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Patrick MORVAN

Professeur Agrégé à l'Université Panthéon-Assas

(Droit social - Criminologie/droit pénal - Théorie générale du droit)

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28 septembre 2009 1 28 /09 /septembre /2009 22:34

(1st PART)

Cet article (en deux parties) est la version longue d'une conférence donnée à la Columbia University de New York le 21 septembre 2009, sur la réforme de l'assurance maladie aux Etats-Unis où le débat relatif à la création d'une assurance publique et obligatoire fait rage.

Les systèmes français et américain sont comparés autour des axes majeurs de la réforme que le président Obama défend avec pugnacité, en particulier la création d'un National Insurance Exchange où régnerait enfin une libre concurrence sur le marché de l'assurance santé, propice à une baisse des primes. La prohibition de la sélection médicale (medical underwriting), qui atteint des sommets, ou l'institution de crédits d'impôt (tax credits) finançant l'acquisition d'une couverture santé sont directement inspirés du système français.

Les chiffres donnent à eux seuls le vertige, qu'il s'agisse du nombre d'Américains dépourvus de toute couverture maladie (plus de 45 millions), du montant écrasant des franchises (deductibles) et des reste-à-charge (out-of-pocket costs) ou des dépenses de santé de l'Etat fédéral (16% du PIB), en croissance exponentielle. Le poids de l'idéologie libertarienne et individualiste au coeur de la Nation américaine est non moins frappant comme en témoigne l'argument obsessionnel de la "médecine socialisée" (socialized medicine).



1. – There is no doubt that the proposed reform of the American health care system is an inflammatory and divisive issue in the U.S. The question of health care reform heated up even more this summer. Former U.S. President Bill Clinton – and his wife Hillary – were unsuccessful in their 1994 attempt to establish universal health care for all Americans. President Obama has learned the political lessons of this failure. While he has clearly made health care reform one of his top priorities, he did not deliver a bill drafted in secret to the lawmakers as a “fait accompli” but instead articulated the broad principles and left the details to Congress.

The risk is as great as the plan is ambitious: while the economic downturn is now favorable to a reform that the majority of Americans - at least before the summer - were in favor of, opponents of Barack Obama would like nothing more than to hand him a stinging political defeat on this issue. A defeat on health care would be particularly sweet given that President Obama has already presented the America’s Affordable Health Choices Act of 2009 (the “AAHC”) as the landmark act of his presidency, and that there is a Democratic majority in the House of Representatives and Senate. The AAHC is thus a strategic target, even before assessing the need for health care legislation in America.


2. – It would seem, however, that the current health care situation in the U.S. cannot be allowed to continue; the numbers speak for themselves: more than 45 million Americans (16 % of the population) do not have health insurance (it is estimated that 65.7 million people will be uninsured in 2019), and almost 100 million people are under-insured (and sometimes in almost as dire straits as those who are uninsured) because of an inadequate coverage. This enormous void conceals numerous disparities:

-          Disparities related to socioeconomic status: the unemployed, whose numbers are skyrocketing due to layoffs brought about by the challenging economic climate, lose their health care coverage entirely unless they can enroll in Medicaid[i];  self-employed individuals are worse off than civil servants or employees who are eligible for employer-sponsored health plans - although it should be noted that employees working for small companies are in a very precarious situation[ii];

-          Geographic disparities: rural areas are both medical and insurance “deserts”; 50 million Americans living in rural areas are faced with a scant care provider network and a small number of insurance companies[iii]; more broadly, in 34 states, 75% of the insurance market is controlled by five or fewer companie, killing competition;

-          Gender disparities: women are less likely to be eligible for employer-based benefits, more widely uninsured, charged higher premiums than men; the health coverage provided to them through the individual market is inadequate (the vast majority of individual market health insurance policies do not cover maternity care!)[iv];

-          Racial, ethnic and cultural disparities[v]: racial and ethnic minorities have higher rates of deaths and higher rates of debilitating disease - such obesity, cancer, diabetes and AIDS - than Whites; limited cultural competency and limited English proficiency alter access to care and provider-patient communication (potentially on vital subjects); likewise, over 35% of all Blacks and Hispanics who do not speak English in the home do not have health insurance[vi].


