Management without objectives
The French health policy gamble |
| ABSTRACT |
| The combined behaviour of providers and consumers under French NHI
has led to a dynamic proprietary sector, the growth and modernization
of public hospitals, and a flood of new doctors. Medicine in France has
become not only big business but good business. I However the price of
prosperity in the health sector has been an explosion of health care costs.
Although this has created pressure for the State to strengthen controls
over the health system, French policy-makers have made an unambiguous
gamble in favour of the status quo they have taken stop-gap measures in
order to avert more jolting structural reforms. |
| After highlighting the virtues of the French health system and the
evolution of health policy, this paper presents the long-cycle trends in
average growth rates of medical care consumption, and analyzes the two
principal management options to balance the structural deficit in health
care financ methods to increase revenues and methods to control expenditures.
Finally, the paper considers three unresolved problems in managing the French
health system and postu that the combination of NHI and la medecine liberale
will survive only so long as these issues are avoided. |
INTRODUCTION
Images of health systems abroad are usually distorted percep of what
one would like to imitate or avoid at home. In the United States, we
harbour images of barefoot doctors, in China, and socialized medicine
with long queues in Britain. The French envisage a 'big brother' state
delivering medical care in Britain and a significant portion of the
population of the United States - those without health insurance - walking
the streets without care (1). Whatever images the British have
developed about the delivery of medical care outside the NHS, this
paper should help in assessing their neighbour's health system across the
Channel. |
| In contrast to Britain, following the Second World War, France was not
a pathbreaker in the domain of social policy. Although the Laroque
Report was instrumental in laying the foundations for a social security
system based on the notion of national solidarity, unlike the Beveridge
Report, it did not reassess the role of the State in assuming
responsibility for the general welfare (2). Nor was its influence
as broad as that of the Beveridge Report. Whereas the British State
increased its control over the health system in one swoop through the
nationalization of hospitals and the creation of the NHS in
1948, the French State increased its control more gradually
while involving business groups - the palronal - and trade
unions in the management of the social security system. As a
result of exercising such prudence before tampering with (lie
financing of medical care, the French health system is char
acterizcd by the co-existence of NHI and private medical
practice under fee-for-service reimbursement - what the
French call la medecine liberale. |
| Douglas Ashford has observed that Britain created its welfare
state 'by intent' and France 'by default' (3). The paradoxical
result is that Britain -the former welfare leader - spends less
(per capita) on health care than all other Western European nations,
including France - the former welfare laggard (4). What is more,
the British elected a Conservative Government which pledged to reduce
social expenditures while the French elected a Socialist President
whose programme involves increasing social expenditures. In the
course of catching up with the level of British health expenditures,
France has developed a prosperous health sector and captured the
imagination of certain British politicians in the Thatcher Government (5).
Is this phenomenon another case of the grass seeming to be greener across
the Channel like French-style economic planning during the sixties?
Or is the organization of medical care, a la franqaise, a system worthy
of imitation? |
| It is presumptuous to answer this question dispassionately. it provokes a
host of value judgments and ideological predispositions about the
proper role of the State in the social organization of medical care
(6). For this reason, in the present essay I proceed rather indirectly
so as to enable the reader to arrive at an independent judgment. I begin
by sketching the broad features of the French health care system and
highlighting its virtues. Then I attempt to fill in this image by
reviewing the evolution of French health policy. Finally, I analyse the
problem of rising health care costs and discuss some unresolved issues
of regulatory policy and management based on my experience in working
with (he Director of the principal NHI Fund. |
AN OVERVIEW OF THE FRENCH HEALTH CARE
SYSTEM
The French health system is a prototype of continental European health
systems: its distinguishing characteristics are collective financing,
through the mechanism of NHI, and the coexistence of a public and
private sector for the provision of medical services (7). |
| National Health Insurance |
| French NHI is part of the country's comprehensive social security
system originally legislated in 1928 and implemented in 1930 (8).
At first, NHI was mandatory for specific occupational groups and
administered by private insurance and mutual aid funds. Since 1945,
however, the Social Security Ordinance committed the State to devising
a unitary NHI programme with equal benefits for all (9). This process
of extending health insurance coverage and making benefits uniform has
taken over thirty years and is still not complete. Virtually the entire
population (99 per cent is now covered under four NHI funds. The majority
(75 per cent) are covered by the Caisse Nationale d'Assurance Maladie des
Travailleurs Salarie's (CNAMTS) - the NHI Fund for Salaried Workers (10).
However, agricultural workers (8 per cent), the self-employed (7 per cent),
and a set of special interest groups (9 per cent), have their own health
insurance funds. |
|
The self-employed are eligible for fewer benefits and required to pay
higher co-payments than salaried workers, and the special interest
groups such as miners, merchant seamen, railway workers, veterans,
and public employees maintain their right to more favourable benefits.
In spite of this pluralism in the structure of French NHI one can safely
say that the French have succeeded in eliminating financial barriers to
medical care. |
| From the point of view of reimbursement, all four NHI funds have similar
hierarchical structures to facilitate service to their subscribers. The
CNAMTS, for example, which finances roughly 70 per cent of aggregate
health expenditures and 30 per cent of the capital for hospital investment
is organized around 16 regional health insurance funds and 122 local
'primary' health insurance funds. In French administrative law, the CNAMTS
is a private organization charged with a public service. But in reality
it is quasi-public since it falls under close ministerial supervision;
and it is parafiscal since it is financed not directly from state
revenues but almost entirely by employer and employee pay-roll taxes. |
| From the point of view of consumers, upon visiting their physicians,
they typically pay the service charge, in full, out of their pockets.
Subsequently, they fill out a form and present it to their local
health insurance fund, either by mail or in person. The fund will
then reimburse the consumer roughly 75 per cent of the charge as
set by a'national fee schedule. Thus, 25 per cent of the fee is
financed as a copayment - which the French call a lickel moderaleur.
