Omitted Trade Option Again Highlighted in FT

Today on June 1st the Financial Times published another letter by Prof. Jagdish Bhagwati that stresses our findings about the benefits of trade in lowering US health costs and improving access to providers. We had earlier written about this on December 23rd, 2008 as also reproduced in my post of that day.

The Obama Administration continues to ignore this option of importing doctors and exporting patients (medical tourism) despite its immense promise. The probable reasons? Expected opposition by a powerful lobby like the AMA, and misplaced protectionism. I call protectionism "misplaced" here because the scarcity of skilled health care personnel in the US is artificially jacking up prices and making it unlikely that medical tourism will contribute to greater unemployment. On the contrary, lower US health care costs as a result of trade may make broader US goods and services more competitive internationally.

Here is Prof. Bhagwati's published letter:

Sir, Krishna Guha’s excellent article (May 28) on Barack Obama’s plans for healthcare reform makes it clear that the president’s economic and medical advisers continue to ignore altogether the most important way in which comprehensive coverage could be facilitated by significant saving in costs and by easing the shortage of doctors and medical personnel: namely, a full-throated embrace of international transactions in medical services.

Sandeep (sic) Madan, of Global Healthnet, and I have argued extensively that costs (whose fiscal magnitude crippled the attempt to introduce comprehensive coverage in California) can be reduced massively with augmented measures to “export patients” and to outsource claims processing and customer service. These savings exceed those claimed with fanfare for the technocratic Obama proposal to computerise medical records.

Again, “importing doctors” and medical personnel represents an excellent way to alleviate shortages (such as those that have afflicted comprehensive coverage in Massachusetts). Independently, Fredrik Erixon of the European Centre for International Political Economy has long advanced similar proposals in the European context and recently extended his arguments to the Obama administration’s omissions in this regard to date.

Perhaps the administration’s de facto antipathy to trade lies at the bottom of this glaring omission; if so, it is costing the president’s major reform agenda!

But perhaps it is also because of the American Medical Association’s fear that international transactions in medical services will harm the earnings of their members. But, in that case, what happens to the president’s frequent claim that his administration will bring an end to the lobbying as we knew it?

Professor Jagdish Bhagwati,
Council on Foreign Relations,
New York, NY, US