How health insurance inhibits trade in health care

A range of health care services are tradable, in that consumers can travel abroad for treatment. In this paper we first estimate the gains from trade. An international price comparison of fifteen procedures reveals that there could be savings of around 1.4 billion dollars annually even if only one in ten U.S. patients choose to undergo treatment abroad. We then identify a key impediment to realizing these gains: the nature of existing health insurance plans, which discriminate explicitly or implicitly against treatment abroad. We propose that coverage should be neutral to provider location and that reimbursement should include travel costs.