Medical Tourism

The NY Times recently published a story about medical tourism. You can read it for yourself. What’s most interesting about the phenomenon and what’s not mentioned specifically is that it is an attempt to establish market economics in medical care. Note again that health care is a terrible misnomer that distracts attention from the real problem – ie medical care is too expensive. It also is another example of moving high priced jobs to countries where costs are lower. It’s the start of the outsourcing of medical services.

Market forces do not exist in American medicine. Everybody is paid the same amount for the same service regardless of what it really costs or how well it’s done. Since almost all medical care is paid for by a third party, the government or an insurance company, and as charges are always negotiated down the incentive for the provider is to charge as much as possible so that the payment will be as high as possible. There is a disincentive to lowering charges. If you have no insurance coverage you get stuck with a bill for the artificially high charge that no insurance company or government plan actually pays. In other words, you’re doubly screwed; you have to pay out of your pocket (assuming there’s anything in it) and you pay more than anyone with insurance would pay via their carrier.

What medical tourism does is allow the buyer (the patient) to shop around for a lower price for a medical service in a foreign country, something he can’t do in his own country. It shows that markets can work to control medical costs. Any expansion of our current system or major change in it that doesn’t lower costs will fail. No exception. It’s guaranteed. The government could control costs. That would lower the bill, but it would inevitably result in rationing by delay as happens everywhere the government sets prices.

If you want medical care to be readily available at a lower price there has to be price competition among providers. The only way I can think to induce this competition is to have the patient pay for any service up front and to bear all of the first part of its cost. The amount paid could be a fraction of income, but whatever it is medical care should never be or appear to be free. Even the totally destitute should pay something for their care. They could get a government subsidy for being poor and allowed to keep whatever they saved on medical care. But there must be a palpable cost.

I asked a single mother of three who has a low paying job in our community what would happen to her if she had a medical expense of $5,000 which she had to pay all of herself. She said it would hurt but that she could survive. It’s not the $5,000 bill that bankrupts people; it’s the $50,000 or more bill that does them in if they have assets but no insurance.

The amount of medical care that people should be expected to bear has to be high enough to hurt, but not so high as to kill. In other words, what people really need is not conventional health insurance, but catastrophic medical insurance. If they knew they had to pay for much of their medical care they would have reason to shop around. Doing so would create a competitive market and prices would fall. Patients, in effect, would become medical tourists without having to leave home.

Some will doubtless say that such a system will encourage some patients to forgo needed care in order to save money. Because the amount of out of pocket expense will vary directly with income all this argument says is that some people will place a higher value on their health than others. We already have such a system. There is no possible system that will be perfect. Medical care is no more important than any other essential of life; arguably it’s less so. You can’t survive without food and water, but you might get better from a serious illness all on your own.

Another issue is quality. If you go to another country how good will the care be? You should ask the same question here. Quality control is little more than a bureaucratic tangle in the US. The Joint Commission sets and monitors hospital care in this country. Doubtless this commission has a positive effect but it’s at the price of so many rules and regulations that all but paralyze medical care in any US hospital. They also have no impact on the most important part of the medical enterprise – the physician.

Quality regulation of physicians goes little beyond getting a license and hospital credentials. Once these are obtained it takes a felony or worse to have them removed. Poor care won’t do it. Any doctor could (but likely won’t) tell you who the best doctors in his area are. He could also tell you who the average ones are and who are the worst. But he can’t do anything about the worst except not refer patients to them.

Hospitals have credential committees but they almost never decredential incompetent physicians. This is because when they try to remove them from the hospital staff they get sued. If you think a pediatrician is bad you need other pediatricians to evaluate his performance. The suspended pediatrician then sues claiming restraint of trade – ie the other pediatricians are trying to get rid of a competitor. And this tactic commonly works. Physicians are often unwilling to even serve on hospital credentialing committees and even more reluctant to take meaningful action

And there’s virtually no monitoring of professional competence of physicians’ outpatient practice. This is even more important since many doctors no longer provide inpatient care. Thus for all the patient knows his doctor in Costa Rica might be better than the one across town. This especially so as the doctor in Cost Rica likely was trained in the US.

The only way to cut costs of any service while preserving its availability is via price competition. Until we have meaningful price competition in American medical care we will be unable to control costs. If we can’t control costs medical care will become ever more scarce and its quality will vary beyond the limits of tolerance. There’s a bumpy ride ahead.

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