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.

Stephen Girard 1750-1831

Stephen Girard

Girard was born in Bordeaux, France and never went to school. By the age of 23, he had become a sea captain, like his father and grandfather. By the age of 27, he owned his own ship and was thus launched on a successful career in a very dangerous occupation. Depending on the destination and weather during that era, up to forty percent of sailors were lost at sea on long voyages. From the point of view of the passengers and shippers, when you were selecting a captain you wanted one who had returned unharmed from many voyages. It was irrelevant whether he had been lucky, or diligent, or had learned a lot from his relatives in the trade.

Stephen Girard did start with a handicap, being born blind in one eye. It may have been a personality disorder which drove him to precise, minute instructions to his subordinates in excruciating detail; he might now be called a "control freak" and be disliked for it. For example, he kept a handwritten copy of all letters he wrote, and at his death, there were 14,000 of them, sorted and filed. His wife went insane, and after spending years at the Pennsylvania Hospital, was buried on the grounds. If this is the price of being rich, some might consider remaining poor. During his working years in Philadelphia, he would normally get to the counting-house at 5 AM, go to his bank at noon, and go to work on his 600-acre farm in South Philadelphia after 5 PM. He said he liked farm work the best. The image left behind by this role model, then, was workaholic. Nevertheless, if you wanted to become the richest man in America, here was the pattern to follow.

Girard probably came as close as any rich man in history, to "taking it with him" when he died. His innately compulsive personality, combined with the sure knowledge that his relatives and others would probably try to break his will for their own benefit, led to the construction of a last will and testament that withstood a century of court challenges. It launched remarkable philanthropy for thousands of orphans and organized the whole Delaware Valley into an industrial machine unlike anything else in the country. Although he left the largest estate in the nation's history, that estate continued to accumulate money from his minute instructions to executors, eventually enlarging his vast fortune fifty-fold, a century after his death. In retrospect, Philadelphia might well have slowly declined into obscurity after the nation's capital moved to Washington in 1800. Instead, the coal, canal, railroad and industrial empire of the Philadelphia region became the "arsenal of the North" during the Civil War, and the main wealth generator of the Gilded Age which followed.

Girard's business career can be somewhat oversimplified as consisting of shipping at the base of his early good fortune, followed by banking during the era when banking was poorly understood and usually ineptly managed. He ended his career with an eager and successful embrace of the emerging Industrial Revolution. Throughout all of this, he characteristically took great risks for great profits, through recognizing what others were too timid to accept fully. On many occasions, his risky ventures resulted in very large losses, made acceptable by other risky ventures proving unexpectedly successful. An example would be Girard's Bank. When the Federal Government first started and then abandoned the First National Bank Girard bought up the remnants and made a great private success of banking, where he had little previous experience. He saw the potential of the canals, and later the railroads when others were content to be farmers or country gentlemen. When he was 79 years old, he purchased vast tracts of wilderness containing some outcroppings of coal, because he could foresee a great industrial future for the region. No pain, no gain.

Another way of looking at Girard was as the most prominent French-American citizen of his time. He arrived in Philadelphia at about the same time Benjamin Franklin stepped off another boat, returning from abusive treatment by British officials which finally flipped him for American independence. Franklin recognized that independence from England meant an alliance with France, or else it meant defeat. It is possible to view the American Revolution as an episode of France searching for an American foothold after its expulsion fifteen years earlier in the French and Indian War; trouble between Britain and its colonies might re-open opportunities for France. Girard was extremely friendly with Thomas Jefferson, the most Francophile of founders and early American presidents. When the War of 1812 with Great Britain threatened disaster for the new American state, Girard staked $8 million dollars, his whole fortune, on financing that war. During the entire period from 1776 to the Louisiana Purchase, America was wavering between its gratitude to France and underlying loyalty to the English-speaking community. During that long formative period, Girard the very rich Frenchman was hovering in the background, probably influencing American foreign policy more than is known, even today. But the France that Girard stood for was neither aristocratic of the LaFayette variety nor intellectual of the Robespierre sort. It was France of the French peasant, crabbed, acquisitive, and morose, forever responding to a "hidden hand" of his own self-interest in a way that paradoxically benefited his whole community, and thus would have hugely amused the Scotsman Adam Smith.

