The French System

Today we’ll show the French System.

As stated before, these assessments are taken from the CATO institute report. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

France

Some of the most thoughtful proponents of national health care look to France as a model of how such a program could work. Jonathan Cohn of theNew Republic has written that “the best showcase for what universal health care can achieve may be France.”(44) Ezra Klein of the American Prospect calls France “the closest thing to a model structure out there.”(45) The French system ranks at or near the top of most cross-country comparisons and is ranked number one by the WHO.(46)

Although the French system is facing looming budgetary pressures, it does provide at least some level of universal coverage and manages to avoid many of the problems that afflict other national health care systems. However, it does so in large part by adopting market-oriented approaches, including consumer cost sharing. Other aspects of the system appear to reflect French customs and political attitudes in such a way that would make it difficult to import the system to the United States.

France provides a basic level of universal health insurance through a series of mandatory, largely occupation-based, health insurance funds. These funds are ostensibly private entities but are heavily regulated and supervised by the French government. Premiums (funded primarily through payroll taxes), benefits, and provider reimbursement rates are all set by the government. In these ways the funds are similar to public utilities in the United States. The largest fund, the General National Health Insurance Scheme, covers most nonagricultural workers and their dependents, about 83 percent of French residents. Separate insurance plans cover agricultural workers, the self-employed, and certain special occupations like miners, transportation workers, artists, clergy, and notaries public. Another fund covers the unemployed. These larger insurance schemes are broken down into smaller pools based on geographic region. Overall, about 99 percent of French citizens are covered by national health insurance.

The French health care system is the world’s third most expensive, costing roughly 11 percent of GDP, behind only the United States (17 percent) and Switzerland (11.5 percent). Payroll taxes provide the largest source of funding. Employers must pay 12.8 percent of wages for every employee, while employees contribute an additional 0.75 percent of wages, for a total payroll tax of 13.55 percent. In addition, there is a 5.25 general social contribution tax on income (reduced to 3.95 percent on pension income and unemployment benefits). Thus, most French workers are effectively paying 18.8 percent of their income for health insurance. Finally, dedicated taxes are assessed on tobacco, alcohol, and pharmaceutical company revenues.(47)

In theory, the system should be supported by these dedicated revenues. In reality, they have not been sufficient to keep the program’s finances balanced. The National Health Authority sets a global budget for national health care spending, but actual spending has consistently exceeded those targets.(48)

In 2006, the health care system ran a €€10.3 billion deficit. This actually shows improvement over 2005, when the system ran an €€11.6 billion deficit.(49) The health care system is the largest single factor driving France’s overall budget deficit, which has grown to €€ 49.6 billion, or 2.5 percent of GDP, threatening France’s ability to meet the Maastricht criteria for participation in the Eurozone.(50) This may be just the tip of the iceberg. Some government projections suggest the deficit in the health care system alone could top €€29 billion by 2010 and €€ 66 billion by 2020.(51)

In general, the funds provide coverage for inpatient and outpatient care, physician and specialist services, diagnostic testing, prescription drugs, and home care services. In most cases, the services covered are explicitly specified in regulation. However, some “implicit” benefit guarantees occasionally result in conflicts over what benefits are and are not fully covered.(52)

Most services require substantial copayments, ranging from 10 to 40 percent of the cost. As a result, French consumers pay for roughly 13 percent of health care out of pocket, roughly the same percentage as U.S. consumers. (53) Moreover, because many health care services are not covered, and because many of the best providers refuse to accept the fee schedules imposed by the insurance funds, more than 92 percent of French residents purchase complementary private insurance.(54) In fact, private insurance now makes up roughly 12.7 percent of all health care spending in France, a percentage exceeded only by the Netherlands (15.2 percent) and the United States (35 percent) among industrialized countries.(55)

The combination of out-of-pocket and insurance payments means that nongovernment sources account for roughly 20 percent of all health care spending, less than half the amount spent in the United States but still more than most countries with national health care systems.(56)

The private insurance market in France is in many ways less regulated than the U.S. market. For example, while 20 U.S. states require some form of community rating or put limits on health insurance premiums, private health insurance in France is largely experience rated. No regulations specify what benefits must be included in coverage or mandate “guaranteed issue”; and pre-existing conditions may be excluded. The only significant restriction requires “guaranteed renewability” after two years of coverage.(57) More than 118 carriers currently offer some form of private health insurance coverage.(58)

In general, French patients pay up front for treatment and are then reimbursed by their government health insurance fund and/or private insurance. The amount of reimbursement, minus the copayment, is based on a fee schedule negotiated between health care providers and the national health insurance funds. These fee schedules operate similarly to the diagnostic-related groups (DRGs) under the U.S. system.