If physicians refer their patients to hospitals, they do not have
to pay directly. Instead, the hospital bills their health insurance
fund for roughly 80 per cent of the charges and bills the patient
separately up to a maximum of 480 francs over a sixmonth period. The
same applies to diagnostic hospital services provided on an outpatient
basis and to costly drugs and laboratory tests. In the hospital, patients
are eligible for further benefits. If they are kept more than three
days and are unable to work, beginning on the fourth day the local
health insurance fund pays cash benefits. |
| La medecine liberale |
| As far as the provision of medical
services is concerned, in French - particularly the medical ambulatory care
sector, the French profession - are deeply attached to a set of
principles associated with la medecine liberale: selection of the physician
by the patient and vice versa, clinical freedom for the doctor, professional
confidentiality and, above all, fee-for-service payment. In the hospital
sector, the French are committed not merely to the co-existence of public
and private non-profit hospitals but also to proprietary hospitals
(cliniques) which account for almost 20 per cent of the total number
of beds. |
| La medecine liberale can be traced to an often idealized past when
the health sector was a cottage industry. Office and home visits
were the predominant modes of medical practice and physicians were
neither concerned about primary prevention such as occupational health
programmes, nor about the diffusion of medical technology, nor about
regional teaching hospitals. Since the passage of the first health
insurance law in 1928, French professional medical associations have
sedulously cultivated an image of the personal, symbiotic doctor-patient
relationship. The principles of la medecine liberale were first
elaborated in a document called la Charle Medicale, in 1927. In 1955,
they were codified by executive decree in the 'Code de Deontologie Medicale.'
|
| Despite the strength and centralization of French public
administration, there are few countries where private
fee-for-service practice has been more established than in France.
Since the Second World War, however, as in other industrially
advanced nations, French physicians have practised in a socio-economic
context whose growth and changing patterns have transformed the health
sector from a cottage industry to a major industrial complex. In the
face of such change, the French state has wavered between protecting
the prerogalives of la medecine liberale and adapting the health
sector to the demands of a modern economy. On the one hand,
policymakers have acceded to pressures from the medical profession
and the hospital industry; on the other, they have' protected the
right of access to medical care by extending health insurance
coverage and introducing controls over physicians and hospitals. |
| The case for the status quo |
| In one of his rare speeches on health policy, former President
Giscard d'Estaing assured the nation that 'France will re
main the country which through the pluralism of its health V
system, will succeed in reconciling la medecine liberale and the
socialization of its cost (NHI)' (11). Political change has not
altered national policy on this matter. Neither President
Mitterand nor Communist Minister of Health, Ralite,
have questioned the combination of NHI and la medecine
liberale. Although the Socialist Party Programme called for
aggressive development of health centres, and although Ral
itc has proposed a law to abolish private pay?beds as well as
private consultations within public hospitals, the fundamental
ways in which medical care in France is currently financed and
organized remain unchallenged. |
| In the long-run, as I have argued elsewhere, the marriage
of NHI and la medecone liberale may not survive as a distinguishing
characteristic of the French health system (12).
Rather than planning for the health system's gradual adaptation,
however, and managing its transformation in relation
to long-range objectives for health care reform, French
policy-makers have made an unambiguous gamble in favour
of the status quo. |
| The case for the status quo in French medical
care organization grows out of a recognition that there are virtues
associated with combining NHI and the private provision of services.
Above all, there is an apparent freedom from resource constraints and
management objectives. This is not to suggest that France has overcome
the problem of scarcity. It does suggest that critical actors in the
health system behave as if there were no resource constraints. |
| From the point of view of institutional providers, since
they are reimbursed on the basis of patient-day rates, they have had
a carte blanche to expand. From the point of view of physicians and o
ther health care professionals, since they are reimbursed predominantly
on a fee-for-service basis, they have been given pecuniary incentives
to increase consultations and medical procedures. From the perspective
of consumers, there are no gatekeepers to the medical care system. |
| They are covered under NHI for a wide variety of treatment modalities.
Pathways through the system may lead to general practitioners as easily
as to specialists, to solo or group practice medical offices, to a
public hospital outpatient department or to dispensaries managed by
municipalities, trade-unions, or non-profit associations. |
| The combined behaviour of providers and consumers under French
NHI has led to a dynamic proprietary sector, the growth and
modernization of public hospitals and a flood of new doctors.
Medicine has become not only big business but also good business.
In 1975 the average income of French physicians was 51 per cent
higher than that of executives and 114 per cent higher than that
of engineers (13). Using 1974 data, an OECD study indicated that
the ratio of an average doctor's income to that of an average
production worker's was higher in France than in all other OECD
countries - 7.0 compared with 5.6 in the United States and a
low of 2.7 in the United Kingdom (14). |
| The price of prosperity in the health sector has been an
explosion of health care costs. Over the past decade, average
annual health expenditure increases have fluctuated around 17
per cent (in current prices). Although this has created pressure
for the State to strengthen controls over the health sector, as
we shall see, French policy-makers have succeeded in taking short-term
stop-gap measures in order to avert more jolting structural reforms. |
A BRIEF HISTORY OF FRENCH HEALTH POLICY
Following the Second World War until the beginning of the 1970s,
the French health system grew without any apparent constraints.
