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.

What's a Repo?

Bear Stearns

On St. Patrick's Day, 2008, Bear Stearns became insolvent and was given to J P Morgan. The Federal Reserve assumed all risks. Effectively, the fifth largest investment bank in America was nationalized for $2 a share, because no private bank would buy it at any price. A year earlier it was worth $170 a share, even one trading day earlier it sold for $26.

At the heart of this catastrophe were "repo's", or repurchase agreements. (They should not be confused with repossessions of cars and other hard goods bought on time, which are also called repo's.) Although most people had never heard of the high-finance version of repo's, the volume of these instruments had grown to $5 trillion by January 2005, presumably even several times larger than that when they caused the nationalization of Bear Stearns. Newsmedia accounts offered the guess that 16% of the resources of the whole financial sector were caught in open repo's when the music stopped. Repo's must be awfully good, or awfully bad.

J.P. Morgan

They were both of these things at once. Like so many innovations in the post-computer era, they offered a major cost saving to an inefficient transaction system but were so successful they overwhelmed the institutions which flocked to their reduced cost. The unanticipated difficulties might have been imagined, but they were not adequately guarded against. Essentially, these loans limited exposure to a few days, a feature that made them appear quite safe. Unfortunately, tons of these loans could expire simultaneously if a rumor got started and everyone held off using them for a week. With a run on a bank, at least people have to take action to withdraw their money; but with these things, simple inaction quickly led to massive cash shortages at the bank. Speeding up the loan process had made it cheaper, but made it vulnerable.

Hedge Fund

Consider the inefficient complexities of a bank loan. The bank wants collateral, perhaps 80% of the value of the loan. The ability of the borrower must be investigated, a clear title assured, and papers arranged for transfer in case of defaulted collateral. Lawyers must organize the agreements, and it all takes time, costs money. To go through all this for a one-week loan for anything less than huge transactions is simply not practical. So the idea was devised to sell the collateral to the lender at a discount, together with a repurchase agreement to buy it back at full price. For safety sake, the discount could be greater than the interest cost, and part of it returned if all went well. The collateral could be held by a third party, who essentially guaranteed the details while the collateral itself never moved. Bear Stearns had perfected these variations at such favorable prices they dominated the market for them with hedge funds; the margin for error narrowed when interest rates dropped, cash got scarce when investors got uncomfortable, the whole hedge fund industry was suddenly paralyzed, and everything connected to hedge funds was frozen secondarily. Much of this was handled automatically by computers, so huge volume made it impossible for anyone to know who might be insolvent. It seemed comparatively harmless to decline to play this game for a few days, but it was not harmless if most people decided to do so at the same time. The daily variations of interest rates and/or duration generate a ("Gaussian") normal distribution curve for the risk, predicting serious deviations will occur once every two centuries. But when events --even false rumors -- suddenly get everyone's attention at once, small daily fluctuations no longer bear much relationship to the frequency of violent fluctuations. Once-in-a-century events start to happen every few years. At those times, the public stops speaking with a million voices and shouts in unison. Quite often, there is no cataclysmic event to trigger it. Like the conversational babel of a dinner party, it can all stop at once for no particular reason.

Black Swan

The mathematics of this matter could be taught to a tenth-grade math class. It starts to get beyond everybody's anticipation however when two such Black Swan events happen at the same time. In this case, an unanticipated pause for a few days bumped into the rule that non-bank institutions must mark their portfolios to the market every day. But for days at a time in this crisis, there could be no trading in certain issues; there was no market to mark to. How then can you demonstrate your solvency -- what might your competitors be hiding during these unannounced market holidays? And, since banks are in the same pickle but aren't required to mark to market, how can you trust them to pay bills? When you see European banks, who must obey new rules called Basel II, go bankrupt and get nationalized, how can you be sure American banks, who needn't obey Basel II until 2009, are any safer bet?

Progress is progress, but how much of it can we cope with?

The 'repo' market from Marketplace on Vimeo.

Franklin's Admirers on TV

Brian Lamb

There are now three channels of C-span, continuous cable television programs about the influence of history on current problems. Sessions of Congress and its committees, the speeches of the President, political campaigns, are shown as they happen. But interviews and book reviews are shown in parallel, with an opportunity to go into the archives and organize originally unrelated programs into seminars on a current topic. The editor, Brian Lamb, has a light hand and considerable impartiality. But he's there, all right, organizing blogs into topics just as Philadelphia Reflections tries to do.

