George R. Fisher, III, M.D.

Obituary

George R. Fisher, III, M.D.

Age: 97 of Philadelphia, formerly of Haddonfield Dr George Fisher III

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.

Streamline Health Insurance?

Let's review the logic. Mandatory health insurance was considered to be necessary because we wanted Universal health insurance. And we wanted universal insurance in order to extend health insurance to those who had pre-existing conditions. In a sense, we don't have a mandatory insurance problem, we have a pre-existing condition problem. Is there no other way to solve this?

Perhaps, and perhaps not; but let's take up this critical point at the end of the discussion. Right now, it is pretty clear that 10% is a pretty big price for someone else to pay your bills. Most of us would not pay so much to have someone buy our groceries, pay our utility bills, or put quarters into a parking meter for us. We very definitely would not pay such a fee to someone who proposed to do it with a system of three insurance policies (one for 80%, one for 20% copayment, and the third one for Major Medical policies for gaps in our policy coverage). Nor would we compensate a payment agent to pay for coverage which is riddled with cash demands for escalating deductibles and copayments, every time we go to the drugstore, to the accident room, to the doctor's office. Something surely is wrong when we surrender the convenience of third-party payment, pay heavily for this service anyway, and they are hounded and confused by a myriad of partial payment demands, or bewildered by undecipherable itemized bills with an astonishing total at the bottom -- but nevertheless marked "patient responsibility, zero". Something is very definitely wrong when hardly anyone can explain the payment system to us, and no one is willing to quote a price in advance of service. So, let's start by considering what would happen if we eliminated co-payments entirely, and confined deductibles to out-patient services.

In the past, it might have been theorized that prices would go up because patient participation puts a brake on prices. But now we would have to contend with the question, "How would you be able to tell the difference?" The patient in a hospital bed is incapable of haggling about prices, while the hospital is mostly reimbursed in an approximated lump sum, called the DRG (diagnosis-related group). Even those insurances which are reimbursed by items are subject to secret discount systems, which vary from 40% discounts for state Medicaid to overpayments of 30% of costs for private insurance, and up to 400% for payments by list price. This system led one very famous Philadelphia surgeon to growl, "The main purpose of having health insurance is to keep the hospital from fleecing you." The bad public relations of asking the public to endorse this summary would make the problems of changing the system seem minor. For public relations alone, the system must be made more transparent. Most hospital administrators would make the irrelevant response that, after it all shakes out, hospital inpatient care only generates about a 2% profit margin.

That may be true but fails to emphasize that emergency room services generate a 10-15% profit margin, and hospital out-patient and satellite clinics approach 30%. If you drive past a nearby hospital, you are very likely to see a construction crane in operation. But just take a guess in advance at what type of building is being built.

Since hospitals are obviously responding to prevailing profit margins, they would be wise to agree on negotiations with insurers based on audited profit margins, assigning the margin to individual departments to divide up after internal negotiation. For inpatients, a refined object of negotiation with insurers should be an agreement on the variation of reimbursement to be tolerated between insurers for substantially similar inpatients, essentially some variation of Diagnosis Related Groups. A later chapter discusses improvements needed for DRG determination. The central point is: no attempt should be made to bargain prices with a patient who is sick enough to require inpatient hospitalization.

For emergency room services , it is possible to imagine a sort of DRG, and if the patient subsequently requires hospitalization, that should be the ideal approach. However, most emergency patients are not admitted, and there are usually nearby competitors for them. Therefore, some sort of hybrid should be constructed, partly an Emergency DRG, but also modulated by comparison with neighborhood facilities.

For outpatients, competition should rule, and any insurance accommodation should reflect that fact. Ideally, small outpatient services should be cash transactions, but the trend lately is for increasingly expensive procedures to be performed in the outpatient area. The most suitable outpatient payment would be the option of using a Health Savings Account. Optional, because it is desirable to encourage those who are able to protect their HSAs for other uses, to be described in later chapters.

The ambulatory patient is fully capable of loud and insistent bargaining over prices, ultimately threatening to go elsewhere or just to refuse the pay the bill. In the last extremity of disagreement, the provider will be very glad to accept an HSA, so it serves as sort of a distorted re-insurance, and it is useful to have a central reporting mechanism to determine how the market is faring. Since everyone is now entitled to have an HSA, everyone should sign up for one. The uproar over the Electronic Exchanges has demonstrated that almost everyone is coming to the conclusion that high deductibles are desirable. The reasoning is not so self-apparent, but it is nevertheless also true, co/pay is something to be discouraged.

