Free Trade in Health Care
The Gains from Globalized Medicare and Medicaid
There is an enormous gap between the price that people in the United States pay for health care and the price people pay in other countries with comparable health outcomes. The average annual per-person cost of health care in the United States in 2006 was $6,714. By comparison, the average per-person cost in the 26 countries with longer life expectancies was $2,964. For a family of four this difference would be $15,000, an amount that is comparable to the typical family's tax burden.
This sort of large gap in costs is exactly the situation in which trade provides the opportunity for the greatest gains. While health care is often place-specific in ways that manufactured goods and other traded items are not, there are still ways in which people in the United States can benefit from the lower-cost health care available elsewhere. In particular, an internationalization of the Medicare and Medicaid programs can offer enormous opportunities for gain both to beneficiaries and the country as a whole.
The basic point is straightforward: the vast majority of older Medicare and Medicaid beneficiaries are retired, so they have the freedom to travel that the working age population typically lacks. In addition, millions of beneficiaries have family, business, or emotional ties to other countries. These people could benefit enormously if these programs were restructured to allow them to buy into the health care systems of other countries and split the savings with the government. This could allow beneficiaries to enjoy a higher standard of living in their retirement years than would otherwise be possible, while also allowing taxpayers to save tens of trillions of dollars in the years ahead.
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