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.

Bonds--Do They Have A Future?

Relic of the Past?

EVER since we finally went off the gold standard completely during the Nixon Administration, the Federal Reserve has adjusted our money supply to create a fairly steady 2% inflation. If inflation is ever less than 2%, the Fed puts more money into circulation. Since many bonds are paying less than a 2% dividend, everybody who buys and holds them at par will lose money in "real" terms. That is, everyone who buys bonds when they are issued and sells them when they mature will lose spending power. Since they fluctuate in the meantime, it is possible for a trader to buy them when they are undervalued by the market. That trader will possibly make money, but only because someone else lost money. Something like that occurred during the recent financial crash bailout, when interest rates declined from 3% to less than 2% but were repurchased by the Fed as "Quantitative Easing", effectively giving speculators a 33% profit at government expense. But that doesn't happen often, and just guess who ultimately lost the money the speculators made. There is also that daunting question: when the time comes for the Federal Reserve to disgorge them, just who is going to buy all these cheapened bonds? In Japan, bonds paid a dividend of less than the rate of inflation for more than a decade; it's hard to think of a reason why the same thing could not happen in America. So it's also hard to imagine a reason why buy-and-hold investors should not abandon bonds, perhaps suddenly all at once, at some unknown time in the future. At that point, many of them will resolve never to try that, again. The whole idea is troubling.

It's particularly troubling in view of the lack of success, so far, of TIPS. These vehicles are new; perhaps the algorithm is set to ignore minor inflation and will over-respond to more major inflation, ultimately rewarding those who buy them. But at least so far, they are a disappointment. Furthermore, TIPS are quite cleverly designed to be inflation-protected, while unfortunately inflation usually does not follow a straight line but is volatile, or saw-toothed; the jury is still out. The jury better hurry up, because all investors look for net income after expenses, which include brokerage costs, taxes, and inflation. A long-term bond might have to pay a dividend approaching 4%, just to emerge with the same net value it started with; after five years of 4%, you could be 20% behind. And yet, the bond market with or without inflation protection is far larger than the stock market and compares in size with all other kinds of market. Who buys them, especially in these huge quantities?

Somebody must maintain statistics which answer this question, but as a guess, the main buyers are insurance companies, endowments, annuities, hedge funds, banks. And foreigners, of course, to whom our follies seem trivial compared with their own. The great argument for bonds is the safety of principal, and although safety is in question anywhere there is inflation when the topic is cash flow, safety is definitely an issue. Cash shortages are what cause bankruptcies, which are mainly useful in providing time to liquidate underlying wealth to pay restless creditors. The management of a non-profit organization must meet its payroll out of cash flow, so non-profits protect themselves from dissolution by having a regular flow of nominally secure bond dividends. Income from donations and contributions can be particularly weak during times of economic stress. Since most for-profit organizations also experience variable periods of time without profits, their situation does not differ greatly from nonprofits. That's particularly true when a for-profit organization has a vocal, activist stockholder group, who will protest fiercely if the management retains abundant cash. For such a predicament, holding bonds creates safety by some definition. The price of that safety is the long-term average loss on the bond portfolio; the company's alternative losses are whatever it takes to maintain a stable work force during unstable times. The business school assessment of this tradeoff is that bond losses can usually be passed through to the customers as a business cost, while layoffs and strikes may not be.

To restate the characteristics of willing bond purchasers, they are governments and corporations who have no common stock issuance alternatives, but regularly face a need to have money available for payroll. They also include borrowers and lenders at nominal interest rates like banks and insurance companies, who can afford to ignore inflation because their own liabilities are in nominal dollars, or come due at a date certain. And then, there are a host of beneficiaries of special-interest bond provisions, like "Flower bonds", state and municipal governments, foreign aid, student aid, etc. As an overall statement, natural bond buyers are those who either do not possess steady equity (common stock) alternative to offer investors or else are shielded in some way from the inflation and tax costs of buying bonds. Speculators and traders are excluded from the discussion because fixed-income trading is a zero-sum game, something you should teach your children to avoid. Other than these special niche opportunities, bonds should be regarded by the ordinary investor as trading opportunities when interest rates get too high, which is roughly every fifteen years or so.

Things in the bond market were not always so bad; Robert Morris, Jr. was a genius for devising this market in 1784. But the equity market was then not so well developed, life expectancies were shorter, and a minimum 2% inflation was not guaranteed by the Federal Reserve. The income tax had not been invented. It was possible to enjoy the promised benefits of lending in those days, for decades or even lifetimes. It was much harder to find investments of superior performance, without getting involved in business management. Meanwhile, the bond market just got huger and huger. Modifying or dismantling it in logical ways would have enormous disruptive effects. So enormous, the Congress has just adopted the stance called "kicking the can down the road", which is a debt you never seriously intend to repay.

Are we waiting for the bond market, the bond vigilantes, or speculators to find some vital vulnerable flaw, and topple it all into the ashcan of history? Or is there some better plan that no one has mentioned?

Utilization Review

When medical care was entirely a private two-party arrangement, the patient and doctor negotiated what was to be done, and often the price; if the patient could not pay, some embarrassed workaround was figured into the equation, including a vague promise to pay the doctor when he could. A surprising number of patients did pay later, and because the doctor's bill contained very little overhead, even partially paying it off created an unspoken promise that the patient would now be welcomed back.

It was the appearance of insurance forms which created secretarial overhead, even though of course it also brought along some revenue. Skeptics may doubt the extent of this, but at my advanced age as a patient I now visit four doctors of different specialties. Collectively, they seem to have fourteen assistants and fourteen computers I can count. That remains the situation even if a patient delegates decision-making to members of the family, or a hospital wants to know what is being given away to charity patients, or a bewildered patient seeks a second opinion. It changed abruptly when third-party payment seemed to entitle a government or an insurance company to be reassured that claims were legitimate. This uneasy and often resented intrusion into a private matter began to cause friction even in the 1920s, soon after third-party reimbursement made an American appearance, and as physicians gradually recognized that "utilization review" generated more overhead cost than simple claims submission. At first, health insurance companies were restrained from brisk business-like behavior, by the realistic possibility that the patient might switch back to paying bills in cash. Somehow that possibility now seems so remote that when the owner of a Korean auto manufacturing company tried to pay his hospital bill with hundred-dollar bills, the hospital simply had no procedure for handling such an unexpected request.

