"Who is this guy FICA, and why does he get so much of my money?": French Edition

The President gave his big speech on health care reform last night. It’s hard for me to believe that a single oration, no matter how inspiring, is enough to move the needle on getting this kind of major legislation passed thorough Congress in the face of entrenched opposition. “Gorsh, that Obama feller sure talks real purty. He convinced me to restructure one seventh of the American economy. I mean, he’s just so durn charismatic!”

But the occasion did spur me to start thinking about health insurance in this country again. Actually, it got me thinking about health insurance in France. After all, the French system is the model most commonly cited in the media as the ideal from the patient’s perspective. Everybody’s covered, the copays are small, and you can never be denied coverage.

Best of all, from all published reports, there is exactly zero interaction with the government run insurance company. You just call the doctor or drop in at the hospital. All the messy financial details are handled off stage. “Monsieur, let us focus on making you well.” What’s not to like?

The question that pops up is a simple one: How do they pay for this great system? More specifically, who pays for the system, and how much do they pay? After all, the money has got to come from somewhere, right?

So I did a little digging, which is a shocking easy thing to do, what with this newfangled Internet and all. It turns out that the French health insurance system is part of the French Social Security system. So in addition to paying retirees, the system also pays for everybody’s medical bills. The interesting thing is that Social Security in France is funded via the same mechanism as in the US: payroll taxes.

In the US, the tax rate for Social Security and Medicare combined is 15%, with half that paid by the employer and half by the employee. The effective payroll tax rate for employees in America is 7.5%.

So what is the equivalent rate in France?

The equivalent rate turns out to be about 22%. That’s right, 22%. So let us say that you earn $10 an hour. In America, your take home is $9.25/hour. In France, say hello to $7.80/hour.

It kind of puts a different spin on the situation, don’t cha think?

I wonder why that number is being reported on more often in this debate. After all, the money for health care has to come from somewhere. There ain’t no such thing as a free lunch.