Business - Written by Dan Herman on Wednesday, March 19, 2008 15:38 - 5 Comments
Free-market global healthcare
Earlier in the year I blogged about the true costs of healthcare and the role technology and the Web 2.0 might play in reducing those costs. But maybe we should forget about providing expensive healthcare procedures all–together and instead take a true free-market / division of labour approach and outsource expensive procedures to where they’re cheapest.
Unlikely and politically unpalatable as that may seem, global medical tourism is a $20 billion industry, expected to grow to 40 million cross-border trips by 2010. In the US, 750,000 Americans went abroad for some type in treatment in 2007, and by 2012 that number is expected to top 6 million. Evidently, there are questions about standards but Joint Commission International , a US not-for-profit that accredits American hospitals, has accredited over 140 international hospitals (based on US standards) and expects the number to grow to almost 300 over the next three years.
For host countries, this is big business. For example, according to the Jordanian Ministry of Health incoming medical tourism attracts 120,000 patients a year, and generates between $650 million and $700 million annually. For a country whose total GDP (PPP) comes in at approximately $27billion and total exports at just $5 billion, medical tourism thus represents a pretty significant, and growing, share of the country’s income.
Moreover, for countries such as the US developing country healthcare hosts represent massive potential savings. The Journal of Financial Planning estimates that savings may range from 50 to 95 percent of the U.S. cost.
Here are some examples from the National Centre on Policy Analysis:
- Apollo Hospital in New Delhi, India, charges $4,000 for cardiac surgery, compared to about $30,000 in the United States.
- Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee replacement that runs $30,000 in the United States.
- A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500 in the United States.
Given those cost savings, should government run healthcare outsource expensive procedures and focus their budgets on what they do best, and most efficiently? Sounds a bit like a basic Ricardo-esque gains-from-trade analysis. And perhaps this is the next frontier of globalization: a world where government budgets are divvied up on a per capita basis and citizens shop the world for the best deal on government services…. global government anyone?
5 Comments
Kurt Heinrich
DH
Hey Kurt, that’s a great question re: imports of healthcare traffic vs. exports. I’ll look into it.
That said, re: total cost, we’ve done a great deal of research on the topic and our stats show that while legal issues do add to the total cost, it’s moreso duplicate procedures (many caused by legal fears but also the lack of evidence based medicine) and care for chronic disease and end-of-life management.
I’ll try and find those numbers for you. DH.
Ben L
While this is a political landmine, free-market healthcare could really be Canada’s solution to its aging population and the costs associated with long-term health care. Instead of building and staffing nursing homes throughout the country, why not outsource it? I imagine labour costs would make up a significant portion of a nursing home’s budget, so why not have these nursing homes in a country with significantly lower labour costs than Canada. With the savings the Canadian government would make, they could not only cover people’s costs, but even pay them to accept this option.
Enter Cuba. Cuba is a country with one of the highest doctor per capita rates in the world. It’s geographically close to Canada, it has a good climate for senior citizens and it already has strong tourist ties with Canada. Of course, this partnership wouldn’t have to be limited to long-term care but could include costly procedures. A flight from Toronto to Havana is about 3.5 hours. Seems pretty comparable to wait times.
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Dan, I like your post. However, I have a couple of questions and things I would like to point out. For the most part in the U.S. the govt. doesn’t supply healthcare (yet at least). Except for the VA all hospitals and doctors are private. The reason some U.S. health services are high is due to legal fees and lawsuits. You talk about the number of U.S. citizens that go out of the U.S. How many come into the U.S. because they don’t have access to timely health services? I suspect far more people come into the U.S. than leave.