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.

Tax Credit Time

Here's how a discouraging proportion of indigent tax credits go right into the pockets of predators. {bottom quote}

Dr. Fisher

If we would only listen, most people have a fascinating story to tell. They usually talk quite freely. Take an illustration from the casual observations of an employee of a tax-preparation service. For him, late February to mid-March is "Tax credit time".

Normal behavior for tax-payers is to wait until the last possible moment before the April 15 deadline, not even thinking about unwelcome income taxes. Commercial tax-preparation services have few if any tax-paying customers in March, but are nevertheless extremely busy. The chairs of their waiting area are occupied by citizens, anxious for the government to pay taxes to them as early in the year as possible.

This startling role-reversal is a result of the tax credit system, which should not be confused with tax deductions. In the case of a tax credit, the government issues a check to make up the difference between what the individual earned during a year, and a certain stated income level. No doubt such benevolence is hedged with innumerable rules, restrictions, limitations, and exceptions, which tax preparation services must know all about and, in effect, certify by countersigning the completed tax form. Following that moment, there is a delay of up to three months before the green government check actually arrives. Since a loan against such pending payments is essentially risk-free, the tax preparation service is more than happy to lend it to the recipient. A fairly representative example would be to charge $200 for the preparation service, plus an additional $200 for the three-month loan of, typically, $7000 in tax credits. Where does that lump-sum payment usually go? Almost invariably, it goes to pay down the unpaid balances of credit cards, otherwise running up 18-30% interest, 23% typical. Since David Swensen of Yale's endowment fund is claimed as the world's best investor for achieving a 17% return, the welfare recipients who effectively get 23% by paying off credit cards -- are making a very good investment decision. Indeed, they aren't being swindled out of anything; they come into the tax preparation services loudly demanding just exactly this product. Although they are mainly unwed mothers in their 20s and 30s, they have obviously been well instructed by their friends about how to make quite a shrewd and entirely legal arrangement.

It's only when you ponder the further implications of this whole process that you begin to wonder if there isn't a more efficient way to handle it. Since the underlying security is the full faith and credit of the United States Government, the loan is essentially risk-free. At a time when commercial mortgages are charging about 6%, these loans imply an extra risk premium of at least 15%. If you regard the welfare client as merely a passive intermediary, a $7000 tax credit payment costs the government $1800 of it to deliver only $5200 to the client, net. That is, about a quarter of the cost of the program is going to loan sharks. Surely, a less costly method could be devised to transmit 12 monthly checks to the clients, or even 52 weekly ones.

Beyond that, there is the uncomfortable question of just where we are going with tax credits. Without begrudging a nickel to the poor unfortunates who are helped by this program, it is alarming to hear that low-income housing and historic rehabilitation of old structures are both rewarded with 20% tax credits, and the idea is spreading that it might be a good idea to pay for health insurance with tax credits. We've opened a door here that we may wish we hadn't opened. Echoing the views of Alexis de Tocqueville, Alexander Fraser Tyler has summed it up: "A democracy...can only exist until the voters discover that they can vote themselves money from the Public Treasury."

Comparatively Easy Financing for the Uninsured

Paul Krugman

Paul Krugman has been quoted as saying "Health Savings Accounts will increase the number of uninsured while benefitting only the wealthiest taxpayers." In fact, financing healthcare for the uninsured is pretty simple, if it would use Health Savings Accounts for pre-funded insurance. To do the very simple math (mind the zeroes, please), giving or loaning $5000 to 30 million uninsureds would cost a total of $150 billion dollars, or fifty billion a year for three years. By contrast, the annual deficit of Medicare alone is $250 billion. We'll get to the quibbles in a minute or two, but because most people aren't accustomed to dealing in numbers so large, let me introduce the jab that financing permanent health insurance for the uninsured would be quite a relief, compared with the unsustainable costs looming for the Affordable Care Act. The Federal Reserve currently spends $80 billion, every month, purchasing treasury bonds which perhaps few private investors should buy. The HSA subsidy cost would not be entitled to tax exemption, so it would actually be somewhat cheaper than $150 billion after-tax. This isn't a monthly cost we are describing or an annual one, it's a one-time expense, spread over three years.