3. – The reasons for this situation are complex:

-          federal laws which do not afford sufficient protection, do not guarantee universal health care[vii] and do not penalize all types of health discrimination, not least against people trying to purchase health insurance directly from insurance companies in the individual insurance market;

-          the business practices of insurance companies :

o       which charge very high deductibles and continue to raise rates;

o       medical underwriting which leads to insurers denying coverage to millions of Americans because of pre-existing conditions (even relatively minor conditions like hay fever, asthma, or previous sports injuries can trigger high premiums or denials of coverage ; it is still legal in nine states for insurers to reject applicants who are survivors of domestic violence, citing the history of domestic violence as a pre-existing condition[viii]);

o       the shameful practice called “rescission” : when a person is diagnosed with an expensive condition such as cancer, some insurance companies review his/her initial health status questionnaire and can retroactively cancel the entire policy if any medical condition was missed (even if it is unrelated, and even if the person was not aware of the condition at the time) ; coverage can also be revoked for all members of a family, even if only one family member failed to disclose a medical condition.

-          unfair practices within the healthcare industry (which keep drugs prices outrageously high, namely through anticompetitive agreements between brand name and generic drug manufacturers or through the process known as “evergreening”);

-          hospital practices in which culture and salaries are not based on performance, or “quality” of care, but rather on “quantity” of care; even though nearly 100,000 patients die each year as a result of medical errors, there are very few systems in place which evaluate the quality of care and patient safety; coordination, medical information and training for health workforce professionals are other areas that are in need of improvement;

-          finally, a very small role is given to preventive actions (in a country where cases of diabetes and obesity are rising at a staggering rate and portend huge health care costs for the future, 40 % of obese adults were not given advice on exercise or healthy eating[ix]); 96% of Medicare expenditures (i should say unsustainable expenditures: $386 billion in 2008, ) are spent on patients with multiple chronic conditions.


4. – Given these statistics, there is an urgent need to overhaul the U.S. health care system; maintaining the status quo is not an option. For a Frenchman, for whom health care is a priority, the thought of U.S. lawmakers missing out on this opportunity is quite simply unimaginable.

The future America’s Affordable Health Choices Act of 2009 (1,018 pages) that is being discussed proposes to “provide affordable, quality health care for all Americans and reduce the growth in health care spending (…).” The second aspect of his proposal is of key importance. This reform probably would not have gotten off the ground if health care spending had not witnessed such exponential growth, even sparking serious concerns among hostile Conservatives.  In a way, the 2008 financial crisis was actually beneficial for the health of Americans, even if it risks depriving the federal government of significant leverage in financing this reform (which is estimated to cost $ 900 million over ten years, or roughly the amount needed to send a manned expedition to Mars - although this is not quite as pressing…).

At any rate, U.S. policymakers are at a historic juncture: they are about to establish a National Health Insurance Exchange, that is a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices and purchase affordable coverage.

Paradoxically, it was the United States which invented the expression “Social Security” in 1935 when Congress passed the Social Security Act of 1935, however it has yet to put in place a social security system worthy of this name which includes mandatory health insurance.




5. – In order to have a better understanding of how America’s new Health Insurance Exchange program would operate, it would be instructive to provide a brief overview of the French social security system.

France, like many other European countries (Germany in particular), has adopted the Bismarkian system. The first layer of this system consists of mandatory statutory schemes (also called base schemes). These schemes are occupational-based, meaning that there are different schemes for different categories of workers, as follows:

-          The general scheme: this is the statutory scheme which covers all salaried workers regardless of the size of their company. This scheme provides health, maternity, disability, retirement and death insurance.

-          The self-employed social scheme (régime social des indépendants or RSI): this scheme provides health, disability and death insurance for self-employed individuals. There are three categories of self-employed: shop owners, artisans and self-employed individuals who do not fall within the previous two categories such as lawyers and CPAs. They are all covered by the same health insurance plan but have different retirement plans.

