New Report: Stemming the Rising Costs of Health Care Through Globalization

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New Report: Stemming the Rising Costs of Health Care Through Globalization

Study Projects Substantial Savings From Allowing Medicare Beneficiaries to Buy into Health Care Systems of Other Countries

WASHINGTON - As the national debate continues over health care and the long- term
budget picture, a report just released by the Center for Economic and
Policy Research (CEPR) suggests a substantial savings to both the
government and individuals through the globalization of Medicare and
Medicaid.

"In the United
States, per person health care costs averaged $6,714 in 2006, compared
with an average of $2,964 in the 26 nations with longer life
expectancies," said Dean Baker, Co-Director of CEPR and an author of the report. "A gap this large suggests significant benefits and gains from trade."

The report, "Free Trade in Health Care: the Gains from Globalized Medicare and Medicaid,"
outlines the potential gains to both the U.S. Government and Medicare
and Medicaid beneficiaries that would result if these beneficiaries
were allowed to buy into the health care systems of the 26 countries
with longer life spans than the United States. This voluntary program
would give beneficiaries vouchers to move to another country to take
advantage of lower health care costs. These beneficiaries, retired for
the most part, are not bound by work to one particular area. Since many
beneficiaries have family, business, or other ties to some of these
countries, a voucher option may be quite attractive.

"While the U.S. would have to negotiate arrangements with each
participating country, the process would be simpler than far-reaching
trade agreements like NAFTA, and the potential economic gains would be
much larger," Baker continued.

The projections in the study show:

  • If
    10% of eligible Medicare beneficiaries take advantage of this program,
    the government would save $8.6 billion a year by 2020, $19.5 billion by
    2030, and $288.9 billion by 2085 (all numbers are in 2008 dollars).
  • If
    10% of those eligible for both Medicare and Medicaid opted to take part
    in the program, the savings to U.S. Government (Federal and State)
    would be $18.1 billion in 2020, $99 billion in 2045, and $505.3 billion
    in 2085.
  • At the state
    level alone, the savings in 2020 at a 10% take-up rate would be $2.9
    billion in 2020, $8.8 billion in 2045, and $27 billion in 2085.

For
individuals, the savings would vary from country to country, but would
be substantial in most cases. In Spain, beneficiaries would pocket
$10,900 in 2020, equal to 61 percent of the Social Security benefit for
a medium earner retiring at age 65 in 2020. In Canada, they would get
$5,600 a year from taking part in the program, equal to 31.3 percent of
a medium earner's benefit. By 2045, these sums are projected to
increase to $26,700 and $22,600 a year, respectively. These gains are,
respectively, 22.6 percent and 3.8 percent above projected Social
Security benefits for a medium earner retiring in 2045. In 2085 the
gains from moving to these two countries would be $74,700 and $77,500,
respectively, both more than double the projected Social Security
benefits for medium earners retiring in 2085.

The projections from the study clearly show the significant savings to
the U.S. Government and potential for increased retirement income for
beneficiaries who sign up for a Medicare or Medicaid voucher. The full
analysis and further details can be found here.

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The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.

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