplates anything approaching what seems to be the normal attitudes prevailing in the VA, it really will not matter much what is written in its regulations. In defense of the VA, a more compassionate history may reveal a plausible explanation.
It is my view that Congress is more responsible than they themselves realize, and the problem is worse than we think. Things have been trending in the present direction for fifty years, but
the adoption of the DRG system of hospital payments came along in the 1980s. It was a brilliant rationing system, but it did not work well in Psychiatry, where the diagnosis has little correspondence to the cost. After a few convulsive experiments, Psychiatric hospitals were offered a payment system so unsuitable they could not exist with it. One by one, inpatient psychiatry disappeared no matter what the patient's finances were, and there is really only the Veterans System left. The situation was so egregious that admission officers simply ignored any rules which prevented admission of a case which clearly needed it. The distinction between service-connected and non-service-connected was most readily shoved aside, since humanitarian and medical urgency so clearly over-rode the rules. After twenty years, the disregard for administrative admission rules spread out to almost every condition, and it is going to be very hard to put the genie back in the bottle, when so many involved participants never wanted such non-medical constraints, from the very beginning.
Building a network of modern buildings in every section of the country, running an organization dominated by unions and their counterpart the American Legion, within a system which most doctors in the country avoid if they can, the VA is a quiet disgrace, slouching along for half a century. The underfunding, the political favoritism, the squelching of pride and achievement and the waste, are all about what you would expect from a union-dominated or politically dominated system. But most disheartening is to watch reform efforts squelched. Under the leadership of Dr. Dan Blain, a system of Dean's Hospitals had been created to infuse the high standards of neighboring teaching hospitals into what seemed like systems similar toward medicine, reformed by the Flexner Report in 1914. For a few years, it seemed to be working, but in time the financial ethics of teaching hospitals seemed, not to raise the standards of the VA, but to be dragged toward imitating their behavior. The medical school doctors assigned to VA hospitals served out their time, then agitated to be transferred back to the teaching hospitals, with difficulties in replacing them with the same quality, slowing winning. When you begin to see elevator operators running the self-service elevators, you can be pretty sure the administrators have lost the battle. There are thank goodness, plenty of exceptions. But nobody seriously expects them to change things very much. If you like what you see at the VA, you are going to love Obamacare.
Those with long experience on audit, budget, and finance committees will recognize the truth of the maxim: Most of the weak points in any budget are to be found as unrealistic revenue projections. The committee will generally begin with a fairly good estimate of future costs, almost always just last year's costs, plus a little. Next year's revenues are harder to challenge, so they are stretched to achieve a "balanced" budget. In seeking to apply the Health Savings Account idea to American healthcare, however, the reverse is -- amazingly -- more likely to be true. Ibbotson and others have published extensive data on past experiences with large-scale investing. This data lends credence to projections of what large masses of passive investors are likely to earn over long periods of time. These data can be adjusted for taxes and inflation, leaving a pretty good idea of what "real" returns for Health Savings Accounts are likely to be. However, in the case of rapidly improving healthcare and rapidly expanding lifespan, it is the costs which are unpredictable. The HSA accounts are tax-exempt. Furthermore, the stock market is apt to rise faster than medical costs at first, and then to rise more slowly. In this analysis, we adopt the position that medical costs and stock prices are both inflated at the same rate at the same time, and result in washing each other out. That may or may not balance out over long periods, but will have to remain the assumption until we have enough data to make mid-course corrections for it. For now, gross stockmarket returns will have to remain a surrogate for net, or "real" returns. At least, we do have nearly a century of reliable data about gross stockmarket returns.
So, let's convert a problem into an advantage: Using the Health Savings Account to represent revenue, we propose that the goal is just to make as much revenue as we can. We could pretend future revenue is greater than it is likely to be, but that self-deception only leads to the sudden discovery of future deficits. Our refurbished goal is to wring as much revenue as we can get out of circumventing the "pay as you go" approach, and let it go at that. We do have good data about gross revenue from different asset classes, so we can make an adjustment for short-term liquidity needs. It the result proves to be more than we need, we'll let our grandchildren figure out what to do with the excess. If it proves to be less than we need, why cry about it? We might still go over the fiscal cliff, but it will take more time. Meanwhile, we can set up monitoring systems which can tell us how much we have to cut, or subsidize, and how long it will probably take to get to that point. If anyone has a better proposal, let him step forward.
