The economic and medical rationale for
U.S. outbound medical tourism
is compelling. The increased
publicity also helps. TV
programs and newspaper articles have made ordinary Americans aware of five
star hospitals abroad offering superior care at a fraction of the
U.S. price. Western patients are shown
attended by skilled surgeons and a bevy of attentive nurses, while being
pampered in plush surroundings.
Though many of these hospitals are in third world countries, they
have state of the art facilities.
They are obtaining European and American accreditation, and deliver
better quality than in the U.S. overall.
Of course, protectionists associate outsourcing
with a loss of American jobs.
While economists and financial pundits challenge that view anyway,
it applies even less to medical tourism. The American healthcare industry
faces a huge shortage of qualified health workers, and the gap is expected
to widen. For example,
U.S. federal health authorities
project the current shortfall of seven percent in nurses to increase by
2020 to 29 percent, or 810,000 positions. In 2002, Health Affairs projected a
U.S. physician shortage of
200,000 by 2020. While
medical tourism may align demand better with supply of health services and
control medical cost inflation, it will not negatively affect
On the other hand, U.S. healthcare costs have
doubled over the decade to $1.9 trillion in 2004. At $6,280 per capita, they are
much higher than in any other country, and twice as much as in the peer
economies of Europe. Interestingly, all this is because
of the higher prices of U.S. healthcare, and not
because Americans receive more healthcare overall. Hence the foreign option for major
medical procedures should attract all categories of U.S. payers. These include the uninsured
Americans or those opting for elective surgery; the private employers who
have seen their health costs double in the past six years; and even the
public agencies plagued with budget deficits because of their rising
The biggest beneficiaries are U.S. patients who are paying
their own way. They may lack
insurance coverage, or seek elective procedures not covered by
U.S. census for 2004 reports 46
million uninsured Americans.
Of these, 31 million have annual household incomes exceeding
$25,000 and 16 million exceeding $50,000. They, unlike indigents, are
targets of vigorous collection methods for medical charges incurred. A major surgical procedure or
costly hospital stay in the U.S. subjects them to crippling
medical bills. Such uninsured
patients, or those seeking costly elective surgery or cosmetic dentistry,
can opt for premier foreign care at prices a third to a tenth of those in
Next, U.S. employers and businesses
with crushing employee healthcare costs can find huge savings by
leveraging medical tourism through well-conceived tiered plans. Private health insurers can
likewise benefit customers and themselves by following the same approach
as a natural extension of consumer directed choice.
On an even larger scale, public-funded programs can
use the same medical offshoring approaches to save tens of billions of
dollars annually. There is of
course strong political sentiment against offshoring, but cost-cutting
pressures may make Medicare more amenable over time. Medicaidís move may be even faster
in view of its increasing burden on cash-strapped states. Moreover, Medicaidís often meager
fee schedule may decrease opposition of care providers to this business
Given all this, outbound U.S. medical tourism is bound
to grow. The question is, by
how much? It is presently a
rounding error as compared to the U.S. healthcare industry, and
just a fraction of even the annual $2 billion inbound market. Will it become big enough to make
a major impact on U.S. health costs and force
some much-needed reforms? A lot depends on how
the actions (or inaction) of some key players affect the different
customer categories. These
players are the U.S. lawmakers and public
health agencies, accrediting agencies and the overseas providers.
U.S. lawmakers can directly and
indirectly open up healthcare to the benefits of medical tourism. Directly, they can lift the
current restrictions on Medicare and Medicaid payments being made to
foreign providers. To ensure
high voluntary participation they should also allow the agencies to pass
on to the patients a fraction of the savings from the much cheaper
treatment. These two changes
directly aimed at realizing the efficiencies of medical tourism involve
minor amendments to the Social Security Act of 1965 that governs public
healthcare funding. Medical
tourism can also indirectly benefit from broader actions already being
debated in Congress. Of
particular note is pending tort reform legislation that includes capping
of some malpractice awards. A
by-product of this will be to reduce the legal exposure of U.S. health insurers and
doctors acting in good faith to help patients go abroad.
The federal public health agency Centers for
Medicare and Medicaid Services (CMS) can take the lead in laying down
quality standards and their method of verification, for the foreign
hospitals that it approves.
Such standards can be based on treatment outcomes like risk
adjusted mortality and complications rates. They should replace (or at least
supplement) the less meaningful facilities based standards currently used
by the primary U.S. accreditation agency, the Joint Commission for the
Accreditation of Healthcare Organizations (JCAHO).
The current standards evaluate the practices,
equipment and facilities that a hospital has, and not the treatment
outcomes that are of more direct concern to patients. This is analogous to measuring the
quality of a car model based on the condition of the factory floor and
equipment used for its manufacture, instead of looking at car defect
statistics or reliability performance. A hospital with adequate
buildings, facilities and procedures can similarly get JCAHO accreditation
even if it is staffed by incompetent doctors and has a mortality rate
several times higher than peer hospitals. CMS can press for meaningful
changes and also require the foreign hospitals to publicly report these
audited quality statistics.
This information can better enable U.S.
patients to choose their hospitals.
JCAHO itself should not wait for an external push
to better align their accreditation criteria with patientsí needs, and
like CMS push for open disclosure.
Prospective patients can then choose better among the currently
seventy one (and counting) JCAHO accredited foreign hospitals, as well as
their U.S. counterparts. Hospitals and doctors may
legitimately worry that pursuit of better statistics may compel them to
turn away sicker or higher risk patients. However, this issue can be
considerably mitigated by using risk-adjustment to better calibrate
quality, as is now being increasingly done in the U.S.
Finally, the foreign providers and private medical
tourism promoters themselves can do a lot to fill some obvious gaps in
serving medical tourists. These include patientsí need for
(a) easily locating the most suitable hospitals in terms of competencies
and prices (preferably online); (b) ready access to U.S. based physicians
for care and coordination before and after their overseas procedure; (c)
adequate consultations (and preferably videoconferences) with their
foreign physicians before their journey; and (d) seamless travel, stay,
treatment and even sightseeing arrangements. Fortunately, private enterprise in
its quest for business will likely provide these linkages on its own, and
such efforts are already under way.
Medical tourism can potentially provide enormous
cost savings and ease the projected U.S.
healthcare woes. Foreign
competition can force some much-needed reforms to make domestic healthcare
delivery more efficient. At
the same time there is little impact on the overall employment of
U.S. health workers, as
continuing manpower shortages plague their industry. So though it may not please some
interest groups, medical tourism will benefit most Americans and should be
actively promoted as part of U.S. trade policy.
Articles, Healthcare Cost Charts