Is US Healthcare Genuinely Capitalist?

Framing the question about US healthcare as socialist vs capitalist is dishonest, unhelpful, and unfair.

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I haven’t been writing much because I’ve been doing a great deal of research about psychology and, specifically the work of Amos Tversky, Daniel Kahneman, Cass Sunstein, and Dan Ariely. One reason I’ve been reading so much is my back went out leaving me to lay around more than I normally would healing. Besides giving me more reading time than usual, that also opened an opportunity to think about the US healthcare system and what these psychologists can tell us about perceptions.

There’s a pernicious message, a widespread perception, that the choice for reforming the US health system to lower cost is between capitalism and socialism. I’ve come to realize that perception, like many perceptions, is simply untrue. There are healthcare systems that provide universal care while simultaneously embracing the benefits that capitalism provides.

Two of the concepts I’ve been studying involve framing and anchoring. They’re simple but powerful concepts to understand. Vastly simplified, framing refers to the insight that people tend to react based on how something is presented. Anchoring is the concept that people tend to judge something based on an initial thing, an anchor. I believe both these concepts are important to understand when thinking about healthcare in the US. Pointing out the obvious, these lessons apply far more widely than healthcare.

Some background: for those who don’t know, I’m American but live and work in France, at INSEAD. When I was living in the US, I had both employer-provided health insurance and also purchased private plans, both before and after Obamacare. My insurance is provided, like everybody else legally working in France, by the government. Like the vast majority of French, I also have a private supplemental policy.

I’ve come to realize that Americans have an enormous misunderstanding of European healthcare systems. Most Americans believe that, for better or worse, US healthcare is a capitalist system and the French system is socialist. I know both systems and believe that is exactly backward. That is, the US system was framed and anchored as capitalist and the European systems, including France, as socialist. The perception that the US is capitalist and France is socialist is simply taken for granted. Like many perceptions, I believe it’s also incorrect and, especially in the context of healthcare, harmful to both the physical, mental, and economic health of the US.

Let’s check out how the French system works. Everybody is covered under social security. It’s similar to US social security. US social security costs 15 percent of pay up to $142,800 (in 2021) plus 2.9 percent for Medicare, uncapped: a total of 17.9 percent. In France, social security taxes are 20% of pay with no caps. For those earning less than $142,800, the cost of the French system is 2.1 percent more expensive.

What does that 2.1% buy? There’s core health insurance that covers everybody, short and long-term disability, some life insurance, and retirement benefits more generous than the US system.

It’s about this time that somebody will jump in to argue wait times for doctors must be terrible, the quality of care awful, the medicines similar to medieval potions, and the entire system staffed with faceless uncaring bureaucrats. That description is not only wrong for France but — when we think about it — is actually closer to how the US system works.

Don’t take my word for it about French wait times: fire up Google Translate, go to doctolib.fr, and search. You’ll see there are plenty of openings at reasonable times with all the same specialists the US has. If you have a more pressing need, your general practitioner will almost always see you the same day or refer you to somebody else who will. You can also show up to the emergency room which will have a longer wait time — more comparable to the US emergency departments — though with vastly lower cost. Some doctors will come to your house though they charge more; when my back went out I had a house call that cost €55 that was covered entirely by insurance.

Click through on doctolib and you’ll also see prices because virtually all medical providers have entirely private practices and set their own prices. The base price for a GP visit is €25 and there are lots of doctors who charge that. However, there’s nothing stopping doctors from charging more and there are plenty who do just that, especially in Paris. My first doctor, who since retired, charged €35 per visit. Most but not all hospitals are run by the government but this isn’t especially different than the US where emergency departments are required to take anybody who walks in. Except, of course, the patients in France are actually cared for and the hospital reimbursed at reasonable rates whereas the US is known to dump them outside in the middle of the night.

