Health and Efficiency: Community Law and National Health Systems in the Light of Müller-Fauré

CASESHealth and E⁄ciency: Community Law and National

Health Systems in the Light of Muº ller-Faure¤

Gareth Daviesn

In Mˇller-FaureŁ the Court of Justice has made clear that restricting patients to receiving medicalservices from their domestic health systems is often contrary to ECTreaty rules on the freemove-ment of services, particularly where the treatment is not in-patient.The patient should generallybe able to go abroad for treatment at the expense of their national health authority. This hasstructural and ¢nancial repercussions for health care systems in several Member States, includingthe United Kingdom, whose systems are premised upon captive patients. It also has broaderimplications for welfare harmonisation and provision in the European Union. Exceptions arepossible, where the implications for the national health system would be very serious, butMˇller-FaureŁ indicates that the Court will not allow national courts or authorities to rely on thesetoo freely.

For half a decade the European Court of Justice has been applying Communitylaw on the free movement of services to medical treatment and insisting thatnational insurers and systems of provision allow for patients to go abroad, gettheir treatment, and then send the bill home.1 However, as be¢ts an area of stateactivity so complex in organisation, and so profoundly politically sensitive, eachstep in the direction of free movement has been accompanied by potentially con-trary concessions to national closure. All kinds of medical services may be subjectto theTreaty, yet restrictions on free movementmayoften be justi¢ed by the needto protect national health care systems from the ravaging e¡ects of uncontrolledpatient choice.

The Member States’ central fear is that patients going abroad, usually to avoidwaiting lists, will result in higher costs. Not only will the national authorities losetheir control over the rate of treatment, and hence spending, but they will also beleft with possibly half-empty institutions. These cannot simply be closed down,because maintaining the national medical infrastructure is a matter of strategicand public health importance. Therefore the state will be forced to operate anine⁄cient system, adding an extra burden to its budget.

Since economic reasons do not justify restrictions on free movement, this fearis usually presented in a slightly convoluted form.The Member States claim thatthe extra cost burden, and loss of control, is such that their chosen system in fact

n Faculty of Law, University of Groningen.

1 See Case C-120/95 Decker v Caisse de Maladie des EmployeŁ s PriveŁ s [1998] ECR I-1831; Case C-158/96Kohll vUnion des Caisses deMaladie [1998] ECR I-1931; Case C-368/98Vanbraeckel vAllianceNationaledesMutualites Chretiennes [2001] ECR I-5363; Case C-157/99Geraets-Smits v Stichting Ziekenfonds andPeerbooms v Stichting CZ Groep Zorgverzekeringen [2001] ECR I-5473; Gareth Davies ‘Welfare as aservice’ (2002) 29 LIEI 27; V.G. Hatzopoulos ‘Killing national health and insurance systemsbut healing patients? The European market for health care services after the judgments of the ECJinVanbraekel and Peerbooms’ (2002) 39 CMLRev 683.

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(2004) 67(1) MLR 94^107

becomes unviable.2 It is not the money itself that worries us, they say, but thebreakdown of our national health scheme.This the Court has accepted as a legit-imate reason for restrictions.3 However, there are no trump cards in Communitylaw,4 and it is a question for each case whether the risk really is great enough tojustify the loss of patient, and provider, freedom. A number of cases have pro-vided partial guidelines for deciding this,5 but now Mˇller-FaureŁ has gone a stepfurther, providing the most comprehensive, and the leading, statement of the lawto date.6Although much of what is in the judgment can be found in earlier cases,much is new, and the decision stands out for the range of questions it addresses,and the precision and completeness of the answers provided.

What it has to say is of wide signi¢cance. Not only are patients granted greatfreedom to go abroad for treatment, but the reasoning used is applicable beyondthe medical sphere, and opens doors to radical restructuring of many other statewelfare activities, from pensions and education to unemployment insurance. Freemovement of welfare is slowly emerging, and with it a new vision of the state inEurope.

MUº LLER-FAUREŁ

The case concerned two Dutch patients, both insured with the Dutch state med-ical insurance scheme ^ the Ziekenfonds ^which covers all of the populationwhoearn below a certain amount. Under this scheme the insured patient may go toany provider contracted with the Ziekenfonds. Generally, payment will be directfrom insurer to provider, without the involvement of the patient. For this reasonthe Dutch government described the Ziekenfonds insurance as a ‘bene¢ts-in-kind’scheme. Because of the size of the scheme ^ it covers most of the populationof the Netherlands ^ almost all domestic care providers have contracts with it,7

and these are often in the form of complex block contracts, under which the hos-pital or clinic can be assured of a regular £ow of patients, and in return may o¡erfavourable terms. In particular, payment may not always be per treatment ^ theremay be lump sumpayments in return for which care up to a certain amount, or ofa certain type for a certain area, may be provided.8 In short, although the systemdisplays manyof the characteristics of an insurance based scheme, which formallyit is, it also looks very much like a national health service, as in the United

2 The same repackaging of arguments occurs in other contexts. See Case 72/83CampusOil vMinisterfor Industry and Energy [1984] ECR 2727; Case C-379/98 PreussenElektra AG v Schleswag AG [2001]ECR I-2099.

