The Effect of Health Care Reform Legislation on the Medical Travel Option
By Victor Lazzaro, Jr.
It’s important to examine the health care reform bill and how it will impact medical travel going forward. First, it should be understood that two bills passed on that historic March, 23, 2010 – the Senate bill and the “reconciliation” measure that changes significant aspects of the first bill. Depending on the outcome of subsequent changes “fixes” will probably continue for months, if not years, to come. One area that was not substantially crossed addressed in this legislation was structural cost reduction or pricing and quality transparency – akey advantage to using a medical travel facilitator.
Taking the bill at face value, and assuming it will ultimately pass into law as more or less written, the impact on medical travel promises to be a positive one primarily because employers, insurers, and third party administrators will be looking for ways to cut costs for several reasons.
Competition and transparency: First, they will want to turn “Cadillac plans” – expensive health insurance plans – into less expensive options. Additionally, they will be subject to the state-supervised marketplace, called exchange, in which insurers would be required to sell their policies for individuals and small businesses. They will also be required to report how much they spend on medical care versus administrative costs. Both the exchange and the reporting measures will additionally compel stakeholders to lower costs, which is where medical travel is able to offer higher quality and lower costs.
Increased coverage: Another potentially positive aspect for the insurance industry as a whole and for the medical travel industry is that the number of covered (insured) individuals will increase. Within 90 days of the new legislation, people with a medical condition that had left them uninsurable will have the ability to enroll in a new federally subsidized insurance program.
Unfortunately, the downside to more covered lives is less access to care. With more people having health coverage, the demand for physicians will increase at a time when the shortage of health care professionals has already reached a critical point, in particular with primary care physicians. In fact, even those who currently have insurance are challenged to find doctors. A survey printed in USA Today demonstrated that long wait times in Boston result in part from that state’s 2006 health reform initiative that requires nearly every Massachusetts resident to have health insurance.
Again, this will compel more people needing care to turn to medical travel – both international and domestic – as a viable, quality alternative with little or no wait times.
Cost control: Right now the health care reform bill expands coverage but does not appear to significantly address the health care system’s escalating costs directly. If this trend continues, medical travel will become increasingly attractive in light of savings of up to 70 percent on some procedures.
According to the American Hospital Association (AHA) the increase in labor costs is the most important single driver of spending growth for hospitals, accounting for about 41 percent of overall growth and almost three-quarters of the growth in the costs of purchased goods and services.
Existing coverage: The congressional Budget Office predicts that employer-sponsored coverage will decrease by four million people as a result of new reforms. This disruption – both in the loss of coverage and possible time spent finding a new primary care physician – will open a window for travel to parts of the U.S. or overseas where medical care is readily available, especially for annual physicals that can be accessed for extremely reasonable fees. What’s more, out-of-pocket expenses are low and transparent.
Other factors: What remains unclear about the health care reform bill is how it will affect HSAs and HRAs. Most likely, they will retain the same $2,500 deductible limit that was specified for FSAs. Higher deductibles will also encourage employees to consider costs more carefully, but as it stands. That capability appears to be now limited to $2,500. This may severely limit the future growth of the concept of Consumer Directed Health Plans (CDHP). CDHP was, in part, considered as a way to have the individual concerned about the cost of health care.
Aspects of the bill that present challenges to medical travel lie in changes to Medicaid and Medicare. With their expansion, more people may enroll, leaving fewer covered by insurance, including self-insure products. This level of impact, if indeed it will have an impact, would not be fully realized for several years out. There are proposed cuts in reimbursement to physicians and this may result in fewer physicians willing to see Medicare and Medicaid patients.
Furthermore, the provision eliminating lifetime maximums could mean the end of limited benefits insurance lines, including “gap policies.” Typically, these benefits are purchased by companies and individuals that cannot afford more substantial coverage but want to offer some level of coverage.
It remains unclear what the impact will be on insurance products that cover specialized diseases or inpatient care, such as vision. Another gray area is dental coverage. As it stands, the Senate version of the health care reform bill has a provision exempting dental insurance from the elimination of lifetime maximums. Presuming this stays, it will keep dental insurance available and affordable (the usual maximum is about $2,000 year) and means patients needing implants or other high cost dental procedure will benefit from medical travel.
Domestic medical travel: The impact mentioned above applies to both international and domestic medical travel. Beyond that, some hospitals within the U.S., because of their size and focus, are able to offer Centers of Excellence (COE) and are in a better position to be competitive with the pricing of foreign hospitals.
They do this by eliminating waste in the system – for example, having a clerk perform clerical tasks that in a smaller hospital would fall on the shoulders of a bust RN. Having this capacity increases productivity, lowers operational expenses, and gets competitive with the pricing points offered by foreign hospitals. They also tend to focus on one area of expertise such as cardiac or orthopedic surgery, which also tends to improve their quality. As a result, they can expect to attract Americans who live outside if the hospital’s immediate area and are willing to travel long distances to access more affordable, higher quality care. What’s more, CEOs often accept pre-negotiated compensation upfront and are able to avoid the cumbersome process of reimbursement after the fact. For these reasons, it’s likely that the domestic medical travel model will prove to be the next big health care trend.
Going Forward: Medical travel will become a go-to option in the wake of the health care reform bill because it amounts to positive health improvement and return-on-investment, particularly if coordinated through reputable health plans and providers. This option serves the best interests of employers, individuals, an the U.S. health care system by aligning costs with outcomes and creating incentives for consumers – such as the ability to compare provider cost and quality.
Furthermore, medical travel offers greater access to high quality care at lower cost. In particular, domestic medical travel will see dramatic uptake, not in spite of reform but likely because of it.
The math is simple: COEs across the country generate better outcomes at lower costs. They do this by performing a high quantity of a given procedure while producing measurably superior clinical results. Better outcomes mitigate liability claims, which in turn stem the tendency toward defensive medicine. By providing employees with access to multiple networks, surgery costs and quality comparisons can easily be mad among domestic COEs, international COEs, and local surgery choices.
The health care reforms will be ongoing. The good news is that as an affordable, quality option, medical travel transcends politics, serves all Americans, and will continue to gain traction among employers and it is available today.
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