Financial Overview

A More Uniform Healthcare Accounting. Here is how to pay for lifetime healthcare. Consider it's a flat tax, in the sense of everyone of the same age paying the same amount. But it's also progressive, in the sense that average amounts vary at different ages. You might say it's a flat tax, more realistically adjusted for age. At least, in theory, children borrow from parents, paying back when older. Old folks, by contrast, use up savings they themselves had accumulated while middle-aged. The existing healthcare payment system is not greatly different, except for how Medicare is sourced out.

Thus, the average child and young person, in theory, ought to borrow from, and repay, his parents. But ordinarily, there isn't enough money in his account to allow it. If there isn't enough aggregate money within the whole healthcare system, it must be supplied from tax subsidies. There are no social classes of permanently rich and poor; just people of different ages, so income tax subsidies are add-ons, considered separately. Income tax is not a flat tax, so subsidies derived from it represent richer people paying for poorer ones. To summarize: all new wealth can be traced back to people of working age. They pay for their children, and they save for themselves, for later. Their children may never pay them back, and their savings may not cover the needs of old age. Nevertheless, for practical purposes, all wealth is generated between ages 26 and 65, often in differing amounts.

The Medicare Exception. It reduces complexity to view it uniformly, and it immediately unravels Medicare as an outsider. There's a great contrast in Medicare, where we only pay for one-quarter of Medicare with payroll deductions in the normal way of saving to pre-pay a coming expense. A second quarter of the cost is paid by elderly subscribers themselves as premiums. But the real problem is generated by paying the remaining half of the cost, in appearance by taxing the working class, but actually by immediately borrowing it from foreigners. If it's ever going to be paid in the future, it adds additional hidden interest cost, so more than half really isn't in full circulation, yet. No wonder it's popular; the public thinks it's getting a dollar's worth of health care for fifty cents.

Tell me what you can spend, and I will predict the costs. {bottom quote}

Getting back to our bookkeeping, we accept the figure in common use, that average lifetime healthcare costs are roughly $350,000 in current dollars. Somewhat more than half of the amount is Medicare, so somewhat more than a quarter is not fully funded. While we accept the approximation that inflation will affect costs about as much as inflation affects revenue, that equilibrium does not apply to fixed-income debts. Major upheavals, like wars and cures for cancer, just have to be dealt with as they arise. The basic premise of estimating future costs is this: we are going to spend as much as we possibly can on healthcare, and we are going to contribute as much as we possibly can, to pay for it. We adopt the cynical premise that politicians and doctors may force us to spend up to every bit we can, but no one can force us to spend more than we possess. So we can predict costs if we can predict revenue.

For example, if you think a 26-year-old can invest more than $3300 a year in his lifetime healthcare, go right ahead and some more revenue is available for politicians to spend. I happen to think this is at, or beyond the ability of a 26-year-old, so anything more than $3300 must come from some other age group, which will naturally resist. Anything borrowed from foreigners makes the whole thing -- non-self sustaining. You will have to elect magicians to make it come true for very long. From age 26 to 65, the system thus acquires $132,000 aggregate per person but spends $350,000. If that isn't good enough, just spend less, die younger, or rely on the black magic called outside debt. Where does the difference come from? From 8% compound investment return, passively invested in nation-wide index funds. And it won't come easily; you will have to scratch and claw for every penny of it.

Total revenue is $350,000, composed of $132,000 in direct contributions by working-age people, plus $218,000 in that compound investment income. To accomplish it, you must be dealing with agents who will leave you 8% after their administrative overhead and periodic episodes of bad stock markets. Therefore, you must get over any prejudices against investing in common stock, and any dreams of getting rich by plunging in them. By passive investing in index funds of the entire American (or perhaps entire World) economy, you should really expect at least 12.5% return, fairly steadily. As can be seen throughout this summary, we have consistently under-estimated future revenue and overestimated future costs. Making 8% net out of 12.5% gross is not easy.

