Avoiding Armageddon
I have glimpsed at the future of U.S. health care and I am pleasantly surprised. Instead of continuing to rise at twice the rate of growth of income, health care spending will slow dramatically. Future prices will actually be lower than they are today. Providers will bundle their services into easily-understood packages with a single fee. They will compete against each other on price and quality and the data will be transparent. Health care will be provided in a free, competitive marketplace. Third-party insurance will be relied upon only for rare, very expensive events. Medical malpractice suits will be virtually unknown.
There is only one catch. All this will happen outside the United States.
httpv://www.youtube.com/watch?v=qiYr-9hbDSU
We Like Guatemala
The National Center for Policy Analysis has written a good bit about medical tourism, the U.S. hospital reaction to medical tourism, and those shopping for health care. Still, I had no idea how easy it would be to solve the vast majority of our health policy problems by simply crossing the border. That is, I had no idea until a recent trip to Guatemala City, where Thomas Saving, Andrew Rettenmaier, Grace-Marie Turner and I toured a facility run by Grupo Hospitalario, a private hospital chain.
The CEO of the facility is Erick Herrera, a Cornell University MBA. Most of the doctors who practice there are U.S. trained, and most are board certified. They have all the latest equipment; and as far as I could tell they can do just about anything an American hospital can do. Right now, only 10% of their patients are foreign and only 2 or 3% are American. But as the U.S. health care system becomes increasingly dysfunctional, a low-cost, high-quality alternative only a few hours away could emerge in a heartbeat.
For starters, the hospital we visited looks like a modern hotel — with all the comfort and amenities. And the price is right — better, in fact, than a hotel. A private room is $55 a day. A suite is $85. And it comes with a TV, minibar, Internet hookup and 24-hour room service.
Almost all medical services cost a fraction of what they would in the United States. Whereas U.S. MRI scans range, say, from $500 to $1,500, the Guatemalan equivalent costs $240 (daytime) or $100 (evening). (Yes, they peak load price.) Gastric bypass surgery, a popular procedure for American patients, costs $8,000 in Guatemala, compared to $25,000 in the U.S.
Everywhere we looked we saw obvious opportunities to compete for the American market. For example, wealthy people from all over the United States routinely fly to ritzy spas and medical centers for super duper, comprehensive checkups. The fee ranges from $2,500 to $5,000, depending on the services selected. If they flew to Guatemala City instead, they could have most of the same services for $120 to $270.
Medical tourism could become the most important export product of Guatemala and other Latin American countries in short order. But would their political systems allow it?
Latin American countries typically have a system of free health care available to everyone. But the public systems are short on resources and ration by waiting. So, almost everyone who can, turns to the private sector for their care. Unlike Britain and Canada, it is not viewed as scandalous when Latin American politicians get their health care privately. Indeed, private care for everyone who can afford it is normal and accepted. The result is booming private sector medicine throughout Central and South America and a potential export industry for patients all over the world.
Bottom line: I have no confidence our federal government will solve our health care problems. I have a lot of confidence that Latin American entrepreneurs can do so.
Fascinating. And I think you are right. It’s just as easy to fly across an international border as is to cross a state border. The more costly and dysfunctional our system becomes, the more likely people will be to seek alternatives to it.
Agree totally. These easiest way to solve our nation’s health care problems is to move everything off shore.
In my MBA thesis on the US health Care system completed in 2005 I predicted just this scenario occurring iff the US health care providers do not take the input of Micheal Porter regarding appropriate competition being put in place for US Health Care Consumers. The patients who are subjected to ever increasing costs with highly dubious improvement in results will ultimately bring this ridiculous situation to a head. Providers protectionism is out of favor. We the US public can no longer afford your version of health care.
Is the hospital in Guatamala City owned and operated by Groupo Hospitalario, JACHO accredited ?
It’s good to know that there is an off-shore alternative in case our own health care system goes into decline. One obvious downside is that people who are sick, especially those of advanced age, may not feel up to traveling. It’s a shame they may have to face this extra burden because of misguided policies.
