In a global economy characterized by better access to information and lower transportation costs

North American consumers are discovering that they can get high-quality health care more cheaply and more quickly in some developing countries. Rising health care costs in the United States and longer waiting times in Canada are inducing patients to seek treatment overseas.

The appeal of this phenomenon is driven by cost savings as high as 90%, depending on the procedure and the country in which it is performed, and virtually no wait times.

A Google internet search on May 1, 2007, using the term “medical tourism” returned 777,000 results approximately using the term “medical tourism” on March 30, 2010, returned 26,400,000 results. With the ease, affordability of international travel, and improvement in technology and standard of care, medical tourism is an opportunity for patients to travel for medical care, and take advantage of reduced costs and wait times.

There are more than 45 million U.S. citizens without health insurance, and even more with health coverage that they consider inadequate. While U.S. consumers are concerned mainly with the exorbitant cost of care, Canadians are more troubled by wait times for certain treatments. Indeed, approximately 1 million Canadians claim to be experiencing difficulties in access to care.

Official statistics on medical tourism have not been collected, but an estimated 150,000 foreigners sought care in 2004 in India alone. This number is growing at a rate of about 15% annually. Most of these patients are from the Middle East or Asia, but the proportion of U.S. citizens and Canadians is rising. Although providers offer a diverse range of services, the most common procedures are elective.

The benefits go beyond cost:

  • Consumers gain from cost savings, but may also receive excellent care from highly qualified doctors.
  • Many providers offer more personalized care, a higher physician-to-patient ratio than is commonly available in the United States or Canada.
  • Some services that are not yet approved by the U.S. Food and Drug Administration, such as certain hip replacement surgery techniques, are available overseas.
  • However, consumers also face risks when undergoing treatment in a foreign country:
  • Follow-up is difficult when the patient returns home, and expensive care may be required if complications occur.
  • Quality assessment is problematic, and the language barrier can complicate matters.
  • Malpractice laws in other countries are different.

Foreign providers stand to gain from the looming demand and are eager to increase supply. Nevertheless, competition is fierce, leading to consumer-directed advertising campaigns. This burgeoning international market for medical care may also drive U.S. providers to respond to the increase in competition:

Overseas impact.

Hospitals, physicians, and medical staff are benefiting from higher revenues. For example, medical tourism in India is forecast to generate over $2 billion in revenue by 2012, according to a study by McKinsey and the Confederation of Indian Industry.

Domestic changes.

U.S. hospitals make most of their money on high-margin elective surgeries not typically covered by insurance plans. They may need to become more efficient and affordable to avoid losing business overseas.

Some U.S. employers, concerned about rising health care costs, are using financial incentives to encourage employees to experiment with medical tourism. This is an especially common practice at large firms that self-insure and pay directly for their employees’ medical expenses.

Medical tourism will continue to expand rapidly, its long-term growth rate depends on several factors:

Insurance market.

While companies specializing in arranging trips for medical tourists are flourishing, insurers have been slow to adapt to this new market.


North American governments may consider facilitating this assimilation of foreign care into domestic insurance plans–both private and public–through legislative action. Such legislation will face stiff opposition from unions and domestic medical groups.

Image problem.

Rich world consumers will have to overcome stereotypes of developing world poverty, lack of education, and hygienic problems in order for the industry to thrive. Positive outcomes for those patients who do venture overseas may help to quell these fears.

Inelastic demand.

Uninsured U.S. citizens represent the largest group of prospective medical tourists. However, research shows patient demand tends to relatively price inelastic for procedures that cost under $1,000 dollars. As median annual health care expenditures per capita for the uninsured are well under this level, more than half may have no interest in medical tourism.

The knowledge that the same care is available elsewhere at a much lower cost may encourage consumers to be more price-sensitive about certain medical procedures, increasing transparency, lowering costs, and improving quality. However, this is unlikely to benefit most consumers, particularly the poor and uninsured if they do not have the financial resources to pay at the lower costs.

To read an extended version of this article, log on to Oxford Analytica’s Web site.

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