AHIP Coverage (May/June 2008)
Medical Tourism Takes Off
Consumers are venturing beyond the nation’s borders in search of more affordable health care services. How are health insurers responding to this growing trend?
By Aileen Kantor
Looking for a price cut on a partial hip replacement? You could just pack your travel books and suntan lotion and head to Argentina where the cost for this procedure—between $8,000 and $12,000—is about 50 percent cheaper than in the United States.
This discount, which is not a special health promotion, is part of the globalization of the health care industry known as medical tourism. Today’s popular use of the term “medical tourism” describes two types of activities: one where consumers take exotic vacations and combine them with surgery, and another where consumers choose to go abroad to find more affordable health care services.
To achieve such discounts, some Americans leave the comforts of home, board a plane, have a procedure done in a foreign country where they hope English is understood, and find recuperative care in facilities that meet similar certification as U.S. hospitals. In exchange, significant discounts in comparison to U.S. rates as high as 85 percent are possible for those willing to make the journey for a select set of health care services.
These services, which range from heart valve and knee and hip replacements to a host of cosmetic surgeries, including dental work, have become attractive for some U.S. consumers seeking to save on elective procedures or for the uninsured with limited funds who need specific services. Medical tourism, or what some call “global health care,” is being touted in the media as a new hot trend.
“As health insurance premiums continue to outgrow American income, offshore health care will be part of a greater flow of cost-saving innovations offered to consumers,” says Arnold Milstein, M.D., chief physician at Mercer Health & Benefits in San Francisco and medical director, Pacific Business Group on Health. “It’s a natural extension of existing plan capabilities, such as claims payment and case management programs for Americans receiving emergency care while abroad. Its greatest value may be realized by uninsureds or by working households in large self-insured employers and Taft Hartley trusts in industries where labor costs—including health insurance—represent a big component of employers’ cost.”
McKinsey and Company estimates that medical tourism gross revenues were more than $40 billion worldwide in 2004, with projections slated for $100 billion by 2012. The National Center for Policy Analysis, a nonprofit, nonpartisan public policy research organization, says that an estimated 500,000 Americans traveled abroad for treatment in 2005. A majority traveled to Mexico and other Latin American countries, but Americans were also among the approximately 250,000 foreign patients who sought care in Singapore, the 500,000 who traveled to India, and the almost 1 million who went to Thailand, according to NCPA.
And with health care costs for certain procedures in India and other countries said to be 80 percent lower than in this country, some experts believe that medical tourism may change the face of the U.S. health care system. That is, if the right formula is established.
Those who are acutely sick or unable to fly are not good candidates for medical tourism. There are also issues regarding finding appropriate follow-up care in the United States and identifying providers willing to be contacted if things go wrong. How to afford travel expenses for family members and the prospect of receiving surgery from an unknown medical team in another land also raise issues for some.
Some issues surrounding quality are being addressed by industry groups. The Medical Tourism Association is made up of international hospitals, insurance companies, health care companies, medical tourism companies, and others. MTA serves as a repository of information on medical tourism as well as top hospitals and their quality of care and outcomes. Its “Quality of Care” project will glean quality information from international hospital participants to create a single methodology of quality reporting.
The Joint Commission’s international nonprofit affiliate, the Joint Commission International, which also assists international health care organizations, public health agencies, health ministries, and others to improve the quality and safety of patient care in more than 80 countries, may give U.S. consumers confidence to travel abroad for medical procedures. JCI provides five different types of accreditation programs for facilities outside the United States as well as care certification programs for specific disease states such as cardiac disease, stroke, and oncology.
With some built-in safety standards, U.S. health consumers might feel more secure about going abroad. Yet, when it comes to insurance coverage, it really boils down to whether a member’s health plan will foot the bill. Experts analyzing the medical tourism phenomenon believe that it is currently an attractive option for the self-employed or self-insured. Some health insurers are also examining medical tourism in some capacity.
Coverage Policies
“While it is not our policy for Blue Cross and Blue Shield of Texas to cover members who travel abroad solely for elective procedures where they can receive lower costs, we will cover specific procedures if they have been pre-approved by the employer paying for the care,” says Margaret Jarvis, spokesperson for BCBSTX, Richardson, Texas. “Of course, BCBSTX will always cover emergency care for members traveling for non-medical reasons, such as business or for vacations. However, if the surgery or procedure is not approved in the United States by the Food and Drug Administration, BCBSTX, regardless of employer permission, will not pay for that care.”
CIGNA HealthCare is another health plan considering how to approach medical tourism. “In general, we view medical tourism as an evolutionary step in health care consumerism—promoting greater choice, access to affordable health care, and cost transparency,” says Jacquelyn Aube, vice president of product development, CIGNA HealthCare, Bloomfield, Connecticut. “The concept is also in line with the national movement to give consumers more information and more choice. While most of CIGNA’s health insurance policies cover members who are abroad and get sick or ill, making the decision to cover elective procedures abroad would require a benefit change and a conscious decision by an employer to drive that change.”
Medical tourism presents opportunities and challenges that employers need to carefully weigh. Savings can be considerable. However, clinical quality and safety standards also should be important considerations. While JCI offers some assurance of quality measures for accredited foreign hospitals, sufficient outcomes data currently are not available to support a common basis of comparison with U.S. hospitals.
