The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
... William Penn's Quaker Colonies
plus medicine, economics and politics ... nearly 4,000 articles in all
Philadelphia Reflections now has a companion tour book! Buy it on Amazon
Philadelphia Revelations
Try the search box to the left if you don't see what you're looking for on this page.
George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
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.
In its early configuration, Health Savings Accounts were envisioned as only paying for outpatient services, so why wouldn't it suffice to pay such claims with a debit card? Inpatient services, where market mechanisms are not practical for a helpless bed patient to negotiate, might be paid by using DRG values and approaches -- payment by diagnosis rather than individual services. It still remains a mystery why this approach isn't taken since the savings would seem to be considered as compared with the cumbersome claims form approach. How long it takes for a hospital or a drugstore to be paid by claims forms are not public knowledge, but it seems to take at least six weeks for a report to go to the patient that the claim has been acknowledged. For inpatients, the delay is usually twice as long and maybe six months. Whatever is the cause for this delay is unclear, and it may somehow be linked to whatever it is that insurance companies do with a claim form. If an auto dealer will accept a credit card, why a hospital can't do the same is unclear, indeed.
Health Savings Accounts for outpatient services are their own business, and how the high-deductible insurance linked to them handled claims was its business. Nobody asked why service benefits companies did things the way they did them, and it is still regarded as a sort of a company secret. Right now, the focus of public attention is on the 10% administrative cost of health insurance, and eventually how they conduct their business enters the discussion slowly. It really is a little hard to see why it costs so much to have someone pay your medical bills, and to outsiders, the whole approach seems bizarre. Since a debit card charges 1-2% for what it does, it really does not matter how either type of business does its work, what matters is demanding to know what value is created by the extra 8-9%, which amounts to quite a lot in aggregate. The same applies to DRG, except that the cost shifting between inpatient and outpatient has reached epic proportions. Today as I write this, I am told that a visit to a teaching hospital outpatient area for myself is billed for over two thousand dollars when as a physician I would suppose it might be less than a hundred dollars. But then, don't worry about it, you personally owe nothing at all. Is the public supposed to sit still for this sort of thing? Business ethics be hanged, I deserve to know what's going on, a lot better than I am being told. And even I understand better than most of the public that the general gist of it is to transfer costs between inpatients and outpatients while attempting to maintain the illusion of equal approaches.
On this level, we continue to ask why the claims form is used, or at least used so often, why the administrative cost is so high, why the service is so slow, and what we could suggest as a better way of doing things. When those questions settle down, the insurance company is entitled to return to its normal stance, that it is none of my business.
Meanwhile, perhaps public agitation on this level will stir up some competition, who will at least improve matters by making itself more clear.
---------------------------------------------------------------------------
Financing healthcare has four defined parts. You can get the money by contributing it to a Health Savings Account. You can accumulate more money by tax-free investment income added to what's in the fund. You can pay big expenses (mainly hospital inpatient costs) with a high-deductible insurance policy. And finally, if you don't have enough money, the government can subsidize you. The object of this hierarchy of choices is to pay for as much of it as you can, from investment income, which is a source of income no one had before. If that's not enough (usually because you got very sick much younger than average), you make it up by personal supplement, and if you exhaust even personal money, you get a government subsidy. If you are lucky and live to a ripe old age with money to spare, you can spend it on the extended thirty-year vacation at the end of life. This last point is important since without it there is no incentive to spend it carefully. For emphasis, let's repeat: for bookkeeping purposes, all Revenue collection is into the Health Saving Account , independent of disbursements or insurance for health care payments.
That's the basic plan, but there is a huge Medicare deficit, built up over years of failing to pay for it, and some may have to be spent on reducing that debt. We may have more financial crashes or other miscalculations, and premiums may have to be increased to pay for all this. Because no one can predict the future, there will have to be a judicial body to oversee how all of this is working out, and recommend mid-course corrections to Congress. The object of all this is to provide a fund to each individual which covers lifetime health costs so that subsidies are minimized, giving preference to subsidizing your own health costs but at a different time of life, perhaps under different financial circumstances. That's the easy part since the management of the pooled funds has a single mandate: make as much investment income as you possibly can, with as little investment expense as you can manage. If private investment funds do better than you do, be prepared to explain it to the judicial body which is made up of outstanding investors and is empowered to replace the management for poor performance. Meanwhile, the President is empowered to replace the judicial body itself for the poor performance of the fund, in consultation with the Senate. As long as the investment pool does as well as the average fund of its size, it should minimize the need to supplement revenue from individuals as well as subsidies, offset by the reduction of debt. And that is its main function.
While the revenues of this pooled lifetime fund are hard to predict, the managers need only assure that it is enough to pay legitimate costs, by informing Congress of the need to raise or lower subsidies. Failing to balance the books subsequently means only one thing: subscriber contributions must be raised or lowered. However, raising contributions should require the consent of Congress.
