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.
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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.
To summarize what was just said, we noted the evidence that a single deposit of about $55 in a Health Savings Account in 1923 would have grown to more than $300,000, today in the year 2014 because the economy achieved 10% return, not 6.5%. Therefore, with a turn of language, if the Account had invested $100 in an index fund of large-cap American corporate stock at a conservative 6.5% interest rate, it might have narrowly reached $6000 at age 50, which is re-invested on the 65th birthday, would have been valued at $325,000 at the age of 93, the conjectured longevity 50 years from now. No matter how the data is re-arranged, lifetime subsidy costs of $100 can be managed for the needy, the ingenuity of our scientists, and the vicissitudes of world finance-- within that 4% margin. We expect that subsidies of $100 at birth would be politically acceptable, and the other numbers, while stretched and rounded, could be pushed closer to 10% return. Much depends on returns to 2114 equalling the returns from 1923 to 2014, as reported by Ibbotson. At least In the past, $55 could have pre-paid a whole lifetime of medical care, at the year 2000 prices, which include annual 3% inflation. An individual can gamble with such odds, a government cannot. So one of the beauties of this proposal is the hidden incentive it contains, to make participation voluntary, and remain that way. No matter what flaws are detected and deplored, this approach would save a huge chunk of health care costs, even if they might not be stretchable enough to cover all of it.
And if something does go wrong, where does that leave us? Well, the government would have to find a way to bail us out, because the health of the public is "too big to fail" if anything is. That's why a responsible monitoring agency is essential, with a bailout provision. Congress must retain the right to revert to a bailout position, which might include the prohibition to use it without a national referendum or a national congressional election.
This illustration is, again, mainly to show the reader the enormous power of compound interest, which most people under-appreciate, as well as the additional power added by extending life expectancy by thirty years this century, and the surprising boost of passive investment income to 10% by financial transaction technology. The weakest part of these projections comes in the $300,000 estimate of lifetime healthcare costs during the last 90 years. That's because the dollar has continuously inflated a 1913 penny into a 2014 dollar, and science has continuously improved medical care while eliminating many common diseases. If we must find blame, blame Science and the Federal Reserve. The two things which make any calculation possible at all, are the steadiness of inflation and the relentless progress of medical care. For that, give credit to -- Science and the Federal Reserve.
Blue Cross of Michigan and two federal agencies put their own data through a formula which creates a hypothetical average subscriber's cost for a lifetime at today's prices. All three agencies come out to a lifetime cost estimate of around $300,000. That's not what we actually spent because so much has changed, but at such a steady rate that justifies the assumption, it will continue for the next century. So, although the calculation comes closer to approximating the next century than what was seen in the last, it really provides no method to anticipate future changes in diseases or longevity, either. Inflation and investment returns are assumed to be level, and longevity is assumed to level off. So be warned.
The best use of this data is, measured by the same formula every year, arriving at some approximation of how "overall net medical payment inflation" emerges. That is not the same as "inflation of medical prices" since it includes the net of the cost of new and older treatments and the net effect of new treatments on longevity. Therefore, this calculation usefully measures how the medical industry copes with its cost, compared with national inflation, by substituting new treatments for old ones. Unlike most consumer items, Medicine copes with its costs by getting rid of them. Sometimes it reduces costs by substituting new treatments, net of eliminating old ones. It also assumes a dollar saved by curing disease is at least as good as a dollar saved by lowering prices, and sometimes a great deal better, which no one can measure. Our proposals therefore actually depend on steadily making mid-course corrections, so we must measure them.
Our innovative revenue source, the overall rate of return to stockholders of the nation's largest corporations, has also been amazingly steady at 10% for a century. National inflation has been just as non-volatile, and over long periods has averaged 3%., perhaps the two achievements are necessary for each other. Medical payments must grow less than a steady 10%, minus 3% inflation, before any profit could be applied to paying off debt, financing the lengthening retirement of retirees, or shared with patients including rent seekers. But if the profit margin proves significantly less than 10%, we might have to borrow until lenders call a halt. No one can safely say what the two margins (7% + 3%) will be in the coming century, but at least the risks are displayed in simple numbers. Parenthetically, the steadiness of industrial results (in contrast to the apparent unsteadiness of everything else) was achieved in spite of a gigantic shift from control by family partnerships to corporations. Small businesses (less than a billion dollars annual revenue) still constitute half of the American economy, however, and huge tectonic shifts are still possible. Globalization could change the whole environment, and the world still has too many atom bombs. American Medicine can escape international upheavals in only one way -- eliminate the disease. Otherwise, the fate of our medical care will largely reflect the fate of our economy. To repeat, it is vital to monitor where we are going.
Revenue growing at 10% will relentlessly grow faster than expenses at 3%. Our monetary system is constructed on the gradations of interest rates between the private sector and the public sector. It would be unwise to switch health care to the public sector and still expect returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, although it indirectly affects the value of the dollar. Without all its recognized weaknesses, a fairly safe description of present data would be that enormous savings are possible, but only to the degree, we contain last century's medical cost inflation closer to 3% than to 10%. The simplest way to retain revenue at 10% growth is by anchoring the leaders within the private sector.