As long as a secretary was sitting there filling out forms, she might as well answer the phone for appointments. In this way, appointment systems became routine, including hidden extra revenue loss generated by broken appointments. Insurance pre-payment is always complicated by the realities of emergency care, where considerable expense must sometimes be incurred before the third-party has a chance to review the facts; in this lies the origin of the term "reimbursement". The third-party acquired the ability de facto to delay or deny reimbursement, an action immediately regarded as high-handed, since expenditures had already been made in good faith and could not be recovered. The right to deny such claims was implicit, and at first it was used gingerly by insurance companies trying to establish themselves. Now that insurance is considered normal, any incurred costs must be handled in some way, so other subscribers are charged extra to keep the hospital solvent. The cost to the system is exactly the same this way, but no other way has been suggested to maintain the credibility of insurance oversight. When I once told the owner of a department store that I had 2% bad debts in 1955 (ten years before Medicare) he replied that my bad debts were less than his and my bookkeeping was far more elaborate. True, some hospitals could not survive without the insurance system, but if others in better locations examined their experience extensively, they might discover their accident rooms are net losers for the insurance. Third-parties slowly retreated, hospital prices crept upward and the system readjusted, but no one is entirely satisfied with this showmanship masquerading as a balance of terror. When you see a sick or injured person turned away from an emergency department for lack of insurance proof, you can be sure there is either not enough slack in the system, or not enough administrative imagination.

Senator Wallace Bennett

Early in the 1970s, Senator Wallace Bennett of Utah devised a solution to this problem, and persuaded the rest of Congress to endorse a nation-wide system of Professional Review Organizations (PSRO), run by the medical profession but paid for by Medicare. Although many physicians muttered about the "creation of new elites", and hospitals were particularly uneasy about the migration of power, the new system worked reasonably well. If the physicians in the local PSRO approved a service, it was paid for. If payment was denied by a local PSRO, an appeal to a state-wide body of physicians was provided. In that way, prevailing local standards were respected, while appeal to distant physician judges was also provided, to guard against local vendettas ganging up on someone they disliked. Inevitably, a few localities would elect an unsatisfactory PSRO, so a voluntary national organization was formed to educate, inform and defend the process, and better able to discipline it with peer pressure than might be supposed. The national organization was pleasingly benevolent, sometimes apologizing for its role as a necessary one to weed out constituent PSROs whose bad behavior might discredit the others and start up the usual chatter about professional self-government: The foxes were guarding the hen house, and must be replaced by wolves. The PSRO gradually adhered to an unspoken rule of rarely boasting of success; it saw its role as redirecting unsatisfactory behavior, not vanquishing wrong-doers. It soon became evident that successful PSROs were of two types, rural and urban. In localities where a single hospital served a county or more, physicians were of all types mixed together, and the need was to strengthen the emergence of the natural leaders, often by placing them on the PSRO board. In large cities, however, a sorting-out process had usually resulted in strong hospitals and weak ones; birds of a feather flew together. The weaker hospitals were soon identified and urged to elect stronger leadership; sometimes it was necessary to suggest that the institution might serve better as a nursing home. Throughout the process ran the threat of exposure; successful PSROs usually relied far more on peer pressure than the threat of withholding payment.

What ultimately defeated the PSRO was its success, not its failures. Many pre-existing elites were content to see a new governance structure fumble, but felt highly threatened by a successful one. Moreover, the AMA leadership seemed particularly concerned about the direction of "regulatory capture", and was not completely certain whether the PSRO was beginning to dominate the Washington bureaucracy, or the AMA House of Delegates, or a little of both. The PSRO fraternity was definitely a large national organization of doctors who knew and respected each other, and many of its leaders were in the AMA House. Matters finally came to a head in a famous vote opposing the PSRO, by 105 to 100. The opinion of organized medicine meant a great deal to Congress. When representatives of the PSRO next testified before the Senate Finance Committee, the Chairman of the Committee wryly announced the next speaker from the AMA was one who was "presumably here to explain to us the difference between 105 and 100." The PSRO law was soon amended, and insurance review took its place.

AMA House of Delegates

For the time being, utilization review in the future is apparently currently limited to Medicare, under the Medicare Accountable Care Act. With the foregoing bit of history to warn the Accountable Care Organizations about what they are getting into, a simple set of principles can be stated. Utilization review encounters two components of cost: the volume of care, and the price of the services. Doctors control the volume, hospital administrators control the prices. Determining the proper volume of services is a job for practicing physicians, alone and unhampered. To some extent, under the new law an incentive to keep it that way was created by sharing with the provider members a portion of any cost savings associated with the patient group. But the ability to change the sharing will probably be a a one-sided government decision unless the physicians fiercely insist that it remain negotiable. Agreeing that the physician voice should be dominant in the issue of service volume should not imply agreement to exclude their inspection of the prices of services. When physician income becomes linked to their choosing less expensive alternatives, physicians must not continue to be blinded to what the true cost of components truly is. While it remains conceded that hospitals and vendors must retain some flexibility in adjusting the ratio of charges to costs, any deviation from a standard bandwidth must be negotiated with the physicians affected. Past experience should be ample proof of the fairness of this demand.

The volume of most medical services at present is about right, but prices will keep rising when they bear little relation to the underlying direct costs. Furthermore, the Medicare (or similar) Cost Report of every hospital must annually report the ratio of cost to charges, probably by item rather than department. And this ratio must be monitored. Complexity is no argument against doing so; the Chargemaster system has never been resisted because of its complexity. It has been no secret for thirty years that a twenty-dollar aspirin tablet has a very high ratio of charges to its actual cost. Other items are provided at a loss, and the mixtures are highly variable between hospitals. Everyone concerned knows this situation is unsustainable, but everyone recognizes that total denial of reimbursement is entirely too destructive if no slack remains in the system. If it is successful an appeal mechanism will become necessary, because new treatments can be resisted by old treatments, but the optimum rate of change will vary by local situation.

Rather than overcomplicate matters, the goal should be total denial of reimbursement for denied services, because the public will demand it. It must however, be coupled with an adequate profit margin on approved services, to service the costs of retrospective review. Designation of the optimum ratio of cost to charges is a critical decision, much like the function entrusted to the Federal Reserve, of picking the best average interest rates for the national economy. If the agencies selected by Obamacare get this point very wrong, very often, the public must quickly be in a position to let everyone know of its displeasure.

