IMPACT: Healthcare Reform and Medical Travel

Editor's Note: Because of the great interest in the potential impact of American healthcare reform on global medical travel, Medical Travel Today is introducing a new section devoted to the topic. For the next several months, we will reserve the opening section of the newsletter for opinion pieces on the subject.

We invite readers to share their thoughts and concerns and respond to the ideas presented here. To submit a piece, please email: ahaar@cpronline.com.

Laura Carabello, Publisher and Executive Editor, Medical Travel Today

Health care reform may be a “done deal” in the minds of many, but it appears that at least thirteen states will challenge the constitutionality of the health care overhaul passed this week by the U.S. House, though this may be more political theater than a challenge with teeth. 

Florida Attorney General Bill McCollum has been vocal on the issue, contending that the legislation places a burden on already cash-strapped states to fund an expanded Medicaid program and build a new insurance exchange so that individuals can find affordable insurance. Florida is being joined by Texas, Colorado, Louisiana, Michigan, South Carolina, Pennsylvania, North and South Dakota, Alabama, Nebraska, Utah, and Washington in a lawsuit that was filed by their state attorneys general just minutes after President Obama signed the Patient Protection and Affordable Care Act (H.R. 3590) into law.

The counter proposals and heated debates are likely to carry forward for the next decade. Despite the uncertainty, many basic issues are a sure bet, and these items will have a positive impact on the business of medical travel, both domestic and international:

Access to care will be compromised:  With so many new entrants having insurance, the pressure on a declining number of physicians, especially in primary care, will result in longer wait times for care.  This has proven to be the case in Massachusetts where similar reforms have been in place and health insurance is mandated.  The word is that it often takes 60 days or more to get an appointment with a physician.

Inevitably, prices will rise and quality will go down.  Individuals who require medical attention are likely to turn to medical travel as a viable and quality alternative to “waiting it out” in the U.S.  They may also seek U.S. hospitals that do not have waits.

Health care reform will do little to control the problem of spiraling costs: Health care reform was initially conceived as a solution to both the impending insolvency of the Medicare program in 2018 and as a means of expanding coverage to those who are uninsured. It has morphed into legislation primarily directed to expanding coverage for the uninsured, but is not expected to control costs. The true causes of our system’s escalating health care costs have not been addressed directly by this legislation.

Conversely, the cost of care outside the U.S. appears to remain stable, with savings of 50 to 80 percent on some procedures.  Medical travel will continue to present less expensive options for quality care.

 “Regulating premiums won’t do anything to reduce the soaring costs of medical care. This would be like capping the prices automakers can charge consumers but letting the steel, rubber, and technology manufacturers charge the automakers whatever they want.” 
-Karen Ignagni, Wall Street Journal, February 23, 2010

U.S. hospital labor costs will continue to rise:  Hospital care in the United States is the biggest driver of overall health care spending growth, accounting for 33 percent of every health care dollar spent.  The cost of labor is the single most important factor for the accelerated growth in spending and, according to a report from the American Hospital Association*, accounts for more than half of the growth in the cost of purchased goods and services.  Foreign hospitals, on the other hand, are not contending with these extraordinary labor costs and may be better positioned to hold down their pricing. Medical travelers will be the beneficiaries and will look forward to accessing less expensive options for quality care. 

*American Hospital Association, “The Cost of Caring’’, March 2010

Domestic medical travel:  Some hospitals within the U.S. that have excess capacity, offer centers of excellence – and can surmount this “labor cost” problem -- will be in a better position to match the pricing of foreign hospitals.

The key is to find waste in the system. For instance, if the clerical tasks being performed by an RN could be shifted to a clerk or business staffer, an institution may be able to increase productivity, lower operational expenses, and match the pricing points offered by foreign hospitals.  As a result, they can expect to attract and serve Americans who live outside of the hospital’s immediate catchment area and are willing to travel long distances to access less expensive – yet high quality – care.  This emergence of “domestic medical travel” is a new market phenomenon that is gaining traction.

