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WEALTH OF NATIONS

French Lessons On Health Care

The success of the French system does not establish the superiority of public insurance.

In the debate about health care reform, France is often held up as an exemplar. The French get excellent outcomes on every measure, and they achieve them at far lower cost than the United States. Their system is a lot like Medicare-for-all. So, at a minimum, many of its admirers argue, the French system makes the case for a "public option"; and perhaps -- whisper it quietly -- for a public option that expands over time, by design or default, to overwhelm the rest.

Undeniably, the French system delivers fabulous results. At the same time, in a structural sense, the French approach has a lot in common with this country's. On the face of it, pushing U.S. health care in the direction of France would be easier than trying to re-create the British National Health Service -- not that any sane person would want to do that. All of this seems to make France an interesting model for U.S. reformers. But it is one that needs to be examined cautiously.

 

On rankings of health care outcomes in rich countries, France usually comes first. The United States is always way down the table. Infant mortality in France is about four deaths per 1,000 live births; in the United States it is seven. Life expectancy is higher in France. Death rates from preventable diseases are mostly lower. France has more doctors, on a population-adjusted basis, and more acute-care beds. And it does all this for about 11 percent of national income, compared with America's 16 percent. Because the U.S. is a richer country, the contrast is even more striking when you look at the cost in dollars per person: America spends nearly twice as much.

We obviously have a lot to learn from France. But what, exactly? A book worth reading on this subject is Differential Diagnoses by Paul Dutton of Northern Arizona University. It is a comparative history of the French and American health care systems. Dutton shows that the two have far more in common than you might think.

Health experts agree that if you want to control health care costs, you have to get away from the fee-for-service model that is dominant in this country. Under fee-for-service, doctors and hospitals are reimbursed for procedures, rather than for packages of care or for providing medical services over time.

 

Undeniably, France's health system delivers fabulous results and does it far more cheaply than the U.S. system.

Fee-for-service creates terrible incentives. Extra procedures deliver income to the suppliers whether the services are needed or not. To make matters worse, U.S. health care consumers are usually one step removed from the cost because they are covered by employer-provided insurance. It is a formula for oversupply and overconsumption. Most health care reformers, therefore, take aim at fee-for-service. Conspicuously, the bills currently before Congress largely duck the issue.

Is a different approach to payment the secret of France's success? Perhaps doctors are salaried, as they are in many other European systems? Look at the Mayo Clinic in Minnesota, which American reformers often cite as a model; it famously gets excellent results at low cost. Salaried doctors have no financial stake in oversupply.

Actually, no. France is very American in this respect. Most French doctors are in private practice, and fee-for-service is as deeply entrenched as here. Public health insurance picks up the check, with the reimbursements based on treatments supplied. Moreover, French doctors have greater independence in diagnosis and therapy than is typical elsewhere in Europe: Again the model is closer to the American approach. In fact, because managed care has made tentative inroads into the U.S. system, you could argue that French doctors are less encumbered in making clinical decisions than their American counterparts.

 

Is there rationing in some other form, perhaps? Is access to medical specialists limited by primary-care doctors serving as gatekeepers, for instance? Not so much. Lately, to get a grip on fast-rising costs, the French government has tried to introduce some gatekeeper elements but with little success. Patients are free to choose their doctors. There are no waiting lists, as you might gather from the country's high ratio of doctors to patients, and patients don't need clearance from the public insurance scheme for treatment their doctor recommends. They simply pay the fee using their insurance card, and the funds are immediately and automatically transferred to the doctor or hospital.

Then, is the French system cheaper because of its relative simplicity, the lighter burden of administrative costs, and the fact that public insurance eliminates the private insurers' profit margin? To some degree, yes to all three -- but not as much as you might think.

The core of the French system is "single-payer": The public insurance fund covers most of the bills. This certainly simplifies administration and subtracts some profit margins and marketing costs. But the system as a whole is by no means purebred public. It is a mixture of public and private, with a bigger private component than is typical in Europe.

Despite the secret ingredient of paying its doctors so little by American standards, the French system is in chronic financial difficulty.

In fact, France has the biggest private hospital sector in the European Union, at nearly 40 percent of all beds. About 90 percent of French citizens also carry private medical insurance to top up their public entitlement -- to pay for private hospital rooms and other supplementary services. (This traces its history back to the creation of the public insurance fund after 1945: Private insurers, displaced by the public fund, were given the market in supplementary coverage as a consolation prize.) Altogether, the overhead is lower than in the United States but not enough to account for the difference in costs.

What is the answer? The main thing is pay -- above all, doctors' pay. A physician in France is typically paid about a third of what his counterpart in the United States receives. A French doctor's salary, in some cases, would barely be sufficient in the United States to cover his or her medical liability insurance, to say nothing of paying down the enormous debt accumulated while training.

The success of the French system does not establish the superiority of public insurance. It establishes the superiority of a system that, as much by historical accident as by design, has kept doctors' pay very low. This, in turn, requires a medical-liability regime that minimizes litigation (so much for patients' rights in that sense) and guarantees essentially free training for medical professionals.

The idea that France's system could be grafted onto the American setup is most misleading. To be sure, in organizational terms, it could be. Structurally, the two countries' systems are not that different. The French scheme is like Medicare on a much larger scale -- with all the virtues and drawbacks of that system. But plug American rates of pay into that design and the impressive cost advantage vanishes.

It is also worth remembering that, despite this secret ingredient of paying its doctors so little by American standards, the French system is in chronic financial difficulty -- as you would expect, in fact, because of fee-for-service and the other dysfunctional aspects that its approach has in common with America's. The costs are covered through a high payroll tax, which employers and workers share; but all of it, in the final analysis, is drawn from wages. Constant upward pressure on costs translates into constant upward pressure on taxes, which then meets the same political resistance one sees in the United States. Meanwhile, paying for everything through a tax on labor most likely contributes to France's chronic high unemployment.

Without question, the U.S. health care system is broken. Its costs are way out of line with those of other countries', and its staggering outlays cannot even guarantee insurance coverage to all Americans, which is a national scandal. No less important than the failure to provide insurance to everyone who needs it is the anxiety aroused by the possibility that those who have coverage will lose it. As Dutton points out in his survey, the French health care system induces high unemployment through labor taxes, whereas the American approach causes "job lock" -- people take or hold on to jobs out of fear of losing their health insurance. The link between health insurance and employment is a critical defect that the systems have in common.

Overall, the French approach is superb -- unless you are a doctor. But once you look at the details, you are forced to conclude that its lessons for the United States are few. Despite the similarities, it would be difficult to get there from here. To be sure, America can choose Medicare-for-all, which is where many advocates of the "public option" want to end up. But the cost implications are daunting -- and dealing with them through the political process, by capping payments and narrowing patients' and doctors' freedoms, would likely make Medicare-for-all much less popular among its users than Medicare is today. America must find its own solutions.

This article appears in the July 18, 2009 edition of National Journal Magazine.

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