The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
... William Penn's Quaker Colonies
plus medicine, economics and politics ... nearly 4,000 articles in all
Philadelphia Reflections now has a companion tour book! Buy it on Amazon
Philadelphia Revelations
Try the search box to the left if you don't see what you're looking for on this page.
George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
Andrew Stewart, the Public Relations Director of the Barnes Foundation, and for thirteen years a member of its Board of Directors, recently addressed the Right Angle Club. He gave a new slant to the quarrelsome saga of Dr. Barnes' will, offering the point of view in favor of moving the paintings to the Parkway. It's useful to hear the legal and historical background because about all we hear are criticisms, balanced by joy at having the famous paintings where we can see them.
Essentially, the will declared a wish for the School and Museum to follow the original indenture. After the passage of time, the old board members died off, and the new board members found the Indenture to be out of date, like specifying the purchase of railroad bonds. Delivered in a charming Scottish brogue, the argument was fairly convincing. But it stimulated in me an entirely different moral from the eternal dispute between the right of a man to have respect paid to his expressed wishes for his own property, versus the self-defeating quality of the same restrictions with the passage of time.
Barnes Foundation
Barnes was born in Kensington, and had a hard life as the son of a Civil War veteran who lost an arm in the war, and had a dismal time making a living as a butcher. Barnes was his fighting-spirit son, who worked his way through medical school. It was Jefferson Medical College, where I was on the faculty for decades. While it is true his patent medicine gave a permanently sickening color to the children who were treated for sinusitis, it is also true that in the form of eyedrops it prevented the transmission of syphilis to millions of newborn children. In that view, it was a real scientific contribution, although the medical profession continues to take a dim view of doctors advertising their wares. Although he was himself a failed artist, Barnes was a highly successful collector of (then) modern art and started a school with John Dewey to teach art appreciation to poor people. One by one, the local universities snubbed his wishes for an art appreciation school, and the local Philadelphia museums were pretty sniffy about his favorite artists.
In fairness to them, Barnes was probably pretty pushy in his demands. Unfavorable local reception to an exhibition which had received rave applause in Paris, convinced Barnes he was right and they were wrong. After this, Barnes developed a lasting hatred of Philadelphia and all its stuffy ways; he definitely didn't want his own impressionist art to be in Philadelphia, which would never appreciate it. While Philadelphia finally woke up to the value of Impressionist painting, Barnes never relented while he was alive. I hope I give a fair portrayal of the argument except for the politics and the legalities, that I know very little about.
But hearing the arguments, I see an entirely different moral to the saga. Ever since the inflation of the 1930s, fine art has appreciated in value, faster than the endowments to maintain the art. (That's probably a useful tip to investors, too.) It's fairly standard for a wealthy person to donate his art collection, plus a sum of money to endow the maintenance of the art. Most of the time, the size of the endowment is carefully calculated to grow at least as fast as the value of the paintings, because you have to ensure them, and pay for increased security, and increasing attendance. With the new trend toward inflation of at least 2% a year, the old premises don't work anymore, and the endowment eventually runs out. At that point, it runs into restrictions which -- to be perfectly blunt -- were created to prevent the trustees from pilfering the museum. A museum may not sell its art to pay for administrative expenses.
Consequently, The Barnes ran into a situation where it had billions of dollars worth of paintings in the basement, which it could not sell, and could not even hang in the museum because of Barnes' specifications for what went on the walls. This situation isn't going to change, because a dollar in 1913, when the Federal Reserve was created, is now scarcely worth more than a penny. And the present Fed is committed to 2% inflation, forever.
So, how about this: let the lawyers who write wills, and the Orphan's Court which administers them, insist that the art collection be divided into two parts. One would be the permanent collection, just as at present, and the other would be eligible for sale in the judgment of the Orphan's Court.
The November 2013 elections have been widely accepted to be a spectacular win for New Jersey Governor Chris Christie, suddenly making him a presidential front-runner for 2016. The only other significant election was a close win in the Virginia gubernatorial race for a fund-raising crony of Bill Clinton over the Attorney General who started the Supreme Court Case over Obamacare. In the view of the news media, there were only two elections in this off-year -- a landslide in New Jersey, and a dead heat in Virginia, for Governor.
