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.

Or, A Few Bad Apples?

Surgeons

Plaintiff lawyers and physicians do occasionally meet socially. A common way to skirt the awkwardness is to nod agreement that the malpractice problem is caused by a few bad apples in both professions. As competitors, physicians can be censorious; doctors who have never been sued find it easy to accept that those who do get sued must be substandard. This contention has been examined many times, and it is pretty firmly established that doctors who are sued are at least as competent as those who are not. While it's undeniable that sociopaths can creep into any profession, this truism has led to few reform proposals of any great promise. It's not true that every doctor gets sued at least once, but in some specialties like obstetrics a majority are sued, and those specialties soon develop shortages. Certain cities and states have a greatly increased incidence of a suit. Put that together, and you can safely predict impending shortages of particular specialties within certain zip codes. It would be a simple matter to examine the quality of particular medical specialists in those zip codes, and then for fairness examine the local legal climates. The outcome of such a study is rather easily predictable.

To assess the matter in a less confrontational way, look at insurance premiums for malpractice coverage. Doctors with a single case in their history can usually obtain insurance at standard rates, but premiums go up considerably after a history of two or more claims. Shopping the market through a broker will usually not discover an insurance company which will yield on this point. All states permit higher premiums for applicants with a history of multiple claims. Since insurance companies keep careful statistics and analyze them constantly, it seems likely they do have proof that one predictor of future claims is a history of having prior claims. There are other predictors, not necessarily marks of criticism: practicing in certain states or cities is risky. Working in certain surgical specialties is a risk. The bigger a doctor's practice, the more opportunity for claims to arise. Mix all this together, correct one factor against another with computers, and you seem to find a small proportion of cases concentrated in an unlucky few physicians. No further tweaking of the data will specify any characteristics of the suit-prone group. Since that leaves you with the conclusion that the only way to identify the suit-prone is to wait for three or four suits, the matter must be approached with resignation. Fortunately, the contribution of these people to the problem, while undeniable, is small.

In desperation, some even suggest an approach once adopted by Napoleon. He said he didn't like unlucky generals and fired them summarily. The managers and coaches of sports teams are similarly treated, and somehow we accept the injustice of it. But regardless of the merits of such pragmatism in win-lose team encounters, it misses a central point in negligence suits.

The patient, counseled by his lawyer, makes the decision to sue. Studies of many hospitalizations reveal the cases brought to the law are not materially different from many other cases that do not result in a lawsuit. The cases brought to court seem chosen by anger, mendacity, or just bad luck. Their grievance may or may not be justified, but it is not a degree of justification which distinguishes them from 90% of similar cases. Many studies of suit-prone physicians have been made, but it's uncomfortable to conduct studies of suit-prone patients. Who can doubt that identifiable suit-prone patients would discover they had difficulty finding a doctor? In summary of this point, the published levels of malpractice premiums are reasonably good measures of multiple suits. Since some regions have vastly higher premiums than others, it remains to be demonstrated whether those areas somehow have a vastly increased number of suit-provocative doctors. Or whether the variability is more fairly described as a local legal one.

Merrill Lynch Illuminates the Mortgage Crisis

John Thain

On November 1, 2007, John Thain replaced Stanley O'Neal as CEO of our biggest brokerage firm. Thain was paid $83 million to take the job, and Stan O'Neal was paid $161 million to go away. Naturally, such large compensation packages for what looks like managing a failure received a lot of notoriety. However, a major purpose of such large salaries probably was to allow the new CEO to protest he hadn't created the problem, and reward the old CEO for allowing it to be said he had. Mixed up in this news attention somewhere is the downfall of the most prominent African-American businessman in American history, just as another African-American is running for election to the Presidency.

Merrill Lynch

Merrill Lynch purchased home mortgages from banks, repackaged them, and sold them to the public through its large distribution system. Somewhere along the line, Stan O'Neal presided over a corporate decision that, since these novel securities were paying a 30% return, Merrill Lynch should keep them in its own account rather than sell them. When credit markets froze up in August 2007, there were few public buyers available, probably adding to the inventory. In any event, Merrill was suddenly seen to be holding about $100 billion of toxic securities. With the markets in turmoil, it was hard to say what these things were worth but surely less than Merrill had paid for them. Accountants and accounting rules forced the company to "write down" the value on the company's books to a varying degree. In July 2008, however, the securities were sold, firmly and finally determining what they were really worth. The sale of around $100 billion in face value was for around $2 billion, plus splitting the difference on around $6 billion more with Lone Star, a Texas company run by John P. Grayken, which specializes in salvaging value from questionable securities. A cute sale-and-loan arrangement attracted admiration in accounting circles but is not central to the story. In the long run, Merrill is only sure to get $2 billion but might get one or two billion more. Out of $100 billion that Stan O'Neal had acquired.

Ministry of Finance

The day after the fire sale was announced, newspapers carried an illuminating story. Earlier in the year, Merrill had improved its lending limits (and diluted its stockholders capital) by selling stock to the sovereign wealth fund of the nation of Singapore. It was now revealed that this purchase contained a covenant that if the stock price fell below the Singapore price, Merrill would pay Singapore the difference. While this sort of covenant is not rare in situations where a loan is disguised as a sale for regulatory purposes, it now became clear that Merrill was under other pressures to put an end to progressive announcements of write-downs. The company would be wise to sell the toxic paper before it did more damage. That is, to put an end to bad publicity as embarrassing matters continued to come to light. After all, every investor would like to be allowed to buy stock whose price could only go up.