How Do You Withdraw Money From Lifetime Health Insurance?
Four ways should be mentioned: Debit cards for outpatient care, Diagnosis pre-payment for hospital care, Transfers from escrow, and Gifts for specified purposes.
Special Debit Cards, from the Health Savings Account, for Outpatient care.Bank debit cards are cheaper than Credit cards, because credit cards are a loan, while the money is already in the bank for a debit card. Some pressure has to be applied to banks or they won't accept debit cards with small balances. Somehow, the banks have to be made to see that you start with a small account and build up to a big one. So it's probably fair for them to insist on some proof that you will remain with them. The easiest way to handle this issue is to make the first deposit of $3300, the maximum you are allowed to deposit in one year. That's difficult for little children and poor people, however, so there must at least be some way to have family accounts for children. You just have to shop around, that's all.
After that, all you do is pay your medical outpatient bills with the debit card, but we advise paying out of some other account is you can, so that the amount builds up more quickly to a level where the bank teller quits bothering you. Remember this: the only difference between a Health Savings Account and an ordinary IRA for practical purposes, is that medical expenses are tax-exempt from an HSA. Both of them give you a deduction for deposits, and both collect income tax-free. If for some reason you do not expect a tax deduction, don't use the HSA, use something else like an IRA. Alternatively, if you can scrape together $6000, you are completely covered from deductibles, and co-payment plans are to be avoided, so then an HSA with Catastrophic Bronze plan is your best bet. If you have a bronze plan, you probably get some money back if you file a claim form, but those rules are still in flux at this writing. The expense of filing and collecting claims forms is one of the reasons the Bronze plan is more expensive, but that's their rule at present.
1. Spend it on medical care. Specially modified benefit packages are possible.
2. Spend less, but spend the savings on something else. The program should not be permitted to do this, but Congress should do it in the general budget.
3. Borrow it, and inflate it away on the books. But inflate the borrowings at some lower rate. The customary techniques of a banana republic.
4. Fail to collect the premiums/payroll deductions.
After 1., which is the essential purpose of the whole thing, the most attractive choice is 4. because a gradual transition is needed, with incentives offered only to those who choose to participate. However, borrowing may be necessary to transfer surplus revenue to age groups in deficiency.
Spending Health Savings Accounts. Spending Less. In earlier sections of this book, we have proposed everyone have an HSA, whether existing health insurance is continued or not. It's a way to have tax-exempt savings, and a particularly good vehicle for extending the Henry Kaiser tax exemption to everyone, if only Congress would permit spending for health insurance premiums out of the Accounts. To spend money out of an account we advise a cleaned-up DRG payment for hospital inpatients, and a simple plastic debit card for everything else. Credit cards cost twice as much like debit cards, and only banks can issue credit cards. Actual experience has shown that HSA cost 30% less than payment through conventional health insurance, primarily because they do not include "service benefits" and put the patient in a position to negotiate prices or be fleeced if he doesn't. Not everybody enjoys haggling over prices, but 30% is just too much to ignore.
No Medicare, no Medicare Premiums. We assume no one wants to pay medical expenses twice, and will, therefore, drop Medicare if investment income is captured in lifetime Health Savings Accounts. The major sources of revenue for Medicare at the present time fall into three categories: half are drawn from general tax revenues, a quarter come from a 6% payroll deduction among working-age people, and another quarter are premiums from retirees on Medicare. All three payments should disappear if Medicare does, too. Therefore, the benefit of dropping Medicare will differ in type and amount, related to the age of the individual. Eliminating the payroll deduction for a working-age person would still find him paying income taxes in part for the costs of the poor, as it would for retirees with sufficient income.
Retirees would pay no Medicare premiums. Their illnesses make up 85% of Medicare cost, but at present, they only contribute a quarter of Medicare revenue. However, after the transition period, they first contribute payroll taxes without receiving benefits, and then later in life pay premiums while they get benefits, to a total contribution of 50% toward their own costs. But the prosperous ones still contribute to the sick poor through their income taxes. There might be some quirks of unfairness in this approach, but its rough outline can be seen from the size of their aggregate contributions, in this scheme. At any one time during the transition, working-age and retirees would both benefit from about the same reduction of money, but the working-age people would eventually skip payments for twice as long. Invisibly, the government subsidy of 50% of Medicare costs would also disappear as beneficiaries dropped out, so the government gets its share of a windfall, in proportion to its former contributions to it. One would hope they would pay down the foreign debt with the windfall, but it is their choice. This whole system -- of one quarter, one quarter, and a half -- roughly approximates the present sources of Medicare funding and can be adjusted if inequity is discovered. For example, people over 85 probably cost more than they contribute. For the Medicare recipients as a group, however, it seems like an equitable exchange. This brings up the subject of intra- and extra-group borrowing.
