A recently emerging phenomenon in the world of international travel is that of medical tourism. Essentially, millions of people around the world are traveling outside their home country every year to gain access to lower cost, higher quality healthcare services.
One of the reasons medical tourism has been gaining traction is that medical inflation, that is to say, rising medical costs, which are growing at a faster rate than has been seen at any other time in history. In many cases the citizens of certain countries around the globe are simply unable to afford quality healthcare services in their home nations, even if those nations host some of the world’s highest quality medical services.
The dichotomy being faced by a myriad of countries across the globe is by no means unique – many governments are being forced to answer the question of how they can provide medical services to an entire population while still managing their balance sheets in a cost efficient manner. However, it is becoming all too apparent that despite the best intentions, there is a severe shortfall in the ability of national organizations to adequately manage the provision of healthcare services, even within systems that are non-governmental in nature. Rising costs, increased waiting periods, and insufficient or unnecessary medical options have forced a plethora of individuals to seek more viable options for the maintenance of their long-term health.
However, it is important to note that even when traveling overseas to receive healthcare, the cost of medical treatment can still be prohibitively expensive if the individual receiving treatment is paying for their medical costs out-of-pocket. For example, representative costs for various medical procedures, in USD, around the world would look as such when adjusted for current inflation levels:
As is immediately apparent from the above table, the USA has the highest average medical costs in the world, which is indeed the case when looking at internal insurance company statistics. In fact, while BUPA – the British United Provident Association, a leading UK based health insurance provider – rates the USA as being the most expensive place to receive medical treatment, it also ranks Hong Kong and Israel as being tied for second place in terms of cost-quality. From that we can see that not only is the cost of healthcare a global issue, but that the issues associated with medical costs are not confined to specific locations; in the Americas, Asia and the Middle East you will be paying a premium for medical services which are able to deliver high quality treatment.
Health insurance is no guarantee of protection either; at least not in the sense which will be familiar to most individuals around the world.
When looking at the numerous health and medical insurance schemes, policies, and plans which are available in a market such as the USA, it’s quite easy to be overloaded by the sheer number of options. What most consumers do not realize, however, is that despite multiple companies, offering multiple plans, the reality is that the US health insurance industry is dominated by a surprisingly small number of organizations. In fact, a 2010 study by the American Medical Association revealed that in 24 US states, the two largest insurers had a market share of 70 percent or more; this huge market capitalization by as few as 2 companies stifles the innovation and production available from policies within the USA.
Not only that, but the levels of protection offered by the plans these companies offer are simply no good for individuals who are attempting to go overseas for medical treatment. The reason for this is that the vast majority of insurance plans within the USA are what is known in the industry as “Local” or “National” health insurance policies. While the consumer may not understand this when purchasing protection for themselves or their family, local health insurance policies are simply unable to afford the policyholder any protection in the event that they leave the country in which the plan was purchased.
So how is medical tourism gaining traction? And how are upwards of 750,000 Americans able to travel overseas for their healthcare each year?
There are a number of reasons, many of them involved with complex socio-economic issues, and which may depend on the largess of the individuals’ employer. However the simplest answer in response to these questions is “international health insurance.”
International health insurance is a radically different type of product from "national" or "localized" health insurance plans. For example, while an individual in Hong Kong would need a Hong Kong Health Insurance policy to receive healthcare in Hong Kong, they would most likely need a Singapore Health Insurance plan if they wanted to travel to that city-state in order to undergo their medical treatment. However, if that same person from Hong Kong purchased an international or global health insurance policy, they would not need a second policy to protect them while overseas, and could in fact receive treatment with the doctor or hospital of their choice, anywhere in the world.
Staying with the example of Hong Kong, but from a slightly different angle, we are able to expand on the issues involved with national health insurance products, and see why, for the medical tourist, these options really do not allow for a wide range of healthcare choice or coverage protection.
Hong Kong and China are currently experiencing levels of economic buoyancy previously unseen in the region, which is driving more and more of the population of both these places to seek ever higher standards of healthcare. China has been making strides towards developing its private healthcare system in tandem with its public offerings in recent years, and as a part of the “Healthy China 2020” goals, and has made significant progress towards installing a comprehensive private medical insurance market. However, most, if not all, of the policies available within China are the aforementioned “local health insurance” plans, and will not provide protection for their policyholders overseas.
This has posed a problem for Chinese nationals in recent years, as the standards of healthcare within the People’s Republic could be considered “mediocre” at best. Even if the PRC national has a private health insurance policy, the options of where to receive treatment are limited; and the place which many of these individuals wish to receive treatment, especially when it comes to having a child under China’s “One Child Policy,” is Hong Kong. The problem then, is that even if Hong Kong is considered a de-facto part of China under “One Country-Two Systems,” many of the health insurance plans supplied within the People’s Republic of China consider the city to be “overseas;” and as such will not cover the costs of delivering a child in Hong Kong under the insurance plans currently being supplied on a domestic basis.
This has caused serious issues for Chinese nationals wishing to start a family, especially as they are only allowed one child under the law and they often wish to ensure that the child is born within the highest quality medical system available. While, for many years, Hong Kong accepted pregnant Chinese nationals into the city, allowing them to give birth within the Special Administrative Region’s public healthcare system, the city was simply being overrun by mainlanders looking to give birth, to the extent that the HKSAR was unable to provide enough hospital beds for local mothers, never mind the influx of pregnant Chinese nationals.
