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.

Public Misconceptions

(Healthcare for Citizen Lobbyists)

There are a few other ideas about the cost of medical care, which I would say are widely held, but the truth of which seems dubious. In fact, I would characterize them as misconceptions. If misconceptions are held long enough, they eventually work their way into the tax code.

Is Preventive Medicine Always and Everywhere Less Expensive? As heads nod vigorously in support of prevention, please notice in general usage it suggests several different things. The overall implication is that small interventions for everyone are less expensive to society; less expensive, that is than large expenses for the few who get the disease. That is clearly not invariably the case, and unfortunately, in a compulsory insurance world, it may seldom be the case. The point is not that preventive care is a bad thing, because it is often a very good thing, even by far the very best thing. It's just not necessarily cheaper.

Take for example a tetanus toxoid booster, which ten years ago cost less than a dollar for the material. Recently in preparation for a vacation trip, I was charged $85 dollars by my corner drugstore, just for the material. If you do the math, $85.00 times millions of Americans is a far greater sum than the present aggregate cost of Americans actually contracting tetanus, especially following the advice to have a booster shot every ten years. This becomes more certain if one adds in the cost of administration. The vaccine is quite effective, Americans had almost no cases in the Far Eastern Theater in World War II. The British who did not vaccinate routinely had large numbers of often fatal cases. Furthermore, even if the tetanus patient survives, the disease is hideously painful. Is it better to immunize routinely? Yes, it is. Is it cheaper? I'm not entirely sure, because I have no access to the production costs of tetanus toxoid. But it certainly seems likely it isn't cheaper. Malpractice costs, which are a different issue entirely, complicate this opinion.

Better, yes. Cheaper? No. {bottom quote}

Preventive Medicine

Something, probably malpractice liability, has transformed an effective preventive procedure from clearly cost-effective to -- probably not cheaper for a nation which no longer has horses on the streets, but still has horses on farms and ranches. This is presently mostly a malpractice liability problem for the vaccine maker, not a preventive care issue. Take another well-known example. In the case of smallpox vaccination, it is now clearly more expensive to vaccinate everyone in the world than to treat the few actual cases. The waffle currently being employed is to limit vaccination to countries where there are still a few cases, hoping thereby to eradicate the disease from the planet.

Over and over, an examination of individual vaccinations shows the answer to be: better, yes, cheaper, no; with the ultimate answer depending on accounting tricks in the calculation of cost, cost inflation because of third-party payment, and related perplexities. To be measured about it, excessive profitability of some preventive measures could act as a stimulant for finally calling off prevention, by taking on a briefly more expensive campaign to achieve final eradication. Somewhere in this issue is the whisper that "natural" gene diversity of any sort must never be totally eliminated, a viewpoint which even the diversity philosopher William James never openly extended to include virulent diseases.

Routine cervical Pap tests, routine annual physical examinations, routine colonoscopies and a host of other routines are in general open to questioning as to cost-effectiveness. The issue is likely to increase rather than go away. Much of the current denunciation of "Cadillac" health insurance plans focus on the elaborate prevention programs enjoyed by Wall Street executives, college professors, industrial unions, and other privileged health insurance classes. A more useful approach to a borderline issue might focus on removing such items from health insurance benefit packages, particularly those whose cost is subsidized, either directly or by income tax deductions. Those preventive measures which demonstrate cost-effectiveness can have their subsidy restored, or be grouped together into a category which must compete for eligible access to limited funds.

The inference is strong that unrestrained substitution of community prevention for patient treatment escalates costs rather considerably, and -- at the least -- needs to demonstrate more cost-effectiveness before subsidy is extended. While self-interest is a possibility if only physicians are consulted, total reliance on bean-counters could eliminate benevolent judgment entirely. Community cost effectiveness is a ratio, and both sides must be fairly argued. Don't forget many people quietly recognize the need for gigantic cost-shifting between age groups. Spending money on young workers to pay for shots is one way to shift the cost of elderly illness, backward to the employer they no longer work for. It can be a pretty expensive way to do it.

In the final analysis, without some form of patient participation in the cost, this issue is probably unsolvable. To launch a host of double-blind clinical trials to find out the truth will lead to answers of some sort, which will quickly be undermined by price/cost confusion, leading to increasingly futile regulation. Including preventive costs in the deductible at least allows public participation in the decisions and true balance to begin; which is to say, even universal preventive care admiration cannot be adequately assessed except in the presence of a substantial open market for the product.

Much "preventive" care is really "early detection" or "early management". That's entirely different. When the goal changes so subtly, it is often not possible to judge what is worthwhile, except by placing some price on pain and suffering. The abuse by the trial bar of the monetization of pain and suffering in the malpractice field, ought to be a gentle reminder of that. Preventive colonoscopy has clearly caused a decline in deaths from colon cancer; that's a medical judgment and a transitional one. Whether the cost of catching those cancers early was cost-effective is largely a matter of colonoscopy cost, and on digging into it, will be found to be as much an anesthesia issue as a colonoscopist one. In any event, it is not one where the opinion of insurance reviewers should be decisive. If the litigation industry moves to make an omission of prevention a new source of action, it will surely be a sign it is a past time, to caution the public about the direction of things.

Average Hospital Profit Margins: Inpatient 2%, Accident Room 15%, Satellite Clinics 30% {bottom quote}

Payment By Diagnosis

Outpatient is Not Necessarily Cheaper Than Inpatient For the Same Problem. Medicare provides half of the hospital revenue; the other half is often dragged into a uniform approach. The reimbursement mostly has nothing to do with the itemized bills hospitals send and may have little to do with production costs. The DRG (Diagnosis-Related Groups) system for reimbursing hospitals for inpatients is thus not directly based on specific costs in the inpatient area. It is related to clustered diagnoses lumped into a DRG group, and then assumes overpayments will eventually balance underpayments within individual hospitals.

That last point, depending on the Law of Large Numbers, is questionable, and especially so in small hospitals. When two million diagnoses are condensed into 200 Diagnosis groups, group uniformity just has to be uneven. Reimbursement means repayment, but this interposed step often interferes with that definition. Someone in the past fifty years discovered the reimbursement step was an excellent choke point. Manipulating the reimbursement rates without changing the service is a handy place to choose winners and losers; it's largely out of sight of the people who would recognize it for what it is. Furthermore, for various DRG groups, or for all of them, it becomes possible to construct a fairly tight rationing system for inpatient costs.

