Medical Tourism

by on June 20, 2012 at 7:32 am in Books, Economics, Medicine | Permalink

We have all heard about medical tourism to India, Singapore or Thailand, places where patients can enjoy high quality and low prices. But do you know about medical tourism to the United States? By some estimates, around 400,000 people travel to the United States for medical treatment every year and the big surprise is that for tourists U.S. health care prices can be very low! Canadians coming to the United States can get a knee replacement for less than half of what Americans pay and at a price not much more than they would pay in India. I learned this from John Goodman’s very interesting new book, Priceless: Curing the Healthcare Crisis (this is an Independent Institute book where I am director of research).

Nor is that the end of the story. Here is Goodman on an even more surprising twist:

Moreover, you do not have to be a foreigner to benefit from domestic medical tourism.
Colorado-based BridgeHealth International offers US employer plans a specialty network
with flat fees for surgeries paid in advance that are 15 percent to 50 percent less than a
typical network. North American Surgery, Inc., has negotiated deep discounts with 22
surgery centers, hospitals and clinics across the United States as an alternative to foreign
travel for low-cost surgeries. As noted, the “cash” price for a hip replacement in the
network is $16,000 to $19,000, making it competitive with facilities in India and
Singapore.

One reason why so little is known about the domestic medical tourism market is that
hospitals prefer that most of their patients not know about it. The reason: they are often
offering the traveling patient package prices not available to local patients. That occurs
because the hospital is only competing on price for the patients who travel.

To be sure, the prices paid in the “travel” market are probably closer to marginal prices than average prices. Nevertheless, I think Goodman is absolutely right to focus in on the sectors of the health care economy which are competitive, it is in these sectors that we see listed prices, falling costs and increasing quality. Priceless is about how we can expand the competitive sectors. More on the book here.

DW June 20, 2012 at 8:18 am

My (Canadian) Mother-in-law came down to NYC for breast cancer treatment (three surgeries and various consultations). Cost 100k altogether and I slept on the sofa.

By this logic I shudder to think what it would have cost a domestic insurer.

careless June 20, 2012 at 8:48 pm

A lot. But they wouldn’t actually pay much of it. And for some reason, Blue Cross pays at 100% and then gets refunded most of their payment.

Lonely Libertarian June 20, 2012 at 8:43 am

Discounts for cash are very significant – and fairly common.

I had surgery 2 years ago and paid over 30% less for both the hospital and the anasthesiologist by agreeing to pay prior to my surgery.

I don’t think this is a marginal cost issue – more like a “real” cost reflecting the savings from reduced paperwork and red tape – and getting funds several MONTHS sooner than would be normal with insurance.

I find it very frustrating that we cannot build a “pay it yourself” component into health care reform.

Prescription drug costs are also inflated – the BP medicine I take would cost an insurer ~ $25 a month but I get a 90 day supply for $10 by paying cash – and NOT enrolling in Medicare drug coverage.

I wonder what the “true cost” of treating hypertension and diabetes would be if we incented everyone to use the $10 for 90 day alternative offered by Wal Mart and many others.

KLO June 20, 2012 at 9:30 am

It is not that difficult to negotiate discounts in all sorts of situations. Many providers seem to assume that patients will not pay once an insurer denies coverage. If the patient shows an immediate willingness to pay something and sort the situation out, a discount is frequently offered.

KLO June 20, 2012 at 9:35 am

I would add that, aside from the discomforts of haggling, the real difficulty in negotiating medical costs is the sheer number of providers that bill a patient who is undergoing complex treatment, say, for cancer. For a single patient, there may be as many as a dozen or more providers. Keeping track of the services and negotiating the bills is time-consuming and can be complicated, particularly when the patient has choices in treatment options that themselves open up different billing pathways. It is a bit like a car buyer negotiating with all of the various suppliers contributing pieces to the car instead of the dealer to arrive at a final price.

Bruce Cleaver June 20, 2012 at 10:49 am

“Discounts for cash are very significant – and fairly common”

Time discounts for cash as well. An eye-opening experience for me was 2 years ago when I needed to visit a dermatologist. The first three offices touted a 4-6 month waiting period for an initial visit. The fourth office said the same thing, then asked, “What type of insurance do you carry?”. I replied that I was willing to pay cash out of my own pocket. “Excellent. We can fit you in on Wednesday at 3:00″….a mere two days waiting!