Although reimbursement levels are set by the government, the amount physicians charge is not. The French system permits providers to charge more than the reimbursement schedule, and approximately one-third of French physicians do so.(59) In some areas, such as Paris, the percentage of physicians who bill above reimbursement schedules runs as high as 80 percent.(60) In general, however, competition prevents most physicians from billing too far outside negotiated rates; and physicians employed by hospitals, as opposed to those in private practice, do not have the same ability to charge more than the negotiated rate.

The government also sets reimbursement rates for both public and private hospitals, which are generally not allowed to bill beyond the negotiated fee schedules. While fees are restricted, private hospitals (called cliniques), which account for 37 percent of all short-stay hospital beds and half of all surgical beds, control their own budgets, whereas public hospitals operate under global annual budgets imposed by the Ministry of Health.

Health care technology that the National Health Authority has categorized as “insufficient medical service rendered” cannot be purchased by public hospitals, and its use at cliniques is not reimbursable through national insurance schemes.(61) Yet in denying reimbursement for such technology, the French government admits that when a product with an insufficient medical service rendered is de-listed from reimbursement, this does not imply that it is not efficient for a given pathology, but simply that the government prefers to commit its resources to other reimbursements which it deems more useful from a collective point of view.”(62)

In general, the quality of French health care is high, but there are problem areas. Until very recently, the French have generally had quick access to their primary care physician of choice. Now, a growing problem, nomadisme medical, wherein patients go from one doctor to another until they find one whose diagnosis they prefer, is driving up costs to the system. (63) The government has responded by increasing copayments and attempting to limit physician reimbursements.

Much of the burden for cost containment in the French system appears to have fallen on physicians. The average French doctor earns just €€ 40,000 per year ($55,000), compared to $146,000 for primary care physicians and $271,000 for specialists in the United States. This is not necessarily bad (there is no “right” income for physicians) and is partially offset by two benefits: 1) tuition at French medical schools is paid by the government, meaning French doctors do not graduate with the debt burden carried by U.S. physicians, and 2) the French legal system is tort-averse, significantly reducing the cost of malpractice insurance.(64) The French government also attempts to limit the total number of practicing physicians, imposing stringent limits on the number of students admitted to the second year of medical school.(65)

However, French physicians have shown growing resistance to efforts at limiting physician reimbursement with several recent strikes and protests.(66) In the face of growing budgetary problems, future conflict may well be brewing.

More significantly, the government has recently begun imposing restrictions on access to physicians. A 2004 study by the High Council on the Future of Health Insurance raised questions about “the legitimacy of the complete freedom enjoyed by health professionals in setting up their private practice.”(67) And in 2005, the government adopted a system of “coordinated care pathways.” Under the new system, which operates very much like managed care in the United States, patients are encouraged to choose a “preferred doctor” and to follow the “pathway” suggested by that doctor. The effect is both to lock patients into a choice of primary care physician and to establish a “gatekeeper” who limits access to specialists, tests, and some advanced treatment options.(68)

So far, the new system has been more of a gentle push than a mandate. If the new system is not used, copayments may be slightly higher or reimbursements slightly lower, much like going “out of network” in the United States. But if costs continue to rise, the new system may be extended and made more rigorous.

Of more immediate concern, global budgets and fee restrictions for hospitals have led to a recurring lack of capital investment, resulting in a shortage of medical technology and lack of access to the most advanced care. For example, the United States has eight times as many MRI units per million people and four times as many CT scanners as France.(69) This partially reflects the more technology-reliant way of practicing medicine in the United States, but it has also meant delays in treatment for some French patients. Also, strong disparities are evident in the geographic distribution of health care resources, making access to care easier in some regions than others.(70) Thus, while the French system has generally avoided the waiting lists associated with other national health care systems, limited queues do exist for some specialized treatments and technologies. In some cases, hospitals in danger of exceeding their budgets have pushed patients to other facilities to save money.(71)

Finally, the government has tried to curtail the use of prescription drugs. The French have long had an extremely high level of drug consumption. French general practitioners (GPs) prescribe on average €€ 260,000 worth of drugs a year.(72)However, the National Health Authority has begun de-listing drugs from its reimbursement formulary.(73) Many French patients have responded by switching to similar, reimbursable drugs, but some patients may not be getting the medicine they need. For example, one study found that nearly 90 percent of French asthma patients are not receiving drugs that might improve their condition.(74)

Government regulation and bureaucracy have also been blamed for rigidity in the French system, preventing it from reacting quickly to changing circumstances. For example, mismanagement and the inability of the system to cope with emergencies were blamed in part for the deaths of 15,000 elderly individuals in the summer of 2003 during the European heat wave; and a shortage of hospital beds occurred in 2004 when a nationwide flu and bronchitis epidemic broke out.(75)