Friends Select School

This similarity of design had been floating around for some time, but it suddenly came into focus when I recognized myself in the front row of an audience on C-span, listening to Edmond S. Morgan talking at the Friends Select School about his new book on Benjamin Franklin, a few months earlier. Thank goodness I bought a book and had it autographed because the filming had been so unobtrusive I hadn't noticed it at the time. I clearly need to have haircuts more frequently. Professor Morgan's parting words that evening had stayed with me, "Franklin doesn't tell you everything about himself, but what he tells you -- is straight." That's quite a compliment from the editor of 47 volumes of Franklin's work.

Walter Isaacson

Grouped with this tv portrayal of me as a groupie were interviews with Walter Isaacson and some other Franklin biographers, taken at other times and placing focus on other aspects. Here again, more insights emerged from quickly considered replies to audience questions than from the prepared speeches. Replies to questions from the audience are more in a class with blogs, anyway. Whenever you get all of the adjectives and qualifications polished, you sometimes don't say what you mean. Perhaps that last comment can be rearranged to say that answering audience questions occasionally leads to blurting out precisely what you mean.

And so, two unrelated audience answers need to be linked. A question about Franklin's love life caused Isaacson to refer to Franklin as a lifelong seducer. From the unknown mother of his illegitimate son William, to the simultaneous flirtations with two famous French ladies that took place when he was an octogenarian, and not overlooking several other affairs with Cathy Green and Polly Stevenson and allusions to others, Franklin was obviously an accomplished seducer in the full meaning of the term. It is thus legitimate to suspect the techniques of seduction at work in many of his public projects, from starting the Library Company to persuading the French to help the Revolution. He discovered late in life what many have discovered about the life of a diplomat, and quickly recognized that he was already pretty good at what that seemed to entail. Let's slide to a slightly different application of that idea.

Benjamin Franklin and French Women

By the accident of hostess seating arrangement, I found myself seated next to two historians from Harvard, and somehow it came out that one of them felt that Franklin loved the French. Simply loved them. Somehow that didn't sound quite right when compared with Franklin's early years of mobilizing Pennsylvania to fight the French, starting the first National Guard militia unit to defend Philadelphia against French raiders, supporting General Braddock's expedition with his own money, urging the British government to sweep the French from Canada, and working most of his life to assemble the colonies and Great Britain into one world-dominating entity. It's true that 18th Century France was at the peak of scientific achievement, and Franklin the inventor of electricity was quickly taken in by the European scientific community, but that's scarcely the same thing as loving France. Louis XVI was in fact quite annoyed by all the attention Franklin was receiving. And so the scholar on TV went on to say that correspondence had been discovered in which Franklin quite casually remarked that during the Continental Congress he had strongly argued that America should stand alone and have no European allies. Congress it seems overruled him, so he dutifully set sail for France to seduce them.

We come to another chance social encounter. On a recent trip to Paris, the GIC had taken along as a speaker, no less than a member of the Open Market Committee of the Federal Reserve, a Governor of a Federal Reserve District, to speak about the threat of inflation and currency crisis. In time, our French hosts invited us to look at some documents of interest, like the Louisiana Purchase. Lying on the table was the original treaty between America and France, signed by B. Franklin. The Federal Reserve governor, making small talk, observed that Franklin sweet-talked the French into loaning America too much money, eventually leading to their bankruptcy. As I recall, my rejoinder was, "Well, just print some more paper money, right?" It was intended to be a jocular remark, but it somehow didn't seem to be taken as such.

Economics of the Oct. 4th, 1779 Attack on Fort Wilson

Fort Wilson

From time to time new essays appear, arguing the dynamics of the Fort Wilson episode of mortal gunfire between factions of the Revolutionary cause. The event is an important one, primarily because it involved several men who later were Delegates to the Constitutional Convention. It thus casts light on the economic attitudes of leaders in the effort to revise the constitutional rules for property which emerged eight years later, in 1787. It seems entirely fair to suppose that men whose lives were threatened by armed conflict with their comrades had retained a vivid memory of it.

