Importing competition

tauringhuang.

Aug 14th 2008
From The Economist print edition

The coming boom in medical travel could help both rich and poor

jupiterimages.comHEALTH care has long seemed one of the most local of all industries. Yet beneath the bandages, globalisation is thriving. The outsourcing of record keeping and the reading of X-rays is already a multi-billion-dollar business. The recruitment of doctors and nurses from the developing world by rich countries is also common, if controversial. The next growth area for the industry is the flow of patients in the other direction—known as “medical tourism”—which is on the threshold of a dramatic boom.

Tens of millions of middle-class Americans are uninsured or underinsured and soaring health costs are pushing them and cost-conscious employers and insurers to look abroad for savings (see article). At the same time the best hospitals in Asia and Latin America now rival or surpass many hospitals in the rich world for safety and quality. On one estimate, Americans can save 85% by shopping around and the number who will travel for care is due to rocket from under 1m last year to 10m by 2012—by which time it will deprive American hospitals of some $160 billion of annual business.

Brain drain or net gain?
The coming boom has its critics. Some worry that a flood of foreigners into developing countries will divert money and expertise from state health systems that are already overwhelmed—an internal brain drain that will worsen care for ordinary people. Others decry it as a distraction from the need to cut costs and improve quality in rich-world health systems.

But the private sector cannot be blamed for the failings of state-run health bureaucracies in developing countries, which neglected the poor long before medical tourists arrived. And the foreigners’ arrival could improve things in developing countries, for the poor as well as the rich. Although the hospitals that cater to medical tourists will of course employ local staff, they will also create jobs, tempt home émigré doctors and nurses, encourage locals to train as medics, spread know-how and treat local people.

The flight of America’s “medical refugees” is indeed a symptom of a troubled health system back home. Yet medical tourism need not be a distraction from necessary reforms, but could be a catalyst to them. The prospect of losing revenues to India or Thailand is already shocking hospital administrators and insurers into raising standards, increasing price transparency and lowering costs. It may even bring the growing political pressure for reform to a head.

If medical tourism is to live up to this promise, several barriers must first be swept away. In parts of America arcane restrictions still forbid out-of-state doctors from consulting with patients on the internet or by phone, which inhibits follow-up care for medical tourists. Legal and insurance barriers make it hard for employers to give employees a financial incentive to choose medical tourism over local options—even though insurers are allowed to offer such incentives to prompt patients to pick cheaper doctors inside America.

In developing countries, the system for training doctors and nurses is often monolithic and state-financed. That makes it hard for the private-sector medical business to grow without depleting state coffers. A sensible model is the one employed in the Philippines, which allows nurses to work in the private sector or abroad if they repay their student loans. And part of the financial windfall which sick foreigners could bring to poor countries that welcome them should be spent on medical care for the poorest. If governments make the best of the boom, then medical tourism should improve the health of rich and poor alike.