Tag Archives: medical tourism

Are Patients Ready to Take Control?

In 1980, the actor Steve McQueen traveled to Mexico to receive unorthodox (and ultimately futile) cancer treatment. The widespread coverage that McQueen’s trip received in the mainstream press can, of course, be attributed to his celebrity. But it was also because the actor had taken the reins of his healthcare from the medical establishment, something that was seen as brazen.

Back in those days, we wouldn’t have used the term “consumerization of healthcare” to describe what McQueen did. However, his approach has become an accelerating trend over the past decade, when Americans have taken more control over their health, and the healthcare experience. Consumers are more informed about choice, more demanding about the services being offered and more focused on how they pay for it.

The list of changes is long and growing, focusing on:

  • Wellness
  • Easily accessible online repositories of medical information and advice
  • Medical tourism
  • Physician ratings
  • Walk-in clinics at stores like Walmart and CVS
  • Health spending accounts
  • A proliferation of insurance options

As technology advanced, consumerization was enabled, and, as healthcare costs increase, it’s grown in importance. But the question remains: Do consumers have what it takes to control their health and healthcare as they both consume it and pay for it?

See also: Healthcare Buyers Need Clearer Choices  

What’s driving the consumerization of healthcare?

Thanks to the wealth of information available on the internet (product and service details, pricing info, ratings and reviews), consumers have more control over what they spend their money on, and where and how they spend it. Consumerization began with product shopping but quickly moved into the service sector (financial services, travel services, healthcare).

Whether consumers are covered by group plans in their workplace or by individual plans, they are paying more for their coverage and experiencing higher out-of-pocket costs. A recent Kaiser Foundation study showed that, from 2015 to 2016, deductibles increased by 12% for those covered by employer-sponsored plans. While deductibles have grown more rapidly than premiums – this is, after all, the tradeoff – premiums have still been rising more rapidly than wages. More now than ever, people are more conscious of what they’re spending.

Consumers have become more active

Today, consumers are increasingly relying on technology to manage their health. This trend cuts across generations. Baby boomers were perhaps the first truly “health conscious” cohort. Running, as a popular activity, took off on their watch, as did an interest in (and willingness to spend on) healthier foods. At the same time, boomers are focusing on the health and the healthcare experience of their elderly parents. Boomers are taking advantage of monitoring technology that enables them to keep a remote eye on their parents while helping them remain independent. Then, of course, there’s tremendous interest coming from millennials — digital natives who are used to ubiquitous technology and to shopping around and finding the best deals in all aspects of their lives. Millennials are more likely than boomers and Generation X-ers to own a fitness tracker, search for a physician online and base physician choice on reviews. Millennials are also more likely than other generations to go online and research a medical problem before consulting a physician. Technology, in fact, is bringing about a merger between health and healthcare. When employers are buying Fitbits and sponsoring wellness programs for their workforce, they’re hoping to achieve the dual benefits of healthier employees and more cost-effective healthcare.

There is a growing body of evidence that consumers want more active involvement in their healthcare, and the adoption of digital health tools and applications is a good proxy. For the past several years, Rock Health has surveyed consumers on their use of digital health. In a 2016 report, Rock Health found that 46% of those surveyed have adopted three or more forms of digital health tools. They’re using a fitness tracker, engaging in some form of telemedicine or contacting their physician via email or text message. The survey also found that the majority of Americans would like an electronic version of their healthcare record, and that, in the six months prior to the survey, 20% had requested or downloaded a copy.

Do consumers have the tools and knowledge to manage cost?

Consumers are showing an increasing willingness to take control on the payment end of things. But they may not yet be in a position to do so. Policy Genius, which offers online tools for buying all types of insurance, surveyed consumers on their understanding of some of the basic concepts underlying health insurance. Only 53% picked the right definition of “co-pay.” The term “coinsurance” was understood by just 22%. Roughly half couldn’t define “deductible.” So, while consumers may express a greater desire to take control of their healthcare, they may lack awareness and understanding of how to best utilize their insurance to pay for it.

See also: Consumer-Friendly Healthcare Model  

There’s an app for that

The good news is that technology applications are making consumer control possible. We’ve already seen plenty of apps that help manage so many aspects of health and the healthcare experience: apps for checking symptoms, chatting with a physician, monitoring medications, tracking vitals and even accessing healthcare records. Applications that focus on the cost and payment side of the equation have been slightly slower in arriving to market, but they are coming.
There is an emerging array of insurance-related (insurtech) apps that are making it possible for consumers to gain control of their insurance buying experience, apps that enable them to figure out whether their physicians are part of their network, whether their prescriptions are covered and just what that coinsurance-copay-deductible means to their pocketbook. These insurtech platforms include businesses like GetInsured, which helps individuals purchase the right health insurance plan; apps like Stroll Health, which brings transparency and efficiency to the imaging referral process by delivering personal recommendations based on what is covered by the patient’s insurance plan; and GlucosePath, an app that looks at the 6 million combinations of drugs available to treat Type 2 diabetes to find the regimen that is affordable (based on the patient’s insurance), effective and has the fewest side effects.

Given that Steve McQueen was famous and wealthy, he probably wasn’t worried about the cost or payment side of his treatment. But taking control of his own healthcare the way he did may have helped spark a major consumer trend. Today, consumers continue to push for active control in their health and in how they consume and pay for their healthcare. And, through technology, the healthcare industry is inexorably delivering solutions to fill any gaps that keep consumers from exercising even more control.

Important Alliance to Fight Health Costs

The Wall Street Journal reported that 20 large U.S. companies joined to fight high healthcare costs, launching the aptly named Health Transformation Alliance. Employers account for one in five dollars spent on healthcare in the U.S., yet they have relatively weak influence in the marketplace. But these influential companies are intent on aggressive action. With this kind of unified leadership, the alliance promises to shake the foundations of our health care economy.

There have been other efforts to harness the power of the business community to improve health care. My organization, the Leapfrog Group, is one such effort, founded by Business Roundtable in 2000 to address quality and patient safety in hospitals. Based on what we’ve learned over the past 16 years, here are three key principles for the alliance to start with:

  1. Lowering costs won’t automatically lower prices.

Whenever the subject of cost reduction comes up, some providers tout the enormous cost savings they have put in place through improved efficiencies, better technology or less invasive procedures. Recently, they have also pointed to the potential of large hospital system mergers to reduce costs through economies of scale. But employers are right to wonder why their own healthcare price tag continues to rise, despite these marvelous advances. Why don’t they see the cost savings?

Simply put, cost savings to the provider are not the same as cost savings to the purchaser. This sounds like such an obvious point. But the obfuscation over whose costs are saved persists and trips up progress year after year, with purchasers left scratching their heads. The alliance members will succeed in cutting their own prices only if they clearly demand that cost-reduction strategies have visible and substantial effects on their own bottom lines.

  1. Lowering prices won’t automatically lower costs.

Even if purchasers do succeed in lowering prices, the cost-reduction job is not done. That’s because the amount of waste in healthcare is profound. The Institute of Medicine estimates that as much as one-third of all costs are associated with unnecessary services, errors, infections and management inefficiencies. Not all providers are the same, and some incur much more waste than others. Whatever the price of a particular procedure, it’s no bargain when there are infections, complications and mismanagement—or if the procedure wasn’t medically necessary in the first place.

This is not chump change, this is game change. A 2013 study in the Journal of the American Medical Associaton (JAMA) reported that, on average, purchasers paid $39,000 extra when a patient contracted a surgical site infection. That excess doesn’t show up on the claim as a line item called “waste.” It is buried in a series of excess fees, tests, treatments and time spent in the hospital. Employers intent on cutting costs must factor wastefulness into the pricing equation.

  1.  Focus on the market incentives.

Our system of costs and pricing creates perverse incentives. The more a provider wastes, the more it can bill the employers. New financing models are slowly emerging, aimed at achieving value—the novel idea that payments align with patient outcomes. One of the most promising models is called “bundled pricing,” in which a health system is paid one total price for a particular procedure, including physician fees, radiology, hospital charges, etc. In this model, a provider is given incentives to actually reduce waste, so it maximizes profit under the bundle.

Some large employers have developed bundled pricing arrangements with a select group of health systems, for a select group of procedures. Walmart is a leader in this, as are employer members of the Pacific Business Group on Health. What have they found? A significant reduction in waste and better care for employees.

Another promising use of bundled pricing is coming from international medical tourism. Health services and pharmaceuticals are often much less expensive overseas than in the U.S. Most international providers offer bundled pricing and concierge hosting services. For example, Health City Cayman Islands offers bundled prices for certain heart and orthopedic surgeries, including all facility and physician fees, along with pre- and post-operative care at a lovely beachfront hotel. Its prices are one-fourth to one-fifth those for comparable services in the U.S.

The problem with medical tourism: determining the quality of international providers. Employer groups, like the Health Transformation Alliance, must address this in their work. Once again, waste and quality need to be factored into the cost equation.

Workers’ Compensation Comes of Age

With close to $40 billion in net written premium, the workers’ compensation line of business is an important driver of financial success for many property/casualty insurers. It has come a long way since its inception roughly 100 years ago. 

As we move forward into the second century of workers’ compensation, it’s possible to anticipate many of the challenges (and opportunities) that are coming. What follows is a checklist of areas to watch.

CLAIMS FREQUENCY—Many aspects of the U.S. economy should help keep claims frequency flat or negative in the near future, including:

An increasing underground economy

In April, Mark Koba, a senior editor at CNBC, chronicled the growth of a large shadow economy of workers who, because they are unable to find regular employment, are taking jobs under the table with no reportable income or taxes. Since these workers have no workers’ compensation insurance protection, medical costs may shift from the workers’ compensation system to the health care system. With some estimates showing construction employment at just 75 percent of 2007 levels, it’s possible that a portion of these jobs are being filled by under-the-table workers. If that’s the case, these traditional higher-frequency classes may not show up as heavily in the industry’s calculations as they have in the past—moderating frequency trends going forward.

Growth in Social Security disability payments

Also in April, CNN Money reported a 29% increase in the number of Americans with little or no employment income who receive disability payments. For those who were formerly employed, the increase was a staggering 44%. In 2011, according to the CNN report, the federal government spent almost $250 billion on disability payments to some 23 million Americans. Although this is a ballooning liability for the federal government, the impact on workers’ compensation insurers is largely in the opposite direction. As workers who are less than healthy exit the workforce, the remaining pool of healthier workers will lead to claims frequency decreases in the future.

Expansion of other state and federal backstops

Since the recession began, there’s been a dramatic increase in federal and state assistance. A March article that appeared on the MoneyNews website reported that the number of food stamp recipients reached a record high in 2012, with an average of 46.6 million people receiving food stamp benefits each month. According to Supplemental Nutrition Assistance Program (SNAP) data, total food stamp benefits increased from $30.4 billion in 2007 to $74.6 billion in 2012, a 145% increase. As state unemployment benefits and other backstop programs cover more people for longer periods, the pool of future workers’ compensation claimants likely to file claims shrinks. When individuals leverage government backstop programs and choose not to work, workers’ compensation insurers benefit.

Older workers not retiring

People are working longer. For the manufacturing industries, this most likely means a dramatic reduction in the number of new employees entering the workforce. Although older workers have higher claims severity, new workers have significantly higher claims frequency.

Workplace health and safety efforts

The risk management and environmental, health, and safety departments of companies continue to focus on enhancing return-to-work programs, promoting workplace wellness, and improving workplace safety. These efforts continue to bear fruit, especially as the workforce ages and the adverse impacts of obesity receive more attention.

Part-time to full-time bias on frequency

Workers’ compensation frequency is often calculated as a ratio of the number of lost-time claims per an adjusted payroll amount. To the extent that recent payroll increases have been driven by more part-time workers converting to full-time work, the doubling of exposure for current workers isn’t the same as doubling the number of workers. In the short term, a heavier reliance on existing employees working longer hours very likely will help make frequency statistics look better. This trend could reverse if smaller employers keep their head count under 50 employees or reduce employee hours to part time (under 30 hours) to mitigate the impact of the employer mandate in the Affordable Care Act (ACA). Newly added part-time workers are likely to bring higher claim frequency, while workers taken below the 30-hour threshold to avoid employer-mandated health care might have an increased incentive to shift claims to workers’ compensation.

SEVERITY—A number of coalescing factors could drive medical and indemnity severity higher in the years ahead, including:

Rising interest rates

With the Federal Reserve finally winding down its quantitative easing programs, interest rates will be heading higher. To the degree that this coincides with an improving economy, indemnity severity is likely to tick up with rising wage pressure. Medical severity, which historically has run at roughly double the medical consumer price index, is likely to rise from the 3% levels we are experiencing today. Severity trends in the 6% to 7% range may be manageable in light of today’s rate increases, but it will be difficult to expand profit margins over the long term if medical inflation returns to double-digit levels.

Claims predictive modeling

Companies increasingly are using advanced analytics to identify claims for triage as early as the first notice of loss. By identifying the highest severity claims, assigning the appropriate resources for triage, and doing a better job on referrals from special investigative units, companies are favorably affecting the duration and severity of claims.

Obesity

The obesity statistics are staggering. The Centers for Disease Control and Prevention (CDC) estimates that in 2010, 36% of Americans age 20 or older were obese. The Robert Wood Johnson Foundation in a 2012 report predicted that obesity rates for adults over the next 20 years would reach or exceed 44% in every state in the United States, and exceed 60% in 13 of those states. Recent NCCI studies show that the ratio in the medical costs per claim of obese to nonobese claimants at the end of five years is 5.3, and the duration of obese claimants is five times that of nonobese claimants. Given the fact that workers of all ages are struggling with maintaining a healthy weight, workers’ compensation costs will only increase as other comorbidities associated with obesity increase costs.

An aging workforce

As workers age, gradual changes in hearing, vision, strength, and balance may lead to increased probabilities and durations of workplace injuries, including sprains, strains, slips and falls, carpal tunnel syndrome, knee and shoulder problems, hip replacements, and back issues. A 2012 NCCI study, however, concluded that an aging workforce appears to have far less of a negative impact on workers’ compensation claims costs than was previously thought. Although there’s evidence that injured workers older than 35 years have higher costs than those younger than 35, costs associated with injured worker cohorts older than 35 tend to be quite similar. And while older workers have more costly injuries, the NCCI observed that such injuries are becoming more prominent in younger workers.

While the NCCI has presented conflicting data on the claim costs of older workers, we know that the number of older workers in the workforce will nearly double in the next 15 to 20 years. The U.S. Department of Health and Human Services estimates that the 39.6 million persons age 65 years or older today will increase to roughly 72.1 million by 2030. That equates to roughly one in every five Americans being 65 or older. While the jury is out on the precise impact of an aging workforce on claim frequency and severity, an aging workforce increases the likelihood of more severe injuries and longer claim durations.

LONG-TERM TRENDS—On the plus side, several trends are emerging that could benefit workers’ compensation insurers in the long run, including:

Price transparency

When the Surgery Center of Oklahoma in Oklahoma City started posting its prices online four years ago, it forced competing area hospitals to follow suit. Although it will take time to catch hold across the country, greater price transparency in the delivery of health care could benefit workers’ compensation insurers. Running counter to this trend is the pace of consolidation in health care. The ACA, with its focus on accountable care organizations (ACOs), electronic medical records, and other coordination-of-care rewards, is fueling consolidation in health care at an unprecedented rate. With increased consolidation comes increased local pricing power, and workers’ compensation insurers could find themselves on the wrong end of that pricing pendulum.

Opioid use

The epidemic of opioid abuse that had swept the nation is finally starting to abate. State governors, attorneys general, and legislatures are passing laws to toughen criminal and administrative penalties for doctors and clinics, establishing standards of care for doctors who prescribe narcotics, increasing the reporting and tracking of prescriptions, and limiting reimbursements to physicians who dispense prescription drugs to no more than a certain percentage above cost. State agencies, local agencies, and the U.S. Drug Enforcement Administration also are aggressively prosecuting individuals involved in illegal prescribing activity and “pill mills,” causing physicians, nurse practitioners, and pharmacies to surrender their federal licenses to dispense controlled substances. In the most serious cases, the offenders have had to surrender their medical licenses to state medical/pharmacy boards. Physicians and medical boards also have developed resources to guide physicians on responsible opioid prescribing, and there’s been a rise in the number of physicians who have had their licenses suspended by state medical boards for the unlawful distribution of controlled substances and for prescription drug fraud. Organizations like the Federation of State Medical Boards and Physicians for Responsible Opioid Prescribing also have joined the fight.

Given the high-profile nature of these efforts to define the proper use of opioids in treating injured workers, it’s likely the workers’ compensation line will see an effect. With medical expenses exceeding 60% of workers’ compensation costs, 20% of that going toward prescription drugs, this would be a welcome development.

Medical tourism

Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

The ACA

Several economist and workers’ compensation industry stakeholders have predicted that the ACA will create shifts in the workers’ compensation industry. But exactly how isn’t clear. Many refer to the Massachusetts Health Care Reform Act to bolster the argument that the ACA will lower overall health care costs and workers’ compensation costs. Under Massachusetts health care reform, costs within the workers’ compensation system decreased. Although ACA is more complex, similar provisions in the two laws allow a comparison of the impact on the workers’ compensation system. Analysis by RAND in 2012 found that expanding coverage to previously uninsured individuals resulted in a drop in workers’ compensation costs in Massachusetts. Finding an association between being insured and the frequency of workers’ compensation claims, RAND concluded that expanding the population holding group health insurance could reduce cost shifting to workers’ compensation.

In a May blog posting, Joe Paduda, a principal at Health Strategy Associates, affirmed his belief that the overall effect of the ACA on workers’ compensation would be positive, citing among other things, that it would lessen the motivation for cost shifting and fraudulent claims. Others have argued that increasing access to care and expanding preventive services, coupled with employer-sponsored wellness initiatives, should make the working population healthier overall, leading to a reduction in claim frequency and faster recoveries when injuries do occur.

On the other hand, some speculate that the ACA will increase workers’ compensation costs over time by straining already scarce primary care resources and causing longer wait times for treatment. The projected shortage of primary care physicians could make it more difficult for injured workers to find a physician. This, in turn, could lead to increased costs because of extended disability durations while waiting to see a physician. Others have pointed out that a decreasing supply of physicians and increasing patient demand could drive costs higher. Other factors that could affect cost shifting are significant increases in copayments and high-deductible health plans—costs that employees must bear. This could motivate some employees to file workers’ compensation claims for nonoccupational injuries.

According to findings from a recent study by Assured Research, a connection between increased health insurance coverage and decreased workers’ compensation costs isn’t supported by the data. The study evaluated health insurance penetration rates by state from 1999 to 2011 and corresponding statewide workers’ compensation loss ratios. After adjusting for national workers’ compensation trends, the results showed 31 states with rising health care penetration that resulted in decreased loss ratios. On the other hand, 20 states with rising health care penetration experienced increased loss ratios.

Immigration reform

There are approximately 11 million undocumented people living in the United States. Many don’t file workers’ compensation claims for fear of being deported. The general consensus is that legalizing undocumented immigrants will increase workers’ compensation claims. At the same time, immigrant workers are more prevalent in high-risk sectors such as agriculture, construction, and landscaping. With an influx of workers into a high-risk injury class, the potential impact on frequency and severity in the workers’ compensation system can’t be overlooked.

Anticipate and Plan

British Prime Minister Benjamin Disraeli once quipped, “What we anticipate seldom occurs, what we least expect generally happens.” Still, it’s important to anticipate and plan for the future risk. There’s little doubt that change is looming for workers’ compensation insurers and that actuaries have a key role to play in identifying and managing the transformation.

Authors

Denise Gillen-Algire and Kevin Bingham collaborated with Bill Van Dyke and William Wilt in writing this article.

Bill Van Dyke, an associate of the Casualty Actuarial Society and a member of the Academy, is a specialist leader at Deloitte Consulting LLP in Hartford, Conn. He has extensive actuarial experience in managing and performing workers’ compensation unpaid claim reserve and pricing analyses for state funds, insurers, reinsurers, state agencies, municipalities, self-insured corporations, and captives.

William Wilt, a fellow of the Casualty Actuarial Society, is president of Assured Research, a research and advisory firm focused on property/casualty insurance. Prior to forming Assured, he held diverse roles as an actuary, as a credit and equity analyst, and in corporate development.

This article first appeared in the November | December 2013 issue of Contingencies Magazine and is © 2013 American Academy of Actuaries. Reprinted with the permission of the American Academy of Actuaries.  All Rights Reserved.

India’s Secret to Low-Cost Health Care

A renowned Indian heart surgeon is currently building a 2,000-bed, internationally accredited “health city” in the Cayman Islands, a short flight from the U.S. Its services will include tertiary care procedures, such as open-heart surgery, angioplasty, knee or hip replacement, and neurosurgery for about 40% of U.S. prices. Patients will have the option of recuperating for a week or two in the Caymans before returning to the U.S.

At a time when health care costs in the United States threaten to bankrupt the federal government, U.S. hospitals would do well to take a leaf or two from the book of Indian doctors and hospitals that are treating problems of the eye, heart, and kidney all the way to maternity care, orthopedics, and cancer for less than 5% to 10% of U.S. costs by using practices commonly associated with mass production and lean production.

The nine Indian hospitals we studied are not cheap because their care is shoddy; in fact, most of them are accredited by the U.S.-based Joint Commission International or its Indian equivalent, the National Accreditation Board for Hospitals. Where available, data show that their medical outcomes are as good as or better than the average U.S. hospital.

The ultra-low-cost position of Indian hospitals may not seem surprising — after all, wages in India are significantly lower than in the U.S. However, the health care available in Indian hospitals is cheaper even when you adjust for wages: For example, even if Indian heart hospitals paid their doctors and staff U.S.-level salaries, their costs of open-heart surgery would still be one-fifth of those in the U.S.

When it comes to innovations in health care delivery, these Indian hospitals have surpassed the efforts of other top institutions around the world, as we discussed in our recent HBR article. Today, the U.S. spends $8,000 per capita on health care; if it adopted the practices of the Indian hospitals, the same results might be achievable for a whole lot less, saving the country hundreds of billions of dollars.

A key to this is that, faced with the constraints of extreme poverty and a severe shortage of resources, these Indian hospitals have had to operate more nimbly and creatively to serve the vast number of poor people in need of medical care in the subcontinent. And because Indians on average bear 60% to 70% of health care costs out of pocket, they must deliver value. Consequently, value-based competition is not a pipe dream but a reality in India.

Three major practices have allowed these Indian hospitals to cut costs while still improving their quality of care.

A Hub-and-Spoke Design

In order to reach the masses of people in need of care, Indian hospitals create hubs in major metro areas and open smaller clinics in more rural areas which feed patients to the main hospital, similar to the way that regional air routes feed passengers into major airline hubs.

This tightly coordinated web cuts costs by concentrating the most expensive equipment and expertise in the hub, rather than duplicating it in every village. It also creates specialists at the hubs who, while performing high volumes of focused procedures, develop the skills that will improve quality. By contrast, hospitals in the U.S. are spread out and uncoordinated, duplicating care in many places without high enough volume in any of them to provide the critical mass to make the procedures affordable. Similarly, an MRI machine might be used four to five times a day in the U.S. but 15 to 20 times a day in the Indian hospitals. As one CEO told us, “We have to make the equipment sweat!”

U.S. hospitals have been developing similar structures, but there are still too many hubs and not enough spokes. Moreover, when hospitals consolidate, the motive often is to increase market power vis-à-vis insurance companies, rather than to lower costs by creating a hub-and-spoke structure.

Task Shifting

The Indian hospitals transfer responsibility for routine tasks to lower-skilled workers, leaving expert doctors to handle only the most complicated procedures. Again, necessity is the mother of invention; since India is dealing with a chronic shortage of highly skilled doctors, hospitals have had to maximize the duties they perform. By focusing only on the most technical part of an operation, doctors at these hospitals have become incredibly productive — for example, performing up to five or six surgeries per hour instead of the one to two surgeries common in the U.S.

This innovation has also reduced costs. After shifting tasks from doctors to nurse practitioners and nurses, several hospitals have even created a lower tier of paramedic workers with two years’ training after high school to perform the most routine medical jobs. In one hospital, these workers comprise more than half of the workforce. Compare that to the U.S. system, where the first cost-cutting move is often to lay off support staff, shifting more mundane tasks such as billing and transcription onto doctors overqualified for those duties — precisely the wrong kind of task shifting.

Good, Old-Fashioned Frugality

There is a lot of waste in U.S. hospitals. You walk into a hospital in the U.S., and it looks like a five-star resort; half of the building has no relation to medical outcomes, and doctors are blissfully unaware of costs. By contrast, Indian hospitals are fanatical about wisely shepherding resources — for example, sterilizing and safely reusing many surgical products that are routinely discarded in the states after a single use. They have also developed local devices such as stents or intraocular lenses that cost one-tenth the price of imported devices.

These hospitals have also been innovative in compensating doctors. Instead of the fee-for-service model, which creates an incentive to perform unnecessary procedures and tests, doctors at some Indian hospitals are paid fixed salaries, regardless of how many tests they order. Other hospitals employ team-based compensation, which generates peer pressure to avoid unnecessary tests and procedures.

Innovation has flourished in the U.S. in the development of new pills, clinical procedures, devices, and medical equipment, but in the field of health care delivery, it appears to have been frozen in time. In too much of the U.S., system, health care is viewed as a craft and each patient as unique. But by applying principles of mass production and lean production to health care delivery, Indian doctors and hospitals may have discovered the best way to cut costs while still delivering high quality in health care.

Authors

Ravi Ramamurti collaborated with Vijay Govindarajan in writing this article which first appeared in the Harvard Business Review. Vijay Govindarajan is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College and a Distinguished Fellow at The Dartmouth Center For Healthcare Delivery Science.

Immigration Reform On The Horizon: What It Means For Medical Tourism And Workers' Compensation

Five years ago, members of a risk management discussion group I belong to on Yahoo Groups raised the question of whether or not illegal immigrants (i.e., undocumented immigrants) were entitled to workers’ compensation benefits. The answer most of the respondents gave was yes, but with some restrictions depending upon the state. One respondent in particular even provided the group with documents from the Independent Insurance Agents & Brokers of America, Inc. (IIABA) that gave the pros and cons in the debate on whether undocumented immigrants were entitled to benefits or not.

The purpose of this article is not to rehash the debate points, but to explore what impact impending immigration reform, which has been promised by the Obama administration in the upcoming second term of the president, will have on workers’ compensation and the likelihood that injured newly legal immigrant workers, especially from Mexico and other Latin American countries, will avail themselves of the benefits of medical tourism to their home countries as an option if injured on the job.

According to the IIABA White Paper, which cited a Pew Hispanic Center report published in 2006, there are probably 11 to 12 million undocumented immigrants in the US, depending upon how many have “self-deported” recently due to the current US economic slowdown. Demographically, this represents 5.4 million men, 3.9 million women, and 1.8 million children. In addition, there are 3.1 million children who are US citizens, having been born here (64% of all children of the undocumented) from one or more parent.

President Obama’s Executive Order last year gave many of these children a reprieve from deportation while they are attending college here and until more comprehensive reform can be achieved for all undocumented immigrants. Undocumented immigrants account for almost one-third of all foreign-born residents of the US, and about 80% of these are from Mexico and other Latin American countries.

The report also states that out of the total number of 9.3 million undocumented adults, 7.2 million (77%) are employed and account for around 5% of the US workforce. They comprise a disproportionate percentage in some industries, such as 24% of farm workers, 17% of cleaning workers, 14% of construction workers, and 12% of food preparers.

These industries typically account for much of the claims filed under the US workers’ compensation system. Within a particular industry, undocumented workers comprise a higher percentage of more hazardous occupations. For example, 36% of insulation workers and 29% of all roofing employees are estimated to be undocumented.

In my blog post, The Stars Aligned, I briefly touched upon the issue of immigration reform’s impact on medical tourism for workers’ compensation in regard to Mexican workers in the US. But since President Obama and Florida Senator Marco Rubio have recently outlined different reform plans, which I will discuss here in this post, it is important to mention first how undocumented workers are treated under the various laws each state has established to govern their workers’ compensation systems.

A document I mentioned in that blog post was a chart of the laws governing workers’ compensation and undocumented workers that one of the respondents had forwarded to the discussion group.

Undocumented workers are entitled to workers’ compensation benefits in thirty-eight states; however, six states have statutes that allow or restrict benefits for various reasons such as:

  • if the employment was obtained under false pretenses (Florida);
  • if disability benefits were payable or they were unable to work because of the injury (Georgia);
  • if they were entitled to medical, but not disability benefits because of a commission of a crime under the Immigration Reform and Control Act (IRCA) of 1986 signed by Ronald Reagan (Michigan);
  • if vocational rehabilitation benefits were covered since the worker could get employment outside the US (Nevada);
  • if disability payments were recoverable at US wages rather than those of the home country or if the employer was aware or should have been aware of the undocumented status (New Hampshire); or,
  • if disability benefits were not payable if the worker was unable to work due to his status and not the injury (North Carolina).

Three states — California, Georgia and Nebraska — have statutes that indicate that undocumented workers are not entitled to benefits in certain situations. California case law establishes that undocumented workers could be refused vocational rehabilitation benefits. Georgia case law establishes that disability benefits are not payable if the worker is unable to work due to his status and not his injury. And, Nebraska case law established that a worker named Ortiz could be refused vocational rehabilitation benefits because he could not legally work in the US and did not plan to return to Mexico to work.

Only Wyoming has a statute that expressly includes only “legally employed … aliens.” And case law in 1999 confirmed that undocumented workers were not entitled to benefits. Eleven states — Alaska, Delaware, Indiana, Maine, Missouri, Rhode Island, South Dakota, Vermont, Washington, West Virginia and Wisconsin — were listed in the chart as unknown as to whether or not undocumented immigrants are entitled to benefits.

As we begin the second Obama Administration, immigration reform has risen to the top of the list, only to be preceded by the debt crisis and the fiscal cliff. As I mentioned above, both President Obama and Florida Senator Marco Rubio have outlined their own versions of what immigration reform would look like. Senator Rubio’s plan would rely more on skilled workers such as engineers and seasonal farm workers while tightening border enforcement and immigration law. Senator Rubio’s plan would not provide blanket amnesty to those already here.

On the other hand, President Obama’s plan, as outlined in a recent New York Times article, would seek to give undocumented workers a path to citizenship. Sen. Rubio’s plan would focus more on merit and skill as prerequisites for entry into the US, much like earlier immigration laws passed in the 1920s and other decades. The president’s plan would be broader and more immediate, and would probably have less of an impact on the economic stability of those industries that currently rely on undocumented workers.

Whatever form immigration reform will take, the opportunities to offer medical tourism as an option to injured undocumented workers, once they achieve some legal form of citizenship, will no doubt increase. The likelihood that something will be done this year has already been the topic of many news programs and even has been discussed by congressional leaders such as Harry Reid, the Senate Majority leader.

Once the currently undocumented can legally remain in the US and continue to work in the industries they occupy, it is more likely that they will opt to go to their home country for medical treatment should they get injured on the job. With the benefits of doing so, such as not having language barriers, cultural barriers, and being able to be visited by friends and family living there, they will be more open to receiving treatment at facilities they normally could never get into. And as many of these countries are fast becoming “rising stars” as medical tourism destinations, the more likely they will want to get treated at the best hospitals in their countries, which will have a huge impact on their recovery, their well-being and their standing with friends and family. And the financial burden of not having to look for a job back home and being able to return to the US will convince them to opt for medical tourism as injured workers.