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.

Goat Head Merchant

Bellvue Hospital

In 1948, one of the Internet physicians at Bellevue Hospital contracted tuberculosis. The senior medical students at Columbia were asked to volunteer to take his place, and for a month I did so. Since I knew I was soon going to Philadelphia to the Internet at the Pennsylvania Hospital, my interest was particularly taken by an old Bowery bum who was talking about untaxed liquor. In New York at that time, it was common for Skid Row denizens to drink the wood alcohol in Sterno, called "squeeze" because it could be extracted from the waxy contents of a Sterno can by wrapping it in cheesecloth or a handkerchief and squeezing out the juice. Another favorite was "Smoke", which was typically a mixture of automobile radiator fluid and other sundry handy ingredients. My new best friend at Bellevue was just recovering from the effects of such recreation, and was in a mood of "never again". He observed that "When I get out of the Bell View, I'm going to get on a bus and go down to Philly. They've got a drink there called Goat Head, and, man, is it ever smooth."

The Chief Resident of the Pennsylvania Hospital was happy to tell me what Goat Head was. It was bootleg liquor, made in the Pine Barrens of New Jersey. Bags of cane sugar were fermented and distilled through coils of copper tubing, obtained from old hot-water heaters. The smooth stuff that so intrigued the bums of Bellevue was what was otherwise known as "White Lightning". It was then sold in the alleys near South Street by "Goat Head Merchants", who carried a suitcase full of small bottles, sold for about 25 cents a bottle. They say that during the Depression, Goat Head was sold out of an open bucket, at 10 cents a dipperful. One of the Goat Head Merchants used the Accident Room of the hospital as his family doctor, let us call him Walter Apple.

One day, Walter had a heart attack and was brought in on a stretcher, in considerable pain. I had just completed an electrocardiogram on him, when the pain disappeared. A few weeks later, he had completely recovered and was going home. Every time I came anywhere near him, he announced to everyone in the vicinity that I was the best doctor in the world, having cured his heart attack by giving him the "wire treatment".

As he gathered up his belongings to go home, he apologized that he was not going to be able to pay his bill. He had once known Dillinger and all those other big shots wore a diamond stick-pin and drove a Duesenberg car. But now he was broke.

But grateful, too. So, if ever there came a time when I encountered someone unpleasant, who needed "pushing' around" -- just you call on Walter Apple, and Walter would be glad to pay off his debt.

Fisher on Issue Politics

Robocalls

robo-calls

Within an hour of receiving my nomination to office, I was handed a folder full of letters to answer. There were fifty of them, at least. One after another, they contained questionnaires for me to fill out, answering slanted questions in bewildering detail. Every one of them seemed to come from a national organization, dedicated to the advancement of some cause or other, from abortion to gun control, which I had not had time to consider. Remember, for years I have attended a weekly luncheon at a club devoted to discussing the news on the editorial pages and elsewhere. We have argued long and hard about hundreds of topics, but never have I encountered issues in such minute detail, cloaked in such threatening terms. There are issues in the healthcare field that I know about in detail, but they did not happen to be present in the packet of questionnaires threatening to take up hours of my time. Nor, for all I could see, were they of particular concern to citizens of my district. I'm pretty familiar with the district where I have lived for decades, and almost everyone I meet on the street bids me a Good Morning. I thought the dialogue was to be between them and me; if other issues come up, I was to use my best judgment because they trusted me. Or maybe I would have to do some research on a topic and go back to consult with the people who elected me.

But that doesn't seem to be how it will turn out if this deluge of hammering from outside issue groups is an example of what I might be in for. They aren't educating me, or supplying me with information I needed for a decision, they were threatening me that if I didn't answer promptly they would pummel me with robocalls, post-cards, maybe demonstrations by people in T-shirts with slogans, who would then get on the bus and go back where they came from, as soon as they see the television cameramen pack up and leave. I had heard of issue politics in the news media, but seeing it in action is pretty annoying. It's synthetic, it's paid for, and it gets between me and my voters.

So, when I find the time, I plan to make up a form letter, telling them as politely as I can manage that their letter is being returned unopened. Or at least, unopened by me, because perhaps "my staff" will find something of value buried in the midst of this hired trash.

