Philadelphia Reflections

Text of the Rosetta Stone

In the reign of the young one who has succeeded his father in the kingship, lord of diadems, most glorious, who has established Egypt and is pious towards the gods, triumphant over his enemies, who has restored the civilized life of men, lord of the Thirty Years Festivals, even as Ptah the Great, a king like Ra, great king of the Upper and Lower countries, offspring of the Gods Philopatores, one whom Ptah has approved, to whom Ra has given victory, the living image of Amun, son of Ra, PTOLEMY, LIVING FOR EVER, BELOVED OF PTAH, in the ninth year, when Aetos son of Aetos was priest of Alexander, and the Gods Soteres, and the Gods Adelphoi, and the Gods Euergetai, and the Gods Philopatores and the God Epiphanes Eucharistos; Pyrrha daughter of Philinos being Athlophoros of Berenike Euergetis, Areia daughter of Diogenes being Kanephoros of Arsinoe Philadelphos; Irene daughter of Ptolemy being Priestess of Arsinoe Philopator; the fourth of the month of Xandikos, according to the Egyptians the 18th Mekhir.

DECREE. There were assembled the Chief Priests and Prophets and those who enter the inner shrine for the robing of the gods, and the Fan-bearers and the Sacred Scribes and all the other priests from the temples throughout the land who have come to meet the king at Memphis, for the feast of the assumption by PTOLEMY, THE EVER-LIVING, THE BELOVED OF PTAH, THE GOD EPIPHANES EUCHARISTOS, of the kingship in which he succeeded his father, they were assembled in the temple in Memphis on this day declared:

Whereas King PTOLEMY, THE EVER-LIVING, THE BELOVED OF PTAH, THE GOD EPIPHANES EUCHARISTOS, the son of King Ptolemy and Queen Arsinoe, the Gods Philopatores, has been a benefactor both to the temple and to those who dwell in them, as well as all those who are his subjects, being a god sprung from a god and goddess like Horus the son of Isis and Osiris, who avenged his father Osiris, being benevolently disposed towards the gods, has dedicated to the temples revenues of money and corn and has undertaken much outlay to bring Egypt into prosperity, and to establish the temples, and has been generous with all his own means; and of the revenues and taxes levied in Egypt some he has wholly remitted and others has lightened, in order that the people and all the others might be in prosperity during his reign; and

whereas he has remitted the debts to the crown being many in number which they in Egypt and the rest of the kingdom owed; and

whereas those who were in prison and those who were under accusation for a long time, he has freed of the charges against them; and

whereas he has directed that the goods shall continue to enjoy the revenues of the temples and the yearly allowances given to them, both of corn and money, likewise also the revenue assigned to the gods from the vine land and from gardens and the other properties which belonged to the gods in his father's time; and

whereas he directed also, with regard to the priests, that they should pay no more as the tax for admission to the priesthood than what was appointed them throughout his father's reign and until the first year of his own reign; and has relieved the members of the priestly orders from the yearly journey to Alexandria; and

whereas he has directed that impressment for the navy shall no longer be employed; and of the tax on fine linen cloth paid by the temples to the crown he has remitted two-thirds; and whatever things were neglected in former times he has restored to their proper condition, having a care how the traditional duties shall be fittingly paid to the gods; and likewise has apportioned justice to all, like Thoth the great and great; and has ordained that those who return of the warrior class, and of others who were unfavorably disposed in the days of the disturbances, should, on their return be allowed to occupy their old possessions; and

whereas he provided that cavalry and infantry forces and ships should be sent out against those who invaded Egypt by sea and by land, laying out great sums in money and corn in order that the temples and all those who are in the land might be in safety; and having gone to Lycopolis in the Busirite nome, which had been occupied and fortified against a siege with an abundant store of weapons and all other supplies seeing that disaffection was now of long standing among the impious men gathered into it, who had perpetrated much damage to the temples and to all the inhabitants of Egypt, and having encamped against it, he surrounded it with mounds and trenches and elaborate fortifications; when the Nile made a great rise in the eighth year of his reign, which usually floods the plains, he prevented it, by damming at many points the outlets of the channels spending upon this no small amount of money, and setting cavalry and infantry to guard them, in a short time he took the town by storm and destroyed all the impious men in it, even as Thoth and Horus, the son of Isis and Osiris, formerly subdued the rebels in the same district; and as to those who had led the rebels in the time of his father and who had disturbed the land and done wrong to the temples, he came to Memphis to avenge his father and his own kingship, and punished them all as they deserved, at the time that he came there to perform the proper ceremonies for the assumption of the crown; and

