Dean Baker and Hye Jin Rho of the Center for Economic and Policy Research have an interesting new paper titled ‘Free Trade in Health Care: The Gains from Globalized Medicare and Medicaid.’
In their paper, Baker and Rho argue the all-too-familiar line that “patients are paying too much for their health care.” But they provide an interesting twist: why not permit free trade in health care?
The huge gap between the cost of health care in the United States and the cost in other countries with comparable health care outcomes suggests the potential for substantial gains from trade. This paper describes one mechanism for taking advantage of these gains – through a globalization of the country’s Medicare and Medicaid programs. The projections in this paper suggest that the country’s long-term budget situation would be substantially improved if beneficiaries of these two programs over the age of 65 were allowed to take advantage of the lower-cost health care available in other countries (that also have higher life expectancies than the U.S.). This could also allow them to enjoy much higher retirement incomes than they would otherwise receive.
They estimate significant savings for the U.S. and gains for other countries. Who would have guessed there would be gains from trade (that’s sarcasm people)?
The chart below illustrates the potential savings to the government over the next 75 years for each beneficiary who opts to use a Medicare voucher to buy into the health care system of another country:
The table below shows the implied savings to the Medicare system if 30 percent of the eligible population opts to use a Medicare voucher to buy into the health care system of another country:
The gains from trade, of course, help the countries that provide health care as well. The gains to beneficiaries from moving to another country for health services are illustrated below:
So what can we make of this? Well, for one, the future can’t be predicated with any degree of certainty when it comes to health care. It is now in the filthy world of politics.
But if the health care debate truly centered on helping those who can’t help themselves, then the focus would remain on fixing Medicare and Medicare. But clearly helping the needy has somehow evolved into helping everyone.
Nevertheless, Baker and Rho provide an interesting way to sharply reduce the costs of health care for those who may need it.** In the words of the authors,
The huge gap between the cost of health care in the United States and the cost in other countries with comparable health care outcomes suggests the potential for substantial gains from trade.This paper has described one mechanism for taking advantage of these gains – through a globalization of the country’s Medicare and Medicaid programs. The projections in this paper suggest that the country’s long-term budget situation would be substantially improved if beneficiaries of these two programs were allowed to take advantage of the lower-cost health care available in other countries. This could also allow them to enjoy much higher retirement incomes than they would otherwise receive.
**I will not go into the morality or practically of providing health care to the poorer segments of society. Whether these programs are necessary is not my point here. My point is to highlight a practical method to improve what is unlikely to disappear.
Posted by Ariel Goldring 
