Philadelphia Reflections

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

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Pearls on a String:Further Extending Health (and Retirement) Savings Accounts
Pearls on a String: Further Extending Health (and Retirement) Savings Accounts. HSAs are the string. Retirement saving, Privatizing Medicare, and Shifting Childhood Costs-- are the Pearls. Other Pearls to follow.

Co-ordinating Obamacare With Health Savings Accounts

A Small Gamble for Big Returns

Although the Pearls on a String design seems to hold great promise for matching American health finances to the medical lifetime it proposes to finance, it contains the flaw of taking 90 years to test it in action from birth to death. That is, almost no one would live long enough to know if it, for certain, worked the way it promised. But on the other hand, there is a significant chance scientists will discover cures for many expensive diseases during the next ninety years-- and so it might work far better than anyone expected. What kind of bet would we be asking people to take?

To be blunt about it, if some fool blows up the earth with atom bombs, it scarcely matters what kind of health insurance anybody had. And if some expensive diseases are cured, all you get for your hundred dollars is a return of $5000 to $29,000. So the main risk is mismanagement. A good idea badly managed can be as risky as a poor idea. Mismanagement includes poor design at the beginning, or poor management along the way. In this case, it's pretty much up to Congress, to neglect it or to use it as a piggy bank. So it's a little early to judge the risk, but it's not too early to anticipate the problems. Congress needs to enable the program, but not to overspecify it. Somehow, the program has to anticipate the early adopters will be those people who are in a position to regard the loss of a hundred or two hundred dollars as no big deal (mostly richer ones) but to leave the door ajar for later entry of timid folks, poor folks, and those who will take no risk except on a sure thing. That means voluntary entry with graded incentives for late-comers (a dollar at birth, 2 dollars at age 10, 4 dollars at age 20, etc.) And it means avoidance of political control except to close it down if its managers misbehave, with the ability to re-open it after the loophole has been fixed. If it works, early adopters will have made a pile of money. And if it doesn't work, well, you only lost a few bucks.

What Are the Reasons to Believe Science Will Cure Some Significant Diseases in the Next Century? 1. In the first place, the National Institutes of Health research budget is currently $33 billion a year. It concentrates on basic research, leaving applied research to patent-seeking companies in the private sector. That is, drug companies and medical device makers. When the private sector produces a patent, the product price is initially high enough to pay for the research and some hefty profit; after a few years, the price comes down. If private sector research should ever seem to diminish, some sensible modification of the Kefauver "efficacy" requirement or its enforcement ought to kick-start it, again.

2. Let me tell you a personal story of a trip to an invitation-only investment seminar, limited to private foundations. On the opening day, the moderator said, "Let's get acquainted. Would everyone who represents less than $30 million dollars, please raise your hand." Of the roughly two hundred attendees, I was one of four who raised his hand. The Dean of the Harvard Business School was on my left, and the representative of the Bill Gates Foundation was on my right. I would estimate that ten times the amount of the Rockefeller Foundation was represented, and that four times the assets of that room would be found in the foundations of the rest of the country who were not attending the conference. By no means all of them are involved in medical research, but many of them fund universities and other research centers. The amount of money available for medical research in the next century is astounding, and it's America's collective bet on success.

3. A relative of mine took a PhD course in mathematics at MIT. He was the only American citizen among the 73 enrollees. The amount of medical research we can anticipate coming from abroad, is very considerable and may in time exceed our domestic production. There is no shortage of available resources, or talent, world-wide. Nor research opportunities, although few foreign countries have caught the American fever for "thinking big". We have gone from the discovery of the DNA helix to complete identification of the human genome, during my lifetime. Only 2% of disease has been connected to the genome, so attention is shifting to the "silent" protein of the cell. Disease can run, but it can't hide. There are lots of diseases, but fifty percent of medical cost is associated with only ten diseases. So, find 'em and get rid of 'em, before we start to become impatient.

4. Nor do we foresee a labor shortage. Self-driving cars should be on the streets in a decade, following which people will summon fleets of them by cell phone, followed by a decline in accidents and accident insurance. Since his entire holding company is balanced on the float from auto insurance, it will be interesting to see how Warren Buffett addresses the issue. The leader of a very large investment company also predicts self-correcting computer code will soon cause wide-spread unemployment. This is all creative destruction. A third of the country will be retired without sufficient income to live on, but an ample pool of employees for terminal care of the others will surface.

But enough. A real early-adopter doesn' t need four reasons to adopt early, and a timid soul won't be persuaded by forty arguments. Only America has the bit in its teeth at the moment, and that seems to be part of our culture. Only America would gamble ridiculous amounts of money on research, assuming that timid gestures like Otto von Bismarck's health insurance plan would only worsen the problem, creating many more problems of its own. What sane person wants to rule the whole world, anyway?

Originally published: Sunday, October 02, 2016; most-recently modified: Friday, May 10, 2019