SECOND FOREWORD (Whole-life Health Insurance)

This second Foreword is a summary of a radically modified proposal. It cannot be implemented without further changes in the law or at least some clarifications of the Affordable Care Act. To state the issue, it is that increasingly larger proportions of American lifetimes are not employed, and therefore are not able to take full advantage of an employer-based system. It becomes increasingly doubtful that thirty years of employment can sustain sixty years without earned income if you include childhood. Further, there is every reason to expect further migration of illness out of the employable age group. And finally, while there are signs of reasonableness, the mandatory stance of Obamacare is not greatly different from a package of mandatory "benefits" imposed on all attempts at innovation before they can be tested. If changes in the law are required before implementation, liberalization might as well be in place before innovations are proposed. No private company could proceed at arm's length without advance assurances resembling cronyism. Everything else is negotiable, but the notion of mandatory pre-approval of any modification must be softened to something less sovereign.

Sickness itself has moved into the retiree age group and will continue to migrate there. The means of payment cannot move from the employee group, so a two-step process is resorted to, with the middle-man government controlling the flow of money between age groups. If we are ever to remove middle-man costs, this feature must be removed, as well. Meanwhile, the paraphernalia of medical care, the medical schools, hospitals, and doctors, remain largely in the urban areas where employment formerly centered. So the government once more becomes a middle-man, and the system begins to resemble a virtual system, based on computer systems which do the job without actually moving. Until everyone stops moving, such duplication increases costs degrade the quality and start riots. We must move people less, and move money more. At one careless first glance, that sounds like shifting money between demographic groups, but picking winner and loser demography has repeatedly been shown to be too divisive; almost a prescription for a second Civil War. In short, we have fallen in love with a computerized virtual model, based on the faulty assumption that it is without cost. Here and there it might be tried experimentally, but it is far too early to make it mandatory. Consequently, it proves much easier to re-design the payment system, shifting money between different stages within individual lives, than to make everyone find a new doctor, just because the insurance compartment changed. It is absurd to make everyone move to Florida on his 66th birthday. Even redesigning transaction systems is not easy, but it is by far the easiest choice. Nevertheless, there is still too much friction in the various systems to make such improvements mandatory.

The best model to adopt is that of the university president who ordered a new quadrangle to be built without sidewalks. Only after the students had worn paths in the lawn along their favored routes to class, did he cover the paths with concrete sidewalks.

The issue at the moment is that money originates with employers, supporting the whole system, but their employees no longer get very sick. To reduce complaints, they are given benefits to spend which they really don't need, raising the cost of transferring the money to retirees who do need the money but are covered by Medicare. We are in danger of repeating that whole cycle with Medicare, piously calling it a single payer system, when in fact it would be a single borrower system as long as the Chinese don't collapse. Expensive sickness now centers in the retirees, but within fifty years a dozen diseases will be conquered, and we will then need the Medicare money to pay for retirement living. Constructing massive systems without that vision will just make it harder to replace them. We are, in summary, in great need of a gigantic funds transfer system, since moving the people and institutions to match the funding is preposterous. But as long as the system has two champions (Medicare and the Employer-based system) in possession of all the money, we flirt with collapses in order to force rearrangements.

All of this is divisive, indeed. For years to come, the easiest thing to move around will be money. Eventually, institutions and clients can sort themselves out for geographical unity, and probably improved efficiency. But a financing system with the money for sickness in the hands of people who aren't sick, plus a governmental, system dedicated to an age group with almost all the coming sickness but unsustainable finances -- is a wonder to behold. Therefore, we offer the Health Savings Account as having the flexibility to collect money from the young and healthy, invest it for decades, and use it for the same people when they get old. It can cross age barriers and follow illnesses, or it can remain with survivors and pay for their protracted retirement. If Medicare is modularized, it can supply the money to buy pieces as they begin to appear less desirable. It can redistribute subsidies to the poor if an agency gives it money, and it can adjust to changes in geography and science, since all it works with, is money. And it avoids redistribution politics by giving the same people, their own money.

