French Healthcare System Awash in Red Ink

Perhaps a tad ridiculously generous with other people's money

Anita Manfredi got nine massages and 18 mud baths at a luxury spa in November. The French government paid two-thirds of the $1,022 bill. "The treatment has done me a lot of good," says Manfredi, a French retiree who suffers from arthritis and enjoys a three-week retreat at the southern spa town of Dax every year. "I no longer have flare-ups."

For decades, France has held up its health-care system as a model to the world. Homeopathic remedies, support tights, and taxi rides to the hospital are among the many costs reimbursed by the health-care branch of France's social security system, known as l'assurance maladie. Average life expectancy is 81.3 years, longer than in the U.S. Adults are less likely to live with diabetes or die from heart disease, and the rate of infant deaths in 2010, the latest year on record, was almost half that of the U.S., according to the Organisation for Economic Co-operation and Development.

Yet France's looming recession and a steady increase in chronic diseases including diabetes threaten to change that, says Willy Hodin, who heads Groupe PHR, an umbrella organization for 2,200 French pharmacies. The health system exceeds its budget by billions of euros each year, and in the face of rising costs, taxpayer-funded benefits such as spa treatments, which the French have long justified as preventive care, now look more like expendable luxuries. "Reform is needed fast," Hodin says. "The most optimistic believe this system can survive another five to six years. The less optimistic don't think it will last more than three."