whereas he remitted what was due to the crown in the temples up to his eighth year, is no small amount of corn and money; so also the fines for the fine linen cloth not delivered to the crown, and of those delivered, the several fees for their verification, for the same period; and he also freed the temples of the tax of the measure¹ of grain for every measure² of sacred land and likewise the jar of wine for each measure² of vine land; and

whereas he bestowed many gifts upon Apis and Mnevis and upon the other sacred animals in Egypt, because he was much more considerate than the kings before him of all that belonged to them; and for their burials he gave what was suitable lavishly and splendidly, and what was regularly paid to their special shrines, with sacrifices and festivals and other customary observances, and he maintained the honors of the temples and of Egypt according to the laws; and he adorned the temple of Apis with rich work, spending upon it gold and silver and precious stones, no small amount; and

whereas he has funded temples and shrines and altars, and has repaired those requiring it, having the spirit of a beneficent god in matters pertaining to religion; and

whereas after enquiry he has been renewing the most honorable of the temples during his reign, as is becoming; in requital of which things the gods have given him health, victory and power, and all other good things, and he and his children shall retain the kingship for all time.

WITH PROPITIOUS FORTUNE: It was resolved by the priests of all the temples in the land to increase greatly the existing honors of King PTOLEMY, THE EVER-LIVING, THE BELOVED OF PTAH, THE GOD EPIPHANES EUCHARISTOS, likewise those of his parents the Gods Philopatores, and of his ancestors, the Great Euergatai and the Gods Adelphoi and the Gods Soteres and to set up in the most prominent place of every temple an image of the EVER-LIVING KING PTOLEMY, THE BELOVED OF PTAH, THE GOD EPIPHANES EUCHARISTOS, which shall be called that of 'PTOLEMY, the defender of Egypt,' beside which shall stand the principal god of the temple, handing him the scimitar of victory, all of which shall be manufactured in the Egyptian fashion; and that the priests shall pay homage to the images three times a day, and put upon them the sacred garments, and perform the other usual honours such as are given to the other gods in the Egyptian festivals; and to establish for King PTOLEMY, THE GOD EPIPHANES EUCHARISTOS, sprung of King Ptolemy and Queen Arsinoe, the Gods Philopatores, a statue and golden shrine in each of the temples, and to set it up in the inner chamber with the other shrines; and in the great festivals in which the shrines are carried in procession the shrine of the GOD EPIPHANES EUCHARISTOS shall be carried in procession with them. And in order that it may be easily distinguishable now and for all time, there shall be set upon the shrine ten gold crowns of the king, to which shall be added a cobra exactly as on all the crowns adorned with cobras which are upon the other shrines, in the center of them shall be the double crown which he put on when he went into the temple at Memphis to perform therein the ceremonies for assuming the kingship; and there shall be placed on the square surface round about the crowns, beside the aforementioned crown, golden symbols eight in number signifying that it is the shrine of the king who makes manifest the Upper and the Lower countries. And since it is the 30th of Mesore on which the birthday of the king is celebrated, and likewise the 17th of Paophi on which he succeeded his father in the kingship, they have held these days in honor as name-days in the temples, since they are sources of great blessings for all;

it was further decreed that a festival shall be kept in the temples throughout Egypt on these days in every month, on which there shall be sacrifices and libations and all the ceremonies customary at the other festivals and the offerings shall be given to the priests who serve in the temples. And a festival shall be kept for King PTOLEMY, THE EVER-LIVING, THE BELOVED OF PTAH, THE GOD EPIPHANES EUCHARISTOS, yearly in the temples throughout the land from the 1st of Thoth for five days, in which they shall wear garlands and perform sacrifices and libations and the other usual honors, and the priests in each temple shall be called priests of the GOD EPIPHANES EUCHARISTOS in addition to the names of the other gods whom they serve; and his priesthood shall be entered upon all formal documents and engraved upon the rings which they wear; and private individuals shall also be allowed to keep the festival and set up the aforementioned shrine and have it in their homes; performing the aforementioned celebrations yearly, in order that it may be known to all that the men of Egypt magnify and honor the GOD EPIPHANES EUCHARISTOS the king, according to the law.

This decree shall be inscribed on a stela of hard stone in sacred and native and Greek characters and set up in each of the first, second and third rank temples beside the image of the ever-living king.

(C) 1981 The Trustees of the British Museum.
Written 27 March 196 B.C.

¹ artabe, a Greek or Persian measure of 52 liters (1.48 bushel).
² aroura, a Greek measure of 2,735 square meters (0.67 acre).
This page was derived from an English translation of the Greek text of the Rosetta Stone, published in a booklet by the British Museum. this derivation the Egyptian names of the gods appear where the Greek names appeared originally. The Greek measures in the text may have had no Egyptian equivalent, as the Greeks had already ruled Egypt for 136 years. No doubt the size of the jar of wine was also standardized.

