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.
Presumably, the proposers of affordable health coverage considered the approach of making it affordable through making it cheaper. Unfortunately, "affordable for every American" is so expansive that some people, somewhere, would require extra subsidy no matter how much prices were cut. Obamacare's supporters would be bitter to discover a two-class system, with them in second class. It did not take long to see how unpopular cutting existing programs would be, first with providers and then with provides. And then Obama advisors must have developed a greater understanding that existing internal hospital cost-shifting meant: Medicare was already subsidizing Medicaid, while the private sector had really been subsidizing the indigent care that Medicaid excluded. The savings to government costs (of universal coverage) were not going to be nearly as much as had been imagined.
So, a subsidy program was required. In addition, ensuring illegal immigrants during high unemployment was seriously unpopular, particularly in border states like Texas, where uncompensated care was already hard to manage. So we can easily imagine how the proposal emerged as: "Affordable health coverage for all Americans (legal residents only) achieved by giving cash subsidies ("refundable tax credits") to lower income groups, and expanding Medicaid coverage above its former income threshold". That wouldn't be a catchy political slogan, but it would be precise.
Such patchwork necessarily made it harder to comprehend. Somewhere in its evolution someone also seems to have determined to rescue Medicare from its impending bankruptcy -- while we are at it, let's fix Medicare. However both ideas, universal coverage and restructuring Medicare solvency, would be expensive; combining them might make the package unsupportably expensive in a recession, but it might also create more opportunity for major progress.
Affordable health coverage for all Americans (legal residents only) was to be achieved by giving cash subsidies ("refundable tax credits") to lower income groups while expanding Medicaid coverage limits to include them. A universal mandate for coverage, (but only our way, or the highway.)
Obamacare Capsulized
Legislative Strategy. It had been sixteen years since the Clinton Plan failed, but a book by Jacob Hacker called The Road to Nowhere outlined Bill Clinton's clever strategy for handling such massive complexity in 1994: by indiscriminately pouring everyone's pet schemes into one legislative package, planning later to remove unpopular prunes in the House-Senate conference committee, but reorganizing a few surviving plums into a unified plan. No one who voted on it would really know in advance what was to be left in the final pudding.
The Obama administration seemed to follow the same path. Modifying the pathway to a Budget Reconciliation Committee added the novel advantage of avoiding the Senate's 60-vote anti-filibuster rule, thus requiring only a simple majority to pass the Senate when it returned. It still needed 60 votes in the Senate to prevent a filibuster on the initial round, so the original Senate contribution to the conference committee had to contain a lot of goodies, just to get to the conference committee -- in order to be dropped.
In the flurries of lobbying activity, hospital advocates have suggested uninsured patients just appeared at hospital accident rooms, effectively causing other patients to subsidize them. That was somewhat true, but extending the idea to a claim the government was already paying for all indigent care, was a stretch because hospital cost-shifting was laying most of the cost on the private sector. To go further and proclaim that including indigent care under the insurance coverage umbrella would thus be cost-free, did really strain the facts. How could it be cost-free and still cost a zillion dollars? Right from the start, this proposal was making itself hard to defend.
The sound-bite is: the Obama health reform proposal of 2009 will extend affordable health insurance to poor Americans (citizen), and save Medicare from ruin by cutting costs. Because this still won't pay the bill, the rest of the nation must get less coverage for more cost.
So, at the end of September 2009, the country confronted multiple thousand-page bills from the House of Representatives containing wide assortments of liberal ideas, and a more conservative Senate proposal from Senator Baucus (D, Montana) representing the views of the Democratic caucus within the Senate Finance Committee. The British magazine The Economist promptly snorted; Senator Baucus' bill was "Half a loaf, half-baked." Since laws passed by strict party votes are in danger of prompt reversal when the other party next gains majority control, Senator Baucus had been struggling to achieve some Republican support but apparently decided bipartisanship was not worth the delay. In any event, the Senate's assignment was to get past a filibuster; the real zingers could come from Nancy Pelosi's House bill. Andy Stern the labor leader, had appeared on a television show offering no arguments at all, merely demanding a vote be taken instantly, presumably before public support eroded. Moderate House Representatives are characteristically most concerned with being turned out of office after passing a controversial proposal because they face election every two years. The much more liberal leadership of the House, with seniority because of their safe gerrymandered seats, are however more likely to honor extreme partisan demands. With a safe Democratic majority of the House, a few moderates could be spared to "vote their conscience".
Because the Senate thinks of itself as the sensible, deliberative body, oversight of law remains with its originating committee, to preserve the connection to the "intent of Congress". Because Medicare and Medicaid are amendments to the Social Security Act, the Senate Finance Committee has maintained jurisdiction over these three social benefit programs. A "unified budget" made it easier to shift one program's surplus to cover another's deficit. In the House, with turnover every two years, continuing oversight is mostly assumed by the Appropriations Committee, on the grounds that this is the only committee which reviews every ongoing program, every session. But the realities of the program mix with the quirks of the Senate, and for over forty years whatever the Finance Committee says about Medicare, pretty much goes. During the fall of 2009, this group of old colleagues could be seen on C-Span, gently joshing each other, and even more genially suggesting their disagreements. Each member of Finance belongs to several other committees, but on Medicare, they know their stuff and have a loyal staff to remind them of what they have forgotten. They considered 550 amendments to Obamacare, and stubbornly defended the right of each committee member of either party to be heard courteously, in spite of what must have been a wild frenzy of pressure by unions and other partisans, to be done with it. Their patient labors turned up one issue that party leaders -- especially the Governors -- probably wish they had left alone.
Blow away the smoke. Obamacare is about fixing Medicaid without admitting who, or what, caused it to need fixing.
The nut of the matter.
The fifty Medicaid programs are a big mess. They are run by state governments with Federal provision of at least 57% of the funds, and in some cases over 80%. Some states offer eligibility to those with incomes at only half of the poverty level, others go to several times the poverty level. Their tendency is to use the HMO model of healthcare delivery, but it is an individual state option. Minority groups absolutely hate HMO. The fraud level in Medicaid is by far the largest in the whole government. The quality of care is uneven, but it is always going to be somewhat substandard since it pays well below cost and deals with high-crime populations, amid uncomprehending chronic poverty. It attempts to deal with the deplorable psychiatric inpatient problem, which is in its present condition because of bungled regulation. Medicaid under-reimbursement is the main cause of hospital cost shifting, which causes still other distortions. And so on. If you search for an explanation of the bizarre statistics on infant mortality, the ranking of U.S. "health care quality" as 19th in the world, etc, the explanation is to be found right here. To the extent that statistics are not rigged in order to make certain countries look good, the poor rank of American healthcare reflects the sadly underfunded Medicaid programs.
Even the medical profession is largely unaware of Medicaid issues because most members of mainstream medicine have long stopped accepting membership in the program, in part because of its laughable reimbursement, but more importantly, the HMO organizational model makes it impractical to treat an occasional poor person free of charge and skip the paperwork. It, therefore, is sometimes true that some Medicaid physicians see nothing else. And finally, hear this: Senator Grassley muttered that 90% of the cost of Obamacare is aimed at fixing Medicaid, and no Democrat on the committee corrected him. When you get down to it, Obamacare is a very expensive program for making Medicaid what it ought to be, and definitely isn't. Originally confined to Maternal and Infant Care, its money is largely spent on nursing homes. This would make a perfectly plausible explanation for why it has been so hard to see what the new proposal is all about -- it's about fixing the old mess which state and federal governments created, while at the same time hoping to extend a similar program to the rest of the country later, as a "single payer" system. Senate Finance has a difficult tap dance with this one, but they have put their heads down and are plodding on.
