The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
In the case of the American Constitution, the initial problem was to induce thirteen sovereign states to surrender their hard-won independence to a voluntary union, without excessive discord. Once the summary document was ratified by the states, designing a host of transition steps became the foremost next problem. The dominant need at that moment was to prevent a victory massacre. The new Union must not humble once-sovereign states into becoming mere minorities, as Montesquieu had predicted was the fate of Republics which grew too large. Nor must the states regret and then revoke their union as Madison feared after he had been forced to agree to so many compromises. As history unfolded, America soon endured several decades of romantic near-anarchy, followed by a Civil War, two World Wars, many economic and monetary upheavals, and eventually the unknown perils of globalization. When we finally looked around, we found our Constitution had survived two centuries, while everyone else's Republic lasted less than a decade. Some of its many flaws were anticipated by wise debate, others were only corrected when they started to cause trouble. Still, many tolerable flaws were never corrected.
Great innovations command attention to their theory, but final judgments rest on the outcome.
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Benjamin Franklin advised we leave some of the details to later generations, but one might think there are permissible limits to vagueness. The Constitution says very little about the Presidency and the Judicial Branch, nothing at all about the Federal Reserve, or the bureaucracy which has since grown to astounding size in all three branches. Political parties, gerrymandering, and immigration. Of course, the Constitution also says nothing about health care or computers or the environment; perhaps it shouldn't. Or perhaps an unmentioned difficult topic is better than a misguided one. Gouverneur Morris, who actually edited the language of the Constitution, denounced it utterly during the War of 1812 and probably was already feeling uncomfortable when he refused to participate in The Federalist Papers . Madison's two best friends, John Randolph, and George Mason, attended the Convention but refused to sign its conclusions, as Patrick Henry and Thomas Jefferson almost certainly would also have done. On the other hand, Alexander Hamilton and Robert Morris came to the Convention preferring a King to a President, but in time became enthusiasts for a republic. Just where John Dickinson stood, is very hard to say. Those who wrote the Constitution often showed less veneration for its theory, than subsequent generations have expressed for its results. Understanding very little of why the Constitution works, modern Americans are content that it does so, and are fiercely reluctant about changes. The European Union is now similarly inflexible about the Peace of Westphalia (1648), suggesting that innovative Constitutions may merely amount to courageous anticipations of radically changed circumstances.
President Franklin Roosevelt
One cornerstone of the Constitution illustrates the main point. After agreeing on the separation of powers, the Convention further agreed that each separated branch must be able to defend itself. In the case of the states, their power must be carefully reduced, then someone must recognize when to stop. If the states did it themselves, it would be ideal. Therefore, after removing a few powers for exclusive use by the national government, the distinctive features of neighboring states were left to competition between them. More distant states, acting in Congress but motivated to avoid decisions which might end up cramping their own style, could set the limits. The delicate balance of separated powers was severely upset in 1937 by President Franklin Roosevelt, whose Court-packing proposal was a power play to transfer control of commerce from the states to the Executive Branch. In spite of his winning a landslide electoral victory a few months earlier, Roosevelt was humiliated and severely rebuked by the overwhelming refusal of Congress to support him in this judicial matter. The proposal to permit him to add more U.S. Supreme Court justices, one by one until he achieved a majority, was never heard again.
Taxes Disproportionately
Although some of the same issues were raised by the Obama Presidency seventy years later, other more serious issues about the regulation of interstate commerce have been slowly growing for over a century. Enforcement of rough uniformity between the states rests on the ability of citizens to move their state of residence. If a state raises its taxes disproportionately or changes its regulation to the dissatisfaction of its residents, the affected residents head toward a more benign state. However, this threat was established in a day when it required a citizen to feel so aggrieved, he might angrily sell his farm and move his family in wagons to a distant region. People who felt as strongly as that was usually motivated by feelings of religious persecution since otherwise waiting a year or two for a new election might provide a more practical remedy. However, spanning the nation by railroads in the 19th Century was followed by trucks and autos in the 20th, and then the jet airplane. While moving residence to a different state is still not a trivial decision, it is now far more easily accomplished than in the day of James Madison. A large proportion of the American population can change states in less than an hour if they must, in spite of a myriad of entanglements like driver's licenses, school enrollments, and employment contracts. The upshot of this reduction in the transportation penalty is to diminish the power of states to tax and regulate as they please. States rights are weaker since the states have less popular mandate to resist federal control. It only remains for some state grievance to become great enough to test the present power balance; we will then be able to see how far we have come.