This expansion phase coincided with a period of triumphant success
in the medical and biological sciences. Politicians, citizens, and
health professionals believed, as a general rule, that more was better
more pharmaceutical products, more hospitals, more personnel, more
innovation, and more expenditures. There was a broad consensus on
this approach to health policy; to such an extent, in fact, that
there was no political debate about priorities in the health
sector - a sure sign of tacit agreement between major interest
groups. |
| In the early seventies, the economic crisis struck and the
situation changed. Signs of this change came as early as 1965
when the Palronal released its report on the future of French
Social Security (15). Two years later, President de Gaulle
centralized the formerly more autonomous social security
funds to tighten control over social expenditures. But it is
only several years later that the exponential growth of health
expenditures was widely perceived and that policyrnakers
began pointing out that this growth was not accompanied by
a significant increase in life expectancy. |
| By the mid-seventies, questions were raised about the
quality of medical care, the functions of a hospital within a
health system, the prevailing method of fee-for-service
reimbursement, and the effects of the CNAMTS' reimbursement
policies on the structure and evolution of the health sector. |
| At the present time, these questions remain central to
issues of regulatory policy and day-to-day management. Be
fore reviewing the problems which they raise in more detail,
however, it is helpful to highlight several turning points
which have characterized the evolution of French health
policy from 1945-80.
|
| Negotiations with the medical profession |
| Since the first health insurance law in 1928, there have been
a series of explosive conflicts between the health insurance
funds and physician trade-unions (16). The controversy has
repeatedly focused on the issue of fee setting. Physician
trade-unions refused to abide by negotiated fees and sign
contracts with the local health insurance funds because they
did not want the State to be in a position to monitor and
potentially control their income. Thus, until 1960, the law
which was supposed to establish a negotiated fee was not
enforced. The physician trade-unions even refused the
'Gazier Plan' proposed in 1956 despite the fact that it would
have adjusted their fees to a cost of living index.
|
|
In 1960, two years after de Gaulle's rise to power, the
government imposed a system of individual contracts on
physicians thus forcing them to accept nationally set fees if they wished
to be reimbursed for (heir services. In giving physicians individual choice
in deciding whether to abide by national fees, a severe blow was struck at
the collective power of trade-unions. The government's strategic move produced
irreconcilable disagreements between physicians and divided the formerly unique
trade-union, the Confederation des Syndicals Medicaux Francais (CSMF) thus leading
to the creation of a second national physician trade-union, the Federation des
Medecins de France (FMF) (17), The system of individual physician contracts functioned
for a decade and in 1970, 130 per cent of physicians in private practice had signed
individual contracts with the government, thus agreeing, in principle, to abide by
the nationally set fees. |
|
In 1971, largely in response to the rising costs of medical care and to
ideas promoted by the VIth Plan's Commission on Health and Social Transfers
(18), a national collective contract was finally accepted by the government,
(he CNAMTS, and the physician trade-unions (19). The contract was made for four
years and applied to all physicians except those who individually took the
initiative to opt out. National fees were negotiated annually on the basis
of a relative value scale - the nomenclalure - and a system of statistical profiles
on the procedures performed by each physician was established to monitor the
volume of medical care provision. Until 1975, for the most part, physicians
abided by the fee schedule while increasing the volume of their procedures.
However, during this period, (he system of physician profiles was not operational
and health care costs continued to grow. In 1976, a new national collective contract,
almost identical to the preceding one, was signed but it functioned with difficulty
especially during the annual fee negotiations. |
|
Within two years the difficulties had grown into open conflict between the State
and the largest physician trade-union, the CSMF, which represents roughly 45 per
cent of all physicians in private practice. In July 1979, the government blocked
the previously agreed - to increases in physician fees, urged self-discipline in
controlling the volume of medical procedures, and threatened to link future
increases in fees to effective control of volume such that aggregate health
expenditures be contained within a global budget. The CSMF called three strikes
between October 1979, and June 1980. The final strike resulted in violence between
physicians and the police and so in June when it came time to renew the collective
contract, the CSMF opted out. |
|
A new collective contract was signed on 1 July between the State and the FMF,
which represents only 13 per cunt of physicians in private practice. The
innovation in this latest round of negotiations is that the collective contract
applies to all physicians and that those who do not wish to abide by the national
fees can sign a special agreement, thereby joining a 'second sector' in which they
arc free to determine their own fees 'with tact and reasonableness' so long as they
indicate the fee on the patient's reimbursement form (20). The patient remains
reimbursed on the basis of a national fee unless the physician has altogether
opted out of the system in which case the patient is hardly reimbursed at all. |
|
This crisis of 1980, significant as it is, is but the most recent one in a
history of conflict between physician trade-unions and the State. |
| The Hospital Reform |
|
In 1958, the Hospital Reform Act was passed to modernize the French hospital
system by linking regional specially hospitals to university medical schools
(21). The principal provisions of the reform were to initiate a shift in (lie
reimbursement of hospital-based physicians front fee-for-service toward salary
payment and to restore the reputation of French bio-medical sciences which had
progressively lagged behind since the beginning of the century. In the French
tradition of reform by Decree, the Hospital Reform look advantage of Article
92 of the Fifth Republic's Constitution, which allowed the Prime Minister to
pass an Ordinance and thereby circumvent normal parliamentary control. Since
the architect of the reform, Robert Debre was not only a distinguished pediatrician
but also the Prime Minister's brother, implementation of this reform was closely
monitored by the government. Not surprisingly, it succeeded in completely
overhauling the hospital in spite of vigorous resistance by
physicians who were hostile to the principle of being paid like civil
servants, by the state. |
|
Although there were measures taken to facilitate the (ransition, the Hospital
Reform made salaried payment in hospitals the rule and encouraged full-time
salaried work. In addition, it encouraged chief physicians to engage in
research and teaching as well as in clinical work. Perhaps the principal
innovation following the Hospital Reform was the emergence of new scientific,
as opposed to clinical, disciplines within the large teaching hospital. New
professors were hired in such fields as biochernistry and biophysics and they
began establishing research laboratories as well. |
|
Despite these changes, the Hospital Reform preserved some of the financial
interests of the highest ranking clinical professors - les grands patrons. They
conserved the right to, hospitalize their private paying patients in 'private'
beds within their service at the public hospital. And they were allowed to use
up to four per cent of their beds in this capacity (this privilege is about to
be revoked). In addition, new investment funds accompanied the Hospital Reform
and thereby increased the hospital-centred focus of the French health system.