“Medical tourism in an employer-based market is something we are actively discussing with a few employers who are interested in pursuing the concept,” Aube notes.
Charles M. Cutler, M.D., chief medical director, national accounts, for Aetna, which is based in Hartford, Connecticut, also is seeing a growing marketing effort in medical tourism in the United States primarily from offshore hospitals that are promoting their services to U.S. consumers.
And while Cutler believes that some of the promotions regarding cost savings are overstated for consumers who have health care coverage, once travel costs are factored in, he says overseas care might be a good option for selected conditions and under certain circumstances.
After identifying medical tourism as an opportunity for high-quality, low-cost health care for specific conditions and under certain circumstances, Hannaford, one of the largest supermarket chains in the Northeast, asked Aetna to evaluate and develop a process to cover certain procedures outside the United States. Aetna agreed. While the details of the plan remain confidential, Hannaford has offered the option to its employees to have certain procedures performed abroad. Aetna continues to gauge interest in this area as it operates and evaluates Hannaford’s pilot.
Meanwhile, Hannaford, which set this program in motion and shared the news within the business community, is watching the trend take off. Peter Hayes, director of associate health and wellness, who was responsible for this program’s birth, is convinced that Hannaford and its associates will be able to get the best value for some health care procedures abroad.
“Let’s assume a hip replacement in the U.S. costs $40,000, but the employee deductible is $3,000, an amount that might be untenable or even financially catastrophic to an employee,” explains Hayes. “However, if a hip replacement costs $20,000 overseas for a top hospital, credentialed for quality, and we pay the medical costs, waive the co-pay, and use this money for all travel to cover the cost for the patient and a companion, there is significant savings to the employee.
“What’s more,” he continues, “this is not only a cost-saving option, but it is spurring competition nationally among U.S. hospitals. With the recent news of our program, we have not only received many calls from other employers trying to learn program details but also from U.S. hospitals trying to bid for the business.”
Will Medical Tourism Hurt or Improve U.S. Health Care?
Now that U.S. hospitals are getting word of providers taking their business abroad, medical tourism is forging competition internationally as well as at home. One medical tourism company is trying to take advantage of the new internal competition, offering overseas prices to consumers here in the United States.
Omer Sheikh, president of the medical facilitator company Circle of Life Health Services, explains this strategy. “Since some consumers don’t want to leave home for their health care, we are pre-negotiating prices with health care providers, such as hospitals, to keep the care here in this country. Given the growth of medical tourism abroad, we are seeing many providers now willing to cut their prices to get the business,” Sheikh contends. “However, a price break on pre-negotiating rates for these health care services here in the U.S. does not mean any reduction of the quality of care provided. Rather, these health providers are held to extremely high quality standards, such as the Joint Commission’s, among others.”
This buzz is also attracting other employers, Hayes says. “When we set up the program in August with Aetna, we believed we were relatively alone in our quest. Now, we hear that at least 11 percent of the self-insured marketplace is looking into medical tourism policies, too.”
In the meantime, some experts identify scenarios that are causing insurers to worry. Some insurers believe or are being told that if they encourage the globalization of health care and send patients elsewhere, their providers will leave their networks.
Ori Karev, CEO of UnitedHealth International, a UnitedHealth Group company, finds this theory unsubstantiated by the reality of provider capacity. “It is close to impossible for hospitals in Asia, among others internationally, to disrupt the patterns of care delivered at the 5,000 hospitals here in the United States,” Karev says. “Even if we were to open the flood gates and let Americans fill the 10 to 15 outstanding hospitals overseas, there is no capacity to serve what 300 million Americans need. Further, once health care inflation globally catches up, health care abroad some day may become cost-prohibitive.”
Notwithstanding these issues, UnitedHealth International is also assessing the feasibility of medical tourism for its members and examining the entire infrastructure to evaluate what is needed to facilitate U.S. quality health care abroad for its members.
Blue Cross Blue Shield in South Carolina has taken a unique business approach to medical tourism. In 2006, David Boucher, assistant vice president, healthcare services, at BCBSSC, began reading about medical tourism in the popular media and followed his curiosity all the way to Asia to assess health care services abroad.
Convinced of the market potential, especially for baby boomers not quite eligible for Medicare, he brought his findings to the BCBSSC management as an obvious carve out. Because Blues’ licensure prohibits it from contracting for services out of state, Boucher and his team created an independent BCBSSC subsidiary called Companion Global Healthcare, Inc.
At present, it is developing a network of overseas hospitals, which only include JCI-accredited hospitals that meet quality standards. Its business model is to outsource many facets of the business of care, including case management and others, such as contracting with physicians in this country who have agreed to see patients for follow-up care who had procedures done abroad. And its concentration is on procedures that lend themselves to medical tourism, mainly joint replacement and elective procedures.
“We are focusing on procedures consumers can travel for, procedures with low complication rates and easy rehabilitation, and procedures for which care is relatively short and easy,” says Boucher. And like others in the market, Boucher says quality service leads this company’s practice: “The quality process begins on the
airplane waiting ramp with the U.S. patient met at the gate.”
Aileen Kantor is the founder of PR Healthcare, Bethesda, Maryland.