----------------------------------
Disbursements. Revenues may be hard to predict, but future health costs sixty or eighty years in advance, are impossible to predict. Certain principles seem fairly clear. Whether to include the premium for the high-deductible health insurance, should be an open option, allowed but not required. Individual marital, employment and other circumstances are too varied to justify a general rule. Whether to include patent remedies and unorthodox treatments, combined with the universal instinct to game the system, pretty much mandate the creation of a permanent oversight body to adjudicate such issues. It should be semi-independent of the government, which has the greatest temptation of all to shade its decisions with budget considerations. The managers of the revenue side should aim for at least 10% overfunding, and during the early transition phase may have to create a special transition (borrowing) fund, with plans to phase it out as the funds grow internally. A special re-insurance fund is also a suitable alternative. Ten years should be the limit to such transition funds, but the exact timing should be estimated at the onset and readjusted once after five years of operation. To do its job it will require a data collection and monitoring system. In most of these areas, it would resemble the Federal Reserve, able to regulate, but bound by the mandates of Congress. An additional, judicial body for the disbursements should be created, to create a pathway for appeals. determine the worth of new additions to claims, to render an opinion on whether obsolete claims costs are diminishing appropriately, and to make industry comparisons about expenses. Its composition should provide representation to major cost components of the claims, and Congress should hold hearings about nominations to the judicial body. Representatives of various industry groups should be allowed access to both the meetings of the board, and related subcommittees, but a suitable conflict of interest rules should be devised. The judicial body should be provided with data on demand, and pay close attention to trends, up or down. Industry groups should be free to introduce data of its own, and in the event of a protest, an appeal to a Congressional oversight committee.
It is the intention that funds in the Health Savings Accounts may be used to pay outpatient costs and catastrophic health reinsurance premiums, while hospital inpatient costs should be reimbursed by DRG methods out of the catastrophic health reinsurance. However, flexibility at the beginning of the program may well be required. Overall, however, subscribers should be encouraged to protect the build-up of their Health Savings Accounts by paying small costs out of pocket even if funds exist in the funds. When funds are utilized, the nature of the claims must be subject to limitation as to true medical need, until the funds grow comfortably above lifetime requirements. Debit cards are encouraged for HSA use, with usage matching a list of allowable claims; other electronic payment methods may appear in the future, and the managers are encouraged to permit reasonable flexibility in their adoption or experimentation. Subscribers should be provided with yearly reports, including a comparison with the experience of peer groups. Since the health coverage is intended to be a lifetime, the records should be a lifetime. The accounts may not be overdrawn, but private credit is permitted within industry-standard boundaries. In short, a myriad of details require some sort of address, and careful thought should be given to concentrating accounting, investing, technological, congressional and medical decisions into review by the appropriate sort of experts.
------------------------
Additional required legislation 1. Once data is available, the Secretary shall negotiate an agreement to reduce or eliminate Medicare payroll deductions and/or Medicare premiums in consideration that a) adequate funds are available in the individual HSA to pay for average Medicare claims costs in the last year of life, providing that contributions continue to grow at a sustainable rate b) that access to the funds for other purposes is then frozen awaiting appropriate balances to be achieved or c) that the age of the subscriber and the size of the fund assure a safe margin. d) Appropriate arrangements for certain age groups can be made to divert payroll deductions to be applied for this purpose, particularly during the transition period. e.)At the time of the individual's death, the HSA will reimburse Medicare for the average cost of the subscriber peer group's last year of life costs, plus any advances made in order to fund this arrangement. f) If more money is available than needed fore), the Secretary shall provide the option to increase or decrease the funds transfers to include more years of average claims costs than the last year of life (the accordion principle). This provision is primarily intended to cover the possibility of major changes in health costs, such as a cure for cancer, or epidemics of new diseases. It might also cover the slow build-up or decline in average costs over a period of time, requiring a major adjustment to keep the arrangement working as intended. This whole arrangement is built upon the assumption of a roughly continuing ratio between terminal care costs and earlier presumptions about them. It must adjust if the ratio changes.
2. Transparency and Price Controls. A satisfactory mechanism must be provided for any patient to learn, at least three months in advance, the price of any item or procedure for which a fixed price can be determined, and to which the provider is then held liable, regardless of whether insurance is involved or not. After six months of operating under this rule, a survey shall be conducted, after which the Secretary has the discretion to publish price comparisons between providers in the region. Further, providers are required to devise a match between outpatient costs (subject to competitive pricing) and DRG component costs, resulting (within 10%) in outpatient costs which are no lower or higher than the calculated inpatient costs, and comparable inpatient DRG ingredient costs which are no more than 10% higher than the competitive regional costs for the same item. Because of extra overhead costs resulting from the night, weekend and holiday operation, a hospital-wide overhead adjustment should be made, compared with regional levels, and made public. This overhead allowance may be made for inpatient and emergency care, but not for outpatient care. Furthermore, all indirect overhead costs shall be subject to an independent audit, frequently, routinely, and in both detailed and aggregate form made public.
