Globalization in Healthcare

September 25, 2010  |   Healthcare Issues

Paul Crist

September 18, 2010

Anyone who has paid any attention whatsoever to the healthcare reform debate knows that the U.S. spends more than any other country on healthcare, yet still fails to measure up on health outcomes as measured by the most common indices.  In the parlance of international economics and global trade, America is not where the comparative advantage lies when it comes to healthcare.

Globalization may be controversial, but no one at the WalMart checkout seems to be complaining about the bargain prices found there, thanks in large measure to the availability of cheaper imported goods replacing made-in-America merchandise.  And the quality of those goods must be acceptable, or consumers wouldn’t be buying.  So, why not apply the rules of international trade to save both consumers and third-party payers, including government which pays 46% of all healthcare expenditures in the US.  

The premise of globalization and gains from trade is based on price difference between high-cost countries and low cost countries for goods or services of comparable quality.  Globalization applied to healthcare offers the possibility of gains to the U.S consumer and economy that are several orders of magnitude larger than any other form of international trade we’re involved in.   

There are two ways of applying the “gains from trade” concept to healthcare:  Take the patients to cheaper doctors overseas, or bring the cheaper doctors to the patients.  Neither approach will be popular with the American Medical Association or other groups that represent the healthcare provider industry in America.  But that doesn’t mean the idea should be discarded.

One option presented in a recent study by the Center for Economic Policy Research suggests a voucher program for Medicare and Medicaid-eligible beneficiaries, allowing them to buy into lower-cost health systems in other countries.  That study bases its substantial projected savings on overly aggressive numbers of seniors who might be willing to retire outside of the U.S., but the underlying argument is sound.

Another approach would be to open up our immigration system to more qualified foreign-trained doctors, who tend to be willing to work for less than U.S. trained doctors.  Perhaps not having $250,000 in medical school debt has something to do with it.   That would tend to drive down physicians income and hospital profits, forcing efficiency and reducing costs.

Either way, we ought to be thinking creatively about how to apply the rules of global markets to health care.

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