Studying what lies beneath the surface of market forces can be fascinating.
BusinessWeek has a slideshow depicting major centers for medical tourism, as well as the cost savings of various procedures in relation to the US. This got me thinking about several dimensions of this concept, particularly since healthcare is 15% of the US economy, yet is also the sector of the US economy, outside of government, where wastage and ineffeciencies are the greatest.
Many procedures that cost $100,000 or more in the US can be done with equal competence for $10,000 in Thailand or India. Normally, if something of comparable quality is available for just a tenth of the cost, demand migrates to the cheaper alternative in a huge torrent. Even after accounting for travel costs, the gulf is immense. Yet it appears that only a small percentage of US patients for cardiovascular surgery, joint replacements, etc. are going overseas for their operations. Medical tourism will still only earn a miniscule $4 Billion in 2008 for India, Thailand, and Singapore combined, of which only one-third is from American patients. Thus, only a fraction of a percent of the US, European, and Japanese healthcare sectors have been dented.
This, of course, can be due to two reasons :
a) Fears about quality/safety, either real or perceived.
b) Net out-of-pocket cost to the patient still being lower in the US, due to insurance.
Regarding quality, many of these surgeons are certified by US boards or even educated in US colleges, and accidents do not appear to happen at any greater rate than in the US. At the same time, it is not possible to pursue malpractice suits against facilities in India or Thailand, which, while certainly an element of risk, itself is part of the reason for their lower price relative to the US. It is inevitable that some mishap befalls an American patient in Asia, and the media latches onto the story for a week or more, reversing the market demand for medical tourism for years, even if the incidence of such tragedies may be no more than in US hospitals. In fact, I am surprised it has not happened already.
In terms of cost, that brings us to the elephant in the room, which is the revelation that it is not India or Thailand that are too cheap, but rather that US healthcare is too expensive to begin with. I am no expert in this field, but it seems obvious that a lack of market forces in the value chain, a lack of regulation of lawsuits, the horrendous dietary habits of most Americans, and the tendency of consumers to not care about how much the insurance company pays are all contributory factors to what is arguably the greatest tragedy in US economic history. Socializing the healthcare system will worsen it, for reasons too vast to delve into here. It is true that many Canadians come to the US for urgent procedures that would require a 3-month wait in Canada.
However, millions of Americans don't have health insurance at all, and while for some this is by choice, for some it is not. For them, traveling abroad for a $10,000 heart procedure may be the only affordable option. Even if the most experienced and well-frequented facilities are in India and Thailand, nearby options also exist in Jamaica and Costa Rica. Over 20 other countries across Eastern Europe, Asia, and Latin America are also vying for a slice of the pie.
As unintended consequences ripple through, herein lies the path to forcing some degree of reform of the US healthcare system. As more Americans either choose or are forced to seek low-cost procedures abroad, even if it is only a small percentage American patients, this will compel insurance companies to include medical tourism options to patients. The insurance company can offer their own version of malpractice insurance to the patient, cover all travel expenses for the patient and spouse, and even throw in a vacation package and cash incentive. Even after all this, if the cost of the $10,000 procedure in India or Thailand has now risen to $30,000, it still outcompetes the $100,000 US alternative handily. Some insurance companies are already starting this with enthusiasm, and before long, all insurance companies will effectively have to compete on this level.
As the number of Americans combining surgeries with a tropical vacation becomes a small but significant percentage of the total patient pool, the US healthcare system will have no choice but to undertake the difficult reforms to bring costs down at a systemic level, thus benefiting even those Americans who refuse to go overseas, and even procedures that are not candidates for offshoring. If software development can be outsourced to India where it is one fourth the cost, surgeries cannot expect to be perpetually immune to competition that is a tenth or twentieth of the cost. Through some combination of tort reform, free-market principles, and preventative focus, US costs will gradually be brought down closer to a market rate. Perhaps the US can comfortably sustain prices that are 3 times that of Thailand, but not 10 times. This will be the next industry in the US that is forced to adapt.
