We Need Free Trade in
JAGDISH BHAGWATI and SANDIP MADAN
2008; Page A19
Health-care reform is a major election issue. Yet
while Democrats Hillary Clinton and Barack Obama offer comprehensive
plans, important gaps remain. Neither plan addresses the need for
more doctors, a problem that Gov. Mitt Romney ran into when he
introduced comprehensive medical coverage in Massachusetts in
The other problem is the cost, an issue that earlier
this year killed Gov. Arnold Schwarzenegger's ambitious attempt at
reform in California.
No presidential candidate can afford to ignore the
potential of international trade in medical services to address
these issues. Consider the four modes of service transactions
distinguished by the WTO's 1995 General Agreement on Trade in
Mode 1 refers to "arm's length" services that are
typically found online: The provider and the user of services do not
have to be in physical proximity. Mode 2 relates to patients going
to doctors elsewhere. Mode 3 refers mainly to creating and staffing
hospitals in other countries. Mode 4 encompasses doctors and other
medical personnel going to where the patients are. All modes promise
varying, and substantial, cost savings.
Arm's-length transactions can save a significant
fraction of administrative expenditures (estimated by experts at
$500 billion annually) by shifting claims processing and customer
service offshore. Nearly half of such savings are already in hand.
Foreign doctors providing telemedicine offer yet unrealized savings.
We estimate that the savings in health-care costs could easily reach
$70 billion-$75 billion.
Mode 2, where U.S. patients go to foreign medical
facilities, was considered an exotic idea 15 years ago. Now this is
a reality known as "medical tourism." Today, many foreign hospitals
and physicians are offering world-class services at a fraction of
the U.S. prices. Costly procedures with short convalescence periods,
which today include heart and joint replacement surgeries, are
candidates for such treatment abroad. By our estimates, 30 such
procedures, costing about $220 billion in 2005, could have been
Mode 3, with hospitals established abroad, will
primarily offer our doctors and hospitals considerable opportunity
to earn abroad. Of course, the establishment of foreign-owned
medical facilities in the U.S. is also possible, and could lead to
price reductions by offering competition to the U.S. medical
Mode 4 concerns doctors and other medical providers
going where the patients are. It offers substantial cost savings,
since the earnings of foreign doctors are typically lower than those
of comparable suppliers in the U.S.
But the importation of doctors is even more critical
in meeting supply needs than in providing lower costs. According to
the 2005 Census, the U.S. had an estimated availability of 2.4
doctors per 1,000 population (the number was 3.3 in leading
developed countries tracked by the OECD).
Comprehensive coverage of the over 45 million
uninsured today will require that they can access doctors and
related medical personnel. An IOU that cannot be cashed in is
Massachusetts ran into this problem: Few doctors
wanted (or were able, given widespread shortages in many
specialties) to treat many of the patients qualifying under the
program. The solution lies in allowing imports of medical personnel
tied into tending to the newly insured.
This is what the Great Society program did in the
1960s, with imports of doctors whose visas tied them, for specific
periods, to serving remote, rural areas. U.S.-trained physicians
practicing for a specified period in an "underserved" area were not
required to return home.
It is time to expand such programs – for instance, by
making physicians trained at accredited foreign institutions
eligible for such entry into the U.S. But in order to do this, both
Democratic candidates will first need to abandon their party's
antipathy to foreign trade.
Mr. Bhagwati is a professor at Columbia
University and senior fellow at the Council on Foreign Relations.
Mr. Madan is the CEO of Global Healthnet.
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