In the first place, what became an armed conflict over inflation and food shortages was a dispute which lasted more than six months, and had the outlines of an organized conflict between two parties, the Republicans and the Constitutionalists, which also had the character of class warfare between the merchant class and the yeomanry of the city. And although the economic issues involved in this conflict have been recurrent over a period of two hundred years, they are not exactly settled in the minds of the two parties. It is not too much to suppose that a representative group of present-day Democrats and Republicans would divide into majorities who favor or oppose price controls, and who are made up of two social groups who style themselves Upper Class and Middle Class.

The most recent analysis of Fort Wilson was written by John K. Alexander in October 1974 in the William and Mary Quarterly and it is quite a detailed examination of the subject. Although the Pennsylvania militia did much of the fighting and introduced the extraneous issue of patriotic military service, they were escalating the anger of what probably started as reasoned economic debate. Food scarcities appeared on every side and were severe, prices were skyrocketing. It seemed entirely reasonable to this faction that merchants were raising their prices deliberately, taking advantage of food shortages, and that it was the responsibility of government to side with consumers to hold prices down with price controls. The merchant class calling themselves Republicans were led by Benjamin Rush, who grew concerned that the more numerous common people would use their majority power to injure the interests of the merchants. In the eyes of the consumer class, it is merchants who mainly set prices, and thus merchants must be restrained by government. Their viewpoint was augmented by the writings of John Locke, who had urged that the common people have a right to take arms when government fails them.

Almost any modern economist would reflexly assume that the problem underlying this agitation was inflation, generally styled "paper money" by the politicians of that time. If too much money is in circulation, prices will go up. If price controls are imposed in that situation, goods will disappear from merchants' shelves, black markets will appear, and with people starving, riots will break out. Academic economists should not jump to the conclusion that this is obvious, however. Prices are normally set by the sellers, held in check by consumers refusing to buy at unfairly high prices. When inflation takes place, it does so in hidden places away from public view. The treasury issues paper money, or reduces the gold content of coins, or the Federal Reserve issues bonds, more or less unseen by the public. Prices rise but for a while, the public assumes they are rising in the traditional way, by merchants raising their prices. The public is often slow to believe that a new dynamic is affecting prices because they want to believe they still have the power to reduce prices by verbal abuse of the merchants; it doesn't work. By the time the public realizes things are serious, things are mostly getting out of hand. Starvation is now a real thing, and the discovery of hoarding by merchants who will not sell at the old prices only heightens their conviction that sharp dealing is responsible for their pain. When they finally become convinced that their government is the enemy in this matter, it becomes time to distrust government officers, and maybe to burn a few buildings. The better-educated class is generally the more affluent class, with more reserves to protect them longer from the pain which the lower classes are experiencing.

On the other hand, if you are Robert Morris trapped in Wilson's red brick house, with bullets whistling past your ears, you also forget about economic theory and consider how you can save your own life, liberty, and pursuit of happiness. As the immediate danger subsides, you ask how situations like this can be avoided. And while it cannot be claimed that America has cured itself of inflation, much stronger controls are now in place, and many more of the public understand where the fault lies. If paper money inflation ever gets seriously out of hand as it did in Germany, Austria, China, and Zimbabwe -- the public will tolerate almost anything else to avoid it, for as long as a century afterward. But not indefinitely, as long cycles of history unfortunately demonstrate.

REFERENCES

The William and Mary Quarterly Oct,1974 Vol. XXXI No. 4 Page 589 John K. Alexander

Amazon

How Do I Pay My Bills With These Things?

To summarize what was just said, we noted the evidence that a single deposit of about $55 in a Health Savings Account in 1923 would have grown to more than $300,000, today in the year 2014 because the economy achieved 10% return, not 6.5%. Therefore, with a turn of language, if the Account had invested $100 in an index fund of large-cap American corporate stock at a conservative 6.5% interest rate, it might have narrowly reached $6000 at age 50, which is re-invested on the 65th birthday, would have been valued at $325,000 at the age of 93, the conjectured longevity 50 years from now. No matter how the data is re-arranged, lifetime subsidy costs of $100 can be managed for the needy, the ingenuity of our scientists, and the vicissitudes of world finance-- within that 4% margin. We expect that subsidies of $100 at birth would be politically acceptable, and the other numbers, while stretched and rounded, could be pushed closer to 10% return. Much depends on returns to 2114 equalling the returns from 1923 to 2014, as reported by Ibbotson. At least In the past, $55 could have pre-paid a whole lifetime of medical care, at the year 2000 prices, which include annual 3% inflation. An individual can gamble with such odds, a government cannot. So one of the beauties of this proposal is the hidden incentive it contains, to make participation voluntary, and remain that way. No matter what flaws are detected and deplored, this approach would save a huge chunk of health care costs, even if they might not be stretchable enough to cover all of it.