Eighty percent of the cost is devoted to fixing the flaws of Medicaid.
Senator Grassley
Many unexpected developments are still possible in an on-going debate, but it seems timely to examine the Obama proposal as presently visible at half time, so to speak. What is so far proposed of consequence, and what problems would be cured?
Employer Mandates. First, nearly universal health coverage hopes to be achieved by mandates, making it illegal not to be covered, imposing fines for non-compliance. It does not seem extreme to predict a rise in the fines to a level where they support the rise in costs they provoke. That would serve the initial problem of pacifying the public during the early going, but ultimately justifying the Supreme Court assessment that it was a tax, not a penalty. Unfortunately for this idea, Justice Roberts stated in his opinion that the fact that the penalty was so low proved it was a tax. If the penalty tax was raised enough, it would prove it was not a tax, and therefore the universal mandate would become unconstitutional because the rest of the Court had already agreed that the Commerce Clause did not support it. Chief Justice Marshall once opined that "The power to tax is the power to destroy" which generates the justification that only a small tax is safely small enough to be a tax and not a penalty. It follows that while the Constitution permits the Federal Government to tax for revenue, it is not an enumerated power to tax in order to coerce or destroy. Justice Roberts may have been tipped off, but if not it was a shrewd guess.
Obamacare closes the safety valve that just about every poor person has long been eligible for Medicaid, but few of them actually join it until they get into a hospital and the social worker signs them up. The true antagonism of poor people to "Welfare medical treatment" has yet to surface into public view. Mandates are always unpopular, but back in Washington two competing ideas for mandates once headed for a conference committee. Because of the tax preference for the purchase of health insurance by employers, we still have a largely employer-based system, defining for poor people what normal health care looks like. As hospitals (responding to the shift of Medicaid costs to Medicare which they are forced to make) have increasingly shifted the costs of indigent care onto employer-based insurance, those employers who participate are increasingly anxious to make their competitors stop evading "their share". Unfortunately for this proposition, the non-participating employers never agreed to subsidize someone else, and do not feel bound by any moral strictures surrounding the demand of big business that their competitors are obliged to share a burden which big business decided to assume for its income tax benefit. If you doubt that small business and big business are competitors, just ask yourself what small retail businesses probably think of Amazon and Walmart. Then ask yourself whether very many small businesses benefit from ERISA.
Since almost all interstate employers already buy insurance for their employees under the coverage of the ERISA law, representatives of large employer groups want their competitors, especially foreign-owned, to experience equal expense. Big employers would thus be pleased with an employer mandate: employers who do not provide employee health benefits would be fined. Big employers are not so much threatened by little ones, as anxious to avoid government regulations which ultimately favor smallness as a preferred business model. By contrast, small employers are resistant to the employer mandate, amplifying the political perspective that increased cost would particularly hurt new employment in the present recession. Small employers enjoy and would hate to lose, the reputation of being the largest source of new jobs in our economy. Employer mandate might indeed ensure some uninsured people but the remaining uninsured would be unaffected. An employer mandate solves some purposes of big business but probably injures small business to a degree offsetting the cost-shifting argument. So, although an employer mandate was on the table, Senator Baucus proposed the individual mandate which Representative Pete Stark of Berkely, California had been advocating for years. That is, every person found without health insurance would be fined. Recall now, that Chief Justice Roberts introduced the qualification that the fine must remain small to be called a tax. Presumably, compliance would be even less than the widely-evaded mandate for automobile liability insurance.
One cannot leave the subject of mandates without the impression that there is some poorly understood connection with the Henry Kaiser income tax preference for employers who provide employee health insurance. Almost nothing can illustrate the intensity of warfare between big business and small business than this. Large employers definitely do not want to share this benefit with their smaller competitors, and definitely, do not want to say so in public. To the rest of the public, big business is taking the wrong side of the fairness argument, to say nothing of the Constitutional argument about equal treatment. But there is no other source visible for the seventy-year defense of the indefensible which has long convinced Congress that the tax inequity is politically impregnable, and cui bono will have to suffice. As long as this remains the case, there is some hope that some Congressman will be willing to fight it out.
Individual mandate creates a somewhat different political problem of what to do about recalcitrants who are both sick and uninsured, who must now fear punishment as much as their illness when they appear for treatment. They are unlikely to forget which congressman voted to create the vexing outcome of fearing-to-seek-treatment. The Congressional Budget Office summed it all up: we started with forty million uninsureds, but it is most likely we will be left with thirty million uninsured (and now resentful) persons, including 7 million who are in jail, an equal number of mentally retarded or disturbed, and 11 million illegal immigrants. The very vocal remainder is hard to classify and hard to count. But the CBO is probably right, it's hard to see how insurance reform of any description will get the number much below 30 million.
Give the tax exemption to everyone, or give it to no one.
A second difficulty with the individual mandate is that it exposes the long-standing inequity in the Henry Kaiser tax law. The main reason we continue a largely employer-based system is that purchase cost is effectively reduced by the tax discount when an employer buys it for an employee. Self-employed or unemployed persons do not now receive this tax-discount. For seventy years it has been desirable to extend this tax exemption to everyone equally, both for fairness, and to create portability mitigating the pain of pre-existing condition exclusions. Pre-existing condition exclusion always existed, but it is the linkage to portability between jobs that makes it such a wide-spread issue. But the employer-based system might lose its main reason to continue, so that particular consequence has yet to be addressed. Inverting the traditional relationship between being sickly and paying higher insurance premiums has never sounded completely plausible, but we are now going to see what happens if we try it that way. Additionally, the political consequence of not equalizing the tax preference would get worse. Compelling millions to buy individual insurance, while at the same time denying them everyone else's tax exemption for it -- is not likely to survive long once it gets public attention.
Give tax exemption to everyone or give it to no one, or give it for a lesser amount, but give the same thing to everyone if you hope for re-election. While tax equity is not in the current legislation, it might as well be, and the CBO should be asked to score it as part of the eventual cost. And finally, no mandate in sight during a recession would insure illegal immigrants, who are a large part of the uninsured problem in certain regions. It is reported that sixty percent of uninsured persons are concentrated in Florida and the four states bordering Hispanic America, a fact that ten senators and several dozen congressmen are sure to notice. Proponents of amnesty for illegals have undoubtedly thought about this matter. Opponents of amnesty are apt to see immigration reform as just a way to cloak the costs of Obamacare as an unrelated issue.
Now turn to the other main objective of reform legislation, to reduce the high costs of medical care. The poster child of this objective, possibly the central issue agitating many politicians, is the approaching bankruptcy of Medicare. To skip over technicalities, accumulated subsidies of fifty years of Medicare recipients have created unfunded liabilities that make Medicare the largest single debtor on the planet, unless someone wants to compete with $250 billion a year. If you think about it, Medicare would have no debts at all if it were self-supporting. Until something is changed, the fifty percent subsidy of Medicare by borrowing from general tax revenues is steadily making the problem worse. The understanding of the public is just beginning to realize that Medicare is so heavily subsidized, and this is probably the main source of its popularity. Ignoring how this growing debt was created, it is accompanied by fifty years of promises to every citizen about what they are entitled to. Perhaps it was believed that an uproar over reducing Medicare benefits could be softened by burying it in a nationwide reduction of all healthcare costs, but half the cost of Medicare is a pretty big nut to bury, and fifty years of accumulated debt is just about impossible to hide.