Escrow and Non-escrow. When the books balance for a whole age group, the managers of a common fund shift things around without difficulty. However, the HSA concept is that each account is individually owned, so either a part of it is shifted to a common fund, or else frozen in the individual account (escrowed) until needed. It is unnecessary to go into detail about the various alternatives available, except to say that some funds must be escrowed for long-term use and other funds are available in the current year. Quite often it will be found that cash is flowing in for deposits, sufficient to take care of most of this need for shifting, but without experience in the funds flow it would be wise to have a contingency fund. For example, the over-85 group will need to keep most of its funds liquid for current expenses, while the group 65-75 might need to keep a larger amount frozen in their accounts for the use of the over-85s. In the early transition days, this sort of thing might be frequent.
The Poor. Since Obamacare, Medicaid and every other proposal for the poor involves subsidy, so does this one. But the investment account pays 10%, the cost of the subsidy is considerably reduced. HSA makes it cheaper to pay for the poor.
Why Should I Do It? Because it will save large amounts of money for both individuals and the government, without affecting or rationing health care at all. To the retiree, in particular, he gets the same care but stops paying premiums for it. In a sense, gradual adoption of this idea actually welcomes initial reluctance by many people hanging back, to see how the first-adopters make out. Medicare is well-run, and therefore most people do not realize how much it is subsidized; even so, everyone likes a dollar for fifty cents, so there will be some overt public resistance. When this confusion is overcome, there will still be the suspicion that government will somehow absorb most of the profit, so the government must be careful of its image, particularly at first. Medicare now serves two distinct functions: to pay the bills and to protect the consumer from overcharging by providers. Providers must also exercise prudent restraint. To address this question is not entirely hypothetical, in view of the merciless application of hospital cost-shifting between inpatients and outpatients, occasioned in turn by DRG underpayment by diagnosis, for inpatients. A citizens watchdog commission is also prudent. The owners of Health Savings Accounts might be given a certain amount of power to elect representatives and negotiate what seem to be excessive charges.
We answer this particular problem in somewhat more detail by proposing a complete substitution of the ICDA coding system by SNODO coding, within revised Diagnosis Related Groupings,(if that is understandable, so far) followed by linkage of the helpless inpatient's diagnosis code to the same or similar ones for market-exposed outpatients. (Whew!) All of which is to say that DRG has been a very effective rationing tool, but it cannot persist unless it becomes related to market prices. We have had entirely enough talk of ten-dollar aspirin tablets and $900 toilet seats; we need to be talking about how those prices are arrived at. In the long run, however, medical providers are highly influenced by peer pressure so, again, mechanisms to achieve price transparency are what to strive for. These ideas are expanded in other sections of the book. An underlying theme is those market mechanisms will work best if something like the Professional Standards Review Organization (PSRO) is revived by self-interest among providers. Self-governance by peers should be its theme, ultimately enforced by fear of a revival of recent government adventures into price control. Those who resist joining should be free to take their chances on prices. Under such circumstances, it would be best to have multiple competing PSROs, for those dissatisfied with one, to transfer allegiance to another. And an appeal system, to appeal against local feuds through recourse to distant judges.
Deliberate Overfunding. Many temporary problems could be imagined, immediately simplified by collecting more money than is needed. Allowing the managers some slack eliminates the need for special insurance for epidemics, special insurance for floods and natural disasters, and the like. Listing all the potential problems would scare the wits out of everybody, but many potential problems will never arise, except the need to dispose of the extra funds. For that reason, it is important to have a legitimate alternative use for excess funds as an inducement to permit them. That might be payments for custodial care or just plain living expenses for retirement. But it must not be a surprise, or it will be wasted. Since we are next about to discuss doing essentially the same thing for everybody under 65, too, any surplus from those other programs can be used to fund deficits in Medicare. But Medicare is the end of the line, so its surpluses at death have accumulated over a lifetime, not just during the retiree health program.
We propose a comprehensive reform of American healthcare finances, resulting in a drastic drop in costs. This is payment reform, not medical reform, although the practice of Medicine cannot escape upheavals in its finances. It must all withstand critical review, but some of the future is simply not knowable. Defense of future predictions relies on extrapolations of history, but brief explanation nevertheless forces some things out of chronological order. We must, however, begin somewhere, repeating ourselves a little when the loop is finally closed.
So, we begin with Medicare, which has worked well for fifty years. Its data are easily confirmed on the Internet. Costs are known, minor faults have had time to be been corrected. Medicare is not the central focus of this book, but it's familiar. Seeing where Medicare fits in, gets the reader a long way toward understanding the system and where it needs to be modified.
