Murray on Dutton, _Differential Diagnoses: A Comparative History of Health Care Problems and Solutions in the United States and France_

[eh.net-review at eh.net]

Published by EH.NET (July 2008)

Paul V. Dutton, _Differential Diagnoses: A Comparative History of 
Health Care Problems and Solutions in the United States and France_. 
Ithaca, NY: Cornell University Press, 2007. xi + 253 pp. $30 
(hardcover), ISBN: 978-0-8014-4512-5.

Reviewed for EH.NET by John Murray, Department of Economics, 
University of Toledo.


This book delivers what the subtitle promises. Keeping in mind the 
general difficulty of writing comparative history, that is no small 
accomplishment. The author, a historian at Northern Arizona 
University, is a specialist in the history of French social policy. 
His previous book, _Origins of the French Welfare State_ (Cambridge 
University Press, 2002) was very well received, and so it is no 
surprise that the parts of the present work that address the French 
situation are clear and fascinating. The American part of the story 
is very much consistent with about 98 percent of the historical 
literature. The other two percent consists of my own book, so I find 
some problems with its presentation here.

By the late nineteenth century, French and American approaches to 
health care financing had much in common. Unlike German and British 
policy, governments steered clear of organizing insurance funds, and 
unlike the Scandinavian experience, neither did they subsidize the 
numerous already-existing funds. Instead, workers contributed to 
sickness funds that paid them a cash benefit when ill, and in some 
cases provided medical attendance as well. By my estimates, such 
insurance covered about a third of the non-agricultural labor force 
in each country, and the value of medical benefits per day was also 
about the same, while the replacement rate of sick pay was nearly 
three fifths in the U.S. but only about a third in France [1]. From 
such similar roots have evolved very different systems. How that 
happened is Dutton's story.

Dutton sees the opening wedge of greater government involvement in 
the French case as the settlement following the Franco-Prussian War 
of 1870-71. The surrender of Alsace-Lorraine to Germany followed by 
its return under the Treaty of Versailles gave France a Manchurian 
candidate in health policy. Two generations of Alsatians who had 
lived under Bismarckian social insurance were less than eager to 
follow the French insistence on individual liberty. In part to suit 
the newly reunited northeast, French reformers used Germany as the 
model for the first efforts at postwar medical insurance reform. 
However, the inability to agree on such proposals by French 
physicians, unions, and employers left them without much purchase.

Around this time American Progressives were agitating to get states 
to mandate sickness insurance for industrial workers. Renaming the 
product as "health insurance" to align it with recent British 
efforts, the Progressives failed at nearly every point in 
statehouses, referenda, and polls. Here Dutton's history moves onto 
shakier ground. He follows the standard explanation in the historical 
literature -- that the Progressives' failure was due to the vast 
advantage in resources enjoyed by their opponents, the commercial 
insurers, unions, physician groups, and employers generally. This 
cannot be the entire explanation, however, because many workers had 
ready access to other sources of such insurance, from reasonably well 
run operations. That is the story of my own book, published just 
after the present work. Contrary to the standard narrative, including 
its presentation here, there is no evidence that proposals for 
government insurance in America had much popular support at any time 
before the New Deal. Thus, the lack of general government health 
insurance in the United States may be less a consequence of 
politicking by insurers, physicians, and intellectuals than the 
general adequacy of the existing system. If my disagreement then is 
more with the standard version of this history than with its 
particular retelling here, I still think that retelling imparts a 
weakness to the book's analysis.

The strongest points of the book include the detail in which Dutton 
describes the intricacies of physician influence in French politics, 
and then his lucid comparisons to the American situation. French 
policy in the 1930s proceeded in a different direction from the New 
Deal. The potential opposition of American physicians persuaded 
President Roosevelt to leave that fight for another day, while French 
physicians compromised with the government and allowed the first form 
of compulsory insurance to be established in 1930. This insurance 
reimbursed patents for 80 percent of their medical bills. The 
downside of the agreement was that individual physicians felt no 
compulsion to abide by fee schedules negotiated on their behalf by 
medical groups. The share of covered population (not labor force) 
rose to about 25 percent, but unexpected expenses and denials of 
benefits increased political discontent with the scheme.

The next step in French insurance policy was actually conceived by 
the Free French government in London, and then enacted in 1945. This 
expansion of the Sécurité Sociale aimed in part to throttle physician 
billing rates. Here Dutton sees a missed opportunity to do away with 
fee-for-service medicine altogether and presumably leap ahead to the 
system that began to be implemented after the 1960 reforms. Still, 
the postwar reforms succeeded in bringing "the quasi-totality of the 
population" under coverage -- a Gallicism meaning about 
three-fourths, roughly the same as the share of Americans with 
hospital insurance. But again, costs rose faster than expected, 
busting French budgets.

These episodes suggest some of the enormous economic problems that 
follow from third-party interventions (of both private and public 
origin) in health care insurance markets. The present situation of 
the two countries is not so different, Dutton notes, with the French 
adopting American techniques of managed care, and the Americans 
drifting towards a public-private combination of health care 
financing similar in many ways to the French system. The book 
concludes with policy proposals that would make the two systems even 
more similar, such as a progressive income tax to pay for universal 
health benefits, to replace payroll levies in France and pre-tax 
premium deductions from American paychecks. Although the book may 
make differential diagnoses of the two cases, the therapy prescribed 
is the same for each: more government intervention in health care 
financing markets. Running backwards from this conclusion makes it 
easier to see the direction of the author's interpretations at 
earlier points: in general, the American failure to adopt government 
insurance was a bad thing, and the French situation would have 
improved if it had adopted government insurance sooner.

_Differential Diagnoses_ has many of the virtues of good comparative 
history. The two histories are intertwined in a manner that is easy 
to follow, and each sheds light on the other in ways that would be 
hard to extract from two separate histories of each country's own 
health care financing system. While I disagree strongly with the 
book's interpretation of early health insurance arrangements in the 
United States, there is much to learn about the interactions between 
politics and health care financing here.

Reference:

1. John E. Murray, _Origins of American Health Insurance: A History 
of Industrial Sickness Funds_. New Haven: Yale University Press, 2007.


John Murray is Professor of Economics, University of Toledo. His 
current project is a history of health insurance in mid-twentieth 
century America.

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