In fact, such expansiveness provokes more suspicion that something is being slipped in by the back door. In angry town meetings which frightened congressmen, held during the August 2009 recess, one speaker after another went to the microphone and said something like, "I have excellent health insurance and I wish everybody else had it, too." Following which, something was immediately said equivalent to, "But don't you dare take my good coverage away from me to give it to someone else!" And not invariably, but often enough to make it emphatic, some would add, "I voted for you in the past, but I'd never vote for you, again." No doubt, every one of those congressmen was asking himself how the party leaders could have got him into such a fix. Why don't we try something else? Senator Baucus offered to pay for reform by putting a tax on health care providers, but every worried citizen quickly saw that taxing providers will raise costs, not lower them. Credibility is waning.
The Affordable Care Act would cost a trillion dollars, and still, leave 5% of the population without insurance.
The Congressional Budget Office
An adage is getting hardened: Increasing access to subsidized health care is not compatible with cutting costs, and won't even produce universal coverage. It is increasingly difficult for presidential oratory to reverse that opinion. The Congressional Budget Office has not pronounced the Obama plan to be an unachievable goal, but after examining an enormous pile of studies, it amounts to that. They simply said it would cost a trillion dollars, and would still leave 5% of the population uninsured. In one sentence, the CBO probably killed a lot of strategies.
Still, the Obama administration gamely plunges ahead, seemingly forgetting that defeat of the Clinton health plan was followed by a mass eviction of incumbent congressmen; by their analysis it wasn't a bad plan that made trouble, it was failure to pass the bad plan, which it must be recalled was a universal HMO system. The Clintons avoided public defeat by pulling that legislation away without a floor vote. But at least they did escape the backlash against what would then have been a ruinously unpopular program. It is not unrealistic to surmise that Obama would never have been elected to a first term if Clinton had not backed away from his version of healthcare reform. Right or wrong, some Democratic congressmen are certainly toying with that heretical idea.
For one thing, the public has always been bewildered by the need for such a rush, such a collision. We are now fighting wars and struggling with the worst depression since 1930. All of those major projects are going poorly. Why in the world would we believe that reforming health care is our major priority, right now?
The following section closes the discussion of the main features of the Obama plan and ignores thousands of pages of legislation not yet implemented. The law is mainly made up of earmarks, boondoggles, and in consequence -- the usual contents of an annual budget reconciliation act produced at Thanksgiving or the day before Christmas. We hear nothing about tort reform, which at most will produce a study or a pilot program. Nor the public option, which Senator Baucus said cannot pass the Senate, and about which former Senator Dole said he heard, but scarcely would believe, that the Public Option was just a smokescreen intended to distract the public while the rest of the bill slipped past the uproar of Public Option getting defeated. The fate of the expensive but inconsequential computerized medical record would once have depended on the precarious health of Senator Byrd of Virginia, who had long held a stranglehold on government computer procurements, but which now mainly perplexes us as to what to do with it. Blue-sky yarns about the value of the Electronic Medical Record abound. But except for large group practices which do seem to need it, most doctors see EMR as an expensive way to add two hours a day to their already overloaded workload and badly compromise patient privacy in the process.
We talk high finance here, so perhaps a simple story from Wall Street is needed to introduce the topic to a non-Wall Street audience. Following the 1929 crash, and consequent to the Glass Steagall Act, Morgan Stanley was the only American investment bank in existence. It was the first of a new kind, but barely in existence, doing something like $300,000 worth of business in 1933. As finance adjusted to the new ground rules, Morgan Stanley grew in size, commonly referred to as the "White Shoe" investment bank. That term was an allusion to the Ivy League background of its partners, who came from colleges which affected white buckskin shoes among their more elite students. It also referred to the fact that almost all Morgan Stanley partners were pretty rich and fairly young, entirely able to live by a code of behavior which might be summarized as, "We don't find it necessary to cheat."
Buried within that motto was the idea that Morgan Stanley was as good as its word, and tried very hard to avoid doing business with anybody who did cheat. In a business where a great deal of business was transacted too quickly for written contracts or vetting by law firms, that meant a lot.
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Morgan Stanley soon climbed to the top of a very tough heap and stayed there for fifty years. Many of its partners were millionaires in their twenties, but so what, they were mostly pretty rich before they joined the firm. The company ran as a partnership, with the capital they leveraged coming from the personal fortunes of the partners. Under these circumstances, it is not surprising many partners retired in their forties, taking their enhanced capital with them. The Glass-Steagall Act (now being imitated by the Volcker Rule within the Dodd-Frank Law) made it illegal for a depository bank to be under the same roof with an investment bank. Much of the capital in the pre-1929 days had been supplied by the deposits in the depository bank, but Glass Steagall cut that off when it created depository insurance, on the theory that deposit insurance was a Federal gift, and its "moral hazard" should not flow through to the speculation of investment banking.
That comment was tinged with populism, with the dubious implication that those who are two generations off the farm are less likely to cheat than those who are five generations off the farm. So the depository bank of Morgan Guaranty has split away from the investment bank of Morgan Stanley, which was the three-step process by which Morgan Stanley eventually grew so big it could no longer be sustained by leveraging the personal wealth of its partners.
Buy And Sell
Eventually, the pressure to raise money by selling stock to the public could no longer be resisted. The rich partners became even richer by selling their company's stock on the stock exchange, the company did grow enormously, and a lot of new stockholders got rich, too. Unfortunately, when you sell a stock you also sell voting rights, so the sale transferred voting control of the company to the new stock purchasers. It did not take many years before the white shoe atmosphere was a thing of the past, along with the discipline that the atmosphere imposed on the rest of corporate America. When the 2008 crash came along, there was enough questionable behavior on Wall Street to justify a populist President of the United States to tolerate, or even encourage, a witch hunt of Wall Street bankers for ruining the country.
Even so brilliant an economist as Paul Volcker has encouraged the idea that separating the two forms of banks was an unmitigated blessing which must be restored, while in fact it is only justified by the gift of Federal Deposit Insurance to the depository arm, not the Investment Banking Arm. It seems only a matter of time before there will be agitation to extend the insurance to the investment arm so we will be chasing our own tail, of extending insurance to encourage risk-taking, instead of using demand deposits to do so. And thus inviting another crash.
I'm sorry, Paul, but there is a reversed way to describe it. The small investors demanded the entitlement of risk-free investing, protected by deposit insurance. And they declared this insurance was a special entitlement to which wealthy players were ineligible. When small punters go broke, it is a tragedy. When big players go broke, it serves them right for being so greedy.
No matter. The point of the story is not the value of Glass Steagall, but rather the enormous power of Wall Street, to force a partnership to become a stockholder company, even so, might a company as the House of Morgan. Because I have become persuaded, and hope to persuade the public, that this is the main mechanism which humbled Philadelphia, from being the mightiest industrial engine in the world, in less than twenty years. Like the perfect storm, it took three other forces to make it quite so violent, and quite so swift. They were the first World War, the 1929 stock market crash, and Prohibition. The central operational lever of force was exerted by converting industrial corporations, from partnerships into stockholder corporations. That was the tool which destroyed the old Philadelphia. The other three forces simply made it happen in certain ways and at certain times.
