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The Self-Insurer: ‘US Employers Turning to Medical Travel'

by Victor Lazzaro Jr., CEO of BridgeHealth International, Inc.

Medical travel emerges as one of the newest, most innovative options for U.S. employers to realize significant savings on their health benefits while ensuring high quality care for their workforce.  What started as an alternative for dental care or cosmetic and plastic surgery has morphed into a preferred option for acute care procedures, especially for the 48 million uninsured or underinsured.

Today, medical travel is generating the attention of the self-insured marketplace, as the interest level soars among employers and payers to produce further savings to their medical expenditures.  Results of a survey of 400 U.S. corporate benefit managers released this year by the International Foundation of Employee Benefit Plans, a Wisconsin-based research group, show that 11 percent of employers now cover medical tourism involving medical treatment outside the U.S.

Thought-leaders predict that the insured will soon be encouraged by their employers to go abroad, for reasons like lower out-of-pocket costs as well as financial or time-off incentives. Arnold Milstein, the San Francisco-based chief physician of Mercer Health & Benefits, says that employers are beginning to include in-hospital networks as an option for getting care outside the U.S.

The globalization of healthcare consumerism is a reality, with the term medical tourism often used as a catch phrase to describe the process for both medical and dental care.  While citizens of other nations have accessed care in the U.S. for several decades, the situation is now reversing itself:  Global outsourcing for healthcare is a phenomenon which is likely to impact not only self-funded employers and payers, but also the American healthcare system as a whole.

The potential reasons why a citizen of one country might travel to another country are nearly always the same: access and cost.  Lack of access, either because the technology is not available, is prohibited or illegal, or the wait is too long in the home country, can lead to medical tourism. In the past, this was a common reason why patients came to the U.S.—for more cutting edge surgery including cardiac, orthopedic, and reproductive technologies such as In Vitro Fertilization. Conversely, Americans might also have traveled due to lack of access to unproven medical therapies such as stem cell or cytoplasmic transfer therapy.

Motivation for medical tourism is increasing, especially with expanded information more available to the public about treatment in other countries through the globalization or economic “flattening” of the world and medical information and marketing on the Internet.  The lure of international travel cannot be discounted.   For many Americans, visiting new destinations and combining one’s needed medical procedure with a recuperative vacation is a dream come true, especially for those who have never enjoyed the luxury of traveling abroad.  It’s a chance to access treatment in an exotic destination—Singapore, Thailand, India, and Costa Rica, Mexico and Panama closer to home—in addition to dozens of other countries -- while mitigating the costs of US-based treatment, even after factoring in the travel expenses and an extended stay. 

The growing number of Americans traveling abroad for medical and dental care is well documented, with a 2007 study from the National Center for Policy Analysis (NCPA) reporting that an estimated 500,000 Americans crossed the border for treatment in 2005. A majority of those traveled to Mexico and other Latin American countries,  but Americans were also among the estimated 250,000 foreign patients who sought care in Singapore, the 500,000 in India and as many as 1 million in Thailand..

For employers, the opportunity for savings is very compelling, and now, there is evidence and the validation of safety standards in foreign hospitals, making medical travel even more attractive.  For example, Hannaford Bros. Co., a supermarket chain based in Scarborough, Maine, is one of the first companies in the U.S. to include a foreign hospital in its network of providers. On Jan. 1, 2008 the company added a hospital in Singapore for hip and knee replacements where the cost for hip replacements is about $10,000 to $15,000, compared to more than $40,000 in the U.S.

Generally, under the Hannaford health plans, the company pays 80 percent of an employee's medical costs -- until the worker reaches an out-of-pocket limit of $2,000 to $3,000. For an employee who goes to Singapore for a hip replacement, Hannaford will pay the entire medical tab; the worker won't have any out-of-pocket costs. In addition, the firm will pay for travel costs, including airfare and lodging for the patient and a companion, up to $10,000.

Significant Cost Savings

American patients travel abroad for medical and dental procedures to obtain quality care for a fraction of the cost charged in the U.S.  There are many reasons why “extranational” medical care is so inexpensive and more affordable than equivalent services in the United States and other industrialized countries, according to physician-economist Michael D. Horowitz, MD, MBA. 

The most important factor in the affordability of medical tourism is the difference in the level of economic development between the patient’s home country and the destination where care is provided. Patients maximize the value of their money when they choose to have healthcare in countries that are economically different from the country where they live, which accounts for the fact of developing countries becoming such popular medical travel destinations.

Horowitz also points to management activities contributing substantially to the reduced price of medical services in medical tourism destinations where hospitals and other healthcare providers are able to purchase labor and supplies at much lower costs.  The medico-legal environment in destinations also contributes to lower costs.  Providers have huge savings in premiums for professional liability insurance.  Reportedly, the insurance premium for a heart surgeon in New Delhi is less than 5 percent of that in New York.  Also, there is little pressure on providers to engage in defensive medical care and documentation.