-          The agricultural scheme: this scheme covers farmers and people working in the agricultural sector.

-          Finally, there are the civil servant schemes : civil servants fall into three categories in France: those who work for the state, those who work for local government and those who work in hospitals ; these individuals are covered by special schemes which, as is the case most everywhere, are extremely advantageous.

All of these schemes provide somewhat similar benefits, however the amount of contributions vary greatly from one scheme to another (civil servants have the lowest rate of contributions while the self-employed have the highest rate since they do not have an employer).

6. – While this mosaic of statutory schemes is wide-reaching and covers France’s entire working population, French policymakers were aware that certain individuals, such as the poor and unemployed, did not have any health insurance at all. This led to the enactment of a July 27, 1999 act which established universal healthcare coverage (Couverture maladie universelle or CMU). Now, anyone who has been legally living in France for at least three months and who is not covered by one of the mandatory schemes is automatically affiliated with the general scheme for salaried employees. Typically, there is no charge for this affiliation, however individuals who have a minimum net taxable income (roughly EUR 6,300 for a single person) are required to contribute at a rate of 8%.

If one were to compare the French and the U.S. systems, the CMU is somewhat like Medicare and Medicaid in the U.S. Like Medicare and Medicaid, the CMU is financed by the State and provides health protection to vulnerable members of the population. However, that is the only comparison that can be drawn. The CMU is free. And it is merely an alternative arrangement that is designed to ensure that no one (either a French citizen or a foreigner who legally resides in France) goes without health care. The CMU is a “safety net,” which, in principle, no worker in France needs given that health care is already provided under the mandatory schemes. This safety net serves to “catch” those individuals who passed through the first safety net - that of the base schemes.

But there is more to the French system. While these safety nets are quite encompassing, it is possible to “top up” this coverage through private insurance.


7. – Individuals can enhance the coverage offered under the mandatory, legally governed schemes by taking out private insurance. This insurance serves to supplement the benefits in kind (the reimbursement of health expenses) or benefits in cash (daily benefits paid to employees who are on sick leave) that are paid under the base schemes in the event of illness or accident. Supplementary insurance is necessary because the base schemes do not reimburse 100 % of the cost of medicine or pay 100 % of an employee’s salary if he/she is on sick leave.

In France, collective bargaining agreements are entered into at the company level, but more importantly they are entered into at the industry level, for example the banking or metalworking industry. Many of these industry-wide collective bargaining agreements require employers to set up insurance plans for their employees (and sometimes even for former company employees who have already retired). These insurance plans are funded jointly by the employee and the employer. Where the establishment of such an insurance plan is mandatory, the employees are obligated to take out the insurance and to have the contributions automatically withheld from their salary. 

It is interesting to note that the AAHC would lay down an even stricter obligation in that individuals would be responsible for obtaining and maintaining health insurance coverage; those who choose to not obtain coverage would pay a penalty of 2.5 percent of their modified adjusted gross income above a specified level. Individuals will be required to carry basic health insurance just as most states require them to carry auto insurance.

In France, self-employed individuals are given the option of taking out private insurance. If they choose to do so, they must bear the cost alone. They are thus under no obligation to take out private insurance, and many self-employed individuals make do with the coverage offered under the base scheme.


8. – 92 % of French citizens have private (supplementary) health insurance. The reason for this is that the law that enacted the CMU also established a complementary CMU (CMU-C), which is also free of charge. Even the most impoverished of individuals can thus have 100% of their health expenses reimbursed - provided that they have been informed of their rights and are able to complete the necessary administrative formalities, which is often not the case, however, for young people, the unemployed and foreigners, who very often forgo needed medical care.

In addition to the CMU-C, French lawmakers established a mechanism that can also be found in the AAHC: assistance with acquiring private insurance (aide à l’acquisition d’une complémentaire santé or ACS). In France, this consists of a tax credit of EUR 100, 200 or 400 for low-income households that is applied to the amount of their insurance premiums. The drawback is that this aid does not cover the full amount of the premium, which amounts to roughly EUR 700 per year on average.