Geoff Olynyk June 20, 2012 at 9:01 am

I’ve often wondered whether medical tourism to the U.S. is a necessary blow-off valve for the frustrations of the rich with the Canadian health-care system. In Ontario at least (and I believe across the country), private health care, in which patients just pay directly, is illegal.

The actual data show only a small percentage of Canadians receiving treatment in the States: about 0.5% per year, with only a quarter of those having travelled to the U.S. specifically for medical reasons. But of course those people are high-performing and well-off. The ones, say, able to do an analysis of breast cancer survival rates under the treatment available in Canada vs. the experimental treatment available in NYC, and then decide to fork out $100,000 cash for the experimental treatment.

If it keeps some pissed-off opinion-makers from detonating the Canadian system, my sense of fairness can tolerate a few people getting away with paying to get to the front of the line (since it’s somebody else’s line).

As an aside, I think the real health care cost problem is going to be in long-term elder care, which means personal attention to people with dementia and Alzheimer’s. No other field suffers so much from Baumol’s cost disease (at least until the Japanese invent an ass-wiping robot that we can import. Seriously, it’ll be that country that either deals with this problem or fails.) The economist Frances Woolley who blogs at the econ blog Worthwhile Canadian Initiative has written several posts about this. (Under the tag Health Economics.)

charlie June 20, 2012 at 10:11 am

I doubt the treatment is that different in Canada than in NYC.

What is different is the wait time.

Geoff Olynyk June 20, 2012 at 10:25 am

Perhaps. Wait times for cancer treatment are really small though (in Ontario, at least). Usually the cancer cases you hear about in the news are when a patient wants new experimental drugs (usually very expensive) that haven’t yet been approved by the provincial panel (a “death panel” if you will) that decides what treatments will be paid-for.

The wait times that everybody gets mad about are generally for things that are not life-threatening, but have a real quality-of-life impact: hip or knee replacements, cataract surgery, etc.

Peterf June 20, 2012 at 11:04 am

Small quibble: private health care is not illegal in Ontario; it’s just that all providers must accept OHIP and not give preference to those paying cash. In my many visits to Ontario I’ve paid cash for my treatment at several different providers with no issues.

Doc Merlin June 20, 2012 at 7:22 pm

“my sense of fairness can tolerate a few people getting away with paying to get to the front of the line”

What line? If there is a serious line, then you have a supply shortage.

Brian_2 June 21, 2012 at 11:04 pm

“As an aside, I think the real health care cost problem is going to be in long-term elder care, which means personal attention to people with dementia and Alzheimer’s.”

Yes. This is one of the major reasons (there are many) why we should focus on curing aging, as opposed to just trying and ultimately failing to treat the diseases that it causes.

kiwi dave June 20, 2012 at 9:51 am

If it keeps some pissed-off opinion-makers from detonating the Canadian system, my sense of fairness can tolerate a few people getting away with paying to get to the front of the line (since it’s somebody else’s line).

How magnanimous of you.

Geoff Olynyk June 20, 2012 at 10:06 am

Yeah, hi, welcome to the Canadian (and northern European) view on health care. It’s not like other goods – it’s life itself. Free markets are fine for HDTVs and cars, but health care should be allocated based on need, not ability to pay. If high wait times are the cost, society should fix the problem, through more efficient delivery or through higher taxes to pay for more people and equipment. This will reduce wait times for everybody.

My earlier post was contemplating the fact that if wait times get bad, the well-off/well-connected/high-functioning have a different path than “fix healthcare for everybody”: it’s “advocate for a privatized healthcare system in which they will be better off”. Some people very strongly believe that this is the way things should go. A fairly small percentage of Canadians, but they do exist. So what I’m saying is, if medical tourism to the U.S. acts a “safety valve” for these healthcare agitators, preventing them from advocating for privatized healthcare in Canada, all the better.

I hope this explains my viewpoint a little more clearly.

Urso June 20, 2012 at 10:23 am

I find it odd how distasteful you make it sound. “Health care is so important; it’s life itself. However, I find it morally repugnant that someone would want health care so badly that they would be willing to pay for it with their own money.”

Peterf June 20, 2012 at 11:19 am

The words you put into Geoff’s mouth in that quote don’t seem to me to correspond to what he wrote.