To repeat the refrain, this one-time expense if invested would comfortably fund the average lifetime health costs of the uninsured population, except for one thing. The clients would have to buy a high-deductible health insurance policy (but only during the years the account is building itself up after being used), paying benefits in audited costs, not posted charges. People eligible for a subsidy would probably invade the fund for small expenses more than tax-sensitive people do so the statistics on existing use may be skewed. There would be startup administrative costs. State laws mandating small-cost items would have to be re-examined. Before all this cost shifting became popular with hospitals, the AMA offered its members a $25,000 deductible for $100 annual premium.

Yes, there would be an annual in-flow of new uninsured being born or imported, and so there would likely be a mechanism for recapturing the loan from those who move out of the subsidy category, structured so as not to act as an incentive to remain uninsured. No one can possibly predict future cures for disease or their cost/benefit, but that is true of any system. We hope the cures will increase and their costs will go down, but we certainly can't promise it. We can safely predict that reducing the cost of the uninsured would reduce everybody's liability for them, including the wealthiest. But also including minimum-wage earners, for whom a proportional reduction would be much more beneficial and welcome. And -- the 30 million recipients of this subsidy would undeniably be better off. It would, however, be entirely sensible to use part of any savings to reduce the national debt from earlier borrowings.

It would, however, be entirely sensible to use part of any savings to reduce the national debt from earlier borrowings. Furthermore, newspapers relate we have 7 million people in jail, and we steadily produce replacements when they are released. There is a constant inflow of new citizens mentally retarded enough they will never be self-supporting. The local school district where I live spends 8% of its budget on what it calls "special services for the mentally handicapped". The uninsured will always be with us. The American public is spending, and will always be spending, a great deal more on charitable healthcare than it gets credit for. We probably should be spending even more on these problems, but universal health insurance isn't going to do the job.

Without much doubt or dispute, the most serious problems with implementing this funding innovation would come from unanticipated effects, about which its opponents would be happy to expatiate without help from its proponents. In general, unanticipated effects begin to appear slowly, and if we remain alert, they may be minimized. But what about the unanticipated beneficial effects? If we really succeeded in wiping out the main causes of health cost, what then? Since an awful lot of people are employed within 17% of gross domestic product now spent, what in the world do we do with them if the expenditure is seriously reduced? Come to think about it, you really have me, there.

Employer Based Health Insurance

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Multi-Year Catastrophic Health Insurance

Since we propose a monitoring agency for health insurance, we might as well add a few suggestions for its formative years. Insurance companies with experience in the field should, of course, be represented, and although an actuary might represent a company, actuaries as a profession should be invited to the governing and advisory committees. My own professional experience suggests the President of a large and influential institution will often nominate himself. Then, after a meeting or two, he sends his chief deputy. But scattered through the field are apt to be occasional revered experts, working for obscure institutions with little political clout. These are the ones you want on the brainstorming committees, and they are more likely to be nominated by the professional organization than by the employing ones. For example, let's imagine multi-year catastrophic insurance has been proposed for multi-year pricing.

Catastrophic health insurance is an indemnity plan, and its tradition is to be a one-year renewable one. That is, it's term insurance when we are starting to propose the whole-life model might be cheaper and have some other advantages. What are the pros and cons of multi-year Catastrophic coverage? It's probably cheaper because of lower marketing costs but lacks the flexibility of changing its premium frequently, in rapidly changing marketplaces. And it provides the opportunity to drop a troublesome customer, which is to say it shifts power somewhat in the direction of the insurer. At least in the life insurance market, most of the profit derives from customers who drop their policies, an unfortunate incentive arrangement. A particular hazard is to attract a disproportionate number of clients who have hidden information about impending health problems, leading to "adverse selection" of clients. That leads to requiring physical examinations, which raise costs.