$132,000 in contributions, plus $218,000 at 8% compounded. {bottom quote}

Lifetime Revenue

If you get and accept the option to consolidate multi-year management (whole life insurance model) out of more conventional term-insurance models, revenue could be enhanced by internal efficiencies, perhaps to 11 % net, instead of 8%. We'll surely hear from insurance actuaries about it, but this feels like a conservative number, which has room to generate compound income in millions per person. This giant step introduces many new complications, but eventually the enhanced revenue projection would make privatization of Medicare seem almost mandatory, but on the other hand, would generate many controversies. My guess is we would adopt parts of it, step by step. The long transition time creates the main concern, however. Stretching so long over several presidential election cycles, consistent planning for a transition from term insurance to a whole-life model might prove very difficult until the idea has proved itself. That's revenue. Total expenditures are equally difficult to predict, except by the cynical assumption we will spend every cent we get. Therefore, it is vital the public have the ability to capture excess medical funds for retirement costs, at least creating a tension between two contenders for the money -- health, and retirement. This issue repeatedly arises and makes some reformulation of Medicare a very desirable feature for planners. For instance, working out the calculations for Medicare is now fairly easy, because so many of the figures are actual data. But politicians say Medicare is the third rail of politics; touch it and you're dead. Politicians ought to know. We're not going to touch it, but we must discuss it. Medicare is itself the source of many difficulties because it costs crowd out competitive costs. That's also why it is political dynamite.

Expenditures: $200,000 Deposited:$8,400 {bottom quote}

Medicare, Longevity 83

Carving Out Medicare, into Escrow. For the sake of discussion, we must be arbitrary about both Medicare's beginning and ending ages. Arguably, Medicare begins at 65, probably soon will progress to 70, probably ought to begin at 75. On the other hand, many people retire in their fifties, creating resistance to raising the year at all. We're going to call it 65, following our principle of being conservative. Medicare's ending is death, with longevity moving from 83 to 85 relatively soon, and probably leveling out at 93 in ten or so years. Sometimes the conservative guess would be 83, sometimes 93. We're just going to be inconsistent, giving a range between the two projections of longevity. There might be a profit in having longevity increase to 93 and then level off. A cure for cancer, Alzheimer's Disease, or diabetes might turn out to be terribly expensive; but patents do expire, so the long-term cost of drugs is headed downward. In summary, one assumption is that Medicare will cover costs from age 65 to 93, averaging $11,000 per year, or $308,000. A lower assumption begins at age 65 to 83, reaching $198,000. Medicare, by the way, is responsible for 50% of all hospital costs, so that's where the crowding-out is coming from.

Expenditures: $308,000 Deposited:$6,000 {bottom quote}

Medicare, Longevity 93

Spending What's Left, on Working Folks. If a person makes one lump-sum deposit of between $198,000 and $308,000 at age 65, a pre-existing escrow deposit would have pre-paid it with only $150 to $325 yearly contributions from age 26 to 65. That may seem hard to believe, but that's the math. Going back to the original budget of $3300 (see Chapter One), his HSA between ages 26-65 would then be reduced to deposits of between $3150 and $2975 annually, left over to spend on his current health expenses between 26 and 65. (That's the same $3300, split into a Medicare escrow fund of $150 to $325, plus $3150 to $2975 for current costs.) Looking ahead to age 65 in the escrow fund, much of Medicare's cost would be paid by new income generated from funds transferred to Medicare and remaining unspent at the time of transfer. In spite of the fuzziness of some of these estimates, it is remarkable they come within $11,000 of the old saying of "Spending your last dime on the last day of your life." This is largely due to the hefty size of the 8% return and the bulk of the money being transferred at age 65. That's before serious expenses become the norm, but after the deposited principle has ceased to be the main source of income. As such, they may be somewhat fortuitous, but most of the trends seem favorable. Rounding errors and unpredictable future events can be brushed aside as inevitable consequences of any attempt to predict the future. The real and enduring weakness will lie in depending on average college students to save money, and average stockbrokers to give it up. Both the early savings and the continuing high returns of this general proposal will have to be struggled for, no matter how precise the predictions in a book.

Financing Health in Middle Age. So, having between $187,000 and $297,000 to spend, what are the expected health costs for a middle-aged person? They will be quite moderate between age 26 and 55, starting to rise considerably in the last ten years, from 55 to 65. During all of this period, the individual will have to save $3300 per year, and in addition, will have to pay for obstetrics and pediatrics out of that. If children had any money, these costs would rightfully be theirs to pay. But children do have one asset to contribute: 26 years of additional compound income. In a theoretical sense, the children need to borrow their own medical costs from their parents. It might be said they should pay this back to their parents directly, but it is the grandparents who will be experiencing the rising medical costs of their fifties. By legally merging children and parents until the children are 26, a choice can be made between encouraging fertility and helping the kids with college costs or helping the grandparents with unexpected health costs. Ideally, it would be preferable to let the family unit decide such choices, but matrimonial courts are full of examples of family dissension, and quarrels between headstrong adolescents and their neurotic parents. It's only a suggestion, but it seems best to me to let the parents decide until the child is 21, and let the child decide after that. Invisibly, the quirks might have to be adjusted in the parents' wills and estates.