The other source of circumvention is the hospital system of enforcing a physician hierarchy reporting to a physician chieftain, but insisting that the chieftain himself be financially beholden to the hospital administration. In that way, financial health of the institution sometimes dominates the health of the third parties, who then find a way to retaliate. if this issue is neglected a deadlock could affect the health of the patients. Since a three-way balance must be preserved, governance must be fairly shared three ways. Those who believe this is a minor issue because the third party obviously has final power, have a great deal to learn.

Some Ruminations About the Far Future.

George Washington soon learned he couldn't defend the country without taxes, so in time the Constitutional Convention lodged firm control over taxes in Congress. If we must have taxes, the people must control them. Except for defense, Congress has ever since been cautious about imposing taxes. Reducing taxes is quite in accord with this attitude, except net reduction of taxes, after raising them first, maybe a little tricky.

Net reduction of taxes is an important argument in favor of tax subsidies for Health Savings Accounts, using them as incentives to healthy people to "tax" themselves while they remain young and healthy. Investing the money internally, the subscribers can meanwhile protect it for their own use when they inevitably grow old and sickly. If interest greater than the rate of inflation is paid, the money returned should exceed the money invested. Investing the money tax-free further helps the process. If people get back more than they contributed, they recognize it as frugal, saving for a rainy day, and so on. Lifetime Health Savings Accounts were designed as a way to enhance this thinking, and are described in Chapter Two. Over thirty years have elapsed since John McClaughry and I met in Ronald Reagan's Executive Office Building in Washington, but there has been a continuing search for ways to strengthen personal savings for health while avoiding temptations to tax our grandchildren, or to make money out of harmless neighbors. Many of the financial novelties naturally derive from models in the financial and insurance industries. This book in largely a result of such thinking.o

But the biggest advance of all has nevertheless come from medical scientists, who reduced the cost of diseases by eliminating one darned disease after another, and meanwhile increased the earning power of compound interest -- by lengthening the life span. We thus luckily encountered a "sweet spot", where conventional interest rates of 6% or better take a sharp turn upward, while 3% of inflation still remains fairly constant. My friends warn me it must yet be shown we have lengthened life enough, or reduced the disease burden, enough to carry all of the medical care. That may well be true, but we seem close enough to justify giving it a trial as a partial solution. Before the debt gets any bigger, that is, and class antagonisms get any worse.

While Health Savings Accounts continue to seem superior to the Affordable Care proposals, you can seldom be quite sure about details until both have been given a fair trial. The word "mandatory" is, therefore, better avoided at the beginning, and awarded only after it has been earned. As a different sort of example, the ERISA (Employee Retirement Income Security Act of 1974) had been years in the making but eventually came out pretty well. In spite of initial misgivings, ERISA got along with the Constitution and its Tenth Amendment, and the McCarran Ferguson Act which depends on them. We had the Supreme Court's assurance the Constitution is not a suicide pact. So with this general line of thinking, and still grumbling about the way the Affordable Care Act was enacted, I had decided to hold off and watch. The 1974 strategy devised in ERISA, by the way, turned out to be fundamentally sound. The law was hundreds of pages long, but its premise was simple. It was to establish pensions and healthcare plans as freestanding companies, substantially independent of the employer who started and paid for them. Having got the central idea right, other issues eventually fell into place. Perhaps something like that could emerge from Obamacare.

Nevertheless, growing costs are ominous for a law proclaiming it intends to make healthcare Affordable. After several years of tinkering, this program stops looking like mere mission-creep and starts to look like faulty reasoning, maybe even the wrong diagnosis. While waiting for the Obama Administration to demonstrate how the Act's present deficiencies could justify rising medical prices and greatly increased regulation, I brushed up seven or eight possible improvements to Health Savings Accounts, just in case. They had been germinating during the decades after Bill Archer, of the House Ways and Means Committee, got Health Savings Accounts enacted. However, my proposed new amendments wouldn't change the issues enough to cause me to write a hostile book. More recently, some newer variations grabbed me: Health Savings Accounts might become lifetime insurance, and thereby save considerably more money, without the fuss Obamacare was causing. Furthermore, in 2007 the nation immediately stumbled into an unrelated financial tangle, almost as bad as the Great Depression of the 1930s. A depression might lower prices, but if it provoked accelerating deflation, we could be cooked. And thirdly, the mistake of the Diagnosis Related Groups was such a simple one, failure to understand it might not be a complete description. Seen in their best light, unrecognized mistakes were about to disrupt a functioning system, while simple solutions were sometimes ignored. Maybe the problem was trying to spend our way out of extravagance, made worse by massive transfers from the private sector to the public one -- actually, just the opposite of what Keynes proposed. And finally, individually owned and thus portable policies, always held the potential for a small compound investment income. But the recent thirty-year extension of average life expectancy is what really changed the rules. The potential for much greater revenue from compound interest made an appearance, simply waiting for the recession to clear, and to be given a chance to prove itself with normal interest rates.

Cost is the main problem. The Affordable Care Act might be making the wrong diagnosis, even though it used the right name. Employer-based insurance did create pre-existing conditions, and job-lock; losing your job did mean losing your health insurance, and often it was a hard choice. If employer-basing caused the problem, why didn't the business community fix it? Is the only possible solution to pass laws against pre-existing conditions and job lock? Maybe, even probably, a better approach was to break, soften, or change the link between health insurance and the employer. Sever that linkage, and the other problems just go away; perhaps less drastic modification could even achieve the same result. ERISA had discovered such a new concept, forty years earlier. Employers might well bristle at the obvious ingratitude, but real causes were creeping up on them unawares. Generations of patronizing legislators had found it easier to raise taxes on the big, bad corporations, than on poor little you and me. Employers had always received a tax deduction for giving away health insurance to employees, but now, aggregate corporate double taxation made it approach fifty percent of corporate revenue. Nobody gives away fifty percent of his income graciously; for its part, the Government thought it couldn't afford to lose such a large source of tax revenue. Big business prefers to avoid the subject, while big government tends to mislabel things. It's mainly a difference in style.
Another issue: the approaching retirement of baby-boomers slowly revealed that Medicare, wonderful old Medicare with nothing whatever wrong with it, had been heavily subsidized by the U.S. Treasury, which was now paying its 50 percent subsidy out of borrowing from foreign countries, notably Communist China. Medicare's companion, Medicaid, subsidized by an elaborate scheme of hospital cost-shifting, transferred most of its losses back to Medicare. And, guess what, the Affordable Care Act transferred 15 million uninsured people into Medicaid. By this time, Medicaid had become hopelessly underfunded and poorly managed, and 15 million angry people were about to find out what they had been dumped into. Other maneuvers affecting the employees of big business are delayed a year or two, so we may not discover what they amount to, until after the next election, four or even five years after enactment. Meanwhile, the Federal Reserve "solved" the problem of mortgage-backed securities by buying three trillion dollars worth of them. That may not seem to have anything to do with Obamacare, except it pretty well crowds out any hope of buying our way lose of this new trouble. And it sure underlined our central problem. There was nothing all that bad about the quality of a fee-for-service healthcare system which gave everybody thirty extra years of life in one century. Two extra years of life expectancy even emerged in the past four calendar years, in fact. Our problem is lack of money. Lack of money, big-time, and Obamacare was going to cost even more. Health Savings Accounts, new style, emerged from all this confusion as a possible rescue for the cost problem. All this, helped me decide to write this book.