For all these reasons, Health Savings Accounts on a lifetime or whole-life model seem the logical place to fix the broken vehicle, while we somehow keep its motor running. If successful, it will grow too big, so it should remain modular from the start. It has feelers in the insurance, finance and investment worlds. It could easily arrange branch offices for retail marketing and service. It should have networks for research and lobbying. But as long as it retains the branch concept and avoids the imperial one, it should manage to keep the doctors, patients and institutions functioning as the whole universe rearranges itself -- at its own speed. The first major step in this process would be to clear up some regulations which did not anticipate it. With Classical HSA adjusted for the interim role, the design stage can be undertaken to link the pieces of a person's health financing. Variations of lifetime Health Savings Accounts can be tried in demonstration projects, perhaps staying out of the way of the Affordable Care Act by unifying parts other than age 21 to 66, as the New Health Savings Account. And then seeing which version of lifetime HSA survives the squabbling. That isn't all. The really big picture is to absorb the pieces of Medicare, one by one, as sickness retreats from being the central cost, and the cost of retirement becomes the real threat.

Half-Started HSAs

There's another quirk in the law, which may or may not endure. You don't need a linked high-deductible insurance policy to withdraw money from an HSA, but you do need it, to deposit more money. If you take advantage of that, watch out for the rule that you can't have two government plans at once, including Obamacare, Medicare, Medicaid, and Veterans Health Benefits. So it's best to take out the HSA first, then the other insurance. This is such a complicated process, it might very well change, so be sure to ask before taking any action.

In any event, the suggestion seems valid at the moment, that the worst to happen to you is to acquire a tax-deductible account which you aren't entirely free to liquidate until you retire. And it has a health insurance feature which is also tax-deductible to the extent it has been funded, but which can be used to empty the account if you are strapped for money. If you have other sources of funds, it probably would be best to spend the first, since doubly-deductible health insurance is hard to find.

Employer Based Health Insurance

In 1965, the most fundamental of economic fundamentals reversed itself. America's international trade balance shifted from positive to negative, has remained negative ever since. It's irrelevant that international currency shifted backward to soften the blow; that's what floating currencies are supposed to do. The era of effortless and largely unchallenged American post-war world supremacy was over. From now on, it was to be everyone for himself, in Medicine as in every other trade.

A new triumvirate, consisting of hospitals, health insurance, and medical schools asserted medical leadership, fought against each other for domination, and consequently found themselves a prized destination for opportunists. The new name of the game was to gain control of the payment system, and through it control of hospitals, and through the control of the doctors. But the sponsors of the earlier system, the employer-based one, were still around, and to a large extent, still, dominate. No proposal for running healthcare could omit physicians from the center of control. Most who attempt it, seek to use medical schools as a surrogate for the practicing profession. However, medical schools are in competition with their alumni by owning hospitals, and the rest of the profession see medical school control as favoring a competitor. They resist it bitterly.

Meanwhile, the doctors had experienced entirely different socialization by going away to various wars, and discovering how little they needed hospitals. As shown in episodes of the TV series Mash, new bonds were formed between a medical band of brothers, operating successfully in tents, not medical centers. This experience comes and goes, but unfortunately, there has been such a succession of wars, the experience gets reinforced. One of the great paradoxes of the present medical upheaval is to see government and insurance doing their best to herd doctors back into hospitals so they can be controlled by salaries, rather than by their patients. And while they seem to have largely succeeded, the ACA ambition to control medical care by control of the payment system is appreciably undermined at its interface between institution and profession. It is always an uphill battle, to defend a more expensive, less satisfying, approach; eventually, it is a losing approach. The oppressive cost of everything, the collision between recessions and inflations, seemed to be keeping everybody under control for the time being. But it would be unwise to assume calm will prevail forever, or that a command-and-control arrangement would continue to work through the hospital, without fragmenting somewhere. In a larger sense, a lot of this history was irrelevant. The people really causing commotion were business leaders with an entirely different agenda; their model was Henry J. Kaiser.

