The Protectionist Washington Post Won't Even Discuss Trade in Health Care

The United States pays more than twice as much per person for its health care as the average for other wealthy countries. It has little to show for this in the way of outcomes as it ranks near the bottom in terms of life expectancy. If we paid the same amount per person as people in other wealthy countries then we would face no long-term deficit problem, as the long-term projections would show budget surpluses rather than deficits.

This is why it is striking that a lengthy Washington Post article on health care never mentioned the sharp contrast between health care costs in the United States and elsewhere in the world. This implies the potential for large gains from trade. For example, if beneficiaries opted to buy into the health care systems of Canada, Germany, or England, the Medicare projections imply that there would be tens of thousands of dollars a year in annual savings that could be split by the government and beneficiaries. A less protectionist paper would have noted these opportunities.

The article also includes a couple of assertions that are questionable or could use some further elaboration. It cites House Budget Committee Chairman Paul Ryan as saying that:

"cutting provider payments beyond the targets in the Affordable Care Act [is] a sure path to Medicare’s collapse."

Given the size of the Medicare program, it is not clear that many providers would have much choice but to accept lower rates. This is almost certainly true in the case of doctors. There are few wealthy patients who do not currently have all the physicians' services they want. This means that if doctors refused to take Medicare patients because they considered the payments inadequate they would simply have to work less or retire early. Since most doctors probably cannot afford to do this, they would likely have little choice but to accept lower pay. (Of course if we removed the protectionist barriers that exclude qualified foreign physicians there would be plenty of doctors willing to accept much lower Medicare payments.)

The article also fails to note the reason that Medicare Part D has cost less than projected. According to the Food and Drug Administration there has been a sharp slowdown in the development of breakthrough drugs. It is possible that the decision to run Part D through private insurers is responsible for the slowing pace of technical innovation in the drug industry, but it is difficult to see how this would be the case. However, if the proponents of this decision (using private insurers rather than Medicare to run the program) want to take credit for slower cost growth, this is what they would be claiming.

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written by wkj, December 23, 2011 8:07 AM

Your main point is correct. However, the restructuring of the health care industry that would result from the suggested changes (or from Rep. Ryan's proposals if they were enacted) would be analogous to, but much more significant than, the agonizing long-term restructuring of the domestic airlines.

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written by skeptonomist, December 23, 2011 8:23 AM

I find outsourcing health care a very dubious proposition; an attempt to keep "free-market" processes going in an area where they don't work well. Krugman often refers to the work by Kenneth Arrow (I haven't read it myself) which explains why private health care breaks down. Most other countries, if they don't have single payer or fully socialized medicine, have very strict limitations on costs in health care, administered by the central government.

Will Americans put up with, in effect, having their health care run by other countries' governments?

Dean's Idea Could Actually Work
written by Paul, December 23, 2011 10:40 AM

Many Medicare users would probably enjoy retirement in Germany, UK, Canada or some other country with lower medical costs.

If Medicare encouraged them to relocate and picked up the cost of their medical care, the government could save billions annually.

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written by Bart Hobson, MD, December 23, 2011 1:36 PM

I'm glad this has come up again. In the latest PriceWaterhouse analysis of healthcare costs http://www.pwc.com/us/en/healt...2011.jhtml
the authors note that physician services account for 33% of costs, but currently have the lowest rate of increase and in fact trend downward in recnt years. It is true that physicians are paid more in the U.S. than elsewhere, but the majority of the costs lie elsewhere (hospital, pharmacy) which are medical services prescribed by physicians. Therefore, the greatest effect of physicians on healthcare costs is from the utilization of other services that they prescribe.

Since the availability of such services is elastic, I believe that bringing more physicians into the system, without controlling that utilization and cost, will increase healthcare expenditures.

I work with physicians from the U.S., India, Bangladesh, Pakistan, Taiwan, and Argentina, among other places, and they all generate pretty much the same utilization of services. My clinic does have lower utilization costs than most, as demonstrated in the recent CMS demonstration project, so my colleagues generally have better utilization profiles than many other physicians. But that is a consequence of the clinic culture, not anyone's country of origin. We have rival clinics in our area with much higher utilization levels.

A family transfers roughly $4000 a year to physicians.
written by Rachel, December 23, 2011 10:16 PM

This $4000 is based on Uwe Reinhardt's post at the NYT on Sept 16. If we could only save 25% of that, physicians would still be overpaid by international standards. And a savings of $1000 a year, as our President would tell you, could mean a lot to many families.

Overpaid: in 2008, $186 k for GPs and $334 k for specialists, according to BLS.

Uwe R. also gives a link to a report with useful international comparisons, including these:
$86 for routine office visit in US,$31 in France,
$526 for a CT scan in the US, $179 in France.
$3525 for C-section in the US, $1336 in France
(and that's just the physician fees).
$29,055 for angioplasty in US, $7666 in France

It's true that we do somewhat better here in terms of cataract surgery. But in general there's ample material here to illustrate CEPR's finding that we could share almost $8000 with any Medicare patients who chose French care over ours, and we would still save money.

Comment on the Politifact "lie of the year" debate "
written by Pat Donnelly, December 24, 2011 11:42 AM

An important point not mentioned is that the Ryan plan relies on provisions of Obamacare to work; insurance companies cannot refuse or charge more for customers with pre-existing conditions and they cannot drop your insurance without just cause. Without these provisions many medicare age people would be denied or over charged insurance. The problem is the Republicans want to repeal Obamacare.
Thank you, Pat Donnelly

The Protectionist Washington Post Won't Even Discuss Trade in Health Care

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