3 See Kohll,Vanbraeckel, Smits and Peerbooms, n 1 above.4 Case C-41/74VanDuynvHomeO⁄ce [1974] ECR1337; Case C-260/89 ERTvDEPand Sotirios Kou-velas [1991] ECR 2925.

5 See n 1 above.6 Case C-385/99 Mˇller-FaureŁ v OnderlingeWaarborgmaatschappij OZ Zorgverzekeringen and van Riet vOnderlingeWaarborgmaatschappij ZAO Zorgverzekeringen, judgment of 13 May 2003. See also CaseC-56/01 Inizan v Caisse Primaire d’Assurance Maladie des Hauts-de-Seine, judgement of 23 October2003.

7 ‘Contracted provider’ is almost synonymouswith‘Dutch provider’.There are just a few exceptionsalong border areas, and for specialised operations where there are long waiting times, where for-eign providers have also obtained contracts. SeeMˇller-FaureŁ , ibid, para 29.

8 See Advocate General’s opinion inMˇller-FaureŁ , n 6 above, paras 47^49.

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Kingdom (UK). The payer-provider relationship is not built around the indivi-dual treatment transaction, but around stable, long-term, agreements to providebulk care, which are essential to the functioning and economics of the system.Also, there is a redistributive element, via central government subsidy of the pre-miums that insured persons pay.

One of the patients, Ms Mˇller-FaureŁ , went to Germany for dental work.Her case is the less interesting. The other, Ms van Riet, went to Belgium for anarthroscopy and some other treatment, partly provided in a hospital and partlyoutside. Shewent largely to avoid the six monthwaiting time in theNetherlands.Both had previously requested authorisation for treatment abroad. In linewith the Dutch rules, both had been refused. Treatment with a non-contractedprovider would only be paid for if medically necessary treatment was notavailable within the system without ‘undue delay’.9 That was not the case. Inparticular, the six month wait for Ms van Riet did not comprise undue delaybecause it was no more than the normal waiting period for that operation in theNetherlands.10

Having chosen to have treatment abroad despite the refusal, both patientssubsequently claimed reimbursement. Both were of course refused again. Theythen began the court case culminating in this judgment. As a rather sad aside, itmay be noted that both treatments actually occurred in 1993^94. Not only werethe Dutch government and the Ziekenfonds rather £agrantly breaking the law inrefusing payment, but it is hard to avoid the suspicion that the case was deliber-ately dragged out pour encourager les autres, and to avoid the inevitably unfavourable,and binding, answer.

THE ARGUMENTS

The questions asked were whether the refusals were contrary to the Treaty,whether the speci¢c nature of the Dutch system made a di¡erence to this, andwhether there was a di¡erence between hospital and non-hospital treatment.The referring court also sought an interpretation of the words ‘undue delay’.These were central to the relevant Dutch law, and to the case in hand.The courtwanted to know whether it must interpret them in a purely medical sense, or byreference to normal waiting times in the Netherlands.11

Not all aspects of these questions were obviously necessary. It had already beenaccepted that hospital treatment could be legitimately restricted, and only thequestion of non-hospital treatment remained unclear, along with the meaningof undue delay. However, the usefulness of the judgment to some extent arisesfrom the schematic and structured way in which the reference was presented.

9 Mˇller-FaureŁ , n 6 above, para 19. The domestic law was actually more complex, including reason-ableness, and the phrase ‘within the time normally necessary’. However, in the light of earlier case-law (Smits and Peerbooms, n 1above) these had been accepted in practice to reduce to‘without unduedelay’,Mˇller-FaureŁ , paras 26^29, 42 and 51.

10 Mˇller-FaureŁ , n 6 above, para 27.11 ibid, paras 32^35.

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Even if analytically ine⁄cient, it seems to have encouraged the Court of Justice toprovide a comprehensive explanation of the law.

The Dutch government, in its submissions, did not deny that free movementof services was being restricted. However, it sought justi¢cations for the restric-tions it was imposing in the character of its system.12 It said that following its‘sovereign power’13 to choose the organisation of its health care it had created acontract-based system which had many advantages. Firstly, it enabled planning.Hospitals and medical facilities were assured of a constant £ow of patients, whichenabled them to be e⁄cient, and to o¡er attractive prices for treatment. Secondly,the inability of patients to exit the system meant that this £ow could be adjusted,by controlling treatment rates, to re£ect the amount of money available, therebyenabling cost control. Although this might result inwaiting lists, this was a realityof limited funds, and the central control allowed a third advantage, prioritisation,which ensured that while some might have towait, overall the systemwas betterand fairer for all.

If, on the other hand, patients could simply bypass waiting lists by goingabroad, the system would be undermined. There would no longer be e¡ectivecost control, and the system of block contracts would break down. Whywould domestic institutions participate in that way if they were entitled totreat patients individually on the ‘free market’ ^ thus at an non-block contract rate^ and be paid for it?14 Therefore domestic e⁄ciency would be severely dimini-shed. In short, free movement was incompatible with the Netherlands’ chosensystem of health care.