If we employ U.S. equity total-market index funds, as I advise, plus U.S. Treasury bonds for a small proportion of cash needs, it would be difficult to challenge the safety of the investment, or its low management cost (less than a tenth of a percent), or even its political neutrality. Fifty percent of investors will claim they can do better than this, but fifty percent will certainly do worse. Because Health Savings Accounts are federally tax-exempt, it is a practical certainty that much more than fifty percent of ordinary investors will do much worse, therefore will express delight and disbelief at how well the accounts have done. Not everyone will do exactly as well, however, because the investments are made at different times. It could be argued that an index fund of small stocks would do better than the total market, but the price you would pay is more volatility.
Because everyone is not born on the same day, some will begin to invest at the top of a cyclical market and be forced to watch the market go down; others will do the reverse, and get better returns for a while. In the long run, this sort of thing will not make much difference, but some will start investing later in life and have less time to recover their losses (or lose some of their gains). That will be particularly true at the beginning of the program, so early frugality will be rewarded and early squandering will be punished. Some will be unable to afford to invest the full amount for variable periods of time, and the later this happens, the less it will be smoothed out in time. But the government and life insurance companies keep statistics; it is possible to adjust these predictions with as much preciseness as desired. Those with access to the data can certainly provide the public with as much predictive accuracy as needed. About revenue.
Predictions about expenses, or in this case medical costs, are a medical issue more than a Wall Street one. Epidemics will occur, diseases will be eliminated by science, patents will expire, societal attitudes will change. There is nothing we can do about some things, other things require effort and investment. Let's return to the conclusion which is reached by most people: make as much money as you can, and hope fervently that it will be sufficient. Meanwhile, we can monitor trends, argue about causes, occasionally avert mistakes. From the design point of view, the biggest mistakes we can make are to put the wrong people in charge, and the founding fathers had a solution for that: create an adversarial tension between the revenue advisors, like actuaries, accountants, and financial experts--and the spending advisors, like physicians, architects, drug manufacturers and technologists. When the original plan has to be amended, the public must be involved, through the press, the academics, and the politicians. Considerations like this lead to the supposition that we need two secretariats and a constitution. Overlooking the secretariats would be civil society, so some linkage should be constructed between the secretariats and professional membership organizations. In constructing a constitution, later amendment should be made somewhat difficult but it must be made possible. Because large amounts of money are involved, access to it should be discouraged, and information about it should be extensive.
Experience with a number of "independent" public/private entities is available. The big mistakes of the World Bank and International Monetary Fund were made at the Breton Woods Conference when they were created, and although some towering geniuses like Maynard Keynes were involved, some simple tinkering with the minutes of the meeting got past the final review. In the case of the Federal Reserve, the originators in 1913 were determined to balance public and private control, but over time, political influence has steadily increased. In the case of benevolent legacies, the intention of the donor has gradually been undermined by the professional managers of the institution, to the point where it is virtually certain that many donors are rolling in their graves. The conclusion I reach is that the best way to reinforce the best intentions of founders of perpetual organizations is to prevent their product from having a perpetual horizon. After seventy-five or a hundred years, they should be disbanded and subject to a fresh look at their constitution.
Doses of Medicine:
A Physician Prescribes Changes for the Health Industry
George Ross Fisher, M.D.
In science, is civilization’s future.
-Francis Bacon
CHAPTER 1: How Did We Get in This Mess?
The medical profession is pretty bewildered; facts have somehow stopped speaking for themselves. It now actually seems urgent to defend Medicine’s traditional arrangement against hostile challenges. No increase in life expectancy, no conquest of yet another disease, no miracle drug seems to constitute a self-evident defense. We must answer for sins; Even the wry old joke about What have you done for us, lately, is easily answered. We give, for a quick example, vastly improved cataract surgery to nearly a third. Yet all that does not seem to matter to people; the health system is asserted to be in “big troubleâ€.
My morning newspaper, for example, tells in a single day of the bankruptcy of two local medical school hospitals, while Moody’s rating service reduces the credit rating of my own hospital, the first and oldest in the country. Medical care almost seems to be entering what chess players call the endgame. We have too many hospitals and medical schools, weed them out. We have too many doctors and other medical personnel; overvalued services must be downsized, in contemporary parlance. Even technology advances are blameworthy. New medical technology is produced endlessly, demand for it consequently unlimited, continuing to grow until it impoverishes the nation if not the world. Belief in social justice will be destroyed by denying new technology to the poor. But the nation’s economy will be destroyed by providing it to everyone.
