View from Washington – On Tour

How large employers may use medical tourism to cope with healthcare cost escalation.

Confucius said “And remember, no matter where you go, there you are.” As employers and their insurers add a medical tourism component to their employee health benefit plans, it is worth considering the pushback that some local providers are exhibiting to the emergence of health care globalization.

As a radical way to save money, medical tourism is starting to make more sense to employer benefit managers. According to Deloitte’s Center for Health Solutions, approximately 750,000 U.S. patients traveled abroad for medical procedures in 2007. The Center believes by 2010, about 6 million U.S. patients will travel abroad for medical treatments annually.

The Joint Commission International, which accredits health systems and hospitals worldwide, has certified about 200 hospitals abroad. Why is medical tourism so much cheaper? Stringent caps on pharmaceutical prices; less expensive physicians (many of them trained in the United States); lower labor costs; universal healthcare freeing proprietary providers of the burden of the uninsured; and, capped or lower malpractice costs relative to the United States.

The domestic response
An interesting response from domestic regional providers is emerging. By way of a recent case study, let’s examine a New England employer with over 150,000 employees and an impressive track record of healthcare cost reductions. Last year, for the first time, this employer included a medical tourism benefit. For specified surgeries, they offered their employees a waiver of a standard $3,000 co-payment as well as an offer of $5,000 for travel expenses to a Joint Commission approved hospital in Singapore.

Yet in 2008, not one employee availed themselves of the medical tourism benefit. Take a procedure like hip replacement. The employer estimates that it costs around $46,000 for a bundled hip replacement. The Singapore hospital quoted an all-inclusive price of $15,000 for the same surgery. Of the 140 hip replacements occurring among the covered employers in 2008, the potential financial exposure was a differential of $3.2 million in additional cost. Even more troubling, local doctors made it known they were less than enthusiastic about providing rehabilitation follow-up after medical tourism surgery.

While this employer was examining if it should provide medical tourism as a benefit option in 2009 again, a strange thing happened. During benefit review and development, a large regional hospital called and offered to match the Singapore rate for all hip replacements for the covered employees for the coming year. The benefits manager then bid out the medical tourism rates for other medical procedures to some other regional providers. Surprisingly, several regional players said they would contract to match the international rates on an all-inclusive basis for specified procedures.

Recognizing a tremendous new value of medical tourism as leverage with regional providers, this New England employer is now moving to expand international bidding for bundled procedure rates. The long-term belief is that employees will eventually avail themselves of the economic incentives of international medical tourism surgery. This employer is wisely giving regional providers the opportunity to bid on the same domestic tourism surgical bundles.

Right now, international medical tourism is mostly viewed as a disposable income phenomenon. Clearly though, large employers are beginning to utilize the model as they try to find ways to cope with healthcare cost escalation To paraphrase old Confucius – it appears wherever employers go in the global health care marketplace; a major benefit of international medical tourism may be right where they are.

Robert Betz Ph.D. About Robert Betz Ph.D.

Robert Betz, Ph.D., is president of Robert Betz Associates, Inc. (RBA), a well-established federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit www.robertbetz.com.

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