The degree to which actual production costs match a particular DRG reimbursement rate is blurred by inevitable imprecision in the DRG code construction. It is impossible to squash a couple of million diagnoses into two hundred code numbers without imprecision. It works both ways, of course. The coders back at the hospital will seek weaknesses out, experimentally. A grossly generalized code is placed in the hands of hospital employees, resulting in a system which suits both sides of the transaction, but is one which ought to be abolished, on both sides, by computerizing the process. At least, computers could avoid the issue of mistranslating the doctors' English into code.

The overall outcome with Medicare is an average 2% profit margin on inpatients during a 2% national inflation. This is far too tight to expect it to come out precisely right for everybody. And in fact, inflation has averaged 3% for a century but is 1.6% right now. The Federal Reserve Chairman desperately tries to raise it, but it just won't go up. If you don't think this is a serious issue, just reflect that our gold-less currency is supported by a 2% inflation target which the Federal Reserve is proving unable to maintain.

For technical reasons, the same forced loss is not true of outpatient and emergency services, which usually use Chargemaster values. Emergency services are said to approximate 15% profit margins, and outpatient services, 30%. It is therefore difficult to believe anyone would start anywhere but the profit margin, and work backward to managing the institution. In consequence, the buyer's intermediary has stolen the pricing process from the seller. Without the need to communicate one word, prices rise to the level of available payment and then stop there. But let's not be too specific in our suspicions. Some incentive to direct patients to the emergency and outpatient areas must develop, and is acted upon in the pricing. It just doesn't have to be so confusing and so high-handed.

Any assumption by the public that outpatient care is cheaper than inpatient hospital care is likely to be quite misleading. Short of driving the hospital out of business, revenue in this system is whatever the insurance intermediary chooses to make it. There was a time when the intermediary was Blue Cross, and behind them, big business. Nowadays, it is Medicare, but Obamacare probably aspires to the turf.

Let's test the reasoning by using different data. Because hospital inpatient care is reimbursed at roughly 106% of overall cost, while hospital outpatient care is reimbursed at roughly 150%, hospitals are impelled to favor outpatient care, no matter which type of care happens to have the cheapest production cost, the best medical outcomes, or enjoys the greatest comforts. Instead, the rates and ratios are ultimately determined by magazine articles and newspaper editorials. At some level within the government, a political system responds to what it thinks is public opinion, vox populi est vox Dei. No matter what their personal feelings may be, hospital management encounters more quarrelsomeness on wages in the inpatient area, less resistance in the outpatient and home care programs. So, true costs must actually rise in the outpatient area, sooner or later, following the financial incentives. Personnel shortages follow, as does friction between hospitals and office-based physicians. The process is circular, but the origin of favoring outpatient care over inpatient care was primarily driven by some accountant reading a magazine article.

A highly similar attitude underlies the hubbub for salaried physicians rather than fee-for-service. It's a short-cut to a forty-hour week, and following that, to a doctor shortage. And following that, to enlarged medical school budgets. If anyone imagines that will save money, the reasoning is obscure.

Everybody can guess what it costs to wash a couple of sheets and buy a couple of TV dinners. Everyone fundamentally understands Society's need to transfer medical costs from the sick population to the well population. Nothing known about hotel prices justifies a 50% difference in price between inpatient and outpatient care, all else being equal. The room price mainly supports overhead costs which are unrelated to direct patient care, so those fixed costs are like migratory birds, settling to roost where it's quiet. Remember, it doesn't cost driving the system, it is now profit margins.

The Return of a Discharged Hospital Patient Within 30 Days is not Necessarily a Sign of Bad Care. Rather, it reflects the fact that hospital inpatient reimbursement is entirely based on the bulk number of admissions, not the sum of itemized ingredients. Having undermined fee for service, Medicare must resort to taxing the whole admission.

Early re-admission can, of course, be a sign of premature discharge or careless coordination with the home physician. But these issues are so remote from the basic reason for admission, that bulk punishment is unlikely to change the criticized behavior. That behavior may mean a convalescent center is convenient to a hospital, making it reasonable to move the patient without much loss of continuity of care; and treating his return to the acute facility becomes a matter of small consequence. It is also a matter of cost accounting; when you claim a hundred dollar hotel cost to be worth thousands of dollars, many distortions are inevitable. If a hospital essentially shuts down on weekends, for example, there actually might be better care available somewhere else.

Imposing a penalty for returns to the hospital post-discharge has certainly changed behavior, but it is far from clear whether institutions are better as a result. Without a detailed study of longitudinal effects and costs, this threat is no more than an untested experiment. Without access to accounting practices, doctors assume the penalty for a high re-admission rate merely affirms that hospital insurance reimbursement by DRG is solely dependent on the discharge diagnosis, therefore bears little relation to the quality of care. Given a particular diagnosis, reimbursement is totally independent of any other cost. When all you have is a hammer, everything looks like a nail to the DRG.

The legitimate reasons for re-admission to the hospital are many and varied. Collectively, they could well constitute a general attitude on the part of a particular hospital that it is reasonable to send many patients home a little early in order to achieve greater overall cost savings -- in spite of sustaining a few re-admissions. But this is somewhat beside the point. The insurance companies accept the fallacy that favoring readmission is the only way a hospital can increase reimbursement under a DRG system. This is merely a debater's trick of redefining the issue, from true cost to reimbursement amount. More or fewer tests, longer or shorter stays have no effect, but readmission can double reimbursement. Consequently, re-admission has been stigmatized as invariably signifying careless treatment, justifying a penalty reduction of overall reimbursement. This is high-handed, indeed. It would require a research project to determine which of the alleged motives is actually operational.

The Doughnut Hole: Deductibles versus Copayments. To understand why the doughnut hole is a good idea, you have to understand why copay is a flawed idea. In both cases, the purpose is to make the patient responsible for some of the cost in order to restrain abuse. As the expression goes, you want the patient to have some skin in the game. The question is how to do it; the doughnut has not been widely tried, but the copayment approach is very familiar: charge the patient 20% of the cost, in cash.