To review, the expected sequence of events is :
1) Americans with no insurance are forced to make a life or death decision to get their surguries abroad, where the service meets or exceeds their expectations.
2) More insurance companies offer medical tourism with liability guarantees and cash/vacation incentives to American patients. Only a small fraction of patients are adventurous enough to do this, but all insurance companies are compelled to offer these options.
3) Major centers for medical tourism, after a track record of about a decade, develop solid brands that can attract American patients.
4) When we finally get to the point that 10% of Americans are traveling abroad for a wide array of procedures, the US will be forced to begin to take measures to reduce costs throughout the healthcare system. Losing 10% of the market is all that it will take to force some positive changes. This could begin to happen by 2020.
Such a sequence of events, of course, will boost the US economy greatly. Of the $2 Trillion mentioned above, as much as half of that, a whopping $1 Trillion or 7% of the US economy, is estimated to be wastage incurred due to a shortage of market forces in healthcare. Imagine if that $1 Trillion could be redeployed elsewhere. A person who saves $90,000 on a heart procedure can choose to use that money on emerging innovations in biotechnology that may be available in the 2020s, such as treatments to slow down or halt some aspects of aging.
This is not going to be a trend that moves as quickly as some of the others discussed here on The Futurist. But the economics involved are massive enough that it has certainly caught my eye. Let's see what happens, both before and after the predicted media frenzy over a foreign medical mishap.
Update (4/3/08) : Businessweek has an article on how technological advances in medical instrumentation are enabling some surgical procedures to be done with far tinier incisions. Patients who previously would have to stay in the hospital for a week to recover now can leave in under a day.
The article also mentions how hospitals are opposed to these technological advancements, as they reduce the number of days of revenue a hospital can collect while a patient recovers after surgury. This anti-productive, entitlement mentality will hasten the downfall of the US healthcare cartel, as shorter recovery times due to smaller incisions will make a trip to a tech-friendly facility in Thailand or India even more compelling. When the cost is a tenth and the recovery time is a fifth of what it would be in the US, how long before market forces dominate?
People don't realize that one of the most protectionist rackets operating in the US is the AMA and its hold on licensing/certification. The procedures to be certified in the US is designed to be deliberately difficult for foreigners, to keep the number of foreign doctors able to practice in the US at an artificially reduced level as possible.
Imagine if the software engineers were better organized, and insisted that H1-B visa holders had to pass an onerous examination process -- with the exam only in English and deliberately using American slang and culturally biased idioms in it as well, to make it as difficult as possible to pass. That is what the doctors have long enjoyed.
This trend in medical tourism will be a severe blow to that, as well. I don't think the doctors and their lobbyists on Capitol Hill will go quietly. Therefore, don't be surprised that a future (no pun intended) article you write on this subject is titled "Medical Protectionism."
Posted by: Zyndryl | March 22, 2008 at 10:58 AM
My wife is currently deciding where to have a cancer surgery. We haven't even considered leaving the U.S., and would obviously be concerned with quality and safety. It would be helpful if there were some agency that could shepard folks through the process and provide answers to FAQs. Here's a shoutout to anyone with overseas/ travel agent/ medical care experience. BUSINESS OPPORTUNITY HERE!
Posted by: Paul Moore | March 23, 2008 at 08:21 AM
I know of a woman who recently went to Costa Rica for plastic surgery (nose and boob). She decided to go to Costa Rica based on the lower price. I didn't see all the results (just the nose part), but she was happy with the result.
In the US, my guess is that elective procedures like plastic surgery paid out of pocket will be the most likely to be offshored. In countries with Gov't run systems and long waiting lines, such as Canada, Britain, etc. they are more likely to use medical tourism for more acute care.
I doubt that many US uninsured will go overseas because I think that they will rely on the existing system of Medicaid, charity, etc.