The development of new medical technology and specialization contributed to the
rising costs of hospitals and eventually to the Social Security Reform. |
| The Social Security Reform |
|
In 1967, the Ordinances of 21 August subsequently ratified by the Law of 31
July 1968, produced a major reform. The reasons for this were largely due to
a 'structural deficit' in health insurance financing: health care costs were
rising 'aster than (he wage base on which the pay-roll taxes were cvied.
Having come out of a social democratic tradition, the )riginal founders of
the social security system in 1945 beieved that the individual regional and
local funds should be rianagcd by elected representatives. However, this did
not provide the government with the degree of control which it fanted over
the funds. Consequently, the 1967 Ordinances divided the responsibility
for managing the system between presentatives of workers (trade-unions) and of employers
(the Patronal). Since the trade-union movement is split (CGT, CFDT, FO) and the Palronal
is solidary, power has actually rests with an alliance between the palronal, the State,
and the more conservative trade-union, Force Ouvriere (FO). |
|
The main theme of the 1967 Ordinances was to coordinate the formally separate
administrative branches of the entire social security system health insurance
including niaternity, invalidity, and industrial accidents; family allocations;
and pensions. Each branch was given a certain autonomy to manage its funds and
the responsibility of keeping its financial flows in balance. In addition, the
local and regional funds were placed under the administrative authority or
national funds which are responsible for maintaining overall budgetary balance.
On the health side of the social security system, the CNAMTS became the central
banker for the entire health system. |
|
Despite the 1967 reform, (lie CNAMTS has failed to eliminate recurring and
growing deficits and consequently the Ministry of Finance and the Prime Minister
have repeatcdly intervened to increase the level of pay-roll taxes and raise
questions about more fundamental reforms, none of which have yet been implemented. |
| The Hospital Law and health planning 1970-80 |
|
The Hospital Law and its subsequent regulations represent a new stage in the
evolution of French health policy - one of planning and increasing regulation.
The idea of medical progress was not questioned but subsequent to passage of the
law, all new hospital construction, as well as capital expenditures, were
upposed to conform to a national as well as detailed regional plans which were
elaborated on the basis of national standards. This procedure is known as the
carle sanilaire (22). Whereas all previous regulatory measures enlanating
from the Ministry of Health aimed to encourage hospital modernization and better
management, the 1970 reform was far broader in scope. It proposed no less
than a series of measures to reorganize the French hospital system by creating
a new 'public hospital service' to which all private hospitals could become
associated. |
|
The Hospital Law aimed especially to control the growth of the private sector.
It established regulatory commissions charged with authorizing hospital expansion
and capital expenditure programmes in the private sector. In addition, the Hospital
Law encouraged co-operation between hospitals within a region and sought to establish
a 'harmonious distribution' of facilities based on identification of health 'needs'.
The Hospital Law required the elaboration of a national as well as regional health
plans. France's 21 administrative regions were divided into 284 health service areas
(secleurs sanilaires) and each area was required to conform to national standards. |
|
Despite the passage of the Hospital Law, however, the number of hospital beds in
the private sector increased until 1978 (23) and health care expenditures have
continued to soar. Since the early seventies, rising health care costs provoked concern about
the state's ability to finance NHI thus casting doubt on the 'limits of solidarity'
(24). The Ministry of Finance could no longer ignore the growth of health
expenditures for they lead to social security deficits, increased fiscal and
parafiscal pressures (from income and pay-roll taxes) and affect disposable
income rind the production costs of industry. Increasing costs of
production get passed on to consumers either
through real wage losses or price increases and this runs against French economic
goals of developing an industrial sector that can compete in international markets. |
THE COST EXPLOSION AND METHODS TO MANAGE IT
Long-cycle trends |
|
Between 1960-80, as a per cent of GDP (Gross Domestic Product), the total
consumption of medical services in Francc almost doubled from 4-3 to 8-1 (25). That
represents an average annual rate increase of 15 per cent in current prices, and 7.5 per cent,
in 1970 constant prices. Figures I and 2 depict secular trends - in current and in constant
1970 prices - of the average annual rate of increase for the three
principal categories of medical care consumption: private hospitals, public hospitals,
and ambulatory services in the private sector. Figure 3 depicts the average annual
growth for aggregate medical consumption - public and private hospitals and
ambulatory services combined - as well as for the expenditures of the CNAMTS (26). |
|
In looking over the growth-rates of average annual health care costs, it is worthwhile
noting the peaks and slumps in Figures 1-3 for they reflect the broader forces which
appear to affect the growth of health care costs: hospital investment policies,
macro-economic stabilization policy (particularly wage levels since 70 per cent
of hospital costs arc attributed to personnel), and political events. |
|
The peak in 1960 probably corresponds to the initial stability of the Fifth
Republic and to the individual contracts signed with physicians, which assured
them of reimbursement in return for acceptance of nationally set fees. The
slump in 1964 is probably a rclIection of Finance Minister Giscard d'Estaing's
dcflationary stabilization programme of 1963. The slump of 1968 appears to reflect
what the French refer to as the 'Events of May' as well as the earlier Social
Security Reform of 1967 which tightened control over the local and regional
health insurance funds. And the peak in 1969 coincides with the wage increases
negotiated at Grenelle following the general strike. |
|
Although health planning, particularly the carle santlaire procedure was in
operation during the early seventies, its effects on hospital investment and
subsequent growth-rates in health care consumption could not possibly be detected
before the late seventies for it takes six-to-eight years. on average, to put
a hospital into service from the date of the initial authorization to proceed.
Since the sixties and early seventies correspond to France's expansion phase
in the health sector, and since wages of hospital workers increased along
with hospital expansion and modernization plans, it is not surprising to note
high growth-rates between 1974 and 1976. As for the slump of 1973, it probably
reflects the energy crisis and economic recession.
|
|
Of course, such explanations are speculative, at best (27). This is not the
place to analyse the determinants of rising health care costs. The purpose of
Figures 1-3 is merely to visualize long-cycle trends and to suggest what
Uvy el aL have already argued in depth: that the growth of health care costs,
in France, reflects broad and complex processes of societal transformation (28).