And if something does go wrong, where does that leave us? Well, the government would have to find a way to bail us out, because the health of the public is "too big to fail" if anything is. That's why a responsible monitoring agency is essential, with a bailout provision. Congress must retain the right to revert to a bailout position, which might include the prohibition to use it without a national referendum or a national congressional election.

This illustration is, again, mainly to show the reader the enormous power 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 to 10% by financial transaction technology. The weakest part of these projections comes in the $300,000 estimate of lifetime healthcare costs during the last 90 years. That's because the dollar has continuously inflated a 1913 penny into a 2014 dollar, and science has continuously improved medical care while eliminating many common diseases. If we must find blame, blame Science and the Federal Reserve. The two things which make any calculation possible at all, are the steadiness of inflation and the relentless progress of medical care. For that, give credit to -- Science and the Federal Reserve.
Blue Cross of Michigan and two federal agencies put their own data through a formula which creates a hypothetical average subscriber's cost for a lifetime at today's prices. All three agencies come out to a lifetime cost estimate of around $300,000. That's not what we actually spent because so much has changed, but at such a steady rate that justifies the assumption, it will continue for the next century. So, although the calculation comes closer to approximating the next century than what was seen in the last, it really provides no 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.
The best use of this data is, measured by the same formula every year, arriving at some approximation of how "overall net medical payment inflation" emerges. That is not the same as "inflation of medical prices" since it includes the net of the cost of new and older treatments and the net effect of new treatments on longevity. Therefore, this calculation usefully measures how the medical industry copes with its cost, compared with national inflation, by substituting new treatments for old ones. Unlike most consumer items, Medicine copes with its costs by getting rid of them. Sometimes it reduces costs by substituting new treatments, net of eliminating old ones. It also assumes a dollar saved by curing disease is at least as good as a dollar saved by lowering prices, and sometimes a great deal better, which no one can measure. Our proposals therefore actually depend on steadily making mid-course corrections, so we must measure them.

Our innovative revenue source, the overall rate of return to stockholders of the nation's largest corporations, has also been amazingly steady at 10% for a century. National inflation has been just as non-volatile, and over long periods has averaged 3%., perhaps the two achievements are necessary for each other. Medical payments must grow less than a steady 10%, minus 3% inflation, before any profit could be applied to paying off debt, financing the lengthening retirement of retirees, or shared with patients including rent seekers. But if the profit margin proves significantly less than 10%, we might have to borrow until lenders call a halt. No one can safely say what the two margins (7% + 3%) will be in the coming century, but at least the risks are displayed in simple numbers. Parenthetically, the steadiness of industrial results (in contrast to the apparent unsteadiness of everything else) was achieved in spite of a gigantic shift from control by family partnerships to corporations. Small businesses (less than a billion dollars annual revenue) still constitute half of the American economy, however, and huge tectonic shifts are still possible. Globalization could change the whole environment, and the world still has too many atom bombs. American Medicine can escape international upheavals in only one way -- eliminate the disease. Otherwise, the fate of our medical care will largely reflect the fate of our economy. To repeat, it is vital to monitor where we are going.

Revenue growing at 10% will relentlessly grow faster than expenses at 3%. Our monetary system is constructed on the gradations of interest rates between the private sector and the public sector. It would be unwise to switch health care to the public sector and still expect returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, although it indirectly affects the value of the dollar. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings are possible, but only to the degree, we contain last century's medical cost inflation closer to 3% than to 10%. The simplest way to retain revenue at 10% growth is by anchoring the leaders within the private sector.

How Do You Withdraw Money From Lifetime Health Insurance?

Four ways should be mentioned: Debit cards for outpatient care, Diagnosis pre-payment for hospital care, Transfers from escrow, and Gifts for specified purposes.

