NCPA - National Center for Policy Analysis


May 27, 2008

In this election, no presidential candidate can afford to ignore the potential of international trade in medical services to increase the number of doctors and to lower health care costs, say Jagdish Bhagwati, a professor at Columbia University and senior fellow at the Council on Foreign Relations, and Sandip Madan, CEO of Global Healthnet.

For example:

  • Arm's-length transactions (where the provider and the user of services do not have to be in physical proximity) 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.
  • The savings in health-care costs could easily reach $70 billion-$75 billion.

U.S. patients going to foreign medical facilities, was considered an exotic idea 15 years ago.  Now this is a reality known as "medical tourism," say Bhagwati and Madan:

  • 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.
  • Thirty such procedures, costing about $220 billion in 2005, could have been "exported."

Hospitals established abroad will offer doctors and hospitals considerable opportunity to earn abroad.   Of course, the establishment of foreign-owned medical facilities in the United States is also possible, and could lead to price reductions by offering competition to the U.S. medical industry, says Bhagwati and Madan.

Source: Jagdish Bhagwati and Sandip Madan, "We Need Free Trade in Health Care," Wall Street Journal, May 27, 2008.

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