Thursday, May 17, 2012

International trade in health care among governments

On an episode of EconTalk from a while back, Dean Baker offers a really cool idea:

Baker: I actually support what I consider a more market solution, in the sense that I'd like to see more trade in health care, and there are a few different ways you could do that. One is you could let people who are on Medicare, who by definition almost--they aren't all retired but most of them are--let them buy into the health care systems of other countries that have lower costs. Let them buy into England's health care system or Germany's and pocket half the difference. So, if the difference, and you look at the projections, 10-20 years out, differences are in many cases over $10,000, even $20,000 a year depending on which country you look at, and suppose you said: Let people pocket the difference.
Roberts: How would we do that? How would that work? 
Baker: Well, we'd have to negotiate a deal with these countries. 
Roberts: They are subsidizing their own people; they are not going to want to subsidize us. 
Baker: No, no, no they are full cost. They are full cost to cure. 
Roberts: Oh, because they are cheaper. 
Baker: Yes. 
Roberts: Or even higher--110%.
Baker: Yes, give them a premium, absolutely; you'd make it worth their while. So, let's just throw some numbers out. Let's say it cost $6000 a year to give a person over 65 care in the United Kingdom, and let's say it cost $15,000 here. So, we'll give them $7000. A thousand to pocket. $8000 left. So, someone goes to the United Kingdom to get their care, they get $4000 and the U.S. taxpayers save $4000. 
Roberts: That's going to be hard to implement, obviously, because most people don't want to go to the United Kingdom for their health care--for a bunch of reasons. 
Baker: Understood, but a lot would. 
Roberts: Because you'd let them pocket the difference. That's clever, interesting.
It's a clever idea, but don't hold your breath for budget-maximizing bureaucrats in the U.S. to drive such innovation.

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