There are some who persuasively argue our even bigger problem is Constitutional. Perhaps because I'm a doctor rather than a lawyer, I don't consider the Constitution to be our problem, I consider it to be Mr. Obama's problem. Because the 1787 Constitutional Convention was convened to unite thirteen sovereign colonies into a single nation -- and splitting it into more pieces wasn't on anybody's mind at all -- they reached a compromise, brokered by two Pennsylvanians, John Dickinson, and Benjamin Franklin. The small states wanted unity for defense, but they also wanted to retain control of their local commerce. They knew very well big states would control commerce in a unified national government unless something fundamental was done to prevent it. Speaking in modern terms, a uniform new health insurance system risks being designed to please big cities who mostly want to hold prices down and wakes up. Sparsely settled regions want -- or need -- to be able to raise prices, here and there, when shortages appear, of neurosurgeons or something like that. The full algorithm is: price controls always cause shortages, so shortages are only cured by paying a higher price. Eventually the Constitution was engineered to give power over all commerce to the several states; otherwise, the small states declared there would be no unified nation.

That's how we got a Federal government with only a few limited powers, reserving anything else to the states. Absolutely everything else was to be a power of the states, except to the degree the Civil War caused us to reconsider some details (which Franklin Roosevelt's Supreme Court-packing enlarged). So, that's why the 1787 Constitution effectively lodged health insurance regulation (among many other things) in the fifty states. Furthermore, The Constitution in the later form of the 1945 McCarran Ferguson Act thereby definitively insulates health insurance from federal regulation, reinforcing the point in a very explicit Tenth Amendment. This may regrettably create difficulties for interstate businesses, and for people who get new jobs in new states. Many states have too small a population to support the actuarial needs of more than one health insurance company, thus creating monopolies in many states and consequent resentment of monopoly behavior. So, work it out. But don't give us a uniform national health system.

There, in a nutshell, you have a brief restatement of the Constitution's commerce issue in the language of the Original Intent point of view. The Constitution as a living document is all very well, but there must be some limits to stretching its plain language; otherwise, it becomes hard to understand what in the world people are talking about.
City dwellers have trouble imagining anyone in favor of either higher prices or lower wages, let alone negotiable prices as the central bulwark of a different way of life. The Civil War toned it down a little, but if it is nothing else, our system is tough-minded and realistic, doesn't surrender easily. The U.S. Supreme Court may soon make the Constitution and its central compromises into the central issue of the day, or they may wiggle and squirm out of it. But as long as they keep squirming, cost containment will remain the central commotion of the Affordable Care controversy. In certain parts of the country, price controls are seen as just one step before shortages appear. That's not entirely unsophisticated. As we will see when we come to it, lifetime Health Savings Accounts could materially reduce the sting of the cost issue, and thus made the final decision for me to write this book. The Constitutional issue, possibly, lurks for another day.
The case in point. On the particular Constitutional point, I would comment whole-life insurance companies in the past seem mainly to have addressed the Federal-State issue by obtaining multiple licenses to sell their products, state by state. Which might bring the Constitutional issue right back, because most insurance companies in practice attempt to be compatible with the largest states, just as John Dickinson predicted they would. In effect, the smaller states are forced to accept whatever regulations the big states have chosen first, or else they might have to do without some new product. Whole-life insurance seems rather less subject to the problem of conflicting regulations because that industry inadvertently acquired another trump card. Life insurance mostly uses bonds in its portfolio, matching fixed income with fixed liability. That's a noble thought, but the additional practicality has surely occurred to insurers that state governments issue a lot of bonds, and insurance companies are major customers for bonds.

Lifetime HSAs could solve the problem of differing state regulations by allowing the individual subscriber to select a managing organization domiciled in "foreign" states, and thus indirectly if the individual chooses, select a different home state for its regulatory climate. After all, the nation has changed in two centuries from a culture of farming in the same local region most of your life, to one where it seems normal to change home states almost yearly. Businesses tied to local laws like insurance, do not move easily. The consequence for lifetime Health Savings Accounts might be a niche market for health insurance in small or sparsely settled states, or others which reject specific California or New York State regulations. Paradoxically, California presently has over a million HSA subscribers, so we must not underestimate the ingenuity of necessary workarounds. Eventually, local pressure mounts to change local regulation, doubtless balanced by the attractiveness of acquiring disaffected customers from out-of-state. All of this could be accelerated by internet direct billing. Consequently, to avert this, we propose:

Proposal 6: Companies which manage health insurance products, particularly Health Savings Accounts, should be permitted to select the state in which they are domiciled, but must, therefore, accept the domicile-state's regulation of corporations. Such licensed corporations may sell direct billing products into any other state; but products sold in another state must mainly conform to the regulations of the state in which the particular insurance operates, even to the point of disregarding any conflicting regulations by the state of corporate domicile.
Comment: Fifty years ago, the main function of any State Insurance Commissioner was to assure the continued solvency of insurance companies, so insurance would be available when the customers needed it. In the past few decades, however, many insurance commissioners with populist leanings have viewed themselves as protectors of the public against price gouging. That is, they adopt the big-city, big-state, point of view. One Insurance Commissioner attitude might thus insist on high premiums, Commissioners with another attitude might reward low premiums. Insurance companies should, therefore, welcome laws which make it easier to switch the state of domicile, since the attitudes of insurance commissioners can change very quickly.
Comment: Lifetime insurance was pressed forward by discovering the investment world's computer-driven innovations might make lifetime coverage far easier, less chance, and considerably more financially attractive, than coverage in self-contained annual slices. It is common knowledge in insurance circles that most term life insurance would be unprofitable, except so many people drop their policies. Therefore the attitudes of different states are not completely predictable. Some states are more aggressive than others in adopting new technology, for example.