Richard is right. It is always good to know that if (when) our health care system crumbles that there will be somewhere to go. He is also right that it would be even better if we could avoid the collapse of our system all together. It would be great if our leaders would get off of their current path, take off the blinders, and look for examples of excellence like Grupo Hospitalario.
Keep up the fight.
All true, but the sad after effect is the diminished resources available for resident populations. As they gear up to accomodate high revenue medical tourism it causes a reallocation of medical resources away from native medical needs. Our benefit is someone elses loss. We need to fix our problem and not cause one somewhere else.
John, there are four more “catches”. The first is that the “provider” fee splitting involved in hospital systems is illegal in the US; illegal for good reasons, which I will defer discussing for now. The second is that the US version is for an annual captiated payment; this is the HMO gatekeeper role transferred to clinics, where clinicians would be the fall guys for each incorporated “at risk” system. Third, annual capitation creates a serious conflict of interest with patients and has been a killer of clinics with a consceince. Fourth, most US care is still pre-paid HMO/MCO “coverage” in one form or another and patients don’t have to ask the price of care; this tax subsidized “coverage” has beginning competition from emerging HSA//HRA/HDHP combinations, but still few Americans actually have to ask the price of care or its total cost.
As long as the Guatemala price is a fee for specific service set (like some cardiac packages in the US) and are not mini HMO-like at risk contracts for a population’s cost of care, one can see some merit in that system. But our policy makers would have us auction populations (of diseases, organ systems, “insured lives”, etc.) to the clinic/hopsital with the best annual capitation bid with all the problems that implies. This is quite different from the competition for the price sensitive patient model you describe in Guatemala. The two models should not be confused. Competition in selling services to patients is different from auctioning blocks employer and governemnt agency clientele for annual servicing contracts. Don’t be blinded by the word “competition”–selling services to people is different from selling people as commodities at auctions.
Finally, maybe number five, you don’t want to do away with state statutes that porhibit fee splitting. Collusion to split fees (illegal amongst providers) or split premiums (legal for HMOs) contingent on the volume of referrals, whether for more care or for restrcting care, is a serious threat to patients. We know the results of contingency payments already–they are always for the benefit of the 3rd party paying the kickback and never for the benfit of the patient.
Medical service could be on casino ships outside the 3 mile limit of the U.S. coasts. If the waves are too high for surgery you could spend some time at the blackjack table waiting for the weather to clear.
Our daughter gave birth to our two grandsons in a private Guatemala City hospital. Our daughter and Guatemalan son-in-law made their home in Guatemala City in 2004. A C-Section in 2006 cost was about $3,500 and their standard delivery last year was also $3,500. This was the all-inclusive cost including per-natal care, doctor’s fees and a nice hospital suite with a separate sitting area for guests. Our daughter’s OB doctor was trained in the US and Germany. We visited Guatemala over twenty times and we like Guatemala too.
John, I appreciate your comment and would just add a sentence to your Vision:
“PREVENTION and HEALTH PROMOTION will be the foundation of the health system and sickness care will be provided in a free, competitive marketplace.”
Interesting story. Looking at the differen tial cost figures, though, I would like to ask John a few questions for clarification:
1. What is the annual pay of doctors, of nurses and of other health workers, and of custodial hospital workers in Guatemala, relative to the US? If they are lower, would Consumer Directed Health Care based on competitively priced bundled payments in the US drive down the wages of employees in US hospitals to Guatemalan levels?
2. Is Guatemala a major contributor to medical innovation — drugs, medical devices, specialized software, etc? If so, what innivation may they have been in the last, say, decade?
3. If something goes wrong with a medical intervention in Guatemala, do patients have access to remedies for medical bills and pain and suffering?
4. Do Guatemalan hospitals treat patients from all socio-econoic strata, with or without health insurance?
UER
Less than 1% of U.S. physician or hospital revenues will come from medical tourism. That is all you have to know about it. The rest is irrelevant.