There is some painful truth to these complaints, but they go too far, unleashing avalanches which are not easily stopped. Changes to the medical system taking fifteen years to evolve might possibly be a good thing; three years convulsions are surely only harmful. Take for example the pursuit of social justice in providing the best medical care for everyone, rich or poor. If the country can’t afford it, what then? Surely, social justice is not achieved by denying, in the name of even-handedness, treatment to the majority who can still afford it. Women and Children First is a noble thought, but Nobody in the Lifeboat at all is just intolerable.
All of these are the confused shouts of a quarrel over “healthcare reform,†or more accurately, healthcare financing reform. Most ordinary Americans sense that something has gone very wrong and it didn’t require the scare tactics of “Harry and Louise†to bring them this awareness. They want to preserve all that is good about medical care. They want to find a rational and equitable way of paying for it. Unfortunately, they don’t find most proposed fixes acceptable, while our leaders cannot openly express the possibility that there just might not be enough money to do everything equitably, within a competitive global economy. The present prosperity of the country actually makes the dilemma seem worse. There does not even exist much likelihood that future gains in an already exuberant economy could pay for constantly improving the medical care of highest quality, denied to no one. In the main sections of this book, it will be my contention that the only force which can resolve these dilemmas is medical science itself. The way to reduce the cost of medical care is to eliminate disease.
Formative Years.
For those who feel more comfortable leading rebellions than defending against them, it must be consoling that today’s conservative medical establishment is a product of two centuries of revolution so radical and continuous that famous colonial notables could not possibly survive in practice today. Indeed, neither could those who graduated just twenty years ago, except for continuous study and retaining. Significant changes usually have insignificant beginnings. In that spirit, someone dug up the possibly apocryphal story of the daily diaries of King George the Third of England, where the entry for an important day for King would have been, July 4, 1776. His Majesty’s alleged comment:
“Nothing much happened, today.â€
Well, that was wrong, and much of what later happened was caused more by the King’s invincible oblivion, than by a mere 30 days lag in transatlantic communication. We cannot trust the continuation of present trends, but at least we can see that lesson of history. What happened to medical care in the future may well depend on whether the reading thinking public wakes up and takes a stance, after first troubling to learn something about the matter. Begin, with a quick history.
Twenty-five years before that fateful day in the colony. Benjamin Franklin and Dr. Thomas Bond in 1751 had founded the Pennsylvania Hospital. In the style of the English voluntary hospital, it was founded primarily for the sick poor and perhaps, if there was room, for those who could pay. Since for decades it was the only hospital in America, it established a purely charitable tradition which lasted more than a century. Poor people went to the hospital. Persons of means were visited by their physicians at home, had their illness, babies and operations, and eventually expected to die, at home.
Franklin had hoped taxation would eventually pay for the care of the indigent, but the Legislature soon taught him (and us) not to count on it. The receipts from paying patients were also minimal. For nearly two subsequent centuries, the charity hospital was primarily financed by gifts and bequests and managed to get by.
Around 1870, two major changes occurred in the character of hospitals. Joseph Lister, an English Quaker surgeon recognized Miss Nightingale’s militarily disciplined hospital, fanatically clean and airy, as an ideal place to practice aseptic surgery. And incidentally, of course, to have paying patients transported to the surgeon and the equipment, rather than the other way around.
At about the same time, the Canadian physician William Osler came to the Philadelphia General Hospital, where he developed a medical education system which was to revolutionize the non-surgical part of hospitals as much as Lister had revolutionized the surgical wings. Osler was largely unappreciated in Philadelphia and soon went on to John Hopkins in Baltimore to perfect a system of medical education through barter. The student nurses, medical students, and interns worked free of charge (and very hard, by the way) in return for education, the patients permitted themselves to be used as an example for teaching in return for free care. (you can still get free haircuts at barber schools), and the community physicians gave free teaching in return for concentrated experience and prestige, highly useful in attracting paying patients.
Although the Osler and Lister systems persisted for little more than a century, the synergies of the arrangement transformed the typical American hospital from an almshouse into the local center of medical care. In many parts of Europe, that system was not followed, so ten-bed clinics owned and operated by a single prominent physician were often the prestige professional centers. In America, it is true, country doctors would often start small private hospitals, but the Osler/Lister model created a strong imperative to merge them or close them. Is somewhat lower prestige somehow implied that the small hospital, unless striving for a transition to a medical school teaching hospital model, might be inherent of lower quality? This was a circular argument, one which certainly raised costs long after costs became a central issue. At any rate, it is difficult to name any other profession where the trade school is also the epicenter of practice.
