NCPA - National Center for Policy Analysis


June 8, 2006

A range of health care services are tradable, but how can industrialized countries increase the scope for trade and ensure that its benefits are widely shared, ask Aaditya Mattoo, lead economist of the Development Research Group (World Bank) and Randeep Rathindran, senior economist with HDR/HLB Decision Economics.

The solution must come from both the supply and demand side; the scope for trade would be greatly increased if the quality of services abroad were improved, and this improvement were credibly signaled, say Mattoo and Rathindran:

  • Hospitals in developing countries that seek to attract foreign patients could obtain accreditation from the Joint Commission International (JCI).
  • Doctors and nurses in export-oriented health care organizations could pass, respectively, the U.S. Medical Licensing Exam (USMLE) and the National Council Licensure Examination for Registered Nurses (NCLEX-RN).
  • Since foreign medical graduates who practice medicine in the United States are obliged to pass these examinations, a natural extension would be to institute a similar requirement for foreign physicians in export-orientated health care organization abroad.

Yet, might the inflow of industrialized-country consumers crowd out poorer local patients? According to Mattoo and Rathindran:

  • There's a danger that the increased foreign demand could raise domestic prices and accentuate these inequalities; however, increased demand also creates opportunities to improve access to health care.
  • In fact, inflows of rich-country consumers could lead to higher incomes at home and a reduced incentives to emigrate.
  • Moreover, health care capacity (especially private capacity) in destination countries need not remain fixed, as increased foreign demand leads to greater domestic and foreign investment.

Furthermore, developing countries should implement universal access policies that require private providers to contribute to a health care fund or directly provide a proportion of their services to the poor, say Mattoo and Rathindran.

Source: Aaditya Mattoo and Randeep Rathindran, "How Health Insurance Inhibits Trade In Health Care," Health Affairs, March/April 2006.

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