Medical Tourism: The Insurance Debate

Most insurers balk at covering medical procedures performed overseas, but some are exploring the option
A room at Bangkok Hospital Phuket. 1.5 million medical tourists traveled to Thailand in 2007. Thailand Ministry of Public Health

Twenty years ago, an American needing knee surgery probably wouldn't think of jetting off to India for the operation. But times keep changing, health insurance costs keep rising, and Kumar Jagadeesan can cite a statistic that has led many patients to jump aboard a plane.

"A knee surgery operation in the U.S. can cost $45,000 to $50,000," says Jagadeesan, the vice-president and CEO of Star, a medical travel company. "In India, the cost would be $10,000, plus the price of a plane ticket," which could be as little as $1,330 for a round-trip.

Star is one of several medical travel companies advertising inexpensive services where patients fly to India, Thailand, the Philippines, and other countries to have surgery. With a few notable exceptions, however, insurance companies aren't eager to cover these trips, even while they acknowledge the cost savings may be great. So for now, most patients must put up their own cash or put down a credit card.

Worries About Credentials

Why are insurers reluctant to send policyholders overseas? "One of the biggest issues is credentialing claims," says Scott Edelstein, a lawyer with the global law firm Squire, Sanders & Dempsey. "They have to take reasonable measures that the providers overseas have the credentials to provide adequate care."

Most medical travel companies, including Star Hospitals, currently rely on the Joint Commission International (JCI), an American nonprofit that accredits hospitals in the U.S., to help find suitable medical centers overseas. Lately the number of international hospitals getting the thumbs-up from the JCI has been growing. "There is great potential for growth, which is being driven by the buildout of high quality hospitals on the global scene," says Josef Woodman, the author of Patients Without Borders. Kenneth A. Powers, the JCI's media relations manager, said that in 2005, there were just 76 JCI-accredited hospitals. Now there are more than 220.

JCI accreditation will probably help insurers overcome fears of getting sued by injured patients. But there are other issues to worry about. The insurers "have to make sure there will be smooth claims processing," says Woodman. And, he says, there are concerns about continuity of care. "What happens when the patient comes back? Even if there are no complications with a procedure, how much is the insurance company willing to cover for physical therapy back in the U.S.?"

Few Legal Options

Despite these lingering issues, a few insurers have been bold enough to dip their toes into medical tourism in the past year. In March 2008, Blue Cross & Blue Shield of South Carolina signed alliances with seven overseas hospitals (BusinessWeek, 03/13/08). And more insurers are in talks with medical tourism companies, attests Rudy Rupak, founder of the medical travel agency Planet Hospital. "Right now we're having active discussions with insurance companies about adding us to their plan design," he says.

Getting more insurers involved might help ease patients' reluctance to fly to another country for a procedure. But lack of coverage is not the only deal-breaker. "What happens if there's an adverse effect?" asks Edelstein. "Will they have any recourse? That's a very hot area in the legal arena. For the most part, those patients are not going to have much recourse in the U.S."

Nor will patients have many legal options in the country where they had the operation. "Access to the court system in countries like India is not as good as in the U.S.," Edelstein adds. "And even if you do get a trial, the judgments tend to be much lower than they would be in the U.S.""

Nevertheless, Woodman and others are optimistic about the changing world of medical tourism and the role of health insurers. "When you think of medical tourism 20 years ago, you picture the Beverly Hills crowd of upper-crust men and women going to Brazil for a procedure and coming back home to brag about it," says Woodman. "The profile has changed. It's becoming a middle-class and working-class phenomenon, where folks are being driven to seek cost-effective alternatives."

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