Well, as a matter of fact, there was also an election in New Jersey for all of the members of the legislature, which means that I was running against the Democratic majority leader in the 6th Legislative District. I got 19,000 votes, but I needed more to win. At least in my family, it was a big event, particularly since no one else in New Jersey contributed a dime to my campaign, and while Governor Christie may have whispered a few encouraging words to me, there was no evidence of his assistance. But you can forget about that, too, because this election was really about the minimum wage.
The first inkling I got that something was up was receiving a sample ballot, three days before the election, where there was a referendum question about the minimum wage that no one had told me about, although it could scarcely have been a secret to get it on the ballot. And secondly, on election day there was scarcely any evidence of campaigning for Democrat candidates except for a few yard signs, but literally, dozens of campaign workers poured into the subway stations, handing out great volumes of campaign literature about the minimum wage. Even that went past me unnoticed, because who in the world would vote for a proposal which would increase unemployment during a severe recession? When I expressed the same sentiment to my Democratic friends, I was surprised to discover they all knew about it in advance. In retrospect, that was a fairly good indication that the Internet had selectively urged support of this proposition to the party faithful, but had not said one word in campaigning for it. It won endorsement by a heavy margin, as things soon turned out. What's worse, what had been endorsed by referendum had been to amend the constitution to this effect, automatically indexing it to the cost of living. It's going to be pretty hard to reverse that since all constitutions have been written to make it very hard to amend them.
p>
In the week after the election, I notice that several other states have been considering raising the minimum wage. An article appeared on the editorial page of the New York Times arguing that research showed there was no evidence that raising the minimum wage caused unemployment, and a few days later, Paul Krugman had a learned column on the Times editorial page to the effect that smart people all knew there was no reason to expect unemployment from raising the minimum wage, and only the hopelessly ignorant rubes would imagine there was reason to think so. Having spent some time with editorial writers, it seemed pretty evident to me that there was a nationally coordinated effort to convert this into a truism, accepted so widely it would be futile to argue against it. When it is also possible to see the existence of a campaign to impose a maximum wage (and not merely in Switzerland, where it was defeated on a ballot), the trajectory of a rising minimum wage meeting a falling maximum wage easily led to conjectures that what was really afoot was a campaign to take wages out of the marketplace. Or was that really the goal?
Ben Bernanke
For months, the Federal Reserve Chairman has been emphasizing that the Fed must obey two mandates: to maintain price stability and to minimize unemployment. Meanwhile, the dirty little secret among economists has been that unemployment is the main obstacle to inflation in the face of a massive enlargement of the money supply. Unemployment is currently at 7.1% and falling, while the Fed has lifted the veil of "transparency" to reveal it made a promise in double-speak to start selling some of the bonds it issued to combat the recession when unemployment reaches 6.5%. As time has gone on, Mr. Bernanke has seemed to back away from that promise. He is not so sure that unemployment is a good measure of unemployment, other measures may be a better measure of what we are driving at. He never meant to start selling bonds when unemployment reached 6.5%, he only meant that he might reduce the number he planned to buy. He never meant to make a promise, he only was being transparent about the current thinking of the Board. And anyway, Janet Yellen will take over his job in a month, so you can't very well bind your successor to do anything at all. What's this tap-dancing all about?
Well, it simply won't do, to suggest that the Federal Reserve isn't as independent of politics as it pretends to be. But everyone noticed that the stock market had a bad fainting spell when he suggested a few months ago that the Board had been discussing the matter; just imagine what it would do if he actually made a promise to act, let alone actually taking an action. By itself, such an announcement would probably send interest rates on a rise toward normal levels. The stock market mostly anticipates the future, so it would jump ahead of whatever action was taken. Since the United States is now the largest debtor on earth, a rise of interest rates would immediately add huge amounts to the current deficit and the projected national debt. The stock market would almost surely drop, possibly severely, in response to such commotion in the debt markets. And the national economy would certainly feel the deflationary effect of such activity in the financial markets, sending markets even lower. Fear of such a reaction would surely persist longer than the real need for monetary easing, making the resultant inflation even worse than it had to be.
Is it possible the Obama Administration prefers a little extra unemployment, to risking a stock market crash before a coming election?
