Wednesday, August 13, 2008

French Public Health Insurance System (PHIS) – An insider story of the reality.

According to World Health Organization’s ranking of health care systems in 191 countries, France came first. The ranking was based on things like the number of years people lived in good health and whether everyone had access to good health care. The United States ranked 37th. Also two researchers at the London School of Hygiene and Tropical Medicine measured something called the "amenable mortality”, a measure of deaths that could have been prevented with good health care. France came first among the 19 industrialized nations and United States was last.

So looks like French system is the best public health system in the world to me. But since I know of someone with firsthand experience of French Health System, I decided to hear from horse’s mouth. Christine is a French citizen, working in the US, and enjoys the benefits of French health care system. Although she is currently in the US, she is eligible for health care benefits under French System since she contributed to this system while she was working in France. I asked her which system she likes better, US or French system. She said, she likes the US system better. Her reason; she spends € 30 when she visits a primary doctor in France where as she pays $15 copayment in the US. It is cheaper for her to go to her primary doctor in the US.


It is no secret that copayments are high for many out-patient services in France. For example, patients must pay 30% of Social security's tariff for a physician's visit; moreover, roughly 40% of specialists and 15% of GPs are allowed to charge more than the tariff. Copayments are also high for dental prostheses and eye-ware.

So if Christine had visited a specialist, she would have paid a copayment of more than € 30 versus still $15 in the US. So I can understand why she wants to do her annual physical exams in the US before taking off for a vacation to join her mom in France.

What if she were working for an employer in France? The story would have been different. Half of her copayment of € 30 would have been picked up by a supplementary private insurance (employer pays for most of the private insurance premium) and would still have € 15 out of pocket expense. These numbers will be higher for specialists while in the US, it remains the same as long as it is an office visit.

Cost of Insurance:

So how much does it to cost this type of insurance? Since she is getting a lower benefit and higher out of pocket expense, you would think she would be paying a lower premium in France. About 21 percent of an employee’s income is deducted through payroll towards the national health care system. Employers pick up a little more than half of that. In addition to this, employees may be able to join group private insurance sponsored by employer to cover much of the gap between what is covered by the national plan and the actual medical expense. Or they can buy a private insurance at an additional 3-4% of their income. Between the employer and employee, the total health care cost in France per employee is around 25% of the individual income. In the US, according to Department of Labor March 2008 report, the health care cost to the employer stands around 7.2% of the total compensation. Assuming another 3-5% is passed onto employees, the health care premium in the US stands at around half of what French are paying in percentage terms. In absolute currency terms, US might be spending more on health care per person, and that’s because of the higher wage and cost structure in the US.

Universal Healthcare Insurance (CMU):

What if you are among the 10% unemployed in France? Since you don’t have a job, you don’t have a supplementary insurance and then you are stuck with high out of pocket expenses. Most of them stayed away from seeking care. In January 2000, public supplementary insurance program called CMU (Couverture maladie universelle) was implemented to ensure the poor access to health care. For those whose income is below a certain threshold, this insurance covers all public copayments and offers lumps-sum reimbursements for glasses and dental prostheses.

Does this sound too good to be true? According to published articles, in a city like Paris, only a 20% of specialists are willing to take CMU patients. This confirms what Christine told me, “The provider may not give an appointment when they know the patient is on CMU program. They may say we don’t have an appointment for next six months!” Essentially, CMU created a two tier class system of health care which it sought to alleviate in the first place. Have you heard of “HMO Bounce” lately?

There must be something right about French:

This is what is right about the French system. In France, for people with one of 30 long-term and expensive illnesses — such as diabetes, mental illness and cancer — the government picks up 100 percent of their health care costs, including surgeries, therapies and drugs. This is probably the most important lesson from French system. In the US, since the insurance is tied to employment, long term sickness can lead to job loss and subsequent loss of insurance.