Much of the resulting endgame depends on what Washington will be willing to do. Congress will have its own ideas, but Congress is often in a hurry. What isn't complicated, is often politically difficult, and it helps things along if the public has thought about them first. The Supreme Court gives itself more leisure to think, but sometimes that isn't a pure advantage. The President has more staff, but he can't always control it. Medical cost-cutting turns out to be like closing military bases; it has to be gradual, it has to be spread wide and thin, but it must show early benefits quickly. In its first six years, for example, a lot of people must see some benefit, and very few must see their jobs destroyed. All this can be done, but it can't be done repeatedly. The country cannot afford to keep using up its reserves with noble experiments. World affairs and world economics surely present enough distractions, without inventing artificial ones.

On medical affairs, Congress should learn to listen more to doctors and less to our ancillaries. But for this to happen, doctors will have to become more open about their experiences, rather than electing more doctors to Congress, where they become seen as competitors rather than experts. When Congress finally wakes up to the full dimension of what has happened, everybody is going to need some friends he can trust.

In the final section of this book, we will talk a little about some of the thorny transition problems to be expected. It's not a comprehensive discussion, but a wake-up to the healthcare industry and to Congress, about the complexity of some of the implementation problems they are abandoning to the Executive Branch -- at everyone's peril.

So, come along, let's learn a few hidden things. Start with employer-based health insurance. That's what we had for the past century but hardly noticed it. It even helps to know a little of its history.

A Short History of Employer-based Health Insurance. Instead of starting with Bismarck or some other link to a non-American, let's say health insurance in America began as a proposal of Teddy Roosevelt's during the Progressive Era just before the First World War, a century ago. The American Medical Association had a flirtation with Teddy's national health insurance but came to prefer something like the business community's Blue Cross system, as it eventually evolved during the 1920s. Business scarcely recognized it, but large American companies were beginning to shift control from founding families to stockholders, an evolution which advanced during the next three decades, as a way to extract capital gains taxes to float war debts. To a certain degree, growing shareholder control was a step toward meritocracy; in a human relations sense, it may have been a step backward. The shift extends to only about half of corporations even today. But health insurance and stockholder control of the big companies advanced side by side, scarcely realizing how diminished employer benevolence was undermining the process. We glorified the decline of a semi-feudal system, but we lost something in the process.

American health insurance traces back to President Teddy Roosevelt {bottom quote}

It makes a huge difference whether the boss is a paternalistic owner or the manager of someone else's company. In the first instance, he spends his own money, in the other instance, his only absolute mandate is to generate money for the stockholders. That's a measurement applied to every "good" manager. Plenty of owners were tight-fisted, and plenty of managers were benevolent. Even today, small businesses (less than a billion dollars in assets) are mostly "Subchapter S" corporations, and about 15% of really large "Subchapter C" corporations are still dominated by founding families. But in spite of frenzied rhetoric about the "rich owner", the shift in attitudes is clear; as founding generations move away from active involvement in their companies, they become less involved with employees. They themselves become more like their hired managers. Current investment trends, moving into index fund passive investing, further widen the distance between stockholders and owners-by-inheritance. The "silo effect" of specialized departments further isolates the core business from non-revenue support departments.

Cost-shifting was an early development, transferred from the business to the hospital. The concept originally underlying Blue Cross was that private rooms should produce enough profit for the hospital to support the poor folks in open wards, whereas semi-private rooms just break even. At first, only a handful of ministers and school teachers were in the semi-private category. When hospital finances improved, more working-class people moved into the semi-private category, the wards shrank in size, and semi-private -- became the standard clause in employee contracts. For two hundred years, multi-bed open wards were standard, but semi-private became standard in a single decade. Semi-private nevertheless acquired a charity flavor. The "Blue Cross discount" began to apply to semi-private beds, at the same time semi-private became readjusted to become "standard size" for "service benefits". That is, most employees of corporations started to be cared for at less than actual cost, at the Blue Cross discount-to-business rate, because their contract called for being provided certain services, no matter what they cost. In fact, what they appeared to cost was so distorted by cost-shifting, you couldn't tell who was subsidized. It would not take long for a new standard to be demanded: sharing a room with strangers was so low-class. Private rooms were going to be the only decent thing. Spending other people's money is fun.