Gasoline
Converting partnership or family businesses into stockholder organizations was a universal outcome of both World Wars, all over the world. The phenomenon can be looked at as one way of extracting frozen wealth to pay war debts. It is accompanied by an increase in national indebtedness, so it makes civilizations less stable. Scraps of partnership control do continue to persist in remote developing countries, and in tiny principalities like Luxembourg, but it seems only a matter of time before the public buys them out. The only major developed country to retain family control of businesses in Germany. Apparently, it was intentional, based on the inheritance laws. Tightly held countries are more commonly tightly held together by force, as in Russia, Saudi Arabia, and Monaco, usually because of a monopoly grip on oil or other natural resources. But even those governments could probably be toppled, except for fear of ensuing chaos, just as did happen to many former dictatorships, and was a source of fear in Philadelphia. A case can be made for populism if it is kept small and under control. Hardly any case at all can be made for chaos.
Brewerytown Map
For those of us who love Philadelphia and wonder what happened to it, let me point out three defining local peculiarities. Prohibition was more of a factor than we like to think because Philadelphia's Tenderloin was the former Brewerytown, filled with Beer Gardens, refrigeration plants (Lager beer is brewed in the cold) and beer distributors. The passage of the Volstead Act suddenly transformed the largest alcohol-production center in the country into the largest alcohol-consuming area, from River to River, from Franklin Square to the Schuylkill.
It was concentrated in the Brewerytown by being illegal, and somewhat secret. Brewerytown soon turned into the Tenderloin, and the Tenderloin into Skid Row, cutting off North Philadelphia from law and order, but in time it was alarming in a different way to see speakeasies spread into other sections of the city. Much as it tried, even the Mafia couldn't control the influx of amateur criminals, when the Tenderloin essentially cut the city in half.
When the great migration from the South occurred after WW II, the immigrants turned North Philadelphia into a slum. Cutting I76 along the same center-city lines helped shrivel North Philadelphia and hustle its flight to the suburbs. Some misadventures of Philco and Ford, Baldwin and Stetson hastened the process and may have caused some of it.
Pennsylvania Railroad
America grew into a mighty industrial nation as a result of becoming the Arsenal of Freedom in the Civil War and two World Wars. The nation needed to expand its industrial base from the essential monopoly corridor of the Pennsylvania Railroad, and it had the money to do so. The land was cheaper elsewhere, labor was nonunion elsewhere, and air conditioning made the South bearable. Wall Street saw an enormous opportunity to buy stock from the family partners of Philadelphia industries, and sell it again to the world. These new owners had no interest in preserving lovable Philadelphia; they wanted to reap the harvest of expanding what we had, to the rest of the country, maybe even the rest of the world.
Once a spiral like this gets started, it runs by itself. The owners of the mansions on the hills, proprietors of what were big businesses by Victorian standards, sold their partnerships, their children were converted into coupon clippers, and their grandchildren into trust-fund babies. If you really have nothing much to do, why not do it in California next to the beaches? Hollywood made trust fund babies seem glamorous on the Main Line, just as Madison Avenue had once made patriots on the left bank seem fatally attractive. Those movies and novels made somebody pretty rich, but whoever it was, doesn't live here, anymore.
Garlands of Unexpected Good Features. So the first part of a Health Savings Account is just that, a tax-exempt savings account, obtainable in the same way you get an IRA or a Roth IRA, although a few eligible outlets were slow to take ours up. And the second combined feature was to require a high-deductible, "catastrophic", stop-loss health insurance policy -- the higher the deductible, the cheaper the premium gets. Somewhat to our surprise, the idea had the greatest appeal to younger people, who immediately recognized the value of compound interest rather than simple interest, sooner than we guessed they would. So most of the early adopters are between the ages of 25 and 40, and most of the appeal has been in the savings accounts rather than the high deductible. They are wrong about that last part. You need both to make it work.
With regard to the catastrophic coverage, which spreads the risk, the more you deposit in the account, the higher is the deductible you can afford, so you save money going either up or down, but by going up, you get into a virtuous circle and the returns can be quite surprising. The industry term for this kind of insurance is "excess major medical", which the two of us wanted to avoid because of its implication it was somehow frivolous or unnecessary, when in fact it is central to the whole idea. Linked together, the two parts enhanced each other and produced results beyond the power of either, alone. The savings account was first envisioned to cover the deductible, but nowadays it also commonly attaches a special debit card to purchase relatively inexpensive outpatient and prescription costs without a lot of insurance processing and delay. That led to further administrative savings to the subscriber if he shopped frugally for optimum proportions of deductible insurance. Right now, it's a little uncertain what the current Administration will permit in the way of catastrophic health insurance, so, unfortunately, it is just about impossible to give concrete examples of what the ultimate cost will prove to be. But we do know that in the old days, a $25,000 deductible was available for $100 a year. Nowadays, a $1000 premium is more likely. When we get to explaining first year and last year of life insurance, it will become clear this premium can be appreciably reduced, once the marketing costs subside. We then got another surprise: a great many young people paid the deductible in cash, in order to preserve the compounding power of what they left in the account.
But while the savings account allowed someone to keep personal savings for himself, the insurance spreads the risk of an occasional heavy medical expense at what ought to be a bargain price for bare-bones insurance. You needn't spread any risk for small expenses because you control them yourself, but no one can afford some of those occasional whopper expenses. There's no reason why you couldn't set the deductible level yourself, weighing your own ability to withstand bigger risks. In practice, the actual savings were reported to approach 30% (compared with "First-dollar" health insurance), quite a pleasant additional surprise. Because of the younger age group of the early adopters, much of this saving was achieved in the out-patient area.
(Let's start using the present tense to talk about it, although right now it's hard to know what politics will permit.) So, hidden in this bland dual package are lower premiums, less administrative red tape, less moral hazard, but complete coverage. Right now, that's somewhat subject to change. It provides complete coverage in the sense that the insurance deductible can be covered by the savings account, but contains the option to be saved, invested or used for small outpatient expenses. Furthermore, the account carries over from year to year and employer to employer. So it eliminates job-lock, use-it-or-lose annoyances, and allows a healthy young person to save for his sickly old age.
In one deceptively simple feature, many of the drawbacks of conventional health insurance had been removed. The bank statement from the debit card can even do the bookkeeping. The first part of the two-part package, the savings account, creates portability between employers, opens up the possibility of compound interest on unused premiums, eliminates pre-existing conditions even as a concept, and creates a vehicle for transferring the value of being a "young invincible" forward into age ranges when the money really is likely to be needed for healthcare. Maybe some other features can be added later, but introducing an unfamiliar product is always greatly assisted by having it appear simple. The HSA only has two features, and yet they solve a dozen pre-existing problems.
To return to its history, nearly 15 million accounts have been opened, containing $24 billion. John McClaughry and I (neither of us received a penny for any part of this) were seeking a way to provide a tax exemption to match the one which employees of big business get when the employer buys insurance for them. That is, Henry Kaiser inspired us to do it, but at the last moment, someone slipped in a clause prohibiting the HSA from paying the premium. That alone remains undone, of the plan to restore tax equity to health insurance premiums. It should be reinstated. Although we got the general tax-free savings idea from Bill Roth, we did him one better by giving a deduction at both ends, provided only -- you must spend the money on healthcare to get the second tax relief. An additional novelty at that time was a high deductible, which permits a "share the risk" feature unique to all insurance, but invisibly limits it too expensive items, consequently hospital items. It wasn't the original idea, but it turns out you get spread-the-risk and limits to out-of-pocket patient costs in the same package. The absolute delight in discovering these features, one by one, is surely a major reason for such sales success without much marketing.