High Gasoline Taxes of Europe
Since it was primarily the automobile which challenged states rights and states powers, it is natural to suppose some state politicians have already pondered what to do about the auto. The extraordinarily high gasoline taxes of Europe have been explained away for a century as an effort to reduce state expenditures for highways. But they might easily be motivated by a wish to retard invading armies or to restrain import imbalances without rude diplomatic conversations. But they also might, might possibly, respond to legislative hostility to the automobile, with its unwelcome threat to hanging on to local populations, banking reserves, and political power.
It helps to remember the British colonies of North America were once a maritime coastal settlement. The thirteen original states had only recently been coastal provinces, well aware of obstructions to trade which nations impose on each other. Consequently, they could readily design effective restraints to mercantilism within the new Union. Two centuries later, repeated interstate quarrels provided fresh viewpoints on old international problems. As globalization currently becomes the central revolution in trade affairs of a changing world, America is no beginner in managing the intrigues of international commerce. Or to conciliating nation states, formerly well served by nation-state principles of the Treaty of Westphalia, but this makes them all the more reluctant to give some of them up.
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
Those with long experience on audit, budget, and finance committees will recognize the truth of the maxim: Most of the weak points in any budget are to be found as unrealistic revenue projections. The committee will generally begin with a fairly good estimate of future costs, almost always just last year's costs, plus a little. Next year's revenues are harder to challenge, so they are stretched to achieve a "balanced" budget. In seeking to apply the Health Savings Account idea to American healthcare, however, the reverse is -- amazingly -- more likely to be true. Ibbotson and others have published extensive data on past experiences with large-scale investing. This data lends credence to projections of what large masses of passive investors are likely to earn over long periods of time. These data can be adjusted for taxes and inflation, leaving a pretty good idea of what "real" returns for Health Savings Accounts are likely to be. However, in the case of rapidly improving healthcare and rapidly expanding lifespan, it is the costs which are unpredictable. The HSA accounts are tax-exempt. Furthermore, the stock market is apt to rise faster than medical costs at first, and then to rise more slowly. In this analysis, we adopt the position that medical costs and stock prices are both inflated at the same rate at the same time, and result in washing each other out. That may or may not balance out over long periods, but will have to remain the assumption until we have enough data to make mid-course corrections for it. For now, gross stockmarket returns will have to remain a surrogate for net, or "real" returns. At least, we do have nearly a century of reliable data about gross stockmarket returns.
So, let's convert a problem into an advantage: Using the Health Savings Account to represent revenue, we propose that the goal is just to make as much revenue as we can. We could pretend future revenue is greater than it is likely to be, but that self-deception only leads to the sudden discovery of future deficits. Our refurbished goal is to wring as much revenue as we can get out of circumventing the "pay as you go" approach, and let it go at that. We do have good data about gross revenue from different asset classes, so we can make an adjustment for short-term liquidity needs. It the result proves to be more than we need, we'll let our grandchildren figure out what to do with the excess. If it proves to be less than we need, why cry about it? We might still go over the fiscal cliff, but it will take more time. Meanwhile, we can set up monitoring systems which can tell us how much we have to cut, or subsidize, and how long it will probably take to get to that point. If anyone has a better proposal, let him step forward.
If we employ U.S. equity total-market index funds, as I advise, plus U.S. Treasury bonds for a small proportion of cash needs, it would be difficult to challenge the safety of the investment, or its low management cost (less than a tenth of a percent), or even its political neutrality. Fifty percent of investors will claim they can do better than this, but fifty percent will certainly do worse. Because Health Savings Accounts are federally tax-exempt, it is a practical certainty that much more than fifty percent of ordinary investors will do much worse, therefore will express delight and disbelief at how well the accounts have done. Not everyone will do exactly as well, however, because the investments are made at different times. It could be argued that an index fund of small stocks would do better than the total market, but the price you would pay is more volatility.