One of the best ways to wreck a good plan, is to fail to provide for success. Most innovators spend so much anxiety over possible failure, they never get around to planning for the problems created by the plan's roaring success. So, let's voice some concerns about where the Lifetime Health Savings Accounts might stand if everything worked perfectly.
In the first place, there could be a conflict between the small investor's best interests. On the one hand, he will undoubtedly do better for himself by purchasing index funds than individual stocks. He gets diversification and low fees, supported by mountains of evidence that only a rare investor will do better with stock-picking and market-timing, no matter who is advising him. But if myriads of people do the same, index funds could overwhelm the market. Already, they represent several trillions of dollars and show no signs of slowing the pace of advancement. The proportion of stockholders who actually vote their shares will steadily shrink, and ultimately we can expect the few shares that are voted, to be in the hands of managers and insiders of the company. Now it is probably true that the average small investor knows so little of what is going on, that both he and the companies are better off if he doesn't exercise an uninformed vote. A more likely danger is imperfect agency on the part of the managers of the funds. Wall Street periodically circulates rumors of fund managers offering to vote the fund proxies, in return for the selection of their fund for the affected company's pension fund assets. It doesn't matter whether this is true, what matters is it is believed. Sooner or later, Congress will get wind of such rumors and pass inhibiting legislation. The nature of such regulation and/or legislation is ultimately to impair the value of the stock. The salaries of CEOs may go down, and some Wall Street predators may be thwarted, but overall return on investment will be lessened by the suspicion.
The bond market is much larger than the stock market because leverage is the basis for a great deal of profitability. No one knows what the optimum ratio of bonds to stocks should be. In 2007, the ratio of bank leverage was fifty to one, and few people complained it was too much. In the depths of the 1930 depression, it was far lower, and few people complained it was too low. In retrospect, fifty times is insanely high, while if you bought any stock at all in 1939, you probably made a ton of money. The herd instinct always seems to drive this relationship to extremes, but in fact, the optimum ratio will also go up and down with the times. Any law setting limits will be meaningless for long periods of time, and then suddenly be a serious impediment to the economy. The problem lies in the reality that bond trading is, with few exceptions, a zero-sum game. For you to win, someone else likely has to lose. By contrast, the stock market represents company ownership, and it is possible for both sides of a trade to be highly satisfied with their outcomes. It certainly isn't guaranteed, but the environment is more favorable for a passive investor. The long-run hazard lies in the possibility that nearly all investors will go to school and learn these aphorisms, thereby undermining the bond market except for insurance companies, banks and other long-term investors, who can hold a thirty-year bond to maturity. A flight from bonds would inevitably make their prices drop, followed by a shortage of bonds, which would then make their prices soar. Carried to an extreme, and protracted for a decade, a disturbance of this sort would cause the buy-and-hold stock investor to lose the faith, and ultimately to lose his shirt.
You have to feel sorry for the traditional stockbroker and investment advisor. The advent of the computer and of low-cost diversified funds have badly shaken what has long been an honorable and respectable profession. However, stockbrokers have resisted adopting the legal role of fiduciary, pledged to put the customer's interest ahead of his own. Most of the major stockbrokers started as private offices to handle the affairs of one rich family, who essentially didn't care about the fees and commissions. As a favor to rich friends, they enlarged the business and utilize economies of scale. In consequence, almost all stockbrokers could hope to get rich from trade secrets. With the advent of computers and high-speed trading, the broker trade became an investing profession, graduates of business schools and even mathematics majors from Ivy League Universities. The secret of success in that environment was volume, not trust-fund babies as friends and former classmates. Pension funds in particular aggregated a large number of obedient clients for them; the salary scale was still opulent, but the clientele was no longer their equals in sophistication.
As the brokerage house with walnut panels and oriental rugs began to fade away, the social level of the broker was no longer so important, and high fees interfered with maintaining high volume. It is only a matter of time before the personal financial manager discovers a small volume of potential clients, including trust-fund babies with some investment training of their own. The surviving financial advisors are only cogs in a big machine. In the meantime, be careful of whose advice you take, especially if he steers you away from index funds. There is a significant risk the advice is really coming from the sales manager, unloading the firm's inventory. The most lurid example is what has happened to 401(k) pension plans, where the investment return is heavily consumed by fees, altogether too often. It would certainly pay to browse through a book by Ibottson, containing all of the statistics you need about the last century. Since 1926, large-cap stocks have averaged 10% total return, while somewhat riskier small-capitalization stocks have averaged 12.5%. Your interview with an advisor can't be considered finished until you are told what the 15-year experience has been at that particular fund. Unless you are determined to get the data, you probably won't get it. Because of this behavior, the famous investor Warren Buffett tends not to buy stocks and bonds at all. He buys the whole company. The results of his investment fund, Berkshire Hathaway, are a rather close match to the returns which Ibottson reports.