Why shouldn’t we go down French Lane:

It is expensive and it has higher out of pocket expenses. Nobody in the US wants to see 25% of their income going into health care insurance. The cost doesn’t end there. To fund the new universal health care (CMU), French government is channeling funds from other welfare programs. France funds their welfare system by taxing the employer and employee to very high levels that is uncommon in the US. According to a CATO institute Article, “The top marginal income tax rate (in France) is 48 percent. When payroll taxes are included, the French can pay as much as 65 percent of their income in taxes. The top corporate tax rate is 34 percent. There is also a 19.6 percent value-added tax (VAT). Overall, taxes consume nearly 44 percent of France's GDP. And even this isn't enough to pay for the French welfare state. France's national debt tops 68 percent of GDP, quite aside from the unfunded liabilities of the French Social Security system -- a debt some estimate to exceed 200 percent of GDP.”

You think CATO is too much libertarian? You can believe Christine’s pay checks. For every 100 FRF paid to her, employer paid another 100 FRF to the government. From her share of FRF 100, government took away another FRF 50. So government kept roughly three times of what she got to keep!

Even after spending all these tax payers’ money, there is no guarantee of government efficiently running business. Think 10% unemployment. Think poor and shut away youths in their dismal neighborhood projects, rioting in the suburbs of France for weeks to protest the lack of educational and economic opportunity. Think Katrina. Think FEMA.

Governments give hopes to people. That’s all it can give and that’s all it should ever dare to give.

Here are some ideas that might work in the US:

1. Make it mandatory for everyone to carry health insurance. The logic of insurance is shared risk and when we have so many people outside of the pool, the risk is magnified. When more people join the insured pool, the cost of insurance comes down for everyone. Enforce this through payroll deduction or employer group insurance
2. If the employee cannot afford health insurance premium due to low wages (when cost of insurance eclipse the wage and employer does not want to pick up part of the insurance cost), the minimum wage should be adjusted upwards to cover cost of insurance (e.g. increase minimum wage by 7.2% to reflect the US Department of Labor average employer cost of health insurance)
3. Let employee buy their own insurance. Employees should be given an opt-out to skip employer sponsored group plan and buy insurance directly from insurance companies. The studies are already suggesting that the rate of private insurance premium is much lower than the employer sponsored group plan and it grows much slower than group plan. Employee should be able to keep this insurance indefinitely regardless of the employment status. The rate of increase in premium should be less than or equal to the rate change by the same insurance provider for an employer sponsored group plan for any given year. In the event of a company defaulting, due to insolvency, individual health insurance can be protected under an insurance guarantee like California Life & Health Insurance Guarantee Association.
4. Under COBRA, the employer is required to provide continued health care coverage for 18 months of termination. But if the employee could not take up a new job due to health reasons, he/she will lapse the coverage and mounting hospital bills will lead to bankruptcy. A possible solution might be to change the COBRA rules to allow employee to continue with health coverage and pay the group rate, regardless of his/her health condition, until the person takes up a new job. The coverage does not have to continue through the employer (due to administrative reasons) and can continue with the insurance company. If the person is unable to take up a full time job due to health reasons, the coverage shall continue indefinitely. During such period of extended coverage, the same out of pocket maximum limit would apply and will put a cap on medical expenses (couple of thousand dollars per year) especially when it is needed the most. Government can give tax credit to offset some of the medical premium paid during the illness period.
5. Just like in the Y2K days, bring lots of overseas programmers and IT Engineers into the US and build a national Electronic Medical Records system. This will be the best investment US can make since Y2K and Internet.
6. Allow Health Care providers to import drugs and medical supplies from less expensive countries. FDA can use some of the savings to beef up inspection of imported drugs and supplies.
7. Allow Health Care providers to bring in MD doctors from overseas and start practicing as Nurse Practitioners/Physician Assistant for a year and then allow them to practice as MD Doctors. It is absurd to make them go through a 3-5 year residency again. Doctors are not among the top 10 overpaid professionals in the US and hence I am not proposing to reduce their wages. But there is a severe shortage of qualified doctors which in turn manifest as shortage in qualified health care facility. With more doctors, there will be more health care facilities and there will be more competition among them. This will result in a tighter and efficient management of health care facilities and establish as a lean and business units. How about a Costco drive through clinic? How about buy one lipid profile test and get one free for the partner!

Health Care Lessons from France - NPR Article

The French Health Care System - Medical News Today Article

Employer Costs for Employee Compensation Summary - US Department of Labor

Universal Healthcare Insurance introduced - EIRO Article

Welfare Lessons from France - CATO Institute Article

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