Generally speaking, the insurance premiums paid by employers to contribute to the financing of private insurance can be deducted from their taxable profits and the employees do not have to pay income tax on these premiums (up to certain limits).


9. – Any system of heath coverage, be it a base scheme or private coverage in particular, must offer substantial tax benefits. U.S. policymakers are therefore considering setting up a tax credit for small businesses who opt to provide health coverage to their employees instead of choosing the public option, as well as affordability credits for individuals. The credits would be more generous for those who are just above the new Medicaid eligibility levels. The credits would decline with income and be completely phased out when income reaches 400 percent of the federal poverty level ($ 43,000 for an individual or $ 88,000 for a family of four). The affordability credits (like the French ACS) are designed to make insurance premiums affordable. If these affordability credits are to be successful, their amount must be sufficient, and in order for this to work, the insurance companies must not charge excessively high premiums.

On the other hand, these types of tax breaks weigh heavily on the federal deficit, which Republicans and even Blue Dog Democrats have been quick to point out. Beginning in 2009, the French government instituted caps on its infamous tax loopholes (niches fiscales), of which there are hundreds, a move that could very well be regarded as a mini revolution. The government does not wish to eliminate them entirely, however, out of fear that it will incite France’s extremely wealthy to leave the country. This would, however, be a means of providing the country with the billions of Euros that are needed to finance its public deficits. Similarly, President Obama has proposed to scale back the amount of insurance premiums that the highest-income Americans can deduct on their taxes, taking it back to the rate that existed under the Reagan years. This money would help finance the health care reform.


10. – The French system can thus be viewed as a pyramid, with the first layer consisting of the statutory schemes and private insurance comprising the second one.

The proposed reform of the U.S. health care system, on the other hand, looks more like a series of platforms. The Health Insurance Exchange would be a transparent marketplace for individuals and small employers to comparison shop among private and public insurers. The public health insurance option would be offered to individuals and small businesses with under 25 employees who would have the option of taking out private insurance (as they have been able to do up until now) or public insurance through the new public option.

Middle-sized and large businesses would be required to provide health insurance coverage: employers would have the option of providing health insurance coverage for their workers or contributing funds on their behalf. Over time, the Health Insurance Exchange would be opened to additional employers as another choice for covering their employees.

The Health Insurance Exchange, which is expected to lead to heated competition among the insurance companies, and thus lower rates, is based on a system of differing offers (private insurance or the public option) and not on cumulative, layered schemes (public and private).

Why is this case? The reason is that President Obama decided not to scrap the system and start all over again (which would lead to a single-payer system like Canada’s or France’s), but rather to build on what was already in place. However, what is in place is primarily an employer-based system that uses private insurers alongside Medicare and Medicaid plans.

At any rate, the private and public systems in both the U.S. and France will continue to exist alongside, and remain closely dependent on, one another. This interrelationship will be fascinating to study as private insurers and public insurers generally adhere to completely different philosophies.


11. – In France, private insurance (layer 2) differs from the statutory schemes (layer 1) on key points. French law has shown that public insurers can indeed co-exist alongside private insurers, even though by nature they are diametrically different. It seems, however, that there is a divide in the U.S. between public and private health care, and this antagonism results in a very strong ideological clash.

France’s supplementary insurance schemes are run by private insurers. These are either for-profit companies, such as insurance companies, or non-profit organizations (such as “mutual” insurance companies, or cooperatives, which refuse to engage in medical underwriting and defend moral values such as solidarity and ethics). They are all “companies” within the legal meaning of the term. In other words, they are subject to insurance contract law and competition law on a common, competitive market with a European dimension. European Union law has had a strong influence on the development of the rules in this area in order to foster the establishment of a single insurance market, and in particular a single market for supplementary pensions (because, as is the case for health care, there are also optional supplementary pension schemes).