An average annual rate of increase in health care consumption of 7.5 per cent
(in constant prices) over two decades is high. This point has been made time and
again in major reports on the problem of rising health care costs in France.
What is noted less often is the secular decline in this growth-rate from 1960
to 1980 (see Figure.3). Although, at first, this downward trend would suggest
that the problem of rising costs is improving, a look at the secular decline of
the GDP, in constant prices, over this same period, indicates that since 1973 the
growth-raw of the GDP has declined faster. This explains why rising health care
costs continue to remain on the health policy agenda: they are felt even more
strongly. |
|
Since 1977, the economic situation has exacerbated the problem of rising costs,
for growing unemployment as well as ilow economic growth have reduced the revenues
of the NI-11 Funds thereby increasing their deficit (29). What, then, can be done
to balance the structural deficit in health care financing? In the crudest terms,
the French State has two principal management options: to increase revenues and
to Control expenditures.
|
| Methods to increase revenues |
| Increase pay-roll taxes |
|
Pay-roll taxes for health insurance provided by CNAMTS arc currently equal to
18.75 per cent of the taxable wage base. Employees pay 5.5 per cent on their
full wage; employers pay 8 per cent on the full wage and 5.45 per cent on the
wage below a ceiling of 7080 francs a month. Over the last eight years pay-roll
taxes for employers as well as employees have been raised on six occasions as part
of financial salvage operations to balance the social security budget. |
| Raise wage ceilings |
|
In France, pay-roll taxes are assessed as a proportion of salaries beneath a
ceiling. To raise or even to eliminate (his ceiling would increase revenues
while simultaneously reduc ing inequalities since those employers with employees
earning wages above the current ceiling pay proportionately less than those with
employees earning wages below the ceiling. |
| Extend the taxable base |
|
Another method to raise health insurance revenues would be to tax capital in addition
to labour or move toward a value added tax. The main argument for a move in this
direction is that the present tax burden penalizes labour intensive industries
and favours capital-intensive ones (30). Moreover, during periods of recession
the present mechanisms encourage employers to reward overtime work rather than
increasing the number of employees. On the other hand, one might reasonably ask
whether it makes sense to tax new investments when these are all the more
necessary to restructure the present economy. |
| 'Fiscalize' the entire system |
|
Whereas raising the wage ceilings and extending the pay-roll tax base represent
methods by which to redistribute the tax burden of firms within the parafiscal
system, financing social expenditures out of the government budget, as in Britain
(through the fiscal system) is yet another option - one with very different economic
and political implications. |
|
Such a reform would eliminate the concept of contributory insurance schemes.
Firms would be relieved of the tax burden they now bear but the State would be
forced to increase taxes in order to finance the present level of social
expenditurcs. Politically, this would shift power from a corporatist social
security system managed by trade-unions, and the Palronal, to the State.
Consequently, French Social Security would fall under the public sector and
be bound by its administrative procedures. Parliament would have to approve
its annual budget, all health personnel including physicians would become
civil servants and the degree of adininistrative centralization would most
likely increase. |
| Increase private financing
|
|
Roughly 80 per cent of French health expenditures are
collectively financed by the CNAMTS and the Ministry of
Health. That leaves 20 per cent in the form of private
financing by individual out-of-pocket payments. One way to
finance the growth of health expenditures is simply to increase
the share of private financing through co-payments or
deductibles. This method would probably result in individuals
relying more heavily on mutual aid funds and subscribing
to private health insurance to protect themselves agains
their increased risk. |
| Methods to control expenditures |
| Price controls |
|
Regulation of prices, in France, is a well-established tradition and the health
sector is no exception to the imposition of administrative pricing. On the demand
side, policy-makers can attempt to reduce utilization of services by adjusting
the level of co-paymcnts and deductibles. On the supply side,
policy-makers can manipulate reimbursement rates for physicians in private
practice as well as for private and public hospitals. |
|
Demand-side policies are strictly limited in a society which has grown
accustomed to NHI. Nevertheless, a number of minor measures can be taken
whose effectiveness depends on the price elasticity of demand with respect
to the service in question. In 1977, for example, the Council of Ministers
reduced reimbursement rates for certain 'non-cssential' drugs from 70 to 40 per cent
of the controlled prices. In 1980. the government imposed a co-payment as well as a
deductible for long-term hospitalization: co-payments above 80 francs a month
for 6 months or above a total of 480 francs were thereafter assumed by the CNAMTS (31). |
|
On the supply side, regulation of physician fees is one of the cornerstones, of
French health policy. As we have seen! negotiations with the medical profession
have resulted in agreement by a large majority of physicians to accept nationally
set fees, Thit problem, however, is that the nomenclature of professional procedures
is more of an instrument for purposes of billing the NHI funds than an instrument
for giving price signals to physicians so as to encourage them to behave in ways
which are cost effective. Since the nomenclature is the result of negotiations
between professional medical associalions, the CNAMTS and the government, it
also reflects the relative power of medical specialty groups to negotiate
advantageous fees for (lie procedures controlled by their disciplines (32).