Changes in Future Cost Volatility. At an advanced age, illnesses are more severe and more sudden. Right now, increasing longevity also mostly affects elderly people who live longer toward the end of life, by widening the interval between the last two major illnesses. You can never be entirely sure that will continue to be the case because medical care and its science constantly evolve. Furthermore, the cost of care often has more to do with the patent status of a drug or device, than with its manufacturing cost, sometimes turning a cheap illness into an expensive one.

One thing you can be sure of, restructuring health insurance in the way to be suggested in Chapter Two, would result in a general reduction of health insurance markup, by exposing local insurance to the more nationwide competition. Health costs themselves might skyrocket, or they might largely disappear, but in any event, will probably end up cheaper than by using other payment methods. No doubt critics will find large numbers of nits to pick since states retain the right to design idiosyncratic regulations, but new regulations would remain semi-optional for residents to the extent some neighboring state disagreed with them. No matter what else turns up, it will be pretty hard to match the cost variation from national marketing, demonstrated by ten minutes of internet cruising. In fact, the great obstacles to an effective system in the past, like "job lock" and "pre-existing conditions", present no obstacle at all to lifetime HSA within an HSA regulatory framework. Many problems would stand exposed as artificial creations of linking health insurance to employers, at least as long as health insurance remains modeled on term life insurance. Just change to a more natural system tested for a century as whole-life insurance, and such technical problems might simply vanish. Even slow adoption, based on public wariness about a new idea, has its advantages.

Although prediction of future sea change is uncertain, a brief review suggests future healthcare financing could very well become highly volatile, in both frequency and costliness. Therefore, spreading the risk with insurance gets more attractive to age groups unable to recover from major financial setbacks. Planners would do well to consider such things as last-year-of life insurance, or some other layer of special reinsurance. Immediately, such ideas raise the question of multiple coverages, with multiple tax exemptions providing room for gaming the system. No doubt, this was the thinking behind imposing regulations prohibiting multiple coverages with HSA, and probably eventually ACA as well. There must be a better way to handle this dilemma than forbidding multiple coverages. Multiple coverages are very apt to be exactly what we will need to encourage. Since living too long and dying too soon are mutually exclusive, consideration should be given to placing tax-deductibility at the time of service, and permitting deductions for the one that actually happens to you. It is thus possible to envision having four or five different coverages, but only one tax deduction. Since the purpose is to spread the risk, we might even go to the extreme of limiting the number of policies that charge premiums, into the one that actually happens to you, but paid out of a common pool. Planners with a more conventional background might well snort at such ideas. Until, of course, they themselves need a life-saving drug costing ten thousand dollars an injection for an extremely rare condition, under a patent which will expire in a year.

So, Let's Get Started with Pilot Experiments in the Willing States. The original idea of modestly improving the original Health Savings Accounts, continues to stand on its own two feet. It's what I would point to right away if you feel unsuited to the Affordable Care Act, or even to ERISA plans. Right now, anybody under 65 (who does not have, or whose spouse does not have) other government health insurance, including Veteran's benefits can enroll in an HSA, and any insurance company can offer a product containing minor variations of the idea, within the limits of the law. A number of Internet sites list sponsors for HSAs. For ease of understanding, we present this idea as if we had two proposals, term and whole life.

Actually, the term-insurance version is the only one which is currently legal, whereas the whole-life variety remains only a proposal. It seems necessary to regard the whole HSA topic as one proposal for immediate use, and a second proposal as a goal for future migration. In fact, almost 12 million people already are subscribers to the term variety, having deposited a total of nearly 23 billion dollars in them. The internet contains brief summaries of their policy variations. At this early stage of development, it is only possible to conjecture that small and sparsely populated states will probably develop more liberal regulations, while bigger and more densely populated states will probably develop bigger and more sophisticated sponsoring organizations. Anyone of the fifty states, however, might someday change its regulations to make itself attractive as a "home state", and at present, it is possible to transfer allegiance.

Unfortunately, current regulations exclude members or dependents of government health insurance programs including veterans' benefits, from depositing new funds in HSAs. It's easy to see why loopholes might allow an individual to get multiple tax exemptions in an unintended way. But loopholes are a two-way street. The early subscribers tend to be younger, averaging about 40 years of age, and probably of better than average health because it would probably require a horizon of two or three years to build up the size of an account to the point where an individual feels adequately protected. That's a result of a $3300 annual contribution limit, and a scarcity of variants of affordable high-deductible catastrophic coverage. This is one instance where "the lower the deductible, the higher the premium" puts the subscriber at risk for the first few years. And that, rather than loophole-seeking, is the reason early adopters are younger, healthier and wealthier; the regulations give them an incentive to be. Let's stop saying, "My way or the highway." If there is a reasonable fear of double tax exemption, the regulation ought to state its real purpose. Otherwise, "Let a hundred flowers bloom", regardless of oriental origins, is a better flag to fly. If a national goal is to get more people to have health insurance, we should be hesitant to impose impediments on it.

Medicare Buy-Out

Could Americans buy their way out of Medicare? Right now, no. In a few years, probably yes. A Medicare buy-out would have a few special complications. The transition to it might take thirty or more years, in view of the several ways it raises revenue and the varying ages of the patients involved. For example, from the time an individual starts his first job, until the age of 66, he is sustaining payroll deductions for future Medicare coverage. Also, from the age of 66 until he dies, he has Medicare premiums deducted from his Social Security payments. Each of these compartments aggregates about a quarter of the cost of the program, and the two methods keep more or less in balance over a lifetime, eventually paying half its cost.

The other half of the Medicare program cost is supplied through general tax sources, as a subsidy, and could continue to build up indefinitely. Eventually, an undeterminable portion of the subsidy is borrowed internationally, and that debt, like a credit-card balance, draws continuous interest. The Economist reports it would be more advantageous for the Chinese to buy American common stock. But using that approach, they would now own a fifth of the major corporations of America, which is politically unacceptable. Therefore, they bought American Treasury bonds. Depending on maturity, these bonds will eventually come due and must then be redeemed or refinanced. This arrangement can only continue with mutual consent of the two nations, and currently, the Chinese economy is shaky.

