Medical Tourism: Global Competition in Health Care

Health | International | Policy Reports

No. 304
Thursday, November 01, 2007
by Devon M. Herrick

What Public Policy Changes Are Needed?

The first step is for state and federal policymakers to understand that global competition in health care will benefit American consumers by reducing costs and improving quality through competition. Just as global competition improved the quality of automobiles, it will also improve the quality of medical care.  Local politicians and community activists often fight to protect community hospitals from closure in the belief that communities cannot do without them.  However, lawmakers must take advantage of cost-saving techniques in health care.  States that border Mexico could follow California's lead and allow insurers to offer policies that include providers in Mexico.  States that border Canada could follow suit.

Modernize State Licensing Laws.   Medical licensing laws must conform to the information age, where distance (or country) is irrelevant. Reforms should include recognizing standards of other countries as an alternative to local licenses.  For instance, many Indian and Thai physicians are board-certified or licensed in the United Sates, Australia, Britain or Canada.  Foreign physicians who meet standard criteria should be considered licensed if their skills have been evaluated and approved for inclusion in a network.  It does not make sense in the information age for each state to approve and police physicians living thousands of miles away.  The same holds true for physicians practicing in the United States.  Laws that prevent physicians in one state from consulting with patients in other states by telephone or e-mail should also be eased.

“Collaboration between American and foreign health providers would reduce costs and improve quality for U.S. patients.”

Relax Laws Restricting Collaboration. The federal Stark laws prohibiting self-referral should be modified to allow beneficial arrangements where care is coordinated and provided in a more efficient manner.  Without revised legislation, it would be difficult to integrate the services of physicians living abroad into the practices of local providers.  Integrated medical services would also allow domestic providers to compete by creating more efficient operations.  For example, a traditional physician practice could offer disease management for chronic conditions at a lower cost through an associated Indian physician.  And an American radiologist might have an Indian radiologist read X-rays at costs lower than competitors.

Encourage Follow-Up Care.   While physicians prefer an ongoing relationship with a patient, outsourcing patients to providers abroad is not much different than referring them to a specialist down the street.  If “safe harbor” contracts were created for physicians providing follow-up care, more doctors would be willing to treat cash-paying patients.  Moreover, if the number of medical tourists rises significantly, entrepreneurial physicians and clinics will sense an opportunity to provide follow-up care.  To facilitate providing follow-up care for patients who return from treatment abroad, a committee of the American Medical Association has recommended creating a current procedural terminology (CPT) reimbursement code for patients who need postoperative follow-up care.

Facilitate Liability by Contract.   Some American patients may be concerned about the potential difficulty of holding providers accountable in foreign legal systems (malpractice liability) and of receiving compensation for complications that will undoubtedly arise from medical treatment abroad..  Federal law needs to recognize patient contracts that provide for binding arbitration or that limit liability.  For instance, patients could purchase additional insurance from their health insurer in an amount they believe will protect them in the event of predefined problems that might occur from foreign treatment.  A policy could clearly identify financial remedies for specific problems similar to an accidental death and dismemberment policy.

“Financial incentives would allow patients to share the savings from globalization.”

Allow Financial Incentives.   Lately, some insurers have begun creating low-cost health plans that rely on foreign-based providers to treat serious ailments.  Unfortunately, lawyers could interpret ERISA and HIPAA (Health Insurance Portability and Accountability Act) regulations in ways that discourage employers (and health plans) from providing patients with financial incentives to travel abroad for lower-cost care.  Insurers and self-insured employers should have the right to experiment with a range of health benefits that inject global competition into health care. In addition, insurers, health plans and self-insured employers that have facilitated the overseas treatment of willing patients should be protected from liability.

Lead by Example. The federal and state governments should lead by example by allowing Medicare and Medicaid programs to send willing patients abroad.  Medicare would particularly benefit from cost savings since it pays for a large volume of orthopedic and cardiac procedures.

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