Ok, ok, got that. But suppose everyone gets it? In that case, one would suppose the prices of common stocks would fall, and the prices of bonds would rise to a new level. At that point, the advice would be to buy funds which hold huge amounts of bonds of all maturities and hold them to maturity. Remember, investors in Health Savings Accounts would effectively be investing for the next sixty to eighty years. Someone must be found to change the composition of the portfolio rather drastically and to do so gradually enough to avoid convulsing the market. Panics are essentially what happens when everyone tries to get out the door at the same time. Are we to risk the entire savings of the nation for healthcare, based on that sort of opinion? It seems pretty clear to me that we have to trust someone, but it is not clear to me how we can assure ourselves that the person or persons with authority, will be sufficiently unaffected by politics -- to be trusted.
Which brings up the Federal Reserve. It would be hard to find a group of more serious people, generously infused with a strong sense of duty and fidelity. But strong differences of internal opinion regularly surface, not necessarily following a political ideology, as much as creating it. After all, some of this stuff is really hard. In the full century since the 1913 creation of the Fed, the dollar has declined a thousand percent, from the value of one dollar to the value of one penny. John Kenneth Galbraith, one of the wittiest civilized men on earth, loudly and earnestly advocated a deliberate 2% inflation in the value of the dollar. Well, we have it, and the dollar has completely severed its connection to gold and silver or any other commodity. The currency has now just become a computer entry when thousands of years of experience speak to the hazard of doing so.
When the dust settles, there remain two reasons why we should take such risks. The first is the rather good possibility we can indeed extricate ourselves from a looming health finance disaster, by taking this risk. The second is to reflect on the growing possibility that medical research can eliminate enough disease, and reduce the cost of caring for what is left, to give us the room to ease into sustainable finances. If that's our grand strategy, only America, using American bravado, could pull it off.
The principles of compound interest are thought to have been a product of Aristotle's mind. The principles of passive investing are more recent, mainly attributed to John Bogle of Vanguard, although Burton Malkiel of Princeton has a strong claim. In the present section, we propose to merge the two methodologies, compound interest with passive investing, trying to give the reader some idea why the combination could supply Health Savings Accounts with seriously augmented revenue. Because there is so much political flux, it cannot be an actual plan until the politically-controlled numbers have some finality to them.
The proposal to accumulate funds, however, shifts responsibility to the customer to spend wisely, even resorting to employing some of the individual's taxable money to pay small medical costs, thus preserving the tax shelter. (Or to use escrow accounts, or over-deposit in some other way, such as reducing final goals.) HSA doesn't directly reduce health costs, it eliminates some unnecessary ones but provides lots of extra money to pay for essential ones. At the outset we want to state, schemes of this sort have a history of working effectively up to a certain level, and then begin to interfere with themselves as eager money rushes in. There's no sign of that so far, but it might appear. Therefore, we advise modest hedged experiments rather than attempts to pay for all of healthcare, reducing health costs perhaps by only a quarter or a half, since those smaller levels would still amount to large returns. Balancing the risks with investments outside the HSA -- is just another prudent way of hedging the bet.
Money earning seven percent will double in ten years.
The rough rule of thumb is, money earning seven percent will double in ten years; money at ten percent will double in seven years. Seven in ten, or ten in seven. You can use simple maxims to verify the attached ideas. An early realization is that compound interest accelerates with time, and is highly sensitive to small interest rate changes. An improved rate of interest generated by (Twenty-First Century) passive investing gets multiplied by (Twentieth-Century) extended life expectancy. This idea might not have worked, a generation ago. And it will not work in the future if future catastrophes shorten life expectancy, or interest rates rattle around. As happenstance, interest rates today rest near the "zero boundaries", but interest risk is not totally eliminated. Interest rates have a way of bouncing, and irrational exuberance is part of our system.
In fact, we have a tragic example in the nation's pension funds. A few decades ago, pension managers were tempted to invest in stocks rather than bonds, and then the stock market crashed, stranding pensioners with low rates of return, rather than the high ones they had hoped for. I want readers to understand I am well aware of the cyclicity of markets, and make these suggestions, regardless. As long as we include a thirty-year "Black swan" contingency by limiting coverage to a quarter or a third, it should be reasonably safe, but savings would still be enormous. There are other, more traditional ways of protecting endowments from stock crashes. With people of every age to consider, the long transition period alone would almost automatically buffer out black swans.
Having issued a warning to be a conservative investor, let's now introduce some notes of reassurance. Younger people are always likely to be healthier. Those who save their money while young therefore need not use all of it for healthcare -- for several decades. Compound interest works to magnify savings, the longer its horizon the better. We'll describe passive investing later, but it too should increase the average rate of return. These investments after some successes increase the incentives to save. If no one buys Health Savings Accounts, the incentives were apparently not large enough. If everyone rushes to buy, perhaps the incentives were unwisely too attractive. Right now, the financial industry is observing a rush to passive investing; nearly fifty percent of mutual fund investors are switching to "index funds" in spite of capital gains taxes on selling other holdings. Since the marvel of compound interest has been accepted for thousands of years, a mixture of compound interest and passive investing isn't an especially radical idea.