Good Ol' Health Savings Accounts

In 1981 at what was then called the Executive Office Building of the Reagan White House, John McClaughry and I conceived the Medical Savings Account, later known as the Health Savings Account. John was at that time Senior Policy Advisor for Food and Agriculture, but he had read my book The Hospital That Ate Chicago, and it inspired him to think about a better way of financing health care. He asked me to come down to Washington to discuss the issue. We met and fleshed out the idea. Little did we then suspect how many delightful features would pour out of the simple little invention with only two moving parts.

It was patterned after the tax-deductible IRA (Individual Retirement Account) which Senator Bill Roth of Delaware was bringing out the following year. But with two major variations: our account contained the unique feature of a second tax exemption, given on condition the withdrawal was spent on health care. Otherwise, a regular IRA subscriber pays the usual income tax on withdrawals and gets only one tax deduction, the one he gets when he deposits money into the account. Bill Roth later produced his second kind, the Roth IRA, which allowed a tax-exempt withdrawal but took away the tax-exempt deposit. Only the Health Savings Account gives you both. In Canada, by the way, they do allow both deductions in their IRA, but in America only the HSA offers it.

Garlands of Unexpected Good Features. So the first part of a Health Savings Account is just that, a tax-exempt savings account, obtainable in the same way you get an IRA or a Roth IRA, although a few eligible outlets were slow to take ours up. And the second combined feature was to require a high-deductible, "catastrophic", stop-loss health insurance policy -- the higher the deductible, the cheaper the premium gets.

Further, the more you deposit in the account, the higher is the deductible you can afford, so you save money going either way and get extra benefit in your account for having a tailor-made insurance program. The industry term for this kind of insurance is "excess major medical", which the two of us wanted to avoid because of its implication it was somehow frivolous or unnecessary, when in fact it is central to the whole idea. Linked together, the two parts enhanced each other and produced results beyond the power of either, alone. The savings account was first envisioned to cover the deductible, but nowadays it also commonly attaches a special debit card to purchase relatively inexpensive outpatient and prescription costs. That led to further administrative savings to the subscriber if he shopped frugally for optimum proportions of deductible insurance. Right now, it's a little uncertain what the current Administration will permit in the way of catastrophic health insurance, so, unfortunately, it is just about impossible to give concrete examples of what the ultimate cost will prove to be. But we do know that in the old days, a $25,000 deductible was available for $100 a year. Nowadays, a $1000 premium is more likely. When we get to explaining first year and last year of life insurance, it will become clear that this premium can be appreciably reduced.

But while the savings account allowed someone to keep personal savings for himself, the insurance spreads the risk of an occasional heavy medical expense at what ought to be a bargain price for bare-bones insurance. You needn't spread any risk for small expenses because you control them yourself, but no one can afford some of those occasional whopper expenses. There's no reason why you couldn't set the deductible level yourself, weighing your own ability to withstand bigger risks. In practice, the actual savings were reported to approach 30% (compared with "First-dollar" health insurance), quite a pleasant surprise. But because of the younger age group of the early adopters, much of this saving was achieved in the out-patient area.

(Let's start using the present tense to talk about it, although right now it's hard to know what politics will permit.) So, hidden in this bland dual package are lower premiums, less administrative red tape, less moral hazard, but complete coverage. Right now, that's somewhat subject to change. It provides complete coverage in the sense that the insurance deductible can be covered by the savings account, but contains the option to be saved, invested or used for small outpatient expenses. Furthermore, the account carries over from year to year and employer to employer. So it eliminates job-lock, use-it-or-lose annoyances, and allows a healthy young person to save for his sickly old age. Curiously, many of the subscribers have elected to pay small expenses out of pocket, in order to make the tax deduction stretch farther.

In one deceptively simple feature, many of the drawbacks of conventional health insurance have been removed. The bank statement from the debit card can even do the bookkeeping. The first part of the two-part package, the savings account, creates portability between employers, opens up the possibility of compound interest on unused premiums, eliminates pre-existing conditions even as a concept, and creates a vehicle for transferring the value of being a "young invincible" forward into age ranges when the money really is likely to be needed for healthcare. Maybe some other features can be added later, but introducing an unfamiliar product is always greatly assisted by having it all appear so simple. The HSA only has two features, but they solve a dozen pre-existing problems.

