Sunday, April 15, 2012

"Free Trade in Medical Services"

James Surowiecki is resigned but displeased. Writing in The New Yorker, he seems resigned to the fact that Obamacare will soon be nullified by the Supreme Court. And he is displeased that we are going to lose the magic bullet that would solve America’s health care problem.

I can’t imagine why Surowiecki thinks that Obamacare will provide affordable, high quality universal health care, but that is neither here nor there.

More importantly, Surowiecki has offered a free market solution to the problem of distributing medical care in a world without Obamacare.

His thoughts are especially interesting because they follow the Republican playbook: let the free market do its work. Without knowing better, I will assume that Surowiecki does not swear fealty to the GOP.

Surowiecki’s solution is: medical tourism, or, more elegantly, “free trade in medical services.”

In his words:

If more Americans sought care abroad, it wouldn’t just save them money; it could also help control medical costs at home. Medical tourism can be considered a kind of import: instead of the product coming to the consumer, as it does with cars or sneakers, the consumer is going to the product. More medical tourism would increase free trade in medical services, something there has not been much of in the past. The U.S. has been religious about breaking down barriers to free trade, especially in manufacturing and service industries, exposing ordinary workers to foreign competition. But health care has been insulated from the forces of globalization. This has been great for hospitals and doctors, but less good for consumers. It’s one reason that the cost of health care has risen so much faster than that of almost everything else.
The American medical care system has been bad for patients and especially bad for taxpayers. But, even if it has been good for hospitals and doctors, it has been great for malpractice attorneys and government bureaucrats.

Didn’t Obamacare promise a raft of new jobs for bureaucrats, all the while protecting the interests of trial lawyers?

Since Surowiecki has opened up the possibility of free market solutions, let’s dust off that old Republican idea: opening up a free national market for health insurance.

Surely, much of the cost of health insurance could be brought down by competition across state lines and by eliminating state-imposed coverage mandates.

How would we implement the free market solutions Surowiecki recommends?

He explains:

It has been generally assumed that medicine is inherently a local business. But that would change if we allowed Medicare and Medicaid funds to be spent in foreign hospitals, or if insurers cut consumers in on the savings from treatment abroad. And if domestic hospitals actually had to compete with places like Bumrungrad or CIMA, the way American car companies have to compete with Toyota and Honda, they might be forced to become more efficient. Even an increase in domestic medical tourism—people journeying to lower-cost U.S. hospitals, like the Cleveland Clinic—would help. There are other ways to bring free trade to medicine, too. As the economist Dean Baker has argued, making it easier for foreign doctors who met standardized requirements to practice in the U.S. would hold down costs and improve service. In addition to exporting patients, we could import doctors. Politically speaking, of course, this all seems improbable, because the medical industry is a powerful lobby and uninterested in competition. But the reality is that, unless we find some other way to rein in health-care costs, the logic of free trade in medicine is going to become harder to resist.

I hate to quibble here, but the medical industry is not the only group that has a vested interest in the way the system is or is not working right now.

Government bureaucrats also have a vested interest, as do trial lawyers. If we ever got serious about medical tourism the airways will be flooded with stories of botched operations in Thailand and of innocent victims who are bemoaning the fact that they gave up their constitutional right to sue.

Still, Surowiecki points us in the right direction-- allowing the free market to help deliver high-quality, affordable, universal health care--something that Obamacare could never have done.


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