Moreover, it cannot be said the two funds will keep in balance. That's essentially true in bulk, but the actual revenue for each age cohort is largely based on its historical birth rate. Payroll deductions for the baby boom bulge have reached a peak and are about to decline to zero, whereas the Medicare premium bulge is just beginning, along with benefit payments. These repeated imbalances could prove troublesome to fund.

I wish I believed these receipts had been put into a bank vault, but in fact, they were likely co-mingled for general government expenses and spent long ago. Whether or not they are represented by accountants as paying for part of future Medicare expenses, or for current bridges and battleships, they are going to make a problem when the boomer bulge catches up with them. The formula will remain unchanged, but the proportion of payroll deduction will fall because the Millennial generation is fewer than the boomer generation, who are in turn more numerous than their parents as consumers of Medicare funds. The Treasury would certainly be concerned about any proposal to accelerate the payout to help a Medicare buyout. And even if an exchange of health funding is agreed to, the accounting problem of determining millions of balances of differing size is sure to be a headache. The balance in question is the net of 6.5%, less the rate on Treasury bonds, which could be either a positive balance or a negative one if the bond market and the stock market do not move in parallel. The unpredictability of markets is amply illustrated at present, when trillions of freshly printed bonds do not cause inflation, even for the mundane purpose of maintaining a stable currency. Even inflation targeting does not work as desired, currently reaching 1.5% when the Federal Reserve is trying to reach 2%.

In the longer run, Medicare buy-outs by the grandchild approach would stretch available funds over a longer time span, and augment them somewhat. Longevity is increasing, but the period of working life is not. People are retiring earlier, and they are entering the workforce later in life. Progressive taxation further reduces what working people have left over to spend, and eventually will make them less willing to support the protracted vacations of their children and their parents. So extra investment income will be needed, and shifting other savings around will probably relieve some of the pressure. Even so, it appears certain some elderly people will outlive their savings and must find a way to generate income with their leisure time. Along the same lines, we must also change the mentality of those who regard employment as a punishment to be avoided, but that is not my present topic. One small advantage of the unemployed Millennials is they are less likely to resist working long after they do get a job.

Summary of One Scheme of Medicare Buyout. Childhood health insurance, funded through health insurance for senior citizens. Owned by two people linked by redefining a birthday or some other strategy, all sounds like a peculiar idea. But let me persuade you to do a little math. At 7%, there are 9 doublings in a 90-year life. 2,4,8,16,32, 64, 128, 256, 512. That's rounding up on 6.5% and 85 years, which are closer to realistic estimates of future longevity and interest rate return, but no one can predict. Every dollar at birth (now redefined financially as the 21st birthday) is multiplied 289 times (the approximation process suggested 512). The grandparent aged 40 would have to add $450 to a sinking fund, and a grandparent aged 65 would have to contribute $27,000 to pay it in advance. Eventually, when things settle down and we have added four doublings, the contribution would be $42+ a person, so considerable juggling would be useful for a few years to smooth it out fairly.

Let's aim for $200 a year for five or ten years for everybody over age 40 or something of that nature. To pay for Medicare coverage, that's amazingly cheap. That's a rough estimate, of course. The overall effect is for the child to wear down his gift from grandpa from birth to age 21, paying $42+ at age 40 to support his own grandchild. He pays for his own care from age 21 to 66. During the transition, a late starter would pay $200 a year for several years after age 40 to make up for his late start, and others would pay the same, but starting later. There are a hundred ways to do this, and the choice would be for the most palatable appearance. We have other, possibly more acceptable, approaches, but this one links well with other goals.

Proposal 22: Congress should enable one voluntary transfer between the Health Savings Accounts of members of the same family, especially grandparents and grandchildren, or one transfer to a general pool for atypical families. Members of the grandparent generation who have no grandchildren may choose one substitute from outside the family, or leave the decision to the fund.
Proposal 23: Congress should permit voluntary buy-outs from the Medicare program, which include consideration of returning payroll deductions, and fair accounting for premiums, copayments and benefits already paid for by age groups in transition; but make little effort to encourage buyouts, until prices start to fall.

All in all, the conclusion of this analysis is that targeted programs are probably better for the thirty million people with special needs, so universal one-size-fits-all is probably not a good goal. Privatizing Medicare is a good goal, but we may not be quite ready for it. What's left is to fund the healthcare of children, by mildly overfunding the healthcare of seniors. That ought to end the discussion of this topic, except for demonstrating how you would control the money machine, exposed by the lack of gold or other standards for the currency. It's done by bringing balances to zero once in a while, and it was uncovered by working around the grandparent-grandchild transfer. By studying what's left, we reach the conclusion that fixing the children problem would do the most good for the least cost, and just about everything else has major disadvantages.

Let us then do this much without waiting to see what Obamacare is going to do. If the Federal Reserve's inflation targeting serves the purpose, this may be held in reserve, but the failure of Keynesians to reach 2% inflation when they try to inflate on purpose, should make everyone uneasy about their approach in a currency system which depends on printing money until short-term interest rates rise to 2%. As the man in the audience called out, "Haven't you been to the grocery store, lately?"

New Health Savings Accounts (N-HSA)

On June 26, 2015, the United States Supreme Court handed down its opinion on King v. Burwell , essentially leaving the Affordable Care Act unchanged. Much will be written about this controversial opinion, but little of it would have to do with Health Savings Accounts.

If anyone is interested in my opinion about the contested language in the law, it is derived from reading Jacob S. Hacker's book about the passage of the Clinton Health Plan, called The Road to Nowhere . The plan as described by Hacker, was to plant deliberately conflicting proposals in the House and Senate bills, so the real proposal could remain concealed until the House-Senate conference committee meeting, where the versions meant to survive could be identified. The final result could thus be released when the press was absent, preferably on the eve of a holiday.
It didn't happen in the case of Hillary Clinton's plan (which was never fully released), while in the case of President Obama's Plan, it was suspended in mid-operation by the death of Senator Kennedy. But the Senate version had been passed by a friendly Senate, so the House was forced to vote on an identical bill, to avoid returning to a conference committee convened by a newly hostile Senate. This version of the story fits the known facts pretty well and is reinforced by Hacker's subsequent membership on the Obama election team. Unfortunately, the Supreme Court's later decision constitutes an endorsement of a parliamentary maneuver which ought to be forbidden. Let's now break off this conjecture, and return to Health Savings Accounts.