There are many sources for cost comparisons pitting the price tag for American-based services against those in other countries. While the numbers differ depending upon the matrices for calculating the procedures, the bottom line remains consistent:  Cost savings for patients, insurers, reinsurers, and employers seeking medical care in other countries is significant.

For example, the American Medical Association offered this cost comparison chart of “serious” surgeries in June 2007:

Procedure

Heart bypass
U.S. $130,000
India $10,000
Thailand $11,000
Singapore $18,500

Heart valve replacement
U.S. $160,000
India $9,000
Thailand $10,000
Singapore $12,500

Angioplasty
U.S. $57,000
India $11,000
Thailand $13,000
Singapore $13,000

Hip replacement
U.S. $43,000
India $9,000
Thailand $12,000
Singapore $12,000

Hysterectomy
U.S. $20,000
India $3,000
Thailand $4,500
Singapore $6,000

Knee replacement
U.S. $40,000
India $8,500
Thailand $10,000
Singapore $13,000

Spinal fusion
U.S. $62,000
India $5,500
Thailand $7,000
Singapore $9,000

The NCPA cited these differentials in its November 2007 study:

  • Apollo Hospital in India charges $4,000 for cardiac surgery, compared to about $30,000 in the U.S.
  • Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip replacement — one-half the price charged in Europe or the U.S.
  • Hospitals in Singapore charge $18,000 and hospitals in India charge $12,000 for a knee replacement that runs $30,000 in the U.S.
  • A rhinoplasty (nose reconstruction) procedure that costs $850 in India would cost $4,500 in the U.S.

With ongoing pressures to reduce healthcare costs, it is likely that benefits payers will continue to embrace the concept.  If only 10 percent of the top 50 low-risk treatments were performed abroad, the U.S. health care system would save about $1.4 billion annually. As more insured patients begin to travel abroad for low-cost medical procedures, medical travel will result in competition that is sorely needed in this country.

Ensuring Quality and Safety

The quality of healthcare abroad can be high, with many foreign hospitals actively courting business in the U.S. by catering to American tastes and expectations.  Foreign healthcare providers often have physicians with internationally respected credentials, many of them with training in the United States, Australia, Canada or Europe. Some foreign hospitals are owned, managed or affiliated with prestigious American universities or healthcare systems. Several companies are building and operating hospitals that meet American standards in Mexico and Central America, largely for American patients (as well as wealthy citizens of those nations).

One of the key quality benchmarks is accreditation by the Joint Commission International (JCI) or others as described below.  These carry the most appeal because of their rigorous standards for credentialing and accrediting facilities outside the country. 

JCI, based in the U.S., is a division of Joint Commission Resources (JCR) and a subsidiary of the Joint Commission designed to improve and regulate the quality and safety of healthcare services. JCI has operated since 1991 and is specifically organized to continuously improve the safety and quality of medical care in the international community. JCI recently formed a partnership with the World Health Organization to develop international standards for patient safety so hospitals and doctors across borders would have uniform standards to be judged on.  The average cost of accreditation is about $30,000, but that covers a three-year period, which breaks down to $10,000 per year.

According to Karen Timmons, CEO of the JCI, there are about 150 hospitals that are currently accredited, with another 105 surveys this year, of which about 47 are triennial surveys.  She anticipates that by the end of 2008, a little over 200 facilities will be accredited. The largest JCI-accredited hospital, incidentally, is located in Seoul, South Korea and holds 2,000 beds.
Additional, respected accreditation bodies include:

  • Trent Accreditation Scheme, or TRENT (based in UK-Europe and Hong Kong) http://www.trentaccreditationscheme.org/.  TRENT is a non-profit organization formed with a mission to maintain and continually elevate standards of quality, especially in healthcare delivery, through the surveying and accreditation of healthcare organizations, especially hospitals, both in the UK and elsewhere in the world.
  • Australian Council for Healthcare Standards International, or ACHSI (based in Australia).
  • Canadian Council on Health Services Regulation, or CCHSA (based in Canada) www.cchsa.ca.
  • International Society for Quality in Health Care, or ISQua http://www.isqua.org.au/welcome.html is a non-profit, independent organization with members in over 70 countries. ISQua works to provide services to guide health professionals, providers, researchers, agencies, policy makers and consumers, to achieve excellence in healthcare delivery to all people, and to continuously improve the quality and safety of care. Its offices are based in Australia.  JCI is accredited by ISQua.