The Great Depression following the 1929 stock market crash suddenly exposed the fact that this hospital-based system was more expensive than community-dispersed medical care, possibly unsustainably more expensive. Dr. Osler’s system of organized free service in return for training had until then largely concealed the steady march of increased expense caused by Lord Lister’s summoning the populace into the surgical temple. The hospital added hotel costs on top of medical costs, and for paying patients there needed to be more amenities. Whenever you cluster six employees together, you need a seventh to supervise them; seven supervisors need a super-supervisor, and so ad infinitum. A supervisor needs an office, maybe a secretary. Pension benefits need a specialist. The expanded mission for hospitals was probably more expensive, but uncertain just what size was the optimum for a hospital, they mostly just got bigger. After the first World War, however, and for the first time in a century the financial options began to be reexamined.
The stresses of the great economic Depression forced all hospitals to recognize that their dependence on financial benevolence would bring them to extinction. The solution they devised was health insurance. Around 1935 the hospitals organized Blue Cross, a non-profit system for community sharing of cost and spreading risk. An insurance company needs reserves to protect against unexpectedly high claims. The hospitals provided such necessary guarantees behind the insurance by agreeing to reduce their prices if necessary to preserve Blue Cross solvency. In 1940 state medical society doctors used the same strategy in founding Blue Shield, similarly putting themselves at risk in lieu of the needed cash reserves. Blue Shield never could quite overcome the disproportionately heavy administrative costs of paying smaller claims for non-surgical physician care, since the insurance mechanism costs money and the costs of processing a small claim are about the same as for a big one. Non-surgeons sulked over this relative exclusion because any bill is easier to collect f insurance makes it appear free at the time of service. You (and fellow insureds) have paid in advance by paying the insurance premium.
Going back a few decades a social cancer had been growing in the medical community, the Technological Entitlement. Best summarized by example, this sense of entitlement grows in the mind of a specialist when he sees a general practitioner performing services he wishes he might do himself, or in the mind of a teaching hospital administrator when he sees a rural hospital keeping cases rather than sending them to Big City. As long as specialists or the specialty hospitals depend on voluntary referrals from the generalists, they must be civil about their sense of entitlement, but professional fraternity inevitably suffers when there is a surplus of specialists. On the other hand, a shortage of generalists leads to referring patients unnecessarily to specialists just to lighten the workload. The issue would resurface in a few decades when “managed care†reversed the financial incentives. Within this specialist/generalist tension lay a whole host of unrecognized problems for the future. The best and most economical situation for the public is to have just the right balance of generalists and specialists. There is a long lead time before you restore balance once you recognize an anomaly because the commitment to a specialty is made at the beginning of a forty-year practice. And smashing through the whole tense situation is a loose cannon. Manpower is in the hands of the medical schools, and the medical schools are competing for patients. Tuition receipts once were their main source of income, but now the majority of medical school income is derived from the practice receipts of the faculty. The conflict of interest is extreme.
These professional bickerings are now intensifying at the end of the 20th Century. They have shoved aside during desperate days of the depression, rendered meaningless during the five-year physician shortage caused by the Second World War. But after America won the War, everything changed. The nation in post-war exuberance felt it could afford some seemingly bold steps. But problems are often caused by solutions. The nation unwittingly committed itself to a financial premise which apparently can now only be altered by a disaster. The Second World War totally changed the financing of medical care.
America Medical Care After the Second World War
In 1940 only 10% of the working American population carried health insurance. By 1950, 50% did, and the explanation is simple. Wartime industries hampered by wage controls had employee recruitment difficulties and were therefore allowed (by the War Production Board) to offer free health insurance benefits without calling the wages. Not only were wage ceilings broken, but the added “fringe benefits†escaped income taxes, probably to maintain the fiction they were not extra wages in disguise. Henry Kaiser was a pioneer in this system; needing people to build “Liberty†ships he launched what would evolve, ultimately, into the HMO or Health Maintenance Organization. By 1950, so many people enjoyed the tax exemption of employer-based health insurance that the Internal Revenue Service tried to get it repealed. In the end, Congress lacked the political courage to do so, knowing very well how people hate to lose something they have come to expect. The post-war economy boomed. Loss of revenue from the tax exemption, although huge, was seemingly bearable. When threats to repeal the tax preference gradually subsided, the matter was forgotten. By 1998 most people are quite unaware of the two main truths of American health insurance: a) It isn’t really insurance, it’s prepayment and b) It’s a rather inequitable tax dodge, which you can fully enjoy only if, and while you are paid a salary by an employer.