Fannie Mae

The other stockholders of Merrill Lynch may not agree, but it was probably the right bullet to bite. Merrill had been one of the few American firms allowed to do business in post-war Japan. They surely watched with dismay when the Japanese Government tried every imaginable expedient to avoid recognizing similar losses, including phone calls from the Ministry of Finance to forget about accounting rules. Nothing worked for Japan, so they had a deep ten-year depression which isn't entirely over. The market sniffs out the truth. You might as well confess, at least be able to re-deploy fragments of frozen capital to get out of your mess, instead of just pretending losses don't exist. John Thain's effort may not be worth $83 million a year because no one is worth that, but he is worth it if anyone is. So far.

It remains to be seen whether Lone Star will forever remain a vulture capitalist, or whether they will be seen as forging the weapons that defend securitization from banishment. Because of all the uproar, the market for securitized mortgages has disappeared. Except, that is, for Fannie Mae which already owns half the mortgage reinsurance in America. Government Sponsored Enterprises have good reason to resist public scrutiny of their books, but that is what is implicit in developing computerized measuring systems for prudent mortgage securitization. It seems elementary and obvious that computers are capable of inexpensive accurate monitoring of all the participants in this arcane process. But a reliable process of transparency for the securitization process cannot be developed except with access to real test data. It would appear that Lone Star is just about the only major entity with the necessary brains, money, and access to live data which would be required to put together an effective system. If you stop to think about it for a moment, you remember that John Thain came from running the New York Stock Exchange and before that had made a name running the computers of Goldman, Sachs. There's at least a chance that something good can emerge from this mess.

Healthcare's Growing List of Indebtedness

Extensive premium changes in health insurance followed the introduction of the Affordable Care Act. Most changes involved an increase in patient participation in the costs, either deductibles or coinsurance, coupled with a "cap" on total patient payments. Almost all insurance seemed to grasp the futility of co-payment as a purchasing restraint, substituting fairly high deductibles for the old 20% co-pay. As election day nears, we are seeing a rash of articles about the hardships of front-end deductibles, during the first year of their introduction, and the largest patient group with this kind of experience are holders of Health Savings Accounts. A sudden media clamor about one point generally suggests some political stirring-up is taking place, but perhaps it is fast-breaking news that someone with a torn fingernail decided to bandage it herself rather than go to the accident room, all because of the shocking discovery that the days of first-dollar coverage are fast receding. The lady in the article didn't mention any other medical debts, but that is surely coming in the news.

After Medicare was introduced in 1965, I had already been in practice for fifteen years, and it did not surprise me how many patients, indigent and otherwise, had snaggly teeth, perforated eardrums, amazingly big hernias, gall stones, extensive varicose veins, and gigantic prostate glands. It was just the way things were, and doctors set about treating 'em as they appeared. What amazed me, six or seven years later, was the supply of these things had greatly diminished. Only then did I realize that people had been holding back on elective surgery because of finances. This backlog was a reasonably good measure of the benefit which Medicare was having, by giving elective surgery away free.

But that was only true if you consider every single remediable condition to be a disgrace of some sort. The people who had these conditions had weighed the costs against the benefits and had often simply declined. You could argue if you must, that poor folks just couldn't afford to get essential treatment, and that anyone who denied them this essential human right was an ogre; but that didn't appear to be the case in large measure. What was true was that the threshold for offering charity care was set to match the judgment of the decliners, rather than the level of physical perfection of an ancient Greek god. Folks just didn't think the surgery was worth the money, but when it became free, a new standard was set and they might as well get it fixed like a dent in an auto fender. Nevertheless, there's a strange fact about surgical scarcity and abundance. If you are planning on having any of these procedures, I would advise getting a surgeon with training during that catch-up period of the nineteen-seventies, because he had a lot of practice. In fact, my granddaughter flew to Nashville to have a perforated eardrum repaired by a famous expert during that period. When she recently needed a second operation after forty years, she had trouble finding a surgeon who could do it, even with half a dozen doctors in her family.

Surely a front-end deductible won't get us back to the same state of affairs, even if deductibles continue another forty years. But to some degree, it will happen, and what we once called a backlog will resurface as a debt from one time period to the next, with the threshold reset. Since we definitely need deductibles, it seems we apparently also need a small backlog of untreated elective (non-fatal) conditions, whether they do better than that in France or Sweden, or not. Since it can be safely predicted this will happen, we need to devise a way of managing the issue without provoking unsustainable costs. In the meantime, known but untreated, treatable conditions will become an accounting entry, which can fairly be attributed to the solving of our health cost issues. It's a debt, but I'm not sure total bodily perfection is the best standard of it.

Foreign debts for Medicare. For some time, Medicare has been 50% subsidized by federal borrowing. At the very beginning in 1965, it was 100% federally subsidized, and gradually payroll deductions, premiums and new programs with better funding arrangements took over. So far as is easily determinable, no one has dug out all of the subsidies and repayments, to be able to tell us what the accumulated unpaid debt for the Lyndon Johnson entitlement programs has been. What it has accomplished is harder to measure, since it must include a share of the improved longevity during the interval. Nevertheless, we could make an effort to see what the book cost has been. Surely it has been greater than just the cost of elective surgeries. At first, the creditors were all American citizens, most taxpayers, but at least it kept the money within the domestic budget. Since we started to borrow the money from the Chinese government, it assumes a different character, one which any creditor would feel entitled to evaluate. To know what to do about this debt is above my pay grade, as they say, but at least it would seem to be responsible stewardship to make a formal accounting of where we stand, and what we plan to do about it.

