Sep 16, 2008

Free and Fair Trade in Healthcare

by Tim Ogden

One problem that developed and developing countries have in common is healthcare. Most developed countries are confronting aging populations, rising health care costs and shortages of trained personnel. Most developing countries are confronting poor healthcare infrastructure, rising healthcare costs (due to AIDS, malaria and TB in part) and shortages of trained personnel. A recent report from the Global Health Workforce Alliance, part of the WHO, pegs the personnel shortage at 4.3 million workers worldwide. In the US, the debate on how to address issues in the healthcare system largely divides into two camps—one which favors the adoption of a government-run national health insurance system and one which favors less government intervention in health insurance and care delivery to encourage more competition and, theoretically, lower costs and higher quality of care.

This summer, economist and free trade advocate Jagdish Bhagwati made the case for free trade in healthcare as a necessary part of any US policy to deal with rising health care costs and uninsured populations. Mr. Bhagwati notes that one of the problems encountered by Massachusetts in implementing its near-universal coverage plan is a shortage of doctors with relevant specialties who were willing to participate. He proposes making it easier for trained health care workers to come to the United States and practice. Easing restrictions on migration of trained workers in industries with worker shortages certainly makes sense, but in the context of a global shortage of health care workers it’s hard to see Mr. Bhagwati’s proposal as anything other than a zero-sum game that benefits the US and costs many developing countries. While the brain drain of trained healthcare workers in developing countries is currently only a small part of the problem—12 percent of developing nations’ worker shortfall, according to the Global Health Workforce Alliance—encouraging a healthcare brain drain is not a way to ease the developing world’s healthcare challenges.

More of a win-win might be achieved by throwing open the doors to medical tourism and trans-national payments for healthcare services. Fredrick Erixon of the European Centre for International Political Economy recently wrote an op-ed for the Financial Times which questioned why EU countries are attempting to limit free trade in healthcare. Many national health care programs in Western Europe are strapped for cash and resources, leading to long waits for non-critical procedures like knee replacements. Mr. Erixon argues that these countries should throw open the doors to allowing citizens to travel to eastern EU members who can provide these services quickly and at a fraction of the cost of western European hospitals. Whether public policy supports it or not, “medical tourism” is growing rapidly, as noted in the Economist. A number of private insurers in the US are encouraging the trend, seeing the benefit to their bottom line of patients getting even complex procedures like cardiac valve replacement in India. At the best hospitals in India, Thailand, Brazil and several other developing nations, standards of care are equal to that of the US but costs are as little as 10 percent of US rates. The Deloitte Center for Health Solutions estimates that at least 15 million Americans annually will travel abroad to receive health care by 2015.

Growing health tourism certainly carries the danger of creating a two-tiered, colonialism-style healthcare regime, where only rich foreigners have access to services while poor citizens remain as far away as ever from quality healthcare. But this outcomeseems to be relatively unlikely and easy to prevent. The growth of such top-tier healthcare providers in developing countries should inevitably create local demand and supply of trained workers with positive trickle-down effects. Additionally, developing country governments could easily create tax or permit regimes that ensured that a portion of medical tourism dollars flowed to national healthcare systems. Meanwhile, costs of healthcare would almost certainly decline in developed nations in the short-term and the long-term due to increased competition. This could also potentially have a positive effect on the distortion of the US doctor training toward increased specialization and less primary care (which has been shown to not only drive up costs but drive down quality).

Fair trade in healthcare that enables medical tourism, then, could be one of the few ideas that both sides of the healthcare reform debate can agree on.