France Fights Universal Care's High Cost

France claims it long ago achieved much of what today's U.S. health-care overhaul is seeking: It covers everyone, and provides what supporters say is high-quality care. But soaring costs are pushing the system into crisis. The result: As Congress fights over whether America should be more like France, the French government is trying to borrow U.S. tactics.

In recent months, France imposed American-style "co-pays" on patients to try to throttle back prescription-drug costs and forced state hospitals to crack down on expenses. "A hospital doesn't need to be money-losing to provide good-quality treatment," President Nicolas Sarkozy thundered in a recent speech to doctors.

And service cuts are prompting complaints from patients, doctors and nurses that care is being rationed. That concern echos worries among some Americans that the U.S. changes could lead to rationing.

The French system's fragile solvency shows how tough it is to provide universal coverage while controlling costs, the professed twin goals of President Barack Obama's proposed overhaul.

French taxpayers fund a state health insurer, Assurance Maladie, proportionally to their income, and patients get treatment even if they can't pay for it. France spends 11% of national output on health services, compared with 17% in the U.S., and routinely outranks the U.S. in infant mortality and some other health measures.

The problem is that Assurance Maladie has been in the red since 1989. This year the annual shortfall is expected to reach $13.5 billion, and $15 billion in 2010, or roughly 10% of its budget.

Despite the structural differences between the U.S. and French systems, both face similar root problems: rising drug costs, aging populations and growing unemployment, albeit for slightly different reasons. In the U.S., being unemployed means you might lose your coverage; in France, it means less tax money flowing into Assurance Maladie's coffers.

France faces a major obstacle to its reforms: French people consider access to health care a societal right, and any effort to cut coverage can lead to a big fight.

France launched its first national health-care system in 1945. World War II had left the country in ruins, and private insurers were weak. The idea: Create a single health insurer and make it compulsory for all companies and workers to pay premiums to it based on a percentage of salaries. Patients can choose their own doctors, and -- unlike the U.S., where private health insurers can have a say -- doctors can prescribe any therapy or drug without approval of the national health insurance.

Private insurers, both for-profit and not-for-profit, continued to exist, providing optional benefits such as prescription sunglasses, orthodontics care or individual hospital rooms.

At a time when the U.S. is considering ways of providing coverage for its entire population, France's blending of public and private medical structures offers important lessons, says Victor Rodwin, professor of health policy and management at New York University's Wagner School. The French managed to design a universal system incorporating physician choice and a mix of public and private service providers, without it being "a monolithic system of Soviet variety," he says.

It took decades before the pieces fell into place. Only in 1999 did legislation mandate that anyone with a regular residence permit is entitled to health benefits with no strings attached. Also that year, France clarified rules for illegal residents: Those who can justify more than three months of presence on French territory, and don't have financial resources, can receive full coverage.

Today, Assurance Maladie covers about 88% of France's population of 65 million. The remaining 12%, mainly farmers and shop owners, get coverage through other mandatory insurance plans, some of which are heavily government-subsidized. About 90% of the population subscribes to supplemental private health-care plans.

Proponents of the private-based U.S. health system argue that competition between insurers helps provide patients with the best possible service. In France, however, Assurance Maladie says its dominant position is its best asset to manage risks and keep doctors in check.

The quasi-monopoly of Assurance Maladie makes it the country's largest buyer of medical services. That gives it clout to keep the fees charged by doctors low. About 90% of general practitioners in France have an agreement with Assurance Maladie specifying that they can't charge more than about $32 for a consultation. By comparison, under Medicare, doctors are paid $91.97 for a first visit and $124.97 for a moderately complex consultation, according to the American College of Physicians.

In France, "If you are in medical care for the money, you'd better change jobs," says Marc Lanfranchi, a general practitioner from Nancy, an eastern town. On the other hand, medical school is paid for by the government, and malpractice insurance is much cheaper.

In 2000, the World Health Organization ranked France first in a one-time study of the health-care services of 191 countries. The U.S. placed 37th.

Since the 1970s, almost all successive French health ministers have tried to reduce expenses, but mostly managed to push through only minor cost cuts. For instance, in 1987, patients were required to put a stamp on letters they mailed to the national health insurer. Previously, postage was government-subsidized.

In 2004, France introduced a system under which patients must select a "preferred" general practitioner who then sends them onward to specialists when necessary. Under that policy -- similar to one used by many private U.S. health-care plans -- France's national health insurance reimburses only 30% of the bill, instead of the standard 70%, if patients consult a doctor other than the one they chose.

At the start, patients balked, saying it infringed on their right to consult the doctors of their choice. But the system is now credited for helping improve the coordination between primary and specialty care, which remains one of the main weakness in the U.S. health-care system.

In recent years, Assurance Maladie has focused on reducing high medicine bills. Just like U.S. insurers and pharmacy-benefit managers, France's national health insurer is promoting the use of cheaper generic drugs, penalizing patients when they don't use them by basing reimbursements on generic-drug prices.

The most important aspect of Mr. Sarkozy's latest health-care legislation, passed this summer, focuses on reducing costs at state hospitals. About two-thirds of France's hospitals are state-run, and they are seen as ripe for efficiency savings. Among other things, Mr. Sarkozy has asked them to hire more business managers and behave more like private companies, for instance, by balancing their budgets.

The proposals didn't go down well. In April, some of France's most famous doctors signed a petition saying they feared Mr. Sarkozy would turn health care into a "lucrative business" rather than a public service.

In the U.S., hospitals are paid for each individual procedure. This system, called fee-for-service, is suspected of contributing to runaway costs because it doesn't give hospitals an incentive to limit the number of tests or procedures.

Ironically, France is actually in the midst of shifting to a fee-for-service system for its state-run hospitals. The hope is that it will be easier for the government to track if the money is being spent efficiently, compared with the old system of simply giving hospitals an annual lump-sum payment.

France's private hospitals are more cost-efficient. But state hospitals say it is unfair to compare the two, because state hospitals often handle complex cases that private hospitals can't.

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