Domestic Healthcare Debts. Without getting into a wrangle about the Tenth Amendment, it is fair to say that health care has long been thought to be a responsibility of the several states, so at the least, the fifty state budgets would have to be examined and aggregated, perhaps the municipal budgets as well. In Philadelphia, the deficit of PGH (Philadelphia General Hospital) was running eleven million dollars a year, when it closed in 1977. The nation's first hospital, the Pennsylvania Hospital, was created by a grant from the state legislature in 1755, at a time when Ben Franklin was active. Perhaps it is not necessary to go quite so far back to see how the books balance, but any adjustment for inflation would bring out the considerable taxpayer expenditure for health, ever since the nation was founded.

Sustainable Growth Factor. Every year since 1997, Congress has calculated the rate at which health costs should be growing, and when it exceeded that, has planned to reduce physician reimbursement to compensate. Every year Congress has relented at the last moment, but never put an end to the threat. Since the accumulation has reached a point where almost every physician in practice would have to stop the practice if Congress honored its threat, something must be done about it. Paying it all off at once would trigger a 26% drop in physician income since every physician carries a 50% gross overhead, collecting an additional 26% would be a disaster. Perhaps the two political parties each hope the other will get the blame and pay the bill. But the bill remains part of the debt hanging over the Federal Government for health entitlements, and like most of this debt, it is a question how to treat all of its inflation in the interval.

Healthcare Mortgages. Bill Dunkelberger the Philadelphia economist, recently remarked that real estate is where the rubber hits the road, the place where interest rates really matter, the place where equities collide with fixed income. For eight years past, our long term interest rates, net of inflation, have been close to zero. That allows the government to borrow free of charge, and in effect allows hospitals and universities to build buildings without much or any cost.

Unfortunately, our businessmen have not responded with a comparable spree of interest-free borrowing, because they see nothing worth borrowing to build for. Their unwillingness to spend leads to the appearance of growing earnings, which artificially supports the stock market. It's hard to imagine a stock crash just because prosperity returns, so it's hard to know what will happen if it does. Hospitals and universities think they have something to build which will generate a healthy return for them, so one builds out-patient facilities, and the other builds lavish dormitories. When interest rates return to normal (they haven't, in Japan, done so for seventeen years), it's a puzzle to know whether the economy and the stock market will tank, or will celebrate. In any event, there is a great deal of new real estate debt which must be added to the level of government indebtedness, due to health. Since nothing much could be done with such single-purpose structures, their disposal is also part of the consideration. When Jefferson University received a gift of a basic science building to house the first two years of its classes, they got a maintenance jolt. Just to heat, air condition and clean the building consumed the entire tuition of the first two years of classes.

Student Loans, broadly defined. To judge by Nineteenth-century plays and novels, medical students were traditionally impoverished. Today, students of all descriptions are carrying six-figure indebtedness, but medical students are a special case. They run up debts in order to stay in school, and the schools prosper. Then, they take jobs for several years as house officers in hospitals, who are paid by the government from Medicare funds which are used in large part to pay off their loans. And then, they go into practice, often reimbursed by salaries provided by government entitlement programs like Medicare and Medicaid. It's more than I am able to say whether these successive loans add to each other, or cancel each other out. In any event, a huge amount of money is being paid for what is described as medical education, but a certain amount of it is diverted to other university uses.

Future Entitlements. In many ways, the largest indebtedness to account for, are entitlements which have been conferred on future generations, many of whom are not yet American citizens. This is the problem most pension funds are now encountering, of whether such a future promise is a contract which must be honored, that is, whether it counts as a debt. Congress certainly acts as though it must say it is a contract, or else be dis-elected. But the rest of us would not regard that as much of a tragedy, so perhaps it isn't a debt. Whatever we end up calling it, it would surely be an improvement if we could hear it accounted for as if it were the debt of a corporation. Perhaps that wouldn't lead to improving the situation, but it would certainly feel a little better.

Pearl #4 : Funding Newborns and Children, a Special Case

We like to say newborns have a limitless horizon, and we also like to say their health costs are pretty cheap. Both things are true in a general way, but the occasional exceptions are quite often a financial disaster. An episode of extreme prematurity can cost a million dollars, and an extra chromosome can lead to a perhaps lovable life combined with the prospect of never becoming self-supporting, for the entire lifetime. The overall situation seems to demand a dual system: catastrophic insurance for one group, and highly predictable protection from the small, steady and universal health costs of the usual child. That seems simple enough, except the economic circumstances of the parents are an additional variable. And probably the unusual abundance of malpractice suits is another.

Medical costs of children neatly bifurcate for HSA use: rare catastrophic costs, and common small ones. {bottom quote}

Let's dispose of the two side-issues hurriedly, in order to focus on the two types of health insurance required. It would be my position, the respectable members of the legal profession have shirked their duty to clean up the profession's trial bar. The malpractice situation will not be rectified until they do. Secondly, most problems are the consequence of earlier solutions, so the changing environment is going to force us to modify the concept of "family plans" to pay for childbirth and children. That was once largely an accommodation to the need for the father's employer to find a way to pay the full health costs of his employee. Subsidizing large families was just part of the approach. But in effect, it created a disincentive to hire employees likely to have large families, at a time when economists view economic growth as parallel to population growth. So the philanthropy of early company leaders eventually became a disincentive for later Human Resources departments, because it was now perceived as not in the company's interest to subsidize expensive employees. (It was probably the change from family businesses to stockholder corporations that was the main change.) That also applies to political squabbles about immigration, probably related to the tendency of immigrants to join one particular political party. Both of these mixed motives, malpractice, and demographics make the already overcomplicated health insurance problem, progressively more complicated.