Because everyone is not born on the same day, some will begin to invest at the top of a cyclical market and be forced to watch the market go down; others will do the reverse, and get better returns for a while. In the long run, this sort of thing will not make much difference, but some will start investing later in life and have less time to recover their losses (or lose some of their gains). That will be particularly true at the beginning of the program, so early frugality will be rewarded and early squandering will be punished. Some will be unable to afford to invest the full amount for variable periods of time, and the later this happens, the less it will be smoothed out in time. But the government and life insurance companies keep statistics; it is possible to adjust these predictions with as much preciseness as desired. Those with access to the data can certainly provide the public with as much predictive accuracy as needed. About revenue.
Predictions about expenses, or in this case medical costs, are a medical issue more than a Wall Street one. Epidemics will occur, diseases will be eliminated by science, patents will expire, societal attitudes will change. There is nothing we can do about some things, other things require effort and investment. Let's return to the conclusion which is reached by most people: make as much money as you can, and hope fervently that it will be sufficient. Meanwhile, we can monitor trends, argue about causes, occasionally avert mistakes. From the design point of view, the biggest mistakes we can make are to put the wrong people in charge, and the founding fathers had a solution for that: create an adversarial tension between the revenue advisors, like actuaries, accountants, and financial experts--and the spending advisors, like physicians, architects, drug manufacturers and technologists. When the original plan has to be amended, the public must be involved, through the press, the academics, and the politicians. Considerations like this lead to the supposition that we need two secretariats and a constitution. Overlooking the secretariats would be civil society, so some linkage should be constructed between the secretariats and professional membership organizations. In constructing a constitution, later amendment should be made somewhat difficult but it must be made possible. Because large amounts of money are involved, access to it should be discouraged, and information about it should be extensive.
Experience with a number of "independent" public/private entities is available. The big mistakes of the World Bank and International Monetary Fund were made at the Breton Woods Conference when they were created, and although some towering geniuses like Maynard Keynes were involved, some simple tinkering with the minutes of the meeting got past the final review. In the case of the Federal Reserve, the originators in 1913 were determined to balance public and private control, but over time, political influence has steadily increased. In the case of benevolent legacies, the intention of the donor has gradually been undermined by the professional managers of the institution, to the point where it is virtually certain that many donors are rolling in their graves. The conclusion I reach is that the best way to reinforce the best intentions of founders of perpetual organizations is to prevent their product from having a perpetual horizon. After seventy-five or a hundred years, they should be disbanded and subject to a fresh look at their constitution.
Although this book promised, and I hope delivered, a detailed discussion of how Health Savings Accounts might work if Congress unleashed them, the original question remains. Where does so much money come from? Well, in one sense, it comes from saving $350 per year, starting at age 25 and ending at 65, earning 8% compound interest. That's if longevity remains at 83. We assume the average person has medical expenses, but we don't know how to estimate them, so we put $350 a year in escrow, and average person has to contibute more cash for medical expenses at 80 cents on the dollar (the tax exemption) until experience shows he has five or ten years pre-paid, or until he reaches an estimated cash limit. Somewhere around that point, he can stop contributing, both to the escrow fund and to incidental medical costs, until the fund catches up with him. In plain language, he gives himself a loan if his expenses are too high. These figures are based on current average costs, so the money is calculated to be present in the fund but poorly distributed. After experience accumulates, these numbers can be readjusted from present over-estimates..
The prudent way to manage future uncertainties is to over-fund them and transfer any surplus to a retirement fund.
Planning For The Future.
Curiously, if longevity goes to 93, it would seemingly only require $150 per year in escrow instead of $350. Longevity could only add ten years if we had some medical discoveries in the meantime, so let's say both the added longevity and the added cost of it, appear fifty years from now. Our hypothetical average person born today contributes $150 per year from age 25 to age 50, when he discovers increased longevity requires him to contribute $ yearly until he is 65. After that, he is all paid up until he dies at age 93. Yes, he has Medicare to account for, but his payroll withholding has already paid a quarter of Medicare cost, and if he pays Medicare premiums he will have paid another quarter of Medicare. His lifetime Health Savings Account escrow contribution would contribute $ per year, which is the present deficit of Medicare, currently being subsidized.
