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Weekly UpdatesFor more than a generation, the United States has capitalized on the benefits of low-cost labor in Southeast Asia as a source of inexpensive merchandise. During the past decade, US industry discovered India, Philippines, and Asia Pacific countries as sources of low-cost technical and call center support. Today, some professional service organizations, such as accounting and consulting firms, outsource work to India to minimize labor costs. The global economy is forcing US business to seek new efficiencies relentlessly to remain competitive. The high cost of healthcare is a prime target for savings.
The US healthcare system is the most costly in the world. Indeed, the high costs of US medicine have put many US businesses at a competitive disadvantage with foreign firms. The US automotive industry is the poster child for the dilemma posed by high employee medical costs: GM, Ford, and Chrysler's medical costs amount to $1,000 to $1,500 per sold car, which greatly exceeds the medical costs for Japanese, Korean, and European competitors. Simply put, countries such as India, Thailand, Mexico, and Costa Rica can provide healthcare treatment at much lower prices than here in the United States. Coronary artery bypass graft surgery, for instance, can range from $6,500 to $10,000 in India, whereas the amounts paid by US health plans to domestic medical centers can exceed $50,000. In today's cutthroat global economy, savings of 50 percent or more for costly procedures will get the attention of most C-suite staff.
All US industries carry the burden of high medical costs. Given the unrivaled cost of medical care in the United States and our history of outsourcing to the Asia Pacific, it should not be surprising that hospitals in Asia Pacific are appealing to the US public as low-cost medical providers that offer quality care at unparalleled fees. The temptation to pursue such treatment avenues is great, driven by the huge cost differential. Mexico's medical providers have attracted some US citizens who have ready access to the border. Mexican hospitals are not viewed as primary targets for US patients needing complex, noncosmetic surgeries and are not discussed in this article.
Although it comes with the highest price tag in the world, quality medical treatment is among the US population's most esteemed benefits. Can plan sponsors save sufficient money by substituting medical services in India or Thailand for those delivered in US medical centers to justify a campaign that promotes this alternative to employees? Is it realistic to expect workers to travel half way around the globe to treat complex medical problems? What legal issues are associated with these alternatives? We explore these issues and more here.
Background
During the past decade, respected hospitals, including Bumrungrad International in Thailand and Apollo in India, have offered cosmetic surgery (e.g., tummy tucks and breast augmentation) to the US public for a fraction of the cost in the United States. Because cosmetic surgery is not covered under most group health plans, individuals were enticed to travel 10,000+ miles for the procedure to avoid high out-of-pocket expenses. These surgeries were often coupled with inexpensive vacations in India or Thailand at five-star resorts. This gave rise to the term "medical tourism."
Today, a handful of Asia Pacific hospitals have expanded their service offering to include complex procedures, such as coronary artery bypass surgery, mitral valve replacement, joint replacement, and herniated disc surgery. These institutions in turn are supported by a nascent industry that simplifies the process by transferring medical records for patients across the Pacific, making air and hotel reservations, and hosting patients when they arrive at the destination airport.
Prompted by publicity associated with a TV "60 Minutes" segment and several articles in the popular press, many plan sponsors and some leading US health plans are weighing the savings of offshore healthcare against the risks of the unknown. The press has reported on medical savings opportunities using institutions in India, Thailand, Singapore, Mexico, Brazil, Costa Rica, Hungary, Israel, the Philippines, and South Africa.
A limited number of employers now promote the option of surgical treatment overseas for certain major procedures as part of their standard medical plan. Without a doubt, healthcare cost savings for both the plan sponsor and the patient are the main objective in offshore healthcare.
Important Considerations
Only highly motivated individuals will travel long distances for medical treatment. The quality of care and clinical outcomes in these Asia Pacific destinations are not the motivators because no country can boast more successful clinical outcomes for complex surgical procedures than the United States can. Thus, plan sponsors must be prepared to offer substantial financial savings to motivate employees to travel extraordinary distances to receive complex treatment in a foreign culture. To a lower-paid employee enrolled in a medical plan with deductibles
and co-insurance, the financial gain associated with seeking this low cost alternative treatment may prove irresistible.