Begin understanding Medicare with how it gets paid for, in three parts. (1) About a quarter is pre-paid, originating as a payroll deduction from the paycheck of every working person and mostly matched by an equal amount from his employer. (2) A second 25% of Medicare expenditure is supplied by the retirees themselves, as various sorts of insurance premiums. (3) And the remaining half is contributed by the federal government, but it originates in everybody's graduated income tax. In recent years, national finances have been strained, so a considerable part of the subsidized half is "temporarily" borrowed from foreign countries. There is general approval of the Medicare program, but it has grown expensive, a crisis usually blamed on the approaching retirement of the baby boomer generation. In a sense, maybe Medicare is a little too popular. Everybody likes a dollar that seems to cost fifty cents.
Focus attention on the pre-paid quarter of the costs, the payroll deduction. It's to be found in a mass of other numbers on any paycheck stub, often mixed with pre-payment of Social Security, and consists of 1.45% of salary for most people, 3.8% for those who earn more than $200,000 a year. The average worker earns $42,000 per year, and thus contributes $630; half of the workers contribute less, half of them, more. Persons earning less than $200,000 are matched by equal contributions from their employer. This has been going on for so long, most people could not guess how much it costs, would overestimate the proportion of their contribution, and underestimate its full cost.
In our proposal, we ask that $360 (of this average of $609), a dollar a day per working person, be set aside in an untouchable "escrow" fund every year, $180 from the beneficiary, $180 from the employer. Essentially, that's a seventh (14%) of the matched average $1218 pre-payment already being made on behalf of the average worker, although it might constitute all of his personal pre-payment if that worker only earned $5,000 a year. (It's a flat tax, but it does not go to zero at zero income.) In forty years of working life, the escrow would total $14,400. (It currently becomes the government's money, so the transaction is a tax reduction as well as an increase in personal income. For the moment, let's skip over the people below the poverty line, who obviously have to be subsidized, and ask, "What do you propose to do with a seventh of a quarter (3.6%) of the average total cost of Medicare coverage?" We're asking for $14,400 spread over forty years, which is 7% of what a person costs for a lifetime of Medicare ($200,000), or 4.5% of what is generally guessed to be one person's health cost for an entire lifetime ($325,000). What are we proposing to do with the money?
Answer: We propose to invest the $14,800 at 8%, and offer one choice about some of it on the individual's 65th birthday, as well as a second choice about it at any time thereafter, including his will. Because we plan to earn 8% interest on it, the $14,800 has turned into $93,260, and by the way, $7400 of the $14,800 was probably contributed by the employer, who got at least $3700 in a tax deduction for it. Furthermore, most economists agree employer contributions effectively reduce the paycheck by an equivalent amount, describing all fringe benefits as just part of employee costs. We will unravel this later, but the point right now is illustrating the largely unappreciated power of compound interest. This little exercise was conjured up to illustrate the power of compound interest, which it does quite nicely; but we aren't quite through. A dollar a day has resulted in 93,260 by age 65, but by age 83 (the present life expectancy) the 93,260 has turned into $360,000, just by sitting in Medicare unused, and $360,000 is the generally accepted figure for the total lifetime healthcare cost of an individual. One conjecture is 8% interest is too high, but we devote a whole later chapter to defending that number, which is merely the highest that can readily be defended.
Remember, however, this gain. equal to Medicare's total cost was achieved by investing only $360 of the $609 actually paid in salary withholding for Medicare. There is another $249 paid to the Medicare "trust fund". At 8%, this has reached $64,505 by the 65th birthday and grows by $6054 a year until age 70. Medicare averages $11,000 a year costs until age 83, the expected age at death. If the second fund makes up the $5946 difference. The two funds are in the position of earning 8% and shrinking at a total of $11,000 per year in combination. By the age of xx, the escrowed fund is growing at more than $11,000 a year, and the surplus fund is shrinking to make up the difference between $11,000 a year and the deficits of the escrow fund. Once the escrow fund is earning more than $11,000, there is a growing surplus which at present would transfer to an IRA.
Well, obviously no one is actually going to do what's suggested in the example, at least not more than once, but it does bring out some important points. The first is that apparently Medicare could be privatized for about one-quarter of what it is now costing, just by depositing and investing what is already collected in payroll deductions. Is it really possible we could also stop collecting Medicare premiums from the beneficiaries entirely, and stop accepting its 50% federal tax subsidy entirely, which we must now borrow from foreigners? Well, sort of. It would all depend on whether you could get 8% from Wall Street, as well as an income tax deduction from the IRS. Since the government doesn't pay itself taxes, the comparison boils down to whether you can get that 8%. A later chapter is devoted to the question.