On the question of undue delay, the Netherlands accepted that where treat-ment could not be provided by a contracted provider without this, a patientshould be allowed to travel abroad. That was the result of Smits and Peerbooms,and now the domestic law also.15 It also accepted that what the phrase meant wasto be decided in the context of the patient’s medical history and circumstances.However, that made it a factual question, and therefore for the national, not theCommunity, court.16 Moreover, the mere fact of being on awaiting list could notbe su⁄cient to show undue delay. That would amount to a rewriting of the na-tional conditions of access to health care, and undermine all planning17 ^ onceagain eroding the very essence of the system.

The Netherlands made no distinction in these arguments between in-patientand out-patient care, but the Commission, in its submissions, did.18 It acceptedthat the nature of in-patient care ^ requiring more infrastructure, and inherentlyless elastic on the supply side than out-patient treatment ^ gave the planningand stability arguments force. Thus it felt that, consistently with earlier cases,

12 ibid, paras 47^49.13 ibid, para 49.14 Although this would not actually be an automatic consequence; see text to note 53 below.15 See n 9 above. Prior to Smits and Peerbooms the domestic law had required patients to ¢rst seek a

non-contracted provider within the Netherlands. This was obviously discriminatory, and foundillegal in that case.

16 Mˇller-FaureŁ , n 6 above, para 52.17 ibid, para 51.18 ibid, para 63.

Gareth Davies


treatment abroad could legitimately be restricted to certain cases. On the otherhand, this was not the case for out-patient care, which included treatment outsideof a hospital as well as treatment in hospital day-clinics. By contrast, the Spanishgovernment considered an important di¡erence between domestic and foreigncare to be that in the former case the money paid to the provider was retained inthe national economy and a slice of it went to the state in taxes. This was truewhatever category of care was supplied, and meant there was no need to distin-guish between them.19

A number of other governments also intervened, mostly in support of theNetherlands. For example the Danes were particularly concerned that freedomto be treated abroad would result in excessive consumption of health care, anda loss of expertise among national medical sta¡.20 However, the UK positionwas the most distinctive. Possessing a system even more antithetic to patientfreedom, and under even more ¢nancial stress, it argued strongly both in supportof the Netherlands, and that even if the Netherlands were to lose, the NationalHealth Service (NHS) would be di¡erent enough to be distinguished. Inretrospect it might have been wiser to have intervened less forcefully ^ thenthe judgment might have been less clearly relevant to the NHS. As it was, bring-ing its particular characteristics to the attention of the Court caused them tosome extent to be addressed, and arguments for their importance to be largelyrebutted.

One argument emphasised the uniqueness of the NHS.21 As a free to patients,non-pro¢t making, body, it was claimed it did not provide economic services.This would exclude it from the application of Article 49 EC, which only appliesto services provided ‘for remuneration’.22 The contrast, although not spelledout in the judgment, would be with continental insurance-based schemes.Even if these provide care free at the point of delivery, as in the Dutch case, theprovider and insurer are separate institutions, and there is clearly paymentbetween them, for services rendered. In the UK, provider and payer are partof a single umbrella organisation. Even if internal payments occur and couldbe identi¢ed, they could be seen as not ‘remuneration’ in the Treaty sense. Theirinternality might rob them of the economic or transactional character necessaryto triggerArticle 49.

Alongside this approach, the government restated the structural and planningarguments of the Netherlands but in a somewhat more apocalyptic form.23 Theysaid that the management of waiting lists was an essential part of maintaining the¢nancial viability of the system, and if patients could dodge them and claimreimbursement then resources would be drained to the extent that the ability ofthe state to provide adequate and balanced health care would be threatened.Moreover the viability of individual institutions would be threatened by the factthat some might experience an increase in patients, coming to the UK, while

19 ibid, para 54.20 ibid, para 60.21 ibid, para 59.22 See Article 50 EC.23 Mˇller-FaureŁ , n 6 above, paras 55^56, and 58.



others might experience a decrease, as UK patients emigrated. Unable to predictthis, they would, presumably, although it was not clearly stated, ¢nd this instabil-ity seriously threatened their function.

On undue delay, the UK proposed an argument by analogy with regulation1408/71,24 to the e¡ect that this should only be the case where waiting times werebeyond what was normal, or the maximum, for the state in question.This, theyindicated, was the current UK condition for authorising treatment abroad.25

