Why Won’t Medicare Pay for Medical Tourism?

In a working paper published by the Mercatus Institute at George Mason University, Marc D. Joffe notes that Aetna, Blue Shield and HealthNet offer health insurance in California that gives beneficiaries access to Mexican providers. The U.S. insurers rent a provider network from a Mexican insurer.

The cost of health care in Mexico is 60 percent to 80 percent lower than in the United States. Therefore, cash-paying Americans travel to Mexico for many medical procedures. Joffe cites estimates of around half a million Americans annually visiting Mexico for medical care (although the number traveling only to fill prescriptions is not reported).

Joffe notes that 25,000 Americans living in Mexico in 2011 were receiving Social Security deposits. Unlike half a million other Americans who travel to Mexico for treatment, these retirees and their spouses return to the United States for treatment. The reason is that Medicare does not pay for their treatment out of country.

Joffe doesn’t estimate how much money Medicare would save if it paid for their treatment in Mexico, but a back-of-the-envelope estimate is not hard to figure out. Let’s just focus on inpatient hospital spending, which totaled $120 billion in 2012 (according the Medicare Payment Advisory Commission). This amounted to $3,263 per beneficiary. However, only 28.9 percent of beneficiaries required inpatient hospitalization in 2012. So, the cost per admitted patient was $11,291.

If Medicare could cut that cost by 60 percent, it would save $4,516 per patient. Scaling that to the American retirees in Mexico, it could amount to as much as $33 million.

Those savings amount to peanuts within the Medicare budget, and would only happen if every retiree took advantage of the option. But it’s a start. And increasing numbers of Americans are planning to retire abroad, not only to Mexico, but Costa Rica and other low-cost countries.

It’s a growing opportunity for Medicare savings. And the federal government wouldn’t even have to establish provider networks: It could just ask Aetna, Blue Shield or HealthNet to share theirs.

Comments (31)

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  1. Clark says:

    What is the quality of these procedures like in these other countries?

    • David Boucher says:

      As is does here in America, the quality of care in overseas hospitals can vary significantly as well. Best bet is to seek at Joint Commission Internationally accredited facilities. If you do your homework or select a medical travel facilitator who already has, you can find demonstrably better care in many international hospitals that you cannot find in your back yard

      • Jim Dillon says:

        The cost of care probably rises dramatically as Joint Commission gets involved. I have long supposed that JC is a critical component, rarely appreciated as such, in the rise of medical costs and, ultimately, in the reduction in access; but I have never seen any data that would allow a fair estimate or test of this thesis. Here I am talking about widespread changes in processes required by JC, not not about the fees or preparation costs as such. Much of what JC requires is senseless for an individual institution. In fairness, JC is to some extent a proxy for CMS, though it certainly has its own agenda as well. International standards are not as rigorous as US standards but their implementation might afford a means to estimate the financial burden of regulatory encroachment. In the US JC’s influence is so ubiquitous that there is nothing relevant to compare it with.

  2. Anne says:

    Seems like an easy, obvious way to cut some costs. It’s true that $33 million is “peanuts,” but why spend money we don’t have to? This doesn’t seem like it’d be difficult to make happen.

  3. Devon Herrick says:

    This is just a guess. But I suspect the reason Medicare doesn’t reimburse providers outside U.S. borders is related to the New York Times article that appears on April 28.

    One Therapist billed Medicare $12 million in 2012: He treated 21 patients per hour, every working hour.

    Medicare could easily select a few reputable providers around the world. But, before long, there would be hospitals from Mexico to Moscow that were suddenly “performing” numerous procedures on seniors who did not exist or who had dies years earlier. If Medicare cannot even police providers in New York City, I have my doubts about providers in Mexico.

    • Roland S says:

      There will always be those who want to game the system, being in Mexico, Moscow, LA or NYC. Allowing system abroad will save them money that they can invest in improving their control systems. This would allow them to save even more money. If we keep the ideal that every foreign provider will want to take advantage of the system, we will have a hard time improving our healthcare.

    • John R. Graham says:

      That is a very good point. If Medicare cannot effectively audit domestic providers, we should be wary.

      Perhaps one (imperfect) solution would be to make the difference in fees transparent, and offer the beneficiary some fraction of the savings as a credit to his or her Social Security deposit.

      That would reduce the risk of “ghost” patients.

      • Matt Downs says:

        Most of the fraud and abuse is in the Traditional Medicare. So the best way to do this is through the Medicare Advantage program.

        A lower capitated rate would let CMS save money, while the MA plan enforces within their network. There would have to be some anti-fraud wrap-arounds, but an MA plan could be fairly easily stood up in some countries, like Panama, the Philippines, and others.

        Incidentally, the member would presumably also save by having lower cost-sharing.

  4. Stevenson says:

    Perhaps someone may travel to some places in name of medical tourism.

