Predicting the Impact of Medical Tourism

Medical tourism is gaining attention as uninsured patients discover high quality care is available abroad for up to 90 percent less than the cost in the United States. Now health plans and employers are taking a serious look at adding international providers to their networks, and overseas providers and governments are hoping to make medical tourism a big business. The industry is in its infancy, but it's time for the United States to start thinking about the implications.

No one knows exactly how the medical tourism field will unfold. Nonetheless, here are some predictions.

Prediction 1: Medical tourism will cross over to the insured population in 2008.Insurers are under pressure from customers to hold down premiums. Managed care techniques such as primary care gatekeepers, limited access to specialists and hospitals, pre-certification and capitation have largely run their course. These approaches are unpopular with both patients and providers, and have lost most of their effectiveness.

Meanwhile, insurers are beginning to get requests to cover medical tourism. These requests are coming from multiple sources: employers and their benefits consultants, foreign hospitals and governments, medical tourism facilitators such as Global Choice Healthcare, and individual members who want to receive coverage overseas. A few major health plans have taken baby steps toward providing coverage. For example, Blue Cross Blue Shield of South Carolina has added Bumrungrad Hospital in Thailand to its hospital network and started Companion Global Healthcare to help other health plans establish overseas networks.

Concerns about patient safety and liability are starting to be addressed as well. The Joint Commission International has accredited over 100 foreign hospitals. Arbitration and mediation mechanisms are being put into place to address legal concerns.

Finally, insurers sense an opportunity to increase their negotiating leverage with their existing provider networks by creating viable alternatives overseas. Such leverage may help them reduce their costs relative to competitors. The lower cost position could be used to boost profits or to create flexible pricing that would allow insurers to better address small employers who are increasingly unable to afford comprehensive health insurance.

Prediction 2: Mini-med plans and small employers--not big health plans and blue chip companies--will be the early adopters.
Medical tourism proponents, such as foreign governments and providers, are heavily focused on attracting interest from big, prominent companies that have made the most noise about unaffordable healthcare costs. They've also concentrated their efforts on large, well-known health plans including Aetna, Cigna, United and the largest Blue Cross Blue Shield plans. They theorize that once one big player jumps in, others will follow.

Smaller employers, health plans and third party administrators have been largely ignored, although this is the biggest segment of the commercial market and the one most open to medical tourism coverage. Consider that close to half of Americans work for organizations with under 200 workers, according to the Census Bureau. Many of those employers are on the edge of their ability to provide comprehensive health insurance. Only 60 percent of employers with fewer than 200 workers offered health insurance in 2006, a decline of 8 percentage points since 2001. This compares with 99 percent of larger employers that provide health insurance, a rate that has held steady over the last decade, according to the Kaiser Family Foundation.

Smaller employers look at insurance differently. Many are shifting to so-called "mini-med" or "limited benefit" plans that cover day-to-day expenses such as doctors' appointments, but not surgery. The plans are affordable but often cap expenses at $25,000 or so per year, which de facto excludes major surgery. Such employers will look at medical tourism as a way to enhance their benefits rather than simply as a cost control measure.

Mini-med companies are already picking up on this opportunity. In fact, the founder of the Medical Tourism Association is an executive of a mini-med plan and his company has quietly begun providing coverage for overseas surgery.

Prediction 3: Opposition to medical tourism by U.S. physicians will be modest. An oft-repeated assumption is that the U.S. medical establishment will block the medical tourism industry from developing by bad-mouthing overseas physicians and hospitals. Some medical societies and influential physicians have made cautionary pronouncements, but the situation among practicing physicians is not nearly so negative.

Medicine is already a global profession. Physicians from academic medical centers attend global conferences where American physicians from leading institutions treat their colleagues from other countries as peers. They have often trained together and they publish in the same journals. Leading physicians from overseas speak and read English.

At the community level, over 25 percent of physicians in the United States are foreign-born, according to the U.S. Census Bureau. They are familiar with the level of professionalism and training in other countries. Many of these foreign-born physicians are in secondary cities and rural areas, which also means that U.S. patients are already accustomed to getting their care from foreign physicians.

The demand for healthcare is relentless. A shortage of physicians means that most doctors aren't scrambling for more patients. In fact, they may appreciate having uninsured patients taken off their hands so they can focus on more lucrative customers.

Prediction 4: State governments will begin to embrace medical tourism by 2010. It sounds far-fetched, doesn't it? After all, can you imagine the backlash against politicians who suggest sending patients away for medical treatment? Who could stand up to the pressure even if it is a good idea?

Actually, it's likely that at least a few state governments (along with some local ones) will begin flirting with medical tourism soon. States have shown a willingness to take the lead on healthcare policy. Massachusetts is implementing near-universal health insurance coverage and California is considering something doing the same. Oregon, Tennessee, Florida and others have embarked upon their own innovative paths in healthcare.

States, unlike the Federal government, generally have to balance their budgets. Rising healthcare expenses require states to shift funding from other programs or raise taxes, both of which are unpalatable. As healthcare costs continue their relentless climb, it becomes more difficult to balance the books. A politician who proposes medical tourism might actually attract praise--by appearing to be doing something about the healthcare cost crisis other than complaining.

Southwestern states, due to their proximity to low-cost countries in Latin America, may take the lead. Other states or municipalities with large foreign-born populations may also be good candidates. New York, for example, has half a million Dominicans. Santo Domingo, which has some excellent cardiac surgeons and low prices, is a 4-hour nonstop flight away. Why wouldn't New York at least explore the possibility?

Prediction 5: The emergence of medical tourism won't have a major, direct impact on U.S. healthcare costs, but the secondary impact will be substantial. Medical tourism will make a dramatic difference for specific cases. Stories describing $100,000 surgeries done for $10,000-$20,000 abroad are real. It makes good economic sense to pursue the obvious opportunities: orthopedic, cardiovascular, dental, or cosmetic, and to find ways to expand the range of procedures and treatments that can be done overseas.

Nonetheless, the aggregate impact will be underwhelming. If every U.S. resident who could go abroad for treatment actually went, the savings on total medical costs would be about five percent. That's still a big number, especially compared to other initiatives that are available. But to look at it another way, if healthcare costs are increasing by 10 percent per year, taking full advantage of medical tourism only buys us about half a year.

However, there is an opportunity to leverage medical tourism to achieve broader benefits. When overseas providers begin to present a credible alternative to their U.S. counterparts, it may spur domestic providers to re-engineer their clinical and administrative processes and to challenge certain inefficient work practices embedded in union contracts. The level of customer service can be expected to rise, and not just in service lines where there is direct competition.

Additionally, U.S. and foreign providers will start to work together in an integrated fashion, with some administrative and clinical tasks done in the United States and some overseas. Advanced, inexpensive communications technology will enable broader application of "virtual medical tourism," through increased use of new forms of telemedicine.

David E. Williams, for HealthLeaders News, Oct 12, 2007 www.healthleadersmedia.com