And because Blue Cross organizations became dominant during the Second World War, their competitors in cash benefits ("indemnity carriers") greatly resented paying more dollars for the same semi-private room than Blue Cross patients did. Some of this was doubtless a response to wage and price controls during World War II, a way of raising wages without expanding the (taxable) "pay packet". The response of commercial indemnity carriers was to price their premiums on "experience rating", which especially cut into the profit margin of Blue Cross private-bed patients. The way that worked was, the insurer waited a year to see what inflation had done, and made a trailing readjustment in the following year's premium. One unexpected outcome of this price warfare was to make the hospital reluctant to reveal its tentative charges, where the employer demanded to be shown the actual costs of his employees, as well as prices to everybody else. When Blue Cross coverage reached government employees, a new power center gained possession of itemized hospital bills. A new employee representative could easily see how much or how little the government was actually subsidizing charity care. Naturally, as the new source of benevolence, they claimed they were paying too much.

When Group practices, or HMOs, started to pay for healthcare, they too demanded to see comparable bills or at least standardized prices. And so it went, with each new wrinkle in payment. Some people paid listed prices, but big groups could afford to send auditors to look at the books. There had long been a three-tier price list, and now there was a six-tier one because of having list prices and actual payments on each of three levels. Soon it began to seem there might be sixty prices for the same thing. Like a stag cornered by barking dogs, the hospital fended off the payers as best it could. Because of the long period of catch-up following the Great Depression and then the Second World War, hospitals usually needed new buildings and improved wage standards for employees. How were they to pay for this, when everybody seemed to be demanding to get backlogged services at the old prices?

For centuries, hospitals had existed on a system of collecting whatever they could, and delivering needed care as best they were able. Their deficits were covered by public subscription, by religions, and by tightening the belts of the charity-minded hospital volunteers. Sometimes the rich guy who lived in a mansion on the hill would donate, sometimes he wouldn't. Surely, the government had a responsibility to rescue such a deserving charity. The student nurses and the young doctors in white worked for no pay at all. That's right, after I graduated from medical school I worked for four years without a dime of pay. If hospitals overcharged a few insurance companies, well, there was nothing else they could do to keep the doors open. Until health insurance made a significant impact, hospitals ruled medical care. They were the only institutions which seemed to work, all new ideas seemed to come from them, and any new idea which came along was somehow centered within hospitals. Although it wasn't described as such, hospitals began to suffer the disease of conglomerates. If an organization takes on too many functions at once, it performs some of them poorly. Usually, one of the subsidiaries fails and drags the rest of the conglomerate down. That's essentially why the Supreme Court, in the State Oil v. Khan case finally decided vertical integration cures itself and usually does not require antitrust judicial action to break it up. That doesn't mean vertical integration is wonderful; it just has to be shown to be bad before you punish it. Unfortunately, high legal fees unbalance the situation. The corporation can usually afford the lawyers, the individual practitioner can't. Threatening to bankrupt the opponent is now a standard procedure in the courts of Justice.

Disregard for the Tenth Amendment in the 1937 Court-packing incident greatly injured the Tenth Amendment's Constitutional requirement that health and health-related activities should be regulated at the state level. But it also heightened public attention on the Constitutional issue, since hospitals, nurses, doctors, pharmacies, and the Blue Cross organizations were all organized along state lines. Only when the Federal government under Harry Truman began to sound serious about central control of medical care, did health insurance begin to cross state lines, and thus weakened hospital and Blue Cross domination of it. By the time Lyndon Johnson began his piecemeal assault in 1965 with Medicare and Medicaid, the insurance industry had broken healthcare into four "markets":

Large-employer groups. The healthiest groups, and hence the cheapest to insure, became the low-hanging fruit. Union pressure combined with the passage of ERISA expanded and somewhat fragmented the groups, but large employers were first and dominant in the planning.

Small-employer groups. Curiously, this often became the most expensive silo of the markets, because of successful pressure to expand -- even mandate -- benefit packages, and the fact that certain expensive cost generators can be selectively insured when the personnel manager knows them by name.

Individuals. Because of adverse self-selection, "non-group" had the highest marketing costs, and often the highest medical costs. It was possible to eliminate the worst abuses, such as figuratively buying insurance while riding to the hospital in an ambulance. But subscribers to non-group insurance move freely between employers and thus can avoid being dropped from the insurance when they change jobs. What is generally touted as a great disadvantage of employer-based insurance, could easily be called the exploitation of being in a position to select only healthy people for jobs. Insurance companies obviously and regularly "prefer to work with groups". Circumvention wears many disguises. When an insurer tells you this is "his company's policy", be sure to kick him in the shins. His company is part of the problem, not part of the solution.