Obstetrics is expensive for young parents, and with prematurity, malpractice costs, and genetic medicine in its future, finances may well get even more strained. The employer's contrivance of "family plans" will only serve as long as employers are willing to pay for it, and society seems to be moving away from even this option. Comparable provisions would apply to those who do not have employer-based insurance. A contrary but related incentive described later, is to add 20 or more years of compound interest at the beginning of the child's Health ("and Retirement") Savings Account. This extra extension of compound interest back to childbirth is about all little children would have to offer an insurance design, while everything else has some kind of drawback.

Newborns have no money. Someone has to give them some. {bottom quote}

The goal we are therefore working toward might easily be called an exchange of the obstetrical and pediatric insurance costs to the baby's HRSA (Health and Retirement Savings Accounts, sort of in return for the protracted compounding. Even such remote return isn't a completely even exchange, but it's an exchange for something society is forced to give away, anyway. This is the exchange of income-generated funds for what had previously been a gift of someone else, usually the parents, sometimes the employer. It definitely is not a repayment of anything the baby paid for. Before that argument causes a flurry, let it be said that all obstetrical and pediatric costs already represent an unacknowledged gift to the penniless child from somebody. Whoever that is, could be called the true recipient of the gift. But since the money was generated by new investment, it benefits some people without hurting anyone else. Call it a gift if you please, but remember it lacks many of the features of what might otherwise be called a gift. Society gains an increase in the birth rate and probably the growth rate of the economy. It also gains some measure of relief from general disquiet arising from cost-shifting to a racial subgroup in straitened circumstances, who have traditionally responded to such pressures to the disadvantage of the educational system, and the choice of careers.

The direct purposes behind a shift are to add the extra years of compound interest to the baby's HSA, which effectively means adding it to everybody's HSA, a very sizeable sum, but perhaps a smaller one than more directly addressing what is causing so much trouble. The same people will generally pay the same amount in premiums, but a framework has even been created for shifting the social sands of the future in same-sex marriages and the like, just as well as penniless parents with expensive children. Every child would get catastrophic medical coverage and routine childhood medical costs through two types of insurance. That is, every newborn would get an HRSA, and every newborn would have cost-free obstetrical and pediatric costs, which for the most part would be shifted from the parent's insurance arrangements. Since the catastrophes, obstetrical and pediatric, usually end up as a cost to society anyway, it is not extreme to investigate whether government subsidies may be appropriate for their insurance. In fact, it is not greatly different from the exchange Henry Kaiser invented, of making a gift to employees out of health insurance, which was already deductible from corporate taxes, and now is deductible from the employee's taxes. Since the unemployed and self-employed are excluded from that contrivance, this proposal -- in a sense, proposes we extend it to everyone.

In somewhat greater detail, the proposal is to take the unsubsidized cost, give half to the mother's HSA, and the other half to the baby's HRSA, with the proviso that with both parent's consent they may assign it to the father's HSA, which makes up the other half of the cost. In essence, the rebate is split between parents unless one objects. (Hidden in the background is the suspicion that childbirth and death costs are both over targeted for cost-shifting, just because they are unavoidable.). The ultimate source of the money is from the growth of the parent's HSAs from the birth of the child until the child's 25th birthday, a growth ratio for the money of about 6 to one. Single-Premium health insurance for the child from birth to 25 might follow the same funding pattern. If you add the extra years to the other end, from age 70 to 90 however, the multiplier is 512 to one. Overall, the gift consists of a substantial subsidy for a substantial portion of the obstetrical and pediatric cost of having a child, but not a full subsidy and, one should hope, not coming from the taxpayer. The cost is reduced by the growth of HSA investments for a 25-year period, but ultimately is only reduced, not eliminated. There would be an initial cost to the parents, or in the case of poverty, a subsidy of about a fifth of the original cost. It would seem unwise to subsidize more heavily until we discover the response of the birthrate to this much subsidy and the resulting public reaction. The subsequent ability of the parents than to modify the birthrate is an unexplored feature of this proposal, which could, unfortunately, extend into disputes about immigration policy.

Advantages. It's complicated to explain, fairly easy to understand. The advantage of an indirect solution lies in the establishment of a program which would considerably widen the appeal of an HRSA, extend its legitimacy to widen the period for compound interest to work and make a start on a solution to a portion of healthcare which has previously defied complete resolution. It begins a program of a First and Last Year health insurance which by accordion principles would eventually replace the present disjointed one with another which matches the more probable scientific future. And all of this at a relatively small cost, because of the multiplier effect of compound interest for twenty or thirty years.

Some time ago, it was originally imagined that Medicare could become overfunded, and result in surplus at the end. Grandparents could then transfer the excess to their children or grandchildren and pay for it all. Unfortunately, the finances of Medicare turned out to be so parlous, this approach must be more tentative; since it implies the money would still be there, ninety years later. It's going to take a long time to restore the trust in government we had a century ago; but on the other hand, it took a century before that, to dispel the distrust of government with which we first crossed the Atlantic.

Being Born as a Pre-Existing Condition. Medical science is a wonderful thing, but it is impossible to imagine a life without some medical costs because everyone has the cost of the first year and the last year of life. The insurance problem is to define who must pay the bill. It seems unfair to assign all of the cost to the mother, but in today's world, it is more visible the father may not always be available. The concept of family plan insurance was once stretched in order to include the employer-gifted concept, whether the mother worked for the employer or not. But the unfairness of charging the same premium for families of three, as for families of six was obvious since it might later warp employment practices to include religious preferences. Everybody had a fairness argument, nobody had a workable plan.

