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Home Publications Blogs Beat the Press Will Medical Trade Be Included in the EU Trade Deal and the TPP? If Not, Why Not?

Will Medical Trade Be Included in the EU Trade Deal and the TPP? If Not, Why Not?

Sunday, 04 August 2013 07:40

The NYT has an article today on the enormous savings available to people who had major surgeries performed in Europe rather than the United States. The piece reports that the cost of hip replacement or knee replacement surgery in the United States are more than five times higher than they are in comparable quality facilities in Europe. (The gap would be even larger with facilities in Thailand and India.)

This shows the enormous potential gains from increased medical trade. In effect, our hospitals, doctors, and medical equipment makers benefit from tariffs on the order of 500 percent or more. If the Obama administration really is interesting in promoting growth through trade it would be difficult to imagine a sector with larger potential gains than trade in medical care.

The agreements would focus on setting clear liability rules, accreditation systems, and removing obstacles for insurers and government programs that prevent them taking advantage of lower cost medical services in other countries.

If the trade deals do not include major openings on medical trade then it would be a clear example of why these deals are in fact about selective protectionism rather than free trade. Past trade deals have been quite explicitly focused on putting U.S. manufacturing workers in direct competition with the low paid manufacturing workers in developing countries.

Anyone who believes in free trade would want U.S. doctors and other professionals subjected to the same sort of competition. Otherwise, they really only want to use trade to lower the wages of less educated workers to benefit the wealthy. (Low wages means cheap help.) It is dishonest to call that policy "free trade."  

Comments (12)Add Comment
Really excellent article
written by Jennifer, August 04, 2013 9:52
I thought this article was a good as any in describing the economic factors in medical costs, and how Belgium (in this example) does it differently, which includes price setting (to some degree) and results in decreased surgeon's salaries. Although it's not really described I'm guessing those salaries were not simply cut but are a result of costs lowered all the way around.
It is kind of ironic that the subject was "wary" of going to Thailand but was shocked how utilitarian the Belgium hospital was. I've read the hospitals in Thailand (at least the ones the foreigners go to) are run a lot like hotels and are in beautiful, tropical settings.
I thought it was great that they did mention patents-but of course they put "FDA expenses" in the same line which is offensive. First of all the FDA "expenses" are to keep manufacturers from killing/harming people, which the recent hip replacement debacle at Johnson and Johnson (briefly eluded to) should prove to people is a very real possibility. The idea that the costs of FDA compliance costs as much as patent protection is a joke.
There was a good place to insert some lines about trade in this piece, although not necessarily about medical service trade. Although its hard to know exactly because the texts are not publicly available it's expected both the European and Asian (TPP) trade deals are expected to significantly increase parent protection (bringing it closer to the US standard). This will have a dramatic effects on drug availability in many countries, it's reasonable to expect it there could similar effects on medical devices-making hip replacements more expensive overseas as well.
written by AlanInAZ, August 04, 2013 10:11
I am scheduled for hip replacement in three weeks in Tucson and have done some research in this area. I thought the Times piece was misleading and poorly written. It gave a totally false picture of the difficulties and risks of the surgery and also the costs in the US. The negotiated price with Medicare for my surgery is about twice the price in Belgium quoted in the Times article, not five times. There are definite risks for clots or infection post surgery and they can occur weeks after the operation. The person who went to Belgium was 67, why was he not on Medicare? No answer given in the piece. Why was he skiing and working out like a madman in the gym post surgery to such an extent that he required a hernia operation four months later? Frankly, he seemed like a jerk to me. There are many issues with these surgeries and they have become big business but this article was a pathetic introduction into the subject. Many commenters noted that their costs for hip replacements were much lower than the price in the Times article. If you are going to make a case for overpricing, then at least use costs that are typical. A $500 haircut in NY is not reflective of the costs of haircuts.

I will add that those with hip replacements are advised not to ski or run for exercise. The implants have a finite life and impact exercise wears them out. The exact opposite impression was given in the article.
written by Last Mover, August 04, 2013 10:38

Does this mean WalMart could soon be offering DIY colonoscopies in a box?

Can't wait.
These studies are nonsense
written by pete, August 04, 2013 10:55
I have negotiated health care too. Too much. But the "costs" are not how much the health care providers get. Hardly.