The mandatory base schemes, however, are governed by social security law, and not by insurance contract law. They are managed by social security bodies which do not have the legal status of a “company” (but rather of a non-profit public service provider) and which enjoy a legal monopoly over the management of these schemes. The European Court of Justice (“ECJ”), which is the highest court in the European Union, has ruled in this respect that the organizations or offices that manage mandatory base schemes (namely pension plans) carry out services of “general economic interest” and perform an “essential social function” and thus should not be subject neither to the principle of free competition nor to the principle of freedom to provide services. In practice, if a French artisan or shop owner decides to stop making the mandatory social security contributions to his social security office and take out insurance with a private U.K. insurer (which is less costly and thus a “better deal”), he would be in violation of the law and could be ordered to pay back contributions and penalties.

This is a key point.  The European Community is not a federation of socialist States. For over 50 years it has existed as a community of States operating under a system of economic liberalism. Its pillars are the freedom of competition, the freedom to provide services, the freedom to move goods and capital, the right of establishment and the free movement of workers within a single Market of goods and services. ECJ case law has extensively interpreted these principles and is often unsympathetic to considerations of social order. Yet, it was the ECJ which took steps to protect social security schemes whose mandatory nature was threatened by free competition.

This is proof positive that a mandatory social security system is not incompatible with extreme liberal economic thinking.


12. – In France, like in other European countries, the supplementary layer (layer 2) is also highly regulated. Even though private insurers are governed by insurance contract law and free competition, insurance companies are subject to strict public policy rules. U.S. policymakers could take this approach and opt to regulate many aspects of insurance policies in order to protect the beneficiaries. To be sure, this type of regulation limits contractual freedom, but insurance companies have always abused this contractual freedom and health insurance is much too important of an issue to give them free reign.

These public policy rules stem from the Evin Act of December 31, 1989.

Perhaps the most noteworthy French rule is that which prohibits genetic testing, and more broadly, medical underwriting in group employer-sponsored plans. A private insurance company must provide coverage to all company employees (even if this means charging higher premiums) or refuse to provide any coverage at all. In other words, it’s “all or nothing.” Insurance companies cannot choose between “good” risks and “bad” risks (for example by refusing to insure older employees, smokers, obese employees, diabetics, etc). This important rule will be one of the pillars of the U.S. health care reform which proposes to do away with cherry picking and the practice of denying coverage to people who have pre-existing conditions.

What’s more, private insurance companies in France are required to provide coverage for the “after-effects of pre-existing illnesses”, for example by paying disability benefits to an employee who sustained an on-the-job accident before he took out insurance and who was subsequently declared disabled. Similarly, insurance companies must honor coverage that was acquired before an insurance contract was terminated (for example, if an accident or illness was recognized before the insurance contract was terminated, the beneficiary remains entitled to coverage for the future)

Finally, several legal sources (the Evin Act described previously, a French Supreme Court decision and a collective bargaining agreement applicable to all employees as of July 1, 2009) have established a system of portability of insurance coverage. This means that an employee who is terminated continues to remain covered by his former employer’s group insurance plan for a fixed period of time (a maximum of 9 months). At the end of this period, the insurance company must offer to maintain certain types of coverage (health expenses for example) through an individual insurance plan and cannot impose an increase in the premium of more than 50 %. These requirements have led to a host of disputes and comments over recent months in France.

The social stakes are considerable: a large number of former employees and their families find themselves in tragic situations when an accident or illness prevents them from working or renders them disabled as they very often lose their jobs after such an incident. Studies have shown that the health of unemployed people deteriorates much more than that someone who is actively employed.

In the USA, a
full one in six Americans with employer-sponsored insurance in 2006 lost that coverage by 2008. Of course, the federal Health Insurance Portability and Accountability Act (HIPAA) of 1996 limits restrictions that a group health plan can place on benefits for preexisting conditions, even in states that allow medical underwriting. Furthermore, the HIPAA provides some protection if an individuals switches from job-based group coverage to the individual market even if he has a medical condition that would make it impossible to pass medical underwriting ; to exercise the HIPAA rights, he first has to exhaust all job-based coverage available to him/her, including COBRA, which allows him to continue in his employer's plan for 18 months by paying the full cost plus 2% ; then he has to apply for an individual health insurance policy within 63 days after his old coverage ends ; every state has to make sure there is at least one individual health insurance policy available that has to accept the individuals regardless of his health status and without waiting periods for pre-existing conditions. But the protection granted by the HIPAA is crippled by complex rules and awkward distinctions (like the method of calculating “creditable continuous coverage” for the purpose of portability). Obviously, it is not efficient.