Data has not been collected to test this idea directly, but some suggestions are intriguing. Medicare reports it spends about $11,000 per year per Medicare subscriber, whose average life expectancy is to age 83. That would imply Medicare is now costing about $200,000 per subscriber per lifetime. Future longevity is unknowable in advance, but it seems plausible it will level off at 93, sometime this century. One way of looking at this is to multiply $11,000 per year, times 27 years instead of 17, and get a future total lifetime Medicare average cost of $352,000. That's quite a wallop, but revenue from compound interest of 8% would be paid longer as well, taking it from $198,000 to $726,000. Old people getting cheaper is quite a surprise. Among the various things suggested is we have no idea how much 2035 technology would cost if it's good enough to extend longevity by ten years. Take a cure for cancer, for example. Would it be $100,000 per treatment, or would it be like aspirin, just lying around waiting to be discovered lowering heart attacks by 50%, at a nickel a pill? Or take another direction: perhaps living ten years longer would result in ten more years on the golf course or bridge table, followed then by the same terminal illness. An unchanged lifetime medical cost, in other words, just spread out over a longer time. Like a tulip on a longer stem. Since we obviously don't have the faintest idea about these projections, we will just have to strike an average, and hope for the best. But to return to a deeper question latent in the discussion: Do we have to worry that living on investment income will reach a point where it can't maintain a decent living in the face of improving technology? The encouraging answer seems to be: There's nothing on the horizon to suggest it.
Choices at age 65 have therefore become more complicated. If you had already reached your 66th birthday, and your choices included taking the $180,000 in cash, of course, you can just take the money and run. You might well be required to pay income tax on the lump sum, reducing its net amount by 15-30%, depending on your tax bracket. Perhaps a better choice has already been created, to roll it over into an IRA. In that case, the tax is deferred until you take minimum distributions for retirement purposes, which start paying a gross taxable amount (calculated by dividing it by your life expectancy, which at 66 is currently 17 years) of $10,500 per year. Considering this the return on an original $7400 cash investment, that's pretty substantial. And even recognizing your employer contributed half of it, it's still pretty good.
But consider another direction, entirely. Suppose by then the laws have been liberalized to allow "grandparents" to transfer a certain limited amount (see below) from their own Health Savings Account into a child's newly-created unique Health Savings Account if the recipient child is any age less than 35. At "grandpa's" death, again if the laws then permit it, the amount (specified below) may be transferred to other accounts. In the past, a child's account would have had more than three doubling opportunities in a 26-year span, but an infant baby has no money to double, and occasionally no way to create an account.
Whereas under our proposed new hypothetical rules, the baby's HSA might contain $8,000 at age 26, if grandpa transfers $1000 at birth and nothing else is spent out of the account until the child is 26, as a hypothetical illustration. The proposal is made that special Catastrophic insurance is also needed for this situation. Nevertheless, the potential should be exploited to create a bridge which connects an age group which is often overfunded with a generation that is usually underfunded, and always incapable of managing its own financial affairs. The extra $8000 at that particular moment in a 90-year cycle would have an immense effect on the cost of the entire scheme at all ages. So immense, in fact, that it undoubtedly would require safeguards against creating a nation of perpetuities in a few generations. My own suggestion is that a surplus from inherited sources should reach its conclusion at age 35, after which any surplus from "grandpa" sources should be transferred to the U.S. Treasury, subject to appeal to the local Orphan's Court. With such a rule in place, the system would readjust its arithmetic in the great majority of cases to accommodate special circumstances.
The compound investment income alone will start this cycle all over again, if it throws off $325 a year for, say, the last ten years, including consuming its principal to do so. To repeat, an estimated $6000 of the eventual $8000 is consumed by the process of paying for the baby's birth and pediatric expense, with perhaps $2000 used to fund the child's own HSA up to $3250 at age 36, getting consumed in the process. Since this hypothetical began with only $1000, the starting amount could easily be tripled without disturbing the conclusion. With actual experience, these estimates can be fine-tuned. Tax-exempt funds like this should probably not be permitted to become perpetual, but allowing them to extend to a grandchild's 35th birthday would provide very desirable bridge funding for a period of life from birth to 36, which is both medically and financially quite vulnerable, and hence requires real-life insurance data (i.e. not hospital charges). He's going to have to go out and earn a living to sustain his own health insurance (see below), but his retirement Medicare costs are already a third paid up.
Just imagine: such a scheme might encourage more women to have children at an earlier age, which would be biologically very desirable, poorer people would be able to go to college without health financing concerns, and probably with reduction of the burden of disease from untreated medical conditions. At the same time, money would remain available for grandpa's health because he got to it first. Invisibly in the background, it assures generosity in the disability costs of the increasing volume of elderly indigents, which have been widely viewed with apprehension. And although all such benefits would entail some costs, at least they could not break the national fisc, within this financing design.
Other choices for the use of this "found" money are suggested in later chapters, and still, others are readily imagined, including perhaps some undesirable ones. At this point in the narrative, we will break off in order to heighten attention to the central feature of this health "reform", perhaps better described as reformulation.
The central feature of this reformulation, is to exploit the sociological changes in healthcare created by advances in science: a much longer life expectancy, with an initial period of low health expenses, followed by a shift of burdensome illness toward its far end. Such change in lifestyle is ideal for gathering compound income early in life, augmenting it while it remains idle, and spending it toward the end. Since the reformulation pushes money toward an uncertain end, it inevitably creates some surpluses, which can best be recycled to assist the difficult costs of some relative's young life that, in the larger view, are quite modest.