Non-covered benefits:  Cost containment strategies under health care reform may increase the scope of non-covered benefits for many Americans – plastic surgery, gastric bypass, and dental procedures are three examples where Americans have been willing to travel for affordable, high-quality care.  This is likely to accelerate in the coming years, with or without health reform.

Additionally, there may be procedures that are not yet FDA-approved but are available outside our borders.  Stem cell procedures or HIFU (ultrasound treatment for prostate cancer) come to mind as examples in this category.  Look for a bump in medical travel volume among those facing end-of-life diseases.

Existing coverage will be affected:   The Congressional Budget Office has estimated that employers will drop coverage for five million people, forcing them to purchase individual insurance. Not only is this a disruption, but many of these people will face further disruption when the insurance they subsequently purchase will require them to find new primary care physicians as their existing physicians may not have contracts with the new plans. Many will choose to travel to another area where medical care is more readily available, especially for annual physicals that can be accessed for extremely reasonable fees.

Uninsured will not really get coverage:  While it is true that those who are currently uninsured will have greater access to coverage than they did prior to reforms -- through a combination of government subsidies and Medicaid eligibility -- the employer and individual mandates create bizarre incentives that will lead to many people with coverage today to elect to go without insurance.

The Congressional Budget Office has estimated that five million people will lose employer-sponsored health coverage as a result of the legislation. These individuals will then determine if they want to pay upwards of $5,000 annually to have individual insurance vs. paying a modest penalty and purchasing basic care out-of-pocket. If they elect to go without insurance, these individuals will always have the option of obtaining insurance if/when they get really sick because of guaranteed issue requirements. This creates a situation where only those who are sick will purchase insurance, driving up insurance prices for everyone.

The bottom line in this scenario is that medical travel becomes very attractive.  The out-of-pocket expenses are cut to the bone (pardon the expression), easing the strain on one’s pocketbook.  This could become one of the most fertile areas for the industry.

 
Vic Lazzaro, CEO, BridgeHealth International

It’s important to examine the health care reform bill and how it will impact medical travel going forward. First, it should be understood that two bills passed – the Senate bill and the “reconciliation” measure that changes significant aspects of the first bill. Depending on the outcome of subsequent changes, “fixes” will probably continue for months, if not years, to come. One area that was not addressed in this legislation was structural cost reduction or pricing and quality transparency — a key advantage to using a medical travel facilitator.
 
Taking the bill at face value, and assuming it will ultimately pass into law as more or less written, the impact on medical travel promises to be a positive one, primarily because employers, insurers, and third party administrators will be looking for ways to cut costs for several reasons.

First, they will want to turn “Cadillac plans” — expensive health insurance plans — into less expensive options. Additionally, they will be subject to the state-supervised marketplace, called exchanges, in which insurers would be required to sell their policies for individuals and small businesses. They will also be required to report how much they spend on medical care versus administrative costs. Both the exchange and the reporting measures will additionally compel stakeholders to lower costs, which is where medical travel is able to offer higher quality and lower costs.  

Another potentially positive aspect for the insurance industry as a whole and for the medical travel industry is that the number of covered (insured) individuals will increase. Within 90 days of the new legislation, people with a medical condition that had left them uninsurable will have the ability to enroll in a new federally subsidized insurance program.

Other Factors to Consider

What remains unclear about the health care reform bill is how it will affect HSAs and HRAs. Most likely, they will retain the same $2,500 deductible limit that was specified for FSAs. Higher deductibles will also encourage employees to consider costs more carefully, but as it stands those are being reduced.

Aspects of the bill that present challenges to medical travel lie in changes to Medicaid and Medicare. With their expansion, more people may enroll, leaving fewer covered by insurance, including self-insured products. This level of impact, if indeed it will have an impact, would not be fully realized for several years out.

Furthermore, the provision eliminating lifetime maximums could mean the end of limited benefits insurance lines, including “gap policies.” Typically, these benefits are purchased by companies that cannot afford more substantial coverage but want to offer some level of coverage.