Although some arbitrary time period, let's say five years, may be arbitrarily selected, everybody would recognize that accurate statistics might suggest a better time interval, let's say three or seven years. The management of the company would naturally prefer a shorter period in which to make mistakes, but it might be just as satisfactory (and therefore cheaper) to pick a longer period. Such decisions are often made by a board member with a booming voice, but it would be better to base them on statistics derived from pilot studies. For example, in seven years the client is seven years older at the end of it, and more likely to have serious illnesses intervene.

That may or may not be decisive. With the one-year term, the client is likely to apply for the insurance "on the way to the hospital", that is after he suspects he is sick, but before the insurer can prove it. That leads to waiting periods of variable length, again decided by the booming voice unless you can produce data that he is wrong, and often not even then. Statistics are the timid actuary's friend when he is in conflict with an aggressive executive who came up through sales. The best statistics are derived from pilot studies aimed at the particular question you are asking.

A committee might have better suggestions, but my guess is there are two curves: a slowly increasing one, with age. And a sharply decreasing one with the duration of time since application. My guess is that cheaters will decline in a year, hypochondriacs in three years, and cancer victims in five. The incidence of cancer is age-related, possibly the others are, too. There may be some other factors at work, which will surface in the first study, and have to be examined in a second one. But eventually, it should be possible to prove just what added risk appears at what age, and how much that is attenuated by adverse selection.

Knowing the added risk, it should be possible to set age-related risk adjustments, modified by different surcharges for the first year, the second, etc. And then, it should be possible to judge the best number of years to cover, since the adverse selection should only appear in the first round, not much in the renewals. And finally, it should be possible to see whether lifetime catastrophic rates might be a commercially viable possibility. Once that is established, it becomes like the fable of Columbus and the egg; everyone can do it.

Co-insurance. This seems like a good moment to introduce the subject of co-insurance. Co-insurance is the main reason for supplemental insurance to cover it, resulting in two insurance policies to pay for one illness. One presumes it was the reason Obamacare does not include it. Although it masqueraded as a utilization control, giving the customer some skin in the game, a 20% co-pay feature had very little effect on utilization. It was customary because a 20% co-pay makes the premium 20% smaller, a 30% co-pay would make the premium 30% smaller, etc. It was a handy tool for midnight labor negotiations, but otherwise, it was a burden.

But in the example we are following, it is very handy to have a fixed relationship between the surcharge and the added risk. Therefore, a demonstrated added risk of, let's say, 14.7% in the first year after initial purchase, would be adequately covered by a 14.7% surcharge on the base rate for the age and gender group. In the second year it would be less, and in subsequent years, still less. The insurance design is simple, once you can define the risk. Almost any other risk would be subject to the same rules: tell me the risk, and I'll tell you the premium.

Let's Chat About Foundations: George Ross Fisher, M.D.

The following interview with George Ross Fisher, M.D., is presented to give specific answers to questions relating to the organization of the Foundation for Medical Care which is being developed by the Pennsylvania Medical Society. Dr. Fisher is a member of the Medical Care Appraisal Committee of the Pennsylvania Medical Society.

Q. Why are Foundations for Medical Care called Foundations?

A. Well, you will recall that Henry Kaiser started a closed-panel salaried group practice which he called the Kaiser Foundation. When the doctors in California, who felt threatened y Kaiser, started a rival organization, they wanted to use the word foundation, too. So the term has stuck to most similar organizations, even though it is a little confusing.

Q. Does the foundation offer a tax shelter?

A. Not at all, and you will see that the team is difficult to understand. Some foundations are chartered as non-profit corporations, and others as ordinary corporations. The ordinary corporations avoid taxes by avoiding profits, so there isn't much difference except in state regulation. The Pennsylvania Medical Care Foundation is a non-profit corporation.

Q. Now, slow down and be a little clearer. Suppose you give a one-sentence statement definition of what a foundation does.

A. It takes two sentences. A medical care foundation is a sort of insurance company. And it's also an organization for medical peer review. You might not think these two functions should be fused, but it really does make sense to do so.