In addition to the discreet data points covered by accreditation, “patient experience” criteria are important to acknowledge in assessing hospitals and facilities.  Criteria can include:

  • Reputation for quality
  • Indicated experience in selected procedures
  • Accreditation status
  • Ability to provide clinical data
  • Agreement to participate in our quality assurance and reporting program
  • Customer service orientation
  • Excellent nurse to patient ratio
  • Choice of geographic location
  • Familiarity with the needs of international patients
  • International standards in clinical delivery and patients’ rooms
  • World-class medical infrastructure and equipment


Medical Travel:  A solution for the 21st century

Today we are witnessing the growth of a new industry with free market response to employer concerns over escalating healthcare costs.  After-care is now less of an issue as American providers are more willingly accepting returning medical travelers and new health insurance plans that cover medical travel are being introduced.  While most insurers do not include foreign providers in their networks yet, they are beginning to actively consider it and many may likely in the future. Several health insurers are also experimenting with international coverage.  Milica Bookman, a professor at St. Joseph University, predicts that by 2009, it will become increasingly common for mainstream health insurers to include foreign providers in their networks.

The substantial savings derived from quality medical providers around the globe compared to typical U.S.-based expenditures will also entice stop-loss carriers to develop methods of offering reduced premiums when underwriting a plan’s risk.  This practice is similar to the current platform of traditional, U.S.-based Centers of Excellence and specialty carve out networks.

Risk takers including stop loss carriers, medical group underwriters and others are expected to benefit from the increased likelihood of better outcomes at lower cost for all concerned. Specialized networks which often have case rates without outliers or limited outliers can look forward to optimal coordination of care with stop loss coverage. Also, specialty networks can help reduce the amount of inappropriate care by reducing the incidence of medical misdiagnoses or mitigating the prevalence of flawed prognoses.

Providers serving the medical traveler offer predictable cost with fixed dollar, proactive knowledge of the medical exposure. This value proposition will be realized by many stakeholders:  employee/patient, plan sponsor, stop loss carrier, as well as other risk-takers.  A patient who incurs a catastrophic claim typically has no familiarity with such an event.

With the surging interest in medical travel, there is a concurrent – almost sudden -- onset in the need for information. Having a specialty network available for medical travel gives the patient and their families a focused resource where they can tap into information and appropriate care. They will be seeking patient advocacy and the best practice guidance within the specialty network for very serious health issues.

Plan sponsors will find this type of specialty network valuable as it ensures the most appropriate care and education will be delivered, with additional support in the way of enhancing the health and productivity of their workforce. Employees will have access to a global network and then drill down to providers with experience and a track record for delivering required treatment.

Whatever the outcome of the upcoming presidential election, the issue of healthcare and affordability of healthcare will continue to be a major focus.  Medical travel transcends party lines and is likely to gain more traction among employers going forward.  As the quality of care in foreign hospitals increases and can be validated, and the cost of care continues to compare favorably to the United States, we are likely to witness significant uptake of this concept among this nation’s employers.

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  The Medical Travel Site; More Employer Benefits Covering Medical Tourism; January 18, 2008;  http://medicaltravelsite.com/blog/2008/01/19/more-employer-benefits-covering-medical-tourism/

 McGinley, Laurie; Health Matters, The next wave of medical tourists might include you; Wall Street Journal, February 16, 2008; Page R6.

 Nathan Cortez, Patients without Borders: the Emerging Global Market for Patients and the Evolution of Modern Health Care, 83 INDIANA LAW JOURNAL, forthcoming (2008).

 Lori Andrews. THE CLONE AGE 6-7 (1999).

 Deborah Spar, Reproductive Tourism and the Regulatory Map, 352 N. ENGL. J. MED. 531 (2005).

 Diana M. Ernst, Medical Tourism: Why Americans Take Medical Vacations Abroad, 4 PACIFIC RESEARCH INSTITUTE (September 2006), available at http://liberty.pacificresearch.org/docLib/20070223_hppv4n9_0906.pdf (last accessed Jan. 2, 2008).

 Medical Tourism Offers Hope To Control Health Care Costs; National Center for Policy Analysis; November 1, 2007. http://www.ncpa.org/prs/rel/2007/20071101.html

 McGinley, Laurie; Wall Street Journal, February 16, 2008.

 Horowitz, Michael D.; Why is Offshore Medical Care so Inexpensive?; Medical Travel Today, Volume 1, Issue 2; September 2007.

 Medical Tourism Offers Hope To Control Health Care Costs; National Center for Policy Analysis; November 1, 2007. http://www.ncpa.org/prs/rel/2007/20071101.html

 Aaditya Mattoo and Randeep Rathindran, “How Health Insurance Inhibits Trade in Health Care,” Health Affairs, Vol. 25, No. 2, March/April 2006, pages 358-368.

 Medical Travel Today; Spotlight; Volume 2, Issue 13.

 Jessica Fraser, “Employers Increasingly Tapping Medical Tourism for Cost Savings,” News Target, November 6, 2006.

 Herrick, Bookman and Rupak, “Global Health Care: Medical Travel and Medical Outsourcing.” Also see Bookman and Bookman, Medical Tourism in Developing Countries (New York: Palgrave Macmillan, August 7, 2007).

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"Reprinted by permission of The Self-Insurer magazine as it appeared in the July, 2008 edition."

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