Government healthcare programs are bankrupting Federal and State governments in the United States. To add to the pressure, employer-provided health insurance takes an ever-greater share of corporate income. The Federal government’s response has been to require individual health insurance coverage and start creating a set of government bureaucracies that are intended to control costs.

Part of the reason for this is a complex relationship between subsidized healthcare; subsequent high public demand for the subsidized care; a consequent shortage of healthcare resources and therefore, ever-higher prices for relatively scarce healthcare. An increasingly popular way to escape from the system is to leave the United States and receive healthcare outside the U.S., a phenomenon often known as “medical tourism.”

Medical tourism is of course an old phenomenon. Wealthy patients for centuries have gone to areas well-known for cures, such as spas and hot springs, including the famous town of Spa in Germany, or Bath in England. And with the advent of air travel, wealthy patients for decades have traveled transcontinentally for medical care. Patients in countries with government health systems have long traveled internationally for better care or to avoid the lengthy wait-times to receive government healthcare. The new medical tourism phenomenon in the U.S. is that patients are bypassing good care nearby to get good but more economical care overseas. Until recently, the phenomenon in the United States has focused on Latin America, as well as East and South Asia, primarily due to much lower cost structures and an increasingly sophisticated healthcare infrastructure. India in particular, along with Thailand, has been at the forefront of providing a high level of care for complex surgeries, such as cardiac surgery, with lengthy rehabilitation schedules. From the perspective of developing U.S. markets, both of these destinations have a high level of medical expertise, but suffer from unfamiliarity to patients and a lengthy travel time, as we shall see.

Medical tourism has heretofore essentially been limited to patients paying out of their own pockets. Part of the reason is programmatic: the Federal Medicare program will not pay for healthcare services outside the U.S. except in certain very limited circumstances. The private market is very different: theoretically, there are few limits on large private employers and insurers providing for or encouraging medical tourism, but this has not been the norm. Partly, the hesitancy to embrace medical tourism is driven by patients: patients seek care close to their homes, so they prefer care in the U.S. And there is no economic reason to go abroad for less costly primary care; therefore, routine and primary care is usually local. Specialist care, for which travel is undertaken, is usually care from a physician or medical center with cutting-edge expertise. This care would also usually be sought in the U.S. However, there are certain complicated procedures, such as heart bypasses, hip and knee replacements, or other major surgeries, which have established protocols (not needing one-of-a-kind specialists) and which are expensive in both hospital and post-acute recovery expenses. There are also procedures, or drugs or devices that have not been approved in the U.S. by regulators, and so are only available overseas. These types of healthcare services have been the services most likely to be successfully offered through medical tourism.

These needs for less expensive care or care not otherwise available, have met with an initial response: large employers are increasingly considering offering medical tourism to their employees as a healthcare option. It is being considered in some cases as a serious potential solution to increasing healthcare costs. However, much care must be taken in the presentation of medical tourism options. Rather than requiring overseas care (which could generate costly negative blowback from employees), it is possible employers will offer medical tourism as an option, whereby employees could be told that they could (i) get an operation locally with a significant co-pay or (ii) travel overseas to receive the operation with no, or much smaller, co-pay. Smaller co-pays (with a difference of a few hundred or even a thousand dollars) may not incentivize patients to go overseas for care. However, with respect to an operation costing, say, $200,000, employers are looking at requiring a significant patient co-pay for domestic care (which could be up to tens of thousands of dollars) versus providing free overseas care. A serious incentive such as this may lead to an embrace by employees of the overseas option.

Of course, one major issue for U.S. patients will be quality of care (or perception of quality). Rightly or wrongly, U.S. patients will be concerned about quality of overseas care vis a vis the U.S. system. In this light, getting Joint Commission International (“JCI”) accreditation can be of great benefit. JCI is an affiliate of the Joint Commission, a widely respected U.S.-based accreditation organization which provides surveys and accreditation to healthcare providers in the U.S. It is not simply a matter of patient comfort, because few patients will understand the full import of gaining such accreditation. The greater impact will be on hospitals, doctors and other U.S. healthcare actors who may refer or be consulted by patients for their opinion, and who will more likely understand what Joint Commission accreditation means. Accreditation (and preparing for it) also has a salutary impact on an organization’s performance, and helps concretize the standards that are expected, and will assist with successful implementation of a medical tourism program.