The disincentive of the same premium for a family of three as a family of six is obvious. {bottom quote}

Dispelling a Myth of the Past. It must be remembered, a "straightforward" funding proposal is not very simple, and for illustration, an alternative is sketched out: Just have someone, the government in the case of indigents, contribute a hundred dollars to everybody's HSA at birth. Invest it in total market index funds for 90 years, and guarantee to pay a "big" lender back. The "big" lender finances the cost of the delivery and is repaid by the guarantee plus rebates from the two parties who benefit: the employer (or individuals who no longer have to pay the premiums for obstetrics), and the hospital which no longer sustains bad debts from this source. After appropriate payments from these indirect beneficiaries, the "baby's" HSA is the ultimate guarantor to the "big" donor. There should be some money left over, so the fund can be transferred to others and become perpetual in effect if not overtly. Unfortunately, this "straightforward" financing scheme is itself so complicated it will probably fail, and if not, its paperwork might eat up all its savings. In fact, the "big" lender might charge a higher interest rate than the HSA could earn. Let's see if a less straightforward approach works better.

Still Another First Twenty-Five Years of Life, Health Insurance Proposal. The first step is to get legal permission to do some unorthodox things. As a condition for providing the Last Four Years of Life benefit, which greatly favors Medicare recipients, the beneficiary agrees that somewhat less than ten thousand dollars may be transferred out of unused death benefits in Health Savings Accounts for the benefit of one child or grandchild, into the child or grandchild's HRSA. The ultimate source of this money is its growth following deposit, so it actually wasn't the depositor's money. Furthermore, with a birth rate of 2.1 per child-bearing woman, the math works out to one contribution per donor, no matter how many grandchildren there are, as long as the present birthrate remains constant. An insurance pool would be provided for childless situations. Because of higher interest rates at the end, payment may be delayed up to 21 years after death, just skirting the creation of perpetuities.

Upon the birth of the first child or grandchild, the money is transferred between HRSAs to the child's, meanwhile continuing to gather investment income for up to 21 years. It is paid out as a health insurance policy for half the cost of the birth of the child, plus the first 25 years of his life, and calculated to become exhausted at that time--except for the seed money to pay the next death benefit, which started to gather interest at birth. After age 25 the child is on his own. Age 25 is the moment of maximum career-choosing, but it is also the time of least financial responsibilities. It is the time to be taking risks, and therefore the time to be carrying least baggage.
Of course, health care might become the responsibility of the Affordable Care Act, the employer, or the individual, until the onset of Medicare. That issue remains to be seen. The rate of return on seed money is constantly monitored and re-adjusted to equal the final cash requirements, so the fund is gradually adjusted to be self-sustaining after the transition period. Our more realistic position is that age 25 is the point of lowest health risk in a lifetime, and it would not be shocking to leave the matter undetermined until the ACA issue gets more clarification. If by any chance the ACA is repealed or collapses, repairing the damage will probably occupy the full attention of Congress. It would then be particularly useful to have debated the various components of this plan in advance, searching for possible substitutes.

Features of First-Last Years Proposal. In the first place, interest on borrowed money is reduced or eliminated; that invisible cost disappears. Secondly, start-up costs can be postponed until financing accumulates, the administration is in place, etc. Thirdly, the day would surely arrive sooner, when this system was self-financing than with the reverse-mortgage approach. Although this system has a complicated start-up, it gets simpler and cheaper with time and would be gradual. Ultimately, it might even solve a problem no one has solved -- unlocking childhood costs, the main obstacle to lifetime, or whole-life, health insurance -- at a comparatively minor cost. That, too, would be a gradual phase-in, but it need not wait for a resolution of Affordable Care perplexities, using Health Savings Accounts in both cases as its foundation.

The Ultimate Outcome is the creation of a First and Last Years of Life Fund. The drain on Medicare, ACA, and regular health insurance is greatly reduced, along the way, but it may be unwise to aspire to eliminate these costs entirely; future generations can decide that. Meanwhile, the creation of a huge pool of ownership rights in the American economy should be addressed, with the first priority of reducing medical costs if possible. The creation of government control of the private sector should be rigorously avoided, as well as concentrating ownership control of corporations, by the accumulation of diffused stock voting control in millions of HRSAs. For this reason, the courts should recognize the unwisdom of permitting voting blocs, transfers of voting control, and other strategies to defeat the diffusion of control expressly intended.

Let's go back and look at the math. Money at 7% will double in value every 10 years, so if a newborn invests a dollar at 7%, it ought to be worth nine doublings in a lifetime, or 2,4,8,16,32,64, 128, 256, 512 increases -- that is, $512 in 90 years. Apparently, it's rough and rounded off; a calculator on the Internet says it will be worth $515.69, based on two assumptions.
The first question is whether you will really get 7% on your HSA investment, and will it be compounded quarterly, following tradition for stock dividends to be issued every three months. Historically, that's fairly close, except the stock market averaged only half as much during recent market turmoils, suffering 30% dips in some years, 30% gains in others. In retrospect, it makes a whole lot of difference if you start investing just before a long recession, or just before the start of its recovery, so it may take 20 or 30 years to smooth out to the average. If you started investing at the age of 60, it's likely your results will mainly reflect your lucky birth year, even if you follow the precepts of "passive" investing in index funds of the entire stock market. A newborn risks a little. Approaching retirement, he may risk everything, but actual performance is unpredictable. Therefore, proposals to even it out in some way, are inevitable. But that should be the last step. Somehow, the public must learn to accept the fact that experimenters, risk-takers, are usually necessary as the first step in any major change.

A newborn risks a little. Approaching retirement, he may risk everything.