This co-pay idea finds great favor with management and labor in negotiations because the premium savings are immediately known. If the copayment is 10%, then employer cost will be decreased by 10%; if it is 50%, the cost is reduced by 50%. In midnight bargaining sessions, such simplicity is much appreciated. However, the doughnut hole was not devised to make negotiations simpler for group insurance, it was devised to inhibit reckless spending, theoretically unleashed once the initial deductible has been satisfied.

Health insurance companies also like both co-pay and doughnuts for questionable reasons. Both offer an opportunity to sell two insurance policies as two pieces of the same patient encounter, adding up to 100% coverage, but eliminating the patient's skin in the game. Doubling the marketing and administrative fees seems like an advantage only to an insurance intermediary, while it totally undermines the incentive of restraining patient overuse. In practice, having two insurances for every charge has led to mysterious delays in payment of the second one, even though they are often administered by the same company. Physicians and other providers hate the system, not only because it involves two insurance claims processes per claim, but because it often makes it impossible to calculate the residual after insurance, i.e., patient cash responsibility, until months after the service has been rendered. Patients often take this long silence to imply payment in full, and disputes with the provider are common. Long ago, older physicians warned the younger ones, "Always collect your fees while the tears are hot."

It has long been a mystery why hospital bills take so long to go through the system; at one time, protracting the interest float seemed a plausible motive. However, the persistence of delayed processing during a period of near-zero interest rates makes this motive unlikely. It now occurs to me that the reimbursement of health insurance costs by the business employer is related to corporate tax payments, and hence to the quarterly tax system. Using the puzzling model of a monthly bank statement for online reporting would have some logic, but great confusion, attached to the bank statement approach for group payment utility. But in the end, I really do not understand why health insurance reimbursement or even reporting to the patient, should take so many months, and cause so much difficulty. Recently, the major insurance companies have started to imitate banks by putting the monthly statement continuously online on the Internet. If doctors find a way to be notified, the billing cycle could be speeded up considerably, and even the deplorable custom of demanding cash in advance may abate. The intermediaries probably won't do it, so it is a business opportunity for some software company, and a minor convenience for the group billing clerk.

So, the idea of a doughnut hole was born, after empirical observation about what was owed on two levels, one for small common claims, and another for big ones. Formerly, the patient either paid cash in full or was insured in full, so arriving at the Paradise of full coverage is purchased in cash within the first deductible. Unfortunately, once that last threshold was crossed, the sky became the limit. Some way really had to be found to distinguish between extravagant over-use, and the use of highly expensive drugs, particularly those still under patent protection. The idea was generated that if the two levels of the doughnut hole were calculated from actual claims data, there might often be a clear separation of minor illnesses from major ones. Since the patient would ordinarily be uncertain how far he was from triggering the doughnut hole, the restraint of abuse might carry over, even into areas where the facts were not as feared.

It is too early to judge the relative effectiveness of the two different patient-responsibility approaches, but it is not too early to watch politicians pander to confusion caused by an innovative but unfamiliar approach, while the insurance administrators simplify their own task by applying a general rule, instead of tailoring it to the service or drug. And by the way, the patients who complain so bitterly about a novel insurance innovation, are deprived by the donut hole of a way to maintain "first-dollar" coverage, which is a major cause of the cost inflations they also complain so much about. Some people think they can fix any problem just by loudly complaining about it. Perhaps, in a politicized situation, it works; but it doesn't fool anyone.

Plan Design. The insurance industry, particularly the actuaries working in that area, have long and sophisticated experience with the considerations leading to upper and lower limits, exclusions and exceptions. Legislative committees would be wise to solicit advice on these matters, which ordinarily have little political content. However, the advisers from the insurance world have an eye to bidding on later contracts to advise and administer these plans. They are not immune to the temptation to advise the inclusion of provisions which invisibly slant the contract toward a particular bidder, and failing that, they look for ways to make things easier, or more profitable, for whichever insurance company does get the contract. The doughnut hole is a recent example of these incentives in action; no member of any congressional committee was able to explain the doughnut for a television audience, so it was ridiculed. The outcome has been a race between politicians to see who could most quickly figure out a way to reduce the size of the hole. The idea that the size of the hole was intended to be an automatic adjustment to experience, seems to have been totally lost in the shuffle. Asking industry experts for advice is fine, but it would be well to ask for such advice from several other sources, too.

Fee-for-Service Billing. In recent years, a number of my colleagues have taken up the idea that fee-for-service billing is a bad thing, possibly the root of all evil. Just about everyone who says this, is himself working for a salary; and I suspect it is a pre-fabricated argument to justify that method of payment. The obvious retort is that if you do more work, you ought to be paid more. The pre-fabricated Q and A goes on to reply, this is how doctors "game" the system, by embroidering a little. I suppose that is occasionally the case, but the conversation seems so stereotyped, I take it to be a soft-spoken way of accusing me of being a crook, so I usually explode with some ill-considered counter-attack. My basic position is that the patient has considerable responsibility to act protectively on his own behalf. That is unfortunately often undermined by excessive or poorly-designed health insurance. Nobody washes a rental car, because that's considered to be the responsibility of the car rental agency. A more serious flaw in the argument that we should eliminate the fee for service, was taught me in Canada.

When Canada adopted socialized medicine, I was asked to go there by my medical society, to see what it was all about. That put me in conversation with a number of Canadian hospital administrators, and the conversation skipped around among common topics. Since I was interested in cost-accounting as the source of much of our problems, I asked how they managed. Well, as soon as paying for hospital care became a provincial responsibility, they stopped preparing itemized bills. Consequently, it immediately became impossible to tell how much anything cost. The administrator knew what he bought, and he paid the bills for the hospital. But how much was spent on gall bladder surgery or obstetrics, he wouldn't be in a position to know.

So I took up the same subject with the Canadian doctors, who reported the same problem in a different form. Given a choice of surgical treatment or a medical one for the same condition, they simply did not know which one was cheaper. After a while, the hospital charges were abandoned as a method of telling what costs more, and eventually, no effort was made to determine comparative prices at all. There's no sense in an American getting smug about this, because manipulation of the DRG soon divorced hospital billing charges from having any relation to underlying costs, and American doctors soon gave up any effort to use billing as a guide to treatment choices. We organize task forces to generate "typical" bills from time to time, but these standardized cost analyses are a crude and expensive substitute for the immediacy of a particular patient's bill.