Helms, Robert B., The Tax Treatment of Health Insurance: Early History and Evidence in A Fresh Approach to Health care Reform, Galen Institute, Washington DC, March 25, 1996,
This system raised medical prices, perhaps intentionally. After the Second World War, there just didn’t seem to be enough medical capacity to serve the country. Fifteen years of neglect had left almost every American hospital with a run-down physical plant. The population had grown, the backlog of untreated conditions seemed unlimited. The country meanwhile enjoyed a world monopoly of undestroyed industrial plant. The Richest Country in History enjoyed prosperity. Nurses an intern were starting to get paid; why not when most people had insurance to pay for it? Medical advances, stimulated by government-funded research, began to produce unimaginable benefits. Hospital construction was stimulated by the Hill-Burton Act. Medical schools were not only urged but almost threatened and bribed, to expand medical student enrollment. And so, in this climate Lyndon Johnson succeeded in getting part of universal national health insurance enacted in 1965, by restricting coverage to the elderly (Medicare) and the indigent (Medicaid). The AMA protested the costs were underestimated; liberal proponents scoffed and announced fully universal coverage would come soon because it was “inevitableâ€. Little noticed at the time, reimbursement to hospitals was made open-ended under the new system, completely reimbursed after the money had been spent. Money for hospital construction was particularly generous, and with sensible accounting, a hospital could be repaid $1.04 for every dollar it spent on construction. Little did the country care.
The country nowadays cares a lot about medical costs, because for so long it cared not a whit. And so, we are now busy bankrupting hospitals, threatening holders of hospital municipal bonds with potential default, and getting ready to go back to operating on kitchen tables. But before we get to that, notice that in 1973 Congress passed an equally colossal bill, a pension bill called ERISA (Employee Retirement Income Act). Nobody in Congress appreciated it at the time; hardly anyone in the public knows, even twenty-five years later, what a fundamental upheaval in medical care had been set in motion by few afterthought clauses in this act. President Gerald Ford, at the time he signed it, could well have written an entry in his diary similar to what George III of England supposedly wrote on the Fourth of July. Nevertheless, today Blue Cross is on the brink of being ruined because of ERISA. Many more people today have health coverage under ERISA provisions than have Medicare. Effective control of a large part of the trillion-dollar medical industry is effectively in the hands of the executives of self-insured big businesses. Control is perhaps too strong a word. The CEO’s make it clear that while they prefer their self-insurance for employee health to be good, they definitely don’t want to hear about it. And, oh, by the way, see to it that Congress doesn’t touch it.
It is harder to characterize the United Auto Workers contract with the automaker as a single event in history with a notable birthdate, but it does stand as some sort of high-water mark of the money-no-object era of medical care, which stretched from 1945 to perhaps 1975. Since the UAW contract is still in force and extends for the rest of every auto worker’s life, however, it is not just a quaint relic of a gilded age. it created a $15 billion contingent liability for General Motors alone, and surely will cause immense pressure to apply to Republicans in Congress by management, corresponding to equally strong pressure on Democrats by the union. What was agreed in a binding contract? That the auto companies would pay full medical benefits, a fee for service and without gatekeepers, for the rest of an employee’s life. As long as Medicare reduced the company’s cost for retirees, that was fine. But no matter how much or how little Medicare would soften the burden, the company had to make up the difference. Consequently, if Congress or the President thinks Medicare benefits should be reduced, any savings to the government would then simply translate into costs for General Motors, so think again. This serious quandary tends to make management and stockholders of auto companies view national health insurance proposals in an unexpectedly favorable light, while conversely it sometimes makes auto workers unexpectedly cool to be “single payer systemâ€. Single payer is very definitely still being promoted n liberal circles, nominally as an innovative way to provide coverage to the uninsured. Although a 1998 decision by the U.S. Supreme Court somewhat let General Motors off the hook on its lifetime contracts, we will surely hear more of this.