To solve this issue the Government of Hong Kong passed into legislation a requirement that any overseas person, in this case including individuals from the People’s Republic of China, pay a deposit in order to access maternity services within the city. The deposit they imposed was HK$ 45,000 (US$ 5,773) – approximately 67 percent of the cost of a routine delivery in one of the city’s best maternity hospitals, which is approximately US$ 8,500 in total. For comparison, the average cost of a routine delivery in an American maternity hospital is US$ 7,600.
Obviously the costs involved here are extreme for a country where the average income is US$ 4,520 per year, but does serve to highlight the fact that even if these Chinese individuals did have medical insurance, and are nominally considered “medical tourists,” in most cases the insurance policies available to them would simply not cover the costs of treatment overseas. This in turn leaves the individual, or family, in question having to deal with large costs associated with the delivery of their child, and can force some fairly drastic financial consequences upon their long term future.
While the cost disparity highlighted in the example above may be much more severe than what an American would experience when traveling to Thailand for medical treatment, the basic issue remains the same; namely, there will still be a significant amount of money involved in any medical procedure, no matter where in the world it is received. As mentioned previously, a solution to the issue of massive financial outlay can be found in an alternative to “local” insurance plans, which are “international,” or “global” health insurance policies.
So how does an international health insurance plan work, why is it different from the local options, and how can it be used from a medical tourism perspective?
One of the major differences is immediately apparent in the name of the product. While “local” policies will provide insurance coverage on a local basis, the “international” plan will offer worldwide protection. This means that the policy will continue to afford you protection no matter where in the world you may be. As such, you are able to travel around the world and receive medical assistance as and when you need it, without worrying about whether the policy will cover you while “out-of-area;” due to the fact that there is no such thing as “out-of-area” when operating on a worldwide basis.
The second major difference between the two types of policies is with regards to the way that premiums are calculated. With local health insurance, a majority of plans will calculate their premiums based on the individuals’ claims history. This means that on first blush the policy premium may seem like a very attractive proposition – the policyholder has not been sick and there will be no claims history under the plan. However, after an initial claim is made, the insurance provider will often adjust the premium based on the revised “risk” of the person being covered. As such, as more claims are made under a local health insurance plan, the more expensive the plan becomes; until eventually the costs involved in receiving coverage mean that it is no longer feasible for the policyholder to continue paying the plan premium – resulting in loss of cover and the individual seeking much cheaper healthcare options, often overseas.
International health insurance plans, like those offered by Hong Kong broker Pacific Prime, on the other hand, will typically calculate premiums on a community rated basis. What this means is that the companies providing these types of plans will look at the average risk, or medical costs, for a person within a specific age bracket. With a community rated policy, the individual being covered is guaranteed that they will always pay the same premium as everyone else of the same age; no matter the amount of medical treatment they receive, or the number of claims they submit while under the policy. This allows the policyholder to receive the treatment which they need, without worrying about whether or not that treatment will impact their annual premium. In addition to this, because the community rating is applied on an age basis, the premium will increase at a rational level, allowing the individual in question to forecast increases due to medical inflation, and plan their finances appropriately.
The final major area of difference between Local and International health insurance policies is with regards to the ability to renew a plan, or the policies “renewability.” Many consumers are unaware that a vast majority of local health insurance plans will impose limits on the policyholders’ ability to renew once they have reached a certain age, typically 65 years old. Obviously, as an individual ages their propensity for getting sick, or suffering from a serious illness will increase; so it is often vital that they have some type of support. However, due to the wide ranging old-age cutoff with most local health insurance policies, elderly persons are often being left to manage the costs of their healthcare independently, or in tandem with insufficient coverage provided by governments busy focusing their resources elsewhere. As such, it is no surprise that recent studies have pointed to the alarming trend that the vast majority of medical tourists, in some cases as many as 60 percent, are over 65 years old. It is this portion of the populace which is being forced to seek low cost alternatives to the healthcare systems which they have been reliant on for most of their lives.
Again, international health insurance policies differ from their local counterparts in this regard. International coverage will often guarantee the ability to renew a plan, no matter what the age of the policyholder. In this sense, a retiree living in Thailand, Mexico, or Spain (in some ways an individual who would already be considered a medical tourist) can have the confidence that they will be able to access the healthcare that they need, when they need it. In fact, some providers, such as IHI Danmark A/S, will take this ideal a step further, and create a flat rate community premium for all individuals over the age of 65 – ensuring that not only do they not have to worry about whether they can actually renew the policy, but also that they can forget about the issues of medical inflation while in their golden years.
Traveling overseas can be the highlight of a lifetime, and in many cases a simple travel health insurance policy will allow you to receive basic healthcare while outside your home country; returning to a local policy when you repatriate. However, in the event that an individual is seeking alternative options for medical treatment, or even suffers a serious accident or illness while overseas, travel health insurance or a local health insurance policy may be insufficient to provide appropriate coverage. Additionally, traveling abroad specifically to receive medical treatment, while often lower cost than the options available in most first world nations, can be a significant expense.
Although nations such as China, Thailand, India, and Singapore are able to provide higher standards of medical care than ever before, handling the costs associated with this treatment out-of-pocket can be a major financial burden; but as many individuals across the globe are discovering, it is often cheaper than the alternative.