What's radical is the idea that all those highly-paid advisors can't do better than random coin-flippers. What's radical is to discover that the main ingredient of poor performance is high middle-man fees. Low fees won't assure high returns, but high fees will assuredly lead to low returns. If that new idea gets replaced in turn, it will be replaced by something better, and everyone should switch to it. But if compound interest is here to stay, this proposal is safer than it sounds. The investment income rate or continued employment of your agent is what isn't guaranteed, which is why business relationships (between customers and managers of HSAs ought to remain portable and transparent by law. Your manager might move, or you might decide to move away, from him.
Start by looking at what happens if you jump your interest rate curve from 5% to 12%, or if you lengthen life expectancy from age 65 to age 93. That's what the graph is intended to show, and we stretch the limits to see what stress will do. Jumping to the highest rate (12%)the interest rate gets the balance to a couple of million dollars pretty quickly and lengthening the time period further enhances that gain. The combination of the two easily escalates the investment far above twenty million. The combination of extra time and extra interest rate thus holds the promise of quite easily paying for a lengthening lifetime of medical care, regardless of inflation. In fact, it gets the calculation to giddy amounts so quickly it creates suspicion.
Average lifetime health costs: $350,000 per lifetime
The actuaries at Michigan Blue Cross, verified by the Medicare agency, estimate average lifetime health costs to be around $350,000 per lifetime. That's just an educated guess, of course, but increasing interest rates and life expectancy will very easily surpass that minimum estimate. How do we go about it, and how far dare we go? Remember, our whole currency is based on the notion of the Federal Reserve "targeting" inflation at 2%, but in spite of spending trillions of dollars, they seem unable even to achieve more than 1.6%. We had better not count completely on schemes which require the Federal Reserve to target interest rates, because sometimes, they can't.
One person who does have practical control of the interest rate an investor receives is his own broker. The broker shares the income, but usually takes the first cut of it, himself. Covering a full century, Roger Ibbotson has published the returns on various investments, and they don't vary a great deal. Common stock produces a return of between 10% and 12.7% in spite of wars and depressions; if you stand back a few feet, the graph is pretty close to a straight line. You wouldn't guess it was that high, would you? If you don't analyze carefully, a number of brokerages offer Health Savings Accounts which produce no interest at all -- to the investor -- for the first ten years. Indeed, the income of 2% also amounts to nothing at all during a 2% inflation. In ten years, 2% approaches a haircut of nearly 20%, explained by the small size of the accounts, and by the fact that customers who know better will generally just politely look for another vendor. Since the number of accounts has quickly grown to be more than fifteen million, it might be time for some sort of consumer protection. The prospective future size of these accounts should command greater market power, quite soon. After all, passive investment should mainly involve the purchase of blocks of index funds, all with fees of less than a tenth of a percent . Much of this haircutting is explained by the uncertainties of introducing the Affordable Care Act during a recession and taking six years just to get to the point of a Supreme Court Test, to see if its regulations are legal and workable. It can be used to provide high-deductible coverage, but it's expensive.
That's the Theory. The rest of this section is devoted to rearranging healthcare payments in ways which could -- regardless of rough predictions -- easily outdistance guesses about future health costs. When the mind-boggling effects are verified, skeptics are invited to cut them in half, or three quarters, and yet achieve a worthwhile result. The purpose here is not to construct a formula, but to demonstrate the power of an idea. Like all such proposals, this one has the power to turn us into children, playing with matches. By the way, borrowing money to pay bills will conversely only make the burden worse, as we experience with the current "Pay as you go" method. By reversing the borrowing approach we double the improvement from investment, in the sense we stop doing it one way and also start doing the other. In the days when health insurance started, there was no other way possible. The reversal of this system has only recently become plausible, because life expectancy has recently increased so much, and passive investing has put that innovation within most people's reach. The environment has indeed changed, but don't take matters further than the new situation warrants.
Average life expectancy is now 83 years, was 47 in the year 1900; it would not be surprising if life expectancy reached 93 in another 93 years. The main uncertainty lies in our individual future attainment of average life expectancy, which we don't know, but probably could guess with a 10% error. When the future is thus so uncertain, we can display several examples at different levels, in order to keep reminding the reader that precision is neither possible nor necessary, in order to reach many safe conclusions about the average future. Except for one unusual thing: this particular trick is likely to get even better in the future. Even so, it is best to do only conservative things with a radical idea.
Reduced to essentials for this purpose, today's average newborn is going to have 9.3 opportunities to double his money at seven percent return and would have 13.3 doublings at ten percent. Notice the double-bump: as the interest rate increases, it doubles more often, as well as enjoying a higher rate. If you care, that's essentially why compound interest grows so unexpectedly fast. This widening will account for some very surprising results, and it largely creeps up on us, unawares. Because we don't know the precise longevity ahead, and we don't know the interest rate achievable, there is a widening variance between any two estimates. So wide, in fact, it is pointless to achieve precision. Whatever it is, it will be a lot.