Financing System Shortfalls. There's one final question to answer. What if, for whatever reason, there isn't enough money in the system to pay all the legitimate bills? We can fumble around with eliminating fraud and abuse, but that won't make much difference. The government can be the banker, but someone might well have to be individually responsible. There is no escaping it, the extra money will have to come from additional deposit contributions by people with an income. Probably, extra deposits will have to be levied on people 50 to 65, who will be at the top of their lifetime earning capacity and beginning to experience a greater share of the costs. At that point, it may seem easier to repay the grandchildren costs by repaying the health loans of children to grandparents instead of parents. It could be done quietly by assessing extra deposits on 50-65 while shifting childhood repayments to grandparent accounts. Immediately, a much smaller amount could be deposited in the children accounts, where compound interest for 26 years would multiply it back to where it started.

Let's Do It All, Backwards. Children's healthcare is paid by the parents. In order to capture 26 years of compound interest, we try to unify the legal family until the child is 26. The child owes a debt, to be repaid to parents or grandparents, later. At age 26, the individual starts depositing $3300 yearly into a tax-exempt Health Savings Account, paying back at least 8% on passive investing in American or Worldwide index funds of common stock, essentially capturing a diversified share of the entire market. This HSA can pay health expenses, but those who can afford it would be wise to pay their medical bills out of other accounts and save the tax-free feature for bigger sums, later. A high-deductible health insurance policy pays big bills, the HSA can (but need not) pay the high deductible. This is how things go until the individual is 65, except between $150 and $325 is placed into an escrow, which will be used on the 65th birthday to buy out of Medicare. It's possible for the individual to deposit less, perhaps $3075 to $2975, but the alternative is to buy out of Medicare, a much better deal.

That's how it goes until the 65th birthday when Medicare appears. The working person has already paid for a quarter of Medicare's costs by payroll taxes. He now faces an equal amount as Medicare insurance premiums, as well as double that premium cost in federal subsidies, plus accumulated foreign debts for earlier subsidies. Right now, only the foreigners are worried about repayment of the debt, but somehow or other it has to be paid. The alternative was to have deposited $150 to $325 yearly, but now it will cost you $187,000 to $297,000, so for most people, it is too late. Meanwhile, the government has collected a quarter of Medicare's cost in payroll deductions, so it should owe you something for that, too.

Oh, yes. If you happen to have been unusually healthy, you didn't spend much money on health. All of that accumulated money is available to pay for your long, long, retirement.

The Deal Breaker

Much ink has been spilled by arguments about Obamacare, compared with almost anything else. That's a pity, because the Affordable Care Act ends up as only a variant of how it originally started, with correcting the defects of employer-based health insurance. No matter how the Obamacare dispute turns out, it fails to address the central cost problem. So, without getting into a detailed history, let's focus on what needs to be addressed, hoping it will help the present cost escalation.

If an employer gives health insurance to his employees, the insurance necessarily terminates when the employee changes jobs. The employee, in short, doesn't own his own policy. The result is "job lock" where an employee dares not change jobs for fear he might lose the renewability of the insurance he paid for, along with the associated hospitals, doctors, etc. with whom he affiliated during the course of his employment. Either that, or go through the grief of re-assembling his medical care under new insurance with new attachments he either fears or has good reason to reject. And all this, at a moment when he is applying for a new job and is necessarily reluctant to make demands.

His employer's grandparents created the problem for benevolent reasons, but the present generation of employers now finds itself blamed for its details, largely steered by his finance department exploiting tax loopholes. Discovering the tax loophole -- remembering the income tax itself was started at about the same time as Blue Cross -- it really is pretty hard to devise a system which is paid for by employers, and tax-deductible by them as a corporate business expense, while still respecting the interests of the rest of the community. Naturally, the employer resists arrangements which would either absorb costs growing out of illnesses occurring before employment ("pre-existing illnesses"), or after an employee is terminated, becoming pre-existing illnesses for the following employer. Furthermore, ever since World War I, family domination of businesses has become unusual.

While the employer community, now largely selected by head-hunters, had a century to devise a cross-generational pooling system, a satisfactory one has trouble emerging in an intensified antitrust atmosphere, involving huge expenses by employers whose stockholders regard healthcare as a minor concern. The Obama Administration was determined to take a stab at it. At first, their solution was essentially to have the government pick up the cost above a certain level (now about $7000), and the opposition Congress became equally determined to frustrate this doorway into eventual total cost control by the government. The business sponsors were also indifferent or displeased with this maneuver because they had devised ways of having the government pay most of the bills by tax deductions of a "gift" while leaving effective control in the hands of business management. And anyway, a recession was not the best time to add new cost centers.