My friends in the Legal Profession make a sort of similar complaint. The advent of cheap computers created the concept of "billable hours", in which some fictional average price is fixed to a two-minute phone consultation. In the old days, my friends tell me, they always would have a conference with the client, just before sending a bill. The client was asked how much he thought the services were worth to him, and often the figure was higher than the actual bill. In the cases where the conjectured price was lower, the attorney had an opportunity to explain the cleverness of his maneuvers, or the time-consuming effort required to develop the evidence. A senior attorney told me that never in his life did he send a bill for more than the client agreed to pay, and he was a happier man for it. Naturally, the bills were higher when the attorney won the case than when he lost it, which is definitely not the case when a hospital is unsuccessful in a cancer cure. Similarly, you might think bills would be higher if the patient lived than if he died, but income maximization always takes the higher choice. So the absence of this face-to-face discussion is a regrettable one in medical care, as well.

Former Foreward to Saving for a Rainy

George Ross Fisher, MD

Philadelphia

January, 2015

three intended as part of a larger volume about the Affordable Care Act of 2010, commonly called Obamacare. However, that episode is vexed with unexpected developments, so I set the longer version aside lest it gets longer. This slimmer one concentrates on what I would offer in place of the ACA, or at least parts of it. I fully expect any criticism of an American President's plan to be greeted with, "OK, wise guy, what would you suggest that's better? " So, here it is.

It's the Health Savings Account, in two forms, single-year and multi-year. The 1981 single-year version works pretty well, but the passage of time suggests a dozen or more tweaks, which are explained individually. The original version has often demonstrated a 30% cost reduction among several million early-adopters. So perhaps if we polish a few rough spots, the 30% savings will spread even further. Whether it spreads any faster will depend on national politics.

Meanwhile, in searching for more ways to cut cost, I discovered less expensive variations of Health Savings Accounts can be developed on a lifetime model. Lifetime insurance makes it possible to eliminate costs like covering gall bladder removal in people whose gall bladder has already been removed. That's the idea which started me down this path. Even more important, however, it soon provided a framework for combining several advances like whole-life insurance, passive investing, direct-pay insurance and eventually, even some Constitutional reconsiderations. Adding complexity worries me because although some people will quit trying to understand complexity, and just adopt it because it works, other people will reject it, just because it sounds confusing. As it gets more complicated, it also must get more paternalistic; opinions differ on whether it is an advantage. There are enough Americans who won't accept anything unless they understand every word of it so their carefulness will keep it slowed down. Even that has its advantage: a careful approach upsets fewer apple carts.

No doubt the two versions of Health Savings Accounts could be described in fewer pages. But greater density can hinder comprehension, seldom helps it for fast readers. Furthermore, presenting an alternative without a critique would leave the reader uncertain whether I believe the Affordable Care Reform presently goes too far, or not far enough. (In fact, both things are true, because it seems so likely both government and business employers will abandon the patient in pursuit of other agendas.) At the same time, the Affordable Care Act seems politically unsustainable. It costs too much. It needs more balance between benevolence and fiscal prudence, and it certainly needs more restraint to both sides protesting the other will ruin us. Of course, we must do what we can for the poor. But we also need to stop promising more than we can deliver. In the very long run, it won't be politicians, it will be scientists who seriously reduce the cost of disease for everyone, by eliminating diseases. Until that happy day arrives, we need to maintain a lowered tension of aspirations. When government and business operate as partners, that's nice, but somehow it doesn't sound like a level playing field for the rest of us. But having business and government at odds with each other would fit anybody's description of unsustainable.

The Affordable Care Act contains at least two innovative ideas which I certainly endorse. The idea of direct payment of insurance from client to the insurance company (replacing employers as absentee brokers), is good since it reduces the temptation for financial intermediaries to abuse the role of umpires. Rent-seeking is the technical term for this, I believe. Most office and outpatient claims could easily be paid by a bank credit card, streamlining the slow and expensive claims processing approach. Sadly, we may never know the full benefits of direct payment, because public dismay at the fumbling introduction of computerized insurance exchanges could poison direct-pay indefinitely. And secondly, to go on with my diplomatic message, the ACA use of a "cap" on out-of-pocket payment seems like a simple, clever way to avoid adding another costly layer of reinsurance. The system already requires three levels of insurance (basic, supplementary, and major medical) to pay simple claims completely; it doesn't need more layers, it needs fewer. These two features, translated as -- more business efficiency, and less mission-creep -- could easily be allied with Health Savings Accounts, which in the past brought financial pragmatism to several million Americans, voluntarily. Remember, this country responds poorly to almost anything containing the word "mandatory".

However, two points of agreement are not enough innovation to balance the remaining unevenness. I regret how the Affordable Care Act continues to push the square peg of "service benefits" into the round hole of casualty insurance. That sort of incompatible mixture befuddled things for a century, and I look for little good to come of it. Except for helpless hospital inpatients with a tube in their nose, service benefits generate rent-seeking, because service benefits blur the boundaries and create loopholes. Later on, we describe the confusion and exploitation created by service benefits (renamed Diagnosis-Related Groups) as a method of reimbursement. If sharpened and refocused, they could ease the problem of negotiating prices with people too sick to cope with finances. But the wide implementation of that inpatient approach without vigilant pilot testing has resulted in chaos in outpatient pricing. Even dropping DRG and returning to the old system would now pose a daunting risk, for one main reason. The DRG system has made hospital outpatient prices -- totally meaningless, and bewildering to patients who encounter two widely different prices for the same thing in the same institution. As a goal, the techniques of service benefits should be revised for inpatients, but eliminated for outpatients, who are generally alert for bargains. Two systems of payments perhaps, but reaching roughly the same price. As it happens, this uproar is not the fault of Obamacare, nor is its remedy inherent in Health Savings Accounts. But neither system of reimbursement can function without understanding what hospitals are all about.