Text of Section 1251 (H.R. 3590):PRESERVATION OF RIGHT
TO MAINTAIN EXISTING COVERAGE

SEC. 1251. PRESERVATION OF RIGHT TO MAINTAIN EXISTING COVERAGE.

(a) No Changes to Existing Coverage-

(1) IN GENERAL- Nothing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.

(2) CONTINUATION OF COVERAGE- With respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.

(b) Allowance for Family Members To Join Current Coverage- With respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act and which is renewed after such date, family members of such individual shall be permitted to enroll in such plan or coverage if such enrollment is permitted under the terms of the plan in effect as of such date of enactment.

(c) Allowance for New Employees To Join Current Plan- A group health plan that provides coverage on the date of enactment of this Act may provide for the enrolling of new employees (and their families) in such plan, and this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply with respect to such plan and such new employees (and their families).

(d) Effect on Collective Bargaining Agreements- In the case of health insurance coverage maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers that was ratified before the date of enactment of this Act, the provisions of this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply until the date on which the last of the collective bargaining agreements relating to the coverage terminates. Any coverage amendment made pursuant to a collective bargaining agreement relating to the coverage which amends the coverage solely to conform to any requirement added by this subtitle or subtitle A (or amendments) shall not be treated as a termination of such collective bargaining agreement.

(e) Definition- In this title, the term 'grandfathered health plan' means any group health plan or health insurance coverage to which this section applies.

Medical Advocate Favors Health-Care Financing Reforms by: Harry Schwartz, PhD May 1983

George Ross Fisher III M.D.

Not many practicing fee-for-service physicians are invited to address the White House staff on the economics of medicine. But two years ago George Ross Fisher, MD, of Philadelphia, Pa., received a White House invitation to speak about the burning medical issue of the day cost containment.

Now considered to be a prominent spokesman for the Physician viewpoint on this topic, Dr. Fisher started on the road to the White House podium when he wrote a book called The Hospital that ate Chicago which was published in 1980. In May 1981 Dr. Fisher’s book got a rave review in The Wall Street Journal’s sister publication, Barron’s a review that caught some White House staff members’ eyes and earned him his invitation.

When the various business coalitions on health held their first national meeting in Chicago last year, Dr. Fisher was the featured luncheon speaker. Before and since then he has outlined his ideas for many influential audiences around the country. For physicians, a key aspect of Dr. Fisher’s thinking is his belief that substantial economics and efficiencies can be made in the nation’s health care system without abandoning the many huge advantages and efficiencies of fee-for-service medical practice. Since he is both informed and articulate, his writings and speeches make a deservedly positive impression.

A member of Pennsylvania delegates to American Medical Association (AMA) House of Delegates for the past five years, Dr. Fisher is also the only AMA delegate in the country to have won an independent position as spokesman for ideas congenial to many, probably most, of the nation’s practicing physicians. Curiously, the AMA seems to have little idea of Dr. Fisher’s eminence and importance in the national debate.

Born in Erie, Pa., in 1925, the slim,erect and vigorous endocrinologist, who is a graduate of Yale and Columbia University's College of Physicians and Surgeons, is self-taught in medical economics, largely as a result of years of service on the economics committee of the Central City Branch of the Philadelphia Medical Society. He is married to another physician, Dr. Mary Stuart Fisher, who is a radiologist at Temple University Medical School. Among their four children is daughter Margaret, who will receive her MD degree next month along with her husband Jonathan Rosenthal.

Dr. Fisher originally wrote The Hospital that Ate Chicago in mid-1979 with the expectation that Sen. Edward Kennedy would be the Democratic candidate for president in 1980 and that national health insurance would be that year’s prime issue. His purpose in writing the book was to demonstrate the enormous cost and numerous inefficiencies inherent in the nation’s partisan approach to national health insurance plus Medicaid and Medicare have already imposed costs and inefficiencies that would be multiplied if the Kennedy nostrum became law.

At the cost of oversimplification, two weakness of the present system of financing medical care in this country is central to Dr. Fisher’s analysis. One is the prevalence of employer-paid private health insurance. This makes many people indifferent to the cost of their health care, especially if it is delivered in a hospital where care is most generously financed.

There is little or no patient resistance to ever more expensive care, practically if delivered in a hospital where insurance will pick up the entire bill.