Special Debit Cards, from the Health Savings Account, for Outpatient care.Bank debit cards are cheaper than Credit cards, because credit cards are a loan, while the money is already in the bank for a debit card. Some pressure has to be applied to banks or they won't accept debit cards with small balances. Somehow, the banks have to be made to see that you start with a small account and build up to a big one. So it's probably fair for them to insist on some proof that you will remain with them. The easiest way to handle this issue is to make the first deposit of $3300, the maximum you are allowed to deposit in one year. That's difficult for little children and poor people, however, so there must at least be some way to have family accounts for children. You just have to shop around, that's all.
After that, all you do is pay your medical outpatient bills with the debit card, but we advise paying out of some other account is you can, so that the amount builds up more quickly to a level where the bank teller quits bothering you. Remember this: the only difference between a Health Savings Account and an ordinary IRA for practical purposes, is that medical expenses are tax-exempt from an HSA. Both of them give you a deduction for deposits, and both collect income tax-free. If for some reason you do not expect a tax deduction, don't use the HSA, use something else like an IRA. Alternatively, if you can scrape together $6000, you are completely covered from deductibles, and co-payment plans are to be avoided, so then an HSA with Catastrophic Bronze plan is your best bet. If you have a bronze plan, you probably get some money back if you file a claim form, but those rules are still in flux at this writing. The expense of filing and collecting claims forms is one of the reasons the Bronze plan is more expensive, but that's their rule at present.
1. Spend it on medical care. Specially modified benefit packages are possible.
2. Spend less, but spend the savings on something else. The program should not be permitted to do this, but Congress should do it in the general budget.
3. Borrow it, and inflate it away on the books. But inflate the borrowings at some lower rate. The customary techniques of a banana republic.
4. Fail to collect the premiums/payroll deductions.
After 1., which is the essential purpose of the whole thing, the most attractive choice is 4. because a gradual transition is needed, with incentives offered only to those who choose to participate. However, borrowing may be necessary to transfer surplus revenue to age groups in deficiency.

Spending Health Savings Accounts. Spending Less. In earlier sections of this book, we have proposed everyone have an HSA, whether existing health insurance is continued or not. It's a way to have tax-exempt savings, and a particularly good vehicle for extending the Henry Kaiser tax exemption to everyone, if only Congress would permit spending for health insurance premiums out of the Accounts. To spend money out of an account we advise a cleaned-up DRG payment for hospital inpatients, and a simple plastic debit card for everything else. Credit cards cost twice as much like debit cards, and only banks can issue credit cards. Actual experience has shown that HSA cost 30% less than payment through conventional health insurance, primarily because they do not include "service benefits" and put the patient in a position to negotiate prices or be fleeced if he doesn't. Not everybody enjoys haggling over prices, but 30% is just too much to ignore.

No Medicare, no Medicare Premiums. We assume no one wants to pay medical expenses twice, and will, therefore, drop Medicare if investment income is captured in lifetime Health Savings Accounts. The major sources of revenue for Medicare at the present time fall into three categories: half are drawn from general tax revenues, a quarter come from a 6% payroll deduction among working-age people, and another quarter are premiums from retirees on Medicare. All three payments should disappear if Medicare does, too. Therefore, the benefit of dropping Medicare will differ in type and amount, related to the age of the individual. Eliminating the payroll deduction for a working-age person would still find him paying income taxes in part for the costs of the poor, as it would for retirees with sufficient income.

Retirees would pay no Medicare premiums. Their illnesses make up 85% of Medicare cost, but at present, they only contribute a quarter of Medicare revenue. However, after the transition period, they first contribute payroll taxes without receiving benefits, and then later in life pay premiums while they get benefits, to a total contribution of 50% toward their own costs. But the prosperous ones still contribute to the sick poor through their income taxes. There might be some quirks of unfairness in this approach, but its rough outline can be seen from the size of their aggregate contributions, in this scheme. At any one time during the transition, working-age and retirees would both benefit from about the same reduction of money, but the working-age people would eventually skip payments for twice as long. Invisibly, the government subsidy of 50% of Medicare costs would also disappear as beneficiaries dropped out, so the government gets its share of a windfall, in proportion to its former contributions to it. One would hope they would pay down the foreign debt with the windfall, but it is their choice. This whole system -- of one quarter, one quarter, and a half -- roughly approximates the present sources of Medicare funding and can be adjusted if inequity is discovered. For example, people over 85 probably cost more than they contribute. For the Medicare recipients as a group, however, it seems like an equitable exchange. This brings up the subject of intra- and extra-group borrowing.