THE FINDINGSOF THE COURTOF JUSTICE

The judgmentwas built around the distinction between hospital and non-hospitaltreatment. For the former, the Court accepted that the needs for planning andstability could justify restrictions on system-external treatment, and in particulara requirement for prior authorisation.26 However, while such authorisation couldbe demanded, and refused on the basis that treatment is available within thesystem, the conditions for permission or refusal must be objective, non-discrimi-natory, and transparent, and the system for authorisation must also be accessible,judicially challengeable, and with decisions given in a reasonable time.27 More-over, if the position is that foreign treatment is only permitted when it is notavailable domestically without undue delay ^ as in Mˇller-FaureŁ , and similarly tothe current position in the UK ^ then this time condition must be interpretedwith respect to all the facts of the case, in particular the medical circumstances,and the circumstances of the patient, but not primarily in the light of what is anormalwaiting time.28 Thus themere fact thatMs vanRiet’s waiting timewas nomore than average for that operation in theNetherlands, although not stated to beirrelevant, did not in itself render it acceptable. One would have to ask, for exam-ple, how much she might su¡er from the delay, whether her situation woulddeteriorate, whether her employment position would be harmed, and whethershe had been the victim of earlier delays. Such factors must be the primary basisof any decision.These rules are a signi¢cant expansion of what had been said inprevious cases, and will be fertile ground for lawyers.

By contrast, restrictions on non-hospital treatment abroadwere not justi¢ed.29

This is the most powerful ¢nding in the case. It re£ects the fact that the essentiallystructural arguments put forward for restriction are far less applicable to this kindof treatment. In anycase, the Court noted a number of factorswhichwouldmini-mise any disruptive e¡ect. One was that that linguistic, cultural and geographicalbarriers were likely to prevent huge numbers of people taking advantage of thisright ^ or at least it had not been prevented with any convincing evidence tothe contrary. As a result the ¢nancial implications would not be dramatic.

24 Reg. 1408/71, in consolidated and amended form in O.J. 1997 L 28/1; since amended by Reg. 1223,O.J. 1998 L 168/1.

25 Mˇller-FaureŁ , n 6 above, para 57.26 ibid, paras 77^81.27 ibid, para 85.28 ibid, paras 89^92.29 ibid, paras 93^98.

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Compounding this, the scope of insurance cover was not a¡ected by where treat-ment was received.The type of treatment whichwas paid for, and the amount ofcover, could be applied equally to foreign treatment, thus ensuring that total costsdid not spiral. Moreover, the conditions of access to treatment, provided theywere objective and non-discriminatory, could be applied to non-system treatmentas much as to in-system handling. In particular, the condition that a specialistonly be seen upon referral from a general practitioner (GP) ^ the custom in theNetherlands, as in theUK ^ could be continued. Apatient could not self-refer to aforeign consultant and expect payment. GPs may now have to write open lettersof referral; referral only to local doctors would be discriminatory.

Finally, the Court considered whether speci¢c aspects of the Dutch systemwould justify a di¡erent position from the one stated above.30 In particular it con-sidered a rather technical argument put forward by the Ziekenfonds.Thiswas thatthe Dutch system contained no mechanism for out-of-system payments.Thus itwas physically, as it were, incapable of adapting to free moving patients. Paymentsabroad were alien to its very nature. The Court rebu¡ed this by remarking thateveryMember State, as a result of regulation1408/71, has a system for the paymentof the costs of foreign medical treatment supplied to their citizens abroad inthe case of emergency.The well known E111 form is a part of this, guaranteeingemergency care throughout the EU, which will be paid for, either directly or byreimbursement, by the home state health insurer or authority. There should beno problem, said the Court, in simply applying this to non-emergency treatment.

This is a rather sneaky and inadequate argument.31Cover for tourists who haveaccidents abroad raises simpler andmore minor issues than systematic payment toforeign doctors for voluntary treatment. One might expect a Member State to beprepared to gloss over issues of cost for authentic emergency treatment, whichwill inevitably be provided in hospitals, thus also making the chance of fraudmuch less. A regular £ow of bills from private specialists all over Europe requiresa di¡erent kind of scrutiny. However, the very fact of the Court’s somewhatcavalier approach is signi¢cant, showing that it is not prepared to allowMemberStates to e¡ectively opt out of the Treaty on the basis of their particular internalarrangements. A contract for free movement becomes meaningless if non-com-pliance can be justi¢ed by the fact that it was not convenient domestically. Thesub-text of the Court’s argument is not that the practicalities of paying for foreigncare should raise no problems, but that these problems are for Member States tosolve and they will be expected to do so.32

COMMENT

The position is simple; patients needing hospital treatment can generally be con-¢ned to their domestic system, but those wanting non-hospital treatment may

30 ibid, paras 99^108.31 Formore criticismof the Court’s use of this regulation in the health context seeA. Segurro Serrano,

‘Improvements in cross-border access to health care within the European union’ (2002) 43 HarvardInt’l LJ 553.

32 Mˇller-FaureŁ , n 6 above, para 102.



travel at will abroad and have their home authority pay or reimburse them.Twoimportant questions remain.Towhat extent is this true of systems other than theDutch, in particular the NHS, and what is meant by hospital or non-hospitaltreatment?

