by Matthew Dunphy
A Solution to the Heathcare Crisis?
Hospital Angeles Lomas in Mexico City, Mexico.
Photo courtesy of Hospitales Angeles, Mexico.
With President Obama coming to power amidst promises of change, much of life in America may face a transition, including its healthcare. The debate on the rising cost of healthcare is decades long, and the problem is only getting worse. What better time, then, to evaluate and consider some legitimate options?
While not a panacea, medical tourism is a potential solution. Outsourcing in any field often gets a bad rap. People worry about the quality of care received in overseas hospitals and question whether this actually saves money. But, as an owner of a medical tourism company since 2006, I argue there is no better time to reevaluate medical tourism, both for consumer savings and to reduce the strain on our exhausted national healthcare budget.
THE HEALTHCARE CRISIS
The United States faces a healthcare crisis. According to the National Coalition on Healthcare, in 2007 healthcare spending reached $2.4 trillion, representing 17 percent of GDP. This breaks down to around $7,900 per person. The Organization for Economic Cooperation and Development meanwhile reports that only a few other countries spend more than 10 percent of GDP on healthcare, with the closest being Switzerland at 11.3 percent of GDP in 2006. At the current rate of growth, the National Health Statistics Group projects the U.S. will reach $4.3 trillion in healthcare spending by 2016.
Driving this huge expense, nearly 46 million Americans, or 18 percent of the population under age 65, were without health insurance in 2007, according to U.S. Census Bureau data, and 120 million Americans have no dental insurance. Even worse, the cost of health insurance premiums is rising faster (6.1 pecent from 2006-2007) than wage rate growth (3.7 percent) or inflation (2.6 percent), according to the Kaiser Family Foundation's 2008 Employer Health Benefits Survey.
Suggestions to address this problem vary. Coverage must increase and costs must decrease for a solution to be politically feasible. Considering these aims, medical tourism looks helpful in two ways: 1) lowering costs on non-emergency procedures by performing them abroad and 2) reducing overall costs so that medical coverage can be extended to more people.
THE HISTORY OF MEDICAL TOURISM
For centuries, people have traveled to faraway places in search of better-quality healthcare. More recently, people have come to the U.S. to benefit from our technology and advanced medical techniques. However, in the last decade, Americans and people from other industrialized countries, such as Canada and the U.K., have started going elsewhere to avoid skyrocketing medical costs and long waits for procedures at home. The ease and efficiency of international travel in addition to the increasing numbers of U.S.-trained doctors abroad have further boosted medical tourism.
Currently India, Thailand and Mexico are some of the more popular destinations for Americans. Seeing the potential for increased tourism spending and local job creation, governments in medical tourism destinations are investing millions of dollars in promoting their countries as preferred locations. International hospitals meanwhile are filing for international accreditation and marketing themselves directly to the new global healthcare shoppers.
When I first began researching the medical tourism market in 2005, only a handful of U.S.-based companies existed and media coverage was minimal. Fast-forward four years and over 50 countries are marketing themselves as medical tourism destinations, with countless intermediaries having entered the market. Last fall, I was one of over 850 attendees at the Medical Tourism Association's trade show. This fall, more than 2,000 are expected at the same event.
CUTTING THROUGH THE HYPE IN MEDICAL TOURISM
Data shows that medical tourism is growing. But is this a salve for America’s healthcare crisis?
The cost savings suggest that it could be a viable remedy. Prices for procedures abroad can be as low as 10 percent of what they cost in the U.S., and generally average 2540 percent of U.S. costs. Emergency care is not well-suited for medical tourism due to the immediacy of the need. But routine non-emergency or elective procedures can feasibly be offered internationally.
For example, a gastric bypass procedure can cost up to $30,000 in the U.S. This same procedure in Monterey, Mexico, costs $9,000. Even when you factor in $2,000 for travel, lodging and logistical costs, this still represents a savings of over 60 percent. Whether one is excited about this industry or not, margins this large are notable.
The Deloitte Center for Health Solutions’ 2008 report on medical tourism puts the market at $60 billion annually, with 1.5 million Americans estimated to have gone abroad for surgical care in 2008 alone. Between 10 million and 23 million outbound American medical tourists are expected by 2017.
The key to the range in this projection is the degree to which medical tourism is integrated into health insurance plans or governmental coverage. This is where the true potential of medical tourism lies: developing “in-network” options for insurance plans to incorporate international facilities. The future could entail global policies which specify that certain non-emergency procedures would be performed abroad, in return for a drastic reduction in the premiums paid. Not only would this save the consumer money, but also the businesses offering employee coverage.
OBSTACLES TO IMPLEMENTATION
Patient room in Hospital Angeles in Ciudad Ju?rez, Mexico.