Executive "Cadillac" plans. are mentioned for completeness, although they could also be grouped with steak dinners and baseball tickets, as mere sales promotion kickbacks for the people who make decisions on behalf of members of a large group. They often had "first dollar coverage", essentially paying for everything even faintly describable as medical care, down to the last penny. It should prompt some concern to learn that health insurance for college professors and politicians is often of this variety. In terms of aggregate medical cost, of course, Cadillac plans are negligible. However, as long as they exist, they light the way for those fortunate who can focus on Henry Kaiser gimmicks rather than the treatment of illness and eventually migrate to the rest of the tax-deductible group.

The general purpose of market stratification is to offer much the same product at different prices. Like other concessions which vice makes to virtue, they constrain admiration for the essential, desirable, feature of insurance in the first place: it spreads the risk and lessens the cost of what is supposedly an unpredictable random health catastrophe. If the insurance industry is really serious about this mission, it would start with one outstanding example of it: catastrophic coverage. Remember, the higher the deductible, the lower the premium. Let's repeat that: the higher the deductible, the lower the premium. Are insurance companies really motivated to have lower premiums? That's like saying Insurance Companies want to lower legal costs in order to preserve the impartiality of the courts.

Almost nobody can withstand a million-dollar illness, but almost anybody can afford a hundred dollars a year. Once you have that minimum feature, you can then start to talk about more expensive, more common coverage -- until we eventually reach first-dollar coverage for non-essentials, at wildly unaffordable premiums. By the way, if you would like to know why I didn't acquire catastrophic coverage back in the days when it was widely available, it was because I already had first-dollar coverage given to me by the University where I worked, I couldn't use extra catastrophic coverage even if it was free. This is no longer pre-1965. Everyone should have catastrophic coverage. Only if he can afford it, should anyone have more than that? Since the logic is beyond dispute, has it occurred to anyone to ask why that isn't the usual case? Read on.

Looking a Gift Horse in the Mouth

Progressive Era

The Progressive Era lasted several decades, some say it still continues. Around 1910, the Progressive Era, reacting to the Gilded Age which preceded it, started doing painful things in the best interest of the individual, like the graduated income tax, the War to End Wars, and employer-based insurance.

Harry Truman

Regardless of originator or date, employer-based health insurance was imported as an idea from Germany in the nineteen-teens, getting started in the nineteen twenties, and becoming the prevailing standard by World War II. Although control later shifted from employers toward government during this period, Harry Truman was unable to move it further. It was only in 1965 that government control jumped forward, coming to a climax in the 1965 Medicare and Medicaid laws. Curiously, the employer-based format itself reached a peak in the Lyndon Johnson legislation. Since 1965, one president after another has struggled to convert the rest of health insurance to government-based but always retaining its same general employer-based form. Along the way, two people significantly modified the model: Abraham Flexner, promoting the research-oriented teaching hospital into custodian of the standard of care, replacing the physician guilds; and Henry J. Kaiser, retaining control of a wage cost by calling it a gift, with high corporate income taxes and exempted employee income taxes reducing its effective cost to the employer. In a curious way, high corporate income taxes increased the proportion of healthcare paid for by the Federal Government, by increasing the value of the deduction. Not everyone would agree with this description of the history, but I'm convinced of its essence.

Henry J. Kaiser

Whether the gift comes from business or from government, makes little difference, except to the two contestants. Henry Kaiser seems to have become enlightened that corporate taxation higher than individual rates actually results in important tax advantages for the employer's gift. It allows employers to shift most of the cost to the government while retaining ultimate control in employers' hands. For many decades the commercial insurance industry tried to break in, but the greatest recent threat to this collusion was accidental. All insurance is a system of cross-subsidies, but the Obama Administration superimposed a subsidy of the poor by the rich, onto an employer system of the young employees subsidizing the older ones. The mismatch between the two seemingly similar subsidies now threatens the coherence of the medical finance system. It also brings out the advantageous warping of the insurance idea by calling it a gift.

