Thursday, March 10, 2011

What Can the US Learn from the French Health Care System?

As reported in the first post in this series, the French health care system comes in at or near the top of international rankings, while the US system falls well down the lists. It stands to reason, then, that US health care reformers should have something to learn from the French experience, but just what? There seem to be lessons both for those who are optimistic about US health care reform and those who think reform will be difficult.

On the optimistic side, the French experience clearly shows it is possible to have universal access to health care of the highest quality while maintaining broad freedom of choice both for patients and doctors. French patients have the right to choose their own primary care doctors, and with only minimal restrictions, to see specialists of their choice. French doctors can choose whatever treatments they believe to be appropriate. That includes even use of cutting-edge treatments like the cancer drug Avastin. (Because that drug, which can cost up to $100,000 per year, does not cure cancer and appears to extend life by, at most, a few months, its use is restricted as not being cost-effective by many US private insurers and also by government health care systems in Canada and the UK.)

Freedom of choice is critical to the politics of health care reform in the United States. Opponents of reform love to play the "socialized medicine" card, which, in the minds of many people, means an impersonal, regimented, system where one stands in line at a government clinic for the first available doctor, who then prescribes a course of treatment according to strict regulatory guidelines. The French health care system is far from fitting that picture.

On the critical issue of costs, the lessons are more complex.

The good news is that their highly rated health care system costs the French 11.2 percent of GDP,  compared with 16 percent in the United States, based on 2008 OECD data. In dollars per capita, the gap is even more dramatic. By that measure, the United States spends exactly twice as much on health care as France, with less to show for it.

There is reason to think that some of the cost-saving features of the French system could be incorporated in US reforms.  Lower costs of administering the medical payment system are one example. France does not have a true single-payer system. Not-for-profit insurance funds closely supervised by the government pay most of the cost of care, but people also carry supplementary insurance, similar to Medigap plans, that cover deductibles and co-pays. Still, despite the involvement of multiple insurers, the French system spends less than half as much on administration and marketing than the 7% of health care costs reported for the United States.

Another area where the French save costs is through more aggressive government bargaining with  hospitals, doctors, and pharmaceutical companies. The US government has done less in this area. For example, under Medicare Part D the government is explicitly prohibited from bargaining for lower drug costs.

Medical malpractice is a third area where would-be US cost cutters might learn from French experience. France uses an approach pioneered in Scandinavia, under which cases of alleged malpractice are decided by special review boards that operate outside the court system. This Scandinavian approach is sometimes compared to the US worker compensation system, in that it is less focused on finding fault than on providing compensation to patients who have been harmed by improper care. Payments are made from a national fund, freeing doctors from the burden of malpractice insurance. Costs of administering the malpractice system are lower than those of adversarial court proceedings, and the chances of freakish "jackpot" awards are lower than when juries are involved.

At the same time, other elements of the French cost control experience are are less encouraging for US reformers. One is the fact that despite all efforts, health care costs have been growing faster than GDP in France, as they have in the United States, and are increasingly a cause for concern. The Sarkozy government has made some efforts to tighten controls, but these have met with opposition. For example, a 2009 reform law that was supposed to strengthen the cost control authority of hospital administrators was perceived by doctors as a threat to their autonomy, and brought them out on the streets in protest.

A final factor that complicates any comparison between French and US health care costs is the fact that French physicians earn only about a third as much as their US counterparts. Although doctors in France are respected, well-compensated, professionals, a medical career there is by no means a guaranteed ticket into the top 5 percent of the income distribution, as it is in the United States. The gap in doctors' earnings makes a big difference for national health care costs. About 20 cents of every US health care dollar is paid to individual physicians and clinics, and that does not count staff doctors in hospitals, whose salaries are included in the 30 cents of the US health dollar that goes for hospital services.

One reason that French doctors can get by on lower earnings is that they do not have to pay for medical education. As a result, they do not begin their careers with tens of thousands of dollars in student debt. Another reason, mentioned earlier, is that they do not have to spend more tens of thousands on malpractice insurance. French doctors also seem to complain less about the burden of paperwork than do those in the United States, presumably because of a simpler system for health care payments. Still another reason for lower earnings is that the French government controls a bigger share of the total health care system, and uses that market share to drive a harder bargain on fees. Finally, we should keep in mind that GDP per capita is almost 20 percent less in France than in the United States, so on average, everyone there earns less.