The second central weakness, Dr. Fisher believes, is that because most hospitals are nonprofit institution they do not have the incentives for taut, economics operations like those profit-making institutions. Instead, they dissipate their surpluses either in above-market salaries for their paid personnel or in ceaseless efforts to grow bigger and more complicated. Where profits are not an index of efficiency and competence, Dr. Fisher remarks, mindless growth tends to replace that index.

From these and related premises, Dr. Fisher tends to favor reforms in health insurance which will give patients incentives to ponder costs among their health-care alternatives. Thus he is an advocate of taxing private health-care insurance benefits beyond some minimum level. The best insurance, he believes, is catastrophic insurance, i.e., health-care-insurance with a large deductible, since most people are healthy and can afford the relatively small bills for medical care the average person racks up in an average year.

He also believes that the charitable functions of nonprofit hospital ought to be separated from their normal operations; he is an advocate of nonprofit hospital turning their hospital and other heal-care activities into for-profit subsidiaries which would be run on a businesslike basis to deliver health care of a high quality as efficiently and index pensively as possible. He notes with satisfaction that since he articulated this notion, some hospital pioneers have begun doing precisely what he recommended.

Since writing his book, Dr. Fisher has developed two other ideas for which he has been seeking support.

One idea, which he got the AMA House of Delegates to support last year, is called health-related IRA penalty exclusions. It asks Congress to amend the individual retirement account(IRA) laws to permit a waiver of the present 10 percent penalty for withdrawal of funds prior to owner reaching age 59 ½. Such a waiver, Dr. Fisher argues, should be permitted under two health-related conditions. One would be in the case of illness required expensive treatment when an invasion of the IRA savings would be permitted to meet limited and defined health expenditures causing economic hardship. The second would permit diversion of investment income from an IRA to escape penalty if it issued to pay health insurance premiums.

Enactment of a law permitting this change in the Ira would mean that the IRA would assist not only in making up for inadequacies of Social Security pensions but also help make up for looming inadequacies of Medicare. The Medicare trust funds are rapidly approaching the bankruptcy that would have affected Social Security of it were not for the radical change and tax increases of recent years.

Dr. Fisher’s second brainstorm is what he calls assigned risk pools for health insurance. Dr. Fisher put the need for this change in these words when he addressed the AMA Council on Medical Services last January: “An uncomfortably large number of Americans presently feel unable to obtain health insurance, either because they have unsuccessfully tried to obtain it, or because they feel they would not know where to if they had to… It cannot be doubted that it would lessen future pressures for nationalized insurance if the public knew that anyone who wished to buy health insurance would not have been refused even though not everyone took advantage of the opportunity.”

In Dr. Fisher’s opinion, this risk scheme would assign applicants to all health insurance firms in a state in specified rotation, so that all insurers would share in the burden. He worries about the assigned risk fee getting so low that people would voluntarily abandon their existing health insurance to go on the assigned risk plan, and for that purpose, he would require that the standard premium of the insurance company. He would also favor making the assigned risk assurance a plain with a deductible of serial thousand dollars linked to a clause making preexisting illness non-coverable for some defined period.

Though Dr. Fisher is a staunch advocate of fee-for-service medicine and does not hide his distaste for such schemes as mandatory fee assignment for physicians, e does not accept the conventional conservative position on all medical issues. He was a strong advocate of the professional standards review organizations (PSROs) because he felt they helped remove the one economic advantage health maintenance organization (HMOs) had over fee-for-service medicine.

That typical HMO advantage he points out is that an HMO hospitalizes its members far less often than does a comparable group of fee-for-service doctors. Dr. Fisher argues that the Philadelphia PSRO helped Blue Cross in that city reduce hospital days per thousand members from 1,085 to 760 in less than a decade. Persistence of such PSRO pressure for eight more years would lower Philadelphia Blue Cross members’ hospitalization to the 550-days-a-year level of Kaiser-Permanente in California, he says.

This summary of Dr. Fisher’s views cannot give a full idea of the subtlety, sophistication, and wit of his writing and thinking. In “the Hospital that Ate Chicago,” Dr. Fisher included a series of fantasy chapters which use fictional scenes to suggest what actually happens in the relations among the various groups impinging on hospitals and hospitals’ decisions.

Dr. Fisher has also gained expertise in the arcane but very important area of the higher mythology known as hospital accounting, particularly as that mythology tends to encourage the building of bigger and more expensive hospitals whether or not they are needed. And Dr. Fisher explains how the momentous misjudgment of the founders of Blue Cross/BlueShield in having both organizations be nonprofit groups made it possible for government officials to expropriate both Organizations from the hospital and physician organizations whose initial investments and scarf ices created first Blue Cross and Blue Shield.