It remains unclear what the impact will be on insurance products that cover specialized diseases or inpatient care, such as vision. Another gray area is dental coverage. As it stands, the Senate version of the health care reform bill has a provision exempting dental insurance from the elimination of lifetime maximums.  Presuming this stays, it will keep dental insurance available and affordable (the usual maximum is about $2,000 year) and means patients needing implants or other high cost dental procedures will benefit from medical travel.



Jack Lundberg, CEO, Medtreks

Bedfellows and the Bill

It is said that politics makes for strange bedfellows.  As one married to a politician—a Justice on the Ohio Supreme Court—I have been afforded many opportunities to interact with politicians of every stripe and flavor, many good and others horribly bad.  Thus, I can personally attest to the truism of this statement. 

The recent passage of the U.S. healthcare bill has brought this dictum into even sharper focus and which may portend several wide-ranging, negative impacts on the future of medical tourism in America.  At the same time, market disturbances typically offer up unique—if sometimes fleeting—opportunities as well.  It is distinguishing between the two that spells the difference between success and failure.

For insights into this legislation and its potential ramifications, I believe it instructive to note those who surround the Obama administration and the supporters of this bill, generally, the Democrat party.  These interest groups can be roughly grouped and categorized as follows: unions, trial attorneys, and entitlement recipients, e.g. government assistance, housing subsidies, etc.  I am of the opinion that all three of these have an interest in seeing patients remain within our borders and will attempt to speak to their respective motivations.

The domestic medical tourism industry has already witnessed multiple instances of union resistance to overseas healthcare alternatives.  Presumably, the reasons for this are: (1) product outsourcing, i.e. it is not “made in the U.S.A.”, and (2) the perception that medical travel is simply another ploy by management to exploit workers, thereby extracting even greater profits than had otherwise.   While there may, in fact, be other factors, I believe these are the primary drivers of union sentiment vis-à-vis medical travel. 

Domestic union philosophy is also such that income disparities and thus, associated cost structures, are cause for union membership outcry regardless of where they may be found or occur.  Consequently, it is highly conceivable that a healthcare worker in Thailand, for example, making $10,000 per year—versus one making $55,000 here--would draw the ire of unions who would, in turn, demand this disparity be rectified or alternately, the alleged “victimization” prohibited via legislative means.  In this regard, unions could then assert they are protecting the rights of a fellow worker, that they do not help perpetuate such wrongs, and thereby potentially increase their membership ranks.

In a somewhat similar fashion, allowing domestic patients to travel overseas does not benefit the trial attorney community.  Why?  Arguably, allowing patients to do so reduces the number of domestic patients who might incur or experience instances of medical malpractice and/or other complications and therefore, are available for representation.  Thus, the number of potential clients, prospective cases and--assuming they prevail--the attendant awards generated, are correspondingly reduced.  Arguing against the medical travel model further, is the fact that lawsuits in foreign jurisdictions, if allowed at all, are prohibitively expensive and few attorneys are qualified, whether educationally, financially or both, to successfully pursue such actions.  Consequently, allowing for patient migration runs counter to their self-interest and therefore, is unlikely to be supported.                    

As regards entitlement recipients, it is important to note that many have not experienced the U.S. healthcare system in the conventional sense, i.e. beyond the emergency room experience.  They are likely anxious to do so.  Also, because insurance coverage will now or soon will be available and provided for by others, experience suggests that domestic hospital resources will be more-frequently, if not heavily, utilized.  Thus, there is little compelling incentive for this group to seek care beyond U.S. shores following implementation.  

There is also the matter of relative ignorance or lack thereof, within this group with respect to learning of, being aware of, assessing and pursuing available, perhaps even more beneficial, alternatives.  In very general terms, this group tends to be comparatively under-educated, under- or unemployed, relatively uninvolved in and/or uninformed about the world that surrounds them, be it the political, financial realms, or other.  Moreover, evidence suggests an affinity for the known and reliable, even among the more-affluent.  For many, the American system has been and is still considered to be the so-called “gold standard” with other healthcare systems decidedly unattractive, unappealing, or even feared.  If there are added incentives through which people are encouraged and/or compelled to use the American system then, this becomes even more pronounced.

