http://www.ncpa.org/pub/ba/ba623/
Medical Tourism: Health Care Free Trade
Global competition in health care is allowing more patients from
developed countries to travel for medical reasons to regions once
characterized as =93third world.=94 Many of these =93medical tourists=94
a=
re
not wealthy, but are seeking high quality medical care at affordable
prices. To meet the growing demand, entrepreneurs are building
technologically advanced facilities in India, Thailand, Latin America
and elsewhere, and are hiring physicians, technicians and nurses
trained to American and European standards to run them.
How Patients Obtain Treatment Abroad. Patients usually coordinate
their treatment through medical travel intermediaries. These services
often employ doctors and nurses to *****s the medical efficacy of
procedures and help select physicians and hospitals. Some services
are affiliated with specific medical providers and send patients
exclusively to those hospitals. Currently, the treatment networks of
most U.S. health insurers do not include foreign providers. But since
six million people a year worldwide are expected to travel for medical
care by 2010, that is quickly changing.
More Health Plans Cover Medical Travel. Blue****eld of California has
a health plan, Access Baja, designed for Americans and Mexicans who
choose to receive medical care in northern Mexico. In 2007, BlueCross
Blue****eld of South Carolina established Companion Global Healthcare,
a network of foreign-based hospitals that includes internationally
accredited medical facilities in Singa****e, Thailand, Turkey, Costa
Rica and Ireland.
Denver-based BridgeHealth International also has a provider network of
offshore hospitals, clinics and physicians. It works with insurers
and employer health plans to facilitate workers=92 treatment abroad.
Insurers Aetna and Cigna both re****t growing interest in medical
tourism among employers. Mercer Health, an employee benefits
consulting firm, is helping several Fortune 500 employers use medical
travel to help stem the rising cost of employer-provided medical
coverage.
Indeed, a re****t by the International Foundation of Employee Benefit
Plans found that 11 percent of employer health plans surveyed now
cover medical travel.
Treatment Abroad Costs Less. Fees for treatments abroad range from one-
half to as little as one-fifth the price in the United States,
depending upon the destination country and type of procedure
performed. For example:
* Apollo Hospital in New Delhi, India, charges $4,000 for cardiac
surgery, compared to about $30,000 in the United States.
* A rhinoplasty (nose reconstruction) procedure that costs only
$850 in India would cost $4,500 in the United States. [See the
figure.]
* An MRI in Brazil, Costa Rica, India, Mexico, Singa****e or
Thailand costs from $200 to $300, compared to more than $1,000 in the
United States.
Why Treatment Abroad Costs Less. There are many reasons why medical
costs are lower abroad.
Lower Labor Costs. In the United States, labor costs equal more than
half of hospital operating revenue, on the average. Yet, Indian
physicians often earn only 40 percent as much, and many Indian nurses
earn only one-tenth as much, as their American counterparts.
Less Third-Party Payment. In the United States, patients spend only
13 cents out of pocket for every dollar they spend on health care;
insurers or government pay the rest. In countries with growing,
entrepreneurial medical markets patients pay more out of pocket. For
instance, local patients payout of pocket for 51 percent of health
care in Mexico and 78 percent in India. Consequently, providers must
compete for patients based on price.
Limited Malpractice Liability. Malpractice litigation costs are lower
outside the United States. American physicians in some specialties
pay more than $100,000 annually for liability insurance, while a
physician in Thailand spends about $5,000 per year.
Price Discrimination. Medical suppliers often charge customers in
lower income countries less than customers in higher income countries
for the same product or service. As a result, hospitals in developing
countries pay much lower prices for medical supplies, equipment and
drugs than do hospitals in rich countries. For instance, wholesale
prices for the artificial joints and other equipment used in hip
replacements are much less in India than in the United States.
Measuring Quality. Many health care providers in developing countries
meet U.S. health quality standards. In fact, more than 120 hospitals
abroad are accredited by the Joint Commission International (JCI), an
arm of the organization that accredits American hospitals
participating in Medicare. Moreover, many foreign hospitals hire
physicians who are U.S. board-certified, or have internationally
respected credentials. And many of the physicians were trained in the
United States, Australia, Canada or Europe.
Obstacles to Medical Tourism. Outdated laws and regulations create
barriers to medical tourism. For example, the federal Employee
Retirement Income Security Act (ERISA) could make it difficult for
U.S. providers to offer financial rewards to willing medical tourists
without being exposed to increased liability risk. State laws that
require doctors to be licensed in the state where the patient receives
treatment are another problem. Such laws prevent medical tasks from
being performed by providers in other states or countries.
What Public Policy Changes Are Needed? The first step for state and
federal policymakers is to understand that global competition in
health care will benefit American consumers by reducing costs and
improving quality through competition. But other action is also
needed.
Modernize State Licensing Laws. Medical licensing laws should be
brought into the information age, where distance (or country) is
irrelevant in procuring many medical services. Foreign physicians who
meet standard criteria should be considered licensed if their skills
have been evaluated and approved for inclusion in an insurer=92s
network.
Allow Financial Incentives. Insurers and employer-sponsored health
plans should be able to offer financial incentives for seeking care
abroad, much as they do currently for medical services within their
network, without facing increased liability risks. Legislation such
as ERISA should not penalize providers who offer lower cost treatment
options for patients willing to travel overseas for care.
Lead by Example. Federal and state government should lead by example,
by allowing Medicare and Medicaid programs to send willing patients
abroad. Medicare would particularly benefit from cost savings since
it pays for a large volume of orthopedic and cardiac procedures.
Conclusion. As more insured patients begin to travel abroad for low-
cost medical procedures, medical tourism will result in sorely needed
competition in the American health care industry.
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