Q. You have the microphone make sense out of it.

A. The foundation offers the patient unlimited medical care for a fixed insurance premium. It offers the doctor unlimited income on a fee-for-service basis. Obviously, there has to be peer review to prevent bankruptcy, just as there has to be an insurance pool in the middle. Of course, there must be a qualifying phrase when you talk about "unlimited" care and "Unlimited" physician income: It's unlimited if it's "necessary and reasonable." It's also limited if you run out of money.

Q. That seems to be pretty clear, but how does it get mixed up with the Bennett Amendment?

A. The Senate Finance Committee was very impressed with the Sacramento, Peer Review Plan, and the Bennett Amendment would make a similar nationwide plan. Senator Bennett noticed that, while you can't have prepayment without peer review, you can have peer review without pre-payment. So the paradox: there might be a great many foundations which limited themselves to peer review.

Q.What are the plans of the Pennsylvania Foundation?

A. The Pennsylvania Foundation has to go through some procedural steps before it can do anything, and it will not be ready to operate until the October 1972 meeting of the House of Delegates of the Pennsylvania State Society. At about that time, it ought to be ready to respond to whatever legislation is passed, whatever peer review contracts the hospitals sign with Blue Cross, and whatever spontaneous demand there is for peer review.

Q. What about the prepayment function of the Foundation?

A. It seems likely that this aspect will be slower to develop, although you can't be sure. This is an election year, and the Democratic State administration in Harrisburg gives signs of developing legislation affecting health delivery system. Since the history of foundations has been that they are a defense of the private practice, it seems likely that they will flourish to whatever degree that private practice feels threatened. There are a number of closed-panel pre-payment groups trying to start up in Pennsylvania. Probably the private practitioners in their neighborhoods will be the ones most interested in the foundation approach. The legal and administrative mechanism will be available if they are wanted.

Q. If the various government authorities don't raise problems, will that end the insurance matter?

A. Possibly, You have to ask yourself how much the public wants pre-paid medical care. The argument goes like this: The average citizen may want to budget his health expenses, having them deducted from his health expenses, having them deducted from his pay-check or however another manner. A pre-paid comprehensive health program allows the subscriber to spend his residual income without worrying about a rainy day. No doubt this argument has some attractiveness to some average citizens, but whether it has enough clout to overcome suspicions and conservatism is open to question.

A more serious stimulus might just come from industry, as surprising as that may sound. You will recall that may sound. You will recall that Blue Cross got its big push during the wage freeze of World War II. The industry was not allowed to raise wages, so it gave fringe benefits. This was the wage equivalent of a black market when labor was scarce. Well, we have another wage freeze today, as of course, you know.

Q. Would it be fair to call the foundation a contingency plan?

A. It might be accurate, but it wouldn't be fair. It takes an enormous amount of time and money to get a foundation organized. You don't make that sort of investment in a solution unless you think there is a reasonable danger that you will develop the problem it would solve. Rightly or wrongly the people active in it really think the foundation may have to be used.

Q. Well, our discussion has given me a fair idea of what the Pennsylvania Foundation for Medical Care is trying to do, but I now have lots more questions.

A. So do we.

How do you know it will succeed?

A. We were enormously impressed by a field trip to California Foundations. There are twenty-two of them, and the oldest has been running for 16 years. You never saw such enthusiastic cohesiveness among doctors as you find in the Stockton Medical Society for example.

Q. Maybe so, but how does the public react?

A. Public enthusiasm is what generates doctor enthusiasm out there, Over and over they proudly tell you of a recent subscription drive by Kaiser in the Foundation's area. Only 2% of the public signed up for Kaiser. The foundation approach is a way of presenting a legitimate alternative to closed panel threats to private practice, an alternative which the public usually prefers. The private practitioners have no need to form a union or to indulge in dubious competitive reactions.

Q. So, the foundation is a way of combating physician unions, too?

A. Let's get something straight. The foundation isn't against anybody. It merely seeks to provide an alternative for those who want an alternative. for those who want an alternative. Any doctor who wants to join the union is free to do so. We are talking about preserving legitimate options, with the faith that free competition will favor the best system. While we are on the subject of hostility, the foundation does not hamper group practice if the doctors want to practice that way within the foundation, nor does it hamper teaching hospital systems.