While all of this suggests a rather gloomy medical travel industry future, there are potential bright spots.  First, the bill’s reputed benefits largely do not kick-in until 2014, thereby providing a significant window of opportunity for astute operators before a possible downturn takes place.  In the meantime, costs such as taxes, mandates, etc., begin almost immediately.  Thus, there will likely be growing sentiment to alter or repeal the legislation until it is fully-implemented and the entire import of the bill felt. 

Second, that legislation is passed does not guarantee that its attendant programs and initiatives are ever funded.  Depending on the composition of Congress—which is solely responsible for approving all federal expenditures—it is possible that the bill’s opponents may take control of the Congress and then simply withhold monies.  Consequently, no “benefits” would ever accrue.

Lastly, the bill, already distasteful to a majority of Americans, may prove even more so as it is rolled out over time.  Even a casual examination of the bill reveals that it does little to address the underlying bases for rising healthcare costs and thus, those will continue to rise.  Thus, a growing number may come to recognize the measure for what it is--largely a political vehicle through which special interest group concerns have been fed, mollified and temporarily brought to heel. 

Ultimately, I believe this legislation will lead to extensive rationing, lower overall healthcare quality, and dramatically reduced options, be they personal- and/or supplier-related if it is allowed to reach its logical conclusion.  At that point in time, I predict medical travel demand will explode.

Given the above, it may well come to pass that insurers, patients and others will re-examine the reputed need for and desirability of such a sweeping regime, their respective roles within it, and determine they prefer instead, to choose their own destinies rather than become mere functionaries of government-run industry masters and their bedfellows.  In that event, medical travel will likely continue to expand and flourish.

Jack Lundberg is an international healthcare consultant and medical travel facilitator from Worthington, Ohio. 



First Thoughts
Josef Woodman, president, Healthy Travel Media

Over the course of the past several months, and particularly since the recent signing of the Patient Protection and Affordable Care Act (otherwise informally known as the Healthcare Reform Bill), I’ve been asked by media and industry people how this new and landmark legislation will affect cross-border medical travel.

The short answer is: who knows?  Most components of the bill take effect gradually, and implementation is likely to be even more glacial.  At this point it’s not clear the Act will stand, as more than 14 states have now filed lawsuits challenging its constitutionality.  Additional challenges are sure to arise, further muddying the already roiled waters.

Should the Act remain in place, we will undoubtedly see increased burdens on our already groaning healthcare infrastructure.  In accommodating 30+ million new healthcare consumers, we’ll likely experience an increased and acute shortage of primary care physicians, nurses, and administrative staff, resulting in longer waits for treatment.  Thus, while the number of uninsured American patients will decrease, the ranks of the underinsured will rise dramatically, as limited resources are triaged by insurers and providers across the healthcare reform landscape. 

In short, the US healthcare systems under healthcare reform will likely morph into something like the public-private system found in the UK, and emerging in Canada.  Not unlike the US education system, we’ll see lower cost—albeit less accessible— public care for those who cannot otherwise afford more expensive private care financed by luxury insurance plans, concierge services, or out-of-pocket payments.

To avoid the scenarios experienced by overburdened government-regulated healthcare systems in the UK, Canada, and Germany, US insurers and providers would be prudent to take proactive measures.  Thinking globally wouldn’t hurt. For example, to help mitigate the pressures of our over-burdened healthcare system, US insurers might aggressively accelerate efforts to include cross-border treatment plans for American-accredited facilities overseas. Cost savings can be substantial, even at the wholesale rates.  In like manner, leading US providers should be aggressively planning the construction of more cost-efficient international facilities and/or creating sustainable affiliations with JCI-accredited hospitals abroad.