A number of factors indicate that the judgmentwill resonate beyond theNeth-erlands.Much of it was worded in away that seemed generally applicable, and thespeci¢c repetition by the Court of the UK arguments concerning the NHS indi-cate that it was considering the wider picture. Also, the Court clearly rejected therelevance of the UK’s argument that the NHS does not provide economicservices.33

In fact, NHS services probably are economic. It is well established that the statecan be an economic actor,34 and given that the NHS is in fact divided into institu-tions which buy and sell care to each other,35 it would be formalistic to claim anabsence of remuneration simply because theymay all in some sense be consideredpart of a single scheme.36 Nor does an absence of pro¢t-motive make any di¡er-ence.37 It is the exchange of money for services that is important, not institutionalphilosophy or ownership.38 Support for this is expressed in the judgment by thewords ‘a medical service does not cease to be a provision of services because it ispaid for by a national health service or by a system providing bene¢ts in kind’.39

The Dutch government had not mentioned a national health service. Only theUK had.This statement goes beyond the facts of the case and must be taken as abroader expression of the law.

However, the whole question may be ¢nessed. The patients’ claim was thattheir freedom to receive foreign economic services was being restricted. For thatit was necessary to show that the services abroad were such as must be paid for ^easy; they already had been ^ and that there was a restriction.The character of thedomestic system is irrelevant.40 At most it might go to the question of whether arestriction exists. It could be argued that a refusal to pay for a service abroad onlycomprises a restriction on movement if there is some prior obligation, or possibleobligation, to pay. Otherwise what is to stop frivolous suits insisting that the gov-ernment pay for holiday villas for all? At such an extreme the argument must becorrect; there have been cases built on similarly tenuous arguments, and the Courthas tended to dismiss them, claiming an inadequate link with free movement.41

The reasoning behind the dismissals is sometimes sketchy, but the sense isobvious. However, in general the threshold for ¢nding a restriction onmovement

33 ibid, para 103.34 See e.g. Case C-41/90H˛fner and Elser vMacrotron [1991] ECR I-1979.35 General information on the structure of the National Health Service can be found at www.doh.-

gov.uk/nhs.htm.36 G. Davies, ‘Welfare as a service’, n 1 above, 33^35.37 ibid, 29.38 ibid, 35^38. See alsoV. G. Hatzopoulos ‘Killing national health and insurance systems’, n 1 above,

693^694.39 Mˇller-FaureŁ , n 6 above, para 103.40 Smits and Peerbooms, n 1 above, para 55. Mˇller-FaureŁ , ibid, paras 39^40, but see Hatzopoulos,

n 1 above, 692^693.41 Case C-291/96Grado and Bashir [1997] ECR I-5531; Case 298/84 Iorio [1986] ECR 247; Case C-299/

95; Kremzow [1997] ECR I-2629; Case C190/98Graf [2000] ECR I-4093.

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is not high. To use the Court’s words, any measure that ‘hinders or makes lessattractive’ cross-border economic activity su⁄ces.42 Nor is this interpreted in aformal or restrictive way.43 It is rather the ¢nding of a restriction that is almost aformality, merely a prelude to themore substantive question of whether it may bejusti¢ed. It is in this latter area that the law does its real work. In the context inquestion, the patient has a choice between receiving treatment at home for free, orgoing abroad and paying for it.The fact of this choice results from the nature ofthe domestic healthcare system. It is obvious that this is su⁄cient to ¢nd a restric-tion ^ as the Court did.

In that case, a justi¢cation must be sought, other than the ones discussed andrejected in the judgment, if the NHS is to continue as it is. It is hard to see whatthat might be, or why it was not put forward along with the other UK submis-sions. At most there is only a question of degree between theNHS and theDutchposition ^ more ¢nancial strain in the UK, more di⁄culty with structural adap-tion. However, the way the Court used regulation 1408/71 indicates it is going totake a very robust approach to practical/structural arguments. A mere cry of ‘theNHS is not adapted to foreign service providers’ will achieve nothing.The UK’sonly resort, it is suggested, is what is in fact the most genuine underlying argu-ment; that the UK system has less money available than the Netherlands’, and sothe threat to its ¢nancial stability would be even greater. Perhaps it could add thatsince its system also has the longest waiting lists, it would also experience thegreatest out£owof patients. However, even this is doubtful.The British may havemore reason to go to Belgium than theDutch do, but they also have further to go,and a di¡erent language to speak. In any case, both these arguments are morequantitative than qualitative. That means they are not strictly for the Court ofJustice, which does not hold trials of fact, but for the national court.44

Yet the reality is that a national judge would be unlikely to distinguishMˇller-FaureŁ without asking Luxembourg. Then, even though the Court could, andstrictly perhaps should, defer questions of degree of e¡ect back to the UK, itsdesire for uniformity of law across the Community, as well as its desire forfree movement, provide it with a powerful motivation to indicate that since theUK position is qualitatively the same as that in M ller-FaureŁ , the answers, andfreedoms, are the same too. If it concedes the centrality of actual e¡ect, then thelegitimacy of Member State action will turn on factors that are dependent uponlocal circumstances, largely within national hands, and almost impossible to assess‘objectively’; budgetary position, the age, health and mobility of citizens (sincethese will a¡ect the actual impact of removing restrictions), and the £exibility ofthe workforce and infrastructure.This would be opening the door to abuse, and adegradation of the principle of free movement of services. Quite apart from thequestion of whether the Court should allow this, it is very unlikely that it would^ particularly on the evidence of the judgment inM ller-FaureŁ itself.