Posted by: Sam | March 23, 2008 at 08:46 PM
A lot of people are going to Moscow and Saint-Piterburg, Russia, to perform complex surgeries nowadays, russian medicine is considered one of the top-level practices, yet prices are still low. Some of people I know traveled all over to Russia to get heard and eye surgeries, paying 10th of what they would pay in US for the same (or even higher) quality job. I, myself, have medical insurance, but often I'm very upset with the quality and the way treatments are done, and it makes me mad because I'm paying premium for such terrible (or absence of it) service...
Posted by: World Citizen | March 24, 2008 at 12:23 PM
I think that medical tourism is the thing that will turn the American people in favor of Outsourcing - they will be cheering on India, Thailand, etc. to topple the bloated costs of the US system. Rightfully so.
Posted by: GK | March 24, 2008 at 01:28 PM
Half-price worked for us, though for long-term care, not acute treatment.
Moved mom to Mexico in 2001 - nursing home costs dropped from about $4,000/month to under $2,000/month, even considering I was paying a group of U.S. expats to coordinate/monitor her care.
The biggest advantage, however, was caregiver/patient ratio was at least 2x better than any local U.S. nursing home.
Worked very well for mom until her death late last year.
Posted by: Bill | April 20, 2008 at 02:57 PM
Hi,
Medical tourism is nice idea.A lot of people are going to Moscow and Saint-Piterburg, Russia, to perform complex surgeries nowadays, russian medicine is considered one of the top-level practices, yet prices are still low..
Posted by: x-ray fluorescence | February 05, 2009 at 10:08 PM
This is a very good article related to 'Medical Tourism'
indiameditours
Posted by: Account Deleted | August 18, 2009 at 10:39 PM
This message is @Paul Moore. Unfortunately, you do not have any contact information, or I would have sent you a message directly.
I work for Bumrungrad International hospital in Bangkok, Thailand. Although there are many hospitals around the world which have similar quality, we are probably one of the better known because of the features on 60 Minutes, Oprah's website, etc.
I would be glad to give you more information (as unbiased as possible, promise) and places to search. If you want, you can go to our website (http://www.bumrungrad.com) and submit an inquiry (please mention that you want the message directed to me) or comment (http://bit.ly/4X7VN7), or twitter at http://www.twitter.com/bumrungradh if you can do that.
If you don't want to contact us directly, then I encourage you to look for hospitals which are JCI accredited, or medical travel agents who focus on hospitals with JCI accreditation. It takes a lot of effort to get this accreditation, and for a good reason. There are other quality factors to review as well. However, medical care outside the US can be exceptionally good at the right places.
Posted by: Scott Minteer | December 10, 2009 at 03:57 AM
The article also mentions how hospitals are opposed to these technological advancements, as they reduce the number of days of revenue a hospital can collect while a patient recovers after surgury. This anti-productive, entitlement mentality will hasten the downfall of the US healthcare cartel, as shorter recovery times due to smaller incisions will make a trip to a tech-friendly facility in Thailand or India even more compelling. When the cost is a tenth and the recovery time is a fifth of what it would be in the US, how long before market forces dominate?
Posted by: homes for sale in costa rica | June 10, 2010 at 07:09 PM
This is a very interesting article. I think it’s good that medical tourism with overseas travel insurance is being considered now. It is better that Americans have a cheaper option to have medications. This is very useful especially nowadays wherein the country is suffering from recession. I agree that some Americans can be doubtful about it though. But I believe there are a lot of high quality medical services in other countries. Testimonials about this are all over the internet. People who want to try this should be extra careful and they must be very sure that the doctors are very reliable. It’s amazing that this could have a good effect on the country’s economy on the long run. I never thought of it that way. I’m glad that I came across your site.
Posted by: Jim is looking for overseas travel insurance | September 27, 2010 at 12:57 AM
If the US won't be able to pass a good healthcare system and insurance program to its people, medical tourism is the only viable option for middle to low class citizens.
Posted by: Plastic Surgery in Thailand | September 19, 2011 at 09:15 AM