The Health Savings Account is a mixture of two approaches which more accurately reflect the natural expectations of consumers. It's a mixture of cash payments with insurance coverage. It can be viewed as cash with insurance standing behind it, or it can be viewed as insurance with cash to fill in its gaps. It's definitely a step away from One Size Fits All. That may make a problem for Congress to decide which committee has jurisdiction, but in practice, it is more useful to address the larger issue, which is making the customer happy. The tendency should be resisted to specify by law that one system is to be used for inpatients, and the other for outpatients, for example. That's the way it mainly works out of course, but there are plenty of exceptions. My friends in administrative positions will have to forgive me for saying no one really likes uniformity -- except administrators. What has evolved is failing to appreciate the difference between a marginally better choice for everybody, and a clearly better choice for a majority. We have democracy all right, but there are many cases where multiple choice is more suitable than the majority rule. Admittedly, individually owned accounts create technical difficulty for cross-subsidy of expensive items, and I thoroughly understand the nation's attachment to pooled insurance as a way to subsidize the poor and helpless. But other patients have special problems, too. An unwarranted affection for simplification leads to this kind of outcome.

Perhaps we do start to wander off the topic, which is saving money for healthcare. In a larger sense, it is only a small part of another larger problem, which is how to fix an engine, while the motor is still running. Neither one of the larger topics, however, is the main mission of this book, so let's restate what it is.

Regardless of chapter markings, there are only two topics: regular Health Savings Accounts, as they exist today. And Lifetime Health Savings Accounts, as I hope they will evolve, tomorrow.

George Ross Fisher, MD

Philadelphia

January, 2015

Black Swans and Portfolio Content.

A standard deviation is the amount of deviation which is seen in two-thirds of cases, and usually refers to the minor dips and bumps seen in a year. The standard deviation of the stock market in a year is about 2% -- and can be ignored for this discussion. A much larger set of crashes occurs about once every thirty years and is characterized by a crash of 30 to 50 percent. No one can afford to ignore something like that.

Protecting the investor against black swans is one of the few legitimate reasons for an investment return of less than 12%. Let's first look at how most big endowments handle the issue. A museum or university typically depends heavily on its endowment to keep it going. If it spent the full 12% of potential average endowment income in the good years, it might be unable to keep its door open during a black swan. It could set aside 30-50% of its endowment as a reserve for such contingencies, but income between recessions might go up to 15% and they would have missed it. A more conventional response has been to adjust the investment portfolio, so it maintains an annual investment return from a portfolio which is 60% stock and 40% bonds. In the long run, that typically starts with a stock return of 12% and reduces it by a third to 8%, while investing the remaining third in bonds yielding 5%. Unfortunately, the long term experience is that inflation will nevertheless reduce all yields by 3%. So by prudent management of the endowment, a stock market yield of 12% is reduced to a spending rule of 5% (after inflation) representing what can safely be spent. Ouch! .

30% Dips, lasting several years, Every 28 years, on average. {bottom quote}

Black Swans

Now, just a moment. We are talking about a Health Savings Account, not a university or an art museum. We aren't paying a big staff during hard times, we are investing for the far future, except for the fact the far future holds a different sort of terror for some than for others. The young person may think he needs to pay his rent more than his drugstore bill. But he has so many years ahead of him, that may prove to be a very bad bargain, since depleting his account by a few hundred dollars may cost him thousands of dollars after he retires. If he can possibly borrow from his family, or reduce his college expenses right now, he should try to do it. A table should be prepared by his financial advisor at the HSA to convince him what is in his true best interests. It's a decision he should agonize over, not act on impulsively.

The converse is obviously true of a seventy-year-old, choosing between a new car and botox injections. Either one might be fine, but growing a fund he will never live to spend, is not so smart. And there are hundreds of situations between the two extremes. Here's one possible alternative, which straddles the issues:

Although the majority of situations vary from one extreme to the other in response to how old the person may be, financial managers often prefer solutions which tend toward one-size fits all because it creates a bigger pool, and maybe better returns. But it definitely wouldn't be wrong to get better returns for a little more risk. Especially for younger people when better returns cast a long shadow. Perhaps the portfolio should have a larger common stock content for clients up to age 50 than 60/40, perhaps 80/20 or even 90/10. The age of 50 is selected because health problems tend to increase after age 50. Or the ratio might be adjusted for the increased obstetrical costs of age 25-35, particularly for females. Actuaries should be consulted for more complicated issues. Since we definitely frown on kickbacks and other manipulations, perhaps fees should reflect the value of actuarial advice of this sort.

Using Escrows to Estimate Cost Risks(1)

The general thesis of this proposal is we can make better guesses about the future than we think we can, just as long as we remain aware they are guesses. In the past, that approach has made some blunders, like the sun revolving around the earth, or Columbus badly underestimating the width of the oceans. And so the world divides itself into "failure-avoiders" and "success-seekers", each contemptuous of the other. Those divisions are not likely to change much.

The proposed approach is to estimate how much we must save to achieve a distant goal, subtract it from the amount we can stretch ourselves to save, and see if what's left, is a realistic number. If you envision atom bomb attacks and climate catastrophes, the answer is No. But if you confine yourself to the question at hand, the answer might well be Yes. So as long as we confine ourselves to a voluntary approach, the nation will hold itself together if someone is wrong.

Let us repeat the basic assumption, that for practical purposes, all money is derived from the working age group, 21-66, and everything else is essentially borrowed. That is, the health costs of children under age 21 are supported by their parents, and those over 66, by savings. In addition to this basic division, about 10% of the population are unable to support themselves because of disabilities, prison and related matters--and must be subsidized. All of these side issues are slowly improving, but in this analysis we must ignore them, or at least treat them as a general category. We are now about to consolidate children and elderly people into one group.

That is made possible by the happenstance that our birthrate is 2.1 children per mother, which comes out to be one grandparent per grandchild. There are all manner of exceptions, like trans-gender people, divorces, polygamy and what have you. Our purpose is not to be comprehensively respectful, but to estimate quantities. And one grandchild per grandparent suffices for that. If each grandparent is financially linked to one grandchild, the others are a matter of pooling more with less. All newborn health costs are the responsibility of someone else, usually the father, increasingly the mother. This proposal suggests that we make health costs the responsibility of the grandparent generation, since Medicare has already made the grandparents the responsibility of government. We do this because Medicare is increasingly becoming a burden we cannot sustain. The public does not seem willing to listen to this, and so politicians are unwilling to bring it up. But Medicare is unsustainable in its present form, and therefore is absolutely destined to change. When we eventually face facts, I believe it will seem rational to combine the health costs of the two groups, so I propose we start the ball rolling by taking advantage of it sooner rather than too late. We can come back to this later, but let me briefly step up to the soap box:

We are launched on a demonstration model to the effect that compound interest income can greatly reduce the effective cost of healthcare. It is the nature of compound interest curve to turn upward the longer they extend. Therefore, we would greatly enjoy substituting lifetime compounding for annual premiums, and the greater the longevity the better. However, lifetime healthcare funding is greatly hampered by the rather high costs of the first year of life. People would almost have to live to be two hundred years old to make up for that high cost at the beginning of life, would have to inherit several thousand dollars, and would have to have rich parents instead of nearly insolvent ones. It is almost impossible to overstate the hampering effect of the high costs of the first year of life. So, we propose that grandpa transfer some of his excess Medicare funds to a grandchild, overfund Medicare a little to make room for the cost, and use Health Savings Account transfers as the vehicle for it. That adds at least 21 years to the compounding of 21 to 66, and it could potentially add the years 66 to 83, our present life expectancy. If we can somehow transform 44 years of compounding to a full 83 years, the financial consequence would be astounding. We are talking about lifetime health care, supported by a third of a lifetime of savings, if that much. No wonder the actuaries are wringing their hands.

Let's Chat About Foundations: George Ross Fisher, M.D.

The following interview with George Ross Fisher, M.D., is presented to give specific answers to questions relating to the organization of the Foundation for Medical Care which is being developed by the Pennsylvania Medical Society. Dr. Fisher is a member of the Medical Care Appraisal Committee of the Pennsylvania Medical Society.

Q. Why are Foundations for Medical Care called Foundations?

A. Well, you will recall that Henry Kaiser started a closed-panel salaried group practice which he called the Kaiser Foundation. When the doctors in California, who felt threatened y Kaiser, started a rival organization, they wanted to use the word foundation, too. So the term has stuck to most similar organizations, even though it is a little confusing.

Q. Does the foundation offer a tax shelter?

A. Not at all, and you will see that the team is difficult to understand. Some foundations are chartered as non-profit corporations, and others as ordinary corporations. The ordinary corporations avoid taxes by avoiding profits, so there isn't much difference except in state regulation. The Pennsylvania Medical Care Foundation is a non-profit corporation.

Q. Now, slow down and be a little clearer. Suppose you give a one-sentence statement definition of what a foundation does.

A. It takes two sentences. A medical care foundation is a sort of insurance company. And it's also an organization for medical peer review. You might not think these two functions should be fused, but it really does make sense to do so.

Q. You have the microphone make sense out of it.

A. The foundation offers the patient unlimited medical care for a fixed insurance premium. It offers the doctor unlimited income on a fee-for-service basis. Obviously, there has to be peer review to prevent bankruptcy, just as there has to be an insurance pool in the middle. Of course, there must be a qualifying phrase when you talk about "unlimited" care and "Unlimited" physician income: It's unlimited if it's "necessary and reasonable." It's also limited if you run out of money.

Q. That seems to be pretty clear, but how does it get mixed up with the Bennett Amendment?

A. The Senate Finance Committee was very impressed with the Sacramento, Peer Review Plan, and the Bennett Amendment would make a similar nationwide plan. Senator Bennett noticed that, while you can't have prepayment without peer review, you can have peer review without pre-payment. So the paradox: there might be a great many foundations which limited themselves to peer review.

Q.What are the plans of the Pennsylvania Foundation?

A. The Pennsylvania Foundation has to go through some procedural steps before it can do anything, and it will not be ready to operate until the October 1972 meeting of the House of Delegates of the Pennsylvania State Society. At about that time, it ought to be ready to respond to whatever legislation is passed, whatever peer review contracts the hospitals sign with Blue Cross, and whatever spontaneous demand there is for peer review.

Q. What about the prepayment function of the Foundation?

A. It seems likely that this aspect will be slower to develop, although you can't be sure. This is an election year, and the Democratic State administration in Harrisburg gives signs of developing legislation affecting health delivery system. Since the history of foundations has been that they are a defense of the private practice, it seems likely that they will flourish to whatever degree that private practice feels threatened. There are a number of closed-panel pre-payment groups trying to start up in Pennsylvania. Probably the private practitioners in their neighborhoods will be the ones most interested in the foundation approach. The legal and administrative mechanism will be available if they are wanted.

Q. If the various government authorities don't raise problems, will that end the insurance matter?

A. Possibly, You have to ask yourself how much the public wants pre-paid medical care. The argument goes like this: The average citizen may want to budget his health expenses, having them deducted from his health expenses, having them deducted from his pay-check or however another manner. A pre-paid comprehensive health program allows the subscriber to spend his residual income without worrying about a rainy day. No doubt this argument has some attractiveness to some average citizens, but whether it has enough clout to overcome suspicions and conservatism is open to question.

A more serious stimulus might just come from industry, as surprising as that may sound. You will recall that may sound. You will recall that Blue Cross got its big push during the wage freeze of World War II. The industry was not allowed to raise wages, so it gave fringe benefits. This was the wage equivalent of a black market when labor was scarce. Well, we have another wage freeze today, as of course, you know.

Q. Would it be fair to call the foundation a contingency plan?

A. It might be accurate, but it wouldn't be fair. It takes an enormous amount of time and money to get a foundation organized. You don't make that sort of investment in a solution unless you think there is a reasonable danger that you will develop the problem it would solve. Rightly or wrongly the people active in it really think the foundation may have to be used.

Q. Well, our discussion has given me a fair idea of what the Pennsylvania Foundation for Medical Care is trying to do, but I now have lots more questions.

A. So do we.

How do you know it will succeed?

A. We were enormously impressed by a field trip to California Foundations. There are twenty-two of them, and the oldest has been running for 16 years. You never saw such enthusiastic cohesiveness among doctors as you find in the Stockton Medical Society for example.

Q. Maybe so, but how does the public react?

A. Public enthusiasm is what generates doctor enthusiasm out there, Over and over they proudly tell you of a recent subscription drive by Kaiser in the Foundation's area. Only 2% of the public signed up for Kaiser. The foundation approach is a way of presenting a legitimate alternative to closed panel threats to private practice, an alternative which the public usually prefers. The private practitioners have no need to form a union or to indulge in dubious competitive reactions.

