City Journal Autumn 2014

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Autumn 2014
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By Guy Sorman

Economics Does Not Lie: A Defense of the Free Market in a Time of Crisis

By Guy Sorman

The Empire of Lies: The Truth about China in the Twenty-First Century

Eye on the News

Guy Sorman
Paying for Le Treatment
Nothing is free—certainly not French health care.
24 August 2009

Recently in the New York Times, mystery writer Sara Paretsky published “Le Treatment,” the story of how she took her husband, suffering from chest pains during their vacation in France, to a local hospital, where he was treated without delay. A cardiologist correctly diagnosed the problem, pneumonia, and administered the necessary medication. The hospital charged no money up front, though the doctor apologetically said that he would have to bill the couple, as they were not citizens. Six months later, an invoice arrived for $220. Paretsky expresses one minor reservation about what she sees as a nearly perfect health-care system: the hospital staff’s behavior was more bureaucratic than cheerful. She concludes, however, that this is a small price to pay for excellent health care at an unbeatable price: “I might put up with a lot of ugly bureaucrats for that.”

What she doesn’t realize is that the French, too, would love to have such a system. Paretsky’s adventure is a parable based on a false assumption: that health care can be public, reliable, and free. It may indeed seem free, or close to free, for an American tourist receiving treatment in an emergency; as a French taxpayer, however, I paid a heavy price for Paretsky’s husband’s treatment. And you, my American reader, did too.

How much? France’s costly national health insurance is mostly financed by taxes on labor. A Frenchman making a monthly salary of 3,000 euros will pay approximately 350 of them (deducted by his employer) for health insurance. Then the employer will add approximately 1,200 euros, making the total monthly cost to the employer of this individual’s services not 3,000 euros but 4,200. High labor costs in France affect not only consumer prices but also unemployment rates, since employers are reluctant to pay so much for low-skill workers. Economists agree that unemployment rates and the cost of national health insurance are directly related everywhere, which partly explains why even in periods of economic growth, the average French unemployment rate hovers around 10 percent.

High as they are, taxes on wages are not enough to cover the constant deficits that national health insurance runs. France imposes an additional levy to try to close the insurance deficit—the CSG (contribution sociale généralisée)—which applies to all income, including dividends, and which Parliament increases every year. Altogether, 25 percent of French national income goes toward what’s called Social Security, which includes health care and basic retirement pensions for all.

French national health insurance is also subsidized by American patients. This is because France decides which drugs to use and at what prices; American pharmaceutical companies must either accept the dictated prices or lose an enormous market. The companies therefore sell their medicines at higher prices in the U.S. in order to cover their expenses and turn a profit; the surplus is then sold cheaply to the French, who take the same pills as Americans but at half the price or less.

In the end, who paid for Paretsky’s husband’s nearly free ride in a French hospital? French workers and taxpayers; American patients; and the young, unqualified, and out-of-work French unable to find jobs because of the unemployment that national health insurance engenders. There is no such thing, anywhere, as a perfect health-insurance system. It’s always a trade-off among competing goods, and the choices to be made are ultimately political ones. Americans commenting on health-care reform should try to make the costs and consequences of these choices transparent, rather than resorting to misleading morality plays.

Guy Sorman, a City Journal contributing editor, is the author of numerous books, including the new Economics Does Not Lie.

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