Differential Diagnoses: A Comparative History of Health Care Problems and Solutions in the United States and France

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 S?curit? 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.