Journal of Financial Economics

REF 143 Health Finance

This contribution presents the main findings of an unusual research project of the health reforms of twelve small and mid-sized nations (usually excluded from international comparative studies), that started early 21^st century. The 19 co-authors have all lived and worked in one or more of these countries.

Located in different continents, the countries vary in size, population, geography, income level as well as cultural and political backgrounds. Still, they share policy goals to safeguard access to healthcare to their population, improve the population health and protect family income against high costs of medical care – policies long embraced by most industrial nations. They all sought to change some of the core elements of their healthcare systems: the mix of financing sources, the ownership, administration, or payment modes for healthcare services.

Each nation implemented reforms within the restraints of national culture, institutional legacies, and stakeholder positions. That resulted in diverging outcomes, not convergence into one direction or model. What works in one nation, may not work somewhere else.

Our study showed, indeed, a remarkable variety in reform activity, ranging from the partially successful efforts to develop universal coverage in Ghana and Tanzania, the more fragmented insurance schemes of Chile and Ecuador, the new procedure for assessing entitlements of Israel's social insurance, New Zealand's rapid changes in regional healthcare governance combined with a remarkable stable tax-based financing, Taiwan's population-wide health insurance, the quasi-private insurance mandates of Switzerland and The Netherlands and a complex mix of insurance schemes and extensive public subsidy in Singapore.

Social insurance, like commercial insurance, is about protection against financial risk. In the United States, Medicare and the Social Security Administration's programs for retirement, disability, worker's compensation, and worker's life insurance have become dominant features of American public policy, amounting to more than 41 % of the federal budget. Yet their fiscal centrality does not rest on anything like an understanding of what makes social insurance social – or why that is so important to American political life. This essay seeks to clarify the crucial differences between social and commercial insurance and elaborates on the conceptual justifications and distinctive operational features of America's social insurance programs.

It took 75 years (1925-1999) to France to create a universal health insurance system. In the beginning, it was exclusively financed thru social taxes based on salary, it was then partially extended to every source of income. These tax bases methods of financing are totally unrelated to the factors which influence medical care demand: demography, medical innovations, epidemies, demand which is almost infinite since medical expenses are free. Given that, for ethical and economic reasons, the market is not working, it was necessary to use rationing methods to reach a financial equilibrium, never reached. Inequitable, inegalitarian, these unsophisticated methods, seldom more complex that the rule of three, blow up from time to time, it is the case to-day. It is however possible to better adjust between supply and demand of medical care while stop playing a repetitive and boring psychodrama plaid by governments for half a century when they try, without success, to limit medical expenditures.

In this article, we recommend that the French public authorities include revenues and expenditures from the statutory health insurance system in the State Finance Act (instead of separately in the Social Welfare Scheme (Sécurité sociale) Financing Acts as is the case today), as this would provide the possibility for a number of essential reforms: simplifying the financial circuits of the Social Welfare Scheme; extending the latter's tax base; abolishing the current distinction between social welfare debt and other public debt. These measures would not entail a dismantling of the Social Welfare Scheme Financing Acts. They should furthermore be coupled with giving greater powers and discretion to the French National Union of Health Insurance Funds (UNCAM) tasked with financing the cost of all care (both for public hospitals and private health practitioners).

The French health system is funded primarily by Social Security, a structuring element of the welfare state, and by health insurers, on a complementary basis. This provides to the French people the best coverage for healthcare expenses through OECD countries. However, this excellent protection system leaves a significant part of the population on the side of the road, in terms of access to healthcare. This leads us to reflect on the respective roles that should be entrusted to the two main funding systems, to promote the adaptation of the health system to the demographic, medical, technological, economic and social challenges for the future. We offer two possible ways, which seem to meet the aspirations of those of our fellow citizens who want to live as free and responsible people involved in a modern and united society.

The role of complementary health insurance organizations (OCAM) is being questioned as they develop. They have gradually taken on an essential role, as the rate of refusal of care doubles for the fortunately few people who still do not have any. Considered more as adjustment variables for the disengagement of the health insurance system from routine care than as partners of the compulsory schemes, they are denied any role in the regulation of medical care expenditure.

After a review of the conditions of their development, the consequences of the inconsistencies of their economic model will be illustrated. Indeed, the preference given to group contracts and to a form of competition leads to risk selection and therefore to exclusion.

Finally, the various solutions recommended by the High Council for the Future of Health Insurance and by the Court of Auditors will be critically examined, as they do not seem to meet the challenges of health policy.

