France and U.S. Health Care: Twins Separated at Birth?

Pascal-Emmanuel Gobry

By way of introduction, I want to make clear that I have no particular expertise when it comes to healthcare policy. My knowledge is merely that of a layman who follows the news. I'm even well-aware that one of my esteemed co-guest bloggers is Avik Roy, who's one of the most talented health care wonks on the internet, whose work I avidly followed at his previous National Review digs. In fact, this post can be read as an invitation to Avik to enlighten me.

All that being said, from my outlook there's something that I haven't seen discussed and yet seems striking to me: how similar the French and U.S. healthcare systems are.

On its face, this seems like a preposterous notion: whenever the two are mentioned together, it's to say that they're polar opposites.

France has been called the best healthcare system in the world by the World Health Organization. And if there's something everyone in the US seems to agree on, it's that US healthcare, well, horribly sucks, although they strongly disagree about why and what to do about it.

And yet, to me, the similarities are glaring:

First of all, the French healthcare system is built on a large, highly-regulated private sector. Unlike Britain's NHS, the government doesn't own everything. Some hospitals are public, but many are private and for-profit. Indeed, there are publicly-traded hospital chains, just like in the US. Most doctors and nurses work in private practice. Even most of the ambulances are private. The sector is highly regulated and subsidized to be sure, but that's also true in the US.

Secondly, there's a crucial feature at the heart of the French healthcare system that is also at the heart of the US healthcare system--and that all US wonks hate: employer-provided insurance. 

France has had a US-style employer-based healthcare system since the end of World War II, but the Couverture Maladie Universelle (literally: universal healthcare coverage), the government program that covers people who can't get insurance, was only enacted in the late 90s (ah, global macro booms). Given how tantalizingly close Bill Clinton was to passing universal healthcare in the early 90s, it's easy to imagine a parallel universe where Americans had universal healthcare before the French, again something you wouldn't guess from reading stories on French healthcare.

The way healthcare works in France, basically, as I understand it from living here (and I may be wrong about this because it gives me migraines), is that you get insurance through your employer which they deduct from their taxes. You can also buy it on the market (and don't deduct it from your taxes). If you can't get insurance, the government will pay for your treatment in a system similar to (I think?) Medicaid, ie you go to the doctor or the hospital you want, and the government will pay for it in a stingy way that incentivizes you to not want to rely on the government too much but still ensures no one is left to die on the streets. French doctors frequently grumble about CMU reimbursement rates as American ones do Medicaid/Medicare rates. Conversely, if you have a job with coverage, you can buy additional coverage and/or services out of pocket.

Some jobs have better healthcare than others: my wife works for a big management consulting firm and has very generous healthcare coverage; as her husband, I get coverage through her policy, since as a freelancer my options are mediocre.

When we had our baby, my wife and I sprung for a private clinic. We chose this clinic because it is a religious institution that provided religious services on top of medical ones, which was important to us, and only later discovered that it's one of the best clinics in Paris and therefore the world. And indeed we were stunned by the quality and level of service and the awesomeness of everything.

The way we paid for it, or rather, didn't, is that the government paid a sizable minority of the bill, and my wife's insurer paid the rest. We sprung for extras like a private room. If we had no or stingier insurance, we would have been free to pay the difference out of pocket. Or we could have gone with a less pricy private option, or with the public hospital which would have been free beyond a token deduction but much less nice.

From my understanding, this is different from how it works in the US, but not that much: it's still your employer-provided insurance that will pay for the hospital stay; you may have to pay a deductible and the government won't pay anything, but the idea of a third-party, employment-based insurer who pays--this idea that everyone agrees makes US healthcare so horrible--is also at the heart of the French system--which most people think is so awesome.

Again, I don't really understand how most of this works, but as a France-based follower of US politics, these parallels struck me as existing and underdiscussed.

Which begs the question: with such striking similarities, how come the outcomes are so different? Most importantly, how come the US healthcare system is so expensive and the French healthcare system so manageable?

One thing that's different, you might argue, is lifestyle factors: French people generally eat better than Americans, shoot each other less, etc. and so it costs less to fix them up. Prevention also plays a bigger role in France: when someone in my family was unemployed and uninsured, that person received vouchers for medical and dental checkups at the local public hospital (which I got to see and seemed gleaming and state-of-the-art, though that's not the state of most French hospitals). The idea that prevention is super important and cost-effective is a big theme in healthcare wonkery. Still, that explanation doesn't satisfy me. While there's probably some of that at play, I'm pretty sure it can't explain such a wide disparity.