This brings me to the next part where the French system is more capitalist than socialist: there is an active and competitive market for supplemental insurance that covers co-pays and those doctors and clinics that charge more. Google “acheter mutuelle france” and you’ll see lots of listings, including the obligatory wall of paid ads, for the “mutuelle” private supplemental policies.

My employer provides one though there are even mutuelle’s that provide double supplemental insurance for those who, for example, don’t want any co-pays if they need excessive dental work. The market for health insurance in France is large, thriving, competitive, and private.

One benefit of my mutuelle is that prescriptions are covered 100%. Despite that insurance pays, pharmacies tell you the price and I have one prescription that costs €34. The lowest price for the same prescription in the US — same dose, same brand, same everything — costs just over 9x as much.

When the government bargains in bulk to set prices, those prices are far lower which is exactly the case with any bulk buyer. Preventing a large buyer like Medicare from negotiating prices as the US does is not capitalist by any stretch; it’s some type of mutated socialism for businesses. By the way - those prices aren’t tied to social security. If you’re on vacation in France and need a refill, find a doctor to translate your prescription then walk into any pharmacy and, even as a tourist, you’ll pay the negotiated price.

What about the argument that pharma companies need the funds for R&D? It’s bunk: they consistently spend more on stock buybacks than R&D (yes, that’s my photo in the story). Look how fast Pfizer and Bio-N-Tech produced an affordable effective COVID vaccine they sell at a reasonable price. This is a great example of how the system could and should work when these businesses focus on medicine instead of markets and marketing.

I’ve been asked if this is like Medicare for All. The answer is … not really. Medicare Advantage, with the supplemental policies, is a similar system except there is no option in France for coverage that doesn’t allow doctor visits, cover medications, and the mutuelle supplemental policies are far less expensive. My parents are on Medicare and told me they pay about $500 per month give or take. A top-tier mutuelle with no co-pays for an older couple would be far less expensive.

One important element the French system eliminates is administrative overhead (yes France, of all places, has less administration for healthcare than the US). Everybody has a green social security card that ties to your mutuelle and bank. Most doctors visits are paid for by patients out of pocket but, with a swipe of the magic green card, funds are reimbursed in a bank account within a week from both social security and the mutuelle. That same green card reader exists in every clinic and pharmacy.

Many doctors don’t have receptionists much less billing clerks; they’re not needed. A shared phone and online scheduling service like doctolib take care of their administrative needs. The state even provides a healthcare records system for free to medical providers.

Are physicians paid less? I’ve done some back-of-the-envelope calculations and don’t think so after expenses are taken into account. Without all the overhead including bickering with insurance companies and massive malpractice policies, they’re able to see more patients. I’m not sure they make as much as US physicians but they’re very well compensated and spend the vast majority of their time practicing medicine, not doing a payment tango with various insurers. Plus, medical school is free so they don’t carry the burden of student loans. Ironically, one reason malpractice insurance costs far less is that if a patient is injured their lifelong care will be taken care of by social security so there’s no need for enormous compensatory damages to pay medical costs for life.

I don’t see that the US health system is capitalist. There’s a lack of competition, enormous centralized decision-making, inadequate price transparency, massive government regulatory support for the status quo, illegal collusion, and, until recently, even legal price collusion. Patients have little to no bargaining power and are at the mercy of a bureaucracy. Don’t like it? Pound dust and die, comrade. That sounds more like a system Karl Marx would design, not Adam Smith.

The French system, in contrast, sounds a whole more capitalistic. Healthcare providers compete for patients by offering different prices, hours, and attitudes towards the practice of medicine. Thanks in large part to genuine capitalism, the French provide better care at a far lower cost.

All this leads to the question of why Americans believe the French system is more socialistic. Even those who support radical reform buy into the perception that European countries like France, which isn’t atypical, are socialist and the US is capitalist. I’d argue it’s long past time to rationally think through and correct that perception. I strongly believe that capitalism, like the French health care system, works well. Soviet-style communism — with the faceless bureaucracies making decisions from afar — doesn’t. Yet that’s exactly what’s going on with US healthcare.