When stories of outbound medical travel—also known as medical tourism—began making news roughly a decade ago, most of the coverage focused on wealthy patients who sought cosmetic procedures and experimental treatments outside of the U.S. But as healthcare costs and the number of Americans without medical insurance have skyrocketed, much of the medical travel industry's growth has been attributed to patients seeking more affordable high-quality care outside of the country.
Still packing their bags
Health reform won't drastically alter the economics of medical tourism, but patients and providers can expect new opportunities, at home and abroad
Now, rapidly moving efforts to pass healthcare reform legislation that would reduce costs and expand medical coverage could force the medical travel industry to undergo another shift even before it establishes a solid foothold in the U.S. market. Whether that shift would redefine the medical travel industry's American clientele or render the option obsolete within the U.S. is unclear, experts say.
By all accounts, outbound medical travel is still a fledgling phenomenon in this country. While some reports have estimated that 500,000 Americans leave the country for care each year, more definitive research conducted by consultancy McKinsey & Co. that was published in May 2008 estimates that only about 5,000 to 10,000 Americans are currently seeking care outside the country each year.
The report's estimates are based on reviews of five years' worth of patient admission records from providers at the 20 top medical travel destinations. “Many of the patients were uninsured, and if you're paying out-of-pocket, you can pay almost four to six times less for surgeries in certain markets,” says Paul Mango, head of McKinsey's healthcare practice. In fact, the McKinsey report found that an aortic valve replacement that costs $100,000 at a U.S. hospital would run about $12,000 at an equally qualified and credentialed hospital in Asia.
Devon Herrick, a healthcare economist and senior fellow at the National Center for Policy Analysis, a not-for-profit group that promotes privatization of services, says, however, that most reformers don't see medical travel as a solution to the affordability problem, but as a symptom of the U.S. healthcare system's uncontrolled costs. “No one would go abroad for care without financial savings, and to the extent that reform could provide greater coverage without affecting people's pockets, then there's not much of an incentive” to travel for care, he says.
But Herrick and other healthcare policy experts questioned whether the current healthcare reform bills making their way through Congress can simultaneously broaden coverage and cut costs for payers and patients alike.
Paul Keckley, executive director for the Deloitte Center for Health Solutions, says he believes outbound medical travel is likely to continue growing unless healthcare reform efforts include limits on patient copayments and significant subsidies to help uninsured low- and middle-wage earners pay for insurance policies. “Right now, we don't know at what level a subsidy to help purchase insurance will be available,” Keckley says.
Herrick adds that he doesn't see much in the healthcare reform bills introduced by House and Senate lawmakers that would help control costs. “There are a lot of good ideas that may improve quality, but not necessarily lower spending.”
Still, other healthcare policy experts say that, even if reform does succeed in reducing costs, providers here will never be able to match the lower prices patients can pay for equally good healthcare services in places like India or Mexico because the cost of doing business is more expensive in the U.S. “Our bricks and mortar cost more, our drugs and devices cost more, and our nurses and physicians are paid more,” says Victor Lazzaro Jr., CEO of the medical travel coordinator BridgeHealth International. “We will not in the foreseeable future be able to compete on those issues and close the gap.”
As a result, Lazzaro and other proponents of medical tourism believe that, even with reform, outbound medical travel will continue to be an attractive option for private payers and employers looking to reduce costs. Recent efforts by insurers and companies that specialize in coordinating medical travel arrangements suggest that may be true.
Lisa Latts, vice president of programs for clinical excellence for insurer WellPoint, said that in March of this year her company partnered with the West Bend, Wis.-based printing company Serigraph to launch a medical travel pilot program that could help reduce employees' costs on certain surgical procedures. WellPoint contracted with two Joint Commission International-accredited Apollo Hospitals in India—one in Bangalore and the other in New Delhi—to provide knee, hip and several other nonemergency surgeries to patients willing and able to travel overseas for care. “One of the reasons we chose India is that Serigraph has a printing plant in Bangalore,” Latts says.
Latts says confidentiality agreements prevent her from revealing pricing for the contracted surgeries, but she says costs are low enough to allow Serigraph to waive the copayments, as well as pay for the travel, food and accommodations for an employee and a companion if an employee opts to go to India for care. “We're looking to expand the pilot to other self-pay employers and other providers who are closer to home,” Latts says of WellPoint's interest in medical travel.
Similarly, Ron Johnson, chief medical officer with medical travel coordinator Satori World Medical, says his company has developed a product aimed at insured workers with high-deductible policies. “Our model would involve no copay, and your employer would agree to share a percentage of the savings” they receive by accessing lower-cost care overseas, Johnson says. “They would put that money into a tax-free health savings account, which employees can use to pay for other healthcare costs.”