Another issue is providing U.S.-licensed doctors.  There are examples of U.S.-licensed doctors practicing overseas, but not a great number, because the financial rewards of practicing in the U.S. are significant. There are many successful operations without U.S.-licensed doctors as the care directors, but the lack of U.S.-licensed doctors may continue to be a significant issue with the expansion of medical tourism among U.S. patients, who tend to trust U.S. doctors. The resistance of U.S. doctors to practicing overseas is also sometimes a question of distance: this is a potential advantage that the Caribbean and Latin American sites have over Indian and other Asian sites, due to their geographical proximity to the U.S.   India does offer significant advantages over many competing sites, but operators who want to “move to the next level” have to take on this issue of providing U.S.-licensed (or U.S.-trained) doctors to American patients.

One major legal issue that is too little addressed is legal liability. The U.S. is an infamously litigious society, and many persons and organizations get involved with facilitating medical tourism without understanding what legal risks it entails.   For example, some U.S. persons have acted as healthcare “travel agents” for patients and have subsequently been sued in U.S. court when the procedure outside the U.S. went wrong. Facilitators in the U.S. must have a written understanding with U.S. patients. This agreement should cover a number of issues, but must provide a patient acknowledgement that the facilitator is not responsible in any way for the success or non-success of the medical services, and is not liable for any outcome, including injury or death. The facilitator’s role must be spelled out clearly and limited.

The same should be true of the non-U.S. providers. They should be clear in providing information on what is being offered and guaranteed (or not). A standard packet of forms regarding health evaluations, practices, outcomes and medical records should be prepared ahead of time with counsel. The relationship with the U.S. medical tourism facilitator should also be clearly spelled out.

The legal climate in U.S. healthcare is changing in unexpected ways due to the passage of the 2010 health bill. The Patient Protection and Affordable Care Act (“PPACA”), also known as “Obama Care,” would seem to have no direct impact on medical tourism. However, the indirect impact of PPACA could be profound. PPACA seeks to control costs through a super-bureaucracy which will directly control U.S. healthcare costs through (presumably) cutting coverage of certain products and services and lowering provider reimbursement, or a combination of both. If this new bureaucracy succeeds where all others have failed, U.S. healthcare costs will go down and the need for medical tourism will fade. Even if the super-bureaucracy fails, and the incentives for medical tourism remain in place, greater governmental control over employer health insurance might easily lead to U.S. healthcare providers lobbying the government to require a “Buy American” mandate into health insurance or create more subtle disincentives, such as: disallowing travel expenses; creating minimum and maximum provider charges; or disallowing per diem post-acute care recovery payments, for example. As the government gets more involved in directing healthcare, it will naturally, as it already does in Medicare, favor domestic providers over overseas providers in ways large and small. Of course, this is all speculative; no such regulations have been announced or put in force, but it is worth considering this issue and remaining aware of it.

India is an interesting case for medical tourism. With a large English-speaking healthcare workforce, it is a natural choice for U.S.-directed medical tourism. However, as noted, long air flights from the U.S. and a relative shortage of U.S.-certified doctors have created issues for many potential patients. And of course, an increasingly wealthy India means that the cost differential between India and the U.S. is more or less constantly being whittled away.

India has been sought out particularly for high-cost surgeries, such as heart bypasses, which have lengthy rehabilitation periods. The trend has grown as Indian healthcare has continued to receive good press and word-of-mouth recommendations from returning patients. In addition, the rising prestige of Indian hospitals, physicians and medical staff and the greater profile of Indian medical products and pharmaceutical companies no doubt also has had a role in increasing the comfort level of U.S. patients with receiving care in India.

Although increasing wealth in India and an increasing domestic demand for sophisticated medical care will no doubt raise the cost of healthcare in India over time, such is the pace of U.S. medical inflation, that India will not soon catch the U.S. in healthcare costs. And in an increasingly globalized market, even services that seem naturally local, such as healthcare, will be provided in the global marketplace.   By paying attention to the fundamental issues of quality, quality perceptions, accreditation, legal structure and the evolving legal landscape in the U.S., Indian healthcare providers have a bright future in succeeding in this new marketplace.

Eric Hargan is a Shareholder in Greenberg Traurig’s healthcare department, based in Chicago, Illinois. He formerly served in the position of Deputy Secretary of the U.S. Department of Health and Human Services in Washington, D.C. and as a U.S. representative to the World Health Organization. He may be reached at hargane@gtlaw.com; phone (312) 208-7089.

by Eric Hargan