However, health insurance portability is an extremely precious benefit. It also prevents employees from staying locked into their job just to secure health coverage, and fosters the freedom of work and free movement of workers. The means of financing this new guarantee is, however, rather complex to put in place.


[i] The Wall Street Journal, April 23, 2009: “Earnings from the nation's big health insurers show them losing members at a rapid rate, suggesting the ranks of uninsured Americans are surging during the recession. The latest evidence came from WellPoint Inc., the country's largest health insurer with nearly 35 million medical-plan members. (…) WellPoint said it was surprised by the nearly 325,000 members it lost to layoffs or workers otherwise opting out of employer coverage. Analysts and economists have said the number of uninsured almost certainly has risen by several million people since the U.S. Census Bureau in 2007 pegged it at 45.7 million. For every one-percentage-point rise in the unemployment rate, the number of uninsured has likely grown by 1.1 million, according to research by the Kaiser Family Foundation. Kaiser estimates that of the 9 million people expected to have lost employer-sponsored health coverage since December 2007, about four million of them currently are uninsured. An additional 3.6 million have likely enrolled in Medicaid or other public programs, estimates the foundation.”

[ii] Many small business owners are forced to choose between laying off employees or dropping health insurance coverage in order to keep their companies afloat in the face of rising insurance premiums and slumping revenues. Health-insurance premiums for single workers rose 74% for small businesses from 2001 to 2008, according to nonprofit research group Kaiser Family Foundation (See article of The Wall Street Journal 5/26/09). In the past two years, more than half of small businesses that offered coverage have switched to plans with higher out-of-pocket costs, one third switched to a plan that covers fewer services, 12% dropped coverage entirely (See Helping the Bottom Line. Health Reform and Small Business: http://www.healthreform.gov/reports/index.html#online).

[iii] See Hard Times in the Heartland. Health Care in Rural America: http://www.healthreform.gov/reports/index.html#online.

[iv] Less likely to be employed full-time than men, women are less likely to be eligible for employer-based benefits. In fact, only 48% can get health coverage through their work (57% of the men; those who can’t be covered through a spouse, or purchase directly an insurance through the individual market, or enroll in public programs are uninsured (that is 38% of working women). Important state and federal laws that protect individuals with employer-sponsored insurance against discriminations do not apply to health insurance sold in the individual market, sparking a wide variation in premiums by state, by plan, by age and by gender of the policyholder; as a result, women are often charged higher premiums than men and the coverage provided to them is woefully inadequate (the vast majority of individual market health insurance policies do not cover maternity care!). See Roadblocks to Health Care: Why the Current Health Care System does not work for Women: http://www.healthreform.gov/reports/index.html#online.

[v] National Healthcare Disparities Report, 2008: http://www.healthreform.gov/reports/index.html#online.

[vi] See Health Disparities: A Case for closing the Gap: http://www.healthreform.gov/reports/index.html#online.

[vii] Nevertheless, the President signed into law the reauthorization of the Children’s Health Insurance Program (CHIP) on February 4, 2009, which provides quality health care to 11 million kids – 4 million who were previously uninsured (a legislation vetoed twice by the previous president). Besides, the President’s American Recovery and Reinvestment Act protects health coverage for 7 million Americans who lose their jobs through a 65 percent COBRA subsidy (a tax credit) to make coverage affordable.

[viii] See Coverage Denied: How the Current Health Insurance System Leaves Millions Behind: http://www.healthreform.gov/reports/index.html#online.

[ix] See The Costs of Inaction. The Urgent Need for Health Reform: http://www.healthreform.gov/reports/index.html#online.

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