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Emerging models aim to boost allure of medical tourism

Posted On: Jul. 26, 2009 12:00 AM CST

Medical tourism—an idea thousands of years old that has gained fresh traction amid rising health care costs—remains something that only a tiny minority of employers and individuals use.

Particularly for medical tourism that would take U.S. residents abroad, experts say more employers are considering the idea. But for individuals, at least one survey indicates interest in going abroad for medical care may actually be waning.

“A growing minority of employers are looking at medical tourism as a viable way to provide cost-effective care,” said Steve Wojcik, vp for public policy for the Washington-based National Business Group on Health.

Internal Revenue Service rules allow individuals to use pretax dollars, either set aside by employees and/or employers in health savings accounts or provided by employers in health reimbursement arrangements, to cover procedures and necessary travel costs as long as the money linked to high-deductible health care plans is not used for personal vacations.

While medical tourism was again brought to the forefront in the 1990s mainly as a way for image-conscious Americans to save money on elective plastic surgery, it has evolved since then as more medical travel companies have formed to arrange major, necessary surgeries and travel for individuals seeking the same care at a lower price.

But medical tourism is far from a mainstream medical option for most employer-sponsored health care recipients, experts say.

While there is no official data on number of insurers and employers offering medical tourism, WellPoint Inc. and Swiss Reinsurance Co.'s Commercial Insurance line are among insurers offering medical tourism as an option.

Employers are giving the idea greater consideration, consultants say.

“(Employers) are starting to look at medical tourism more seriously now, with costs going up,” said Sharon Cohen, Washington-based benefits counsel for the group health care practice with Watson Wyatt Worldwide. “This is definitely on the table right now.”

It's the obvious next step after employers' plunge into CDHPs, said Renee-Marie Stephano, chief operating officer for the West Palm Beach, Fla.-based Medical Tourism Assn. Inc.

However, when it comes to diseased or injured employees facing costly surgeries with five- to six-figure price tags in the United States, employers still are footing much of the bill aside from deductibles and copays. Workers also are feeling the brunt, as copays generally increase year to year.

That's where medical tourism kicks in, Ms. Stephano said. As a way to make the option attractive to workers, some employers and insurers are offering to waive deductibles and copays if a covered individual insured agrees to have surgery abroad. Under this model, employers can save tens of thousands of dollars on one procedure alone.

For example, a worker in need of hip replacement surgery can turn to his local hospital for the estimated $80,000 procedure, pay his $2,000 deductible and copay, with insurance covering the rest. However, if the employer and insurer offer to waive the worker's deductible in exchange for having the procedure done instead in India for $20,000 instead, the insurer and the employer pay far less.

“I don't see how, in this economy, with health costs going up, that we cannot (consider) medical tourism as a way to get health care,” Ms. Stephano said.

Building on growing interest, San Diego-based Satori World Medical formed in 2007 and has established a patent-pending business model centered on linking company HRAs to medical tourism.

Satori's medical tourism program, which is free to companies that sign up, offers employees a package deal that includes the cost of the medical care, air fare and accommodations for the patient and a companion. The procedures take place at Satori facilities, with Satori-controlled quality measures, around the globe, the company says.

What makes Satori's business model unique, it says, is depositing a percentage of the amount saved to be deposited into an employee's HRA to be used to cover future medical expenses.

“We for the first time have started to put the pieces together,” said Steve Lash, the company's president and chief executive officer.

The IRS has no limits on how much an employer can contribute to an HRA, making such a model an employee retention tool, Mr. Lash said.

Jim Williams, president of Newport Beach, Calif.-based Integrated Healthcare L.L.C., which administers CDHPs, said Satori's model is just one way companies can enrich their benefits offerings.

“People know they are paying more for health care, so they want these options,” Mr. Williams said. “Whereas people would have never considered (medical tourism) in the past, they are starting to look at this now.”

But individual interest is not firmly established.

An April Gallup poll of 5,000 adults found that up to 29% of U.S. residents would consider traveling abroad for medical procedures such as heart bypass surgery, hip or knee replacement, cancer diagnosis and treatment or alternative medical care.

In 2008, a Deloitte L.L.P. survey found that nearly 40% of consumers would consider having elective survey done outside the United States if they could save 50% or more and be assured that the quality would be equal to that in the United States. However, in a May update, only 10% said they would consider receiving health care services outside the United States. While there was no explanation of why there was a decline in overall interest, the 2009 Deloitte update did note far greater interest in medical tourism among younger adults than those at or near retirement age.