The amount of contribution to the escrow fund could be reduced to actual costs over time, but the prudent way to manage uncertainties is to over-fund them, planning to roll any surplus over to a retirement account. Three-hundred-fifty million Americans, times $350,000 apiece in lifetime medical costs, results in a number so large it requires a dictionary to pronounce it correctly. Cutting it in half still suggests a financial dislocation of major proportions, so out of whose pocket would it come? Even if it's a win-win game, dumping that much money into the economy sounds destabilizing. These are not legitimate reasons to avoid it, but it seems hardly credible it could happen without someone noticing a big difference. What does it do to the monetary system?
If it is assumed funds generated by this system are ultimately used to pay off accumulated debts, the result should be some degree of deflation. The Federal Reserve has already purchased several trillion dollars worth of bad debt so debt repayment would not seem to pose a threat. By contrast, inflation could become a threat if corporate taxes are reduced too rapidly, but presumably, we have learned the lesson of lowering Irish corporate taxes too rapidly. Because of international ramifications, we have to assume this threat would be recognized. Because of the nature of compound interest, it has the least effect in its early stages, and there would be sufficient warning of inflation to mobilize action. Interest rates would probably rise, but there is a cushion of several years of subnormal rates, and most people would feel the elderly have suffered enough from low rates to justify some relief.
A certain amount of trouble resulted from using the "pay as you go" model, in which current premiums pay for current expenses. That is, the money from young healthy subscribers pays the bills of old, unhealthy, ones. By that reasoning, the original subscribers in 1965 got a free ride from Medicare and never paid for it. The debt has been carried forward among later subscribers, and although it is a debt which still remains to be paid, it seems very likely no one would ever collect it. Each generation makes it a little bigger by adding subscribers and running up hidden debt charges, but at least it is accounted for. In a way, there is enough guilt feeling about this matter, that it would probably be politically safe to create a balancing fund, to be used in case there are monetary issues with this unpaid indebtedness.
Let's remember that a major part of the health financing problem can be traced to the unequal taxation exemption of big business, which traces back more than seventy years to World War II. No one welcomes reducing net income in half by any means, but reducing corporate income taxes might just be one of the few ways it could be an inducement.
No taxes, no tax exemption; it sounds pretty simple until you review the trouble the Irish Republic got into when it reduced them too fast. But when corporate taxes are the highest in the world, and international trade is threatened -- is certainly the best time to do it. And politically, when wealth redistribution has just been given a thorough pounding in the polls, is also a good time to advance the idea. If everyone would be reasonable about the details, an important tool for managing international trade could be fashioned out of needed healthcare reform. It certainly is a double opportunity.
A fiduciary puts his customer's interest ahead of his own.
The End of The World?
One way or another, the success of Health Savings Accounts will depend on crossing the tipping point, where investment income is greater than borrowing cost. These accounts will be forced to do a great deal of internal borrowing, particularly at first, when some financial information does not exist, and therefore must be deliberately over-funded. We have a reasonably workable idea of total health care costs and longevity, but an uncertain grasp of the shape of the revenue and cost curves in the middle. Inevitably, certain age groups will be in chronic debt, and others will run protracted surplus; the situation demands low-cost internal borrowing. Meanwhile, the overall prediction can be made that healthcare costs will generally be lower for young people, higher for the elderly. If the premiums of young people can be invested at least 8% net, the system should work. When we learn common stocks are averaging 11% returns, and investment intermediaries frequently capture 85% of it, the whole idea of passive investing is ruined until this is repaired. Requiring Health Savings Account agents to be, and to act like, fiduciaries is just about mandatory. A fiduciary puts his customer's interest ahead of his own. The day of opaque pricing must come to an end.
We mentioned earlier, Roger G. Ibbotson, Professor of Finance at Yale School of Management has published a book with Rex A. Sinquefield called Stocks, Bonds, Bills and Inflation. It's a book of data, displaying the return of each major investment class since 1926, the first year enough data was available. A diversified portfolio of small stocks would have returned 12.5% from 1926, about ninety years. A portfolio of large American companies would have returned 10.2% through a period including two major stock market crashes, a dozen small crashes, one or two World Wars hot and cold, and half a dozen smaller wars involving the USA. And almost even including nuclear war, except it wasn't dropped on us. The total combined American stock market experience, large, medium and small, is not displayed by Ibbotson but can be estimated as roughly yielding about 11% total return. Past experience is not a guarantee of future performance, but it's the best predictor anyone can use.