45

42 Case C-55/94Gebhard [1995] ECR I-4165.43 V.G.Hatzopoulos‘Recent developments of the case lawof the ECJ in the ¢eld of services’ (2000) 37

CMLRev 43, 74.44 See n 56 and 57 below.45 See text to n 56 et seq below. In other contexts the Court has also shown reluctance to hand factual

control back to national courts, and either denied the relevance of particular national fact sets, or



Andwhat is hospital treatment? The point is complicated by the fact that prac-tices are di¡erent in di¡erent Member States. In the UK and the Netherlandsmuch out-patient treatment is provided in hospital clinics, which in some coun-tries, such as Belgium, might be provided by specialists working from their ownpremises. Even small operations may occur outside of a hospital. Some of Ms vanRiet’s treatment was received outside of a hospital, but had she received it in theNetherlands would not have been. So is it or is it not ‘hospital treatment’? Theessential question is whether it is the place of actual treatment, or the normal loca-tion of that treatment domestically, which is decisive. Initially the latter may seemmore logical. The basis of permitting restrictions is the need to maintain infra-structure, which suggests that treatment that would be in that infrastructure maybe con¢ned there. However, apart fromonce again opening the door to abuse, bystructuring care unnecessarily around hospitals, the logic is less convincing uponexamination.The very fact that the care was provided elsewhere indicates that itcould have been. Therefore the need for infrastructure is clearly not as great, ifexistent at all. It is merely being used opportunistically, as it were.

This is supported by the fact that the Court in fact categorised Ms van Riet’streatment by looking at where she had actually received it, and ignored whetheror not it would have been in a hospital in the Netherlands.46 Following thisapproach broadens the signi¢cance of the case for the UK. Any specialist consul-tation, and many treatments, are available on the continent outside of hospitals. Itwould seem that they therefore fall within the non-hospital category, and UKpatients are now free to travel to receive them, and to avoid waiting lists at home.

The Court also acknowledged the logic, apparent from the above, of assimilatingout-patient care to non-hospital care, as the Commission had proposed.47 Althoughthe Court felt the point did not in fact need to be decided, since the parties had notbrought it into dispute, it is suggested that this must be correct. Then everythingother than care actually received as an in-patient would count as non-hospital.

CONCLUSIONS

This is a remarkably purposive judgment, in both substance and methodology.Welfare and defence are the last bastions of respectable nationalism, and the Courtis clearly pushing for a Europe where Member States are more concerned withe¡ective provision, and less with achieving national closure. The UK govern-ment, embarrassingly, claimed that waiting lists were necessary to ensure the pro-vision and maintenance of adequate hospital care; they guaranteed the food forthe machine.48 The Court, sardonically, replied that waiting lists were obviously

contained their use. See e.g. Case C-418/421Semararo Casa Uno Srl v Sindaco del Commune de Erbusco[1996] ECR I-2975 (but cf Case C-405/98 Konsumentenombudsmannen v Gourmet International Pro-ducts AB [2001] ECR I-1795 and see P. Koutrakos,‘On groceries, alcohol and olive oil: more on freemovement of goods’ (2001) 26 ELRev 391); Case C-210/96Gut Springenheide GmbH, RudolfTusky vOberkreisdirektor des Kreises Steinfurt, Amt f ˇr Lebensmitteluberwachung [1998] ECR I-4657.

46 Mˇller-FaureŁ , n 6 above, para 93.47 ibid, para 75.48 ibid, para 55.

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the antithesis of the provision of high-quality hospital care to patients.49 It will beinteresting to see whether national authorities succeed in presenting their defenceof national systems as in the interests of the patient, or whether the Court is seenas the patient’s protector against re£exively conservative authorities who are lessinterested in the quality of individual welfare than in resisting loss of control.

To some extent this depends on what actually happens; will patients £oodabroad or not? The Court thought not, Member States feared so, but both wereinevitably speculating. A rational approachmight seem to be trial-and-error, withthe possibility of re-imposing restrictions if necessary.While not excluded bylegal principle, Member States may understandably fear that if they concede freemovement, and then their worst fears start to materialise, the Court may not letthem retreat. The law may operate in practice, if not in theory, like a ratchet.Hence they ¢ght to resist the ¢rst step. Ironically, by doing so they weaken theirown position; they have no hard evidence to support their £oodgate claims,which as a result seemmelodramatic and unconvincing.

But where is it all going? After health, what? Analogous arguments can bemade about pensions, education, and unemployment insurance.Why should Inot be able to send my child to school in France and have the government paywhatever it would pay for him to go to school in the UK?50 Why can I not stoppaying the proportion of my tax that goes to social insurance, and then take it outwith a foreign provider, who perhaps o¡ersme better terms?One response to thislatter argument is that this undermines the redistributive aspects; the rich willleave the system, leaving not enough money for the poor.51 However, this neednot be the case.The rich can be obliged to pay their tax to the extent that it is redis-tributive, but be relieved of the proportion that may, on average, go to themselves.This they could then use to purchase their insurance, or other service, elsewhere.