Q. So, the foundation is a way of combating physician unions, too?

A. Let's get something straight. The foundation isn't against anybody. It merely seeks to provide an alternative for those who want an alternative. for those who want an alternative. Any doctor who wants to join the union is free to do so. We are talking about preserving legitimate options, with the faith that free competition will favor the best system. While we are on the subject of hostility, the foundation does not hamper group practice if the doctors want to practice that way within the foundation, nor does it hamper teaching hospital systems.

Q. It sounds that way to me.

A. Not at all. There is a portion of the public who wish to budget their health costs through payroll deductions or annual premiums. The Foundation sets up an insurance pool to make this possible. The foundation does not care whether the doctors are in group practices, medical schools, or solo private practice.

Q. If that's the case, what's all the fuss about?

A. There are probably only two principles on which the foundation must do or die. The first is that reimbursement is on the basis of fee-for-service at some point in the chain from subscribers to doctor. The Mayo Clinic, for example, collects fee-for-service from the patients and pays its doctors salaries. There is no objection to the doctors choosing to receive salaries as long as the payments mechanism has squeezed through the fee-for-service keyhole at some point. The second essential issue is physician domination of the foundation. We have no objection to competing with identical systems which are consumer domination, stockholder-dominated, or government-dominated. We merely wish to provide a physician-dominated alternative for those who wish to enjoy it. We have faith that a physician-dominated foundation will flourish in such open competition because we have faith that the premium will be wrong to offer the public a physician-dominated system without a free choice of systems with other types of domination. We are putting our faith in competition to achieve the greatest good for everyone, and since we are for competition, we have to have it.

Q. The foundation must have a competitor?

A. Certainly, and for a variety of reasons. First, to achieve the public image of being in favor of a free economy rather than, let us say, a non-free one. Secondly, the vulnerability of the premium. As everyone in Pennsylvania has come to realize, the insurance commissioner has to approve your premium or your request for premium increases. If you are running the most expensive system, you are apt to be badly squeezed. We are willing to risk the gamble that other plans will be more expensive. The exposure of being the only insurance scheme of this type is what is too dangerous to risk.

Q. All right, if you like the competitors so much, what's wrong with them?

A.Probably more through accident than design, the competitors have some features we would rather not embrace. Compulsory salaried practice, for example. As I mentioned, we have no objection to the group being paid fee-for-service and then paying salaries to their members. What seems objectionable to entrepreneur psychology is the use of compulsory salaries as a mechanism of cost control. Doctors on salary forgo the opportunity t work as hard as they please and thus, to make as much money as they can. Having less incentive to work, the salaried doctors have to be supervised, watched, suspected, threatened. Since most of the public receives salaries they see nothing abnormal about this, but most doctors selected medicine as a profession in order to escape it. So the entrepreneurial doctors have sort of a bargain with the public. They say they will work all kinds of ridiculous hours in return for being left alone. The converse of this is this is that universal doctor salaries lead to instant thirty-hour weeks. If you are already neglecting your family to work a sixty-hour week, you aren't very happy about the prospect of an instant doctor shortage.

Q. Why not build more medical schools?

A. Because the public won't adequately fund the schools we already have. And probably, it would be cheaper to have the doctors work longer hours than to build more schools. After all, a great deal of the overtime returns to the public as income taxes. But the foundation can't solve that issue, and we are talking about foundations.

Q. Sorry to digress. What's wrong with consumer-dominated plans?

A. From our point of view, there is nothing wrong, and I told you we need them as competitors. The flaw from the competitive point of view is that public-dominated plans are likely to be more expensive and to emphasize the wrong services. That is, they may well overspend on amenities and underspend on medical advances. It seems more likely that a doctor-dominated plan would recognize and drive toward new methods and new equipment, possibly sacrificing amenities to achieve it. It seems to me that this type of competitive tension is in the public interest.

Q. What's wrong with leaving things the way they are?

A. Not much, and it seems very likely the public will be very slow to enroll in any prepayment scheme. The public now has the choice of Blue Cross plus Blue Shield as a prepayment scheme, as well as self-insurance. By self-insurance is meant you save your money and pay your bills when they are due. A few people do what I do, which is to skip the Blues and buy a major medical plan with a low deductible.

Q. How does the foundation differ from the Blues?

A. In two ways. The first is to offer comprehensive ambulatory coverage, which includes everything done in a doctor's office, including routine check-ups. The second is to try to include the Blue Cross coverage under the umbrella of risk.

Q. Why include Blue Cross?

A. You have now touched on the most difficult issue of all. Everyone recognizes that public concern is aroused by the disproportionate rise in hospital costs. If we didn't have a cost-plus situation with Blue Cross and the Hospitals, we probably wouldn't be worried about delivery systems. By including the hospital cost in the package, we hope to provide an incentive for the doctors to reduce hospital utilization.

At the same time, it is important to recognize that the cost-plus feature of Blue Cross created some very important advantages. The first was that expensive medical advantages could be buried in the budget for later reimbursement by Blue Cross. You didn't have to fight with the insurance commissioner every time a new drug came along, or a new x-ray machine. Blue Cross completely ignored the hospital bill and paid actual costs. It was a free ticket for waste, but it was also a way of keeping up with progress.

Now, there was a second advantage to the system. It paid for expensive features which one hospital provided and another hospital didn't, but which the community in general needed. A good example would be nursing schools. If hospital A had a school and hospital B didn't, in effect hospital A was training nurses for both of them. And the cost was shared by all subscribers in their premiums, regardless of where they were hospitalized or even if they were never hospitalized or even if they were never hospitalized. You hear it said that it is unfair to make the sick patient pay for nursing education, but that isn't what happens. All subscribers pay for it in their premium, and Blue Cross distributes the money where it is spent.

Q. Yes, I just recently learned that Blue Cross does not pay hospital charges, but rather on some cost formula of its own. But why is this a problem for the foundation?

A. Because it leads to a vast difference in costs, they will very likely destroy the teaching hospitals and community hospitals. If you give the doctors an incentive to reduce hospital costs, they will very likely destroy the teaching hospitals by shifting their patients to cheaper institutions. The Pennsylvania Hospital has already announced the closing of its nursing school, and no doubt others will have to. In five years this sort of thing would totally disrupt medicine.

Q. Shouldn't the government pay for these things?

A. The nursing schools happen to be a discrete component of what we call quality medicine; no doubt you could isolate them and get federal funds even in an era of serious federal deficits. But how are we to pay for cardiac surgery? The prospect of total federal involvement in all expensive medical advances is too hideous to contemplate. There is an appalling serenity to the way a great many people are talking about this. For an era that has become alarmed about disturbing the forces of nature, this would be major pollution of medical ecology.