During that most recent prior century, we had a lot of crisis events, which normally bump the stock market up and down. A standard deviation is an amount it jumps around, and one standard deviation plus or minus includes by definition two-thirds of all variation. During the past ninety years, the standard deviation has been 3 percent per month or 11% per year. Standard deviations for the whole century are not meaningful because of more or less constant inflation. Throughout this book, we repeatedly describe investment income as 10%, for a simple reason: money compounded at 10% will double every seven years. Using that quick formula, it is possible to satisfy yourself what 11% can do if you hold it long enough. Since no one knows what will happen in the next 100 years, it is futile to be more precise. We may have an atomic war, or we may discover a cheap cure for cancer. But 10% is about what you can reasonably expect, doubling in seven years if you can restrain yourself from selling it during short periods when it can deviate less or more. The most uncertain time is immediately after you buy it before it has time to accumulate a "cushion". As we see, your money earns 11%, but it isn't necessarily what you will earn.
Your money earns 11%, but that isn't necessarily what you will earn.
Expecting it and getting it, can be two different things, therefore. And even if Congress establishes it, as they say in Texas, "You can't turn your head to spit." Because, for one thing, most expenses for a management company also come in its first few years, on their first few dollars of revenue. Wide experience with a cagey public, therefore, teachers experienced managers to get their costs back as soon as they can. Until most managers get to know their customers, in this trade, charging investment managing fees which amount to 0.4% annually is considered normal for funds of $10 million, so charging 1-2% for accounts under a thousand dollars is common practice. These things make it understandable that brokers are slow to lower their fees, or 12(1)bs, or $250 charges to distribute some of your proceeds. But our goal as customers is to negotiate fees reasonably approaching those of Vanguard or Fidelity, which have fees of about 0.07% on funds amounting to trillions of dollars. Such magic can only be worked by purchasing index funds from a broker who aggregates them, and also develops a smooth-running standardized service with minimal marketing costs to cover the debit card, help desk, hospital negotiating, and banking costs. And who, by the way, may make really serious income from managing pension funds, so they remain wary of antagonizing corporate customers who get a big tax deduction from giving employees their subsidized health insurance. Remember, stockbrokers are not fiduciaries; they are not expected to put the customer's interest ahead of their own. A broker sells stock to anyone who wants to buy it, even if two successive customers are bitter rivals of each other. One of the better-known brokerage houses advertises charges of $18 a year for HSA accounts over $10,000, but only after it reaches that size will it permit the customer to choose a famous low-fee index fund. With $3300 annual deposit limits, it eats up three years of your earnings even to get there. You really have to feel sorry for an industry experiencing such a general decline of net worth, but the incentive it creates is obviously for you to get the account to be over $10,000, as fast as you possibly can. To many people, those sound like staggeringly large amounts, but they are realistic at this stage of the market, if not entirely accessible to everyone.
The last few paragraphs sound like a digression, but they aren't. The question was, Where does all this money come from? Would there be wealth creation if the system favored the retail customer more, or wouldn't there be. I don't know the answer, but one likely approach is, let's try it.
We knew this election was coming; we didn't know who was going to win it. Whether Hillary Clinton would replace the Affordable Care Act with her own plan, or whether Donald Trump would replace the ACA with a different plan, was far less certain. In either case, the many flaws in the Affordable Care Act would be addressed. One thing seems certain: the Affordable Care Act will start off 2017 with a bigger deficit than was expected. My previous four books on the subject were forced to assume the ACA was cost-neutral, offering proposals for lifetime health finance for every age group except age 26 to 65, the working years of life. This book mostly concentrates on that gap.
Cheaper. The core of this lifetime proposal is the Health Savings Account. It was devised by me and John McClaughry of Vermont in 1981, when John was Senior Policy Advisor in Ronald Reagan's White House and I was a Delegate to the American Medical Association's House of Delegates. It flourished after John Goodman of Texas wrote a book about it, Bill Archer of Texas pushed it through Congress, the American Academy of Actuaries found it saved 20-30% of the cost of more usual Health Insurance, the AMA endorsed it, and thirty million accounts were established by June 2015. It consisted of two ideas welded together: a high-deductible catastrophic health insurance policy, and a double tax-exempt Savings Account, acting as a sort of Christmas Savings Account for the deductible. It wasn't free, but it helped a poor man get coverage as cheaply as we could devise it. The individual patient or client owned his own account, so it had no "job lock" to hinder changing jobs. In that sense, it was patterned after Senator Bill Roth's IRA or Individual Retirement Account. A significant improvement followed the question of what to do with an unspent surplus which remained
in the HSA (Health Savings Account) if you turned 65 after being healthy and then got Medicare. The Law was changed to turn such surplus into an IRA.