So far, we have only looked at reformulation as a way to generate revenue. Another proposal to choose as an alternative is to drop Medicare, and simply pay medical bills out of the health savings account plus fail-safe catastrophic coverage. While at the moment few would have the courage to make such a switch, a credible threat to do so would at least perform the public service of discouraging mission creep, cannibalism by other agencies, and/or administrative bloat. It will always be impossible to determine how much of the present cost overrun was avoidable, but it's a fact, and a source of restlessness. Its best preventative is some viable competition.
Viable competition would include both luxury care for those willing to pay extra, and bare-bones care for those who cannot afford the standard variety. Both these desirable competitors would require some mechanism for extracting a fair financial equivalent from the standard product's expense account, and transferring it to the competitive systems. Needless to say, the existing system would resist, but a proposal might additionally be devised to resolve state/federal Constitutional problems in parallel with the money.
The Constitution's Tenth Amendment is decisively opposed to any centralized national healthcare system so this issue will continue to arise. To drive a not-so-subtle point home, it is only fair to conclude that many perhaps most citizens would prefer to impair employer-based health insurance -- if the only alternative offered, is to impair the Constitution. To state the matter in a conciliatory manner, there exists a widespread consensus not even to speak critically about the Constitution, unless a sincere bipartisan effort has first been conducted, trying to work around a problem. We tried the nullification alternative in 1860, and the results proved discouraging.
So, I propose we have at least two state-based healthcare systems, and eventually, a third national system exclusively limited to interstate issues, conflicts between jurisdictions, etc. That's what the Constitution wanted, and until we give it a chance, the state/federal uproar will be recurrent. It appeals to me to envision a hospital-based system and a retirement-village-based system, taking care to restrain medical schools, the federal government, or major employers from dominating either one. That gives state governments a chance to dominate locally, but the condition of state governments makes it unlikely that more than a handful would be up to the task. Governors, possibly, but legislatures, not so likely. A unique obstacle is to discover many sparsely settled states do not have the actuarial numbers necessary to support more than one health insurance company.
And so, since big changes are expensive, we need to find some extra money. As the reader will see, I believe Medicare could be paid for by reformulation at a fraction of its present cost, with a compound income of about 8%. The precise fraction and its compound income can be juggled around, but it looks achievable. If finances are tight, and 8% is unachievable, perhaps the Federal government could supply block grants which would support 8%, just as an example. However, any such expedient is a stunt that can probably only fail once, so we better study it hard. But if it can be done with Medicare, the pattern can be repeated with other age groups.
Finally, there really is a scientific end in sight, to a problem which science largely created. Just find an inexpensive cure for five or six diseases, and the main problem which will loom is spending too much money on non-serious complaints, cosmetic enhancements, and flummery. It may surely come to that in another fifty years.
Because of the extent and complexity of the problems, this first chapter only states the premises and gives a few examples; later chapters will explore more details needed to understand certain poorly understood features. But if there is doubt about the goal, let's make an explicit statement of it. We have been convulsed by health care reform since at least the time of President Theodore Roosevelt, but every ten years it keeps coming back. Let's stop thinking small and start thinking big. Let's fix it right and get on with it.
Unless a Congressman's name is attached to it by the media, it generally isn't easy to know who was the originator of a disagreeable law. In the case of Medicare, moreover, the program is technically an amendment to the Social Security Act, so revenue amendments must originate in the House of Representatives, Committee on Ways and Means, Subcommittee on Health. The difficulty is easily fixed by the Senate making an amendment to some unrelated House bill such as housing relief in Kansas. All subsequent amendments must jump through the same hoops because Congress is very strict about such traditions.
At any rate, some amendment was passed by both Houses to the effect that doctors' reimbursement would be held down if general Medicare costs had risen more than a certain amount. The theory was of course that doctors are in control of all medical costs, and therefore should be punished if they rose too high. The real purpose was to keep the doctors docile and quiet, since, at the last moment, each and every year, an exception to the punishment was made, just for one more year. This went on for eighteen years until Republicans finally achieved a majority in both Houses of Congress, and the law was promptly repealed in 2014. It was now possible to be pretty sure who had been behind the law all along. To reinforce this identification, the Senate Majority leader, Mitch McConnell (R, Ky.) executed a flashy last-minute parliamentary maneuver to rescue the repeal from its unidentified enemies, who had surely been of the other party. The "doc fix" was finally fixed.
In the course of this wrangle, it was revealed that physicians received 12% of Medicare expenditures. It reminded me, I had published a graph in The Hospital That Ate Chicago, showing that physicians received 20% in 1980. That would suggest their reimbursement had fallen by 8%, and perhaps that is true, corrected for inflation. However, reimbursements to other providers have risen, so the net change in physician reimbursement might be different from 8%. However, a related but different factor probably played an important part in this shift. Also during that period, a majority of physicians changed from solo private practice to working on a salary provided by a hospital group practice. The net effect was to shift the spokesmen for doctors' financial interests. It used to be the American Medical Association and now was to be hospital administration. In time, substance will follow form.