HSA

Furthermore, the gift is ultimately one of money, so how did service benefits get mixed into this? What does the diagnosis have to do with paying hospital bills, except as a mechanism for obscuring the price? The insurance premiums begin with money, and the insurance intermediary ultimately sends money to the provider of care. Money-in, money-out is what the insurance industry calls indemnity insurance. They were using indemnity for centuries before health insurance came along. Why change to a unique and expensive accounting system, if final prices remain unchanged? This device probably started as a way for an insurance intermediary to check the medical validity of a remote claim, but has gradually evolved into an elaborate cost-shifting device. The unfortunate result is to blind the doctors in charge of the true costs of their options. So doctors nowadays totally disregard the posted prices which emerge, when they devise their treatment strategies. The result is very bad, no matter what the original purpose was.

There may be something to the idea that adding diagnoses and services adds enough mystery to the process to keep away competition, but there are business incentives which seem more central. Now that health cost consumes almost 17% of the gross domestic product, corporate taxes are an important part of the federal budget, largely explaining why the President might not want to lower them, even driving international businesses to consider moving abroad, rather than lower corporate tax rates. However, if the tax reduction which results from the gift is considered, the net corporate taxes actually paid are not too different from prevailing international rates. If corporate income taxes were eliminated, at least the employer would have to pay for his own wage costs masquerading as gifts. They might even discontinue them since employers could get the same tax abatement by calling them what they are, wage costs. Following this scenario, the main benefit appears as the tax exemption in the workers' pay package, and the main victims are the competitors who do not receive the gift. If the government is willing to lose the revenue from the tax-paying half of the workforce, they could permit the Health and Retirement Savings Accounts to pay the premiums, essentially providing tax exemption to everyone. If unwilling to lose revenue, the government could start taxing the large employers, which they are now prevented from doing by the seemingly high rates. It's hard to know whom to blame, except this sort of Byzantine structure creates winners and losers, and is ultimately unhealthy.

Abraham Flexner

Two simple and comparatively painless steps -- equalization of tax preferences, and lowering of corporate income taxes -- might soften the objection to indemnity, so why continue the service benefits concept? For this answer, you must return to Abraham Flexner, who brought Bismarck's "der her Professor" system to America, stimulated much research, and ultimately made teaching hospitals vastly more expensive than community hospitals for routine medical care. And now it is necessary to understand the system of calling all activities which are unrelated to patient care "indirect overhead". Although research is largely funded by outside agencies like the NIH and drug companies, it is described as indirect overhead, and distributed among the patient care bills as additional indirect overhead. Unfortunately, a great deal of bloated administrative cost is classified as indirect overhead, as well. No modern corporation could exist without a certain amount of cross-subsidy, but the present amount of it in hospitals is unreasonable. Beyond a certain level, indirect overhead should be forced out of the hospital cross-subsidy system, funded independently, or at least forced into public view. In short, too much routine care is being reimbursed at a high tertiary care level in the teaching hospitals, and this may well stimulate excessive administrative costs as well, even though it may be hard to trace how it comes about. Their competitors in the community hospitals also probably get a little raise, indirectly, to help suppress their complaints. Wall Street was once lambasted for steak dinners and Superbowl tickets from vendors, but you don't hear much about the hospital administrator version.

To make a long story short, service benefits tend to equalize the cost differences between teaching hospitals and community hospitals, ultimately raising the cost of both, but particularly the cost of routine care in teaching hospitals. Historically, this surplus subsidized the research revolution, to which we owe a thirty-year lengthening of our life expectancy. So, go figure. But nevertheless, it now blinds physicians as much as the public to the true cost of their medical decisions until they are unable to respond effectively to rising prices, and don't try. A century of it is long enough to devise a better approach, so apparently, some pain is needed. But any way you go about lowering them, if you want to control costs, you must start and end with undiluted true costs, not accounting fictions.

Philadelphia Reflections

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

Obituary

George R. Fisher, III, M.D.

Stephen Girard 1750-1831

SECOND FOREWORD (Whole-life Health Insurance)

Half-Started HSAs

Employer Based Health Insurance

Looking a Gift Horse in the Mouth