Indeed, strictly the law already demands these things.TheTreaty provisions onthe free movement of services are directly e¡ective, and as the Court often says,the special nature of certain services does not remove them from its ambit.52 Nor,following the logic ofMˇller-FaureŁ , does the fact that they are not economic havemuch force. One of the intriguing possibilities raised by this judgment is whatmay be called cross-liberalisation. Even though a service is not organised in an‘economic’manner in one Member State, it may become subject to the liberalis-ing e¡ect of theTreaty because equivalent services in other Member States are. Asthe case outcome indicates, it is not the nature of the system itself that determinesthe free movement obligations upon it, but the nature of the outside system, orprovider, towhich an individual wishes tomigrate.53 Yet once a system is adapted

49 ibid, para 92.50 See Davies,‘Welfare as a service’, n 1 above, at 35; Case 236/86 Belgium v Humbel [1988] ECR 5365;

Case C-109/92W|rth v Landeshaupstadt Hannover [1992] ECR I-6447.51 See Case C-159/91Poucet and Pistre vAssurances GeŁ neŁ rales de France [1993] ECR I-637.52 E.g. Smits and Peerbooms, n 1 above, para 54.53 Free movement is here importantly di¡erent from competition law. Behaviour by public institu-

tions that restricts movement can often also be seen as anti-competitive. The NHS, with guaran-teed subscription from all UK taxpayers, is a prime example.Yet competition law often does notbite because the institutions are not seen as undertakings, and so not subject to its obligations.Their own character thus plays a much greater role than in free movement. Competition canregulate the players once the market game starts, but it seems less suited to getting that game



to permitting exit, and funding that exit, it comes under pressure to reorganise,and is likely to become itself ‘economic’. This can be seen as a replication in thearea of services of the storyof the EuropeanUnion as awhole. Formally,MemberStates remain competent to choose their tax systems, the organisation of theirpublic services, and many other aspects of life. However, once some MemberStates make certain choices ^ low taxes, loose planning controls, privatisation,strict asylumpolicies ^ it becomes very di⁄cult in practice for other states to resistfollowing. Member States pull each other up, or down.

This e¡ect is magni¢ed by the fact that cross-border liberalisation often leadsto domestic liberalisation. Admittedly, the law is unambiguous in excluding in-ternal situations.54 The right of free movement protects foreign providers, andpatients wishing to travel abroad, but does not embrace domestic non-systemproviders.Thus a Dutch (or British) patient may go to Paris, but has no Commu-nity law right to go to a non-contracted or private hospital in the Netherlands orUK. This may be quali¢ed if that domestic institution is foreign owned, or abranch of a foreign operator, so that a cross-border aspect may be present, butthe general rule remains.55 However, this presents an apparently absurd policy; isit really sensible to pay for treatment in Ostend but not in Kent? Such an ap-proach is di⁄cult to defend politically, leading to pressure to apply free move-ment within the state too. There is also the advantage that national rather thanforeign treatment diminishes the loss of money and skills that may be feared.On the other hand, domestic movement is likely to be much more used thanmovement abroad, so the system-undermining e¡ect of patient freedomwill bevery much greater.

The Court’s purposiveness, impatience even, is also shown by its method. On areference such asMˇller-FaureŁ its competence is limited to questions of Treaty in-terpretation.56 What that means is ambiguous, but clearly it suggests a degree ofabstraction, and in any case it is uncontroversial that factual issues, including theapplication of theTreaty to the facts in hand, are for the national court.57 Yet thisdistinction is a soothing mantra more than an operating rule, and many of theCourt’s ground-breaking judgments in the area of free movement have been oneswhere it has e¡ectively decided the case in hand ^ descended to avery low level ofabstraction, and spelled out in a factual way what can and what cannot.58 Mˇller-

going. There are a number of other issues about the relationship between free movement andcompetition in the area of welfare that may become important, but are outside the scope of thisnote. In particular, the notion of economic activity is central both to Treaty services and to thede¢nition of an undertaking ^ yet it is not obvious that it is applied or understood the same wayin both contexts. See here V. G. Hatzopoulos ‘Killing national health and insurance systems’, n 1above.

54 See e.g. Case C-108/98RI-SANSrl vCommune di Ischia, Italia Lavoro SpA, Ischia Ambiente SpA [1999]ECR I-5219; N. Nic Shuibhne ‘Free movement of persons and the wholly internal rule: time tomove on?’ (2002) 39 CMLRev 731; G. DaviesNationality discrimination in the European internal market(The Hague: Kluwer Law International, 2003) 117^144.

55 See Hatzopoulos, n 1 above, 703^705.56 Article 234 ECTreaty.57 See A. Arnull note on Case C-206/01Arsenal Football Club v Reed, (2003) 40 CMLRev 753, 765.58 E.g. Case 120/78 Cassis de Dijon [1979] ECR 649; Case C-267 and 268/91Keck andMithouard [1993]

ECR I-6097. See also G. Davies ‘Of rules and referees’ (2003) 28 ELRev 408, 415; S. Enchelmeier‘The awkward selling of a good idea’ (2003) YEL (forthcoming).