True, the primary cause of this shift was DRG pressure to shift revenue to the outpatient area, but since hospitals also participate in the Henry Kaiser tax dodge, this incentive was also at work, in a combined or concerted effect. The overall reimbursement effect was to shift physician overhead out of the costs, but not out of the reimbursement, which now goes to the hospital. Since almost every physician in practice spends 50% of his gross revenue on office overhead, there is plenty of room for shifts which do not appear on the balance sheet. Yes, physicians temporarily protected their net income by this maneuver, but the hospitals acquired an expense they did not necessarily intend to maintain. Squeeze the hospitals with DRG or other means, and politicians, as well as hospitals, had a piggy bank they could always return to, in a pinch.
The Doc fix has finally been repealed, possibly in part because it has served its several purposes. But tickling the victim for campaign contributions hasn't been repealed. This ancient parliamentary maneuver is unaffected. It will return, in other guises.
Reverse Bribery. Still another seemingly tangential issue is in the news, six months after control of Congress shifted parties. An ordinary layman would wonder if a 2.5% tax on medical devices is worth the acrimony its repeal seems to engender. But the ordinary layman is not familiar with bare-knuckle Chicago politics. When the Affordable Care Act was approaching legislative action, most of the affected groups were approached to sign up. Behind the enticements was an unspoken threat: if you don't come on board, you will be sorry. With only one notable exception (the medical device people), everyone signed on. And then the 2.5% special tax was laid on Medical devices. If you wonder why such small matters stir up so much bitterness, the history of the legislative preliminaries would seem of value to the search.
The Presidential campaigns just started, we don't even know the final candidates. We can't, therefore, predict if the election decides the health issue or the health issue decides the election. As one of the originators of Health Savings Accounts, my own position may be a foregone conclusion. But millions of people enrolled in HSAs. They will remain a factor, no matter who gets nominated or elected.
Simplicity is a banner we fly. Instead of a thousand-page law, we offer the simplest of proposals. No matter what the disease, the HSA (Health Savings Account) will probably pay for it. It's only about money, not elastic "service" benefits. It consists of health insurance with a high deductible. That's good, because of the higher the deductible, the lower the premium. Since poor people may be unable to afford a high deductible, it's then linked to a sort of Christmas savings account where you can save up the deductible. After that, coverage is complete.
It's true, a poor person is incompletely covered during the first few years, but it's also true young people have little risk of an expensive bill until they get older. So although millions own these accounts, the majority signed on between the ages of 25 and 45. Simple, simple, simple. It tells you something when forty percent have never made a withdrawal for health, apparently preferring to let the account build up, rather than spend it on small health bills. These people aren't fools, they know heavy expenses lie ahead of them. But they also know interest rates are starting to rise, and they all have experience with paying bills on credit. There are a few who can never accumulate a thousand or so dollars in their whole lives, but subsidies for the poor are a commonplace if America wants to provide them. In an HSA arrangement, subsidies present no steep barrier to later saving, because of an underrecognized feature. If you haven't had a big illness by the age of 66, and then receive Medicare, you get to keep what's left. The incentive seems to work. People with Health Savings Accounts spend 30% less on health than those with other health insurance.
So Health Savings Accounts are not only cheaper, they are the only health coverage which helps your retirement if you don't get sick. They already exist, so if something makes other health coverage collapse, they could immediately substitute. You aren't at the mercy of politics or economic disasters. So, if threatened by loss of insurance, HSAs are as safe as you can get. So the only criticism is lack of tax deductibility for the high-deductible insurance, but that could be remedied by a one-sentence amendment. True, the deposit and age limits haven't been extended in decades, but then we haven't had a Republican president for almost that long, either.
So Health Savings Accounts are already about as good as you can get with divided government, but the present form is far from exhausting their potential. In the first place, we are slowly coming into the era when interest on deposits amounts to something worthwhile. The use of "passive" investment with stock index funds could provide a dizzying reduction in effective costs.
Furthermore, the advance of science hints at more novel uses of unspent health money for retirement purposes. Five or ten diseases account for the majority of health costs, so if somebody cures a disease we could fight the political battle to pay for increased longevity, with reduced health costs. Eventually, the far future contains a vision of constraining serious health costs to the first year of life and the last year of life. Even at present, those two years account for twenty or more percent of health costs, but because they affect 100% of us, they cost so much. By some scientific magic, we can dream of basic costs as only a quarter of present costs, not extended infinitely into the future. It wouldn't be easy to retain such savings as retirement income, because the government always wants to divert savings into battleships. Nevertheless, recasting the image as creating value in retirement, instead of a bleak period of uselessness, sounds like a desirable vision thing, to me.