Minimum Wage Uproar
And so comes the rumination that perhaps raising the minimum wage has some merit, after all. Under the peculiar circumstances of looming inflation with high unemployment, with the economy unresponsive to huge monetary expansion, with the banks refusing to lend until the economy is deleveraged, perhaps the minimum wage can be raised, briefly and temporarily, without increasing unemployment. Perhaps, that is, the "research" published recently is not the product of some Administration poodle, but actually shows a true effect. Perhaps it remains true that if you raise the price of something (wages), you will get less of it (employment). But any businessman faced with this situation has a choice. He can either hire fewer hamburger flippers, or he can raise the price of hamburgers. Which one he will choose will depend on whether he has streamlined the efficiency of his workforce as much as he can, or whether he has already raised prices as much as the market will bear. That is, whether there is more "elasticity" in prices, or labor, at that particular moment. And it seems entirely possible that nearing the end of a recession, and the end of monetary expansion, wages may be the more elastic of the two. And so raising the minimum wage may have a counter-intuitive effect of preventing unemployment from falling further, or else he can sustain profitability by raising prices. At some later time, it is equally likely that price resistance may be stronger, and the full force of a mandatory wage increase would again result in increased unemployment. The tricky part would be to guess the proper timing of the end of QE3, using blunted signals. Could it be even remotely possible that the Obama Administration prefers a little extra unemployment, rather than risk precipitating a stock market crash just before a coming election? It's easy to believe the President would go to the stake rather than admit such a thing.
In an era of desperate experimentation with the simultaneous solutions of several problems at once, perhaps the best conservative response to this paper is to seek ways to relax its inflexibility. The political process, particularly the amendment of state constitutions, is a lengthy and cumbersome impediment to agile management of the economy. It is fairly unlikely that a secret springing of a referendum trap can be repeated. The greater risk is that we will know what should be done, but become unable to do it quickly.
Meanwhile, the politicians are designing things and politicians like things simple. The Republican solution is to pass a minimum wage, but keep its benefit slightly below the entry-level wage; they get credit for passing it, but it has almost no applicability. The Democrat approach is to make a big noise about passing a meaningless bill, promising they will make it up with off the balance sheet entitlements, like health care and college tuition. Either way, usually nothing much happens after the election is over.
If we aim for lifetime (or "whole life") health insurance, using a Health Savings Account, provision must be made for the vast majority of people who do not buy it with a single premium at birth, as we use for a simple example. If we know the lifetime goal and the expected average rate of return, it is easy to project the average growth of accounts by any future year. A simple table of such projections becomes useful for displaying the "buy-in" costs for any age. Naturally, it incidentally underlines how costs increase for late-comers since essentially the same costs are distributed among fewer remaining years. Conversely, compound investing while you are young is very attractive. These are important selling points and are valuable lessons to learn. But no strong argument is improved by exaggeration. This is not a way to reduce the cost of medical care, it is a way to pay for some unnecessarily added costs inherent in choosing a "pay as you go" design. The use of compound income does indeed give the initial appearance of something for nothing but should be viewed as a more efficient insurance design.
If it does nothing else, lifetime health insurance clarifies where this money is coming from. Under Medicare, for example, a person contributes all his life but gets no income on that contribution. At some advanced age, he spends that money at prices which reflect the Federal Reserve's 2% inflation of the money, but he pays no taxes on the gain. Meanwhile, some younger person pays his bills at the inflated rate, and in due course inflates it again before he spends it. In the case given, the last of three generations are spending money which includes eighty years of inflation at 1-2% tax-free. However, he has an opportunity cost: the money could have been invested in index funds which Ibbotson has shown would have grown at 12% per year over the same time period, tax-exempt if he put it in a Health Savings Account. And it wasn't even mostly his own money at work. It really doesn't sound impossible for that amount of compound earning to pay for a great deal if not all of the lifetime cost of one person's healthcare, providing he does not pay excessive investment costs to do it. And since this conclusion is based on considerations which have almost nothing to do with the cost of medical care or increasing longevity, it is nevertheless impossible to make precise predictions. Any investment outside the insurance plan will result in a considerable revenue gain, probably a big gain, and possibly pay for all medical costs. Fundamentally, this money is generated by obtaining a higher return on the money, and not sharing much of it with financial agents, or other contestants for your wealth, like the health industry, or like the luxury goods industries. In that sense, it's just like any other wealth.