Black Swans Another way of looking at this matter is to get out Yale Professor Roger Ibbotson's compendium of stock prices for the past century and ignore the boilerplate reminder that past performance is no guide to future performance. Of course, it is no guide, but it's all you have. Limiting your attention to the biggest 500 or 1000 corporations, which are a little safer, stock market total returns have risen fairly steadily at about 11% a year. However, inflation has eaten away at that by 3%, so the investor only realized 8% before the broker agent took out his own expenses. Moreover, the market is subject to 30% swings every few decades, and if you protect yourself from "black swans" by holding 40% in bonds, your returns average closer to 5%. "Active" investors try to run between the raindrops and do a little better, but the fees of an expert advisor absorb most of the profit, bringing you to about the same result. So unless you can somehow control the year of your birth, you are going to average somewhat less than 7%. The great challenge is to whittle away at these deductions. For example, this particular fund does not have a museum or a school to run, and thus has fewer ongoing cash needs to compete with depositor distributions. We must be careful not to add a burden in the name of prudence.
But if you fool around with tips you heard at a party, you will almost certainly do worse. Taken all together, most conservative investors would say: an average investor is going to do worse than 7%, would be lucky to average 6%, and may well average about 5%. The challenge is to beat those numbers. According to our predictions, that won't be enough to pay for healthcare and retirement completely. But then, nothing will do it perfectly as long as we don't know where longevity will level out, or whether healthcare costs will fall, or what the economy will be like in the meantime. We must assign a more reasonable definition to a "decent" retirement, provide for a moderate one, and leave the differences to our own sources of wealth. It's essential to encourage that much financial Darwinism to keep one generation from attacking the income of another through other routes. But it's hard to see us going much further.

An average investor is going to do worse than 7%, would be lucky to average 6%, but may well average about 5%.
Black Swans

To doubt that investor distribution won't cover the entirety of healthcare and retirement is definitely not trivial. It's worth trying however, in view of the gamble that science might do the rest, by curing some common diseases cheaply. And it's close enough to keep seeking that extra percent return, here and there. Since the existing financial system is so riddled with obvious inefficiencies, the chances of finding a breakthrough are not all that bad. The opportunities for people willing and able to take a risk are pretty attractive, but not everyone is temperamentally or financially wise to take them. Furthermore, everybody alive has already paid his birth costs somehow, so this childhood program can afford to be phased in last.

My guess is childhood funding will be greeted with reluctance. All the nasty talk about Wall Street makes a jarring clash with our soft and fuzzy notions about little kids. Kids run around in circles making excited noises, quite at variance with extensions of compound interest or contingency funds. But nevertheless, the math is close, and we cannot afford sentimentality. If we want to fund everybody's future, we need those years of extra compounding, and we need to face the fact that newborns will never have any money unless someone gives it to them. Those things won't change, and it helps nothing to drag out the discussion of it.

The system badly needs to put some money into itself, as early in life as possible, in the following areas:
Contingency Fund. Any person whose grandparent is willing to spend a thousand dollars at birth is very likely to win any healthcare bet. (It's likely to require much less than that if we work hard at it.) There are lots of people who will never see a thousand dollars in one pile, in their whole lives. But there are millions of others who could easily afford it and would become belligerent to be deprived of the liberty to do so. Is it really fair to prevent 80% of children from doing what 20% are unable to handle? Furthermore, a five-year-old may seem impoverished at age five and become a prosperous basketball star at twenty-five. With a swing of 500x from start to finish of a 90-year life expectancy, a contingency reserve eventually growing to a quarter or half-million dollars could easily be leveraged into a life free of healthcare and retirement worries, and hence make a significant difference to lives. The issue of income disparities for newborns has little meaning until much later when the opportunity to exploit it has already eroded. There surely are many people who could afford this, and the leveraged effect on our economy might well unleash an unimaginable economic boom. Maybe it wouldn't, some would say; so a whole lot of people have lost a thousand dollars. So what? With enough income gain, these quarrels lose their significance. This contingency platform needs a demonstration program to make the gamble seem more realistic to its detractors.

Transfer away from terminal care costs should reduce the cost of all healthcare by a quarter, and the cost of Medicare by half.

The Last Four Years of Life Reinsurance. Medicare now costs about $12,000 per person per year, and the average person stays on Medicare for twenty years. Remember, average lifetime health costs are thought to be 300 or $350 thousand. But Medicare health costs themselves are also internally J-shaped -- a miniature version of full lifetime costs. Half of the expenditures come in the last four years of someone's life. Let's simplify the slogan: Medicare is about half of healthcare cost, and the last four years are half of that. Advancing science may change this curve, which seems likely to reflect terminal illness. If it's approximately true, the transfer away of terminal care costs should reduce the cost of all healthcare by a quarter, and the cost of Medicare by half. The money isn't taken from anyone else and it isn' t created by magic. It takes advantage of the fact that terminal care comes at the end of longevity, which has grown to be almost ninety years. The rest is up to the stock market and the elimination of unnecessary costs. It can't be done completely, it can be done in part. Its first step might be to eliminate the costs and profits of the secondary carrier and add them to the compounding interest pool (see below). If the contingency fund pays for terminal care, it would come after a newborn expenditure of about a hundred dollars. That is to say, an expenditure of $100 (to the contingency fund at birth) could readily pay for cutting Medicare costs in half. If you know it is coming, why not save for it? The savings would express themselves as a reduction of deficit financing, payroll withholding, and Medicare premiums. These reductions could be gradual and in different priority, during the transition phase.
The first Twenty-five Years of Life Reinsurance. There is no way for newborns and children to pay for their own health costs; someone else has to shoulder this burden, usually the parents. Families of differing size are another complication because small families resist paying for large ones. Because this problem has defeated conventional notions, we originally presented the possibility that grandparents should make the transfer, largely using investment gains to do it, but eventually for the relief of the parent generation. The parlous condition of Medicare makes this less certain. The first and last years of life would be largely funded by investment gains, and residual health costs would be much smaller and more equitably distributed. The precarious present system, of having the working third of the population support the non-working two-thirds of the population, would be much reduced by a way shown to do it more safely.
Seemingly Shifting the Birth Costs to the Baby. Furthermore, it is important to emphasize that parents are currently paying the costs for children, so programs to fund childhood health would really mostly benefit their parents or their employer. Therefore, the most important part of this program is the re-arrangement of health costs between mother and child, which on first hearing seems to benefit the child. But it is unclear where the emancipation of women is going to take us. The perfectly understandable surcharge for women's health insurance is nonetheless a factor in hiring patterns, and in family decisions about who is going to stay home as a caregiver. If the costs of health insurance for men and women were closer, it could help a lot. But they must not appear to violate the designs of Nature, or they will cause more trouble than they help. The two genders are in fact so different that attempts to even them out are often met with a contempt that is no help to the situation at all. A shift of health costs from the mother to the baby is a shift to someone else -- to a spouse or a consort who may well be isolated by his employer from the actual shift in costs. But it has a certain logic to it and is about as far as you should dare to go. It also might help this problem to have a few states try it out as demonstration programs, because its effects may be unexpected.