My interpretation of the Canadian belief (based not only on what Geoff wrote but on conversations with my Canadian relatives) is that a private system produces lots of health services for people who have money (including when they don’t need them) and none for those who have no money (even when they desperately need them). A public system produces lots of health services for those who are very sick and less for those who aren’t, regardless of how much money either has. Most Canadians think the latter system is more just than the former, and that those Canadians who disagree have a good alternative: they can avail themselves of the private system in the US.

John Schilling June 20, 2012 at 4:07 pm

Health care is not life itself. Food is life itself. Also air and water, but those tend to fall from the sky in Canada and Northern Europe. But 99% of the human race would die faster, and suffer more in the process, from lack of food than they would from lack of health care.

I take it, then, that you feel the free market in food is an abomination, and that you’d prefer it if all Canadians who are dissatisfied with the provincial soup kitchens would shuffle off to America and stop interfering in your quest for a food-care utopia.

Speaking as an American, I agree. Please send us the Canadians who insist on paying their own way, and keep the rest.

Tom West June 20, 2012 at 5:05 pm

First, I think that Geoff Olynyk and Peterf capture the rough gestalt of Canadian opinion on medical care quite nicely.

As for a public market on food – people’s need for food is consistent enough that such is not needed to run a system that provides almost all with enough to eat. A simpler money subsidization of the less successful seems to be reasonably effective (albeit not always – see food banks).

> Please send us the Canadians who insist on paying their own way, and keep the rest.

Of course, if you just have successful people, then it’s pretty simple to run a society. The challenge only occurs when there are those with unmet basic needs – at that point difficult choices between freedom and care for one’s fellow human being must be made. (Of course, for those who don’t value one or the other at all, it’s not so much of a challenge, but such people are, happily enough, few and far between.)

John Schilling June 20, 2012 at 5:45 pm

“…people’s need for food is consistent enough that such is not needed to run a system that provides almost all with enough to eat”

A: Please expand on the word ‘such’; the meaning is not clear in context

B: Is it sufficient to provide people with “enough to eat”, or are we obligated to provide them with the very best food?

B’: Yes, they really will live a little bit longer if we provide them with the very best food, which they cannot afford, compared to the “enough” that they can afford.

C: How much does it actually cost to provide people with “enough” health care, if we pay cash? And how much variation is there, really? Numbers, if possible.

D: It seems to me that Olynyk and Peterf are more concerned with how unfair it is that the rich get more health care than the “need”, than how unfortunate it is that the poor don’t get enough.

D’: No, the two are not in fact correlated to any significant degree.

Tom West June 21, 2012 at 12:18 am

> A: Please expand on the word ‘such’; the meaning is not clear in context

I think we can fulfill societal goals about people and food without all the difficulty and expense of a government food program. Simply giving money is enough to fulfill those goals.

> B: Is it sufficient to provide people with “enough to eat”, or are we obligated to provide them with the very best food?

Well, if we’re using the medical system as an analogy, then adequate food is sufficient. For medical care, it’s perfectly obvious that a country like Canada could never possibly afford the best levels of US health care for all of its citizens.

> B’: Yes, they really will live a little bit longer if we provide them with the very best food, which they cannot afford, compared to the “enough” that they can afford.

Agreed.

> C: How much does it actually cost to provide people with “enough” health care, if we pay cash? And how much variation is there, really? Numbers, if possible.

Well, the catch is that if you have a US style health-care system, it would cost more than Canada could afford to provide desired levels of health-care. Canada can do so only because we’ve broken the health-care market. To use an analogy, if we have an open market in gasoline where there’s a shortage, the wealthy might drive the cost of extra gasoline to $10/gallon, in which case the government can’t afford to buy a gasoline ration for the poor. If we break the market by saying you can’t buy more than your ration of gasoline, then the price drops radically as demand drops, and now the government *can* afford to do so. But it does so because the wealthy lose their ability to use more.

> D: It seems to me that Olynyk and Peterf are more concerned with how unfair it is that the rich get more health care than the “need”, than how unfortunate it is that the poor don’t get enough.

I would disagree. I would say it is the recognition that if the rich can buy as much health-care as they would like, then it becomes impossible to provide the poor with health-care as the price rises because of the increasing demand. The US is our prime example of this. (I will say that some Canadians talk about unfairness of getting more health-care, but at least the one’s I talk to who actually care are more worried that an official two-tier system is unsustainable, inevitably falling to a US style system.)