To return to its history, nearly 15 million accounts have been opened, containing $24 billion. John McClaughry and I (neither of us received a penny for any part of this) were seeking a way to provide a tax exemption to match the one which employees of big business get when the employer buys insurance for them. That is, Henry Kaiser inspired us to do it. Although we got the general tax-free savings idea from Bill Roth, we did him one better by giving a deduction at both ends, provided only -- you must spend the money on healthcare to get the second tax relief. An additional novelty at that time was a high deductible, which permits a "share the risk" feature unique to all insurance, but invisibly limits it too expensive items. It wasn't the original idea, but it turns out you get spread-the-risk and limits to out-of-pocket patient costs in the same package. Who could have guessed?

Volume control versus Price Control in Helpless Patients.We did know a third automatic advantage, not fully exploited so far: it seems possible the hateful DRG system (with its codes restructured) could become a useful tool for dealing with a major flaw in the Medicare system. Professional peer review has become pretty good at controlling the volume of services, but prices still escape effective control. No amount of volume control can, alone, address the price issue. Controlling vital services for helpless people is a delicate matter.
Quite a few of those services match (or contain) identical items in the outpatient area. The outpatient area faces outside competition from other hospitals, drugstores or vendors. Instead of letting helpless inpatients generate unlimited prices for the outpatients, why not let competition in the outpatient area define standards of prices for inpatient captives? Outpatients and inpatients overlap in the ingredient components, considerably more than most people suppose. Inpatients may have higher overhead because of the need to supply their needs at all hours, but a standard extra markup around 10% ought to take care of that. No doubt some services are unique to the inpatient area, but a relative value scale is then easily constructed, thereby linking unique costs to other services which are exposed to competition. Ultimately, provable relationships to market prices might even discipline big payers demanding unwarranted discounts. This last is a deal breaker, provoking suspicions of abused power by a fiduciary. The government in the form of Medicaid is often the worst offender, so we need not imagine laws will prevent discounts so long as law enforcement remains crippled. Every business school teaches that discounts below cost are a path to bankruptcy, but business schools have apparently not had enough experience with governments to suggest an effective remedy.

Other than two variations (double tax deductions, and incentives if used for health care), a Roth IRA would be nearly the same as an HSA, with independently purchased Catastrophic backup. But the assured presence of low-cost, high-deductible insurance provides security for another needed feature: Using individual accounts with year-to-year rollover , we could introduce the notion of frugal young people pre-paying the healthcare costs of their own old age. For all we knew, there weren't any frugal young people, but we were certainly pleasantly surprised. And catastrophic insurance added the ability to share the opportunity of that feature -- subsidizing the poor at bearable prices. As we will shortly see, it also offers an incentive to save for retirement. Think of it: almost nobody can afford a million-dollar medical bill, but almost everybody welcomes low premiums. Catastrophic coverage offers the only chance I know, of approaching both goals at once. And it offers the fall-back, that if you are lucky and don't get sick, you can use it for your retirement.

As the only physician in the room, I also pointed out another pretty gruesome fact: either people end their lives have a lot of sicknesses, or they end up paying for a protracted old age. Only infrequently, do real people encounter both problems. It can happen of course; breaking a hip after long confinement in bed would be an example.

People end their lives with sickness, or else they must pay for protracted old age. {bottom quote}

Still More Good Features. Including these self-canceling needs in a single package allowed some flexibility between them -- something badly needed for a century. We cannot go on passing a new regulation for every quirk of fate; a good program must allow some latitude. Extended longevity tends to be hereditary, and so separate policies (sickness care and long-term care) are more expensive individually than the two combined because the patient can out-guess an insurance company. Health Savings Accounts balance an incentive to save for one's own future health costs "at the front end" with reasonable cost limitations "at the time of later service", even though two time periods are decades apart. That's obviously superior to increasing the sickness subsidy at the back end, because, among other things, the patient will later have even more clues about his impending future. If cost reduction goes too far at either end, it amounts to an incentive to spend carelessly. Saving becomes fruitless.

A tax deduction is a tax deduction, but this one has two: An incentive to save, and a later option to spend the savings on either healthcare or retirement. That's nearly specific enough. Furthermore, it offers a choice between saving preferences -- you can have interest-bearing savings accounts, or you can invest in the stock market, or a mixture of both. The HSA automatically converts to a regular IRA (for retirement) at age 66 when Medicare appears; that should be optional for all health insurance, but isn't. The IRA up in Canada includes both front and back features, but in the United States the HSA is the only savings vehicle to have dual deductions, so it's more flexible. As the finances of Medicare become shaky, it may be time to provide additional alternatives. At least, we ought to consider extending age 66 to a lifetime coverage option.