Buried among these details was a dominant payment system based on "service benefits" instead of indemnity, or cash, benefits. Everyone understands that ten dollars is less than a thousand, but not everybody agrees a blinding migraine headache deserves less attention than a hopeless brain tumor. The indemnity system had its flaws, but over the course of a century, labor negotiations readjusted to insurance coverage focused increasingly on illness episodes, rather than on the itemized price of treatments. This was much more advanced in hospitals than doctors' offices, but it fitted specialization better than general practice. To a certain extent, this arrangement originally did make it possible for employees to choose their own doctors and hospitals, regardless of price variation. Fine points could be overlooked, but the ability to draw a line could never be surrendered to a counterparty in wage negotiations. "Service benefits" were particularly unable to migrate into a blank check for the illness, regardless of when it had been contracted. That still left high-cost outliers, particularly those extending after employment had been terminated. If the employee left his employer on bad terms, the line could still be invoked, even if it was often ignored.

Two responses ensued: The government made assurances to insurers they would stand as re-insurers to cover cost over-runs ("risk corridors"), a feature which the political opposition greeted with great suspicion. And secondly, luxury treatment was able to exploit the tax-shelter, eventually becoming sufficiently expensive to permit less reckless insurance to undercut it. Younger employees were cheaper than older ones, certain geographic locations, ethnic groups, and employer advantages became health advantages as well; a ruthless employer could injure a more generous competitor by concentrating on health costs by indirect approaches. In other words, a benevolent system imposed disadvantages on a benevolent employer, and retained customer control in the hands of employers. Over time, employers lost control of a major cost center and had to stand by, while the interests of employees and employer took different directions. Over time, employers solved their cost problem by taking a tax deduction at higher tax rates than individuals, shifting much of the cost problem to the government without losing control. The government promptly responded to accepting more of the cost by demanding more of the control. Underlying much of this evolution was the decline of the family-owned business, gradually replaced by much less benevolent stockholders and headhunter-selected managers.

Let's summarize the evolution, to state that patients will not tolerate it when decisions about what is important are made by his employer, his insurance, or his government. In turn, those entities can not tolerate a blank check. The only solution left was for the third party to set a price limit and leave other decisions to the patients and their doctors. That is, patients, doctors, and insurance companies were better off with an indemnity insurance system and should return to it. Unfortunately, the twists and turns of the process have left all three participants without much say in the matter. This is what you get when you allow lawyers to describe your employer's tax dodge, as a gift.

Lots of other things changed materially in the course of a century, and a variety of approaches might mitigate the bad things. Giving health insurance to everyone might solve matters, but it would surely cost more, and the present Obamacare controversy is already largely whether we can afford it at 16% of Gross Domestic Product. You can blame 16% on the haste of Lyndon Johnson and Wilbur Cohen, to the extent, it isn't 8%. It's that extra 8% this book is struggling to recover, the rest of the waste is often transfers, not real expenses.

Mr. Obama's abandonment of the limitation on pre-existing conditions, however, additionally undercuts a traditional expedient the insurance industry, one it suspects it cannot cope without. Insurance companies were given assurance of government support in case an alternative didn't work. That might be a separate issue. None of these, however, prevented standard care from migrating from wards to semi-private rooms, and semi-private to start to migrate toward single rooms. It's rather chilling to imagine what would happen if events continue in that direction. Expanding Medicaid to cover all poor people might facilitate this particular flaw in the present system, but falls foul of the Tenth Constitutional Amendment, which was the original basis for fifty Medicaid programs rather than one national one. And so it goes. The proposal I make is far simpler and is admittedly not a total solution to any problem except pay-as-you-go. And even pay-go existed for fifty years before 1965.