    • Gorden says:

      And this issue touch upon international cooperation. We have to be very cautious.

      • David Boucher says:

        Actually 100% of the heavy lifting on this trend was completed years ago. Domestic Human Will is the missing link.

        • J. Heckman says:

          It is too time-consuming. In addition, people probably do not trust the quality of care outside U.S. borders.

          • James M. says:

            A lot of it has to do with the cost. I know many people who prefer to go to Mexico for healthcare. It is cheaper and quality is about the same. You could go to Mexico to get a procedure and vacation at a lower cost than the procedure in he States.

          • David Boucher says:

            Really? Bumrungrad International Medical Center in Bangkok treated over 450,000 international patients in 2013 alone, over 50,000 of them American…..

  5. Miguel M says:

    Savings are only “peanuts” if we only consider Mexico, but if we expand this to Canada and other countries in the region the savings will be significant. Also, the increased competition will eventually lead US providers to lower what they charge, leading to further cost savings. Exploring this opportunity might be very advantageous for Medicare.

  6. Wilson G says:

    I think that the straightforward answer is that monopolies in the health industry and their lobbyists oppose this change so fiercely because they would be harmed if Medicare was allowed to disburse for treatments abroad. Because there are so many interest involved in this issue, it be allowed in the foreseeable future.

    • John R. Graham says:

      If a single politician mooted the possibility of Medicare paying for overseas hospitalization, the American Hospital Association’s lobbying and advocacy budget would multiply immediately to counter it!

  7. charlie bond says:

    Good morning,
    Excellent post pointing out that American programs should fund doctors without borders, lest Americans wind up getting their care from Doctors Without Borders.
    Charlie Bond

  8. Laura Carabello says:

    Why stop at Medicare? Medicaid is certainly a “natural” for this opportunity. And the Workers’ Compensation system would also benefit.

    This is not simply a question of “if” but “when.”

    There are 500+ JCI accredited hospitals worldwide. Physician credentialing is also important.

    The quality of international providers can now be validated. Let’s start saving.

    • Devon Herrick says:

      JCI accreditation is a good place to start. U.S. hospitals must be accredited to participate in Medicare/Medicaid. Physician credentialing is also a good idea.

      There would probably need to be some type of registration by seniors (presumably living abroad) and copayments / cost sharing so seniors are aware each time a service is billed on their behalf.

    • David Boucher says:

      Now HERE’S a woman who knows this space weighing in…..Laura is one of the first international movers in this space!

  9. Gitmoray says:

    One thing that no one seems to be taking into account is that Americans retiring overseas are not creating cost to Medicare. Most keep up their medicare part B payments (for a rainy day) and Medicare receives $1,300 a year per beneficiary and pays out nothing.

    I know a lot of retirees who live in Ecuador, Costa Rica, Panama and Thailand, and they all get to use the local health system for retirees. In most countries it is relatively simple to buy into the local system which is considerably cheaper than Medicare.

    Once we allow bills from overseas care, most American expat retirees would leave the local health system and revert back to Medicare. This would probably consume most if not all the savings from medical tourism.

    The only way this would work would be for Medicare to approve overseas procedures on a case by case basis where the savings warrant the approval. The present system does not have the intelligence, incentive or political willpower to undertake such an experiment.

    This could work today through Medicare Advantage, and I am not aware of any restriction from Medicare that would prohibit any of the MA companies from using this as an option. The fact that none of them have chosen to even try is very telling. These are private , for-profit companies that have much better control on fraud than Medicare, and they are not doing it…you have to wonder…Why?

    • Devon Herrick says:

      This could work today through Medicare Advantage, and I am not aware of any restriction from Medicare that would prohibit any of the MA companies from using this as an option

      MA plans would be the logical place to experiment with medical tourism under Medicare. But, if MA plans began discussing offering seniors the opportunity to seek treatment abroad, the politicians that John Graham mentioned in an earlier comment would begin receiving calls from worried (hospital) constituents — and their lobbyists!

      It’s true that seniors living abroad must return home for care that’s too costly to afford out-of-pocket. But there is 1 million hips and knees replaced each year. Medicare could engage in selective contracting with domestic and foreign providers. Within a short time domestic providers would likely agree to steep discounts. This is what CalPERS had occur in California when it created a value-based health plan arrangement.

      Enrollees were informed they had to pay the difference between the reference price and what the hospital charged if they chose high-cost hospitals. Within a year, most of the hospitals that charged more than the reference price had lowered their rates to match the reference price.

  10. Ron says:

    Medicare would save even more money if it would promote and pay for medical travel/tourism in the United States as a start. Send people with travel expenses to the Inter Mountain Healthcare System, to MD Anderson, to the Mayo Clinic or anyone who proves they are equal or better quality than local services and are lower cost.

