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Same-Day Analysis

Budget 2008: Tighter Controls on Healthcare Spending as French Conservatives Crack Down on Social Security Deficit

Published: 27 September 2007
France's proposed Social Security budget for 2008 sees continued funding contributions from the pharmaceutical sector as well as new patient co-payments in an effort to move out of the red.

Global Insight Perspective

 

Significance

The proposed 2008 Social Security budget sees growth in healthcare spending limited to 2.8%, and new measures aim to reduce the health sector's deficit from a feared 7.1 billion euro (US$10.03 billion) to 4.3 billion euro (US$6.077 billion).

Implications

The pharmaceutical industry will again contribute to part of the funding for public health insurer CNAM, with a return of the 1% tax on drug revenues as well as a one-off contribution from wholesalers. However, a new tax on dividends will bring in the lion's share of new Social Security funding.

Outlook

Previous governments have tried to curb the torrent of public healthcare spending in France with limited success, and the reversal of the progress made in 2006 has put extra pressure on the new administration to make this budget succeed. New incentives for doctors to prescribe cheaper drugs and improve awareness at CNAM of annual health service expenses, alongside sweeping new patient co-payments should go some way towards achieving targets.

Health Minister Roselyne Bachelot Narquin has presided over the unveiling of the much-anticipated proposals for France's 2008 Social Security budget. The proposals, known in France as the PLFSS (Projet de loi de financement de la Sécurité sociale), have been made with one objective in mind: to put the brakes on the Social Security's deficit and reduce it to 8.9 billion euro (US$12.6 billion) from a feared 12.7 billion euro if no emergency measures are taken. In the public healthcare branch of the Social Security, the goal of the PLFSS is to reduce the anticipated deficit from 7.1 billion euro to 4.3 billion euro. In spite of this, some growth in spending remains unavoidable, and the PLFSS proposes just under 2 billion euro in additional funding across the entirety of the Social Security system, of which the bulk, 1.6 billion euro, will go to public health.

Social Security Deficits, 2005-2008 (bil. euro)

 

2005

2006

2007

2008*

Healthcare

-8.0

-5.9

-6.2

-7.1

Work Accidents

-0.4

-0.1

-0.4

-0.1

Families

-1.3

-0.9

-0.5

-0.0

Pensions

-1.9

-1.9

-4.6

-5.7

Total Social Security

-11.6

-8.7

-11.7

-12.7

* Before PLFSS reforms.
Source: Ministry for Health, Youth and Sport.

Part of the new funding will be sourced directly from the pharmaceutical industry, with a 1% tax on the revenues of drug companies operating in France expected to bring in some 100 million euro over the course of 2008. Meanwhile, a one-off contribution on wholesalers' turnover will see an extra 50 million added to the pot. However, the largest slice of the new Social Security funding, at 1.3 billion euro, will come not from the pharmaceutical industry per se, but rather from a new tax on share dividends. According to Tax-News.com, some 970 million of the revenue derived from the new dividend tax will remain for the Caisse nationale d'assurance-maladie (CNAM) after an anticipated rise in healthcare spending has been offset.

The planned rise in healthcare expenditure has been agreed under the ONDAM (Objectif national de dépense d'assurance-maladie) national public health spending target. The ONDAM limit has been set at 2.8% year-on-year for 2008, which is higher than the 2.5% goal fixed for 2007 and the 2.7% seen in 2006. However, given the overspending in various parts of the public health service witnessed over the year to date, which has seen the government implement emergency mid-year savings measures (see France: 5 July 2007: Social Security Anticipates US$3.5-bil. Overspend on French Public Healthcare by End-2007 and France: 4 July 2007: New French PM Says CNAM's Savings Measures to be Implemented Immediately), the new ONDAM target is arguably somewhat more realistic in terms of France's capability to shift its longstanding tradition of generous public healthcare. The PLFSS does, however, put in place a number of checks and balances to ensure that while spending increases, it does not get out of hand:

  • There will be no increase in tariffs on medical procedures until six months after the PLFSS agreement has been finalised. After this point, any increases may be suspended if there is an "alert" that the ONDAM spending target will be surpassed by more than 0.75%.
  • The franchise co-payment system—which sees patients bear the costs for their treatments up to a certain level, after which CNAM takes over—on healthcare products and services will come into force from 1 January 2008. The thresholds include 50 euro cents per box of medicines, 50 euro cents on auxiliary care services and 2 euro on health transport, up to a maximum of 50 euro per person per year. The system is designed to save 850 million euro for improving care for cancer and Alzheimer's disease patients.
  • Healthcare specialists including surgeons, radiologists or dentists anticipating to carry out a more-costly-than-usual service must now submit information on this to CNAM ahead of time, including the estimated price of the service and the likely reimbursement costs. Failure to do so will result in sanctions.
  • Different areas within the public health sector have been assigned different ONDAM targets of their own, with the smallest permissible growth target (2%) going to primary care. A 3.2% limit has been assigned to hospitals and a 6.5% limit for the medico-social sector (palliative care, etc).

Hospitals are also due for a shake-up in financing under the PLFSS for 2008. For the first time ever, French hospitals are to be financed according to their revenues. This will prioritise the busiest and most successful of the public-sector hospitals, as well as not-for-profit private-sector hospitals.

Outlook and Implications

The first budget to be released under new President Nicolas Sarkozy is being intensely scrutinised in all sectors, not just health, after Prime Minister François Fillon declared the country's financial situation as "bankrupt". The need to reduce deficits is pressing, and the conservative Union pour un Mouvement Populaire (UMP) government has promised to foster economic growth to reverse the prevailing trend. While there was some success at reducing CNAM's healthcare deficit in 2006, following two years of stringent pricing and reimbursement cuts, the sudden return to overspending in 2007 has thrown the confidence of public healthcare administrators in France, who are struggling to maintain a balance between reducing costs and keeping the pharmaceutical industry sweet. For the most part, the proposed Social Security budget does not see too much extra burden on the pharma sector, with the 1% tax on revenues having been in place for some time now. Wholesalers stand to lose out to a certain extent, and the success in meeting next year's spending targets will most probably determine whether their contribution to CNAM's funding remains a one-off or becomes something more regular. The 2008 budget, which is due to go before Parliament during the autumn session, has been described by Public Accounts Minister Eric Woerth as being a prelude to bigger structural reforms to the Social Security anticipated for 2008, and that "plugging the leaks" in the system was no longer a viable option.
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