Dr. Fisher has managed t develop is a high level of understanding and exposition of medical economics while continuing a demanding practice as a board-certified internist and endocrinologist on the teaching staff of the medical school of both the University of Pennsylvania and homes Jefferson University. There may be other remarks physicians in the United States, but they must be few a far between.

Health Insurance National, and Otherwise

Health Insurance National, and Otherwise

George Ross Fisher, M.D.

A Message to Big Business

Recently the National Chamber of Commerce studied the question of cost containment in the health field and urged local chambers to organize data reporting systems for employee health and hospital costs. It is not clear what employers could do with such information once they had it since their employees (or unions) are likely to be resentful of intrusion into personal privacy. If the data should by chance demonstrate that one doctor, hospital or HMO was cheaper than another, the more expensive providers of care would surely claim that quality was related to cost. In any event, the American tradition is for the patient, not his employer, to select his doctor.

A far more productive data analysis for employers would be one which helped him select the best insurance company, or the best health insurance benefit package, for the employee group. While it is true that unions have exerted considerable influence on benefits packages or even carrier selection, the unions and the employers unite in a desire to get the most benefits for the least health insurance cost. It, therefore, seems likely that more action would result from examination of the financial data than the medical data, although in both cases it is necessary to be a diligent pupil before the data is intelligible. We here propose that it is worth-while to understand the ratio of hospital costs to hospital charges. Having understood the matter, the Chamber is urged to apply it to local hospitals and individual employee groups.

The examination of internal hospital subsidies is greatly assisted by the existence of an unwieldy document, the SSA-2552. The Medicare agency requires every hospital to complete a 25-page annual financial summary, complete with folded-over pages and filled with numbers. This document is prepared for a public purpose, and under the Freedom of Information Act, is available to all who wish to examine it. For the purpose at hand, it is possible to ignore all of this document except for column 2 on page 18. On page 18 is found “Worksheet C.” Departmental Cost Distribution. In column 1 will be found; the total costs generated by each department during the year (A.), together with the total charges generated by that department (B.) In column 2, the place where present attention is focused, each department displays the ratio of A divided by B, the ratio of Cost to Charges. A quick glance will identify that the ratio is usually less than 1.0, in keeping with the practice of charging more than your costs in order to make a “profit”. A glance down the line will quickly show even a casual reader that there is a very considerable variation in the ratios from one department to another and that there are definitely department with a ratio greater than 1.0, which means that these departments are being subsidized.

The Medicare cost report, available from every hospital, displays the ratio of costs of charges for each revenue-production department of the hospital. The concept of the ratio is simple enough. In a free enterprise system, everyone is accustomed to the idea that the price of things is always a little higher than the cost. The difference is called a profit margin, or mark-up. We are even familiar with the occasional situation where the selling price (charge) is less than the cost; that is called a loss-leader.

Therefore, loss-leaders excluded, we would except the normal ratio of costs to charges to be approximate.90, allowing about a 10% profit for bad debts, charity, etc.

Furthermore, we would expect the individual department of the hospital to display a cost-to-charge ratio which is relatively uniform, and fairly close to overall total for the hospital.

Notice that the important issue is not how close the ratio is to unity (1.0) but rather how close it is to the overall hospital total ratio. That is, how uniform the ratios are between departments.

A great many people assume that, if the cost-charge ratio is less than 1.0 and a profit is therefore generated, any insurance company which pays charges must have higher premiums than an insurance company which pays “costs”. Such an inference is not necessarily correct as a theory and is quite clearly incorrect in certain circumstances. The premium reflects all of the expenses of the insurance company, not just the hospital payments. Subsidy of non-group individual subscribers by group subscribers is a major example of the equalizers affecting health insurance premiums.

The following figures for cost-to-charge ratios were taken from an actual hospital’s Medicare cost report. They fairly represent the national pattern, although there is a great deal of individual variation between hospitals. The important things to notice are the non-uniformity of departments, and the separation of hospital departments into two distinct classes:

Table 1. Ratio of Costs to Hospital Charges by Department

Undercharged (Ratio) Overcharged (Ratio)

Operating Room 1.02 X-Ray .74

Short Procedure 1.20 Isotopes .68

Labor & Delivery 1.32 Laboratory .69

Anesthesia 1.19 Oxygen .59

Physical Therapy 1.38 EKG .22

Daily Room Charge 1.22 EEG .54

Intensive Care 1.25 Medical Supplies .46

Drugs .58

Finally, one dare not assume that the cost-to-charge ratio for a department is reflected in every service performed by that department. The ratio comes about by the cost accountant assigning indirect costs to those departments which have the best cost reimbursement experience. At the same time, charges are raised on those items most likely to be paid for in cash, within the perceived limits of the ability to pay. Charges tend to be closely examined on common items like blood counts and chest x-rays, while uncommon test and services tend to be too much trouble to examine frequently in close detail. Therefore, there are often bargains in rarely-used services whose charges have not been raised in some time. Finally, there are items which can be charged off as bad debts if unpaid by a Medicare patient. Under this heading are personal items like television sets, or uncollected 20% coinsurance on ambulatory services; for setting h charges on these items, maximum brazenness is rewarded.