In 2000, France was fifth worldwide in biomedical research production. In 2020, France ranked ninth. Over the past ten years, both resources devoted to biomedical research in France and French scientific production declined compared to other leading countries. The currently planned increase in funding and reforms won't be enough to restore France competitiveness in biomedical research. In the international context, this article documents key developments over the past ten years, describes currently planned reforms, and suggests other evidence-based restorative measures: creating a quantitative and qualitative evaluation program for biomedical research to deepen understanding of the situation; imposing rules about coordination and maximum delays for decisions to the multiple agencies and organizations funding and managing biomedical research; developing training programs in research quality and reproducibility for doctors and scientists; subjecting clinical trial funding to methodological criteria; and fostering interdisciplinarity in higher education.

For the past two decades, prevention has been considered an absolute priority in the French health system reforms. However, the process has been slow. Striking social inequalities in health is still a characteristic of the “French paradox”: good medical care and high social inequalities.. Prevention in the health sector cannot be simply decreed. It requires articulation between the local and the national levels, strong incentives for both users and health professionals and must be based on evaluations. However, the standardization of institutional and scientific evaluation procedures has encouraged the use of “ex post” approaches and has prevented the “ex ante” option. This article suggests a wider use of that method in order to choose efficient methods able to reduce health inequalities.

Digital reforms all over the world have common characteristics and the same failures. The intoxication of technology and a ready-made solution is the same everywhere and leads to the same disillusionment. A strong plea is made here for a more rational approach, continuity of effort and the systematic use of medical cost/benefit analysis.

Patients' deprivation is associated with increased hospital costs, which are currently funded through an envelope whose lump sum is distributed among eligible hospitals, i.e. those over a certain threshold of deprived patients. In this model, deprivation is measured through social benefits, meaning that only the most deprived are identified as such. However, a growing body of the literature is reporting an association between deprivation and increased length of stay and hospital costs all along the social gradient, and not just at its extremity. It is therefore time to rethink how deprivation is accounted for in hospital payment methods, both in terms of indicators used to identify deprived patients and mode of payment. In this context, a modulation of hospital tariffs based on patients' deprivation level, measured by an ecological indicator, would improve the allocative efficiency of the healthcare system.

Management tools must keep pace with quick changes in the environment of health care institutions. The authors propose some avenues for improvement:

 – avoid the disadvantages of conglomerates by separating income statements, balance sheet accounts and financing accounts;

 – adapt the separation of authorizing and accounting officers to the new processes resulting from the IT revolution (artificial intelligence, robot process automation, platforms, e-admission, etc.);

 – redesign the work units of medical and technical services, in particular the relative cost indexes (RCI);

 – make “omogeneous patient groups” (GHM) more homogeneous in terms of treatment;

 – adapt the activity-based financing method to ensure the funding of capital investments;

 – better understand the reality of medical and technical cost centers;

 – define regular interim management accounts.

The coronavirus pandemic has once again raised controversies calling into question the pricing practices of drug manufacturers, a subject that regularly emerges with therapeutic innovations. Biotechnologies for the treatment of cancers and autoimmune diseases, innovative treatments for hepatitis C and now gene and cell therapies have both opened real hopes in the treatment of these pathologies and stoked criticism on an industry. accused of making comfortable profits on health. The purpose of this article is educational: it explains the industrial rationale behind the pricing methods for new drugs, oriented by the achievement of profits allowing both to remunerate shareholders and to reinvest in the development of new products. Mirroring this rationale, to present two models of European “payers”, France and the United Kingdom, whose objective is to offer access to innovative treatments to their population while controlling expenditure on reimbursed drugs and trying to find a good balance between the sustainability of their financing systems and the encouragement of innovation.

In the face of mounting evidence of global warming, which is an irreversible process, setting a social price of carbon at the global level and devising appropriate metrics to assess climate risks at a microeconomic level are the current priorities. Central banks, as other policymakers, have to play their part and thus consider climate risks when devising their strategies, conducting their policies and implementing their decisions. In doing so, they can rely on market forces. At this stage, this seems to require some limited adaptations of their monetary policy frameworks rather than profound changes. However, climate change risks are bound to take an increasingly important role in the conduct of financial stability policies in the coming years.

This article assesses the impact of monetary policies and new technologies on financial intermediation in the euro area. Disentangling the effects of low or negative interest rates from those of FinTech activities can be tricky. These developments did arise more or less at the same time. For our study, we begin by statistically describing the main macroeconomic variables that are thought to represent the trends of the economic sectors related to financial intermediation. Three sectors are studied: banks, insurance companies and money market funds (MMFs). A simple statistical analysis shows that FinTech, combined with an environment of low, or even negative, interest rates apparently helped increase the returns of financial market assets to the detriment of bank assets. Moreover, traditional financial intermediaries have suffered from the ongoing erosion of their interest rate-driven profits. As a result, banks and insurance companies have shifted more towards market activities that are certainly more profitable but more volatile. Some have not hesitated to seek out less regulated non-bank financial entities. This shift from regulated to less regulated finance has been facilitated and accelerated by the technology used in financial sectors.