> D’: No, the two are not in fact correlated to any significant degree.

I’m not quite certain which two you are referring to here.

In the end, the trade-off is economic. Canada does not have the wealth of the US. Currently we get 95% of the health-care outcomes for about 50-60% of the price. The catch is that the last 5% will cost you hugely. If Canada went to a free-market health economy, we might have 50% of the population with US levels of health-care, decreasing wait-times and marginally increasing outcomes. But the cost of that would be that we could no longer afford to cover the other 50% of the population. I don’t think most Canadians would support the trade-off of greater freedom to purchase better health-care at the cost of leaving other Canadians without any health-care at all.

And as mentioned before, the USA provides a very helpful safety-valve for those Canadians who would be very angered. I consider it to be using our natural resources, one of which is a proximity to the USA. (By the by, US hospitals do, on occasion, send excess patients to Canada – it’s remarkable how little the people who are actually involved in saving people’s lives actually care about which system is used to do so…)

The other benefit of a socialized medical system is a little more subtle. I think Canadians have a slightly better opinion of each other because we realize that as a whole, we value our fellow citizens’ lives highly enough that we’re willing to sacrifice the better health-care that we’d be able to purchase in a market-oriented system. Certainly it gives me a slightly warm fuzzy feeling that if my fortunes radically changed and I became destitute, Canadians would still consider valuable enough simply as a Canadian that I would be worth giving health-care. That’s certainly why I don’t begrudge the 2.5 additional families that my health-care tax dollars theoretically support.

Brian_2 June 21, 2012 at 11:00 pm

“Free markets are fine for HDTVs and cars”

Really? More expensive cars generally have better safety features, meaning that many people who die in car accidents would have lived had they been able to afford a safer car. By your reasoning this should be unacceptable, and we should mandate that all cars have exactly the same safety ratings: no better and no worse.

mrmandias June 20, 2012 at 11:22 am

We lost our insurance at one point. My spouse had a continuing medical problem that required a repeated procedure in the low thousands. We called several vendors in our area, explained our situation, and explained that we’d be paying cash and wanted a quote to compare.

We ended up selecting the cheapest vendor, which turned out to be the same folks we used when we had insurance. Our total cash cost was less than our co-pay for the same procedure on insurance.

Bill June 20, 2012 at 11:24 am

Ask yourself this question:

Do the few examples given comport with your knowledge of the average cost of healthcare paid by all Americans, or is this selection bias?

Cliff June 20, 2012 at 12:00 pm

What do you mean, selection bias?

Cliff June 20, 2012 at 12:01 pm

Isn’t the point of competition that it “biases” selection of the low-cost, efficient providers?

Bill June 20, 2012 at 12:15 pm

Ever taken a stats course, or experimental psych course, or an empirical marketing course?

Doc Merlin June 20, 2012 at 7:29 pm

Americans don’t pay a single price. Prices for healthcare vary by as much as a thousand percent for the same procedure within a 10 mile radius.

I have an HSA+ catastrophic plan which costs me 150 dollars a month, but the 4 grand yearly deductible means for almost everything I have to pay out of pocket. This means I end up shopping around (using the phone), and I have saved a lot of money.

Bill June 20, 2012 at 9:28 pm

Doc, That you have a catastrophic plan means that, after the deductible, you do not shop after that deductible is reached. If you believe what you say, why wouldn’t you go naked, and get even better deals.

Go for it.

kvm June 20, 2012 at 11:15 pm

All or nothing. There can’t be anything in between.

IVV June 20, 2012 at 12:41 pm

So there’s a big difference in cost between being willing to pay in cash up front, and being without insurance?

Chulbul Pandey June 20, 2012 at 9:19 pm

The last time I was self-insured, a care provider explained it to me thusly:

“If you pay right now, it’s $25. If I have to bill you, it’s $75.”