How to Play the Game

The free-market, or Adam Smith, philosophy is presumably highly regarded by the Chamber of Commerce. The theory supposes that every rational person will press his own interest and advantage to the point where he comes into equilibrium with the rest of the community, who are acting on their own separate behalf. It must be clear that the hospital financial and reimbursement system strongly endorses the “every man for himself” philosophy. What follows are a few suggestions for overachievers in the business world who would like to play the hospital game with a little more success than they have demonstrated in the past. Perhaps if they do, the community at large will benefit as a new equilibrium is set.

Notice that a cost/charge ratio greater than unity (1.0) means a loss leader. If your insurance company pays charges, it is paying less than another company which is paying costs. Never mind that the “costs” are inflated with doubtful indirect costs; that’s what the cost-reimbursing insurance company pays.

Notice that the benefits package of a charge-reimbursing insurance company should heavily include the use of those hospital departments which are loss-leaders. Those departments which are highly profitable for the hospital, however, should be avoided, since the presence of insurance just raises the prices still more. Since these services are mainly out-patient (ambulatory) services, tell your employees to go for them to their doctor’s offices. If you must cover them with insurance, specify that the insurance is not valid for use in a hospital. (Don’t worry about anti-trust: plenty of policies are only good in a hospital out-patient department.) If you feel you must cover them, put them in the major medical policy.

Notice that the cost-reimbursing insurance companies have an exactly opposite set of motivations. They need to include a large number of ambulatory benefits since they get a bargain on such services. However, if they are restrained from this endeavor, they will be forced to resist the cost escalation of inpatient-intensive services, which means they resist the current escalation of indirect costs. Since the root cause of hospital inflation is the rampant growth of unrestrained indirect costs, it is possible that restricting Blue Cross to inpatient reimbursement would stop the spiral. It is in the competitive interest of a charge reimbursing carrier to avoid extending out-patient benefits. Blue Cross, by contrast, would have to be forcibly restrained.

If an employer intends to be serious about playing the hospital game, he needs to know what kind of services his own employees are using. He also needs to know what the particular cost/charge quirks are at the local hospitals where most of his employees find themselves from time to time. It is easy to imagine one employer with 30% of his employees' women under the age of thirty, while another employer mostly might have nothing but middle-aged male employees. A new business will have young active employees, an older business may have pensioners to consider. The climate makes a difference, and occupational hazards must be considered. So, what’s good for one employer isn’t necessarily good for others, or necessarily good after the business grows for ten years. And the hospital cost accountant, by the way, isn’t going to be asleep as things change over time.

It would require a rather sophisticated data system for an employer group (or even an insurance company) to analyze its experience in terms of hospital departmental usage. So, a simpler conceptual approach is suggested. The departments with a high cost/charge ratio tend to be used by surgeons and surgical specialties. Conversely, the non-surgical physicians' internists, pediatricians, psychiatrists, family practitioners) tend to use most heavily the hospital departments which have low cost/ charge ratio. There is no conspiracy at work; it just happens to work out that way as a result of independent stresses which have been discussed elsewhere.

So, it would appear that subsidizing is taking place by the patients of non-surgeons for the benefits of patients who have surgery. Somewhat true, although the situation is more complicated.

Both Blue Cross and the commercial carriers employ an analytic system for large employee groups, known as experience-rating on the basis of charges incurred, (even though the plan pays costs, not charges). The commercial carriers experience-rate on the basis of charges, too, but they actually pay the charges. So, an experience-rated group gains nothing by switching carriers so long as the experience-rating continues to be based on hospital charges. The premium they pay will reflect a subsidy of surgical patients by non-surgical ones.

But there is another class of patients for whom the reverse is true. The non-group individual subscribers to Blue Cross have a diversion of premium money toward surgery, while the whole non-group program is receiving a subsidy from the group subscribers. It is difficult to tell whether the continued effect is positive or negative for surgical patients. But the non-surgical, non-group subscribers are certainly getting a bargain. Until someone figures out a way to force subscribers to belong to a group, a company should think twice about forming one. Decreased benefit package? Buy an excess major medical policy and forget it.