Q. It sounds that way to me.

A. Not at all. There is a portion of the public who wish to budget their health costs through payroll deductions or annual premiums. The Foundation sets up an insurance pool to make this possible. The foundation does not care whether the doctors are in group practices, medical schools, or solo private practice.

Q. If that's the case, what's all the fuss about?

A. There are probably only two principles on which the foundation must do or die. The first is that reimbursement is on the basis of fee-for-service at some point in the chain from subscribers to doctor. The Mayo Clinic, for example, collects fee-for-service from the patients and pays its doctors salaries. There is no objection to the doctors choosing to receive salaries as long as the payments mechanism has squeezed through the fee-for-service keyhole at some point. The second essential issue is physician domination of the foundation. We have no objection to competing with identical systems which are consumer domination, stockholder-dominated, or government-dominated. We merely wish to provide a physician-dominated alternative for those who wish to enjoy it. We have faith that a physician-dominated foundation will flourish in such open competition because we have faith that the premium will be wrong to offer the public a physician-dominated system without a free choice of systems with other types of domination. We are putting our faith in competition to achieve the greatest good for everyone, and since we are for competition, we have to have it.

Q. The foundation must have a competitor?

A. Certainly, and for a variety of reasons. First, to achieve the public image of being in favor of a free economy rather than, let us say, a non-free one. Secondly, the vulnerability of the premium. As everyone in Pennsylvania has come to realize, the insurance commissioner has to approve your premium or your request for premium increases. If you are running the most expensive system, you are apt to be badly squeezed. We are willing to risk the gamble that other plans will be more expensive. The exposure of being the only insurance scheme of this type is what is too dangerous to risk.

Q. All right, if you like the competitors so much, what's wrong with them?

A.Probably more through accident than design, the competitors have some features we would rather not embrace. Compulsory salaried practice, for example. As I mentioned, we have no objection to the group being paid fee-for-service and then paying salaries to their members. What seems objectionable to entrepreneur psychology is the use of compulsory salaries as a mechanism of cost control. Doctors on salary forgo the opportunity t work as hard as they please and thus, to make as much money as they can. Having less incentive to work, the salaried doctors have to be supervised, watched, suspected, threatened. Since most of the public receives salaries they see nothing abnormal about this, but most doctors selected medicine as a profession in order to escape it. So the entrepreneurial doctors have sort of a bargain with the public. They say they will work all kinds of ridiculous hours in return for being left alone. The converse of this is this is that universal doctor salaries lead to instant thirty-hour weeks. If you are already neglecting your family to work a sixty-hour week, you aren't very happy about the prospect of an instant doctor shortage.

Q. Why not build more medical schools?

A. Because the public won't adequately fund the schools we already have. And probably, it would be cheaper to have the doctors work longer hours than to build more schools. After all, a great deal of the overtime returns to the public as income taxes. But the foundation can't solve that issue, and we are talking about foundations.

Q. Sorry to digress. What's wrong with consumer-dominated plans?

A. From our point of view, there is nothing wrong, and I told you we need them as competitors. The flaw from the competitive point of view is that public-dominated plans are likely to be more expensive and to emphasize the wrong services. That is, they may well overspend on amenities and underspend on medical advances. It seems more likely that a doctor-dominated plan would recognize and drive toward new methods and new equipment, possibly sacrificing amenities to achieve it. It seems to me that this type of competitive tension is in the public interest.

Q. What's wrong with leaving things the way they are?

A. Not much, and it seems very likely the public will be very slow to enroll in any prepayment scheme. The public now has the choice of Blue Cross plus Blue Shield as a prepayment scheme, as well as self-insurance. By self-insurance is meant you save your money and pay your bills when they are due. A few people do what I do, which is to skip the Blues and buy a major medical plan with a low deductible.

Q. How does the foundation differ from the Blues?

A. In two ways. The first is to offer comprehensive ambulatory coverage, which includes everything done in a doctor's office, including routine check-ups. The second is to try to include the Blue Cross coverage under the umbrella of risk.

