Obstacles and opportunities in American healthcare

 

The passage of the Affordable Care Act (ACA or "Obamacare") in 2010 marked the greatest change in the health insurance markets in the US since 1965.

Since then, the Republican administration has tried and failed over 70 times to repeal and replace this law, causing uncertainty for both consumers and companies. ACA still remains very popular with consumers however and it is likely, regardless of the political party in charge, that certain features of the law will survive. