You've seen charts and comparison tables that all position USA health prices as the highest in the world.
Understand the real story behind the "noise" so that you don't use the data to your disadvantage and make strategic blunders!
Have you seen USA healthcare prices in medical tourism comparison tables?
In the early stages of a medical tourism market entrant's research, thousands of medical pricing comparisons are available online. Few are accurate. Many are downright dangerous if one makes any reliance in developing a market penetration or positioning strategy using this unverified data.
- Medical tourism associations worldwide and many research outlets based outside the USA have syndicated little more than misinformation and confusion about the real story of healthcare pricing in the USA.
- Some publish comparison tables to justify their "training" offers and certification programs.
- Some publish these tables to sell memberships offering exclusive information once you pay membership fees.
- Others do it to justify compelling arguments to enter the medical tourism industry. Most do this with impunity and total disregard for truth-in-advertising and use the "caveat emptor" defense (meaning, let the buyer beware) and then add disclaimers to their charts and tables so that just in case your business strategy and concept fail, they cannot be named as a contributor to your demise.
The American healthcare pricing and insurance reimbursement system takes years of hands-on experience and university studies to learn and keep up with.
Prices charged in US hospitals, clinics, doctors' offices, diagnostic centers and other outlets are rarely paid as invoiced on the face value of the bill. Regulations set forth in U.S. laws are confusing, inter-related, and often co-dependent.
Attracting "Baby Boomers" and Senior Citizens with the means and ability to travel for health services
Medicare is a national health insurance program in the United States, begun in 1966 under the Social Security Administration and now administered by the Centers for Medicare and Medicaid Services(CMS). It provides health insurance for Americans aged 65 and older. It also provides health insurance to younger people with some disability status as determined by the Social Security Administration, as well as people with end stage renal disease and amyotrophic lateral sclerosis. Medicare is funded by a combination of a payroll tax, beneficiary premiums and surtaxes from beneficiaries, and general U.S. Treasury revenue.
In 2018, the Annual Report of the Medicare Trustees (for the year 2017), indicated that in 2017, Medicare provided health insurance for over 58 million individuals—more than 49 million people aged 65 and older and about 9 million younger people. This number changes each year with the growth of the baby boomer population. Medicare doesn't cover a penny of healthcare expense outside the USA. Inside the USA Medicare beneficiaries can travel anywhere they desire to receive health services covered by the Medicare program and offered by a participating supplier.
As a result of this coverage, few Medicare beneficiaries (the majority of which are baby boomers or older) have little desire or reason to travel internationally for services covered by the Medicare program. Not to neighboring countries, not to India, China, Thailand, Malaysia, Dubai, Turkey, Spain, or even Canada. So all you've ready about Baby Boomers and medical tourism? Filter this noise by first sorting out which services are covered by Medicare under which eligible conditions and then see if there's enough of an addressable market to make sense to focus efforts to attract them.
Medicare is divided into four Parts. Medicare Part A covers hospital (inpatient, formally admitted only), skilled nursing (only after being formally admitted to a hospital for three days and not for custodial care), and hospice services. Part B covers outpatient services including some providers' services while inpatient at a hospital, outpatient hospital charges, most provider office visits even if the office is "in a hospital," and most professionally administered prescription drugs. Part D covers mostly self-administered prescription drugs. Part C is an alternative called Managed Medicare by the Trustees that allows patients to choose health plans with at least the same service coverage as Parts A and B (and most often more), often the benefits of Part D, and always an annual OOP spend limit which A and B lack. The beneficiary must enroll in Parts A and B first before signing up for Part C.
No matter which of those two options they choose or if they choose to do nothing extra (very rare) beneficiaries have out of pocket (OOP) costs. OOP costs can include deductibles and co-pays; the costs of uncovered services—such as for long-term care, dental, hearing, and vision care; and the costs related to basic Medicare's lifetime and per-incident limits. In many instances, the deductibles and copayment amounts are covered by other secondary or complementary insurance programs, leaving very little out of pocket cost payable by the beneficiaries unless the service is experimental, investigational or unproven as determined by the Medicare local carrier contracted by the program in its sole and absolute discretion. If a Medicare beneficiary is unfortunate to require very expensive medications which may be less expensive if purchased outside the USA, they may only bring back a 90-day supply or less without risk of confiscation by U.S. Customs officers.
Medicare Eligibility reduces the addressable market even further.
In general, all persons 65 years of age or older who have been legal residents of the United States for at least five years are eligible for Medicare. People with disabilities under 65 may also be eligible if they receive Social Security Disability Insurance (SSDI) benefits. Specific medical conditions may also help people become eligible to enroll in Medicare.
People qualify for Medicare coverage, and Medicare Part A premiums are entirely waived, if the following circumstances apply:
- They are 65 years or older and US citizens or have been permanent legal residents for five continuous years, and they or their spouse (or qualifying ex-spouse) has paid Medicare taxes for at least 10 years.
- They are under 65, disabled, and have been receiving either Social Security SSDI benefits or Railroad Retirement Board disability benefits; they must receive one of these benefits for at least 24 months from date of entitlement (eligibility for first disability payment) before becoming eligible to enroll in Medicare.
- They get continuing dialysis for end stage renal disease or need a kidney transplant.
Those who are 65 and older who choose to enroll in Part A Medicare must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid the qualifying Medicare payroll taxes. Without going into too much detail to explain the Medicare Program further, suffice it to say that most Medicare beneficiaries are not really candidates to be counted as your addressable cross-border market from the USA. After the age of 65, many don't really purchase cosmetic surgeries for face lifts, tummy tucks, and cosmetic dentistry. So those are unlikely to be appealing to them.
On the other hand, medical tourism marketers "within" the USA seeking to attract domestic medical travel patients have a very different opportunity because if they are already program suppliers to Medicare, the insurance is portable and any Medicare beneficiary can avail the services of any supplier nationwide, in Puerto Rico, Guam, the Virgin Islands, Hawaii, or in warmer climates in the winter and cooler resorts in the summer to receive medical care. All Academic Medical Centers and most Centers of Excellence within the USA participate with the Medicare program so Medicare beneficiaries can receive services for the cost of their copayment or coinsurance and their annual deductible. In the most simple terms, that means that the cost of their treatment is less then the airfare cost to fly abroad, pay for hotels, visas, currency conversions, and the price of your services. It means, in simple math, that the deductible for their inpatient stay of up to 60 days is less than USD $2000. So for the Baby Boomers and disabled persons on the Medicare Program, it really doesn't matter what that medical tourism association's comparison table price range stated, does it? You can't beat the real out-of-pocket price, can you?
Medicare Most-Favored Nations Regulation
The Medicare, "most favored nation" clause prohibits providers from offering discounts to non-Medicare payors that were not offered to Medicare, being that Medicare should never pay more than any other payor. That means that pricing for non-Medicare services, whether cash or paid by insurance, are not permitted to be set at less than the official Medicare fee schedule. So all those published prices you see are artificially higher than what the supplier, hospital, physician or clinic expects to be paid just so that they don't run afoul of the MFN clause. Therefore, the suppliers set a retail published "price"... the one you see on those comparison tables for medical tourism services, and then take discounts. This is allowed. So the price is a reference number and the negotiated payment allowable can be set at any level that does not expose the supplier or provider to allegations of "predatory pricing" or "undercutting"... an antitrust concern and violation where the pricing of goods or services are negotiated at such a low level that other suppliers cannot compete and are forced to leave the market.
Managed Care and Preferred Provider Organizations (PPO) price negotiations
Across the USA, managed care plans often negotiate rates that are 45-55% discounted from the retail quoted "price" published by the supplier or provider or physician. The discount rates are confidential, and are negotiated contract-by-contract. Larger group health buyers can negotiate lower prices than their smaller group health buyers and individual consumers. So it is safe to say that unless the individual in the USA has no insurance, which is now against the law, chances are high that they will be able to access some discount level through their insurer. In many cases, the contract requires that any remaining balance left to deductible and co-insurance must be first sent to the insurer for adjudication and the discount applied even if the entire amount is not covered by the plan and paid 100% out of pocket. So again, published price you may identify online is not the same as the amount typically paid by the patient or responsible other party.
Work-related injuries and illnesses
In each state, workers' compensation laws exist that require employers to cover the expenses of industrial accidents and illnesses and each state has a maximum allowable fee schedule set in statute or administrative code. If the injury requires a surgery that causes disfigurement, the employer may be liable for the cosmetic surgery or any rehabilitation necessary to achieve maximum medical improvement. Most cases that are anticipated to cost over $500 in treatment costs are managed by case managers who coordinate care through local providers. Their cost liability includes medications, diagnostics, surgery, ongoing management, rehabilitation, and supplies. So those cases are also rarely candidates for medical travel outside the state or across the border. For a medical provider to treat these patients and designate an official impairment rating, they must have special credentials that most providers and suppliers outside the USA don't have and cannot acquire. So these folks filter out of the addressable market for medical tourism suppliers and providers outside the USA.
Military health services
The U.S. Veteran's Administration organizes benefits for active and retired military and their eligible dependents. In some cases, the VA pays for services outside the USA, but that opportunity for medical tourism providers is so limited that it really isn't a significant source of revenue and requires specialized vetting, billing forms, training, and other overhead costs that the revenue is often less than the cost to service the accounts. And if the need is significant at or near the duty station, the military sets up what may be needed locally through established procurement channels.
Wealthy American patients go where they want, when they want and the seek care of the highest quality that is the most convenient to meet their needs.
To position marketing messages on the basis of cheap prices to attract wealthy American patients is silly. That's an irrelevant message that falls on deaf ears. Wealthy Americans go where they want, when they want, and seek out the finest providers, hotels, physicians, hospitals, and other services at the most convenient location. Sometimes that convenience means that providers come to their home. They don't travel to cheaper places for care. In fact, they use the price as a symbol for affluence and think nothing of paying more for the convenience or the belief that the services is better than what everybody else can afford. They may also donate significant amounts of money each year to not-for-profit hospital foundations that afford them special privileges when they do need medical services. In return, the "whale" donors are honored with endowment chairs, recognition wings named after their family or surname, and even entire buildings. You rarely find them in the grocery store redeeming coupons to save money, and you'll rarely find truly affluent Americans seeking to travel for healthcare unless the surgeon is the preeminent expert on what is wrong with them. And in those cases, it is their local doctor who arranges the consultation and referral, not a medical tourism facilitator, and certainly not a website link.
When Steve Jobs exhausted all he could do in the USA, he traveled to Switzerland for an experimental treatment in 2009, which involves using a radioactive isotope to attack the faulty hormone-producing cells of the body. It’s impossible to know what went into Jobs’ decisions at work and at home, and whether his unexpected medical decisions were in spite of or because of his business brilliance. But when wealthy Americans are mentioned in medical tourism parlance, I often wonder how the filters are set in the mind of the person speaking and using the term "wealthy" or "rich". These terms are relative.
In the USA, Ultra-high net-worth individuals (UHNWI) are defined as people with investable assets of at least $30 million, usually excluding personal assets and property such as a primary residence, collectibles and consumer durables. The most commonly quoted figure for membership in the high net worth club is $1 million in liquid financial assets. An investor with less than $1 million but more than $100,000 is considered to be "affluent" or perhaps "sub-HNWI."
Credit Suisse's "Global Wealth in 2018" measured the number of millionaires in the world. According to the report, the US has 17.3 million millionaires, highest in the world. They rarely shop for the cheapest medical care on the planet. So that reduces the addressable market of rich Americans by 17.3 million people and their families. And most of them have some insurance because they can afford the premiums, the deductibles and the copayments due from their pocket. The discounts are extended to them by their insurance plans, and they seek out the level of service and the location that is most convenient to them - because they can. They may seek out consultation after consultation from expensive providers because there is no limit to the health insurance benefit as of the enactment of the Affordable Care Act. But few if any of the plans offered under the Affordable Care Act offer coverage for medical expenses outside the USA.
New rules in 2019 and posted prices for hospital services are not much help
As of 2019, a new rule is in effect that requires hospitals to list the price for all the services they provide and medications they prescribe for patients while they’re in the hospital. In theory, this should give patients more information that can help them decide where it makes the most economic sense to receive hospital care. But it doesn't. The new rule doesn’t require that the information be written in plain language, only that it be machine readable. The prices listed are different from the lower fees that insurers negotiate, so estimating how much one might pay for care is nearly impossible. In addition, the rule only covers care delivered by a hospital, so patients don’t have the information they need to make price comparisons for services performed in doctor’s offices, urgent care facilities, diagnostic test sites and outpatient surgical centers. For medical tourism sellers, especially those where care is traditionally not broken down into different suppliers and corporations each billing their own services, a marketer of health services outside the USA generally fails big when attempting to compare prices with American counterparts because the bundled services are not clearly articulated and explained on either side.
The moral of the story:
Don't use price to attempt to compete except as the last resort when you know there's nothing else you can do to differentiate your brand, your service, your location and your expertise.