Thus, although negotiation of the nomenclature is a critical institutional
mechanism for controlling reimbursement rates of physicians in private practice,
it is not nccessarily an effective instrument of price control. |
|
Economists suggest that fee schedules be designed so that relative value points
reflect relative costs (33). By this criterion, the nomenclature is a crude
instrument. For example, the value of a particular surgical procedure is constant
whether or not it is performed by a general practitioner, a certified surgeon,
or a cardiologist, and regardless of the presence and degree of pre- or post-opcrativc
complications. In contrast, pricing rules for X-rays are more refined. They not
only distinguish between reimbursement rates for radiologists versus gastroenterologists
but also include aniortization and operating charges based on the value of the technology
and equipment required by the procedure. As for consultations and home visits,
their rate of reimbursement is constant, regardless of whether the doctor spends
five minutes or an hour, thus encouraging 'fast medicine' and multiplication of procedures. |
|
There is an additional problem with the French noinenclature: the relative
values are not annually adjusted for changc in technology - for example, economics
of scale in the production of laboratory tests, or the introduction of micro-processors
that reduce the unit cost of radiological equipment. Thus, there
are built-in distortions which, on the whole, tend to encourage specialized diagnostic
services and use of medical technology such as electrocardiograms an colonoscopes. |
|
In addition to physician reimbursement rates, French policy-makers also control
reimbursement rates to proprietary hospitals (cliniques) and to public hospitals.
Both are reimbursed largely on the basis of costs incurred, the principal unit of
reimbursement being the patient-day (prix de journee, In the public sector, the value
of the patient-day for year n + I is calculated by dividing total operating costs,
including teaching, research, and administrative costs, other ancillary costs plus
the institution's deficit for year n, by the tot number of patient-days. In the
private sector, the patient-day is less of a catch-all category for, in contrast to
the public hospital, operating room costs, expensive drugs, laboratory costs, blood
transfusions, and prostheses are all billed separately on a fee-for-service basis. |
|
From the point of view of price control over hospitals co-ordination is exceedingly
difficult to achieve because the CNAMTS negotiates the rate of the patient-day for
cliniqe whereas the Department Prefect, on instructions from the Ministry of Health
as well as the Ministry of the Budget, sets the rate of the patient-day for public
hospitals (34). |
| Volume controls |
|
In an open-ended system characterized by fee-for-service payment under NHI the
problem with price controls is that
the volume of services tends to be adjusted to compensate for
rigid price regulation. This is true for private practice in the
ambulatory sector as well as for cliniques and public hospitals.
Thus, policy-makers in France have attempted to control the
volume of services provided. |
|
In the ambulatory care sector, since the collective contract
of 1976, the system of statistical profiles on the procedures
performed by each physician was computerized. Thc rationale
has been to control the quality of medical care and to
sensitize physicians to the financial implicat ions of their
activities. The system is based on finding irregularities in
medical practice and issuing sanctions to doctors who over
prescribe tests and drugs. This is exceedingly difficult, how
ever, because criteria on proper workloads have not yet been
agreed on. If the entire medical profession is influenced by
reimbursement inccntives to increase medical procedures,
particularly specialty services and high-technology medicine,
or if it is influenced by cultural norms to ovcrprescribc drugs,
the effect of the profiles will be negligible. |
|
Since 1980, all French physicians receive periodic state
ments summarizing the consultations and procedures for
which they have billed the CNAMTS through the intermedlary
of their patients. Enormous amounts of data have been
collected on patterns of physician activity. Information is
currently being collected by the CNAMTS on the sociodemographic
characteristics of physician clientele populations. This
is critical for it will one day enable the CNAMTS
to go one step beyond pointing up disparities in the procedures
performed by physicians; it will enable the CNAMTS
to ignore disparities easily explained by such factors as age
and sex and to investigate selectively the seemingly less
justifiable disparities. |
|
In the hospital sector there have been isolated attempts to
control volume and regulate quality of care. However, there
has been no systematic effort comparable to the physician
profiles neither in the chniques nor in the public hospitals.
When volume controls have been imposed in the hospital
sector, they have aimed largely at procedural issues to reinforce
the price controls. For example, they have attempted to
put limits on allowable rates of expenditure increase and to
regulate administrative procedures such as hospital budget review (35).
Although French hospitals are not Financed on the basis of closed budgets,
estimated budgets may be inferred indirectly once one knows the allowable
patient-day rates and the estimated number of patient-days. |
|
With respect to cliniques more refined classification schemes have been
devised within which to regulate expenditure increases of like groups of
institutions. With respect to public hospitals, every year a Circular is
issued by the Ministry of Health, after consultation with the Ministry of
the Budget and the Ministry of Social Security (now called the Ministry of
Solidarity) which sets the allowable rate of increase for all hospital
budgets. In addition, entire categories of expenditure within hospitals
have been strictly liniited, and new positions for full-time staff have
been denied by the Ministry of Health (36). |
| Capital controls |
|
In contrast to price controls and volume controls which are short-run methods
to contain expenditures, capital controls are designed to contain long-run
health expenditures. They aim to limit hospital expansion and modernization
plans capital expenditures for new medical technologies, and the production
of new 'human capital,' e.g., doctors. Although controls on hospital investment
have been a part of national economic planning in France since 1946, controls
on the supply of medical manpower arc relatively new.
|
|
With respect to hospital facilities and capital expenditures, the carle
sanilaire procedure originally aimed to promote redistribution of health resources.
At the national level, areas of need were explicitly identified and standards
were devised in terms of hospital bed/population ratios for specific medical
services. At the regional level, resource inventories were carried out for
each of the 284 new health sectors. The level of existing resources was
compared to the national ,standards and public issues were made on the
basis of the observed disparities. The result of this exercise was to identify
'substandard' regions and to legitimate new investments there. There was no
corresponding decrease of hospital beds, however, in regions which were above
standard. |
|
Since 1976, the carle sanilaire procedure has served as an instrument for
the planning of retrenchment. Over a period of ten years (from 1970-80)
the rejection rate on hospital investment requests (in the private sector)
increased From 55 per cent to over 80 per cent (37). As for the public sector,
a series of new Circulars as well as a new law have increased the Ministry of
Health's authority over the growth of public sector hospitals (38). In 1976,
the government decided to stabilize file aggregate number of hospital beds in
France. In 1979, file Law of 29 December granted the Minister of Health
authority to close down hospital beds in the public sector. So far, no beds
have yet been closed by Ministerial Decree. Under the previous regime, the
carte sanitaire standards served as criteria for assessing where to cut.