Somewhere around 1975 (The Vietnam conflict had its effect), the country lost faith that all the health system needed was somewhat more money. The new concern was that the health system is a bottomless pit which will bankrupt us all. Carefully considered, the real panic should have been based on a recognition that health insurance itself had pushed up health costs to a point where no one could afford to be without health insurance. Society’s dilemma appeared insoluble, so everyone looked about for individual ways to survive. Someone was going to get hurt, look out for yourself. The emotional counter-revolution about costs soon generated the various enabling acts for HMO’s (Health Maintenance Organizations), which passed the state legislatures around 1980. The HMO was scarcely a new idea; many had been around for decades. A blender and less effective national law had been passed seven years earlier. The driving features of the model act promoted by the National Association of Insurance Commissioners was a bias in favor of investor-owned companies, particularly those with no physicians running them. It is worth nothing that those who framed the HMO legislation incorporated into it the first explicit statutory exception to the long-standing prohibitions against corporations practicing medicine. Up until that moment, all states had a ban on corporate practice. The HMO acts specified that HMO corporations might practice, just in case anyone wanted to obstruct them on that level. In fact, the law created an enormous hidden incentive for doctors to combine into corporations. Furthermore, since the 1975 Supreme Court’s Goldfarb decision, groups of independent physicians are expensively investigated under antitrust for doing things they could freely do if they worked for a corporation. Meanwhile, the managers of any corporations have only one duty to their stockholder owners; make as much money as possible. Managers have ample power and considerable experience imposing this imperative on anyone they employ, doctors or not. Meanwhile, the courts are interpreting ERISA as prohibiting an injured patient from suing the HMO, even for the corporate policy as the source of injury.
We can now see the imperative to control medical costs, mainly driven upward by widespread insurance eliminating price resistance, is curiously linked with a contradictory mandate: expand insurance coverage even further. A notable piece of legislation was enacted in 1983, demonstrating the national carelessness about this contradiction. In response to widespread criticism, by me among others, Congress abolished the 1965 system of unlimited cost-reimbursement for hospitals and substituted payment by diagnosis, the DRG (diagnosis-related groups) system. Hastily crafted, the 1983 budget reconciliation bill included an overpayment to teaching hospitals based on the number of resident physicians they had in training (“the indirect medical educational allowanceâ€). It also created a bonus for hospitals who have a “disproportionate share†of indigent patients (please remember the irony of how hospitals started). And, finally, it phased in the new payment system in different quadrants of the country in stages, basing payments on the ongoing experience, but with resulting regional differences.
While the DRG system worked better than its crude construction suggested was likely, the indirect educational allowance created a multimillion-dollar incentive for hospitals to hire unneeded residents, whether domestic or foreign-trained, thereby both expanding a physician specialist glut and resulting in a differential overpayment to the teaching hospital. The disproportionate share payments intentionally skewed payments toward urban hospitals but also created a perverse incentive to maintain medical ghettos for indigents, just the reverse of bringing poor people into the mainstream as Lyndon Johnson had hoped to do. And the rolling phase-in of the 1983 law, for its part allowed some regions of the country to set costs at an artificially high level during the on-going year, effectively setting an inflated standard that suggested they could be overpaid forever. Efforts to create rebasing, or to reform the disproportionate share or the indirect teaching bonuses, have led to a rather dismaying 14-year stonewalling in Congress, reflecting resistance from the winners in this lottery. Worse still, it presented Congress with the political difficulty that all rectifications, if nationally uniform, would only exacerbate the competitive disadvantages of hospitals which had been unintentionally neglected in 1983.
In 1993 the Clinton health Plan net with disaster. While it masqueraded as a way to extend health coverage to the uninsured, it was primarily a cost containment plan. It had largely been developed by the Jackson Hole Group, consisting of the major health insurers, meeting in the vacation home of Paul Ellwood. Following the defeat of the national legislation, this interest group put enormous resources behind a campaign to force the health system to adopt “managed care†universally. Part of the reason for haste was the recognition that a strong argument mighty emerges that employee health benefit money really belonged to the employee. It was doubtful that employees would agree to managed care once unions and the public generally woke up to the fact that employers really had almost no right, apart from their responsibility as agents acting on behalf of employees, to insist on particular insurance choices. Or physicians, specialist, drug, and hospital choices.
