Everyone knows Bill Gates, the man who got incredibly rich by gaining a near monopoly in the computer operating system market. In the last decade Gates has devoted much of his money to the foundation he created for the ostensible purpose of helping humanity.
Whatever the merits of his foundation’s programs, he is missing out on an enormous opportunity to do good for the United States and the world. As has been often documented, health care costs in the United States are hugely out of line with health care costs elsewhere in the world. There is a huge gap with costs in the developing world, but the ratio of costs for most items and procedures is more than two to one even in comparison with other wealthy countries.
And, this gap is not explained by better care in the United States. We actually have worse outcomes compared with most other wealthy countries.
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What fans of the market everywhere should be able to see is that this enormous gap in costs leads to huge possibilities for gains from trade. Just as people in the United States can benefit from buying cheaper steel or clothes produced in other countries – and those countries can benefit from selling these products to us – we can also gain from getting cheaper medical care in other countries.
However providers of medical care in the United States, drug companies, medical equipment suppliers, doctors and others who benefit from high prices, are far more powerful than steelworkers or textile workers. As a result, the trade deals we have been writing over the last three decades have not been designed to facilitate medical trade.
This is where Bill Gates and his fortune could make a huge difference. Suppose he established an insurance company that gave people the option of getting some of their health care in other countries. The potential savings would be enormous. For example, according to the International Federation of Health Plans the average cost of a hip replacement in the United States is $40,400. The average cost in Spain $7,700 and in Argentina just $3,400. For heart bypass surgery the average cost in the United States is $73,400 compared with $12,400 in Chile or $8,900 in Argentina.
The insurance could be structured so that people in need of these services could still get them in the United States and be covered as they would with other standard insurance policies. However they could also have the option of using high quality facilities in other countries and splitting the savings with the Bill Gates Insurance Company. To ensure that the population of the receiving country benefits as well, the insurer could pay 10 percent of the cost to support the training of additional doctors and other health care professionals in the country.
Imagine someone needing bypass surgery chose to get it in Chile. Their half of the $60,000 in savings would be enough to cover the airfare and hotel stay of several family members for several weeks and still leave tens of thousands of dollars to put in the bank. The same would be true for many other expensive procedures; patients would see an enormous dividend from escaping the wasteful U.S. health care system.
This would have three hugely beneficial effects in the United States, in addition to providing an additional source of revenue to support health care in developing countries. The most immediate benefit would be the obvious one: tens of thousands of people would receive much lower cost health care than would otherwise be possible.
The second effect would be that by reducing demand in the United States for many of these procedures it would put downward pressure on prices in the United States. Many highly-paid specialists whose skills are currently in limited supply would suddenly find a lack of demand for their services. This would put hospitals, insurers, or the government in an excellent position to bring their pay scales back down to earth. The same is true for the drug companies and the medical equipment suppliers.
The third benefit would be the educational effect of seeing that other countries have high quality medical care at a fraction of the price that we pay in the United States. This is due to the fact that they organize their health care systems far more efficiently.
While many people may read about the greater efficiency of other health care systems, this information will have much less impact than actually experiencing the greater efficiency first hand. Everyone who puts $20,000 in their pocket after getting top notch surgery in Chile or India will be a huge billboard for the reform of the U.S. health care system.
Of course this is why our laws are not conducive to this sort of insurance arrangement. There are issues of legal liability that act as a major disincentive for insurers to go this route. However if Gates were to use his money and power to deal with such problems, he should be able to get an insurance company promoting medical travel in high gear.
With national health care costs running close to $3 trillion a year, if U.S. costs could be brought in line with costs in other wealthy countries the potential savings would be on the order of $1.5 trillion a year. Those savings could provide a lot of health care for people in the United States and around the world. That would be a really big deal, something that the richest person in the world might be in a position to make happen.