Fun With Numbers. In summing up the reasons for a childhood insurance plan, one warning. These figures are derived from the published reports of CMS for 2015, probably reflecting 2014 data. Let's take the average Medicare benefits cost per capita as an example. To an East Coast resident, the figure of $12,000 per year per person seems a little low for terminal care. It is a national average, reflecting low rates for one state, high rates for another. Furthermore, a great deal of terminal care takes place at state expense in Medicaid. To enhance the recipients of ACA, such costs are shifted to Medicaid nursing homes. It's mainly Federal money, but it appears in the state ledgers and could quickly shift around, and end up as a Medicare expense. So the use of Last Years of Life cost-shifting might well shift the investment savings, but the net overall cost might also shift, or even seemingly rise when new expenses are dropped on it. The transfer of terminal care to the contingency fund from Medicare would indeed save the consumer about $120,000, but the net Medicare cost could almost be made to see what the political opponents want it to seem, even including an increase in Medicare expenditures as their last resort.

The Working Population, from age 25 to 65. Except for removing its destabilizing burdens, this proposal does not endeavor to change the Affordable Care Act. Although the author harbors opinions about it, this proposer has every intention of leaving the ACA to the political, judicial, and electoral decision. For the practical purpose of avoiding discussion, the fiscal effects of the ACA are assumed to be neutral, in order to have as little effect on the broader discussion of program design as possible. In its present formulation, the ACA could disappear tomorrow, or it could last forever, and still make little difference to the essence of this proposal. But the chances the ACA budget rearrangements will be neutral, are apparently pretty slim.

Letter Gordon K. MacLeod Re: Some Proposals for PMS to Use Money as a Measure.

Gordon K. MacLeod, M.D., Chairman

Ad Hoc Committee on Long Range Strategy

Pennsylvania Medical Society

20 Erford Road

Lemoyne, PA 17043

December 15, 1984

Re: Some Proposals for PMS to Use Money as a Measure

Dear Gordon,

Ludwig von Mises, the Austrian economist, won a Nobel Prize for drawing the world's attention to the information value of prices in a market economy. Since a capitalist society measures most things by money, you can learn a great deal about how society values a person, system or product by how much society is willing to pay for him or it. Herein was an academic formulation of the old Calvinist doctrine that if you were rich, it was probably a sign you were beloved by the Almighty. For von Mises, the important issue was not theological, but political, since he maintained socialist economies function badly mostly because they fix prices by a committee and thus deprive themselves of the information system of the "bottom line".

Well, non-profit corporations like the Pennsylvania Medical Society also deprive themselves of the information content of prices and profits, although I here maintain that it is undesirable to do so, that it is feasible to do otherwise, and that our committee ought to try to get the Society to use money as a measure where it can. I intend to use the AMA as an example because it is readily visible to us. The AMA can afford to spend large amounts on management consultants who suggest systems which become entrenched because they work, even though the users of the systems may well not understand them. that sort of entrenchment by effectiveness, too, ought to be one of our goals.

When organizations get to be a hundred years old, they acquire a number of functions which do not readily fit into a crisp mission statement. In the case of the Pennsylvania Medical Society, we have some activities which are typically for-profit businesses, even though the organization as a whole declares itself to be non-profit (hence, tax-exempt) corporation, dedicated to carrying out a number of public- service missions. The most obvious for-profit activity is the operation of the endowment portfolio, which differs in no major wat from the operation of a mutual fund or any other investment activity. In addition, we are in the rental real estate business, the speculation in raw land of our headquarters, the malpractice insurance business, the magazine publishing business, and probably a number of-of other actives which I have not had time to ferret out. Activities of this sort always are applauded as a way of reducing dues (speaking to the members) and of expanding the scope of our benevolent activities (when speaking to the governmental authorities who would like to tax us.) Because of the discomfort of scrutiny by the tax collector, there is always a tendency to conceal or at least blur the discussion of such activities, and out of that tendency may grow slackness of management (as in the case of Blasingame) or unwarranted domination of the organization (as in the case of Fishbein). These two potential evils will cost the Society much more than it could ever pay in taxes, and therefore I make my first proposal:

1. All profit centers of the society should be measured by their return on fair-market equity. It is sometimes described as "conservative" accounting to maintain stocks, bonds and real estate on the books at the purchase price of twenty years earlier; it is no such thing as conservative, it is deceptive.