In response to this astounding shift in the nature of health insurance in just two or three years, the really serious and possibly irrevocable reaction began. Hospitals responded with consolidations into chains and mega-corporations. Traditional hospital incorporation as not for profit was typically circumvented by consolidating the business aspects into a for-profit subsidiary, and then selling it (mostly stripped of its cash reserves). Seven thousand hospitals may consequently soon be only five hundred. There is even talk of consolidation into thirty national chains. One large chain is noted for its unique method: buy five hospitals in a town, close three of them, make everybody pay your price to use the remaining two. The non-profit shells of former voluntary hospitals still wonder about, uncertain of their control. Things are moving too swiftly for the convoluted antitrust statutes to catch up; that’s another incentive for haste. The Supreme Court, through a century of decisions, had established complex definitions of what constitutes anti-trust violations by a business. But it little imagined that such definitions and sanctions might later be mindlessly applied to either learned professions or charity hospitals.
However, in 1975, that’s what happened. Irritated by the behavior of some fellow lawyers in Virginia, the lawyers on the Court handed down a decision which removed all lawyers’ traditional anti-trust immunity. Unfortunately, lesser courts defer to every word of a Supreme Court decision, and by speaking of ‘learning professions†rather than just lawyers, the Burger Court’s Goldfarb Decision suddenly astounded physicians, as well, into an industrial model that largely bears little resemblance to the practice of medicine. While it may be true for other forms of business, the medical profession has never acknowledged that money, efficiency, and prices (economic standards) are more important than the health of their patients (non-economic standards, excluded from antitrust consideration). Case law had earlier evolved in the courts defining concepts like “vertical integrationâ€, which had manufacturer, wholesaler, and retailers in mind. Such rulings now present bewildering obstacles to rationalizing insurance companies which own hospitals, or hospitals which employ physicians. By applying ancient “per se†doctrines to an amazing medical profession, the Court even blocked the medical anti-trust neophytes from explaining their unique facts under the “rule of reasonâ€. The hodge-podge of the Goldfarb Decision with Burger terminology embellishment was soon made worse by a particularly egregious lapse of common sense, called the Maricopa Decision. In that case, the Court made a chilling example of a county medical society, found guilty of the newly invented crime of placing maximums on their own fees. Since doctors were thereafter not allowed to publish a schedule of either maximum fees, they had to stand by and watch the insurance company chosen by the employer divert their patients into the offices of competitive physicians who were perfectly free to fix prices, by being employed or part of a group practice. The patients may not have been happy about this, but the too found little choice. What the Supreme Court didn’t notice in the Maricopa decision was that for practical purposes prices were no longer set by physicians in a physician-based marketplace. Rathe, physician prices are really set by insurance companies in an insurance-based marketplace. If price fixing has any modern significance in healthcare costs, it is a collective significance, not an individual one. To tangle one group of market participants in per se price-fixing arguments while a competitive group runs loose with collective pricing is scarcely equal justice, and is obviously destabilizing the market.
In the 1997 arguments about State Oil v. Kahn the Justices challenged the Solicitor General to name a single instance in which someone had been prosecuted for maximum price fixing unless the maximum price was just a minimum price in disguise. The Solicitor General couldn’t think of any, but the Maricopa case was the perfect example if it had been permitted to have a hearing.
In 1998 it is fair to say the country is fed up with intractable healthcare contradictions Physicians consequently tell themselves that Managed Care stands convicted in the court of public options and will surely be mostly abandoned. But just a minute. The desperate hospitals have meanwhile turned the healthcare system on its ear, scrambling eggs that not be easy to unscramble.
In the next two sections of this book are my best efforts to suggest some ways to get out of this mess. In the section of Part, I which immediately follows I will propose some incremental and I hop achievable reform proposals for health insurance, with the goal of improving general access to healthcare. In Part II of the book are suggested ways to reduce the cost of care which are far less radical than chain-saw massacres presently in prospect, but consequently more likely to endure. This book would then still not be complete without a final assessment of the present blood-soaked battlefield, the villains, and the heroes. After two hundred pages of constructive suggestions, I do ultimately feel entitled to say my say about the destructive ones proposed by others. Read on but keep pondering the original questions. In the name of medical evenhandedness, if we cannot have everything we want, must nobody have anything at all?
Four Prescriptions: Proposals or Reform of Health care Financing
Rx. I: PRE-FUNDED HEALTH INSURANCE
INTRO page 1.