One of the REAL issues is that many insurnce comanies my own included engage in writing non disclosure agreements with the hospitals they negotiate with in order that the consummer, me, the one ultimatly responsible for paying the bill is denied the right to know what the final bill will be. Hence competition is obliterated. Third party payer or not we need to insist that we can get a realistic estimate of the total cost prior to a commitment to receiving service if we are ultimately responsible for paying the bill. Transparency is the key to truly competitive operation of the medical market place here and abroad. In Virginia we need transparency in order to be able to access the real relative value of the service being offered. Transparency from all that offer the service, no protection, no hiding. One of the fundamental points made by Micheal Porter with regard to how the competitive environment NEEDS to operate in order to effect change. Tell me the cost: tell me the quality: tell me why your institution represents value for my medical dollar and let me the consumer vote on that basis, anything less is folly. desatruction rouni
Excellent article. I have been touting medical tourism for several years. People overcame their fear of using calculators, using computers, shopping online. It may be more critical, it may be happen more slowly, but it will happen. The economics of healthcare are powerful forces. (www.ilovebenefits.wordpress.com)
The Joint Commission (JCAHO) is part of the problem and it’s elimination would be a good start for saving the medical system.
I have been in joint commission meetings, and these people are bureaucratic with minimal common sense.
For example, one reviewer could not see why locking up supplies might be dangerous in an emergency.
Mark Kellen, MD
John,
My best health care experience ever was in a Quetzaltenango Guatemala (aka Xela). For something like $6 including labs I was diagnosed (same day) with Giardia and Amoebas. Not pleasant, but what made it more tolerable was that I was in and out of the office in 15 minutes, didn’t wait, and paid the doctor cash (there was no receptionist). I received a call within a few hours and was told the med to buy from the pharmacy, no prescription of course… I was cured. After more travel in Guatemala evidently I had the problem again but was then heading back to the states. So I figured if the country doctor in Guatemala could cure me so could a Northestern clinic in Chicago! Not so, what a disaster: after waiting for an apointment, waiting after arriving for the apointment, getting another apointment (several more in fact) I wasn’t cured, or even diagnosed. Don’t ask me what it cost for all of that because know one knows… believe me or not the NET price, yes net, on the EOB is sometimes not the real price (ask me about that sometime). I’m tempted these days to get a cash pay doc here in the states, cancel my (employer) health insurance (yes it’s HSA eligible) and instead pile the meager AFTER tax contribution money up toward another visit to Guatemala. All tax deals are deals with the devil you know ; )
Answers to Uwe:
1. I assume international trade in medical services would tend to raise prices and therefore compensation levels in Guatemala and lower them in the US. More importantly, the US system would have to completely transform in order to compete. It isn’t provider incomes that will make US services less competitive. It is bureaucracy and the suppression of the marketplace.
2. I assume Guatemala is not an important innovator, but so what? Shouldn’t consumers buy products that best fit their needs? And doesn’t a competitive market for consumer services serve as the best overall guide for innovation?
3. There is very little malpractice litigation in Guatemala. But the system doesn’t work in the US either.
Reputation and competition are apparently better producers of high quality care.
4. Guatemalan private hospitals take all comers — so long as they pay for their care. Free care is available from the state. (I’m sure you approve of that!)
Dear John,
Thank you for this and all your excellent letters!
Imagine if we could create health care tourism inside the US. Some of us are working on that. Meanwhile, who knows Native American tribal leaders and would be willing to urge them to open modern medical facilities on their reservations? The income they gain and good they would do would far outpace the income from casinos.
John,
Great insight. I shared with all my friends on facebook. Starting a national tour in August.
See: http://www.mbproject.org/tour.expedition.php
Ron Greiner, let’s go into business together. The U.S. Navy has hospital ships and I’d bet they auction off the surplus, aged ones periodically! Dave Racer’s idea is also good. It’s clear from the discussion that regulatory arbitrage will be a key element of innovation in health.
“Bob” is quite right that the pre-payed care, employer-based U.S. model of health insurance inhibits the adoption of effective medical tourism. However, an innovative insurer could overcome this, even in the employer-based market, by abandoning its network contracts and simply maintaining a list of credentialled facilities. (I’ll leave unresolved the question of who does the credentialling for now.) The insurer would publish a schedule of allowances, from which it would “split the difference” with the patient, whom it would free to choose the most appropriate provider.