    CMS could tap into the carriers’ Center of Excellence programs.

    To save more, reduce the formula for long term hospital stays that are beyond the DRG base,

    • David Boucher says:

      Good idea, but I’m pretty sure that the Mayo Clinic(s) exited the Medicare program a few years ago.

  11. Wanda J. Jones says:

    John and All…

    This is an important and timely question as Medicare growth with Boomers will add 76 million to the rolls in two decades. All of us, including politicians, will have to get used to the fact that we are already operating in an international market, a national market, state-wide markets and regional markets, in addition to local markets. And experimenting on price is sure to increase, especially with procedures that are can be scheduled.

    There are at least two more ways to pay: Ask for bids from a short list of providers via Craig’s list or another site devoted to healthcare, and treat the price as one would the purchase of a car; negotiate both the amount and the period over which it can be paid. The contract can be sold to a financial institution.

    As to quality, there are hospitals around the world that have made it a special mission to achieve US-level quality for the express purpose of attracting medical tourists, including in Malaysia, currently the preferred destination for sex change operations. Mass General has a Vice President that oversees Executive medical tourism for companies that do business around the world. Perhaps they could be asked for their preferred providers.

    What Medicare does not have is the staff and experience to vet oversees providers and authorize targeted payments.

    Wanda J. Jones President
    New Century Healthcare Institute
    San Francisco

  12. Bob Hertz says:

    In a world where many Americans have seen their jobs outsourced to cheaper foreign nations, health care has been one of the last outposts of the middle class.
    (along with education jobs and government jobs)…….no heavy lifting, no foreign competition, and employers that cannot pick up and move.

    Numerous economists have pointed out that virtually all the net growth in middle class jobs for the last 20 years has come from the ‘non-tradeable’ protected sector.

    This may gradually end, but I fear that overall America will get poorer rather than richer in the process. The cure for high medical costs may be as bad as the disease.

  13. Matt Downs says:

    Very late to this conversation, but find it very interesting and thorough, as was the short blog post.

    We think Medicare can be extended to some countries, those with a ready infrastructure to accommodate a MA plan, a large number of US retirees and significantly lower health care costs than the US.

    the Center for Medicare Portability is working on this already in Washington and invite your input.

    Matt Downs, President
    The Center for Medicare Portability
    Washington DC

  14. Daniel Kass says:


    A couple of years ago I went to China with a group. On the plane trip back, I visited with some of the people from the tour. After explaining what my company does, they told me a great story that resonates with your latest blog: They needed a certain piece of medical equipment that was prescribed by their Medicare doctor. They did some research and found it online at a much cheaper price than their Medicare approved med. equipment provider. But, since their online provider was not Medicare approved, they wouldn’t get reimbursed by Medicare. So, they ended up buying from the Medicare approved provider. Your blog reminds me of this story. Medicare laws stand in our way to save money on our healthcare!

    Further, there is no incentive to Medicare consumers to go to the cheapest place. In fact, here’s a prime example: My best friend’s father, when he’s not feeling well, waits until it’s so bad that he ends up going to the emergency room, the most expensive place to get medical care! Part of the reason for this is that he thinks that he can’t get into the doctor right away. Plus, he also thinks that he’ll have to see a specialist anyway. Another reason, probably, is that fewer and fewer doctors are accepting Medicare patients because the reimbursement is so low.

    In 2006, Congress (not sure if that was a Republican or Democratic majority) passed a law to make it illegal to purchase prescription drugs from Canada as part of a Homeland Security Bill. As it turns out, the customs department turns the other way as long as it is an individual’s prescription. This legislation makes it much more expensive for Americans to buy prescription drugs. Unfortunately, our Congressmen and Senators have no clue about how this affects Americans, because they don’t have to pay for their drugs. In other words, they’re in utopia.

  15. Scott T. says:

    It never fails to amaze me how uninformed so many people seem to be. Certainly, in at least the last dozen years, it’s been well documented how excellent medical care is in many foreign countries, some even surpassing treatment in this country. In some countries, some of there cities chief industry is medical care,and mainly for treating foreigners. And like any good company they strive to attract the best employees, offer the best service at the best price. In our country, medical care is set up basically to care for its citizens and for the profit of drug companies and some medical facilities.
    And how naive we all are, from this article that claims it’s just so many millions, but it millions here and there and there adding up to billions. And even more naive is to wonder why should such a simple,logical and cost-saving idea is not done. Laws are passed by politicians who are bought and paid for by these same drug and medical companies, only caring about what’s in it for them.
    And why should they worry about what we think as long as we continue to care more about things to fight over…like u-suck because you’re a democrat or u-suck because you’re a conservative.And while we’re too stupid to see that it’s their game that we keep playing we go to vote like zombies for the same a**holes who will continue to do the same thing.