This harnessing of two familiar approaches makes a deceptively simple package which ought to be considered in other environments, unconnected with medical care. In most public policy proposals, the deeper you dig, the more problems you turn up. In this one, we found the proposal already had hidden answers to most concerns we could discover. It's possible to fall in love with an idea that does that for you. It lets you sleep at night, secure in the knowledge you aren't mucking things up for people.

Another surprise. Overall, the Affordable Care Act has probably helped sales of HSAs, since all four "metal" plans of the ACA contain high deductibles, serving in a (rather over-priced) Catastrophic role. This may be a way of covering the bets in a confusing situation. The ACA is a needlessly expensive way to get high-deductible coverage because it pays for so many subsidies. Frankly, it baffles me why subsidies swamp the costs of Obamacare but are made unworkable for HSAs. Many of the details of the subsidies are obscure, including their constitutionality, so we have to set this aside for the moment.

One good motto is don't knock the competition, but we must comment on a few things. The Bronze plan is the cheapest, therefore the best choice for those who choose to go this way. But uncomplicated, plain, indemnity high-deductible, would be even cheaper if its status got clarified. The good part is, the current rapid spread of high deductibles suggests mandatory-coverage laws may, in time, slowly go away. At first, the ACA looked like a bundle of mandatory coverages, all made mandatory at once. But they may be learning a few basic lessons as they go. Mandatory benefits are an example of mixing fixed indemnity with service benefits, with the usual dangerous outcome. Like many dual-option systems, they create loopholes. The HSA seems to avoid this issue by effectively being two semi-independent plans, for two separate constituencies -- who are the same people at different ages. Once more, we didn't think of it, the features just emerged from the plan.

That's about as concise a summary of Health Savings Accounts as can be made without getting short of breath. But of course, there is more to it, particularly as it affects the poor. For example, there is an annual limit to deposits in the Health Savings Account of $3350 per person, and further deposits may not be added after age 65. They can be "rolled over" into regular HSAs when the individual gets Medicare coverage, and supposedly has no further financial needs. So plenty of people have health care, but can barely support their retirement. These plans are absolutely not exclusively attractive to rich people, but it must be admitted, poor people start with such small accounts that companies can't operate profitably unless the client sticks with them for a long time. If people possibly can, they should scrape together one $3300 maximum payment to get a running start.

The problems of poor people can nevertheless be eased, within the limits of the plan's design. Since people will be of different ages when they start an HSA, it might be better to set lifetime limits, or possibly five-year limits, to deposits, rather than yearly ones. Some occupations have great volatility in earnings, and sometimes a health problem is the cause of it. To reduce gaming the system, perhaps the individual should be permitted to choose between yearly and multi-year limits, but not use both simultaneously. As long as the self-employed are discriminated against in tax exemptions, that point could certainly be modified. There remains only one major flaw, which we propose should be fixed:

Proposal 6: Congress should permit the individual's HSA-associated Catastrophic health insurance premiums to be paid, tax-exempt, by Health Savings Accounts, until such time as elimination of the present tax exemption for employer-based insurance is accomplished by other means.

Subsidies for the Poor? Here's my position. If poor people could get subsidies for HSA to the same degree the Affordable Care Act subsidizes them, Health Savings Accounts should prove at least as popular with poor people as the Administration plan. Mixing the private sector with the public one is always difficult. Why not make subsidies independent of the health programs? There is no point in having the poor suffer because someone prefers a different health system. Quite often, a subsidy program is mixed with a public program, in order to make its passage more attractive; that's not necessary.

Proposal 7:That health care subsidies be assigned to patients who need them, rather than attached specifically to one or another health system that happens to serve them.

Let's just skip away from all those digressions, and return to the poor in other sections. If the concern is, health care is too expensive, why in the world wouldn't everyone favor the cheapest plan around? Part of the answer, politics aside, is that young people have comparatively little illness cost, while old folks have a lot. Since Medicare, therefore, skims off the most expensive healthcare segment of the population, the fairness of any health subsidy program is difficult to assess. Evening out the tax deduction for the catastrophic portion equalizes the unfair tax deduction for self-employed and unemployed people. Perhaps the equality issue should be re-examined after each major revision since many moving parts get jostled, every time.

