With the the U.S. health care reform debate heating up, I can't resist jumping in here with some thoughts on how "free trade" could play a role in improving health care. I have two things in mind: (1) free trade within the U.S. and (2) free trade globally.
Two points at the outset, though. First, hopefully this won't be my John Mackey moment. Second, feel free to correct me on any factual details I get wrong -- I'm not an expert on health care, just an average consumer.
1. Free trade in health insurance within the U.S.
As I understand it, the health insurance industry in the U.S. is characterized by separate and distinct state markets. Generally speaking, you can only buy health insurance from a company licensed to sell in your state. There may be some exceptions to this, but I think it is generally the case. It was certainly the case for me when we moved from DC to Florida. We had to give up the health plan we had in DC and shop around for a new plan down here.
This state-focused system with segmented markets has (at least) two problems. First, when you move from one state to another, you have to re-apply for health insurance from a company in the new state. When this happens, insurance companies get a chance to screen you for any "pre-existing conditions," which they can exclude from coverage (or even just not cover you at all).
Second, when you are shopping for health insurance, there are not many choices, as you are limited to those companies licensed in your state. This was my own experience, and it has been reported that this is the case more generally. It seems very likely that this limited competition results in higher insurance costs and lower overall quality of service.
A national health care market could help with both of these problems. If you could keep your insurance when you moved to a new state, there would be no need to re-apply. Also, competition would be enhanced if you could choose from any insurance plan offered anywhere in the country.
One objection is likely to be that particular states impose minimum standards on what must be covered, and allowing people to shop around out of state will undermine these standards. If this is a concern, perhaps national standards could be used, or maybe the states just need to make it easier for out of state companies to offer insurance that complies with their standards.
Summing up, if we had free trade in health insurance within the U.S., the industry could perhaps be changed from a segmented, state-based system into a competitive national market. (It almost seems as though each state has its own health insurance oligopoly. This Tyler Cowen post suggests that health insurance profit margins are not particularly high, but some of the commenters on his post point out that return on equity is a better measure and shows a very different result).
(As a side note, isn't there a possibility of a dormant commerce clause challenge to the current restrictions on purchasing health insurance from out of state? It may depend in part on what these restrictions look like, e.g., how burdensome they are, which is something I'm not sure about.)
Now, I'm not expecting this idea to change the debate. It has been proposed before, but has not gone anywhere. But let's just assume for a moment that people like this suggestion. If there are benefits to free trade within the U.S., how about moving on to a more controversial suggestion, which is ...
2. International free trade in health insurance
Elaborating on these two posts, if a little added competition from out of state companies is good, isn't competition from foreign companies even better? My favorite health insurance company of all time is Van Breda & Co., the company the WTO used at the time I worked there. Here's the way it worked. I went to the doctor, submitted the bill to Van Breda, then got reimbursed. Very simple, and very unlike many of my experiences in the U.S. Of course, Van Breda might have acted this way because Swiss law required them to, but regardless, if I could choose any health insurance company, that's the one I would choose. So why can't I?
I recognize that there may be a concern that people could be taken advantage of by disreputable companies who promise services that they do not ultimately deliver. But that's a concern with U.S. companies, too, and I would think that regulation could deal with this issue. We would just have to make sure that the foreign companies meet the same requirements as their U.S. counterparts.
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So, those are my quick thoughts on free trade in health care. They are not likely to make it into the final U.S. legislation (if any), but I feel better having gotten them out there!