IMPACT: Healthcare Reform and Medical Travel

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.