One Dollar: Lifetime Compound Interest
Start with a newborn, and give him a dollar. At age 93, he should end up with between $200 (@7%) and $10,000 (@10%), entirely dependent on the interest rate. That's a big swing. What it suggests is we should work very hard to raise that interest rate, even just a little bit, no matter how we intend to use the money when we are 93, to pay off accumulated lifetime healthcare debts. Don't let anyone tell you it doesn't matter whether interest rates are 7% or 12.7%, because it matters a lot. And by the way, don't kid yourself that a credit card charge doesn't matter if it is 12% or 6%. Call it greed if that pleases you; these "small" differences are profoundly important.
If that lesson has been absorbed, here's another:
In the last fifty or so years, American life expectancy has increased by thirty years. That's enough extra time for three extra doublings at seven percent, right? So, 2,4,8. Whatever amount of money the average person would have had when he died in 1900, is now expected to be eight times as much when he now dies thirty years later in life. And even if he loses half of it in some stock market crash, he will still retain four times as much as he formerly would have had at the earlier death date. The reason increased longevity might rescue us from our own improvidence is the doubling rate starts soaring upward at about the time it gets extended by improved longevity. In particular, look at the family of curves. Its yield turns sharply upward for interest rates between 5% and 10%, and every extra tenth of a percent boosts it appreciably.
Now, hear this. In the past century, inflation has averaged 3%, and small-capitalization common stock averaged 12.7%, give or take 3%, or one standard deviation (One standard deviation includes 2/3 of all the variation in a year.) Some people advocate continuing with 3% inflation, many do not. The bottom line: many things have changed, in health, in longevity, and in stock market transaction costs. Those things may have seemed to change very little, but with the simple multipliers we have pointed out, conclusions become appreciably magnified. Meanwhile, the Federal Reserve Chairman says she is targeting an annual inflation rate of 2% of the money in circulation; the actual increase in the past century was 3%. If you do nothing at 3%, your money will be all gone in thirty-three years. If you stay in cash at 2%, it will take fifty years to be all gone.
But if you work at things just a little, you can take advantage of the progressive widening of two curves: three percent for inflation stays pretty flat, but seven percent for investment income starts to soar. Up to 7%, there is a reasonable choice between stocks and bonds; but if you need more than 7% you must invest in stocks. Future inflation and future stock returns may remain at 3 and 7, forever, or they may get tinkered with. But the 3% and 7% curves are getting further apart with every year of increasing longevity. Some people will get lucky or take inordinate risks, and for them, the 10% investment curve might widen from a 3% inflation curve, a whole lot faster. But every single tenth of a percent net improvement will cast a long shadow.
But never, ever forget the reverse: a 7% investment rate will grow vastly faster than 4% will, but if people allow this windfall to be taxed or swindled, the proposal you are reading will fall far short of its promise. Our economy operates between a relatively flat 3% and a sharply rising 4-5%. In other words, it wouldn't have to rise much above 3% inflation rate to be starting to spiral out of control. Our Federal Reserve is well aware of this, the public less so. A sudden international economic tidal wave could easily push inflation out of control, in our country just as much as Greece or Portugal. On the other hand, as developing nations grow more prosperous, our Federal Reserve will control a progressively smaller proportion of international currency. Therefore, we would be able to do less to stem a crisis that we have done in the past.
To summarize, on the revenue side of the ledger, we note the arithmetic that a single deposit of about $55 in a Health Savings Account in 1923 might have grown to about $350,000 by today, in the year 2015, because the stock market did achieve more than 10% return. There is considerable attractiveness to the alternative of extending HSA limits down to the age of birth, and up to the date of death. It's really up to Congress to do it. If the past century's market had grown at merely 6.5% instead of 10%, the $55 would now only be $18,000, so we would already be past the tipping point on rates. In plain language, by using a 10% example, $55 could have reached the sum now presently thought by statisticians -- to be the total health expenditure for a lifetime. By achieving a 6.5% return, however, the same investment would have fallen short of enough money for the purpose. Like the municipalities that gambled on their pension fund returns, that sort of trap must be avoided. Things are not entirely hopeless, because 6.5% would remain adequate if our hypothetical newborn had started with $100, still within a conceivable range for subsidies. But the point to be made provides only a razor-thin margin between buying a Rolls Royce, and buying a motorbike. If you get it right on interest rates and longevity, the cost of the purchase is relatively insignificant. That's the central point of the first two graphs. For some people, it would inevitably lead to investing nothing at all, for personal reasons. Some of the poor will have to be subsidized, some of the timid will have to be prodded. This is more of a research problem than you would guess: a round-about approach is to eliminate the diseases which cost so much, choosing between different paths of research to do it, or rationing to do it. Right now we have a choice; if we delay, the only remaining choice would be rationing.
Commentary.This discussion is, again, mainly to show the reader the enormous power and complexity of compound interest, which most people under-appreciate, as well as the additional power added by extending life expectancy by thirty years this century, and the surprising boost of passive investment income toward 10% by financial transaction technology. Many conclusions can be drawn, including possibly the conclusion that this proposal leaves too narrow a margin of safety to pay for everything. The conclusion I prefer to reach is that this structure is almost good enough, but requires some additional innovation to be safe enough. That line of reasoning will be pursued in a later chapter.
