The Benefits Blog

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Medical Tourism: A New Wave of Healthcare that’s Lowering Costs

Jul 29, 2019 9:00:00 AM

If someone were to mention “tourism” alone, this conjures up thoughts of sunny beaches, fun, relaxation, blue waters, and sinful indulgence (within reason of course). If the same person were to mention “medical tourism,” a term that refers to a type of travel for treatments that are elective and generally of an acute nature, you may be puzzled as to why someone would consider mixing tourism travel with medical treatments. The simple answer is to reduce costs and seek care that may be of a standard and/or quality that is better than what you may receive in your home country.

Medical Tourism

The Purpose of Medical Tourism

Medical tourism, or, more specifically, travel for treatment, has been in existence for quite some time. Traditionally, travel abroad to obtain medical treatment was something reserved for affluent patients only. A person seeking a radical or experimental procedure not available in the U.S. may go to another country where access to the technique may not be in question. It should, however, be viewed more as a cost savings technique for lowering your company’s healthcare costs.

According to the Centers for Disease Control and Prevention (CDC) in Atlanta, procedures commonly obtained by medical tourists include oncology, orthopedics, dentistry, cardiology, and cosmetic procedures. The wife of the late Rev. Dr. Martin Luther King, Jr., Coretta Scott King, traveled to a facility in Rosarito Beach, Mexico as a medical tourist seeking holistic treatment for her advanced ovarian cancer just prior to her death in 2006.

The CDC does caution of certain risks associated with travel for treatment. One of the biggest risks the CDC warns medical consumers of is that of antibiotic-resistant infections that may be contracted abroad. Another risk is that of the effects air travel may have on a person’s body, particularly one who was involved in a surgical procedure where the chance for blood clots may be increased due to high altitude. If a procedure takes place in a facility that does not meet or exceed the standards and protocols established for U.S. facilities, there is a higher risk for outcomes that are less than desired by the patient, which could become financially burdensome to you as an employer. Fortunately, there are systems in place that have advanced travel for treatment that ensures that U.S. quality standards are met at a much lower cost.

 

An Example of How Medical Tourism Works for Employers

A way that travels for treatment can work is through partnerships with those providers abroad that use U.S.-based doctors and other medical professionals on a rotational basis. The facilities that participate in the travel for treatment program meet U.S. standards and protocols, alleviating the fear that the patient may be exposed to undo health risks.

Jim Polsfut and Jonah Cave of North American Specialty Hospital in Denver, CO, specializing in working with employers to provide a medical tourism benefit option for their employees to reduce the cost of certain elective procedures by nearly one-third. This option is available for plans that are both fully-insured and self-insured, although self-funded health care benefit plans have an advantage of faster implementation and utilization by plan participants, resulting in savings being realized quicker. This is because, as Jim Polsfut states, “self-insured plans do not have to go through the approval process of a large insurance company to include the option as part of the plan design.” Jonah Cave further points out that with this type of tourism, “we are better able to control the variability of costs found in traditional pricing for surgical procedures, returning the savings to the employers.”

Say an employee seeks to have performed a medically covered procedure at a U.S. hospital, for example, a knee replacement. The typical cost for knee replacement surgery in the United States runs around $50,000 ($49,500 to be exact). An employee with an annual deductible of $2,500 and maximum out-of-pocket cost of $5,000 pays $5,000. An employer who self-insures pays the balance ($44,500). If the employee were to seek the same treatment in a nearshore (a facility closer to the U.S. that is abroad, such as Mexico), the cost may be 60-80 percent lower.

 

How Travel for Treatment Cuts Healthcare Costs

Here’s how the use of travel for treatment cuts costs within your healthcare benefit plan. Remember the example from above for total knee replacement:

Cost of the procedure $49,500
Employee’s maximum out-of-pocket cost $5,000
Employer’s expense (self-insurance) $44,500

 

A total knee replacement procedure in a nearshore facility located in Mexico, say Cancun (such as the one operated by NASH, Galenia Hospital) costs around $15,000 to $20,000 (including travel and associated recovery at or near the facility for the patient and a travel companion, with a typical recovery time for knee replacements of 3.4 days).

As you can more than guess, your costs as an employer look as follows:

Cost of the procedure (and travel exp.) $15,000
Employee’s maximum out-of-pocket cost $5,000
Employer’s expense (self-insurance) $10,000
Cost reduction 77.5%

 

A system like NASH goes one step further by waiving the employee's out-of-pocket costs (i.e. deductible and co-pays, etc.), as well as paying for the travel and accommodation expenses of a traveling companion.

Cost of the procedure (and travel exp.) $15,000
Employee’s maximum out-of-pocket cost $0
Employer’s expense (self-insurance) $15,000
Cost reduction 66.3%

 

Either way, as illustrated you as an employer pay 22.5 to 33.7 percent of the cost for a total knee replacement.

 

The Future May be a Shore Away

The illustrated example is a snapshot of the savings that can be achieved through the incorporation of travel for treatment. The cost savings can be achieved within any plan type and the benefit results in a dramatic return to your company’s bottom line!

Mick Rodgers
Written by Mick Rodgers

Mick Rodgers is the Managing Partner of Axial Benefits Group (ABG) and Founder of the Alliance Healthcare Coalition (AHC), a nationwide healthcare purchasing coalition. Mick has been called a pioneer and a disrupter, but has always had a focus on disintermediation. He received the prestigious “Adviser of the Year” award from Employee Benefits Adviser Magazine in 2017, as well as the 2018 "Leadership Award" from the Association for Insurance Leadership.

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