Volume control versus Price Control in Helpless Patients.We did know of a third automatic advantage, not fully exploited so far: it seems possible the hateful DRG system (with its codes restructured) could become a useful tool for dealing with a major flaw in the Medicare system. Professional peer review has become pretty good at controlling the volume of inpatient services, but prices still escape effective control. No amount of volume control can, alone, address the price issue. Controlling vital services for helpless people is a delicate matter.
Quite a few of those inpatient services match (or contain) identical items in the outpatient area. The outpatient area faces outside competition from other hospitals, drugstores or vendors, as the inpatients do not. Instead of letting helpless inpatients generate unlimited prices for the outpatients, why not let competition in the outpatient area define standards of prices for helpless inpatient captives? Outpatients and inpatients overlap in the ingredient components, considerably more than most people suppose. Inpatients may have higher overhead because of the need to supply their needs at all hours, but a standard extra markup around 10% ought to take care of that. No doubt some services are unique to the inpatient area, but a relative value scale is then easily constructed, whereby unique costs are linked to equal-cost services which are exposed to competition. Ultimately, provable relationships to market prices might even discipline big payers demanding unwarranted discounts. This last is a deal breaker, provoking suspicions of abused power by a fiduciary. The government in the form of Medicaid is often the worst offender, so we need not imagine laws alone will prevent discounts so long as law enforcement remains crippled. Every business school teaches that discounts below cost are the path to bankruptcy, but business schools have apparently not had enough experience with governments to suggest an effective remedy.
Other than two variations (double tax deductions, and incentives if used for health care), a Roth IRA would be nearly the same as an HSA, with independently purchased Catastrophic backup. We do need some workable standard for out-of-pocket limits, but the assured presence of low-cost, high-deductible insurance provides security for another needed feature :
Using individual accounts with year-to-year rollover , we could strengthen the notion of frugal young people pre-paying the healthcare costs of their own old age. To make that complete, we need permanent insurance, not term insurance.
For all we knew, there weren't any frugal young people, but we were certainly pleasantly surprised. And catastrophic insurance added the ability to share the opportunity of that feature -- subsidizing the poor at bearable prices. As we will shortly see, it also offers an incentive to save for retirement. Think of it: almost nobody can afford a million-dollar medical bill, but almost everybody can afford low premiums. Catastrophic coverage offers the only chance I know, of approaching both goals at once. And it offers the fall-back, that if you are lucky and don't get sick, you can use it for your retirement.
As the only physician in the room, I also pointed out another pretty gruesome fact: either people end their lives have a lot of sicknesses, or they end up paying for a protracted old age. Only infrequently, do real people encounter both problems. It can happen of course; breaking a hip after long confinement in bed would be an example.
People end their lives with sickness, or else they must pay for protracted old age.
Still More Good Features. Including these self-canceling needs in a single package allowed some flexibility between them -- something badly needed for a century. We cannot go on passing a new regulation for every quirk of fate; a good program must allow some latitude. Extended longevity tends to be hereditary, and so separate policies (sickness care and long-term care) are more expensive individually than the two combined because the patient can out-guess an insurance company. Health Savings Accounts balance an incentive to save for one's own future health costs "at the front end" with reasonable cost limitations "at the time of later service", even though two time periods are decades apart. That's obviously superior to just increase the sickness subsidy at the back end, because, among other things, the patient will later have even more clues about his impending future. If cost reduction goes too far at either end, it amounts to an incentive to spend carelessly. Saving becomes fruitless.
A tax deduction is a tax deduction, but this one has two: An incentive to save, and a later option to spend the savings on either healthcare or retirement. That's nearly specific enough. Furthermore, it offers a choice between saving preferences -- you can have interest-bearing savings accounts, or you can invest in the stock market, or a mixture of both. The HSA automatically converts to a regular IRA (for retirement) at age 66 when Medicare appears; that should be optional for all health insurance, but isn't. The IRA up in Canada includes both front and back features, but in the United States the HSA is the only savings vehicle to have dual deductions, so it's more flexible. As the finances of Medicare become shaky, it may be time to provide additional alternatives. At least, we ought to consider extending age 66 to a lifetime coverage option.
This harnessing of two familiar approaches makes a deceptively simple package which ought to be considered in other environments, unconnected with medical care. In most public policy proposals, the deeper you dig, the more problems you turn up. In this one, we found the proposal already had hidden answers to most concerns we could discover. It's possible to fall in love with an idea that does that for you. It lets you sleep at night, secure in the knowledge you aren't mucking things up for people.
Yet another surprise. Overall, the Affordable Care Act has probably helped sales of HSAs, since all four "metal" plans of the ACA contain high deductibles, serving in a (rather over-priced) Catastrophic role. This may be a way of covering the bets in a confusing situation. The ACA is a needlessly expensive way to get high-deductible coverage because it pays for so many subsidies. Frankly, it baffles me why subsidies swamp the costs of Obamacare but are made unworkable for HSAs. Many of the details of the subsidies are obscure, including their constitutionality, so we have to set this aside for the moment.
One good motto is don't knock the competition, but we must comment on a few things. The Bronze plan is the cheapest, therefore the best choice for those who choose to go this way. But uncomplicated, plain, indemnity high-deductible, would be even cheaper if its status got clarified. The good part is, the current rapid spread of high deductibles suggests mandatory-coverage laws may, in time, slowly go away. At first, the ACA looked like a bundle of mandatory coverages, all made mandatory at once. But they may be learning a few basic lessons as they go. Mandatory benefits are an example of mixing fixed indemnity with service benefits, with the usual dangerous outcome. Like many dual-option systems, they create loopholes. The HSA seems to avoid this issue by effectively being two semi-independent plans, for two separate constituencies -- who are the same people at different ages. Once more, we didn't think of it, the features just emerged from the plan.
That's about as concise a summary of Health Savings Accounts as can be made without getting short of breath. But of course, there is more to it, particularly as it affects the poor. For example, there is an annual limit to deposits in the Health Savings Account of $3350 per person, and further deposits may not be added after age 65. They can be "rolled over" into regular HSAs when the individual gets Medicare coverage and supposedly has no further financial needs. So plenty of people have health care, but can barely support their retirement. These plans are absolutely not exclusively attractive to rich people, but it must be admitted, poor people start with such small accounts that companies can't operate profitably unless the client sticks with them for a long time. If people possibly can, they should scrape together at least one $3300 maximum payment to get a running start.
The problems of poor people can nevertheless be eased, within the limits of the plan's design. Since people will be of different ages when they start an HSA, it might be better to set lifetime limits, or possibly five-year limits, to deposits, rather than yearly ones. Some occupations have great volatility in earnings, and sometimes a health problem is the cause of it. To reduce gaming the system, perhaps the individual should be permitted to choose between yearly and multi-year limits, but not use both simultaneously. As long as the self-employed are discriminated against in tax exemptions, that point could certainly be modified. There remains only one major flaw, which we propose should be fixed:
Proposal 6: Congress should permit the individual's HSA-associated Catastrophic health insurance premiums to be paid, tax-exempt, by Health Savings Accounts, until such time as elimination of the present tax exemption for employer-based insurance is accomplished by other means.
