Is Europe's Health Care Better?

U.S. health care has been declared a disaster. Britain's subsidized NHS is little better. France's hybrid system works, but faces rising costs

by Kerry Capell

In his new film Sicko, gadfly Michael Moore's latest target is the U.S. health-care system. He makes his case that it is expensive, unfair, and leaves nearly 47 million Americans uninsured. The director's answer to the U.S. national crisis? Europe. Across the Atlantic, France, Britain, and most other Old World countries long ago took the plunge into universal health insurance and have made it work, with varying degrees of success.

Moore likes to spark controversy, but when it comes to health care, many of the conservative groups he aims to inflame are already on the same page as he is. A recently formed coalition of 36 major corporations led by grocery chain Safeway's (SWY) chairman and chief executive officer Steven A. Burd and including PepsiCo (PEP), General Mills (GIS), insurer Aetna (AET), and drugmaker Eli Lilly (LLY) is calling for major reforms.

In the May 16 issue of The Journal of the American Medical Association, Dr. Ezekiel J. Emanuel, chairman of the department of clinical bioethics at the National Institutes of Health, wrote "The U.S. health-care system is considered a dysfunctional mess."

French Success Story

Indeed, a May 15 study from the Commonwealth Fund study comparing the quality of the U.S. system with five other countries found that despite spending twice as much per capita, the U.S. ranks last or near last on basic performance measures of quality, access, efficiency, equity, and healthy lives. "The U.S. stands out as the only nation in these studies that does not ensure access to health care through universal coverage," says Commonwealth Fund President Karen Davis (see BusinessWeek.com, 6/12/07, "Universal Health Care: Say Yes").

Gazing across the Atlantic won't lead Americans to a model that fits everyone's requirements. Britain, in particular, suffers myriad problems in its National Health Service (NHS). But in some respects, France comes pretty close to the ideal. Not only are its 62 million citizens healthier than the U.S. population, but per capita spending on health care is also roughly half as much.

France relies on a mixture of public and private funding, as does the U.S. But unlike Americans, every French citizen has access to basic health-care coverage through national insurance funds, to which both employers and employees contribute. Some 90% of the population also buys supplementary private insurance to provide benefits that aren't covered, and the government picks up the tab for those out of work who cannot gain coverage through a family member. "We pay higher taxes in France, but at least we get something for our money," says Leslie Charbonnel, an American who has lived in Paris for two decades.

The key to France's success is that its system, like the U.S.'s, values patient choice and physician control over medical decision-making. But France does it for far less, with per capita health-care spending in 2004 at just $3,500, compared with $6,100 in the U.S., according to the World Health Organization. All told, France spends 10.7% of gross domestic product on health care, vs. 16.5% in the U.S.

Keeping Rates Low

"The French model suggests that you can have universal coverage without relying totally on the state, without restricting patient choice, and without abolishing private medical practice and the insurance industry," says Victor G. Rodwin, a professor of health policy and management at New York University's Robert F. Wagner School of Public Service. One reason the French system seems able to do it all is its practice of using price controls.

A national fee schedule determines reimbursement paid by the government and by most private insurers.

Doctors can charge extra, and more than one-third do. But the low rates set by the national fee schedule—typically less than $50 for a routine office visit—help keep salaries modest. French doctors on average earn just one-third the salary of their U.S. counterparts, says Paul Dutton, an associate professor of European history at Northern Arizona University and author of Differential Diagnoses, a comparison of the French and U.S. health systems.

Despite this, rising costs and an aging population make it a struggle for France to finance its system. On May 29, the government warned that health-care inflation this year is running ahead of projections, threatening to deepen an already worrisome $5.2 billion deficit. In Britain, the National Health Service presents a much grimmer picture. It has provided universal coverage for nearly 60 years and boasts benefits such as drug prescriptions that cost no more than $13 for a month's supply.

Fewer Drugs Covered

Yet despite the government pouring $81 billion into the NHS over the last six years, access to treatment is spotty, and long waiting lists are the norm. In 2005, 41% of British patients waited four months or longer for elective surgery, compared with less than 10% in the U.S., according to London-based think tank Civitas. Limited resources also mean medical care varies widely depending on where you live. Access to life-extending new cancer drugs is especially constrained. As a result, Britain has one of the lowest five-year survival rates for cancer overall: 43% for men and 53% for women, vs. 53% and 71%, respectively, in France.

Many critics of the British system blame the National Institute for Health and Clinical Excellence (NICE), whose mission is to analyze the cost-benefit of treatments to determine which should be covered by the NHS. Some of the new cancer therapies NICE has nixed include Imclone's (IMCL) Erbitux, for colon cancer, Genentech's (DNA) Tarceva, for non-small-cell lung and pancreatic cancer, and Avastin, another Genentech drug used to treat bowel cancer.

The picture is no brighter concerning access to advanced, gene-based medicine. It was only after two women sued for access to the treatment that health authorities approved the use of Genentech's Herpacin for early-stage breast cancer in people whose genetic makeup strongly indicates that they will be helped by the drug. Herpacin costs $44,000 for a year's treatment.

Still About Money

A further downside for residents of Britain: The cash-strapped NHS places less emphasis than the U.S. or France on preventive care. Annual physicals aren't insured. And screening programs are less generous than in the U.S. So despite the fact that pap smears can help detect cervical cancer, the second leading cause of death for women, they are only offered once every three years, as opposed to the recommended annual test in the U.S.

What neither the French nor the British system can overcome is the stark math of cost-benefit analysis. A cancer drug like Avastin, which can extend a patient's life by a few months, costs $48,000 annually per patient. It's far too expensive, by NICE's reckoning, to provide to all colon cancer patients, so it's available to none. In France, the state pays a portion and the wealthy are free to make up the difference. Money, in other words, buys good health—on both sides of the Atlantic.