Market-Based Outpatient Costs as a Cornerstone. It is to try to approach a cash or debit-card system for paying for outpatients at market-set prices, thereby greatly reducing processing costs, while constraining insurance payment and review to the helpless inpatient -- with an improved DRG coding system, related to true costs by overlapping with the market-based outpatients. The dual nature of the Health Savings Account readily suits itself to a dual system of this sort. As far as the insurance is concerned, if cost and portability are seen as the main problems, the change with least disruption seems to get back to indemnity insurance with a high front-end deductible, which coordinates better with a second more or less invisible, reinsurance. That's such a concentrated summary it will take the rest of the book to explain its reasoning. So, let's come back to the re-insurance part in a later chapter, and concentrate on the indemnity insurance for ordinary hospital costs. Should the hospitals be consulted? Obviously, yes. Should they be given veto power? No, because they have a rather daunting conflict of interest. You can't blame hospitals for preferring a blank-check approach to any alternative which isn't a blank check for hospitals. But the nation is more or less united on the idea, we now have to be more careful with public money -- because in the long run, it's our own. High-handedness destroys this image, so they would do well to act humble.

The case for indemnity insurance also boils down to this: the premiums are collected in cash, and the providers are paid in cash. All that expensive processing in the middle is on trial as redundant, time-consuming, and ultimately ineffective in suppressing costs. The burden of proof is on it, that it can justify its own costs, let alone restrain an army of bill-collectors. Demonstration projects are welcome, stonewalling is useless. I suspect it has a minor utility for preventing fraud.

Medical Reform Through Payment Reform, not Payment Reform as a Club. Affordable Care, the nation's current "healthcare reform" really concentrates on the payment mechanism for healthcare. It may nurse grander ambitions, but it directly confronts only one of many problems with healthcare delivery -- whether poor people can afford it. Much is made of the electronic medical record but its impact is mostly one of user annoyance with increased overhead. Instead of calling doctors rigid resisters, consider their point of view: The electronic record adds four hours a week to the doctor's limited time. The extra overhead cost means more employees, which means the doctor never takes a vacation. Working harder means he can quit, but he can't slow down. After six years, EMR still hasn't justified itself. And so it remains in a class with driverless cars -- it's coming, but it isn't here. The fundamental structures of hospitals and medical practice, growing out of the much older employer-based system, are pretty much unchanged. The configuration remains mainly the employer-based system.

In the far future, control of payments may eventually be used as a hammer to control healthcare, but that goal has never been articulated, and the slow pace of the past six years suggests any such goal is distant, indeed. For practical purposes, the Affordable Care Act (ACA) reduces to a payment mandate -- universal health insurance for everyone regardless of cost, subsidizing those whose insurance costs exceed 8% of income (presumably, a pretty elastic number). Opponents reply: Since 87% of the people who bought insurance on a Federal Exchange did so with subsidies, the cost could seemingly bankrupt the country, at least crippling more important priorities. In general, I sympathize with both emotional responses (care for the poor but don't wreck the economy), except for one essential point. In almost every foreign health plan, the government becomes generous with trivial items and stingy with expensive ones. Plenty of cough drops, but not many chest x-rays. Or plenty of chest x-rays, but woefully few MRIs. When you see what others have done, you get a clearer idea of what we might be facing.

The deal-breaker for me is the kind of insurance selected to be mandatory. Catastrophic (high-deductible) health insurance without frills would be far more suitable, and considerably cheaper. Linking it to a tax-exempt savings fund makes it even more flexible with first-dollar coverage, and doesn't raise the cost of the insurance standing behind it by one penny. Somewhat to my surprise, cash overfunding leads to retirement income and creates the incentive for the patient to be frugal.

Its bare-boned catastrophic insurance has both a top limit and a bottom limit and uses money as an indemnity measure, not elastic definitions like "service" benefits. (Indemnity pays for your itemized bills, not your disease.) Without prior experience, new insurance entrants cannot guess at their risks, either individually or collectively. Service benefits might be considered after the long and stable experience, but for a beginning new program, they tilt the balance between patient risk and insurer risk, entirely too much in favor of patients whose real client is the elected politician. If diagnostic payments have any utility it is in detecting odd-ball charges, but it would take a lot of persuading to convince me the fraud in the system amounts to 8% of GDP.

The deal-breaker for me is the type of insurance made mandatory. {bottom quote}

The problem with the Affordable Care Act is not that it excludes too much, but that it scolds too much, improves too little, and never comes even close to identifying the central problem. By utilizing the principle that the higher the deductible, the lower the premium, the flexibility of catastrophic coverage could almost rest its case. By adjusting the premium, anyone might afford it; by adjusting the deductible, anything might be a covered service. But the final philosophy we would hope for is to cover no non-essentials until the last essential service has been covered. But let's settle for less. The choice of deductible threshold defines the coverage by simultaneously defining the premium, allowing both the paying public and the subsidizing public to bid in the same auction. Deficit financing is much harder to conceal if you play by indemnity rules, and is a whole lot more difficult to prevent than allowing your relatives to sit on your bed. Nothing else I know of can make a similar claim. I tend to resist anything with the word "mandatory" in it, but high-deductible indemnity health insurance offers a flexibility which might justify an exception.