The government is going to have trouble affording the existing subsidy, so it may not endure, particularly at 400% of the current poverty level. But if we can subsidize one plan, we can subsidize the other, instead. The government would then be seen, and given credit for, saving a great deal -- by inducing destitute people to use HSA as an alternative option, equally subsidized by an independent subsidy agency. As for single-payer, the government for fifty years borrowed to continue Medicare deficit financing and got it to 50% universal subsidy without much notice. That's like boiling the frog too gradually to be noticed until it is too late. But suddenly expanding the 50% subsidy to the whole country at once, would definitely be noticed. Extending such levels to the whole country should anyway be buttressed with accurate cost data. Administrative cost savings are just a smoke screen. Total costs are the real cost. Other people also point out Medicare was financed after we had won some wars, but now we seem to be losing wars.

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.

Summary of N-HSA

In looking at what would be involved in launching full-scale New Health Savings Accounts (N-HSA) right away, we concluded there were too many obstacles to launching even a large-scale demonstration project with it as the centerpiece -- unless it had some additions. That's based on the assumption it would serve those who are younger than 21, or older than 65. The underlying theory is almost certainly correct: we will in time cure enough diseases to make retirement living a more pressing financial issue than paying for early death and disease. But we aren't even in sight of the crisis yet, and many people still remain unconvinced it is the face of the future. So based on these assumptions, unfortunately, this step toward a longer goal cannot be stripped of its survival features, even in the name of compromise.

In fact, we have not yet shifted disease to the point where important health costs are substantially all located in the Medicare age group, as plenty of defenders of the Affordable Care Act will protest, but which I contend is the next stage. The doctors who have received large cohorts of uninsured, such as those who work at Kaiser Permanente, are often astonished at how little complaining these previously uninsured people do. They have accepted untreated elective surgery as part of their life and glumly submit to it. In a few years, we will work off this backlog of self-neglect, and there will be a great fuss about how much costs have come down. At least, that's what happened after 1966, and then we found rent-seekers taught us what a new normal looks like. This time, it probably won't take so long or cost so much.

Nor before that situation confronts us, will we be ready to look for things for retirees to do, and money to support them while they do it. But it will come, and it probably won't go away unless we think harder about it. My rumination is we should start with architects, to redesign more one-floor homes with home offices. Working at home isn't popular, but commuting is worse. Unless the storage battery problem is solved, and Silicon Valley gives us driverless cars. Everybody ought to have some sort of electronic hobby, which can be turned into a working skill after retirement. Amazon and Federal Express must foresee old folks working at home along with their colleagues in a virtual workshop. One thing is obvious; we will probably need the money we now spend on Medicare to supplement a part-time income. Although transforming Medicare, piece by piece into Social Security, sounds like a simplistic idea, someone had better think of something better before we abandon it. The Health Savings Account automatically turns into an Individual Retirement Account at age 66. Until a multitude of similar transformations are devised, we should resist disturbing that forerunner.

We have not yet cured cancer, the common cold, Alzheimer's Disease, schizophrenia or Parkinson's Disorder, but when we do we must see a clear path toward pouring these savings into retirement income. And while we are about it, we must take what we learn and apply it to changing Social Security from defined benefit into defined contribution, with compound interest and passive investing working their magic on the idle money. But politicians have a different sense: not here, not now, when it would provoke hostility rather than appreciation. They won't change their minds until their constituents do.

The one concept which survives this revery is transferring surplus wealth from the grandparent generation to the grandchildren, with compound interest in the meantime. That's an idea which can be applied immediately, even though interest rates are at an all-time low. When they recover, bondholders will suffer, but stockholders should enjoy a nice ride. It has been restrained for various reasons for decades, so it might just unleash unexpected results in terms of the birth rate, or the value of the currency, or other totally unexpected ways. But it's ready, even though retail stockbrokers, banks, insurance companies, and financial advisors are definitely not ready.

Philadelphia Reflections

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

Obituary

George R. Fisher, III, M.D.

Goat Head Merchant

Fisher on Issue Politics

Good Ol' Health Savings Accounts

Employer Based Health Insurance

Summary of N-HSA