John, you are right. It will NEVER happen here. Drug and insurance companies have paid too much lobby-money for a trillion dollar unfunded Medicare part D and Advantage Plan system to ever get real competition. The objective is to keep over 3,000 part D plans and Advantage plans to confuse seniors.
We need to simplify and standardize all senior plans. We also need to regain control of excess charges relating to part B Medicare. Balanced Billing has silently been circumvented and all plan Fs are not really valid anymore because providers are [again] allowed to charge above 15 % of Medicare allowable amount.
We [senior advocates] are losing ground and senior citizens are again being pushed deeper and deeper into the dark black hole of financial and POLITICAL greed. Senior citizens that have been paying into a program since 1966 are being tricked by their government and insurance and drug companies into signing themselves OUT of this program that they have paid 7 1/2 % of every dollar they have ever earned into.
Some Medicare Advantage plan insurance companies receive over $15,000 a year of taxpayer dollars for every senior they can enroll and then provide medical care based on rationing. Sales people promise everything including a trip to Disney if they will join and then the seniors are denied test and care. You tell me if you think this is REALLY the AMERICAN WAY.
Medical Tourism is ideal for specific, scheduled medical and dental procedures.
To address John R. Graham’s comment, above, about an adoption of medical tourism in the employee group benefits market:
Insured Medical Tourism benefits are offered by Plan Benefit Services, Inc, of Columbia, SC, the innovator in creating medical tourism programs for the self-funded employer market. These specialists in group insurance developed an immensely cost-effective International PPO plan available to self-funded employers throughout the US. Their International PPO plans help employers mitigate their extraordinary medical expenses and present impressive financial rewards and savings for the employees.
The insured offshore healthcare benefits amount to $Billions in cumulative savings for consumers, employees, employers, insurance carriers, and the US medical community (patient payment defaults).
Global health travel will never replace regional hospitals and providers, but it offers much needed options as well as distinct financial and treatment advantages.
US dental insurance coverage continues to lag behind rising dental care cost, still capping benefits at $1,000 to a max of $2,000 annually. Accredited dentist in Costa Rica offer affordable solutions. Patients requiring extensive dental procedures (caps, implants, etc) can save thousands of dollars (even calculating travel expenses) and enjoy a nice vacation, too. Yet, these same globe-trotting patients are not expected to forgo their regional dentist.
Medical Tourism can be to the Healthcare industry, what Foreign Automobiles were to the Auto Industry. Better value overseas will attract consumers. A bloated American Health Industry will not change, and be chained to the old way of business. Marketshare will be lost in our Healthcare system, and jobs will be cut. The Hospitals will go to the government for help…it will bail them out…then take 60% ownership. Hmmm…sounds familiar. Some lessons are hard to learn, I guess.
Interesting. I’m doing a lot of consulting around medical travel these days. You will be happy to know that US hospitals are starting to do the same thing. This is something all must support.
Most of these comments are forgetting to take into account the most important thing about medical care. RESULTS. I see no hard data in any of the discussions above that shows that technical procedures done in these “medical tourism” countries is on par with what most Americans take for granted. I still believe that the technical expertise offered in the US is unmatched anywhere in the world. Remember, we are not talking about having a plumber fix your sink or an automobile mechanic fixing your car. We are talking about your body. You may only get one chance to have a procedure done correctly and if it is not done correctly there may be life changing consequences for the remainder of your life. What happens when one of these procedures is botched and you are back in the US and realize something is very wrong. I can garauntee that you will come running to your US physican and will not be running back to Guatemala to the doctor who pocketed your cash. You are now the unlucky US physicans problem. I have seen first hand many terrible results form surgeries done in foreign countries for a “cheap price”. Infections, early failures, life threatening complications that have crippled many for the rest of their lives. I would reccommend that anyone strongly take these factors into consideration before thinking it is a great idea to travel to a foreign country to save a few dollars for their medical care.
That’s why I am seriously considering moving to Costa Rica. This is the first time in my life that I’ve been ashamed to be an American. Barack Obama has driven us into fascism faster than we could draw three breaths.
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