It also should not matter much whether the planning design aims for the account to terminate at death or when Medicare takes over. Naturally, the same lesson applies to the terminal end as to the buy-in date; the more you delay withdrawals, the more time there is for growth of the principal. With a growing tendency for costs to cluster around the last year of life, many "young old" retirees have only minimal medical expenses for ten or more years after retirement. Since invested money at 7% will double in ten years, there would be a considerable advantage for latecomers in transition. If the latecomer intends to terminate deposits at an attained age of 65, he will need about $40,000 to see him out. If he intends to terminate at death, he will need about $300,000, but the buy-in price at any age before 65 should be the same. As experience gathers, there probably will emerge some distinctions matching health status changes, but curiously the costs seem to decline after age 85. After the preliminary layering by age, the annual lump sum can be broken into installments more realistically matching the income and health practicalities of individuals. Each annual step of a table would represent the "buy-in" price at that age, which is also the average account size achieved by a lump-sum at birth by that age, without withdrawals. The point about "without withdrawals" should be seriously considered as a reason to substitute out-of-pocket payments for trivial expenses. With the passage of time, it can be made more precise by experience. But it should be kept in mind that a regular HSA only hopes to make as much income as possible, while a lifetime HSA seeks an average lifetime target. As experience accumulates, it may be found that required balances actually shrink with advancing age, as the individual lives past the time when expenses had been expected but not experienced. However, without experience, the best conservative assumption is that expenses steadily rise with age.
Since a Health Savings Account tries to serve several purposes, a particular account may not have enough deposit content to match the deductible, for example, because the cost of an individual's illness has little to do with his investment history. The manager of an account will create rules designed to protect his own position, and for example might have a minimum designed for investment purposes, which happens to be considerably short of what the high-deductible insurance company needs as a deductible for a particular age-group's sickness experience. For another example, a gift from a grandparent at birth may be adequate to cover lifetime expenses, but not at first. Only after it has multiplied several times will it be enough to meet the deductible. Some managers impose fees on the first $10,000 of deposits rather than reject the account, and it really only becomes an attractive investment a decade or more later. At present, accounts have an annual limit of $3300 for deposits, so it takes three years to reach a suitable size, and perhaps ten years if only a single deposit is made. Investors must learn to be highly resistant to brokerage fees, especially in new accounts. True, the regulations are likely to be highly changeable in the first few years, so investors much learn to pay fees from outside sources, in order to protect the tax advantage when it is most needed. Unfortunately, educating young investors about complex new regulations can be expensive for the investment advisor, so it is, unfortunately, true that the interests of broker and client are not well aligned in the early years.
The rules should be adjusted to recognize this problem, even though many people would find it unnecessary. A subscriber may have enough savings to make a single-payment deposit but is hampered by the $3300 rule. Finally, an account might once be large enough to be self-sustaining, but be reduced below that level by one or two depletions to pay deductibles. Generally speaking, the conventional HSA does not need to concern itself with such issues, which only become a serious problem if lifetime Health Savings plans are contemplated.
Consequently, the regulations should be modified in the following ways:
1. A family of tables is prepared, showing the deposit required to equal the total average future health cost for each yearly age cohort of life, from now until the average death expectancy, using various extrapolation assumptions. It is possible to reach the same goal with almost any investment assumption, or almost any time period, or almost any starting deposit, but only so long as the other variables are adjusted to conform to that specification. A family of tables would show several investment levels of compound interest reaching the same goal, let us say $40,000 at age 65, at ten percent; seven percent; and five percent. Obviously, a higher interest rate gets you to the goal sooner. Attention should be focused on achieving $40,000 at age 64.
Any subscriber should be allowed to buy into the lifetime Health Savings Account for a one-time deposit of $30,000 at age 48 assuming 5% return, at age 55 assuming 7%, or at age 57 assuming 10%, merely as a rough example. The subscriber may not have savings of that size, of course, and a separate calculation should be made for time payments, also reaching the same goal. If such tables are displayed on a computer terminal, it should not be difficult to make a selection, but "user friendliness" is often more difficult to achieve. As are later modifications, if life circumstances change. The relentless mathematics will soon demonstrate that the more money deposited, and the earlier it appears, the more attractive the investment becomes.