2. To the maximum feasible degree, activities which should have a major goal of producing profit should be separated from the purely benevolent activities in a special accounting system. To the extent feasible, such activities should become for-profit corporations, the stock of which is contained in the Society's investment portfolio, and whose return on equity is evaluated in conventional terms.. No doubt the Society now maintains its books in other ways for other reasons, and it is not here proposed that the present books need be discontinued for whatever audience reads them. Rather, it is proposed that the membership and the leadership need a new reporting methodology for their purposes. The concept being urged is that our return on pure endowment investments can now be readily compared with the results of other professional investments can now be readily compared with the results of other professional investors, and therefore becomes our gold standard. To the extent that Pennsylvania Medicine, for example, falls short of the return on equity which our portfolio managers can produce with non-medical investment,Pennsylvania Medicineis being subsidized. The amount of that subsidy can be carried over to the benevolent side of the ledger as a cost to the membership dues. At the present time, I believe, only absolute losses are being carried over, and such a system, therefore, does not measure the "opportunity" cost. Because it is desirable to structure returns to take full advantage of the Society's tax-exempt status, determining the "total return" on such investments will depend on our ability to produce accurate estimates of the underlying market value of our subordinate business. Since that goal is to produce estimates of the degree of subsidy from the dues, ranges of estimates would be sufficiently serviceable for the oversight and decision-making function. For example, it should be possible to form a rough estimate of how much the Society Could realize from selling the malpractice insurance company to a commercial carrier, and from this to decide the order of magnitude of the subsidy from dues. It seems possible that the total investment return which we presently realize is much less than we could realize from selling out and investing in the Dow Jones Average. Conversely, it is equally possible that the invisible total return on a growing asset is more than we could realize from any alternative investment. The point is we do own a substantial piece of property and yet have not made such an appraisal, against which subsequently would have to be argued its merits in a non-financial sense, of course.

Turning to the non-profit, or service, side of PMS, we could do worse than to emulate the AMA system. They divide their activities into "missions" and report how much they have spent on political representation, education, member services, etc. If PMS employed the same format, we could at least compare our expense allocations with those of the AMA. Presumably, we spend a much smaller proportion of our money on publications and scientific information than the AMA does, and proportionately more on other things, but it might be illuminating to compare the "pie-chart" of our expenses with their pie-chart, utilizing the same scheme of mission definitions. Other state societies may have thought of the same idea, and we might compare ourselves with other states. Ultimately, of course, we hope to compare our expenditures on each mission with our accomplishments in each mission; the result is a cost/benefit ratio. Within each mission there are projects, and projects have cost/benefit ratios, too. Ultimately, we can put a price on small services. How much does it cost PMS to write a letter? To answer the average member request for information? To process a new member? To hold the annual meeting? To publish one issue of Pennsylvania Medicine?

It might carelessly be said that we already have a good estimate of such costs, but I believe it is not possible to know your costs unless you have constructed a matrix in which every penny you spend is included, and every benefit you produce is defined. If every cost must be allocated somewhere, you find that you have to do something with the cost of unsuccessfully lobbying to have a bill passed. Its cost may well have to be added to the visible cost of successfully lobbying a bill through the legislature, on the win-some, lose-some philosophy. Some credit must be assigned to preventing some unwelcome bill from passing, and some indirect overhead cost must be developed for the general purpose of making the legitimate like us a little more or dislike us a little less. This cost is legitimate, and it must ultimately be added to the true cost of our occasional successes since they are all part of the same process.

There is a dark side, too; since no one likes criticism. perhaps it is costing too much to answer member letters either we find a way to do it more cheaply, or we stop answering letters, or we stop complaining about the cost. Management should always have the first crack at such problems, but ultimately such cost/benefit analyses are the proper concern of the Board of Trustees. The Board must decide whether to seek efficiencies, to drop a program, or to stop complaining about its costliness. The line-item sort of budget and financial summary is probably not terribly useful to the Board, although it is useful to management, and it is essential to prepare it for tax purposes and for financial audit. But there is a question whether the Board would ever even look at a line-item budget if it had a budget by function with which it was pleased.

I guess what I am proposing come down to an elaborate computer spreadsheet program, with all expenses recorded at least three times:

1. By function, as locally defined in response to Board request.

2. By function, as defined at the AMA (for comparability).

3. Byline item, as needed for management, audit, and tax purposes.

Furthermore, I do not see how the overlapping functions, particularly of the higher levels of management, can be allocated without the use of a "lawyer's time-sheet". From my experience with other organizations, I know that employees rebel at such things, since they fear the worst motivations are at work. Therefore, the time-sheet idea (for which inexpensive computer software is readily available for use by lawyers) is only feasible if it starts at the top, and each layer of management is able to assure its juniors that they themselves "have tried it and it isn't so bad".

Let me try to summarize. Where we are engaged in remunerative activities, the profit yield should be compared with the yield on similar resources in our investment portfolio; the investment yield should be compared with the yield of professional investors.

Where we are engaged in service, we develop cost/benefit ratios, making certain that we divide 100% of our costs by 100% of our benefits. Missions, goals, projects, and activities can be defined in many different ways; such redefinitions are legitimate only if they adhere to the 100%rule.

Out of these two measurement schemes, one for bottom-line profits, and one for service functions can come to a heightened appreciation of where we are and where we are going. The Board needs to know this, management needs to know it, and ultimately, the membership needs to know it.

Respectfully submitted,

George Ross Fisher, M.D>

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Letter Gordon K. MacLeod Re: Some Proposals for PMS to Use Money as a Measure.