May 26, 2018
We all know that protectionism is bad. If someone proposes a 20 percent tariff on steel or cars the news pages will be filled with economists and other serious sounding people hyperventilating about how this tax will devastate the economy. Unfortunately, these voices are completely absent from discussions of the much more costly protectionism that allows our broken health care system to rip us off for hundreds of billions annually, and cost lives.
NPR and ProPublica gave us a fascinating account of how our broken health care system operates. The basic story was that Aetna had a contract with a major hospital that allowed it to charge grossly excessive fees for some procedures. Apparently, Aetna didn’t mind the overbilling since it is able to pass its costs on to patients in a largely uncompetitive market.
The piece is fascinating since the protagonist, Michael Frank, was an actuary with three decades of experience working with insurance companies. It describes in detail the effort he went through to try to get a clear explanation of why his bill was two or three times as high as the normal billing for a procedure he had done.
If anyone involved in the health care debate was committed to free trade, we would have a discussion of how this sort of abuse could be avoided if we facilitated foreign medical travel. If patients were routinely offered the opportunity to have this sort of procedure in high-quality facilities in other countries, with patients splitting the tens of thousands of dollars in savings (net of travel costs for themselves and a family member), it is likely that hospitals and insurers that engaged in this sort of price rigging would go out of business.
However, medical travel never features in discussions of trade. One can speculate on the reason, but it is almost certainly true that the reporters, economists, and political actors involved in trade debates have many more friends and relatives who benefit from the bloated health care system than work in manufacturing jobs.
Addendum
The International Federal of Health Plans has some data on relative prices. To take an example, it reports an average price for bypass surgery in the United States of $78,300. This compares to $24,100 in the U.K. and $14,600 in Spain. This sort of gap would leave plenty of room to cover airfare and hotel stays, and still leave plenty of money to put in the bank.
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