Introduction
Benjamin Franklin organized the first American fire insurance company in 1736. Success in the insurance business rests almost unnoticed among the many scientific and political accomplishments of that remarkable man. Even in Philadelphia, few people realize Franklin’s company and several others like it still operate comfortably. Franklin called his company a “Contribution shipâ€, but a more familiar modern term is “mutual†insurance company. Even though mutual life insurance companies have come to predominate, for important reasons fire insurance has been more salable when provided by profit-making companies. The ancient mutual fire insurance companies remain small but reflect some important thinking which this book argues should be applied to health insurance, where ideas are currently badly needed.
What the world already knows about these quaint little companies is almost a hindrance. Occasional articles in the Philadelphia Sunday supplements do sometimes mention them, mostly fascinated with how socially prestigious it is to be a member of their boards of directors, what excellent dinners are served at directors meetings, what priceless antiques are to be found in their headquarters. Franklin to be sure would probably relish the elegance. Unlike the Quakers of Colonial Philadelphia, Poor Richard was not frugal in order to be inoffensive; he was frugal to get rich. Dying the second richest man in the city, he lived the kind of life many Yippies might admire.
Mutual fire insurance companies sell something called "perpetual insurance" which turns out to be perfectly ordinary homeowner's insurance, with one big twist to it. The customer makes one large lump sum deposit in advance, then never pays premiums. During all the time the insurance is in force, perpetually if need be, no further premiums are paid. The deposit earns enough interest to pay the full premium cost of the insurance protection. In that way, the customer has the perfectly astounding experience of having every penny he paid to the company returned when he eventually gives up the insurance. Centuries of experience show that a single deposit of roughly ten years conventional premium will generate enough investment income to cover all anticipated costs from "losses" and administration. The deposits themselves "share the risk", eliminating the cost of paying investors to provide a "contingency reserve". This simple scheme is Perpetual mutual insurance.
As everyone knows, that isn't the way most fire insurance works; the only things perpetual about a more typical policy are the yearly premium notices, which in the aggregate eventually cost much more than making a deposit and giving up the income from it. It is left to the typical stockholder company to worry about getting contingency reserves coming from investors are more popular with homeowners than reserves they have to provide themselves, consequently why perpetual premiums are so much more scalable than perpetual insurance. The young homeowners is typically a debtor, stretching to buy the best house he can afford when he can stump up a down-payment; fire insurance is something his mortgage banker insists he buys. In order to have the American dream a little earlier, the homeowner agrees to pay a little more, later.
Two hundred years after Franklin's death it is possible to gain other insights from "perpetual" insurance because the unfamiliar approach makes us ask basic questions. The next several chapters of this book now set out to argue that health insurance has some serious problems which could be improved by asking those questions. The problems of health insurance are not trivial; many experts question whether we can afford to continue the present system. Whether a breakdown of health insurance would lead to worse care, no access to care or rationed care, the whole subject of health insurance is important to more people than insurance executives. We will return to Franklin's idea after a flyover of current major problems of health insurance, with reflections on how things got to be such a mess. Then, after compounding several insurance remedies based on Franklin's formula, an effort is made to identify potential harmful effects but few are found. The main problem with the prescription is that it has a rather bitter taste.
WHAT'S WRONG WITH HEALTH INSURANCE
There are many things good about the American system of health insurance. Compared with the nationalized health insurance schemes of other countries, our health insurance is a utopia. Indeed, the main reason to criticize the American system of health insurance is to save it from itself, since the foreign alternatives are so much worse. No doctor ever saved a patient by ignoring the symptoms. To be concise, our health insurance system is unfunded, inappropriately linked to employment, adequate for moderate illness but not for catastrophic ones, and incredibly expensive to run. For each of these four disorders, this book offers a prescription. In the first section, keeping Poor Richard in mind, the disorder under examination is that health insurance is unfounded. For the ailment of being unfunded, the prescription offered is the IRA for Health.
Unfunded, Being unfunded does not mean cheap. It costs a typical family about $3500 a year for health insurance premiums. It has become commonplace to read newspaper articles announcing or predicting 15-30% increases. Annual national costs of healthcare are about $500 billion. Those who would like to solve the problem with a national health scheme should remember that $500 billion would be half of the current Federal budget; the $200 billion already federalized are nearly destroying the government. Health care is expensive all right, and unfunded.
Further, because an employee can escape income taxation on a health insurance premium if his employer pays it for him, that's the way health insurance.
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.