Q. What's to be done about it? No one wants to destroy teaching hospitals.

A. Unless you simply exclude hospital costs from the foundation package (as HIP in New York has done), two major strategies seem available. They are complicated to explain.

Q.OK, go ahead.

A. The first approach would be to recognize that a certain portion of the premium dollar isn't insurance at all, but a donation. That proportion could be put into an Education and Development Fund, which would be distributed for the purposes we mentioned, and which when exhausted could not invade the remainder of the pool for health care insurance. You still have the battle with the Insurance Commissioner when an unbudgeted medical advance appears, but at least everyone knows what is under discussion. And there is no scapegoat to hang it on.

Now, the second approach is experience rating. That's a fancy insurance term for saying that the premium will be less if all your subscribers, through experience, cost less than the standard plan. An underwriter is a person who pockets the profits in return for the risk that he will have to pay for deficits. Perhaps you begin to see that a consumer-dominated plan means that the consumer is the underwriter. And why, we believe, the physician-dominated plans will turn out to be cheaper. Because doctors are in a much better position to hold costs down.

Q. But if the doctors are the underwriters for the Blue Cross experience rating, don't they continue to have an incentive to shift their patients out of teaching hospital?

A. Yes, indeed. Although, if you isolate the education and development costs into a fund, it might not be entirely a bad thing to put pressure on the teaching hospitals to get their straight patient-care into line.

However, hospital cost accounting is so difficult that the teaching or metropolitan hospital is probably always going to cost more. A plausible solution would seem to be to divorce experience-rating from dollars and put it on a point-system of relative values. In the simplest possible terms, a ten percent reduction in patient days would result in a ten percent experience rating in dollars.

Q. How could the Blue Cross cope with a situation where there were more points than dollars? Where would the dollars come from?

A. You are assuming that the teaching hospitals are infinitely elastic and that every patient prefers them. On the contrary, the big move is from the city to the suburbs. Since the teaching beds are fixed, for every foundation patient into one of them there would have to be a non-foundation patient out of them. In the rather unlikely event that there was a net movement of all patients into teaching hospitals, only one solution is possible. The higher total cost of medical care to the community would have to be paid for by a Blue Cross premium increase. We've had them before. In this case, however, the public would be asked to pay for something it was asking for.

Q. Who asked for the recent 40% rise in Philadelphia Blue Cross premium?

A. I'm afraid we are wandering off the subject of foundations again, but let me make an example of that. Since 70% of hospital costs are personnel costs, we have to ask whether it is likely that either salary rates or the number of employees increased by 40% in two years. Since that obviously isn't the case, the Philadelphia Blue Cross situation has something special about it. That special thing was an extension of benefits to outpatients. The idea was that paying for x-rays and lab for outpatients would reduce the incentive to hospitalize. There was in fact no subsequent decrease in hospital admissions, and the out-patient benefits killed the Blue Cross finances. This experiment was mandated by the Insurance Commissioner of Pennsylvania two years earlier (Mr. Denenberg predecessor).

The whole thing illustrates the pollution-of-the-ecology theme. We are all in the medical space-capsule together, and we must all involve ourselves in disturbances of the environment by anybody. There is nothing for anybody to gain by slandering the closed-panel groups, the teaching hospitals, the full-time doctors, or the American Hospital Association. To the degree that we get polarized, we are going to lose the atmosphere of goodwill which is essential for everyone's survival.

Q. That sounds like a good curtain speech to me, but I have some more questions.

A. I can take it if you can.

Q. You haven't' talked much about peer review.

A. . Maybe not, but perhaps you can see why effective peer review is absolutely essential to the financial survival of the foundation, and the public will like that. Conversely, the risk feature of the insurance plan is a big help to peer review. One of the great surprises of the visit to California was to find how little friction the peer review system generated among the doctors subject to review. They had a very good reason to want effective peer review (on others, of course) and so they acquiesced to it for themselves. After all, the best way you have of knowing that the others are under control is to see how review touches your own practice.

Doctors commonly share the suspicion that, while their own practices are clean, there are a lot of other guys who may be abusing things. I happen to believe that there is a very minor degree of conscious abuse at the present time in Pennsylvania and that an effective peer review mechanism will prove it. If the reviewer isn't finding much abuse, he has to be quite an egomaniac to create much friction. We have a few doctors of that variety, of course, but we can cope with them. What we can't cope with is an enormous book of rules and regulations formulated by people remote from the problems. The methods and procedures of peer review can change with the times, but they need to meet only one standard: keep the premium cheaper than Kaiser. If the salaried systems, with their rulebooks and time clocks, can't keep their costs under control, you have demonstrated all that the public wants to know. Everybody in the foundation then gets a year-end bonus, and please keep out of our hair.

Q. Are the . unions going to let you get away with this?

A.You seem to need to learn what Mr. McGovern discovered: organized labor has become pretty conservative lately. Surprisingly, one needs to be a little concerned about big corporations. When a company gets bigger than a certain size it is run by managers, not entrepreneurs. Many of them had Mr. Kenneth Galbraith as a stimulating teacher. My hunch is that the fear of higher taxes is what will make friends of the corporation managers, not a commitment to free competition. The unions are beginning to see that closed panel groups have some of the features of a company store.

Q. What future would you personally like to see?

A. Like every other doctor, I wish the whole problem would go away and let me tend to my patients. Maybe the international money crisis will divert the government to other concerns. But very likely the pre-payment idea will slowly gather a small constituency, and I believe the public is entitled to choose pre-payment if it likes. I would hope that we could depolarize the consumer-dominated and doctor-dominated plans. Since you are entitled to dominate to the extent that you are at risk, I would hope that we can devise intermediate situations between all-or-none. (Again, allowing for the free option of all-or-none for those who want all, or none.)

Philadelphia Reflections

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

Obituary

George R. Fisher, III, M.D.

Public Misconceptions

(Healthcare for Citizen Lobbyists)

Former Foreward to Saving for a Rainy

Black Swans and Portfolio Content.

Using Escrows to Estimate Cost Risks(1)

Let's Chat About Foundations: George Ross Fisher, M.D.