Gareth Davies


FaureŁ follows this tradition.The question of howmany patientswould be likely togo abroad for treatment, and the cost implications of this, and the consequente¡ects on the health care system, and then whether restrictions are justi¢ed andproportionate, all look at ¢rst glance factual matters, and thus for the nationalcourt. Not any more.The Court has e¡ectively claimed these issues as part of theTreaty, and in doing so been able to enforce its will upon all Member States.Theadvantage lies in the results; an inevitable change is achieved quickly and cleanly.The disadvantage lies in the infantilising of national courts,59 and the risk of, evenunwilling, insubordination.60 What if a High Court judge now hears evidencethat in fact the e¡ects on the NHS would threaten its infrastructure? Should hedistinguish Mˇller-FaureŁ ? Such factual precision would be the common law way,but it is not normally the Community law approach ^ although the language ofthe Court inMˇller-FaureŁ does not entirely exclude the possibility.

61

Yet in the end neither the detail, nor even the direct results, of the case are asimportant as its function as a test-case for the potential of negative harmonisation.It is the fact that the Court got to this issue ¢rst, before the Commission, thatraises the really big questions. It means that theMember States have been exposedto the limited and negative e¡ects of a court judgment applying theTreaty, ratherthan the dramatically homogenising e¡ects of Community legislation. This istherefore an opportunity for them to demonstrate that they can in fact complywith theTreaty evenwithout sharing a common system, that regulatory diversityinwelfare is compatible with free movement. If they can do so, then there will beno need for any further Community action, and indeed subsidiarity and propor-tionality would forbid it. The national advantages of that will be that states willstill be able to organise according to their wishes and culture, and the Europeanadvantagewill be that diversitymay serve as a laboratory for quality. On the otherhand, if Member States fail to take on board the judgment, so that every inch ofmovement in this area and related ones has to be fought for before the Court ofJustice, then inevitably the case for positive harmonisation will be that much ea-sier to make, and ultimately it will come.62 Subsidiarity cuts bothways, it may besaid.Where an end can be achieved locally, that must be permitted, but then thelocal power must do its part too.

The national failures to remove welfare barriers no doubt result largely fromthe usual mixture of incompetence, lack of imagination, and a blind fear of thenew. Certainly this is the impression reading the judgments. However, there maybe something more principled as well. Openness and free movement are di⁄cultto achieve when the core providers are state monopolies, which rely on compul-

59 See P. Allott ‘Preliminary rulings ^ another infant disease’ (2000) 25 ELRev 538.60 See A. Arnull, n 57 above, and G. Davies ‘Of rules and referees’, n 58 above.61 SeeMˇller-FaureŁ , n 6 above, paras 95 and108, emphasising that the Court’s ¢ndings are based on the

evidence it has seen, but then para 109 presenting its answer as ¢nal and legal and no longer opento negotiation.

62 Currently harmonisation of health matters is forbidden byArticle 152 EC. However, a‘High LevelRe£ection Process’ on patient mobility and healthcare is underway, and the European Councilhas called for a Commission communication setting out further proposals for cooperation in this¢eld. See ‘Strengthening the social dimension of the Lisbon strategy: streamlining open co-ordi-nation in the ¢eld of social protection’.



sory membership by the population. Thus reform to comply with the Treaty islikely to lead in the direction of more market-like structures, with a multiplicityof possible providers, so also private.This is the directionMember States aremov-ing in anyway, for economic and political reasons, but it is also one of which theyare nervous, and to which there remains ideological opposition. The regulatorystate, however e¡ective at protecting and nurturing its citizens, is not seen asequivalent in social or ideological terms to the directly providing one. In the con-sensual corporate states of Northern Europe the distinction may not be perceivedso sharply. However in centralised and con£ictual Britain and France, to give twoexamples, the state is not just form, but substance, and the line between publicand private is traditionally clear and important. It is an increasing blurring of thatlinewhich is inherent in themix of solidarity and cross-border freedom called forby theTreaty, and which is di⁄cult for domestic political authorities to embrace.

Nevertheless, the foot-dragging approach seen in M ller-FaureŁ is a dishonour-able compromise. A realisation, and on a certain level, acceptance, of the necessaryreforms is shown by the fact that states allow the Court to decide these cases. Ifthey believed their own arguments they would surely have pushed for Treatychange to protect their position.Yet so long as they do accept theTreaty, one feelsthey must have some obligation to initiative, to show creativity and purposive-ness themselves in achieving its ends, rather than seeking to turn every technicaland futile argument into a reason for delay. It would be sad if Europe was head-ing towards a grand union of principle, and yet a legal culture of sullen non-compliance.

Gareth Davies


Health and Efficiency: Community Law and National Health Systems in the Light of Müller-Fauré

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Transcript of Health and Efficiency: Community Law and National Health Systems in the Light of Müller-Fauré