Another thing you might argue, and again it's probably true to some extent, is that the French healthcare system is really a house of cards: it may not be horrible, but it will be soon. A striking number of people inside the system I've spoken to seem to believe this: many people are convinced that French healthcare will no longer exist as we know it within 10 to 20 years because of (like everywhere else) budgetary pressure, exploding debt and Boomers retiring. This should probably cool the enthusiasm of so many France-loving US healthcare wonks.

But, precisely because the US has the same macro problems, it doesn't explain why France does so well, and the US so badly, now. The US demographic picture is actually slightly better than France, so if that was the explanation, you'd think the US would be doing slightly better.

After mulling this on and off for many months since I've been thinking about this, I think the defining thing is: costs. Costs are just much higher in the US.

You see this with doctors: American doctors just make way, way more money than French doctors, which drives up costs across the board. The reason why American doctors must make more money than French doctors is because medical school in France is free and medical school in the US is really, really expensive. I don't have any figures, but I wouldn't be surprised if what the median starting doctor pays in student debt in a year is more than what the median starting French doctor makes in a year.

And by the way, this is why doctor is such an unappealing profession in France. Since I've been thinking about this, I've gone through my memory and been struck by how, when I was in school, nobody asked if I wanted to be a doctor. As I understand it, the cliché is that a bright young middle-class kid will become "a lawyer or a doctor." In my upper-middle-class background, no one even brought up the idea that I might want to be a doctor. Lawyer? Sure. Bureaucrat? Of course. Business executive? Why not.

Medical interns in France make less than the minimum wage per month (and therefore much, much less per hour) so if you want to become a doctor you had better have parents who can afford to support you into your late twenties. In the fancy prep school I attended, the only pupils who were thinking about becoming a doctor had a doctor parent. This completely scientific survey of some people I vaguely knew over a decade ago leads me to speculate that becoming a doctor in France has become sort of like contemplating a military career in both countries: a profession you might choose because of prestige/family tradition/passion but that has stopped being a smart financial bet and so draws on an increasingly narrow pool of applicants. Which is quite worrisome from a societal perspective when you think about it.

By contrast, you can't swing a cat across a dorm room at an elite US university without hitting a pre-med. Not all those kids will end up becoming doctors but the idea that becoming a doctor is an enviable path for a bright kid who wants a prosperous upper-middle-class lifestyle is well-entrenched.

Doctors are just one example. As Ezra Klein was arguing recently, prices in US healthcare are very high across the board, and that seems to be the big, big difference.

All of this is a roundabout way of saying that my neophyte impression is that the French and US healthcare systems, rather than being these wildly different systems operating from wildly different premises, are actually pretty similar. It just so happens that one is much, much more expensive than the other, and that's what leads to these very different outcomes.

Now, why is that? The process is well-understood: France (and other countries) simply set prices low by political fiat. The US doesn't, and so has very high prices.

So should the US do the same? The argument against is that medical innovation requires a profit motive, a view with which I concur. Non-US countries can get away with setting low prices only because medical innovators make their profits in the US, and the US is thereby subsidizing the rest of the world's healthcare costs.

That makes sense, but there's still a problem: in every other sector, competition and innovation drives prices down, not up. I work in the information technology industry where this effect has been staggering, and yet I see so many people blithely saying about healthcare, essentially, "Well of course prices are going to go up because the technology keeps improving", which makes intuitive sense until you realize that the opposite is true everywhere else.

The left-reformist response is that healthcare decisions are unlike other kinds of market decisions: there are information asymmetries (if your doctor says "Buy this pill" or "Take this procedure" even if it's unnecessary, you'll still do it because you don't know better), people aren't price sensitive (you're not going to risk killing grandma by buying the cheaper option). Therefore, the buyer-driven competitive market process that usually pushes prices down doesn't work for healthcare, which legitimizes the idea of government intervention to control prices.

That also makes some sense (then again: there are also information asymmetries in things like computers and cars--most consumers aren't computer or mechanical engineers--and yet relentlessly prices go down and quality goes up), but my instinctive response from my pro-market perspective is: I'd be more convinced by that argument if we'd at least tried to have a competitive market in healthcare products and services and found it wanting. Which we really, really haven't. A common example here is laser eye surgery, which isn't caught up in the regulatory-subsidizing web because it's considered a surgery, and where prices really have gone down as quality went up.

So, where does all that leave us? Well, I don't know. As I said, I'm a layman when it comes to healthcare policy. My pro-market instincts tell me that deregulation and consumer choice are the answer. It might look like Brad De Long's healthcare utopia, or it might look like Will Wilkinson's. I lean toward the latter (you should really read Will's post), but I also think DeLong's plan would be an improvement over the status quo, in either France or the US. And my thinking on the issue was also deeply influenced by the Atlantic story "How American Healthcare Killed My Father."

But I felt it was important to note what I see as big similarities between France and the US, when most of the commentary seems to regard them as polar opposites.

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