Taunter Media

For years we have been subjected to odd debates about whether the government should permit, encourage, or attempt to prevent the reimportation of prescription drugs from Canada.  Seniors love it; they want to be able to drive across the border and save money.  The drug companies hate it; they want to charge American prices.

That the entire debate happens offends good sense.  Drugs that are researched, tested, trialed, and manufactured in central New Jersey do not magically become cheaper from a round-trip drive along the New York Thruway.  If we are to discuss prescription drugs, the only policy question should be whether the US should do something to use the purchasing power of its 300mm person market to drive down the cost of drugs, not whether scattered northern seniors should be left to try to free ride on the purchasing power of 30mm Canadians.

I thought of this when looking at Dean Baker’s novel paper at the Center for Economic and Policy Research suggesting the globalization of Medicare and Medicaid.  He proposes a radical concept for America – considering outflow as well as inflow when looking at migration.

The idea of extending government benefits to people who are abroad is not that rare, although completely foreign to Americans.  The Australian government has expedited work visa arrangements with a variety of countries to allow college-aged Australians to travel and easily find employment; just ask any ski lift operator.  A fifth of New Zealanders are outside of New Zealand at any point in time, the product of a country that encourages outbound travel.  The Mexican government famously does everything it can to provide documents and services for the millions of Mexicans in the US who are one of the largest sources of capital inflow for the nation.

Baker suggests that the US address the cost imbalance between American medical care and the medical care of other OECD nations – nations that deliver higher quality care, by life expectancy – by contracting with other nations to put Americans on those nations’ health systems.  For example, if an American retiree moved to France, the US would fund his participation in the French medical system, and the savings from the cost difference would be split between the retiree, Medicare, and the French state.  Basically, seniors would get paid to move (barring Switzerland and Norway, where exchange rate/purchasing power parity currently would leave seniors with a small out of pocket).

There is one small quibble with Baker’s paper that it probably petty to mention: there is limited evidence that other nations’ health care systems are better than the American system for retirees.  That is to say, the life expectancy at 65 isn’t terribly different in the US from the rest of the OECD; some studies suggest it is higher.  Once Americans get on socialized medicine, we seem to be just as healthy as other people on socialized medicine (we spend more money on being healthy, but that’s a legitimate policy decision).  The lousy mortality issues arise from the stuff that happens before people turn 65, when Americans have a bizarre corporatist/free market system that flat-out doesn’t work.  So it’s far from clear that switching a retiree to another nation’s plan is going to improve his health.

Still, it won’t hurt, and it will save money.

Except it won’t.  Or, at least, it probably won’t.

Baker calculates the savings to Medicare, which are substantial, and to Medicaid for low-income retirees, which are enormous (the program goes away for those who move, since Medicare alone is able to cover all the costs and more).  But here’s the problem: the retiree is now in another country.

If Joe Smith pulls stakes and moves to France under the Baker Plan, the Medicare line of the Federal budget goes down by the US’ savings.  But now when Joe Smith goes to buy a cup of coffee, his 17% VAT goes to the French state, and the rest of the money goes to the cafe’s supply chain.  He will slowly but surely liquidate his assets in the US – real property, retirement accounts, claims on the US government such as Social Security and Medicare – for consumption in France.  What a great deal for France – it gets a new resident who is externally funded by a decent credit and does not pick up any of the obligations and responsibilties of taking care of a new citizen.

An expatriate Joe Smith who did not expect to return to the US would also have a curious set of voting interests.  To the extent that health care migration were a significant phenomenon – which it would have to be to save a significant amount of money – we could expect many retired Americans to move their US domicile to Wyoming or another state without an income tax.  It doesn’t take a lot of people to make a major voting block in Wyoming.  Why wouldn’t the expats vote for the candidate who would let the roads and schools rot in the name of low costs?  Why wouldn’t they vote for senators and congressmen who would be laser-focused on reducing taxes and maximizing Medicare expenditures?

You know, maybe it wouldn’t make such a difference after all.

Baker’s paper is flawed in its methodology, but it leads to a useful point about social cohesion.  The US would benefit tremendously from sending Americans to other countries, preferably without a rifle.  Immigrants to the US need to assimilate to American culture; the process is legendarily difficult, and in the case of the migrating generation, often does not happen at all.  Americans returning from time abroad bring with them the distilled experiences of their time away, without nearly the cultural baggage of someone who has never lived in the US.  Bill Bryson has a fantastic take on this. 

This benefit only happens when the Americans return.  By putting the elderly out to government-sponsored pasture abroad, we would be furthering our forty year experiment in lavishing governmental largesse on the least-deserving chunk of society.  Maybe it will happen.