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32 EW NEWS & OPINION October 2013 Insights Lorenzo de Tonti: A man for the times by J.C. Noreika, MD, MBA J.C. Noreika, MD, MBA S ome fun? How about the Bible, gambling, high finance, and healthcare reform? Let's start with the Book of Ecclesiastes, that Old Testament teacher who sayeth, "the thing that hath been, it is that which shall be; and that which is done is that which shall be done; and there is no new thing under the sun." The informed of a certain age recall the generic, if not specific, rapaciousness of Michael Milken, Ivan Boesky, and Bernie Madoff. These three are forever entwined by financial maneuverings that generated obscene wealth, dramatic perp walks, and jail terms. They were amateurs compared to Lorenzo de Tonti. De Tonti was a Neapolitan banker in the seventeenth century. He is credited with inventing a financial instrument, the eponymous Tontine. Taking up residence in France after incurring the wrath of the Spanish viceroy in Naples, he proposed to Cardinal Mazarin a revenue-raising scheme admixing elements of insurance, lottery, and destiny. It would prove so lucrative that Louis XIV could replenish his treasury after the Thirty Years War and recreate Paris in the Sun King's image. De Tonti didn't live to see France employ its first Tontine in 1689. He had an unfortunate habit of offending powerful people. With no contemporaneous Club Fed prisons in France, he served seven years in the Bastille upon the order of Mazarin's successor, Finance Minister Jean-Baptiste Colbert. He died a pauper in 1684. The Tontine is simple. It has four moving parts: the scheme's organizer, for example, government; investors or subscribers who provide funds; shareholders who may or may not be the same as the subscribers; and nominees to the contract. The nominees are crucial. The investors make an original contribu- tion to the Tontine for the shareholder in the name of the nominee. Once fully subscribed, it is closed to further investment and the pool of funds is determined. The shareholder receives a yearly dividend from the pooled money. This continues until the nominee dies at which time his invested money reverts to the pool. Lorenzo de Tontine initially proposed that after the last person standing had assumed room temperature, the remaining money devolved to the government. Hence, Louis XIV's windfall. Other Tontines consigned the pool to shareholders of the last living nominee. Necessary redefinition stipulated a distribution after, say, 80% of the nominees had died. Homicidal intrigues as conjured in Robert Louis Stevenson's "The Wrong Box" might otherwise be encouraged. But after initial subscribers to Louis XIV's 1689 Tontine had invested 300 livres, the last survivor, Charlotte Barbier, age 96, collected 73,000 livres, a 240-fold return plus dividends, for staying alive. The Affordable Care Act may or may not work. Critics contend it doesn't address America's underlying healthcare dysfunction. Incentives are fundamentally flawed: The government and insurance companies reduce a service's remuneration while ignoring volume, and having little skin in the game, patients abuse themselves because someone else pays for their self-inflicted negligence. De Tonti's time has come. Let's assemble diabetics, the obese, the noncompliant. Make them subscribers, shareholders, and nominees contributing to the scheme's pool. The poor could be subsidized, the middle class granted tax credits. Others, like doctors and family members, could invest in nominees. The Tontine might run for 10 years. Shareholders forfeit their claim to the annual dividend if their nominee dies or his healthcare expenditures exceed some predetermined cap. The final distribution of the pooled funds, augmented by the forfeitures, would be made to the remaining shareholders. Politics dictate that the bonanza be taxed as would the dividends. But a doctor's child could be designated the shareholder if her summer job's earnings are lower than that of her parent's income. What could be more American? Lotteries, politics, tax evasion, and healthcare are national obsessions. Governmental intrusiveness would be reduced to creating and managing the Tontines, no medical micromanagement. Voila! Incentives for rationalizing the nation's healthcare system are fully aligned. Physician-subscribers have a stake in keeping their patients alive and healthy at reasonable cost and enjoy bonuses, the annual dividends and payouts, for easily verifiable quality of care outcomes to supplement reduced insurance compensation. Patients' families are similarly motivated to keep dividends flowing with a chance at the Tontine's jackpot. The government realizes increased tax revenues; insurance companies spend less for hospital admissions, emergency room visits, and unnecessary procedures. Irony can be delicious. De Tontine's second son, Alphonse de Tonty, served under Antoine de Cadillac and was instrumental in the founding of Detroit. General Motors, Motown and "Obamacare" could learn from his father's financial innovation. And this wheel need not be reinvented; as the Preacher foretold, "There is no new thing under the sun." EW Editors' note: Dr. Noreika has practiced ophthalmology in Medina, Ohio, since 1983. He has been a member of ASCRS for more than 30 years. Contact information Noreika: JCNMD@aol.com