Medical Tourism Offers Hope To Control Health Care Costs

November 01, 2007

Major Insurers May Soon Steer Patients to Foreign Health Facilities, Says NCPA Study

DALLAS (November 1, 2007) - One of the most promising solutions for our nation's soaring health care costs may be found in patients traveling outside the country for care, according to a new study released by the National Center for Policy Analysis (NCPA).  The NCPA notes that health care spending per capita is growing at twice the rate of growth of national income, an unsustainable path that is on course to crowd out all other consumption (http://www.ncpa.org/pub/st/st304).

"Wealthy patients from developing countries have long traveled to the U.S. for high quality medical care," said NCPA Senior Fellow Devon Herrick, author of the report.  "Now a growing number of less affluent Americans are traveling outside the U.S. for affordable health care that rivals care in the U.S. in quality."

According to the study, an estimated 500,000 Americans crossed the border for treatment in 2005.  A majority traveled to Mexico and other Latin American countries.  Americans were also among the estimated 250,000 foreign patients who sought care in Singapore, the 500,000 in India and as many as 1 million in Thailand.  The cost savings for patients seeking medical care in other countries can be significant.  For example:

• Apollo Hospital in India charges $4,000 for cardiac surgery, compared to about $30,000 in the U.S.
• Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip replacement - one-half the price charged in Europe or the U.S.
• Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee replacement that runs $30,000 in the U.S.
• A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500 in the U.S.

"Foreign hospitals are posing a challenge to domestic hospitals similar to the challenge Japanese automakers posed for Detroit," said NCPA President John Goodman.  "There is nothing being done in Mexico, Thailand or India that can't be done just as inexpensively in this country.  But to do so, U.S. hospitals need to be freed from unwise public policy constraints."

Prices for treatment are lower in foreign hospitals for a number of reasons.  Labor costs are lower, third parties (insurance and government) are less involved or not at all involved, package pricing with price transparency is normal, there are fewer attempts to shift the cost of charity care to paying patients, there are fewer regulations limiting collaborative arrangements between health care facilities and physicians, and malpractice litigation costs are lower.

Despite the lower cost, the quality of health care abroad can be high.  For example: 

• Foreign health care providers often have physicians with internationally respected credentials, many of them with training in the United States, Australia, Canada or Europe.
• 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; another 20 are accredited through the International Standards Organization; and some countries are adopting their own accrediting standards.
• Some foreign hospitals are owned, managed or affiliated with prestigious American universities or health care systems such as the Cleveland Clinic and Johns Hopkins International.
• Several companies are building and operating hospitals that meet American standards in Mexico largely for American (and wealthy Mexican) patients.

Patients who are not familiar with specific medical facilities abroad can coordinate their treatment through medical travel intermediaries.  These services work like specialized travel agents.  They investigate health care providers to ensure quality and screen customers to assess those who are physically well enough to travel.  They often have doctors and nurses on staff to assess the medical efficacy of procedures and help patients select physicians and hospitals.  In addition, patients can also use online communities to get information on the safety and quality of medical providers by reading the testimonies of other patients who have had surgery abroad.

"Most insurers do not cover foreign providers, and we are unlikely to see a large number of patients going overseas right away," said Herrick.  "But if these trends hold, the future of medical tourism will be insurers taking advantage of global competition by adding nearby lower cost foreign facilities to their network."  For example, BlueShield of California's Access Baja plan is for people living near the border that want to receive physician care in Mexico.

Models of Medical Tourism

1. Least Aggressive: Patient Pays
2. Aggressive: Insurer Pays, Patient Pays Deductibles
3. More Aggressive: Insurer Pays and Waives Cost Sharing
4. Most Aggressive: Insurer Pays Patient to Go Abroad