Retirement Funding. In correcting this oversight, the right thing was done for the wrong reason. Before anyone really understood Medicare was 50% underfunded, a retirement fund had been created. Since increased longevity was an inevitable consequence of better healthcare, it seemed natural for this "Medicare money" to pay for the extended retirement. It soon became apparent that retirement came at the same time as Medicare, and Medicare was thus underfunded. Even though the $3400 annual limit to Health Savings Account deposits was not enough to pay for soaring Medicare costs, it was not needed for that purpose for up to forty years. So augmented funds became available for healthcare at age 26 but had to be invested for fifty years or more until sickness made its appearance later in life. Emergencies might come up before then, but the Catastrophic health insurance took care of them. After many state laws mandating small-cost expenditures were amended, the high-deductible product took off, particularly in California and New York. Millions of policies were issued before anyone took the trouble to count them. When the Affordable Care Act made high-deductible insurance widely mandatory, Health Savings Plans took off like pursuit planes.
So, when competitive plans -- like HMOs, Preferred Provider Plans, First-dollar Coverage, Employer-sponsored plans, and a host of others -- started to encounter criticism, Health Savings Accounts became much more popular. Their flaws, instead of provoking consumer resistance, provoked demand for legislative relief. It was a mistake to limit ownership to people who were employed, or who were age 26 to 65; what good purpose did those age and employment restrictions serve? The advent of DRG payment limits to hospitalization and debit-card payment for outpatient services raised a question of the usefulness of insurance claims processing, which was certainly expensive. Prohibiting the HSA from purchasing the required catastrophic health insurance seemed to hamper unnecessarily a tax deduction which its competitors widely enjoyed. One or two amendments were all that would be needed to enhance sales considerably. People change jobs a lot; why would anyone want to prohibit dual coverage if someone wanted to pay for it, for his own personal reasons? The changes needed to enhance Health Savings Accounts were short and simple and could be enacted over a weekend. Why wait?
Improved Investment. Changes in the HSA Law to permit higher returns on invested deposits, are certain to provoke resistance but should be addressed very soon. If you are serious about replacing the old with the new, there are some zero-sum tradeoffs, especially within the finance industry. Go to the library or the internet, and look up the graphs of Professor Ibbotson of Yale about the performance of stocks and bonds for the past century. You will surely find the total stock market has risen at 9-11% for the past century, and what people describe as crashes and disasters seem like small wiggles in the line -- in retrospect. Some opportunities are better than others, but the main determinate of investing is the year you happen to have been born. In spite of these retrospective results, you will find very few investors who received half of that, but John Bogle and Burton Malkiel have demonstrated that random selection of stocks in a total market index fund beats expert active investors more than half the time, at a hundredth the cost. Bogle has something like 3 trillion dollars invested in his funds, and they have grown so fast he has trouble satisfying the demand. The average investor should be getting 5% on his money over the long run, and regulatory changes ought to aim for 7%. Money invested at 7% tax-free will double every ten years. With an average life expectancy approaching 90 years, that's ten doublings, or 512 times the initial investment in 90 years. And it still leaves 9-12% minus 7% (2-5%) for the finance industry.
But that's only half the problem. If you invest massive amounts of money for 90 years, there are plenty of cheerful brigands out there. Inflation is the main one -- it averages 3% a year -- because governments issue bonds, and enjoy low-interest rates. Federal Reserve and other central bankers are the nicest people in the whole world, mandated to preserve independence from the rest of the government. But they read newspapers and know who appoints whom. Bankers and brokers are also nice people, overvaluing rigidity because counterparties cheat when vigilance gets relaxed. One way or another, spreads should be narrowed.
The present system, plus stronger management, plus a few simple legislative amendments, would suffice to get us started with something workable, while we immediately roll up our sleeves and plan for a revolutionary future, better, system.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