Q. Why include Blue Cross?

A. You have now touched on the most difficult issue of all. Everyone recognizes that public concern is aroused by the disproportionate rise in hospital costs. If we didn't have a cost-plus situation with Blue Cross and the Hospitals, we probably wouldn't be worried about delivery systems. By including the hospital cost in the package, we hope to provide an incentive for the doctors to reduce hospital utilization.

At the same time, it is important to recognize that the cost-plus feature of Blue Cross created some very important advantages. The first was that expensive medical advantages could be buried in the budget for later reimbursement by Blue Cross. You didn't have to fight with the insurance commissioner every time a new drug came along, or a new x-ray machine. Blue Cross completely ignored the hospital bill and paid actual costs. It was a free ticket for waste, but it was also a way of keeping up with progress.

Now, there was a second advantage to the system. It paid for expensive features which one hospital provided and another hospital didn't, but which the community in general needed. A good example would be nursing schools. If hospital A had a school and hospital B didn't, in effect hospital A was training nurses for both of them. And the cost was shared by all subscribers in their premiums, regardless of where they were hospitalized or even if they were never hospitalized or even if they were never hospitalized. You hear it said that it is unfair to make the sick patient pay for nursing education, but that isn't what happens. All subscribers pay for it in their premium, and Blue Cross distributes the money where it is spent.

Q. Yes, I just recently learned that Blue Cross does not pay hospital charges, but rather on some cost formula of its own. But why is this a problem for the foundation?

A. Because it leads to a vast difference in costs, they will very likely destroy the teaching hospitals and community hospitals. If you give the doctors an incentive to reduce hospital costs, they will very likely destroy the teaching hospitals by shifting their patients to cheaper institutions. The Pennsylvania Hospital has already announced the closing of its nursing school, and no doubt others will have to. In five years this sort of thing would totally disrupt medicine.

Q. Shouldn't the government pay for these things?

A. The nursing schools happen to be a discrete component of what we call quality medicine; no doubt you could isolate them and get federal funds even in an era of serious federal deficits. But how are we to pay for cardiac surgery? The prospect of total federal involvement in all expensive medical advances is too hideous to contemplate. There is an appalling serenity to the way a great many people are talking about this. For an era that has become alarmed about disturbing the forces of nature, this would be major pollution of medical ecology.

Q. What's to be done about it? No one wants to destroy teaching hospitals.

A. Unless you simply exclude hospital costs from the foundation package (as HIP in New York has done), two major strategies seem available. They are complicated to explain.

Q.OK, go ahead.

A. The first approach would be to recognize that a certain portion of the premium dollar isn't insurance at all, but a donation. That proportion could be put into an Education and Development Fund, which would be distributed for the purposes we mentioned, and which when exhausted could not invade the remainder of the pool for health care insurance. You still have the battle with the Insurance Commissioner when an unbudgeted medical advance appears, but at least everyone knows what is under discussion. And there is no scapegoat to hang it on.

Now, the second approach is experience rating. That's a fancy insurance term for saying that the premium will be less if all your subscribers, through experience, cost less than the standard plan. An underwriter is a person who pockets the profits in return for the risk that he will have to pay for deficits. Perhaps you begin to see that a consumer-dominated plan means that the consumer is the underwriter. And why, we believe, the physician-dominated plans will turn out to be cheaper. Because doctors are in a much better position to hold costs down.

Q. But if the doctors are the underwriters for the Blue Cross experience rating, don't they continue to have an incentive to shift their patients out of teaching hospital?

A. Yes, indeed. Although, if you isolate the education and development costs into a fund, it might not be entirely a bad thing to put pressure on the teaching hospitals to get their straight patient-care into line.

However, hospital cost accounting is so difficult that the teaching or metropolitan hospital is probably always going to cost more. A plausible solution would seem to be to divorce experience-rating from dollars and put it on a point-system of relative values. In the simplest possible terms, a ten percent reduction in patient days would result in a ten percent experience rating in dollars.

Q. How could the Blue Cross cope with a situation where there were more points than dollars? Where would the dollars come from?