2. Salesmen for HSA should be required to carry their illustrations out to the goal of $40,000 at age 64, supplying achievement benchmarks along the way. So long as the account contains less than the buy-in amount for the subscriber's age, the manager of a fund should be allowed to wager a guaranteed band of investment results; let us use an example of 7% and 10%. If the funds make more than 10%, the manager keeps the excess. If the fund achieves less than 7%, the manager must make up the difference, either by reinsurance or by offering to be at risk for it. If fund results fall between 7 and 10%, the investor retains it all. This mandatory arrangement may (not must) terminate when the fund reaches a buy-in level, so long as it resumes if illness depletes the account.
The actual limits should be set after consultation with managers in active practice since the purpose is to create incentives to get the funds to self-sustaining levels without kickbacks to investment vehicles. The tension is between a subscriber who has investment choices to make, and a fund manager who must cover his expenses. In the long run, it is to everyone's advantage to maintain a steady view of the risks and rewards of income compounding, while serving the goal of paying as much as possible toward everyone's health care costs in a free-market system. It is best if the limits are realistic, and they should be chosen to drive all the participants toward the highest safe level of performance. Ultimately, the subscriber should recognize that an unsafely high level (with leverage, for example) will make paying his health bills more difficult, not easier.
3. The easiest definition of the top limit is the running cumulative average of the stock market, so total-market index fund results are ideal for the purpose. However, index funds differ in their results, so transparent competition should even be able to squeeze out somewhat better results than the 10% compounding which has characterized the past 90 years. Curiously results significantly worse than the market is not a sign of safety. Consequently, freedom to change managers should be as unhampered as possible, comparative results and costs widely available, and exit fees discouraged.
4. In general, single premium policies are rarely used. However, since starting an HSA at birth adds 26 years to the compounding, and while the amounts at first are so small they are somewhat unattractive to HSA managers, they could nevertheless become an important feature of their future. Throughout childhood, the paradox will be common that the necessary deposits in an account for lifetime coverage of health costs are nevertheless far too small for a deductible which is sensible for children with such low health expenses. Therefore, provision should be made for supplemental policies which cover this gap in childhood between the amount in the account and the amount of the deductible, which is often set with an eye to the parents' situation, not the child's. Intuitively, such insurance supplements ought to be quite cheap.
Lifetime Health Savings Accounts generate surprising amounts of money, and therefore solve lots of problems. However, they leave three problems unsolved, all of them having to do with the administrative agent. The first is trusting some stranger to hold most of your assets for a century, acting supposedly on your behalf in the meantime. The second is to obtain a fair return on your investment, which is to say, you must not overpay for honest service. The remaining problem is a transition from an old system to a better one, for hundreds of millions of different ages, different-wealth, different health. It seems to me Senator Cruz' proposal might ease all three issues, although it lacks details.
The Federal government could seem like an ideal immortal to handle long-term deposits until you look at its record. Watering the currency, shaving the edges of gold coins, and spending money earmarked for one thing, but spent on another, are things which pepper a history more attuned to getting votes than providing service. The motor vehicle office is a symbol of it. In a century, the Federal Reserve has turned a dollar into a penny of value and bought a lot of battleships with money held in trust for pensions. Politicians constantly accuse banks of stealing, but their own record is no better. Private institutions are expected to hold money for a century, but the person in front of you will probably retire, quit or retire in twenty years, to be replaced by a succession of strangers. Mergers, corporate raiders, and outright bandits teach the only generality you can trust is diversification, not consolidation. Insurance is a mixed blessing. In six corporate embezzlements I have been forced to watch, all six were overlooked by management who were easily satisfied with the insurance benefits. What that means is the insurance premiums are too high, mostly designed to save the directors from embarrassment.