But while private insurers and self-pay employers see cost-control opportunities in medical travel programs, most healthcare policy experts say reformers are unlikely to embrace medical tourism as a cost-saving option for public payers like Medicare and Medicaid. They point to legislative failures in states such as West Virginia, which in 2006 considered medical travel coverage legislation, as an indicator for a potential federal effort to reimburse for medical travel. Many believe taxpayers would balk at any effort to send federal healthcare dollars overseas.
“If medical tourism were included in the reform bill, I'm absolutely confident that the reaction at home to the lawmakers who voted for that would be hostile,” Keckley says. “It looks as if instead of helping our economy, you're trying to help that of another country.”
Even providers of medical travel services acknowledge that it could be difficult for foreign systems to structure reimbursement agreements with state and federal payers.
John Zipprich, senior vice president of Christus Health, which has seven JCI-accredited hospitals in Mexico, some drawing self-pay patients from Texas, says his system would be challenged to meet many of the reimbursement requirements of payers like Medicare and Medicaid.
“A lot of the U.S. system is geared to comply with Medicare requirements for the way to track and treat patients, and Medicare reimbursement is based on DRGs,” Zipprich says. “That isn't the way things work in Mexico. One of the cost-savers here is not just labor costs. In Mexico, we don't have the same tracking requirements. We can meet the U.S.'s quality and cost standards without the administrative burdens.”
Zipprich adds that laws addressing physician conflict of interest, fraud and abuse are also different in Mexico and those differences could potentially cause problems with U.S-based public payers.
An unwillingness to use federal dollars to pay for medical travel benefits is likely to prevent any rapid large-scale expansion of outbound medical tourism, particularly since many of the nonemergency procedures offered by international providers are typical among the Medicare-aged population. They include hip and knee replacement surgeries as well as certain cardiovascular procedures.
Nevertheless, some observers believe healthcare reform efforts could still prompt greater use of medical travel. That's because many anticipate that a universal health insurance requirement is likely to increase patients' demands on an already strained U.S. provider system and cause longer waits for care. As a result, the medical travel industry could see increased interest in overseas care among wealthier patients seeking quicker access to care, says McKinsey's Mango.
“One of the biggest myths about healthcare reform is that because you'll have access to health insurance, you'll have access to care,” Mango says. He adds that medical travel in the U.S. could begin to mirror the medical tourism market in places like Canada and the U.K., where wealthier patients are the ones who leave home for care. “They can say, ‘I'm tired of waiting. I'm just going to pay out of pocket and go to Thailand.' ”
Some medical travel observers see other possible growth or market-shift scenarios for medical tourism in the wake of healthcare reform.
Huron Consulting Group Managing Director Robert Crone, who previously was president and CEO of Harvard Medical International, says reform efforts could ultimately spur partnerships between U.S. and foreign providers, particularly if payers move toward a bundled or global payment system that has pricing transparency and reimburses providers a single predetermined fee based on an episode of care.
“I suspect that increased access to healthcare will expose some of the cracks in the delivery system, and that may drive providers here to think globally about how they can combine services with providers overseas,” Crone says. He ultimately envisions relationships where U.S. providers deliver primary and follow-up care and partner with more affordable, high-quality foreign providers to deliver surgical care to patients in need of certain nonemergency procedures.
U.S. providers would pay for patients' travel and reimburse their overseas partners by sharing a portion of their bundle or global fee for the care episode. Such partnerships could allow stateside providers to better manage increased demands for care while maximizing their reimbursement by accessing more affordable overseas delivery of certain services.
Other medical travel industry experts say even if reform efforts succeed in reducing American patients' interest in traveling overseas for more affordable care, the need to reduce healthcare delivery costs might necessitate more domestic medical tourism (June 15, p. 28).
“You'll see hospitals here say to payers, ‘I'm willing to offer discounted bundled care for particular procedures,' ” says Brian Kelly, national medical director for insurer Aetna's national and international solutions program. Kelly believes that, under payment reform, many U.S. hospital
s will opt to become high-quality, high-volume providers of certain procedures, which they will discount in order to attract patients from across the nation.
While U.S. providers may not be able to offer the same discounts as foreign providers on most surgical procedures, Kelly says the appeal of patients staying stateside where cultural and legal concerns are known variables, is likely to override the narrowing cost difference that payers see between U.S. and foreign providers if reform and domestic competition helps to push down costs.
“It would be easier for us to have people stay in the U.S. for care,” Kelly says.
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