How do you solve America's health-care woes? Outsource them.
One of the few things that Republican and Democratic politicians in the United States can agree upon today is that their country can no longer afford Medicare and Medicaid. In 2009, the U.S. government’s principal health-care entitlement programs between them spent $876 billion — an expenditure about the size of the entire economy of Mexico. The Congressional Budget Office projects that those costs will continue growing at 7 percent a year for at least the next decade, considerably outpacing GDP growth. And as the costs of Medicare and Medicaid have ballooned, the programs have become an explosive political issue. On Tuesday, May 24, Democratic candidate Kathy Hochul won a decisive upset in a Republican-leaning New York congressional district in a special election that was widely viewed as a referendum on Republicans’ ambitious plan to overhaul Medicare.
It’s not just the entitlement programs, either. Total health-care expenditures in the United States in 2009 topped $2.5 trillion –18 percent of GDP. And the efficiency of all that spending appears pretty low. According to World Bank data, Costa Rica and the United States have the same life expectancy (79 years), but Costa Ricans spend only 16 percent what Americans spend per citizen on health services.
That statistic, however, suggests a possible solution — or at least a partial one — to America’s health-care woes. Maybe Medicare’s services don’t need to be cut, overhauled, or saved. Instead, they should be outsourced. The U.S. government could save billions by simply letting its citizens go abroad for their federally funded health care.
Medical tourism has a bad reputation in the United States, synonymous with doctors in Tijuana and St. Barts hawking cut-rate plastic surgery and taking a liberal hand with the prescription pad. But going abroad for treatment is already a big business, and an entirely legitimate one. The Bumrungrad International Hospital in Bangkok, for example, sees tens of thousands of American patients each year, part of an industry that brought 380,000 foreigners to Thailand for treatment in 2005 alone. U.S. patients are attracted not just by the low costs but also by the quality of treatment. The Bumrungrad hospital has international accreditation from the Joint Commission International, the global arm of a leading certifying organization for U.S. hospitals. And Americans have other options besides Thailand. India’s Apollo hospital chain has a 99 percent success rate in the 50,000-plus cardiac surgeries it has done, equal to the performance of the best U.S. cardiac surgery centers.
And if the idea of going under a knife wielded by a foreign doctor worries you, you probably shouldn’t go to a hospital in the United States, either. According to economists Aaditya Mattoo and Randeep Rathindran, there is a 25 percent chance that the physician you visit in a U.S. hospital was educated abroad — and the great majority of those foreign-educated doctors now come from developing countries. It’s not really a matter of the quality of the doctor who will treat you; it’s just a question of where the treatment will happen.
The best foreign hospitals and their U.S. counterparts may offer similar quality, but their costs are miles apart. Mattoo and Rathindran calculated in 2002 that a knee surgery costing over $10,000 in the United States would run just $1,500 in the best hospitals in India and Hungary, including travel expenses. There are 400,000 such procedures a year in the United States; outsource one-quarter of them, and that’s $850 million in annual savings for one procedure alone.
Beyond savings for U.S. citizens and their government, allowing patients to go overseas for treatment would provide developing countries with a new source of revenue and foster the growth of world-class hospital care that local people could then access alongside medical tourists. The Philippines is the global leader in exporting qualified nurses, who send valuable remittances back home. This export success has stoked such an increase in demand for nursing courses that the country now has more nurses per capita than Britain. But if the patients were to move rather than the nurses, so that the latter could stay at home and treat foreigners in hospitals in Manila, the development benefits to the Philippines could be at least as large as those from the nurse export business.
The problem is that Medicare and Medicaid, like private insurance programs, cover virtually no services abroad, much less travel costs. This is despite the fact that a survey of retired Americans living in Mexico found that 96 percent said they would seek medical services in the country if Medicare would cover it. (The U.S. military and veterans’ health-care plans do, in fact, cover treatment abroad.) This might be a case of shortsighted protectionism, or pandering to the health-care industry. But at a time when both President Barack Obama and the Republicans in Congress are pushing for more free trade alongside budget reductions, expanded trade in medical services that saves the government money to boot seems like something that should be on the table.
It is true that some of the most expensive medical care is long term and end of life; around 27 percent of Medicare costs go to patients in their final year of life. It would be difficult to outsource that health-care to other countries because people want to be close to family and friends. And yes, for some complex treatments, the best (or only) qualified doctors may be in the United States. So to those who might worry that outsourcing medical procedures would eviscerate the domestic health-care market, don’t fret: The considerable majority of Medicare and Medicaid costs would remain at home, even if the programs covered travel and overseas treatment.
But health-care costs are so high that even a relatively small shift to foreign care would offer considerable savings. A 2008 report by the Deloitte Center for Health Solutions forecasted the growth of medical tourism from the United States. Its low-end estimates projected $26 billion in U.S. health tourism expenditures by 2015 for procedures that would have cost $195 billion to perform in the United States — that’s $169 billion in savings. If legislators allowed for a Medicaid and Medicare rule change, allowing the programs to save a comparable percentage of overall expenditures, that would still amount to $60 billion annually — considerably larger than the total savings from April’s budget deal between Obama and Congress. Add in the development benefits for other countries and the opportunity for a holiday in the sun for recovering seniors, and what’s not to like?