In this way, most sane people eventually come to the conclusion the only person you can trust is yourself, and protections will probably only make you careless. Somewhere, this cost is built into the system, and it is hard to say how much it costs. The ancient Quaker doctrine is only a variant of it, "The way to make sure you have enough, is to have too much." Working backward from present longevity, the average person needs to save for retirement, tax-free, about 3% of average income, for about fifty years. And he needs to compound those savings at an average of 6-7% per year, so the first fifteen years are the crucial ones. That goal should accumulate enough to pay for a lifetime of healthcare, plus thirty years of retirement, plus a Quaker cushion of too much. But it needs to reckon with a general obligation of 10% unemployable, plus a one-time transition cost which might be as much a 50% of one lifetime's accumulation. There are other variables, like Korean bombs and Wall Street crashes, minus cures for cancer and automation, but we simply cannot predict all that. It's bad enough without such variables, implying the American public gets serious sooner than its history suggests. Let's project a doubling of savings, or 6% for fifty years, average savings including hardship cases. Actuaries can arrive at more precise calculations, but this is close enough to know it will be a struggle but achievable.
The struggle part is to navigate the jiggles of a continuation of the 12% average annual rise of the stock market over the past century smoothed out for annual volatility, and to assume we can wrench 6% from the finance industry out of limiting inflation to 3% inflation and their own retention factor to 1% . The first step in that process is to transfer the 3% inflation risk to where it belongs, with the customer, not his agent, by isolating and constraining storage costs. Another step is to see what we can wrench from the undeveloped 80% of the world becoming developed, minus the part they can wrench from us. That is profit growth averaging 3% per year for a century. There will be bumps on this road, you can be sure.
The other industry with which the customer must contend is the insurance industry. Their profit is also the customer's loss. It may turn out that the services of the insurance industry are quite fair, and any lessening of producer profit will eventually lead to shortages of their consumer product. But the European taunts at our costs, plus staggering glimpses of insurance reserves, suggest transaction costs plus insurance costs are appreciably overpriced and have been so for decades. Perhaps they are over-regulated, perhaps overpaid, but it seems likely a percent or two can be squeezed away. It is a certainty they over-insure the risks. We should be earning interest on what we now pay interest for, only ensuring what we cannot afford to spend. That may well imply we should spend less on some things, and our problem is to identify which ones they are. To some extent, this is a universal struggle. But most of its excess would surface after a two-year study by impartial experts.
The alternative to this steady grind is to create a market-place and then let the competitors wring the wet washcloth of costs on their own terms. What does the customer care about the technical details, he knows what he wants and for a while will be satisfied with it. The profit margin of a healthcare supermarket defines the cost of doing things that way, providing the signals for change of emphasis when the environment inevitably changes. The chances are good this approach will prove cheaper than continuing down the present path, hoping for a miracle without knowing where it might come from: funds administrators, investment administrators, insurance administrators, hospital administrators, or government administrators. Essentially, we have specialized ourselves into this mess, and the agents have themselves prospered excessively from the design. Whether they were always good at math or not, individuals have been given thirty years of new longevity to cope with the mess their institutional specialist agents have created.
"Eighty years ago any one of the 'tycoons,' whether in the U.S, Imperial Germany, Edwardian England or in the France of the Third Republic, could and did by himself supply the entire capital needed by a major industry of its country. Today the wealth of America's one thousand richest people, taken together, would barely cover one week of one country's capital needs. The only true 'capitalists' in developed countries today are the wage earners through their pension funds and mutual funds." (Peter F. Drucker, The Wall Street Journal, September 29, 1987.)
In the passage displayed above, a noted authority on the American economy has concisely captured the new dimensions of capitalism in the Twentieth Century, even though his jump in logic can be disputed. It is too soon for the evolution from Nineteenth-Century tycoons into universal capitalism to have affected common parlance; redefinition took place without anyone's planning or prediction. People who describe themselves as workers and employees are slow to develop attitudes and skills appropriate to their new economic power. It is equally uncongenial for those who think of themselves as entrepreneurs and managers to accept "people's capitalism" as the present and growing future of free-enterprise America. Drucker's partitioning of the country into two classes may well be disputed, but he has an insight of some sort which warrants examination. Obsolete class rhetoric will doubtless persist through several more presidential election campaigns.