Before promoting the offshore medical treatment option, plan sponsors need to consider a host of issues:
* Quality of care
* Savings potential
* Public perception
* ERISA fiduciary obligations
* Plan sponsor liability
* HIPAA privacy
* Travel-related exposures
* Protected groups
* Tax implications
Quality of Care
Some institutions in India and Thailand seeking US patients tout the fact that they have secured accreditation from Joint Commission International, a subsidiary of the Joint Commission for the Accreditation of Healthcare Organizations (JCAHO). Some physicians performing services will be US-trained or board-certified. It makes sense that any US employers promoting offshore healthcare should seek accredited or board certified medical providers to reduce liability exposure. Nevertheless, plan sponsors need to keep in mind that medical treatment outcomes in the United States vary substantially across JCAHO accredited hospitals. Indeed, studies in this country have shown widely varying mortality and complication rates for accredited hospitals even in the same city. Thus, despite best efforts to work with only "quality" medical providers, there will always be a risk of surgical complications that could develop into a public relations nightmare, not to mention trauma for the employee.
Continuity of care, mainly postoperative treatment, should not be overlooked in planning an offshore healthcare benefit. Plan sponsors need to explore how patients can link up with a US physician to receive post-operative care when they return home. Some US physicians may be reluctant to take clinical responsibility for such patients, if the surgery was performed in another country. In addition, even the most accomplished surgeon, supported by experienced nurses and other healthcare personnel, will have occasional complications for complex procedures. Occasionally, complications develop post-surgery after the patient has been discharged.
Savings Potential
Savings per procedure in low-cost Indian or Thai hospitals might tempt even the most skeptical plan sponsors; however, savings can be misleading. The focus should be on net savings and not on per unit savings. The following factors will temper the savings potential:
1. Only very high cost treatment exceeding $25,000 in the United States will be worthy of extraordinary travel distance and unknown risks.
2. All treatment must be elective and scheduled.
3. Savings will be reduced by travel costs, financial incentives to the patient, vendor fees, administrative costs and travel, meals, lodging, and any trip cancellation insurance for a companion to accompany the patient.
4. Because most eligible individuals covered in group health plans will not be attracted to as radical a concept as offshore healthcare for life-threatening or life-altering treatment, expect only limited acceptance by patients who meet offshore healthcare criteria.
5. Absenteeism may be considerably longer for workers electing offshore treatment because of the need for preoperative testing at the destination facility and recuperation following the procedure to get patients to the point that long return travel can be endured.
Given these and other limitations, even the most effectively promoted offshore healthcare benefit, reinforced with attractive financial incentives to patients, is unlikely to save more than 1 or 2 percent of total annual medical spend. Such modest savings must be weighed against potential adverse publicity and a host of largely ill-defined legal risks.
Public Perception
One company in the southeast learned the difficult lesson that medical care should not be viewed as a commodity. The company redesigned its medical plan to reward covered members financially who sought complex treatment in India. Employees were to receive 25 percent of the savings if they selected specified offshore institutions for treatment.
When the first union member volunteered to receive gallbladder removal and rotator cuff surgeries in India, the company's union threatened to file an injunction, went public with its opposition, and forced abandonment of the offshore healthcare program. What began as positive publicity for innovative action ended with the need to manage adverse press reports.
ERISA Fiduciary Obligations
Plan sponsors must meet ERISA fiduciary requirements when managing their group health plan. They have wide latitude in designing plans to best meet the needs of both parties: the plan sponsor and plan participants; however, plans must be administered in the best interest of plan participants and fiduciaries must act prudently in selecting plan vendors, including an offshore healthcare vendor. In addition to using due diligence in selecting an offshore healthcare company, the vendor selection process and decision-making should be fully documented.
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