FacebookTwitterGoogle+RedditEmail

Free Trade in Medicare

by DEAN BAKER

Washington policy debates are chock full of rich people telling poor and middle-class people that they will have to tighten their belts. In fact, in the crazy upside down world of Washington this passes for “courage.”

Cutting back Medicare is one of the favorite forms of belt-tightening being pushed by the elites. Many of the advocates of deficit reduction argue for raising the age of eligibility for Medicare from 65 to 67.  Another favorite among this group is to require larger premium payments for Medicare from middle-class beneficiaries. Of course many Republicans would simply privatize Medicare and replace it with a voucher, which almost certainly would not be sufficient to cover the cost of health care.

It is striking in this discussion that no one advocating Medicare cuts ever proposes taking advantage of the lower cost health care systems in other countries. As every policy analyst knows, the problem of Medicare costs stems almost entirely from the fact that our health care system is incredibly inefficient. We pay more than twice as much per person for our health care as people in other wealthy countries even though we have almost nothing to show for it in the way of better health outcomes.

This enormous gap in costs suggests an easy opportunity for massive gains from trade. If people in the United States can get their health care from other countries there would be huge savings.

While it may impractical for most of the population to go to another country for most of their health care needs, this is not true for Medicare beneficiaries, the vast majority of whom are retired. Many retirees have friends and/or family in other countries. If they opted to move to another country to get their health care, there could be enormous savings that they could share with the government.

To take a simple example, the Medicare trustees project that the cost to the program for an average beneficiary in 2020 will be close to $16,000. Suppose the cost of providing care in the United Kingdom is half as much or $8,000 a year.

If Medicare paid for a beneficiary to get care in the U.K. instead of the United States, the savings would be $8,000 a year. It could pay half of this money, or $4,000 a year, to the beneficiary and still save $4,000 for each beneficiary that opted to go to the U.K. to get care. If 1 million beneficiaries (at 2 percent of beneficiaries) opted to take advantage of this sort of deal, the savings would be $4 billion a year. If 5 million beneficiaries took advantage of this opportunity the savings would be $20 billion a year.

Over a longer horizon the gains would be projected to get much larger as U.S. health care costs are projected to hugely outstrip the increase in costs in other countries. As a result, the savings from going to the U.K. or elsewhere could easily exceed $16,000 a year by 2030. This would mean both that the government’s savings would be increasing for each person that took advantage of this deal and also that many more beneficiaries would likely opt to get their care from other countries.

Once we go out 20 years, for many beneficiaries their share of the projected savings would more than double their income. The projected gap in health care costs are so enormous than the U.S. government could even pay a premium of 10-20 percent above the cost of health care in other countries and still have enough money left over to allow large payments to beneficiaries and huge savings to the government.

The point is simple. The story of those incredibly scary long-term deficit projections is a story of exploding health care costs. If these projections of exploding health care costs prove accurate, then the country would enjoy enormous savings by having Medicare beneficiaries get their health care from the more efficient health care systems in other countries.

If we were having an honest policy debate this sort of proposal for free trade in health care services would be front and center on the national agenda. After all, which is a better way to save money on Medicare, making people wait until age 67 to qualify for benefits or giving beneficiaries the option to get health care in another country and to put some money in their pockets?

However you won’t hear about free trade in health care in the Washington policy debates. The Washington policy elites love trade when it can be used to beat down the wages of auto workers or truck drivers. However when trade might jeopardize the income of the pharmaceutical and the insurance industries, and highly paid medical specialists, they don’t even want it to be part of the discussion. And since the elites control the Washington policy debate, folks can expect to wait until age 67 for their Medicare and/or pay higher premiums.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on The Guardian.

More articles by:

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

June 22, 2017
Jason Hirthler
Invisible Empire Beneath the Radar, Above Suspicion
Ken Levy
Sorry, But It’s Entirely the Right’s Fault
John Laforge
Fukushima’s Radiation Will Poison Food “for Decades,” Study Finds
Ann Garrison
Jeremy Corbyn, the Labour Party, and the UK’s Socialist Surge
Phillip Doe
Big Oil in the Rocky Mountain State: the Overwhelming Tawdriness of Government in Colorado
Howard Lisnoff
The Spiritual Death of Ongoing War
Stephen Cooper
Civilized, Constitution-Loving Californians Will Continue Capital Punishment Fight
Bruno Rodríguez Parrilla
Cuba Will Not Bow to Trump’s Threats
Ramzy Baroud
Israel vs. the United Nations: The Nikki Haley Doctrine
Tyler Wilch
The Political Theology of US Drone Warfare
Colin Todhunter
A Grain of Truth: RCEP and the Corporate Hijack of Indian Agriculture
Robert Koehler
When the Detainee is American…
Jeff Berg
Our No Trump Contract
Faiza Shaheen
London Fire Fuels Movement to Challenge Inequality in UK
Rob Seimetz
Sorry I Am Not Sorry: A Letter From Millennials to Baby Boomers
June 21, 2017
Jim Kavanagh
Resist This: the United States is at War With Syria
James Ridgeway
Good Agent, Bad Agent: Robert Mueller and 9-11
Diana Johnstone
The Single Party French State … as the Majority of Voters Abstain
Ted Rall
Democrats Want to Lose the 2020 Election
Kathy Kelly
“Would You Like a Drink of Water?” Please Ask a Yemeni Child
Russell Mokhiber
Sen. Joe Manchin Says “No” to Single-Payer, While Lindsay Graham Floats Single-Payer for Sick People
Ralph Nader
Closing Democracy’s Doors Until the People Open Them
Binoy Kampmark
Barclays in Hot Water: The Qatar Connection
Jesse Jackson
Trump Ratchets Up the Use of Guns, Bombs, Troops, and Insults
N.D. Jayaprakash
No More Con Games: Abolish Nuclear Weapons Now! (Part Four)
David Busch
The Kingdom of Pence–and His League of Flaming Demons–is Upon Us
Stephen Cooper
How John Steinbeck’s “In Dubious Battle” Helps Us Navigate Social Discord
Madis Senner
The Roots of America’s Identity and Our Political Divide are Buried Deep in the Land
June 20, 2017
Ajamu Baraka
The Body Count Rises in the U.S. War Against Black People
Gary Leupp
Russia’s Calm, But Firm, Response to the US Shooting Down a Syrian Fighter Jet
Maxim Nikolenko
Beating Oliver Stone: the Media’s Spin on the Putin Interviews
Michael J. Sainato
Philando Castile and the Self Righteous Cloak of White Privilege
John W. Whitehead
The Militarized Police State Opens Fire
Peter Crowley
The Groundhog Days of Terrorism
Norman Solomon
Behind the Media Surge Against Bernie Sanders
Pauline Murphy
Friedrich Engels: a Tourist In Ireland
David Swanson
The Unifying Force of War Abolition
Louisa Willcox
Senators Bernie Sanders, Cory Booker, Tom Udall Back Tribes in Grizzly Fight
John Stanton
Mass Incarceration, Prison Labor in the United States
Robert Fisk
Did Trump Denounce Qatar Over Failed Business Deals?
Medea Benjamin
America Will Regret Helping Saudi Arabia Bomb Yemen
Brian Addison
Los Angeles County Data Shows Startling Surge in Youth, Latino Homelessness
Native News Online
Betraying Indian Country: How Grizzly Delisting Exposes Trump and Zinke’s Assault on Tribal Sovereignty and Treaty Rights
Stephen Martin
A Tragic Inferno in London Reflects the Terrorism of the Global Free Market
Debadityo Sinha
Think Like a River
FacebookTwitterGoogle+RedditEmail