Under the present regime, however, policy-makers are talking of expanding
hospital personnel not reducing beds. |
|
Along with the December 1979 Law granting the Minister of Health power to
close down hospital beds, as part of a long-term cost control policy, the
French government passed legislation reducing the number of physician trained,
by cutting enrollments in the medical schools. In effect. since
1971 the Ministers of Health and of Education were granted the authority to
control indirectly the supply of physicians by controlling entry into the
medical school 'pipeline'. The criteria for controlling entry were supposed
to reflect file university's capacity for training physicians. However, in
1979, when it was declared that the number of medical students accepted into
their second year of training would drop over a few years from 9000 to 5000,
there was no longer any doubt about the fact that France had imposed a numerus
clausus. One may speculate about the reasons - no doubt partly to control long-run
health care costs but also to conserve the prestige of The medical profession, or
at least its income. |
| Structural change |
|
Price controls, volume controls, and capital controls share one thing in common:
they assume that the way in which the Health system is presently organized will
stay the same, If we relax that assumption, however, there may be other methods
to control health care expenditures all of which are worth at least a brief mention.
|
|
Above all, changes in the financial and organizational arrangements for health
services hold the promise of containing health care costs. The experience of
health maintenance organizations (HMO's), for example, in the United States
suggest that effective management may reduce hospitalization by as much as
30 per cent (39). In contrast to the French or British health systems, HMO's
and other prepaid group practice organizations assume a contractual
responsibility to provide or insure the delivery of a range of health
services in return for a fixed payment from enrolled members. HMO's put
physicians at risk for the expenditures they generate. Generally, the physicians
work on a salaried basis with a possibility of earning an annual bonus depending
on the organization's success in assuring low rates of hospital admission and
short lengths of stay. Such an incentive structure discourages inappropriate or
excessive use of ancillary services and of inpatient facilities while at the same
time maintaining incentives for quality: an HMO whose reputation is questioned
may suffer from disenrollment and find it more difficult to attract new members. |
|
The experience of encouraging health centres (CLSC's) in Quebec and imposing
prospectively set annual budget limits on hospitals - so-called global budgets - is
another approach to controlling health expenditures. Its significance lies in
showing that there are possibilities for substitution of community-based
ambulatory care for costly institutional services. Within the hospital sector,
global budgets force policymakers to ascertain the relative efficiency of hospitals
so as (o distinguish between those with execssive and those will, insufficient budgets.
Although global budgets arc no panacea for the problems of resource allocation in
the health sector, at the very least they force explicit consideration of how to
allocate limited resources among competing claims within the hospital sector. |
|
Finally, still another experience in devising new financial arrangements for
hospitals is now in progress in the state (if New Jersey (USA). The New Jersey
Health Department, in collaboration with all third-party payers and the state
hospital association, have agreed to link reimbursement directly to standardized
costs identified by analysis of case mix so-called diagnostic related groups
(40). The innovative aspect of this experiment is the application of a
primitive administrative technology capable of establishing a common language
between doctors and administrators. The technology enables physicians to examine
patterns of resource consumption for similar patients in their own practices
over time, and also permits one physician to be compared with another, and one
institution with another. Thus, a potentially powerful mechanism now exists for
increasing the visibility of physician practice in a fashion which permits
non-physicians to observe deviations readily and to evaluate them. |
|
The combination of NHI and la medecine liberale, in France,
has been so cherished that there has been no temptation to
transform financial and organizational arrangements for the
delivery of health care. Currently, however, there have been
some signs of change. Inspiration from the experience of
Quebec has prompted policy-makers to experiment with
global budgets in individual hospitals. Also, the new Director
General of public hospitals at the Ministry of Health recently
arranged for a French delegation to review the New Jersey
experiment. In addition, members of the Cabinet at the
Ministry of Solidarity are talking cautiously about experimenting
with 'new forms of medical practice' such as health
centres that attempt to combine social and medical services
like the CLSCs in Quebec. |
|
Perhaps the most interesting structural change now under consideration
concerns the future role of preventive medicine in the French health
system. In March of 1982, Minister of licalth, Ralite, received the report of
an urgent task force he had appointed to make recommendations about what to
do in the field of prevention (41). Thus, far, his first measure has been to
designate four regions which will receive a starting budgct with which to
initiate a range of prevention programmes. Assuming that these programmes
remain a political priority and that they are effective, it follows that
one Wuld reduce significantly the burden of disability and disease
associated with alcoholism, smoking addiction, and poor workitig conditions.
Of course, this may be a great illusion for all of these achievements will
not prevent us from dying some day of a disease requiring costly medical
technology and prolonged hospitalization. Nevertheless, the idea is enticing. |
THE PRESENT PREDICAMENT:
SOME UNRESOLVED PROBLEMS |
|
Faced with the problem of financing the explosion of health care costs,
French policymakers have relied, above all, on revenue increasing methods -
in particular on raising payroll taxes and raising the wage ceilings to which
they are applied. As for the methods to control expenditures, outlined above,
French policy-makers have relied largely on short-run methods such as price
controls and volume controls. They have also reinforced the carle sanitaire
procedure to regulate investment and limit enrollments of medical students
so as to regulate the future supply of doctors. There have been no long-term
strategies, however, to alter the financial and organizational arrangements
for health care services in France. |
|
To devise long-term strategies, it is necessary to specify
explicit objectives and to reach agreement about the desirability
of meeting them. Such is the conventional wisdom
embodied in decision-making techniques such as 'management
by objectives', PPBS, and zero-based budgeting. These
administrative technologies were helpful during the expansion
phase of the health sector when there was widespread
agreement on the pursuit of such objectives as hospital
construction and modernization. During the present containment phase,
however, the old administrative tools no longer
seem relevant (42). |
|
In modern France - even the new France of socialist inspiration - no one
appears to know what the future 'modern' health sector should look like.