A. You are assuming that the teaching hospitals are infinitely elastic and that every patient prefers them. On the contrary, the big move is from the city to the suburbs. Since the teaching beds are fixed, for every foundation patient into one of them there would have to be a non-foundation patient out of them. In the rather unlikely event that there was a net movement of all patients into teaching hospitals, only one solution is possible. The higher total cost of medical care to the community would have to be paid for by a Blue Cross premium increase. We've had them before. In this case, however, the public would be asked to pay for something it was asking for.

Q. Who asked for the recent 40% rise in Philadelphia Blue Cross premium?

A. I'm afraid we are wandering off the subject of foundations again, but let me make an example of that. Since 70% of hospital costs are personnel costs, we have to ask whether it is likely that either salary rates or the number of employees increased by 40% in two years. Since that obviously isn't the case, the Philadelphia Blue Cross situation has something special about it. That special thing was an extension of benefits to outpatients. The idea was that paying for x-rays and lab for outpatients would reduce the incentive to hospitalize. There was in fact no subsequent decrease in hospital admissions, and the out-patient benefits killed the Blue Cross finances. This experiment was mandated by the Insurance Commissioner of Pennsylvania two years earlier (Mr. Denenberg predecessor).

The whole thing illustrates the pollution-of-the-ecology theme. We are all in the medical space-capsule together, and we must all involve ourselves in disturbances of the environment by anybody. There is nothing for anybody to gain by slandering the closed-panel groups, the teaching hospitals, the full-time doctors, or the American Hospital Association. To the degree that we get polarized, we are going to lose the atmosphere of goodwill which is essential for everyone's survival.

Q. That sounds like a good curtain speech to me, but I have some more questions.

A. I can take it if you can.

Q. You haven't' talked much about peer review.

A. . Maybe not, but perhaps you can see why effective peer review is absolutely essential to the financial survival of the foundation, and the public will like that. Conversely, the risk feature of the insurance plan is a big help to peer review. One of the great surprises of the visit to California was to find how little friction the peer review system generated among the doctors subject to review. They had a very good reason to want effective peer review (on others, of course) and so they acquiesced to it for themselves. After all, the best way you have of knowing that the others are under control is to see how review touches your own practice.

Doctors commonly share the suspicion that, while their own practices are clean, there are a lot of other guys who may be abusing things. I happen to believe that there is a very minor degree of conscious abuse at the present time in Pennsylvania and that an effective peer review mechanism will prove it. If the reviewer isn't finding much abuse, he has to be quite an egomaniac to create much friction. We have a few doctors of that variety, of course, but we can cope with them. What we can't cope with is an enormous book of rules and regulations formulated by people remote from the problems. The methods and procedures of peer review can change with the times, but they need to meet only one standard: keep the premium cheaper than Kaiser. If the salaried systems, with their rulebooks and time clocks, can't keep their costs under control, you have demonstrated all that the public wants to know. Everybody in the foundation then gets a year-end bonus, and please keep out of our hair.

Q. Are the . unions going to let you get away with this?

A.You seem to need to learn what Mr. McGovern discovered: organized labor has become pretty conservative lately. Surprisingly, one needs to be a little concerned about big corporations. When a company gets bigger than a certain size it is run by managers, not entrepreneurs. Many of them had Mr. Kenneth Galbraith as a stimulating teacher. My hunch is that the fear of higher taxes is what will make friends of the corporation managers, not a commitment to free competition. The unions are beginning to see that closed panel groups have some of the features of a company store.

Q. What future would you personally like to see?

A. Like every other doctor, I wish the whole problem would go away and let me tend to my patients. Maybe the international money crisis will divert the government to other concerns. But very likely the pre-payment idea will slowly gather a small constituency, and I believe the public is entitled to choose pre-payment if it likes. I would hope that we could depolarize the consumer-dominated and doctor-dominated plans. Since you are entitled to dominate to the extent that you are at risk, I would hope that we can devise intermediate situations between all-or-none. (Again, allowing for the free option of all-or-none for those who want all, or none.)

Philadelphia Reflections

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

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George R. Fisher, III, M.D.

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Let's Chat About Foundations: George Ross Fisher, M.D.