The higher the deductible, the lower the premium. {bottom quote}

High-Deductible Catastrophic Insurance

Of course, flexibility is only valuable if you use it. With its high deductible, catastrophic coverage excludes small-cost items. Like birth control pills, I'm sorry to have to say. High-cost automatically means expensive but relatively infrequent health issues, which in present circumstances leans toward inpatient hospital care. Defining low-cost benefits as "service" benefits usually undermine the high-deductible part of Catastrophic insurance. It converts the ACA into scarcely more than a collection of small mandatory benefits, all of which combine to defeat the purposes of a high deductible.

The effect of all this seems to suggest high-cost items are the enemy, but in fact, they are the most important benefit to insure. Collecting all small benefits into Health and Retirement Savings Accounts substitutes patient choice for unlimited bureaucracy, shifting the selection burden to the subscriber, and if uncertain, his doctor. High deductibles make them turn to their doctors for advice when they are worried. That's quite different from requiring a slip of paper from a doctor whenever things are expensive.

Escrow and/or Escrow-like

There are many times in a lifetime when new opportunities to spend rather than save, appear. You have a little cash and must decide what to do with it, for example. This choice presents itself with every paycheck. We suggest an automatic paycheck deduction is the best way to handle it. Big specific temptations also come up. Your neighbor buys a new car, and you reflect whether it is your time for a bigger car, too. You are therefore tempted to make a big withdrawal from a retirement account to pay for it. Bad idea, don't do it. On the other hand, maybe you smashed up the old car and must have a way to get to work, so you do it. You want a way to resist big-ticket temptations, but you must not close that door entirely. We suggest an escrow account.

An "escrow" is a service often performed by a third party for a fee, to hold the two main parties to terms they independently agree on, and can only change if they both agree, or else a judge agrees. Escrow can be a variant of insurance. Please bear with us, for a paragraph or two on this remote subject. Escrow variations in real estate are common, many assume escrow must be limited to real estate. But in an HSA there also arises a frequent need to identify illiquid funds, set aside for some future purpose; the term escrow also comes to mind. Illiquid funds usually command higher interest rates, the "yield curve" is in the daily newspapers, but both parties must agree to change it. Some people are naturally frugal, others are spendthrifts; funds are needed for emergencies, others are saved for later. All that creates a need for what we describe as an escrow account, as distinguished from "demand" accounts; others may call it something else. Since fees are often hidden, let's just say custody account instead of escrow. But remember. Don't escrow yourself into unnecessary fees for a lifetime; do it only for the best interest rate. Words like "prime rate plus 1%" might be used.

Short term investments carry lower interest rates than long-term ones because there is more risk of default the longer the risk continues. Banks survive on the difference (yield) between the rate for them to borrow and the rate to lend; the "spread" varies with the duration of the loan -- overnight, say, or thirty years. The critical issue is the duration of quarantine, but in general U.S. Treasury bills and bonds are found in demand accounts, while common stocks, lines of credit, and other permanent investments must be guaranteed in some way for the duration of investment when their term is not already stated. It's a method of protecting the lender if he pays higher rates, but it's also useful to everybody if life situations change.

Therefore, whether you call it an escrow or not, investors should be given the option of setting certain HSA funds aside were, like Ulysses tied to the mast, they cannot touch the account until a certain time, by common consent, or with a court order. Their broker will respond with a higher investment return if he knows the investment can't be sold "out from under him". Getting back to Health and Retirement Savings Accounts, young people nowadays rarely get seriously ill; old folks often do. If a young investor knows he can ride out the bumps along the way, he is justified in hoping he can get 8% after-tax and after-inflation return. Otherwise, he might be lucky to get 1%. With really long-term investments, even a few tenths of a percent can make a major difference. Let's touch on a few examples.