Two things fit together here. It takes a ton of money to finance a multi-trillion a year economy. It also takes a ton of money to pay for a whole country to retire from work at age 65 and then go on a twenty-year vacation. The new imperative of capitalism is that we somehow must save enough of our collective working income to supply the capital requirements of the economy, which must, in turn, employ such capital efficiently enough to pay for our old age including its inherently heavy medical costs. If we have wars we will have to pay for them too, but the main dividend of our economy does go into a national retirement nest-egg. That's why we work, and that's all we have when we are done working. Stop worrying about quick-rich stories like Mr. Boesky's concerning conspicuous consumption by overpaid yuppies on Wall Street. Forget about the occasional person who takes a year or two off in mid-career to wander around Nepal. Don't however forget to remember the poor, the disadvantaged and the shiftless, because they get old too, and are part of the molten mass. In my view, the national economy can be roughly summarized as a process in which we collectively attempt to have nearly everyone spend his last cent on the day he dies but not a day sooner, living as well as he can in the meantime. Within the scope of this description we thus all become capitalists as we strive to enjoy twenty years without working income after we retire. The only alternative is that we mustn't live so long.
Because broad-based or near-universal capitalism has evolved recently and is not entirely acknowledged, the present system has some large transitional defects. Health insurance, unfunded health insurance, is one of the main defects we will get to in a few pages. A more immediate structural defect is what is that we have not yet evolved an efficient system of aggregating the savings of a nation of little capitalists who are unsophisticated in the ways of Wall Street and want to stay that way. Not only does it cost excessively to hire investment advice, but the voting power of ownership control gets lost in the process.
In the bad old days, when J.P. Morgan and others would buy common voting stock, they bought the company, and the company certainly knew it had been bought. If all of the officers and managers of the bought company weren't soon changed, that was only because they made desperately clear they were ready to take orders about company policy. By contrast, when T. Boone Pickens today buys a similar share of the voting stock of a corporation, the hired hands appear before a congressional committee, or the legislature of Delaware, to get a law passed outlawing the "unfriendly takeover". In Morgan's day, money didn't just talk, it screamed. Today, well, money is in a fight for its life with one-man-one-vote power in the hands of elected representatives. People's capitalism has become a humbled passive investment process, although not necessarily a cheap one, or invariably profitable.
There may be some exceptions, but the middlemen in peoples capitalism have generally declined to grab the voting power which the small stockholder cannot usefully exercise. The people who run what is known as the "Institutions" are custodians of great gobs of other people money in a mutual fund, pension or insurance trusts, and hence hold enormous voting power in the election of corporate directors, officers, and auditors. For some reason institutional investors seldom vote against the management, generally preferring to sell the stock if they are dissatisfied with the way things are going in a portfolio company. Consequently, the entrenched management of major publicly held corporation can do just about as it pleases even following policy disasters. To say this is a flaw in our system is a massive understatement. Things which run by the law of gravity generally tend to go in only one direction. No one wants to see the Japanese pulverize our major corporate jewels, no one wants to see them repeatedly greenmail. Nobody loves a corporate raider.
And still, it is clear the little stockholder cannot and never will aspire to meaningful voting power in a corporation which has millions of shares and thousands of stockholders. (Footnote; When I get those expensively packages proxy cards for my pitiful holdings, I always vote along with management. My theory is it's a good thing to change watch dogs frequently, and my Quixotic vote might hurt somebody's feelings enough to notice the message it sends). The system of governance of very large corporations needs to be reformed by its insiders before consumer activists using one approach, or elected public officials using another, manage to fill the power vacuum to our national disadvantage. They might, for example, reexamine the New York Stock Exchange rule, prohibiting the listing of companies with more than one class of stock. Someone should be asked to evaluate the experience of companies like Ford which evaded the rule, or of those companies which escaped to other exchanges to avoid it.
The directions such reform might take are not the concern of this book; the present focus is on the difficulties which are created for pre-funded health insurance by the fact that corporate voting power materializes whenever major purchases of common stock are made for purely investment purposes. Unpredictable things happen no matter how the stock is voted. If the voting power in the hands of custodians is never exercised, corporate control automatically concentrates in the hands of those whose ownership is relatively minor, whether insiders or outsiders.