Photo courtesy of Hospitales Angeles, Mexico.
Despite the obvious benefits of medical tourism, there are critics. Domestic hospitals and surgical associations have vocally opposed medical tourism, citing patient safety concerns. While not endorsing medical tourism, the American Medical Association did issue guidelines for best practices in the industry in 2008, representing a shift in previous attitudes. Given the positive feedback received from customers receiving procedures ranging from dental surgery to a gastric bypass procedure, I contend that when properly planned and implemented through reputable organizations, concerns about the quality of healthcare are generally unfounded. In fact, outcomes are often superior in international hospitals where there are more nurses and therefore more attention for the recovering patient.
Renee-Marie Stephano, the COO of the Medical Tourism Association, a trade group tracking this industry, echoes this. She says that, generally, in private American hospitals, the nurse-to-patient ratio is one to 10 compared to a ratio of one to three in the private hospitals catering to medical tourists. “Most patients also get the cell phone (number) of the doctor, which is virtually unheard of in the States,” she says.
I believe the real obstacle for achieving widespread medical tourism is skepticism and resistance among politicians and CEOs. Even when presented with the benefits of reduced medical costs, government and business leaders fear the loss of American jobs. In light of the current economy, this is probably medical tourism's biggest hurdle to overcome.
MEDICAL TOURISM AND THE BORDER SOLUTION
One rebuttal to these objections involves phased implementation. Certain ethnic groups are some of the most willing medical tourists, with the Deloitte study citing 51.4 percent of Hispanics and 56.8 percent of Asians saying they would consider medical tourism. Caucasians and African-Americans were both reported to have a willingness of below 40 percent. With the heavy concentration of Hispanics in the American Southwest and its proximity to Mexico, this is a natural place to focus on the medical tourism solution in the short term. Once medical tourism becomes more mainstream, it could then be rolled out to a larger population and geographic base.
The first step is forming alliances between Mexican hospitals and U.S. insurance companies or self-insured employer groups. To assuage quality concerns, only those Mexican hospitals that have achieved Joint Commission International accreditation would be selected. The Joint Commission is the same group that accredits hospitals in the U.S., thus assuring the same level of quality found at home. These organizations could then offer new types of insurance plans that feature drastically reduced premiums and stipends to cover travel expenses to international in-network facilities. The recently unveiled Blue Shield Access Baja Plan illustrates this. In fact, a recent survey by the International Foundation for Employee Benefit Plans reported that 11 percent of their surveyed companies are now covering medical tourism as part of their plans.
New insurance plans like this not only appeal to companies with a large Hispanic makeup, but could also target small- to medium-sized business. The Kaiser Foundation reports that in 2008, only 62 percent of small firms (3-199 employees) offered health insurance benefits, down from 68 percent in 2001. How many of these firms wanted to continue offering benefits, but couldn’t afford it? How many jobs could be saved in companies in this region by cutting healthcare costs?
In my view, medical tourism does represent an opportunity for those with healthcare connections, especially in the insurance industry. The supply is there for those who can create the demand. In a contracting economy, the most successful ideas are ones that are disruptive, yet solve a problem.
Medical tourism is not a cure-all for the ailments of the U.S. healthcare system, but it is a viable alternative that could and should be included in a greater package of general reforms to the healthcare system. The global recession forces people to make sacrifices and consider options that aren't comfortable and probably would be rejected, had they more money. Given this difficult climate, now is not the time to ignore what could well benefit those in need.
MEDICAL TOURISM RECOMMENDATIONS
- Do your research. Ask for surgeon credentials and hospital or clinic accreditation.
- Speak to your surgeon of choice before departure. Surgery is a personal process, and your relationship with your surgeon is an important element in ensuring a successful outcome.
- Stay at a quality hotel to ensure a safe and sanitary recovery. You can save money here, but it is generally not worth it.
- Stay in the country long after the procedure for a safe return trip home. Your surgeon should make this decision, not the medical tourism facilitator.
- Ensure you will have access to your medical records upon departure. Make sure to bring a copy with you so you have records of your medical history.
- Remember this is your health. Get input and support from intermediaries, but make sure that all final decisions are made by you. You have to live with the results.
- Ask about legal recourse and liability. Is insurance available? Make sure to study waiver of liability agreements and other contracts before departure.
- Ask for recommendations from friends or family. Ask to speak to a former patient if using a company you are unfamiliar with.
Matthew Dunphy (’09) is a Rady School MBA student and co-founder of Medical Tourism Solutions LLC, an intermediary assisting clients with the acquisition of affordable overseas surgical care in Colombia. The company focuses on dental services, outpatient surgery, weight-loss procedures and fertility treatment and has begun expansion efforts in Latin America. Dunphy also offers marketing consultation services for medical tourism ventures.
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