Nonetheless, despite lower earnings, there is no indication that France suffers from a doctor shortage. According to OECD data, France has 30% more professionally active physicians per capita than the United States.

What should reformers make of the fact that French doctors produce such good results while earning less? It would be an oversimplification to draw the inference that across-the-board pay cuts should be a priority element of US health care reforms. Attempts to cut payments to doctors have not always worked well. Low reimbursements have been blamed for difficulties in finding doctors willing to take new Medicaid patients. Fears that the same could happen to Medicare has led Congress to overrides previously mandated cost-cutting formulas.

Instead, the earnings differential would seem to carry implications more like the following:
  • First, replication of the main elements of the French system in the United States could very well end up costing considerably more than in its home country. The difference in doctors' earnings alone would probably erase half of the cost differential that the French system currently enjoys.
  • Second, doctors' earnings cannot be considered in isolation. The combination of high prospective earnings, high student debt, and the US malpractice system create a risk-reward profile for a US medical career that is quite different from that in France. Over time, changes in policy could plausibly attract sufficient numbers of qualified people to the medical profession even if the package included  a lower equilibrium level of earnings. But to say that is quite different than to say that doctors who are already practicing in the United States would or should accept immediate pay cuts.
  • Third, to some extent, the earnings differential between US and French doctors reflects decisions that shift costs from one government account to another without any real saving to the economy. Lower payments to doctors may be at least partly offset by higher government spending on education and costs of administering the malpractice compensation system.
So, what is the bottom line? What can reformers in the United States learn from the French health care system?

On the one hand, the French experience really does make it look like Americans are not getting their money's worth. It shows that the possibility of high quality combined with universal coverage is a reality, not a utopia. Furthermore, such a result can be achieved without sacrificing freedom of choice either for doctors or for patients. In fact, choices of doctors and treatments are in many case less restricted by the French public health care system than by private insurance companies in the United States.

On the other hand, the prospect of replicating the admirable performance of the French system in the United States and at the same time realizing a cost saving of something like 5 percent of GDP seems less realistic. For one thing, as discussed above, there are reasons to think that running the same kind of system in the United States would be inherently more costly than in France, not to mention the fact that costs are rising there, too.

What is more, the politics of cost control are daunting. During the debate over the 2009 US health care reforms a broad variety of cost-cutting proposals were raised, ranging from streamlining the administrative costs of payments and record keeping, to malpractice reform, to striking harder bargains with drug companies. One by one they were rejected or watered down to the point of tokenism. There is a reason that happens. Every dollar of national health care cost represents a dollar of income for someone. Insurers, drug companies, hospitals, medical associations, and other health care providers do not hesitate to deploy the full arsenal of political contributions and lobbyists to defend their interests.

If Americans want a better health care system—they should want one, and they deserve one—they will probably have to pay about as much for it as they pay for their current dysfunctional one, at least initially. Reform is going to require getting at least large parts of the medical-industrial complex on board, and taking a way a big chunk of their revenues is not a good way to start.

As a quid pro quo, however, insurers, drug companies, hospitals, doctors and all the rest will have to accept measures to restrain costs in the future. That includes moving, over time, to a regime in which doctors can expect lower earnings in return for relief from the financial burdens of malpractice insurance, medical school costs and excess paperwork. As part of the same deal, pharma companies should expect harder bargaining from the government, insurance companies should accept measures to cut administrative and marketing costs, and so on. In many ways, those are bargains the French government seems already to have struck.

Follow this link to view or download a short slideshow comparing the French and US health care systems. Thanks to Charlie Janeway for comments on an earlier draft.


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  3. Another factor that may be worth mentioning is that doctors in the US are more likely to choose highly-compensated specializations (dermatology, orthopedics, cardiology) and less likely to choose a general medical practice (family practice, internal medicine) than are doctors in other countries. This is clearly related to the higher relative earnings of such specialists in the US. One consequence of this is more difficulty seeing "front-line" practitioners, another is the higher cost of seeing specialists.

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