How to Get There from Here

There’s been much discussion of late about what other country’s health care apparatus the US should consider emulating, and in such discussions France is often mentioned. Now, all cheerful ribbing against the French aside, their health care system is not nearly as “socialized” or nearly as afflicted by treatment denials and waiting lists as those of the UK or Canada. It is also rather more like the system that the US already has, in that it is a hybrid public/private system, though in their case there is a guaranteed base level of coverage everyone has through the government (funded via a hefty payroll tax — not unlike Medicare) which most people supplement with private coverage. Most doctors are in private practice, and 25% do not even accept the public plan, just as some practices in the US do not accept Medicare. However, everyone does have that minimum level of coverage, and the French spend a lower percentage of their GDP on health care than the US (11% versus 16%) which when you take into account that France’s GDP per capita is a good deal smaller than that of the US (which is the polite, economist way of saying it’s a poorer country) works out to the US spending about twice as many dollars per person on health care, while still not having universal coverage.

So what are we waiting for? Why don’t we go enact the French system here right now? Why doesn’t Obama put on a jaunty beret, dangle a cigarette coolly from the corner of his mouth, hoist a glass of wine, and just say, “Oui, nous pouvons.”

Well, these things are often not quite as simple as they seem. It turns out that the French savings are rather hard to reproduce. This paragraph from a recent National Journal piece packs a lot of problems into a short space:

What is the answer? The main thing is pay — above all, doctors’ pay. A physician in France is typically paid about a third of what his counterpart in the United States receives. A French doctor’s salary, in some cases, would barely be sufficient in the United States to cover his or her medical liability insurance, to say nothing of paying down the enormous debt accumulated while training.

A Business Week piece from a couple years back seems to be working with the same data and provide specific figures:

To make all this affordable, France reimburses its doctors at a far lower rate than U.S. physicians would accept. However, French doctors don’t have to pay back their crushing student loans because medical school is paid for by the state, and malpractice insurance premiums are a tiny fraction of the $55,000 a year and up that many U.S. doctors pay. That $55,000 equals the average yearly net income for French doctors, a third of what their American counterparts earn. Then again, the French government pays two-thirds of the social security tax for most French physicians—a tax that’s typically 40% of income.

Now honestly, that 1/3 figure sounds odd to me, and it’s net income, which means comparing two very disparate tax codes. So I looked around for some more data. Catherine Rampell of the NY Times Economix blog links to a congressional study with definite figures that ring truer to me. Using salaries adjusted for purchasing power parity, thus giving a good comparison of real living standards adjusted for the price of goods and services in both countries, US general practitioners average $161k/yr versus $91k/yr in France. For specialists, it’s $230k/yr in the US versus $149/yr in France. So US doctors would have to be hit with a 35-45% pay cut in order to get them down to French levels. Associated with that, it’s highly likely that the people building and servicing medical technology and software as well as the non-doctors involved in running health care facilities make more than in France, so there’s probably a pay cut to hand out there as well in order to get overall medical spending down.

Once you start to contemplate these things, it becomes clear that it would take a restructuring of our entire economy and educational system to get anything close to the cost of the French system. Whether one likes the idea or not, it’s not something that would ever make it through congress. And if a similar structure were implemented without those cost savings (if one really considers what would effectively mean shrinking the economy as a whole a savings) it would cost rather more than our current one.

This does not mean that we should therefore do nothing, but it does mean that we need to think not so much in terms of making large structural changes to achieve an instant savings (this is likely impossible) but rather along the lines of setting forces in motion that will gradually drive costs down, while making sure to take care of those in need in the meantime. Driving costs down in the long term would probably mean, among other things:

– Pushing for more medical schools and/or more acceptance of foreign medical degrees.
– Serious medical malpractice reform.
– Regulatory changes in regards to allowing some types of care to be handled by a nurse or pharmacist rather than requiring a doctor.
– Simplifying Medicare paperwork and regulatory compliance.

Taking care of those in the mean time would require some sort of highly means tested program for identifying those needing assistance in getting coverage, and either providing it directly through a government program or providing incentives for private insurance to accept these people via some sort of subsidy or tax break.

9 Responses to How to Get There from Here

  1. Phillip says:

    Well done Darwin,

    Many factors in health care. One is physician salaries as pointed out in other posts. Many factors in physican salaries as you point out including the high cost of medical school and indirect malpractice costs. If those aren’t addressed while cutting physician salaries, problems will most certainly follow.

  2. Eric Brown says:

    Dear God… someone finally stopped talking about British and Canadian health care and realized that are quite a number of schemes to reach universal coverage and single-payer systems aside (I don’t feel like having that go-round), France is a pretty good model.

    Moreover, I think if we attacked education (costs) and provided greater assistance to medical students (not just with public funds), we could slightly lessen doctor salaries — as health care costs go down and depending on their specialty.

  3. Eric Brown says:

    And by ‘lessen’ I don’t mean put caps on it via legislation.

  4. Related to this but in a more general sense: I think that dealing with a situation like this (in which it becomes necessary to drive a group of people’s income down for the common good) the impersonal nature of markets is generally more socially acceptable than government action. I don’t think anyone would tolerate reducing doctor pay 30-40% by fiat, even when they generally make a lot of money. But creating the conditions for it to gradually reduce due to market pressure doesn’t have the same antagonistic edge.

    Just had to get the market plug in. 🙂

  5. Phillip says:

    30 – 40% again seems not to take into account malpractice costs let alone medical school. Maybe your figures take into account malpractice costs. But if not, using your figures, a specialist in the US averages 230k vs 149k in France. Subtract the average 55k for malpractice and you get a difference of 175 vs 149. Excluding medical school costs you’re now talking about a 14% difference, not 30 – 40.

    What’s the average malpractic attorney’s pay?

  6. Phillip says:

    Actually just Googled it. In 2006 it was 100k.

  7. I guess, I’m not sure how stuff like malpractice insurance is usually accounted for. Do doctors always have to pay it out of pocket (thus out of their personal pay) or is it often payed by their practice as a business expense?

    Either way, significantly reducing the malpractice lottery would have a salient effect on health care prices — not just in allowing for health care providers to charge less, but also reducing the number of extra procedures which are done for tail covering purposes rather than medical effect.

  8. Phillip says:

    Depends on the practice. Those that are stand alone pay out of their own pocket. Those in large practices or hospital based practices get it paid for. But that will be considered part of compensation and usually salaries are lower to reflect that. Either way, there is a cost to income from malpractice premiums.

  9. John says:

    The cost of malpractice insurance is inflated by insurance companies, just as insurance companies inflate the cost of medical insurance. But the big issue is that usa doctors and hospitals do not like to be held accountable for their bad medical practices and poor outcomes. Their private for profit medicine ranks 37th in outcomes compared to other countries, which rank muych better using national health programs. Malpractice costs would clearly go down if usa outcome rankings improved. The fact that france ranks number one, having the best outcomes, while paying their doctors much less, is all just a further indictment of our private medical system in the usa.

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