Subsidies for the Poor? Here's my position. If poor people could get subsidies for HSA to the same degree the Affordable Care Act subsidizes them, Health Savings Accounts should prove at least as popular with poor people as the Administration plan. Mixing the private sector with the public one is always difficult. Why not make subsidies independent of the health programs? There is no point in having the poor suffer because someone prefers a different health system. Quite often, a subsidy program is mixed with a public program, in order to make its passage more attractive; that's not necessary.
Proposal 7:That health care subsidies be assigned to patients who need them, rather than attached specifically to one or another health system that happens to serve them.
Let's just skip away from all those digressions, and return to the poor in other sections. If the concern is, health care is too expensive, why in the world wouldn't everyone favor the cheapest plan around? Part of the answer, politics aside, is that young people have comparatively little illness cost, while old folks have a lot. Since Medicare, therefore, skims off the most expensive healthcare segment of the population, the fairness of any health subsidy program is difficult to assess. Evening out the tax deduction for the catastrophic portion equalizes the unfair tax deduction for self-employed and unemployed people. Perhaps the equality issue should be re-examined after each major revision since many moving parts get jostled, every time.
The government is going to have trouble affording the existing subsidy, so it may not endure, particularly at 400% of the current poverty level. But if we can subsidize one plan, we can subsidize the other, instead. The government would then be seen, and given credit for, saving a great deal -- by inducing destitute people to use HSA as an alternative option, equally subsidized by an independent subsidy agency. As for single-payer, the government for fifty years borrowed to continue Medicare deficit financing and got it to 50% universal subsidy without much notice. That's like boiling the frog too gradually to be noticed until it is too late. But suddenly expanding the 50% subsidy to the whole country at once, would definitely be noticed. Extending such levels to the whole country should anyway be buttressed with accurate cost data. Administrative cost savings are just a smoke screen. Total costs are the real cost. Other people also point out Medicare was financed after we had won some wars, but now we seem to be losing wars.
Since we propose to fund the end of life with money generated many years earlier, and since the whole structure disintegrates if funds are spent prematurely, it might be a long time before savings amount to much for the people funding them. A long gap between savings and spending generates the income windfall, but failure to distribute the windfall generates restlessness. Saving for one's own later spending does help pacify restless people, and is a major reason for using individual accounts rather than pooling. Minimal amounts of insurance and government redistribution are necessary, but as much as possible should be confined to 5% of the population which generates 40% of the costs. Self-interest thus concentrates transitional revenue as a whole toward individuals who do not live long enough for a full cycle to rescue them. With many contingencies certain to arise in such a long interval, it is difficult to construct a convincing model, except by estimating the upper limit of what it can produce and then guessing at the lower limit of what might satisfy the participants. What follows is an attempt to do that.
The cost of dying is always likely to be greater than the cost of being born. In our estimates, it is taken to be five times as great. Between birth and death, rent-seeking is a formidable competitor to program reduction whenever science produces lower medical costs. Intermediate steps and middle-men should be as few as possible. A reward system should be devised for intermediaries who demonstrate low costs. To be blunt about it, this is one of the strong arguments for individual rather than merged accounts, and private rather than political control; history shows a need for such a bias. It has been Medicare experience that 5% of the clients generate 40% of the costs, so here is another guide for the model. Each year, about 6.6% of Medicare patients die. The number of newborns plus immigrants of various ages are both likely to be capricious and will constantly vex projections. We must do better than we did with the baby boom bulge, where adverse projections were ignored for decades. Scientific advances are likely to mitigate diabetes, Alzheimers, cancer, Parkinsonism, osteoporosis, and a dozen less common degenerative diseases, during the next century. So longevity will increase. Although a dozen, now less common, diseases will take their place, the tendency will be for healthcare costs to decline after age 55 and diffuse more widely after age 75. Since costs will be less affected before age 55 than afterward, there is a potential for investments and compound interest to rescue us in time, since Medicare now covers about half of the costs, and Medicare will continue to expand for increasingly older members. As costs flatten out, there will come a time to take the jump to an entirely new but less expensive system.
The secret of a successful transition is to hold back expenditures but accelerate revenues until the two are close. Then take the jump.
There are such big differences in average health costs between men and women, between regions of the nation, and between employment situations, not to mention income brackets and ethnic groups, the earnest, honest statistics available to the public about its health costs are alarmingly variable. When the recent commotion about the costs of Obamacare are added in, with the delayed changes in the status of employment inclusion, plus unexpected jumps in insurance premiums ranging up to 50%, this seems like a poor time to be talking absolute numbers. Consequently, we prefer to make our transitional projections in terms of relative values. It seems more accurate to say that if women of reproductive age continue to cost 20% more than men, the savings will be 20% greater -- if you follow our plan. Consequently, it is probably more meaningful to project a 50% improvement in both costs, than to make a thousand mistakes in estimating all the numerical variations of the same idea. Only when prices stop changing so rapidly will it be safe to be more specific.
Accordingly, we note that substituting catastrophic insurance for Obamacare ought to reduce costs by 30%. And paying for childhood and last year of life by reinsurance-switching ought to shave off 20% more. Consequently, the addition of $50 per year premium cost (paid into the escrow fund) and substitution of catastrophic insurance, combined ought to reduce costs by about 50%. Since Medicare now consumes about half of health costs, we ought to be ready to complete the transition in about half of the life expectancy, or 42 years. Scientific advances should shorten this time interval, and the many extra suggestions of this book ought to provide additional financial cushions against surprises. Consequently, we project that a transition should take no longer than 42 years, and we fervently hope that luck could improve on that. But 42 years is what we project. Can anybody propose a plan which would improve on that projection? It's, of course, a pity we didn't do this ten years ago, so it would only take 32 more years, but that should be a caution that if we spend ten more years calling each other names, it will take 52 years.
A physician friend of mine was a patient of a famous neurosurgeon who had joined a group and accepted a salary. Quite recently, he visited the neurosurgeon, only to have the interview interrupted by an automated telephone call. The automated message was to the effect that time scheduled for the visit had expired, and he should quickly terminate the office visit. The neurosurgeon remonstrated, to little avail. It seems safe to predict this whole relationship is soon to terminate, although it will be interesting to watch. There are limits to what evasions can be devised, as well as to what controls will be tolerated. I predict this neurosurgeon and this institution will eventually test such limits.
In the same way, I predict a funded pre-payment system will eventually devise enough compromises to keep its system functioning. It produces too much extra revenue to tolerate unlimited abuse. Any system which can produce so much revenue that inflation protectors are necessary, and one which at the same time is so complex it requires actuaries to project revenue--will find the necessary accommodations.
Stimulated mainly by the passage of PL-92-603 and the data requirements of the PSRO's established by that law, a lively debate has developed as to how health care data will be collected and processed. The three main topics around which the debate revolves are:
1.) Accuracy of the data
2.) Confidentiality and access
3.) Cost.
Recent passage of PL 93-641 has increased the urgency of this debate, as it would seem logical for the HSA's established by this law to work closely with the corresponding PSRO's and to use data provided by the latter. It is apparent that they will not be able to become effective until such data is available.
Therefore, it seems appropriate at this time to develop a general scheme for data management which would:
1) Meet the requirement of accuracy, confidentiality/access and cost effectiveness
2) Provide a minimum data set necessary for a uniform national system of peer review.
3) Be flexible enough to adapt to specific local needs and to unforeseen future needs.