Of all the subsidies which characterize this giant medical financial equilibrium, the greatest is on the basis of the age of the subscriber. It scarcely needs proof to recognize that young subscribers do not have the same health costs as older ones, but they do pay the same premium. All health insurance plans would do well to devise a system of vesting before competition exploits this inherent weakness and topples the structure. A movement by groups into non-group would eventually reach an equilibrium, but a selective movement of young subscribers to competitors or self-insurance would start a spiral which could be very drastic, indeed.

Finally, there is one other recourse which subscribers could take to the situation wherein non-surgical hospital patients subsidize surgical ones, while experience-rating prevents them from doing much about it. The recourse would be to seek care outside of a hospital. Nowadays there is not much difference between a first-class nursing home and a hospital, except that you can’t do much surgery there. Next time you hear someone talking about “excess hospital beds”, take a hard look at who is talking.

Jottings

What is happening to all of the other employees a delivery system? What's happening to the nurse glut ant and the optometrist glut?

Office overhead. Back to the office in the house?

I am apprehensive about the effect of reducing tax brackets on overhead costs of a medical practice.

DRG's ve prospective payment. Do we want to work for reform of prospective payments system or do we want to make it collapse?

"Gatekeeper" concepts. Is there a problem of overspecialization mixed in this, or is passionate defense we hear just a matter of self-referral by patients?

Industry rightly has a role in reducing the maintenance costs of employee illness, even they are dominating the spending of money which is no longer theirs. However, health costs are also, a luxury item, where people have a right to spend disposable income as they see fit. Psychoanalysis, cosmetic surgery, simple curiosity about their bodies, fitness, etc are no business of business. By mixing the two issues together, talking about "quality medicine", denouncing a "two-class system", business is getting into areas they should be evicted from.

Market Efficiency story: Program trading, in which instructed to buy the component stocks of an index whenever the options or futures market detects a certain profit by exchanging the stock for the options, was a new phenomenon in 1985. It could send the Dow Jones Average up or down 30 points in a day, at the time of the "triple witching hour". By the time the press began to notice it, or in about eight months, the game was pretty well over. When the concept was first employed, the computers reacted to a 5% margin of profit, but the margin was continuously narrowed as the game got hotter and more popular. One broker lost $4 million in one day by mistakenly reaching for a spread of .8%, and by eight months the target spread was .3%. People had moved on to the second-order game, which was to trigger buy and sell orders in anticipation of the 30-point jumps. When that game is over, there will be a third-order game. But the efficiency of the arbitrage game is such that the market in American stocks will be totally efficient in another year or two, and you will not even see a ripple of price movement to identify the presence of a witching hour. Like doctors, arbs put themselves out of business by doing a good job; however, the time of a transaction is 40 years of practice, not one nanosecond of a stock trade. The Market principle is the same for both professions, but the inherent inefficiency of the medical marketplace is inherently extreme.

The baby boom: the pig in the python. The source of libertarian ideas because of the licentiousness of the sixties? What does this mean for medicine? Anything?

From 1970=6 to 1984 he was a 300% increase in Congressional staff and committee staff. This was more important to Republicans than Democrats because the bureaucrats were mostly Democrats; what happened was a great movement of Conservative young people to Washington. The Cato Institute, eg. Conservative, libertarian ideas got generated, publicized, excited. A lot of wheels were reinvented; but a lot of liberal assumptions were tested, challenged, changed. They can't make up their minds between Jefferson (Cato--liberty and individualism) and Hamilton (growth), but it is remarkable that they took Jefferson away from the Dems.

Efficiency, we must have efficiency. Efficiency in medical care is part of the productivity of society in general since a major component of health care is maintaining workers on the job (not the only part, however, some of it is a consumer luxury item.). Within health care efficiency we have productivity, but that not the same as productivity of industrial output of the nation.

Opinion analyst Terry Nichols Clark: "You can provide services to the disadvantaged and hold down taxes only if you make government more efficient."

George's story about the inefficient Japanese culture, deliberately employing unnecessary people to do menial unnecessary jobs, at the same time that the nation was moving toward high efficiency in production. The cultural consensus was reached about how fast and how slow, and it was disruptive for foreign firms to come in and betray the tacit inefficiency. So the Japanese pass laws a create obstacle to foreigners, which foreigners greatly resent.

The Privatization of Government. A nice idea, and no doubt it helps. But the PRO contracting process shows you how you dominate a contractor in his money, policies, and personnel. It makes very little difference if they are privatized or not in terms of what they do. But maybe it's cheaper that way, for all I know.