Revenue growing at 10% will rapidly grow faster than expenses at 3%. As experience has shown, it is next to impossible to switch health care to the public sector and still expect investment returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, but it indirectly affects the value of the dollar, greatly. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings in the healthcare system are possible, but only to the degree, we contain next century's medical cost inflation closer to 2% than to 10%. The simplest way to retain revenue at 10% growth, on the other hand, is by anchoring the price to leading healthcare costs within the private sector. The hardest way to do it would be to try to achieve private sector profits, inside the public sector. This chapter describes a middle way. It's better than alternatives, perhaps, but not miraculous.
Cost, One of Two Basic Numbers. Blue Cross of Michigan and two federal agencies put their own data through a formula which created a hypothetical average subscriber's cost for a lifetime at today's prices. The agencies produced a lifetime cost estimate of around $300,000. That's not what we actually spent because so much of medical care has changed, but at such a steady rate that it justifies the assumption, it will continue into the next century. So, although the calculation comes closer to approximating the next century (than what was seen in the last century) it really provides no miraculous method to anticipate future changes in diseases or longevity, either. Inflation and investment returns are assumed to be level, and longevity is assumed to level off. So be warned. This Classical HSA proposal, particularly with merely an annual horizon, proposes a method to pay for a lot of otherwise unfunded medical care. The proposal to pay for all of it began to arise when its full revenue potential began to emerge, rather than the other way around. If a more ambitious Lifetime HSA proposal ever works in full, it has a better chance, but must expect decades of transition before it can. Perhaps that's just as well, considering the recent examples we have of being in too big a hurry. Rather surprisingly, the remaining problem appears merely a matter of 10-15% of revenue, but all such projection is fraught with uncertainty.
Revenue, The Other Problem. The foregoing describes where we got our number for future lifetime medical costs; someone else did it. Our other number is $150,750, which is our figure for average lifetime deposit in an HSA. It's the current limit ($3350 per year of working life) which the Congress applied to deposits in Health Savings Accounts. No doubt, the number was envisioned as the absolute limit of what the average person could afford, and as such seems entirely plausible. You'd have to be rich to afford more than that, and if you weren't rich, you would certainly struggle to afford so much. To summarize the process, the number amounts to a guess at what we can afford. If it turns out we can't afford it, this proposal must be supplemented, and the easiest expedient is to raise the contribution limits. Other alternatives are pretty drastic: to jettison one or two major expenses, like the repayment of our foreign debts for past deficits in healthcare entitlements, or the privatization of Medicare. Not privatizing Medicare sounds fine to most folks, but they probably haven't projected its coming deficits. It would leave us considerably short of paying for lifetime health costs for quite a long transition period, but it might be more politically palatable, like Greece leaving the Euro, than paying more. Almost anything seems better than sacrificing medical care quality, which to me is an unthinkable alternative, just when we were coming within sight of eliminating the diseases which require so much of it.
Escrow Accounts and Over-Depositing. The main unpredictable feature of these future projections is you can't predict when you will get sick and deplete the account. Money withdrawn early is much more damaging than money withdrawn late in the cycle. Catastrophic insurance will somewhat protect against this risk, but the safest approach is to use segregated, somewhat untouchable, escrow accounts for future heavy expenses. That, combined with deliberate over-depositing, is the safest approach. If Obamacare would settle down, it might serve that function, as well, but the political situation is pretty unsettled until a large-group design is made final, and that seems to mean November 2016 at the earliest.
Ben Franklin expected a hospital to pay for itself by returning sick people to employment. That misconception runs through medical payments even today.
Instead, our good intentions have created a more expensive problem, with its solutions always just out of reach. If you live longer, you get more retirement to pay for, because society also asks for an age limit to employment. Like Franklin, we might miss our target, but at least we see the goal. Right now the inevitable consequence of eliminating the disease is the extension of longevity. Because retirement is continuous while illness comes in episodes, the extra retirement cost (Social Security payments, if you please) might even become more costly than Medicare. Science may eventually cure enough disease to shave costs down to the first and last years of life, starting if possible with the most expensive diseases first. All fine enough, but not right now.
We must devise a better system than that, which like Health Savings Accounts, could expand from cradle to grave (and 21 years beyond death), generating a surplus by age 65, retaining unused medical surpluses for retirement, and taxable only at death. Because of compound interest, such a result is actually achievable but requires a discouraging length of time. We can buy more time with more money, but the public must agree it is worth it.
A lifetime perspective has six new features, because we begin with a deficit and end with a surplus: 1) Passive investing of reserves as a new revenue source 2) Twenty years of post-mortem Trust Funds to pay for transition 3) Redeployment of current Medicare payments to individual Health Savings Accounts without changes to its delivery system 4) Hooking the pieces together on individual Health Savings Accounts like beads on a string, to increase compounding. 5) Funding retirement with unused augmented Medicare funds, as diseases become cured by science. 6) Reaching zero balance at age 18, by grandparents half-funding the first 18 years for each of 2.1 grandchildren out of HSA surplus. These are unfamiliar concepts, consuming the rest of this essay.