Squeezing the Lemon Dry. Let's imagine he only spends 1.4% on investment expenses (at age 21); he thus gets back 6.6% on an 8% investment, net of inflation. If he spends 0.1% more on expenses, he will only net 6.5%, or $30,000 less at age 66. That's a lot of money for very little difference in effort, but he should have planned better. We are here suggesting passive investment in the entire stock market, using index funds, no tips, no stock-picking. In a pinch, the higher quality of "collateral" will command somewhat more favorable rates.
"Active investment" or "stock picking by experts" may yield somewhat more for what is judged high-quality assets, although it is hard to see why they should, net of hidden fees. The extra yield is often eaten up by extra fees. And then there is the theory of "black swans", general stock market dips of 30-60%, occurring every twenty or thirty years. The older he gets, the less likely an investor will be, to have time to recover from a "black swan", and the more he needs deflation protection with up to 40% Treasury bond content. But that protection costs his yield another couple percent in fifteen years. To have the funds to manage it, a young borrower needs to squeeze out another .1%-.2% of expenses from his managing firm. If he starts saving later in life, he may need to squeeze 2-3% from expenses, which is probably impossible. The bulk of his retirement will have to come from somewhere else. That's a pity, but what other proposal promises even a fraction as much, most of the time? Most investment managers who must constantly meet payroll with endowment income feel pretty satisfied with 5% total return, employing the 60/40 method. The HSA investor has no payroll to meet, and often needs to do somewhat better to survive.
Just about the only way, one can give it all to him fairly safely, is to use passive investing for a long escrowed time. Lower fees, buy-and-hold. But watch yourself, since managers are often replaced by new managers. We're definitely not saying,"buy and neglect".

In later sections of this book, we take up additional issues of, say, funneling money from Medicare to retirement. If science cures a few diseases; or transferring money from grandparents to grandchildren after research renders medical risk superfluous for retirements; or otherwise using extra funds for new purposes as chance and vigilance make it possible. But all of these windfalls require some sequestered fund to be protected against raids by pirates. Certain segments of the financial community will resist any or all of them. After all, most of the time your gain will be someone else's lost income.

But more fundamentally than that, banks, in particular, are also in the business of taking short-term deposits and making a profit on turning them into long-term assets at higher rates. If you persist in keeping idle money at short-term rates, they will take your money and use it in this way. Curiously, globalization tends to create more short-term loans on components of what was formerly one single long-term loan on an assembled unit. This tends to unbalance the normal ratio of long-term to short-term, in the direction of excessive short-term availability. For the person approaching retirement without any way to pay for it, there is little choice but to take more risk. That is to say, if your goal is to avoid risk, don't dawdle until there is nothing you can do but take a risk. So, start saving young, start investing young, and learn your game. One old sage, maybe it was Ben Franklin, used to say, "The best thing which can happen to you, is to lose some money when you are young." Ben Franklin didn't like to lose money at any age. What he meant was, if you wait too long, you're likely to be stuck.

How to Live a Long Life and Get Rich

A long time ago, a rich oriental man flew five thousand miles to ask me a question, "What is the secret of a long life?" I was so startled by the experience I never did ask him why in the world he would think I knew the answer to such a question. But after a few seconds, I blurted out an answer. "The secret of long life," sez I, " is never get sick." I don't know what his opinion of my profundity was. But I do know what he died of. He was executed by his government, so I hadn't given him the right answer to his question.

At other times, people especially my children, asked me how to get rich. After some practice, I developed a pat answer to that one, too. "The secret of getting rich is to spend less than you earn." What I realized too late to be useful, was that "Don't get sick and don't spend more than you earn", is a peculiarly American viewpoint, a Philadelphia attitude, and ultimately a Quaker one. It probably explains why there have been so few Pennsylvania Presidents of the United States, few Nobel prize winners, and relatively few Philadelphia glitterati in general.

Because, "Avoid risky behavior" comes closer to the right answer, since risky behavior is a fairly good pathway to glitterati success, and the Quakers had figured out it was a fairly good trade-off, to prefer longevity with prosperity. When I worked at the National Institutes of Health, I was struck by how many eminent scientists went through red lights, and otherwise exhibited risky driving behavior. Everybody knows eminent politicians play around with risky sexual behavior, as do movie stars and glitterati in general. But it is less noticed that America has an even larger proportion of risk avoiders who use that method to live long and prosperously. America has developed an environment where it is possible to get old and prosperous without so much tiresome risk-taking. Kingley's famous text of, "Be a good, sweet child, and let who will be clever", doesn't quite get to the root of it. It's the risk you want to minimize, not cleverness.

And the verb is minimizing, not eliminate. The Quaker term is "steely meekness". And a bothersome American response comes from Winston Churchill, "If the enemy comes, be sure to take one with you."

Philadelphia Reflections

The musings of a physician who served the community for over six decades

Obituary

George R. Fisher, III, M.D.

Streamline Health Insurance?

Financial Overview

The Deal Breaker

Escrow and/or Escrow-like

How to Live a Long Life and Get Rich