Want Affordable Health Care? In Order to Get It You May Need to Leave the Country!

As health-care costs rise, insurers are experimental with the idea of outsourcing your medical care to foreign countries in order to save a buck. Find out what this could mean for you and the insurance companies.

Jul 13, 2014 at 10:32AM

For decades the outsourcing of American jobs has been a major concern of workers and labor unions. Businesses looking to lower their manufacturing and product development costs have been turning in greater numbers to overseas countries which offer cheaper labor in order to lower their costs and pad their bottom line. Now, it appears as if your health care plan could be the next thing in line to be outsourced, at least according to New Republic.

U.S. medical costs: an adventure into the confusing
It's a fairly well-known fact that medical care in the U.S. costs more than just about anywhere else in the world for a comparable procedure or care.


Source: StockMonkeys.com, Flickr.

For example, in July 2013 Bloomberg noted that the cost to perform coronary bypass surgery in India was just 95,000 rupees ($1,589), about half the cost of the same procedure 20 years ago. By the same token, data from the Centers for Medicare and Medicaid Services indicates that the same procedure at Ohio's Cleveland Clinic would cost $106,385 – and these costs have only been rising over the past 20 years.

Obamacare boosts insurers' costs
Although medical cost inflation has been generally tamer recently than at any point over the past couple of decades, the implementation of the Affordable Care Act, better known as Obamacare, isn't necessarily decreasing costs for U.S. businesses or insurers.

12-month percentage change for U.S. medical care costs. Source: Bureau of Labor Statistics. 

The law, which is designed to reduce the rate of uninsured persons and help spread the cost medical care across a greater portion of the population to control medical cost inflation, has led to a number of major shifts in the way insurers offer health care. Most importantly, the ACA removed a prior provision that allowed insurers to deny coverage to persons with preexisting health conditions, meaning insurers across the country are accepting new members of all walks of life when it comes to personal health. For many insurers this means (at least in the meantime) a less favorable blend of new members that's leading to higher medical costs.

In response to higher costs associated with the ACA insurers are looking for new ways to reduce their expenses. Some have tightened salaries and slowed hiring, while other insurers have merged or purchased other companies in order to take advantage of cost-saving synergies. However, one under-the-radar move aimed at reducing insurers' costs that New Republic recently brought to light is the idea of cross-border or cross-country care.

Cheaper care may be just a border crossing away
In the past it hasn't been uncommon for uninsured or insured but low-wage workers to cross into Mexico or fly to another part of the world to receive medical care that's markedly cheaper than what can be found in the U.S. This so-called medical tourism drove approximately 900,000 people out of the U.S. to seek medical care last year, according to Patients Beyond Borders. This organization estimates that the number of U.S. citizens looking abroad for cheaper medical care is growing by about 15% annually.


Source: Eric Molina, Flickr.

But the idea of cheap cross-border medical care has also infiltrated a number of our largest insurers. New Republic notes that UnitedHealth Group (NYSE:UNH), WellPoint (NYSE:ANTM), Aetna (NYSE:AET), and Humana (NYSE:HUM) are experimenting with cross-border plans that encourage patients to seek care abroad, thereby helping reduce expenses for insurers. Some U.S. insurers, such as Blue Cross Blue Shield of South Carolina, have contracted with providers in Singapore, Thailand, Ireland, Turkey and Costa Rica for low-premium but high-deductible plans which are affordable for low-income workers.

A more specific example comes from Aetna, which in 2010 established Vitalidad Plus in California in collaboration with one of Mexico's top health maintenance organizations, Sistemas Medicos Nacionales. Vitalidad Plus offers employers the opportunity to send workers to Mexicali, Tecate, or Tijuana, Mexico in order to receive affordable health care. As Aetna's press release noted, "People are more like to get routine care and stay healthier when they have a primary care physician they can relate to."

Ultimately, cross-border care is a potentially meaningful cost-saver for the insurance companies. Even paying for the extra costs of an airline ticket, a companion, and the medical procedure in a foreign country, can sometimes equate to tens of thousands of dollars less than having the procedure performed in the United States. 

My initial thought was, "Can insurers actually do this?" Truth be told, only two states (California and Texas) have laws in place that disallow cross-border medical care for U.S. citizens -- and apparently the law isn't regularly enforced. To add, neither the Affordable Care Act nor the Department of Health and Human Services offer any more clarity on the ability of insurers to require members to leave the country to receive care. In other words, there's pretty much nothing that prevents insurers from requiring, or at least offering their members, the opportunity to head beyond the confines of the U.S. for medical care.


Source: Vic, Flickr.

Could this catch on?
On one hand the idea of sending members out of the country to receive cheaper care is music to the ears of insurers. There are almost certainly some individuals in this country, likely in the lower-wage category, who would jump at the chance to pay less out of pocket if they require medical care, costing both the patient and insurance company less. On top of this, offering the opportunity to receive cheaper out-of-country medical care could complement Obamacare by improving the number of physician choices that members have to choose from. 

But, there are also a number of concerns associated with cross-border medical care. On top of that list is whether a patient would receive comparable quality care in a foreign hospital when compared to a U.S. hospital.

This isn't to say you can't leave the U.S. and find high-quality medical care, but regulations and expectations are much higher in the U.S. for medical care than in many other countries around the world.

Second, I'd be concerned that consumer backlash could actually harm enrollment for insurers participating in this practice. As I mentioned above, while some citizens would jump at the chance to save on insurance premiums and medical procedures should they arise, I'd suggest that a vast majority of citizens might view this as an attempt for big insurers to skirt their duties of paying for high-quality care for U.S. citizens. Considering that cross-border networks could require sick people to go hundreds of miles away from their family and friends to receive care, it's quite plausible that there could be some backlash here that might negatively affect enrollment.

Finally, regulation becomes a big concern. How do you ensure that U.S. citizens are getting ample physician choices and high quality care when they aren't even contained within the border of the United States?

Here's what you should know
Truth be told, although these four national carriers are experimenting with cross-border care, it's probably not going to have a meaningful impact on lowering their costs or boosting their bottom line anytime soon. The only reason that cross-border care has even worked for hundreds of thousands of individuals over the years is because it's remained largely under the radar. If too many insurers began outsourcing patient care to foreign countries I suspect you'd see a fairly quick alteration to the Affordable Care Act and from individual states that would reduce the chance of this happening.

In the meantime, expect medical care outsourcing to remain a backburner issue for major national insurers, but ensure that you still keep one eye open on this topic as I'm fairly certain we haven't heard the last of it.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends WellPoint. It also recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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