As for the present health care system, political debate has focussed more
on the management of the entire social security system than on the social
organization of medicine, the objectives of the health system, and alternative
methods of achieving them. In this context, it is hardly surprising to note the
absence of long-term strategies to alter the financial and organizational
arrangements for health services in France. Even if one were to focus on
the broader management of the entire social security system, it would be
challenging, indeed, to identify a set of explicit agreed?upon objectives
for reform. It is no small paradox that the French welfare state, in
pursuing universal entitlements and national solidarity, has created rising
expectations and virulent disagreement between major interest groups. |
|
At the present time the Socialist Government has proposed dismantling the 1967
Social Security Reforms and returning the management of the system to the trade-unions
or elected representatives of the insured. In response, the Palronal has threatened
to have no part in the system. Such ideological conflict is frequent and unfortunate,
for it detracts attention from the more fundamental problems of health sector
management: substantive health policy issues; institutional issues; and
political issues. |
| Substantive health policy issues |
|
Four critical problems - all widely recognized by French policy-makers - have
periodically been addressed, then quietly dismissed and remain, to this day, unresolved. |
|
First, there is the problem of the appropriate role for hospitals within the
health system. France was one of the first European countries to classify and
eventually reorganize its hospitals in relation to the concept of regionalization
(43). The 1958 Hospital Reform Law envisage the regional teaching hospital as the
pivotal institution around which the health system functioned. In contrast, a 1969
task force made a case for regionalization of health services so as to enable
substitution of ambulatory community-based care for hospital care, whenever
possible (44). Most recently, the Gallois Report criticized the lack of co-ordination
between hospital services and la midecine liberals and urged the government to
strengthen the organization of health services outside the hospital sector (45). |
|
In spite of the attention devoted to this problem, the Aministrative and organizational
separation between hospital
|
|
In contrast to Britain, the French have highly
disaggregated information on the activities and prescribing behaviour of
French physicians in private practice. With respect to hospitals, however,
the CNAMTS is unable, at this time, to calculate its total reimbursement payments,
over a given period, to a particular hospital. The CNAMTS knows what it pays to all
general hospitals (centres hospitaliers) in France for reimbursement of patient-day
fees but it cannot yet distinguish, for example, between patient-days in surgery and
patient-days in intensive care. |
| Institutional issues |
|
When viewing the health sysem from (lie outside, it is odd to note that the
CNAMTS finances health care expenditures without exercising management controls
on what is provided; the central government, through the Ministry of Health
exercises titular control over all public hospitals even though it finances
only a small fraction of total health expenditures; and physicians determine
the mix and quantity of resources used even though they share no financial
responsibility, neither in hospitals nor in private practice. Front the point
of view of institutional analysis, the most critical problem in French health
policy is the lack of effective linkages between health care payers (the CNAMTS),
the providers, and the State Administration as regulator (47). |
|
Since the CNAMTS controls the purse strings, it sets implicit policies and
these policies do not necessarily coincide with the goals of health policy;
in fact, they often work at cross-purposes. For example, provider reimbursement
incentives encourage the multiplication of medical procedures and of patient-days
spent in hospitals whereas policy-makers at the CNAmTS and in the Ministry of the
Budget are concerned with controlling rising health care costs (48). |
|
ln 1976, a group of students front France's elite National School of Public
Administration (ENA) published an analysis of the relation between the CNAMTS
and the public hospital. In their analysis they suggested that 'the contradictions
between the exigencies of good management and the rules of hospital remuneration
should be eliminated' (49). |
|
They explained that 'the relations between health insurance and the public
hospital are more influenced by factors resulting from their historic evolution
than by a rational distribution of skills and responsibilities.' Finally, they
questioned the legitimacy of an administrative system in which two health
planning institutions - the Ministry of Health and the CNAMTS - can follow
divergent policies. Since 1976, this situation has remained the same. |
| Political issues |
|
At some point in the future, it will be interesting to see if a number of
fundamental policy issues will be identified and explicitly confronted, in
France, or if they will be avoided and, if so, how? These issues revolve
around the following questions: What kinds of political and institutional
mechanisms will be established to decide what proportion of the GNP to devote
to health? By what criteria should health and social expenditures he allocated?
How can revenues and expenditures be kept in balance? Who should finance these
expenditures and how (e.g., income taxes or pay?roll taxes)? How can France move
from the present system of administrative centralization and rigid controls to one
more open to local initiatives and more adaptable to the evolution of new medical
technology, new management methods, and emergent risk factors? What mechanisms
will be devised to monitor the? quality of medical care and to evaluate its
impact on health status? Finally, how will health care be rationed and will
the procedures for health care rationing be explicit or implicit? (50). |
A CONCLUDING COMMENT
The unresolved problems of French health policy are captivating for the
intellectual but not for the policy-maker. For the policy-maker, these
problems are more likely to resemble the labour that greeted Hercules in
the Augean Stables. Health policy-makers in France tend to keep their heads
high and protect the marriage of NHI and la medecine liberale from
the menacing storm of rising health care costs. |
|
Like captains of a ship in a stormy sea, French policy-makers strive to keep
the present system afloat. The key ingredient to hold the ship on course is
short-term policy - sensitive negotiation with physicians, representatives of
the private and public hospital sector, the Palronal, and tradeunions; careful
avoidance of sensitive policy issues; and delicate day-to-day management without
long-range objectives. |
|
If this health policy gamble is won, the social organization of medical
care in France will be preserved, structural reform forestalled, and the
case for the status quo vindicated. If the gamble is lost, it means
that the storm of rising health care costs is strong. The ship keels over,
and as the pressures to face trade-offs explicitly grow, management without
objeclives will no longer be appropriate. French policy-makers will be forced
to contemplate the unresolved problems outlined in the preceding section.
Should this occur, the French image of the British MIS may require reappraisal
and French policy-makers may find themselves looking back across the Channel! |