My original intent in 2014 was to offer Lifetime Health Savings Accounts (L-HSA) in such a way the two programs (ACA and HSA) could be negotiated into a compromise that both could live with. In time, they would eventually evolve into hybrids that both would be proud of, or else lead the voters to state a clear preference for either one to be exclusive after they had a taste of both. Offhand, I could see no value for either one to be declared mandatory if that would still leave 30 or so million people uninsured. "Mandatory" did not seem like a helpful word to use, and often it seemed harmful to someone. In applying a computer search engine to the Affordable Care Act, I was unable to find a single use of the word "mandatory". Looking back on it, its premise was flawed but its intent was felt to be benign, so perhaps face-saving boilerplate was called for.

The central feature of the Savings Account has always revolved around the fact that youthful health care is usually cheap, while health care for the elderly is expensive. Many decades of tax-free compound interest at 6.5% would thus have been allowed to build up in some sort of escrow under both plans, until the age when healthcare really gets expensive. At that point, it would not matter which program it was assisting, and both sides would stop looking for a victory. By that time, I wouldn't be surprised if the deficits of the Medicare program had become so fearsome, and the debts of the program become so threatening, that both sides would be willing to consider modifications of Medicare. If not, subscribers to a buy-out had built up a six-figure retirement fund.

Medicare is already more than 50% subsidized by taxes and foreign borrowing, but the public scarcely knows it. I believe it is just a matter of time before the public realizes where it is going, but right now they see Medicare as getting a dollar's worth of healthcare for 50 cents if they think about it at all. I suspect it would take a full year or more of intense Congressional work to fill in the action details of a lifetime or lifecycle system, and maybe longer than that to re-direct public opinion. The proposal is voluntary, no politician dares to force it down anyone's throat. And the proposed incremental steps would also be voluntary. The investments would be in personal accounts, so no one could divert them for aircraft carriers. And the accounts would be lucrative, so no one needs to be afraid of their solvency.

Because compound interest on savings from the working years tends to rise after about age 45, a long period of Health Savings Accounts generates much more money than from a string of disconnected single years. Like the difference between term insurance and whole life insurance, you can't judge the improved investment of L-HSA by multiplying one C-HSA time your life expectancy, so it is a subtlety that two continuous programs would generate more funds than two separated ones.

Meanwhile, we have Classical Health Savings Accounts (C-HSA) which already have more than 15 million satisfied subscribers, steadily growing in number. Most of the Obamacare subscribers wouldn't want HSAs, and most of the HSA subscribers wouldn't consider the ACA plan, so total insured would increase. HSAs are described in the first chapter of this book, and in 35 years only about four or five improvements have come along, awaiting Congressional approval, but the bipartisan passage of them would calm the waters considerably. They need a tax deduction for the Catastrophic health insurance premiums, to make their owners just like everyone else. The easiest way to accomplish this is to extend permission for the Accounts themselves (which are tax-exempt) to purchase the catastrophic insurance which is required. Catastrophic health insurance is itself tangled in Obamacare regulations, which need to be revised, to deserve Presidential signature from any President. The annual deposit limits now need to be liberalized, and restated as total lifetime limits to account for the varying ages of new subscribers.

And new regulations need to accommodate the new phenomenon of passive investing, which is deservedly sweeping the nation, providing much lower transaction costs and higher average returns, which might be made still higher. Although HSAs are mostly self-administered, new investment managers are a little afraid of them, and well-established firms do not yet seem to recognize their enormous long-term potential. For these reasons, many early investors have been "savvy financial people", an image I am very anxious to see the change to "ordinary folks", without resulting in "high fees for rubes".

To return to the Supreme Court's King decision, the only version of HSA which is ready to go is the Classical one, which would still be improved by a few amendments, if the President is of a mind to cooperate. His own plan seems more or less in suspense, waiting for Big Business to emerge from its policy huddle, after two years of delay. Many tradeoffs and compromises can be envisioned for that coordination, of by far the biggest eligible group of subscribers. It is my commentary that employers' gift of health insurance in 1945 has long since been compensated for, by a corresponding drop in wages. So nothing but a tax exemption is left. The amount of money involved is so huge, it requires other issues to be brought into the discussion to avoid a stock market panic. It particularly needs to be emphasized that a loophole based on the corporate income tax rate is not at all -- not at all -- the same as an increase or decrease of corporate income at that rate. Getting a free lollipop at a 60% discount does not affect your company's income by 60%.

Nevertheless, the existence of fringe benefit tax dodges does create pressure to retain the high corporate taxes, and those taxes need to be reduced to keep our corporations from fleeing to tax havens abroad. My suggestion is to lower the corporate income tax in parallel with a comparable reduction of the employer tax dodge, a maneuver so delicate it ought to be overseen by the Federal Reserve, acting under a Congressional time limit. Such a proposal is so newsworthy it might well suck the air out of the room for Health Savings Accounts, and Obamacare, too. Everyone involved has an incentive to be cautious and reasonable, a difficult thing to be, during an election year. However, with prudence, breaking the logjam on the migration of American corporations to foreign locations could be the thing which suddenly gets everyone's attention.

New Health Savings Accounts (N-HSA)

Because it increasingly seems so unlikely a notoriously stubborn President would ditch his health plan at this late date, I turned my attention to seeing what could be done with using Health Savings Accounts for what's left. Obamacare is likely to be subject to twists and turns until after the November 2016 elections, and this administration has a history of preferring to operate out of sight. Therefore, my revised plan was to avoid the subject as much as possible, except for one thing. The savings in a portion of the Account would continue to accumulate as a tax-exempt investment account, available for extra medical expenses until age 66 when it turns into a retirement account. That is, an N-HSA account could exist untouched for as many as 45 years (21-66) without catastrophic backup insurance, or else if agreeable, with a catastrophic policy coordinated with an Obamacare policy. The purpose of this part of the structure was to provide a haven for a long-term buildup of funds, with as few financial drains on it as possible, while it stays out of the way. On the other hand, money seems no good if you can't spend it, so it needs some contingency exists.

It is possible to summarize a great deal of thinking by stating that it mostly can't be done. The evolution in healthcare has not reached the point where people aged 21 to 66 could save enough to support the rest of the population while taking care of their own health. In fifteen years that might become possible, but not yet. Even then, an additional thirty million people who are unemployable (prisoners in custody, disabled people, and illegal immigrants) would probably topple the system without some major reductions in the cost of chronic diseases (diabetes, Alzheimers, arthritis, emphysema, kidney failure) which might well take another fifty years. So we temporarily set this attractive idea aside.

