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Home Publications Blogs Beat the Press Health Economists Don't Believe in International Trade

Health Economists Don't Believe in International Trade

Monday, 27 September 2010 17:03
Princeton University Professor Uwe Reinhardt does not believe that it is possible to keep per person health care costs from rising from twice the average in the countries with longer life expectancies than the United States to more than four times the average in countries with longer life expectancies. Of course there are obvious ways to get costs done, such as the $270 billion a year that could be saved by eliminating government patent monopolies for prescription drugs and adopting a more efficient mechanism for financing drug research.

But the easiest mechanism to eliminate these enormous price differentials would be to simply open the market to international trade and allow people in the United States to take advantage of the more efficient health care systems in other countries. Too bad the NYT's economists don't believe in free trade.
Comments (9)Add Comment
Off-Shoring the Sick
written by Ron Alley, September 27, 2010 8:37
Even after scanning your paper I cannot quite understand why another country, say France for example, would be willing to let battalions of sick Americans enlist in its health care system. Most probably would not want to leave home, family and community until they faced serious illness.

Communicating with physicians is difficult even when English is their native language.

Maybe Reinhardt had a point when he suggested that Nixon's cost controls would not survive long today.
People R Not As Dumb
written by James, September 27, 2010 8:48
Mr. Ron Alley said "Most probably would not want to leave home, family and community until they faced serious illness."

Really? It has been in practice for years and even CNN Money, which doesn't have much good info, talks about plenty of people trending to take ELECTIVE surgery in foreign countries.

Take a look at Thailand and esp. Singapore that has spent tons of money to build up their hospital care knowing their own will not meet the demand but all for foreigners.
written by izzatzo, September 27, 2010 9:05
The problem with Baker's proposal to reduce unit health care cost with competition is that price elasticity is greater than one, which will increase health care spending even more due to consuming too much of a good thing, so Reinhardt is correct.

For example, this is what happened when aspirin went over the counter and generic, causing people to consume way too much aspirin due to the moral hazard of underpricing rather than pay Bayer brand prices.

By keeping prices higher, spending will be constrained appropriately to avoid shortages of physicians who refuse to work at wages and prices set below free market prices by socialized medicine.

Besides, patients don't have any business making choices among competitive medical alternatives anyway. It's time consuming, risky and deeply offensive to those in the field who have spent a large part of their career advancing the practice of price discrimination from a science to an art.
The Medical-Industrial Complex
written by paul, September 27, 2010 10:13
Health care costs in the U.S. are caused by the Medical-Industrial Complex, i.e, the medical device and delivery system that is reaping massive profits that are funded by law under Medicare, etc.

Just take a look at the $10 Billion stent market that didn't even exist a decade ago: there is unlimited demand for stents and the government is funding virtually all of it.
easier easiest mechanism
written by frankenduf, September 28, 2010 8:16
hello... anyone heard of single payer?!
Biased Selection, Anyone?
written by CLBetley, September 28, 2010 2:54
Dean Baker could be commended for creativity in applying one of economists' favorite ideas: comparative advantage in production of goods for trade.

As a practical policy, however, trade in human lives (or the actuarial value thereof) is not only illegal, it is also a bad idea. Nowhere in his 2009 paper is there any recognition that those elders who might take advantage of the opportunity to migrate to another country's health system are likely to be the healthiest and most mobile.

The remainder to be served by Medicare and Medicaid would be comprised of the most expensive, complex, and hardest to care for chronic illnesses. Understanding how different health care systems address the issues of caring for their most difficult cases (or preventing their occurrence) would better enlighten us in seeking control of the US health cost problem.

Then we might consider whether the ideal model of a global market, without constraints and regulation, is as ill-suited for health care as it is for finance and manufacturing, as Dr. Baker has often pointed out in his articles.
written by Jerry Jones, September 30, 2010 9:22
I love this idea!

I'm going to write my congressional representatives and ask them to support this:

written by ???, October 02, 2010 10:12
written by fp3690, October 03, 2010 5:48
Two things. First, you cannot have a free market for healthcare. Otherwise, the unhealthy would not have insurance. This is textbook undergrad adverse selection.

Second, who said that there is a free market for doctors? It's actually one of the most stringently protected industries from the US. Coming from abroad to work as a doctor in the US is next to impossible. Also, as it costs so much to become a doctor (and this cost does not reflect market outcomes, but mostly AMA influence) fewer people than optimal become doctors and this scarcity pushes up the cost too high.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.