PRESENT SITUATION
It is apparent that there is a considerable investment (both private and public) in data systems at present of the order of magnitude of billions in hardware and annual expenditures of approximately billions in EDP operations, related to healthcare. Among the larger data processors is the National Center for Health Statistics, the Bureau of Health Insurance, SRS, State Medicaid programs, Blue Cross / Blue Shield, and private health insurance companies. In addition, the considerable data-collection capability exists in private monitoring systems (such as the Commission on Professional and Hospital Activities) as well as within individual hospitals. Because of the substantial existing investment, legitimate concern has been expressed that PSRO's might simply add "another layer of data-gathering" and further increase cost and confusion. This concern must be addressed.
In spite of the significant capacity in existing systems, there are several glaring defects. One is compartmentation. Data collected by one organization is not available to other organizations that need it. The corollary to this is duplication, organizations have set up duplicating systems because of ignorances of data available elsewhere or inability to get it. Both of these problems tend to increase the total cost of data collection. Related to the problems of compartmentation and duplication is the significant problem of harassmentof the provider. Hospitals have increased administrative costs simply to provide the information required by federal state and local agencies of government as well as third-party payers, and physicians and clinics are likewise struggling under an increasing load of paperwork which threatens to impede their ability to deliver the medical services which are urgently needed.
In spite of the complexity and extent of existing data-gathering apparatus, there are areas in which gross inaccuracies occur. In Hospitals the crucial point of data-gathering is usually in the hospital record rooms, and the causes of inaccurate data fall into two main categories;
1) Insufficient, inaccurate or illegible recording of diagnoses and procedures by the attending physician.
2) Deliberate distortion of information to accommodate third-party payment mechanisms.
3) Inadequate or inaccurate identification data due to lack of uniformity of hospital discharge data sets and lack of uniformity of training and supervision of personnel abstracting the data.
The problem of confidentiality and access to data are magnified considerably by the present uncoordinated system not only are there flagrant breaches of confidentiality because of the multitude of people handling this data without overall supervision, but conversely, when a public party has legitimate need to know certain information, it is often nowhere readily available in an aggregated format.
These defects in the present system relate mainly to data concerning institutional care. When it becomes necessary to collect ambulatory care data, all these problems will be multiplied manyfold. Additionally, present data collection systems are seldom demographically oriented so that what actually happens within a given geographic area or within a defined population is difficult to determine.
PROPOSAL
A. Structure.
In an attempt to bring more order into the presently fragmented system and to address the three basic issues of accuracy, confidentially/ access, and cost, we would propose the following scheme diagrammed in Figures 1 and 2: (see diagrams following)
These figures are based o the concept of a "data brokerage" (Ref.), and a common pathway for all health care data, with management of the system at the PSRO/HSA level by a Data Sub-Committee of the PSRO, and at the State Support Center or State PSRC level by a similar data sub-committee of that body. Both sub-committee would, of course, be responsible to their Boards.
A key feature of the system is the data-processing contractor at both levels. This organization would be chosen after competitive bidding in response to an RFP put out by the data management sub-committee. Organizations which might bid for such contracts would be either existing data processing firms, specializing in health care data, such as EDS, like wood.
Optimum Systems, Health Application System, etc..., or they could be spin-offs of existing third-party payers, either the Blues or commercial health insurance companies. In the latter case, the EDP organization, handling data under the integrated PSRO system, would have to be managerially divorced from the parent corporation in order to avoid conflict of interest. Existing organizations such as BHI, the Blues, commercial carriers, etc., would continue to maintain data systems for their own internal needs, but common needs would be met by the PSRO network.
A second key feature of the system is that management information, quality assurance data, and claims payment data would all flow over a common pathway. The compelling reasons for this are
1) Economy of operation
2) Minimal harassment of providers
3) Effectiveness of managerial control.
Economy and minimal provider-harassment would be accomplished by the necessity for submission of only one abstract containing the necessary data elements for each service rendered, whether in hospital, nursing home, doctor's office, or patient's home. This could be submitted to a local PSRO data center, generally by direct terminals located in community hospitals. When ambulatory care review becomes required, doctors and clinics or medical office buildings may find it expedient to have entry terminals primary for ambulatory care data in their own facilities. Doctors in solo practice or in more rural communities could submit abstracts by mail to their OSRO data centers or to the entry \terminals in their community hospitals. Large hospitals having their own computer systems at present would only need to make arrangements for linkage from their computers to the PSRO data center for transmission of essential data elements.
B. Management
Managerial responsibility at the PSRO/HSA level would be invested in the PSRO Board and delegated to the Data Management Sub-Committee. Although the Board membership is restricted to M.D. or D.O. members of the local PSRO, the sub-committee could, and should, include non-M.D. members. Certainly a member of the corresponding HSA should sit on this committee, and if the PSRO is statewide, each of the main users of this system should be represented; namely, BC/BS, HIAA, State Hospital Association, Inc.
At the level of the state or regional support center (of which 12 exist at present), the Data Management Sub-Committee would be even more broadly representative, with representation from the appropriate state health agencies, medical schools, regional HEW offices, and responsible consumer organizations, etc.
Confidentiality/access issues would be settled by the Data Management Sub-Committees at the appropriate levels. A uniform policy would be established, and there would be no question as to where to fix responsibility for the release or retention of information.
Although not shown in the second diagram, there is a third, or nation, level of data-handling represented by such organizations as the National Center for Health Statistics, Bureau of Health Insurance, SRS and, When some national health insurance plan is voted by Congress, whatever federal agency will be given authority to manage this program. These organizations should be concerned mainly with aggregated data and only when necessary for eligibility determination or payment of claims with individually identified data.. Much of the argument on this subject at present seems pointless if it is recognized that disciplinary control of both patients and providers should be delegated to the PSRO level and at higher levels. Management should be concerned with managing the systems, not with the disciplining of individuals.
On this subject, it might be pertinent to observe that, as the data system becomes operational, the present tendency of BQA to try to control process in each PSRO should be drastically curtailed, and the role off BQA should be mainly to monitor the outcome of the efforts of each PSRO actually relying on the support centers to provide most of the data that will be necessary to do this.
C. Funding.
Funding of the PSRO Data System is a part of the general problem of funding PSRO operations, which is an issue at present. We will not go into this question in detail in this paper, other than to observe that we feel strongly that PSRO's should receive their income mainly from those institutions for which they provide services so that all purchasers of data from the PSRO would pay an appropriate amount for it. It should be remembered that in addition to providing data, the PSRO also providers certification of the necessity, quality, and the appropriateness of the service, upon which payment will be based. The cost of EDP and certification must be recognized as reimbursable costs, and provision made to pay for these functions through the same reimbursement mechanism which pays for the health care services themselves. At present the total cost of PSRO review of institutional care including administrative, EDP, and certification costs is between $10 and $35.00 per hospital admission (Ref.).
It would appear that, as PSRO's become more efficient, this cost will settle down to between $10-$15 for a total of $110-$165 million dollars for present 11 million Medicare and Medicaid admissions annually. Reimbursement for review of nursing home care and ambulatory care will require slightly different arrangements, but the principles should be the same.
Funding for the State-Support Centers and the data libraries, which would be used primarily for medical care evaluation studies and other retrospective research, might come directly from BQA and research grants from medical schools or schools of public health.
DISCUSSION
Questions which have been raised in regard to the feasibility of such a common data system are;
1) The possibility of requiring a significant investment in "new hardware" by duplicating existing capacity. We anticipate that the successful bidders for the data-processing contracts would use existing hardware to a large extent and only invest in new hardware as technologic advances in the industry require it. Certainly, new software systems would be required and the stimulus of competitive bidding on some 200 individual PSRO contracts, plus the stimulus of minimal data requirements, established, presumably by the Professional Standards Review Council would, we feel, be a healthy influence to continued improvements in the system.
