There is no such thing as a free lunch. Part 3: health care

The French have a reputation for hypochondria that is not entirely undeserved. Molière’s famous comedy “Le Malade Imaginaire” (usually translated into English as “The Imaginary Invalid”) still resonates strongly with audiences, nearly 350 years after its first performance. They watch with glee as the hero, Argan, groans and grumbles about his imaginary ailments, follow the many and various remedies proposed to alleviate them and perhaps too, secretly identify with his deepest desire to have his daughter marry a doctor.  In everyday conversations, health issues are never far below the surface and there are many who take their cue from the everyday greeting “how are you?” to tell you exactly how they are, in every possible detail.

This predilection of the French for their own health is surely one of the reasons why they have chosen to give themselves one of the best and most generous health care systems in the world, in terms of quality, availability, medical technology and cost to patients. But it is also, in its way, the ultimate free lunch inasmuch as the vast majority of patients are oblivious to its true costs. Latest developments are likely to conceal them even more.

Health care is under the authority of a large administration that also manages pensions and family allowances. It raises revenue from compulsory earnings-based contributions from employees and employers, the latter paying the larger share. Employees can, if they so wish, trace on their pay slips the amount paid by themselves and their employers, but most don’t bother, being primarily interested, naturally enough, in their take-home pay. They therefore tend to discount, not to say take for granted, the real cost of their health care and pension entitlements. The self-employed, also subject to compulsory contributions, are a little more conscious of what they pay, but full tax deductibility goes some way to deadening the pain. In 1991, in view of the increasing deficit of the entire social security system, a new tax, called the contribution sociale généralisée (CSG) based on all sources of revenue was introduced and a little later a special and “temporary” levy designed to pay off the system’s mounting debt. The rate at which the CSG is levied has steadily increased, from an initial 1.1% to the current 7.5% and the temporary levy is still in force. Although the government initially maintained that the CSG was a tax based on all revenue and therefore not specifically a "social contribution", the European Court of Justice found otherwise and ruled, in 2015, that non-resident recipients of dividend and other income from French assets were not obliged to pay CSG because they don’t benefit from health care in France.  It is also clear that increasing life expectancy and the fact that most people require more health care as they grow older can only increase the system’s annual deficit and lead to further escalation of its accumulated debt. Governments sometimes manage to contain the deficit and declare triumphantly that it has been reduced from, say 11 billion euros to 3 billion, always failing to add that the debt remains and grows bigger every year.

The way the system works makes it easier to understand how the deficits and debt continue to grow. Patients may consult the doctor of their choice, within limits, pay the doctor directly for the treatment they receive and are refunded almost the entire cost by the health care system. Doctors, for their part, do not only make a diagnosis and prescribe the appropriate treatment but are also keen to give their patients “value for money” because they are also their clients! It is here that the essential difference between the French system and those of many other countries can be found – and it goes a long way to explaining why French public expenditure and national debt is so huge. In the U.K for instance, governments allocate fixed budgets to the health trusts that administer the National Health Service and they have to make the difficult choices about how to spend it. In the U.S, for those not on Medicare or Medicaid, insurance companies call the shots. In France, difficult choices are avoided inasmuch as health care costs are generated by medical professionals, refunded to patients with few questions asked and the total amount of expenditure is recorded at the end of the year. Unsurprisingly, it invariably turns out to be higher than revenue.

It is the kind of system that encourages people to spend more or less what they like on their healthcare and doctors have little reason not to give them what they want. Two examples suffice to prove the point. When CT and MRI scanning machines were introduced some years ago, there was brave talk of limiting their use only to the most serious cases. Under pressure from patients and doctors, these types of investigation are now widely available and used routinely in establishing a diagnosis, regardless of the cost. In terms of drugs prescribed, the top ten most costly drugs for ailments like rheumatoid polyarthritis, diabetes, high blood cholesterol levels and some forms of cancer cost over €23 billion in 2014. The third most costly drug was the lowly Paracetamol, at just over I euro for 16 tablets.  Mainly under pressure from patients, steeped in the generalised “refund culture”, doctors added €321 million worth of this mild, over-the-counter painkiller to their prescriptions in the same year. The system is also generous in terms of surgery. In the U.K, patients over the age of 80 cannot normally expect to have hip or knee replacement operations on the NHS. Nasty words like discrimination and rationing are avoided but that is what it amounts to. In France, patients between 80 and 90, all other things being equal, can have their hips or knees replaced, fully refunded by the health care system. Any whiff of health care rationing on the basis of age, or any other criteria, is anathema.  Quite rightly so, most in France would argue.

Conscious of escalating liabilities, successive governments have not been unsuccessful in streamlining the system and cutting its costs. The old paper based refund system has been largely replaced by a state-of-the-art card-based data transmission network; uncomplicated surgery is performed increasingly on an out-patient basis and doctors have been encouraged to prescribe a greater proportions of generic drugs, although of course the most recently developed, and therefore most effective and also most costly drugs are still under patent protection. There is always talk of making patients more “responsible” but there are huge built-in incentives not to be. On top of the half-concealed payroll costs, the previous government introduced legislation to oblige companies to provide top-up health care insurance for all employees, as a way of transferring more costs to the insurance companies. In addition, generalised third party payments have been introduced for everything. Most patients now just have to produce their health care entitlement card when they consult a doctor, pick up drugs at a pharmacy or undergo surgery in a hospital or clinic.

Is there any way of slowing the inexorable upward path of health care costs in the French system and bringing them eventually back into balance? The omens are not good. The system itself, because of the way it works and because its real costs are so well concealed from patients, is highly biased towards more expenditure. Not only is there a very strong culture of seeking medical treatment at will and simply passing the bill on to the system, but in addition, the recently introduced third party payment, and the top-up insurance paid for by employers are powerful disincentives for patients to economise on their health care or pay for more of it out of their own pockets. Emmanuel Macron’s electoral promise to replace employee health care and unemployment insurance contributions by an increase in the CSG is in the same vein. The political advantage of such a move is obvious: employees will see an increase in their take home pay (pensioners of course will see the opposite effect). However, tilting the burden of funding towards the CSG, which is largely deducted at source, will make the costs of health care even more opaque. As one commentator pointed out the other day, the overall effect of this measure will be to increase the amount of tax (VAT and CSG) deducted at source and therefore, supposedly,  “painless”, while income tax, for instance, paid by an ever smaller proportion of households, will account for an ever smaller proportion of overall tax revenue.

The conclusion that can be drawn from all this is that one of the major components of public spending, that the current government is committed to cutting, is more than likely to continue growing, unless restrictions are introduced to oblige French patients to pay more of their health care costs out of their own pockets and therefore become less spendthrift. Such moves would undoubtedly cause a huge outcry and will probably never be seriously considered. Overall therefore, it doesn’t look as if this particular free lunch will be made less nourishing any time soon.