Hanging Paul Nathanson out to dry as a symbol to the others, and then having him get a job at $200k. Where is he in five years? The three-way control of a program, including the bureaucrats, the contracted program, and the authorizing committee. Also, the appropriations committees, although this is less intrusive than I thought. McShain underbids and then squeezes his subcontractors; McCloskey underbids and then gets a supplemental appropriation from his political cronies.

Paul H. Weaver, author, The End of the Corporate State: During the 1920s there was a curious growth of licensure for all sort of things like barbers, taxi drivers, etc.

Weaver: you can search back in literature to the origin of the corporation and never find any sympathy for laissez-faire in corporation managements; they always favored regulation and government control, planning, tariffs, etc. "American business has always favored government management of market".

Weaver: The attitudes of business are changing because of 1) takeover activity 2) global competition 3) weakened unions 4) less respect for authority in society 5) contempt for PR which tells you things are other than what they are. In my opinion (GRF) the basic one is global competition. American society has said it wants efficiency and productivity to beat the Japs; dignity and generosity and the old school tie are too expensive if they hamper efficiency. What does this mean for medicine?

DRG: Among the consequences of the hasty slap-together of PPS, was the failure to field-test, failure to consider ( let alone anticipate) the secondary consequences. The speedy success was particularly unexpected, and so there was scant opportunity to react to changes as they appeared. The change outrun the data collection, and so the doctors found themselves squeezed as both part A and B were constrained rather than use B as a cheaper escape from A. As overhead got worse, especially liability premiums, the squeeze on the doctors became serious; consequently they were perfectly willing to cost the system more by hospitalizing. The DRG would have saved even more money than it did if the B squeeze had been restrained.

the Ontario strike (see Harry's letter in July 1986) over balance billing. What effect on America?

How about using the AMA reports which they produced in response to my resolutions, as chapter?

From George Schaefer: The Sherman antitrust act made labor unions illegal, until freed by subsequent legislation (Wagner Labor Relations act?). For about 10 years, labor unions went underground, and his great-grandfather was a member of the Knights of Labor, an underground union organization. Thus the Wagner Act, or whatever it was, was the greatest of the many indulgences sold. What an irony, if a law passed at the behest of small businessmen ultimately came to victimize them more than others, since the essence of the indulgence is that you must be in a genuine employer-employee relationship to be entitled to the indulgence.

Pre-existing Illness:

1) ie clubfoot. You were born with it; it should be included after you have had insurance for two years. not to include it would mean you might have trouble getting a job.

2) ie multiple sclerosis, with complete recovery. If you developed it while covered, it is never again a pre-existing illness; only a matter of dispute between two carriers, with the extra cost born by the carrier which covered when it developed.

3) ie Ms. if you developed it between coverages, it makes some difference how long you were without coverages, it makes some difference how long you were without coverage. one formula would have it be deniable by the second carrier for the same length of time you went bare, up to a maximum of two years.

4) If there can be uniform agreement about the duration of the deniable period, then perhaps there can be agreement about the cost of the "tail". The tail does not ensure you when you are uninsured, it merely recognizes the extra cost of health insurance subsequent to illness which developed during the uninsured period. An actuarial cost would be best, but a pool would serve, and some arbitrary formula might be workable even though there is no experience on which to base an actuarial judgment.

Summary: there are two costs of illness when you are uninsured, the actual costs, and the later increase in premiums if the illness is chronic or recurrent; this essay addresses only the latter. There may be a separate issue of deferred semi-elective health needs which accumulate during uninsured periods; therefore it may not be fair to expect the two insurance companies to pick up all extra cost, even with tail insurance.

Adam Smith: People of the same trade seldom get together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

The National Journal: 1700 editorial page editors of the nation are little read by the public, but have an enormous influence on Congressmen less so on the administration. it costs about $5000 to send a mailing to each editors; about $80,000 to visit a significant number of them, and generate 40-50 editorials. "a coterie of opinionated high-brows who pen the unsigned pleas, paeans, platitudes, censures, insights, analyses and occasional arcs of whimsy that fill the left side of newspapers' editorial pages."

Closed for Lunch: the lunchroom at Stockley. The astounding ability to place three in a house with full-time supervision, vans to the training center at less cost than Pennhurst. But don't forget the great people.

The data experience with PA DPW. One whole year, and no information.

The 1500 form: did HCFA mandate information which wouldn't fit? Or is it intransigence? Why no communication between Medicare and Medicaid? HCFA central office and regional office difficulties .

The HCPCSA code-- a vital issue which the AMA won, but at a price. The jerry-rigged computer and administrative complex of the carriers and the Medicaid-welfare agencies exposed.