Escrow and Non-escrow. When the books balance for a whole age group, the managers of a common fund shift things around without difficulty. However, the HSA concept is that each account is individually owned, so either a part of it is shifted to a common fund, or else frozen in the individual account (escrowed) until needed. It is unnecessary to go into detail about the various alternatives available, except to say that some funds must be escrowed for long-term use and other funds are available in the current year. Quite often it will be found that cash is flowing in for deposits, sufficient to take care of most of this need for shifting, but without experience in the funds flow it would be wise to have a contingency fund. For example, the over-85 group will need to keep most of its funds liquid for current expenses, while the group 65-75 might need to keep a larger amount frozen in their accounts for the use of the over-85s. In the early transition days, this sort of thing might be frequent.

The Poor. Since Obamacare, Medicaid and every other proposal for the poor involves subsidy, so does this one. But the investment account pays 10%, the cost of the subsidy is considerably reduced. HSA makes it cheaper to pay for the poor.

Why Should I Do It? Because it will save large amounts of money for both individuals and the government, without affecting or rationing health care at all. To the retiree, in particular, he gets the same care but stops paying premiums for it. In a sense, gradual adoption of this idea actually welcomes initial reluctance by many people hanging back, to see how the first-adopters make out. Medicare is well-run, and therefore most people do not realize how much it is subsidized; even so, everyone likes a dollar for fifty cents, so there will be some overt public resistance. When this confusion is overcome, there will still be the suspicion that government will somehow absorb most of the profit, so the government must be careful of its image, particularly at first. Medicare now serves two distinct functions: to pay the bills and to protect the consumer from overcharging by providers. Providers must also exercise prudent restraint. To address this question is not entirely hypothetical, in view of the merciless application of hospital cost-shifting between inpatients and outpatients, occasioned in turn by DRG underpayment by diagnosis, for inpatients. A citizens watchdog commission is also prudent. The owners of Health Savings Accounts might be given a certain amount of power to elect representatives and negotiate what seem to be excessive charges.

We answer this particular problem in somewhat more detail by proposing a complete substitution of the ICDA coding system by SNODO coding, within revised Diagnosis Related Groupings,(if that is understandable, so far) followed by linkage of the helpless inpatient's diagnosis code to the same or similar ones for market-exposed outpatients. (Whew!) All of which is to say that DRG has been a very effective rationing tool, but it cannot persist unless it becomes related to market prices. We have had entirely enough talk of ten-dollar aspirin tablets and $900 toilet seats; we need to be talking about how those prices are arrived at. In the long run, however, medical providers are highly influenced by peer pressure so, again, mechanisms to achieve price transparency are what to strive for. These ideas are expanded in other sections of the book. An underlying theme is those market mechanisms will work best if something like the Professional Standards Review Organization (PSRO) is revived by self-interest among providers. Self-governance by peers should be its theme, ultimately enforced by fear of a revival of recent government adventures into price control. Those who resist joining should be free to take their chances on prices. Under such circumstances, it would be best to have multiple competing PSROs, for those dissatisfied with one, to transfer allegiance to another. And an appeal system, to appeal against local feuds through recourse to distant judges.

Deliberate Overfunding. Many temporary problems could be imagined, immediately simplified by collecting more money than is needed. Allowing the managers some slack eliminates the need for special insurance for epidemics, special insurance for floods and natural disasters, and the like. Listing all the potential problems would scare the wits out of everybody, but many potential problems will never arise, except the need to dispose of the extra funds. For that reason, it is important to have a legitimate alternative use for excess funds as an inducement to permit them. That might be payments for custodial care or just plain living expenses for retirement. But it must not be a surprise, or it will be wasted. Since we are next about to discuss doing essentially the same thing for everybody under 65, too, any surplus from those other programs can be used to fund deficits in Medicare. But Medicare is the end of the line, so its surpluses at death have accumulated over a lifetime, not just during the retiree health program.

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.