Although the changes made so far do not amount to rationing, 62 percent of French citizens report that they “have felt the effects” of the new restrictions.(76) Slightly less than half consider the waiting time between diagnosis and treatment to be acceptable.(77)

Valentin Petkantchin, a scholar with the Institut Economique Molinari, warns that France is in danger “of joining the group of countries [such as] the UK and Canada, where the existence of rationing of health care and waiting lists raises serious questions of access to treatments by those who need them.”(78) And some French health professionals have suggested that waiting times for care have begun to lengthen.(79)

The impact of all these cost containment measures is alleviated to some degree by the ability of French patients to privately contract for care outside the public system. If a drug is removed from the national formulary, patients may still purchase it if they are willing to pay for it themselves. The same is true for technology. Likewise, patients may ignore the “coordinated care pathway” and accept higher prices, paying more for immediate access.

In addition, the added resources from payments by private insurance have increased the supply of health care technology and services. By increasing the overall amount of capital available for investment above and beyond the restrictions imposed by the government system, private insurance payments increase the number of hospital beds and the amount of technology available within the system. The capital infused through private insurance may also increase the number and training of physicians.(80)

In essence, the French system avoids widespread rationing because, unlike true singlepayer systems, it employs market forces. Even the OECD says that the “proportion of the population with private health insurance” and the degree of cost sharing are key determinants of how severe waiting lists will be:

• Waiting lists for elective surgery generally tend to be found in countries which combine public health insurance (with zero or low patient cost sharing) and constraints on surgical capacity. Public health insurance removes from patients the financial barriers to access leading to high potential demand. Constraints on capacity . . . prevent supply from matching this demand. Under such circumstances, non-price rationing, in the form of waiting lists, takes over from price rationing as a means of equilibrating supply and demand.(81)
• And Ezra Klein praises the French because [France’s ability to hold down health care costs] is abetted by the French system’s innovative response to one of the trickier problems bedeviling health-policy experts: an economic concept called “moral hazard.” Moral hazard describes people’s tendency to overuse goods or services that offer more marginal benefit without a proportionate marginal cost. Translated into English, you eat more at a buffet because the refills are free, and you use more health care because insurers generally make you pay up front in premiums, rather than at the point of care. The obvious solution is to shift more of the cost away from premiums and into co-pays or deductibles, thus increasing the sensitivity of consumers to the real cost of each unit of care they purchase.(82)

However, the benefits of private insurance are not equally distributed. The wealthy are more likely to be able to pay privately to escape the government system, creating in essence a two-tier system. That has resulted in a disparity in health outcomes based on income.(84) While this is certainly the case in the United States and elsewhere—and there is nothing wrong with the wealthy being able to pay more to receive better care—it demonstrates that the professed goal of entirely equal access is largely unattainable even under this government-run health system.

A 2004 poll showed that the French had the highest level of satisfaction with their health care system among all European countries. This is partly because their hybrid system has avoided many of the biggest problems of other national health care systems. Yet it also stems from French social character. For example, by a three-to-one margin, the French believe the quality of care they receive is less important than everyone having equal access to that care.(85) This means the French experience may not be easily transferable to the United States, which has a far less egalitarian ethic.

While satisfied with their care today, the French do express concern about the future. In particular, they acknowledge the need for greater cost control. This leads to the standard contradiction inherent in government services: most people are opposed to paying more (either through higher taxes or out of pocket), yet they worry that cost-control measures will lead to a deterioration of care in the future. There is no consensus on what French health care reform would look like. Still, some 65 percent of French adults believe that reform is “urgent,” and another 20 percent believe reform is “desirable.”(86)

Moreover there is growing dissatisfaction with the French welfare state—of which the health care system is a significant part—and the level of taxes necessary to support it. The recent election of French president Nicolas Sarkozy is widely regarded as a reflection of this new attitude.(87) Indeed, the new French government has made a crackdown on health care spending one of its top priorities..(88)

To sum up: the French health care system clearly works better than most national health care systems. Despite some problems, France has generally avoided the rationing inherent in other systems. However, the program is threatened by increasing costs and may be forced to resort to rationing in the future.

The French system works in part because it has incorporated many of the characteristics that Michael Moore and other supporters of national health care dislike most about the U.S. system. France imposes substantial cost sharing on patients in order to discourage over-utilization, relies heavily on a relatively unregulated private insurance market to fill gaps in coverage, and allows consumers to pay extra for better or additional care, creating a two-tier system.

This is clearly not the commonly portrayed style of national health care.