Free trade in Medicare benefits: the best idea you won’t hear in Washington | Dean Baker | Comment is free | guardian.co.uk
It is striking in this discussion that no one advocating Medicare cuts ever proposes taking advantage of the lower-cost healthcare systems in other countries. As every policy analyst knows, the problem of Medicare costs stems almost entirely from the fact that our healthcare system is incredibly inefficient. We pay more than twice as much per person for our healthcare as people in other wealthy countries – even though we have almost nothing to show for it in the way of better health outcomes.
This enormous gap in costs suggests an easy opportunity for massive gains from trade. If people in the United States could get their healthcare from other countries, there would be huge savings.
While it may impractical for most of the population to go to another country for most of their healthcare needs, this is not true for Medicare beneficiaries, the vast majority of whom are retired. Many retirees have friends and/or family in other countries. If they opted to move to another country to get their healthcare, there could be enormous savings that they could share with the government.
To take a simple example, the Medicare trustees project that the cost to the program for an average beneficiary in 2020 will be close to $16,000. Suppose the cost of providing care in the United Kingdom is half as much, or $8,000 a year. If Medicare paid for a beneficiary to get care in the UK instead of the United States, the savings would be $8,000 a year.
Medicare could pay half of this money, or $4,000 a year, to the beneficiary and still save $4,000 for each beneficiary who opted to go to the UK to get care. If 1 million beneficiaries (@2% of beneficiaries) opted to take advantage of this sort of deal, the savings would be $4bn a year. If 5 million beneficiaries took advantage of this opportunity, the savings would be $20bn a year.
Over a longer horizon, the gains would be projected to get much larger, as US healthcare costs are projected to hugely outstrip the increase in costs in other countries. As a result, the savings from going to the UK, or elsewhere, could easily exceed $16,000 a year by 2030. This would mean both that the government’s savings would be increasing for each person that took advantage of this deal and also that many more beneficiaries would likely opt to get their care from other countries.
Once we go out 20 years, for many beneficiaries, their share of the projected savings would more than double their income. The projected gap in healthcare costs are so enormous than the US government could even pay a premium of 10-20% above the cost of healthcare in other countries and still have enough money left over to allow large payments to beneficiaries and huge savings to the government.
The point is simple. The story of those incredibly scary long-term deficit projections is a story of exploding healthcare costs. If these projections of exploding healthcare costs prove accurate, then the country would enjoy enormous savings by having Medicare beneficiaries get their healthcare from the more efficient healthcare systems in other countries.
If we were having an honest policy debate, this sort of proposal for free trade in healthcare services would be front and center on the national agenda. After all, which is a better way to save money on Medicare: making people wait until age 67 to qualify for benefits or giving beneficiaries the option to get healthcare in another country and to put some money in their pockets?
However, you won’t hear about free trade in healthcare in the Washington policy debates. The Washington policy elites love trade when it can be used to beat down the wages of auto workers or truck drivers. But when trade might jeopardize the income of the pharmaceutical and the insurance industries, and highly-paid medical specialists, they don’t even want it to be part of the discussion.
And since the elites control the Washington policy debate, folks can expect to wait until age 67 for their Medicare and/or pay higher premiums.