Black Death June 20, 2012 at 12:55 pm

Good lessons here. Many hospitals and doctors in the US have high fixed costs, low marginal costs and excess capacity. This is an ideal negotiating situation for prospective patients willing to pay cash up front. As the article correctly states, substantial discounts are often available. Laser eye surgery is a good example of the benefits of this approach, since the procedure is mostly elective and not usually covered by insurance. Most health care providers set their “list” prices very high and then sign up to participate in insurance plans that pay them much less. Ant there’s a considerable amount of cost-shifting to make up for losses sustained on Medicare and Medicaid and non-paying patients. So a potential patient willing to pay out of his or her own pocket can obtain real bargains if sophisticated enough to negotiate them.

sort_of_knowledgeable June 20, 2012 at 3:21 pm

Some places encourage cash and others don’t. I had a scratch that became infected and called one place said that they wanted $200 down but wouldn’t tell me what the cost of a consultation was. I found a place in a Hispanic section of the city where I could see a doctor for $50. I think it’s up to $75 now.

mobile June 20, 2012 at 3:25 pm

My kids’ neighborhood public school, not far from Stanford, is lousy with high-performing tri-lingual European kids with all sorts of rare and debilitating conditions.

Isaac Crawford June 20, 2012 at 4:10 pm

I had a medical condition that was not covered due to it being a pre-existing condition. Instead of paying $2400+ for an MRI, I paid $600 by paying up front. There are actually websites that help find inexpensive imaging services. If I had needed a lot of them, it could have been cheaper to fly to Las Vegas and back just to take advantage of the steep discounts. What I want to know is this, why can’t we negotiate the best price and then have insurance reimburse us? Everyone would have been better off…

Another little trick is to make sure you deal with offices that do their own billing. They are more than willing to cut you a big discount up front. Before I figured this out, I had gone to another place that didn’t do their own billing. When I went in to negotiate, they literally couldn’t help me, they didn’t take payments! I had to wait until the billing company threatened to take me to collections before they would negotiate. The trick is to talk to the people that are in charge of getting money, they will talk to you…

economist1 June 20, 2012 at 5:15 pm

The left argues that U.S. health care providers have extensive market power that could be counteracted by a universal insurance system’s market power, which would lower U.S. health care costs to be in line with similar developed countries. This post shows this position to be correct- Medicare-for-all could clearly negotiate similar deals and lower the cost of health-care. The rents being collected by the health-care system are so massive that an individual can negotiate sharp discounts.

kvm June 20, 2012 at 11:14 pm

Medicare is already a large portion of spending. If it’s so easy, why don’t they do this already?

steve June 20, 2012 at 5:22 pm

1) Many of the Canadians who have stuff done here are really not quite medical tourists. They work here in the US, especially at US hospitals, so it is more convenient to have procedures done at US hospitals or surgicenters, especially if they work at one.

2) The very large majority of patients will not travel very far for care. If you sit and talk with pts and their families, do economists really do field work, patients prioritize differently than internet pundits. The 81 y/o guy having a CABG really does not want his 80 y/o wife driving 100 miles at night to make visits. How do you manage follow ups when there are complications? A small group of people are actually willing and able to travel fairly large distance for care.

Steve

Donald A. Coffin June 21, 2012 at 9:15 am

I sent a link to this to my wife, who is an accountant at a really large hospital/health care operation. She wrote back:

“That is interesting. We have people from other countries come here for transplants & I know that the price is negotiated by the Managed Care group. They usually ask us what will Medicare pay, so the discount is probably significant. Medicare doesn’t pay much.”

I suspect the use of Medicare rates as a point of comparison is fairly widespread–”higher-than-Medicare” may be good enough, even if it’s not a marginal-cost price. (My impression is that at least the place she works has no idea what the marginal cost of a service is…)

skeptic June 21, 2012 at 2:51 pm

Easy when you are young and have a single medical problem to solve. How many people reading this blog are over 65 and have 2 or more chronic conditions? With each additional medical condition (and drugs) the risk of post-op complications increase. Say you get your knee replaced but develop pulmonary embolism or a myocardial infarction and need to be seen by dozens of specialists? Will these specialists be covered? What then if you need thrombolysis or angioplasty/stent to treat these conditions. What happens when length of stay goes up from the standard 3 to say 10 days. What then if instead of needing outpatient rehabilitation you need inpatient rehab? How many will read the lawyers language that this may not be covered. There are obviously ways to model and adjust for this. I would hate to be the outlier who needs the extra help.
This concept is OK if you are young and otherwise healthy and need a single diagnostic test or a simple outpatient procedure but doubt it would work for older, sicker or complex patients who by far consume the most medical resources. While individually this may be the right thing for you, at the population level this will hardly dent the health care spending, for this model will not be applicable to the majority.

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