2) A single, nationwide data system would be another example of "Big Brother is watching you", and a further breach of individuals privacy in a particularly sensitive area.
As we have mentioned above, there are numerous possible "leaks" in the present, uncoordinated system, and essentially no control of confidentiality by any responsible public party. The proposed system clearly fixes responsibility for release or retention of information with data management sub-committees of the PSRO at the local level and the corresponding committee of the support center at the state or regional level. All requests for access to data would be channeled through these committees, and such request would have to be supported by documented "need-to-know".
The converse problem of access to health care information by consumer groups and public parties with a legitimate interest in health care data would be much more readily solved in our proposed scheme than at present. With regard to individual data relating to a particular patient-doctor relationship, confidentiality is the predominant issue, and professional control should be maximal at this level, with only enough non-professional input to keep the professionals honest. At the state, regional and federal levels, access to aggregated data, in order to assess the elements of the healthcare delivery system becomes the dominant concern, and at this level non-professional control becomes important, with a small component of professional input, principally to safeguard privacy and to ensure accuracy. This relationship is shown in Figure 3, taken from a report of the Institute of Medicine, entitled, "Advancing the Quality of Health Care".
Confidentiality of "business" information is a legitimate concern to many providers. For instance, how many beneficiaries Mutual of Omaha or the Blues have in a given area, or the total benefit payments for a given group of beneficiaries, or the retention rate for administrative costs and reserves, are generally regarded as business information, which should not be released to competitors. We are satisfied that the technology exists to build into a "common pathway" system adequate safeguards to secure the privacy of this information.
It should be noted in our scheme that the repositories of "old" data (as opposed to "online" data needed for day-to-day operation) are the "data libraries" controlled by the state / regional support centers. Such data would be used for retrospective MCE studies comparing the performance of different PSRO's, hospitals, clinics, HMO's and other provider groups. Since, as a result of such comparison, someone is always going to come off second best, strict control of such studies and release of information only to those with a legitimate need for the information will be important. The conduct of such studies and the monitoring of the coordinated data system for accuracy and efficiency are two reasons why we feel the support centers should continue to exist and not be phased out (as is present HEW policy).
3) . A large amount of data which would have to pass over a common pathway would "jam the system" and slow the speed of transportation of information, particularly that required by third-party payers for payment of claims
We have reason to believe that, conversely, the transmission of such information would be accelerated rather than delayed, and the efficiency of claim payment would be increased. How to claim payment request comes from a variety of providers (hospital, doctor, pharmacy, VHA, etc.) . and to a variety of payers (Medicare, Medicaid, the Blues, commercial health insurance companies, and the patient himself). Attempts to coordinates the payments of benefits are still clumsy, resulting in duplicate payments, incorrect payments, retroactive denial of payments, and a tremendous volume of correspondence phone calls, etc., trying to rectify these errors.
The "common pathway" scheme would afford an opportunity to gather together the claims of all providers pertaining . to a given case, and to compute accurately the deductibles, co-insurance and coordinated payment of benefits by various payers. At the same time, the PSRO certification (required at present only for payment under federally-funded programs, but eventually in all probability for payment under all health insurance program) would be added to the claim. In approximately 85% of cases based upon present experience, the claim would pass through the screens built into the local and regional computer systems without delay, arriving essentially instantaneously at the office of the third-party payer. The third-party payer would then only check eligibility and conformance to the scope of benefits provided by his contract, and issue checks or payment credits to the appropriate providers.
For approximately 15% of cases requiring review at the PSRO level, the review process would be accelerated by the gathering of all information regarding a particular case in one locus, and the development of online accessible data systems for review of much of this data. We visualize a BSRO room in each community hospital where the paramedical and professional personnel would review questioned cases, using a CRT terminal to access the PSRO data bank (for details of such a system,). Experience to date indicates that of the approximately 15% of cases "kicked out" by computer screens, all but 2-5% can be certified after paramedical review and promptly returned to the payment mechanism. The 2-5% requiring professional review would be reviewed by doctors at their community hospitals (where they are usually available on a daily basis), and certification would have to wait for weekly or monthly meetings of peer review committees only in rare instances. The virtually total abolition of delayed, retroactive review of claims and denial of payment, which is a source of considerable irritation to all providers at present, should be achievable under our proposed scheme.
4). Such a scheme would be exorbitantly expensive.
We have previously mentioned that the system would not require significant capital investment in new equipment nor in the training and employment of large numbers of personnel as these already exist and need only to be organized in a different management structure. It is even possible that by eliminating some presently duplicative systems, there may be a net saving. There is reliable evidence that the review of institutional care can be done at present for approximately $10-15, per admission. With the costs per hospital admission of Medicare and Medicaid patients averaging $750-$1,000, this amounts to 1-2% of the total cost of care. Experience in the costs of ambulatory care review indicates that it can be done at present for approximately 3-5% of the cost of providing that care and as volume increases that figure can be reduced.
It might be pointed out that when such a scheme becomes operational for both ambulatory and in-patient care, we will have available for the first time reliable data on the costs of an entire spam of illness, from the first patient contact to eventual recovery or death. Such information will give us much more useful information with regard to the cost-effectiveness of different elements of the healthcare system that is available at present.
The question as to how much effect the PSRO review system will have on total costs of healthcare in the nation has been widely debated, and it does not seem wise to make any sweeping generalizations on this point. It seems apparent that initially some unnecessary services will be eliminated, and the length of stay in expensive institutions will be reduced, and there will be an opportunity for better control of provider charges.
On the other hand, insistence on a higher quality of care will, in some instances, increase costs and the inevitable pressure of inflation in the national economy and the continuing introduction of high-cost technology into the healthcare field may offset any potential savings resulting from the PSRO review system.
5). A "common pathway" system might multiply errors in data-gathering and information-handling.
On the contrary, we believe that the proposed scheme affords opportunities for control of the accuracy of data which do not exist in the present "patchwork" system. One important feature is the initial control of data input. We have mentioned that institutional data at present is subject to several causes for the error. In our scheme, all institutional data would be gathered initially by trained nurse-coordinators and transferred from their abstracts to the computer terminal by another specially trained individual. These individuals should preferably e on the payroll of and supervised by, the local PSRO, although in some cases they may be on the hospital payroll and supervised by the PSRO.
When ambulator review is added, we recommend the adoption of the minimum data set for ambulatory care review, which is similar to the UHDDS, which is becoming standardized for institutional care review. We also recommend the adoption of a simple encounter-reporting form for ambulatory care, adapted to individual practices, similar to that developed by H. Philip Hampton of Tampa, Fla. This will provide all information necessary for both claims payment and quality review, reducing the "harassment factor" to a minimum. Information from these encounter forms would be entered likewise by trained data entry personnel in either the local PSRO office or at computer terminals located in community hospitals, clinics, and doctors' office buildings.
One of the important functions of the Bureau of Quality Assurance, working cooperatively with state regional support centers, would be to monitor the accuracy of data system and to continue to develop and introduce into the system improved techniques to ensure accuracy. Such control is impossible at present.
SUMMARY
In this paper we have attempted to demonstrate the need for, and the feasibility of an integrated PSRO data system, addressing the three main issues of accuracy, confidential/access, and cost. A proposed scheme is described in general outline. Some frequently voiced questions regarding such an integrated data system are posed and answered.
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.