But this is a good point. We should open our borders to health care professionals. Probably most of the labor cost is nursing, other than the infrequent surgery. If we allowed more health care professionals in this would get our costs down to the level of Europer. It will take a while to get down to Thailand/India. These places are pushing hard for medical tourism, and are counting on U.S. protectionism to keep them profitable. Likely they will lobby to keep their health professionals in Bangkok, not California. So will the SEIU and the AMA.
written by skeptonomist, August 04, 2013 10:56
The cost differential shows the advantages of centrally administered systems, not the potential benefits of truly free trade. Is Belgium's system more "free-market" than that of the US? Of course neither is really free-market, prices are just set by different people.

It is obviously inefficient to fly back and forth to Belgium for medical needs. As far as I know medical care even in the EU is national, not cross-border. Importing doctors is more practical than medical tourism, but even there we would presumably be taking advantage of more national support for education in the other countries.

Foreign countries, especially those with lower per-capita GDP, tend to have a lot to gain from capturing manufacturing from the US. Would they really be gaining if non-taxpayers flocked to their countries for medical care? Maybe they would totally forbid such things or jack up prices to US levels. Would they want doctors to leave after having been educated?

As a rhetorical device Dean's promotion of medical "free trade" may make some sense, but it seems to me that the raw cost figures - twice the cost per person in the US - should be persuasive enough. There is not much hope for people who can't understand that.
written by GuyNoir, August 04, 2013 12:36
From the article:

"In addition, device makers typically require doctors’ groups and hospitals to sign nondisclosure agreements about prices, which means institutions do not know what their competitors are paying."

In what other market does this exist? This is crony capitalism at its worst folks.
written by AlanInAZ, August 04, 2013 9:37
I have visited the website for the hospital in Belgium cited in the Times article. They favor metal on metal implants, something I definitely would avoid.


It wasn't clear if they use the direct anterior or posterior approach for THR. The anterior approach would be a definite requirement for me based on my research and feedback from people I know who have experienced both.
@ AlanInAZ
written by ellen1910, August 05, 2013 4:21
I also wondered why the article's subject wasn't on Medicare so -- I reread the first couple of paragraphs. He was 61 at the time of the operation and presumably ("he could not stand long enough to make coffee") unable to wait four years for the operation.

The article pointed out that Medicare negotiates an inclusive fee with hospitals; it averages $12,099. (If that's Medicare's share, then, the negotiated cost is, on average, around $15,125 which is probably, a bit less than the current Belgium price.

N.B. The real issue is whether those of us going in for appendectomies are having our bills jacked up to pay the exorbitant costs of medical equipment.
written by AlanInAZ, August 05, 2013 6:04

Thanks for the clarification. Many of the NYT commenters also missed the timeline.

Everyone knows that medical care is more expensive in the US - what I objected to is the decision by the Times to create a sensational context to pull readers in. The majority of people in his position with private insurance would have been covered for DJD even if the disease was promoted by sports injury. As skeptonomist commented, the piece is really a call for regulated pricing in the health care industry. Europe does not have a free market in health care - they regulate pricing just as my utility charges are regulated by the Arizona Corporation Commission.
written by http://www.vogue4me.com/my_profile/blog-view/blog_56825.htm, August 05, 2013 10:44
Market power: why it's $127,500 for knee replacement near SF, $46,800 not far off
written by Rachel, August 06, 2013 6:55

Huge price variations occur even within California, according to the public interest group Calpirg.
It is not clear that facilitating international trade would improve these in-state variations.

Why so expensive near SF (to be precise, in the Oakland/Berkeley area)? It's because of the market power of a couple of big hospital chains. So, according to Calpirg, our hospitals in general charge about 2.7 times as much as hospitals in the lowest priced regions of California. (Angioplasty in San Jose costs $144,900, vs Bakersfield, $44,400. Life is more expensive in San Jose, but not four times more expensive!)

Unfortunately, the notions of medical market power or oligopoly scarcely ever enter into public discussions of excessive health care costs. Despite the fact that the power of the hospitals, for various reasons, seems to be growing. (Interesting article by Gottlieb in WSJ though.)

Adam Posen's article in 7 August edition of FT
written by Richard Cory, August 07, 2013 3:51
I would be interested in seeing Dean's reaction to this article which suggests (amongst other things) that IP rights are not really enforced in China and other emerging countries.

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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.