One does not have to be a rabid conservative to recognize that government ownership of voting control of a corporation is a form of is w form of nationalization. The Labor party in England nationalized the steel and airline industries, the Socialists in France and India nationalized the banks, Communist doctrines go to the extreme of requiring government ownership of the total "means of production". If we are imaging success in the effort to pre-fund a trillion dollars of health insurance, we have to contemplate the highly undesirable features of potential government control of the voting stock of IBM, American Telephone and Telegraph, Exxon, and Morgan Guaranty Bank. The aggregate worth of all he stock on the New York Exchange is xx xxx. A trillion dollar worth of all the stock implies voting control of quite a bit of corporate America, no matter how sincerely its managers try to avoid it. a resolutely passive investment stance would just make it cheaper for the Japanese to buy control or for that matter the Russians, if they wanted to do it.
This scary line of thought potentially leads to the conclusion that pre-funded health insurance should avoid the purchase of common stock. But that seems bizarre; the historical difference between a 3% return (bonds) and 8% return (stocks) means this voting control issue could condemn health insurance pre-funding to a pitiful fraction of its potential for reducing the costs of an essential social service. It seems imperative to seek ways to improve the long-term return, even if government-controlled pools have to be rejected. True, massive increases in the proportion of non-voting stock confer unwarranted power to the management of the corporations and their potential greenmailers, no matter who runs the passive investment pool. Go one long jump beyond that; they just cannot be permitted.
As a matter of fact, it is impossible to conceive of a permissible investment vehicle for a government-controlled fund, except government bonds. Unfortunately, when you look at what has happened to the Social Security trust funds which are totally invested in government bonds, you find an appalling thing. Buying government bonds isn't too satisfactory, either.
When sums approaching a trillion dollars are involved, even the finances of the United States Government must reckon with the law of supply and demand. If a lot of people want to buy government bonds, they push the price up as long as the supply is limited. Since government bonds are issued to pay for federal debt, increasing the supply of those bonds means increasing the national debt, so we ordinarily don't want to do that either. That is, we don't want the Treasury to issue more bonds just to provide a safe investment vehicle for funded health insurance. On the other hand, by restricting permissible investment to government bonds in huge amounts we cripple the cost reduction of health insurance, since the inevitable result of clamoring to buy bonds will be lower interest rates. Quite aside from the fact that a captive customer gets shabby treatment, it may not be in the national interest to lower interest rates. Since Government bonds are regarded as the safest possible investment, their rate is the floor under all interest rates in the country or even the world. So, lower interest rates are inflationary, even at times when it may be contrary to national policy to stimulate inflation.
What this focus on government bonds has stumbled onto is the mechanism by which modern government attempt to fine-tune the national economy, a process mostly devised by the British economist Maynard Keynes. Based on the premise that no one controls enough money to affect the market price of government bonds, the government sets the price by buying and selling to itself. This particular conflict of interest operates between the Treasury which issues the bonds, and the Federal reserves which buy them. To a certain extent, the Arabs and the Japanese have been rich enough to influence the price of US Bonds, but the largest "external" bond buyer has been the Social Security trust funds. The quasi-external quality of the trust funds is often minimized or exaggerated as it suits some momentary purpose. If more money flows into the funds from tax payments than flows out for pension checks, the trust funds are described as assisting the national deficit. However, if the future indebtedness of the funds is increased more than current revenues are, this debt is regarded as the trust funds' problem and not a matter of national accounts. All this is a cross-generational difference in point of view. My generation can only see it as one big sticky ball of wax. The Federal Reserve's regards it as a major obstacle to their effective use of Keynesian principles. One has to conclude that it would be very unfortunate to add a great big lump of health insurance funding to a government bond problem which will be convulsive enough without it.
In summary, what can we conclude about investing the proceeds of funded health insurance, if we could ever get around to funding it? We see that the creation of a new source of investment capital would be an enormous asset for the national economy, but reckless dumping of huge amounts of cash in any market at all could be disruptive. The purchase of common stock would be considerably more cost-effective than buying bonds, and in the long run, might even be safer. However, equity markets need to consider how to cope with the continuous concentration of voting control of major corporations by default, as a majority of votes would become further locked into passive custodial accounts by funded health insurance. And finally, control of funded health insurance by government agencies poses the same problem of stock voting power which is left to Wall Street to solve, the next chapter tries to consolidate these issues into a general prescription. Remember, Index fund investing is momentum investing. If everyone does it at once, it will pop the bubble.
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.