It may be a surprise, but the concept of a Limiting Factor (the Law of Perpetuity) may once again intrude the U.S. Supreme Court into the Affordable Care Act. It may also be a little hard to follow, so pay attention to what would ordinarily be regarded as a dry subject.
The concept of a limiting factor makes modern law, and possibly modern economics, possible. Several centuries ago, well before the US Constitution was written, lawyers came to see that many things are only possible if you don't carry them too far. The operation of compound interest is an example. In ordinary human commerce, the tendency of compound interest to rise over time leads to an eightfold rise over one lifetime of 84 years (48 in 1901 to 84 in 2017). A 200-year lifetime would lead to even more rise, to the point where one dollar invested at birth at 7% would pay for the entire average medical cost of a lifetime of $350,000 expressed in the year 2000 dollars. But quite obviously, if some scientist discovered a drug which lengthened life that much, something in the law would have to be changed to hold the economic world together.
So, about three hundred years ago, some English judge laid down the Law of Perpetuity, stating that Trust Funds may not endure for more than one lifetime, plus 21 years. It's proved to be a useful limiting factor, not likely to be changed easily. Congress might feel empowered to change it, but too much of modern commerce revolves around this definition of perpetuity, for the public to permit tampering without huge uproar. Notice the flexible wording: 21 years plus one life expectancy. Changing life expectancy would not invalidate the law.
A century ago, life expectancy was thirty years shorter, five doublings at 7%. And now it is more than eight doublings or in effect (2,4,8,16,32,,64,128,-->)256 times the original number. But that doesn't matter, because the law only effectively states its limit is 2 doublings (four times as much) more than the life expectancy at birth. A century ago, that implied two hundred-fifty-fold increase more than the starting amount at birth, and today it implies a thousand times. Inflation chugs along at 3% simple interest in both cases, at a growth rate doubling in 24 years (72/3). That's three doublings at simple interest a century ago, versus four doublings today. The important present difference is the thousand-fold compounded gain, compared with only 256-fold compounded at 7% a century ago, a seven-hundred-fold difference in the base price. The problem we have nevertheless still threatened less than forces opposed to changing the Perpetuity age limits.
To summarize, compound interest on Medicare-linked investment has gained six or seven hundred-fold over inflation in a century, as a result of medical progress bumping against mathematical principles. This difference is not likely to change in the coming century, because longevity at birth would have to increase to age two hundred to overwhelm the judges into changing the age limits of such a fundamental law. If net Medicare-linked costs rise to approach that level, moreover, this revenue opportunity might disappear.
There is no reason to avoid exploiting this opportunity while it lasts. It presents a quick and dirty solution to the present urgent problem, which is to find alternative proposals for reforming transition to healthcare financing, in case the Affordable Care Act is suddenly repealed. At the present time, the opportunity to reduce the effective cost of transition lies in the gap between the average age of death and the Law of Perpetuity -- about twenty years. At 7%, that's two doublings or four-fold profitability. The question becomes whether to raise the term limit of the Health Savings Accounts above its present level of the age of Medicare attainment. The natural instinct would be to terminate the HSA at death, but the Perpetuity law would permit 21 years more. Since the life and health of the depositor has very little bearing on this subject, Congress has the opportunity to allow Trust funds to continue to earn investment interest after death, until either its Medicare funding debts are extinguished, or the birthdate of the deceased depositor reaches 104 and is terminated by the unchanged Law of Perpetuity. The effect of doing this would multiply the funds for the transition by 400%, and largely solve the problem if the Trust applied all funds to the debt incurred when offered the opportunity to choose. When we get to that subject, the transition is the big obstacle for three reasons: 1) There may not be enough money to do it. 2) The transition may take too long if it is constrained by available funds. 3) And the courts may find some reason to block it.
As a non-lawyer, I can see no technical reason why this could not be done, but some reason might be invented for political reasons. Unanticipated problems might arise, but under present law the challenge would probably come through the State courts, using the Tenth Amendment as a basis. If the adoption of the idea is voluntary with the States, or if demonstration projects are employed, a conflict between jurisdictions is very likely, and the U.S.Supreme Court would have to settle the conflict. This split approach might satisfy both State and Federal proponents enough to remove the obstacle, because the Wickard v. Fillmore decision still rankles after eighty years, and after much longer than that from the Civil War, memory of which still greatly affects the regional popularity of federalism.
Several other ways to pay for the transition costs, or shorten the transition time, will be offered in later chapters. But only this simple change is required early in the process, and so only this proposal will transform transition from a plan to a process. It has always bothered me for a complete transition to take nearly a century, during which interval there would be many changes of political control of Congress. In turn, those transitions offer a chance to smother central concepts in a welter of obfuscation. And that applies to all transitions, suggesting original planning should always be followed. To a certain degree, that has sometimes proved useful, but the transition in this particularly vexed case is going too far with it. So having major alternative approaches, and thus creating opportunities for later innovation, seems on balance a worth-while addition.
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.