Unfortunately, even if Congress devises a system to do all this, a century is a long time to leave your money in the hands of strangers. There would be one invariable consequence. Whether money is diverted to bankers' salaries or to aircraft carriers, rulers always prefer inflation to long term taxes, and sometimes prefer "imperfect agency" to other short term solutions. Even the Roman Empire eventually succumbed to this conflict. No one oversees other peoples' money as carefully as he would spend his own, so we stand warned by Milton Friedman that your own money management is the only peaceful oversight with a chance of widespread success. Even that success depends on running dual systems during the transition, one fading out and the other fading in. In the technical section which follows, ways are suggested to manage this dilemma, but above all, it seems best to prevent false starts by planning for them. Allow duplication, the ability to make mistakes, and a certain amount of waste from repairing bad choices, as the cost of doing business. Most flaws start as proposed solutions, so it will prove best if winners and losers are widely visible.
This Lifetime Health Savings Account is not a competition of ideologies; it is a series of seemingly unrelated mid-course corrections relating to changing age environments. It leans heavily on putting idle money to work at compound interest, preferably by John Bogle's total market indexing. Even Bogle's system works best with some initial lucky timing. But after a few decades, it would scarcely matter when you started, it only matters how much time you have left. Since the beneficiary is dead by the time of settlement, the ones who will really care are those who must pay off the debts. It is up to beneficiaries to fund it and to educate their descendants to begin early. A single system for everyone will probably never prove universally sensible for hundreds of millions of people. A voluntary system with age quotas seems the most painless way to smooth out an admittedly protracted transition. This is a long term plan with short term concessions.
Non-profit systems are not very good at weeding out failures, so for-profit competition is advisable, to speed things up. But anti-trust violation is a common for-profit short-cut, so modern approaches concentrate on preserving competition, not necessarily efficiency. Always remember we probably have plenty of money, never plenty of time. Young people almost never see it that way.
No other large nation has the money or the brashness to attempt so much change all at once, so there are few foreign models. We are pioneers, and costs will be higher for it. Scientists are not fools, they concentrate research on the eight or ten fatal diseases which (they are told) cause 70% of present costs. But several hundred other diseases wait in line, undermining cost prediction for the coming century. Nevertheless, there are only three stages in life with transitions to consider: childhood, working years, and retirement. Two out of these three are dependent on the remaining one at any particular time, but everybody gets a turn. The easiest way to pay for children is for grandparents to donate at death; the best way to pay for retirement is to add compound interest to what we already have saved, and all the rest depends on working people doing more saving, or less spending than they formerly did. There are lots of gimmicks, but that's the basic plan, while we pray for scientists to eliminate the most expensive disease instead of marking time, counting the number of grains of sand on every beach.
A good plan uses demonstration projects and accepts the possibility of occasionally slowing down. Research and development can be costly at first before costs eventually decline. We may be--or may not be-- as lucky as we were with heart attacks, in which the commonest cause of death was greatly diminished by a daily aspirin tablet. Or we may struggle on as we did with pernicious anemia and diabetes. Both diseases are treated with injections discovered almost a century ago. But pernicious anemia is treated at trivial cost while diabetes struggles as the most expensive chronic disease we have, prolonging life but not extinguishing cost. Only Americans would plunge ahead anyway, while a President would be foolish to try to change deep cultural attitudes too rapidly. We are warned not to see ourselves as exceptional, but we do see ourselves as exceptional, no matter what the facts.
The facts are the Medicare age group has most of the costs, younger people generate most of the savings. Third rail or not, the problem is to manage a gigantic funds transfer between generations while avoiding imperfect agents who divert money to their own purposes. In some ways, it is more a financial problem than a medical one. We watch private insurance pay its executives multimillion-dollar salaries, and we watch our government divert medical money for battleships and babysitting. It is time to stop watching and try modified individual ownership, putting our idle money back to work. Saving our own money for our own retirement if given a choice, instead of forcibly moving money among demographic groups of strangers. Choices should be voluntary and for-profit, so people will actually notice which approach works best, and then switch to it when convinced. This being political, some people will put their thumbs on the scale. But this being America, the public will not be fooled for long.
So this summarizes the idea. What follows is a general outline of vital technical details for pulling it off.
WHEREAS system of electronic claims submission are becoming increasingly common because of cost savings to carrier.
And WHEREAS the complexity of managing deductibles, copayments, supplementary insurance contributions, major medicals, and MAAC limits make it increasingly important for the physician to incorporate"explanation of benefits" information into his office computer system.
And WHEREAS the need to solicit physicians cooperation in electronic claims submission provides a suitable moment to request carries to provide electronic information in return.
RESOLVED that ASIM promote the reverse flow of electronic explanation of benefits information to the provider in any system, but particularly a Medicare system, of electronic claims submission.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