Except for one thing, paying for children under 21. The system devised was to overfund Medicare slightly, gather investment income for a combined 104 years, and transfer the result to a grandchild or pool of grandchildren to pay for 21 years of healthcare. The grandparent transfers the money at the death after 83 years of compounding, but the child receives a lump sum at birth and erodes it to near zero by the 21st birthday. This is how 104 years are available to the next generation to grow a contribution of $42 to $27,000 while staying within the limits of the Law of Perpetuities. To do this requires passive investing of a total-stock index averaging 6.5% net of 3% inflation. According to records by students of the subject, the total stock market has averaged 11% returns for a century, in spite of wars and depressions. Right now, the main obstacle to achieving this is the community of middle-men in the financial world. It the problem continues to be a stubborn one, I advise taking delivery on the stock index security, putting it in a safe deposit box, and opening it decades later.

One issue comes up, that this system could produce unlimited amounts of inflated money by escalating the initial single payment. But it cannot do so if the account balance starts from, or must go to, zero. If loopholes are discovered, additional points of zero balance could be imposed.

Medicare Backup Insurance. In the original planning of Health Savings Accounts, it never seemed likely we would lack places to spend money earmarked for healthcare. However, 45 years really is a long time to have your money locked out of reach. The other side of this coin is the spectacular result of long-term passive investing. Just to throw in a couple of examples, the investment of $1000 at age 21 would result in a fund of $16,000 at age 66, and an investment of $1000 a year, every year from 21-66, would accumulate a fund of $246,375 at age 66, quite a nice retirement fund. And if you were lucky enough to live frugally, from 66 to 83 the $16,000 would grow to $ 43,800, and the $246,000 would grow to $680,165. If you grow uneasy about Medicare solvency, these sums would be nice to have in the bank. In effect, they could serve the function of catastrophic self-insurance, without the insurance.

As a matter of fact, it would be nice to include a provision that the Health Savings Account could dispense with the expense of catastrophic insurance when it grows to a point equalling it. It would dramatize the subtle transformation, from an account for drugstore expenses, into a serious investment tool. That won't happen soon, and it won't happen to everyone, but it is a realistic goal.

Healthcare for Children. Now, that leads into an entirely different direction. One of the perpetual headaches of designing health care finance is the fact that newborn babies are expensive. Part of that is due to inordinate malpractice costs for obstetrics, partly it is due to expensive care being devoted to premature babies and Caesarian sections. But mainly it is due to the parents being young people without much savings. It's pretty hard to design a pre-funded health care plan for an individual who starts the second year of life with a $10,000 debt.

His parents barely climb out of a financial hole before the child himself is ready to have children. As we have seen in earlier paragraphs, some frugal grandparents end up with more healthcare money than they can spend on their own health. American mothers average 2.1 babies apiece, and with a little fumbling it can be seen, that figure averages one grandchild per grandparent. If aggregate health care for children 0-21 averages $29,000, Grandpa could give a child a very nice start on life by rolling over his surplus at age 83 to a grandchild at birth -- if the laws permit such a thing, particularly if no family connection exists. (We'll have to leave unorthodox family sexual preferences to the matrimonial lawyers to sort out. )

With ingenuity, an additional 21 years can be added to the period of compound interest, and we've already shown what a difference that can make in an 83 (or maybe 93) year lifespan. In case you missed the point, when Grandpa relieves the cost of healthcare for a grandchild, the benefit is indirectly felt by the child's parents, although that isn't invariably true. Right now, the cost of a child's healthcare is the responsibility of the parent, so it's relatively fair.

Payroll Deductions and Premiums for Medicare. With 300 million citizens, a lot of exceptional cases can arise, and the foregoing probably doesn't contain enough incentives to start a stampede for N-HSA. Accordingly, let's consider forgiving the Medicare payroll deduction, in whole or in part, as a legitimate spending outlet. And if that isn't enough, consider waiving Medicare premiums. Both of these are legitimate health costs, so no one is violating the purpose of a tax deduction for Health Savings Accounts. Each one of them covers about a quarter of Medicare costs, so the funds are ample. (The present average costs of Medicare are about $180,000 per lifetime).

And finally, there's your Social Security contribution. SS isn't a medical cost, but it's a retirement cost, and that's what N-HSA could turn into. Reducing any or all of these expenses will free up a comparable amount of spendable income. If all else fails, consider abating your income tax. Income tax isn't a health expense, but it is often the largest item in a retiree budget. Reducing income tax could displace other funds designated for health costs, and hence indirectly could sometimes be considered a health cost, itself. There are plenty of ways to create savings with the government, and all you probably really need is their permission to do it.

To repeat, the purpose of all this is to find a way to subsidize the health expenses of children, which in my view is the unsuspected stumbling block for all self-funded lifetime proposals. Even the tax-evasive employer-based system gets into a tangle over it.

Subsidies for the Poor. We must conclude by mentioning poor people. It's, of course, true you have to start with some money to earn income from it. What are you going to offer poor folks, when the country is already deeply in debt? Well, it's practically impossible to say what Obamacare is going to do for them, although it will surely do what it can. The possibility of double-subsidies is still present when the situation is as unstable as it is, and the economy is as fragile as it is. So this proposal prefers to delay the subsidy discussion until Obamacare is also on the table.

To facilitate that discussion, this plan has been forced to organize the subsidy money for poor folks to come out of the age group 21-66, who are effectively the only real creators of wealth in the whole system. That coincides with Obamacare, and cannot be effectively discussed without including it. However, once it is coordinated, the subsidy to poor people could be quite substantial as a result of being placed at the far end of the compound interest curve and given enough years to work in an escrow account. If came to a showdown, the subscriber could take delivery on an index fund certificate and put it in a bank lockbox until it was needed. I propose separating subsidies from all healthcare and funding them independently. Independent of the intermediaries of their grants, that is.

To summarize, we start with a regular Health Savings Account with obstructions removed. In return for allowing the HSA to remain in the background, gathering interest, the HSA effectively assists Medicare. Assisting Medicare could mean helping in a Medicare buy-out, or it could be used to help Social Security. Or it could recirculate through Grandpa, to help the coming generation. An option for Grandpa to make the choice would simplify administration, but possibly unbalance something else.

Philadelphia Reflections

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

Obituary

George R. Fisher, III, M.D.

Bonds--Do They Have A Future?

Utilization Review

Some Ruminations About the Far Future.

Medicare Buy-Out

New Health Savings Accounts (N-HSA)

New Health Savings Accounts (N-HSA)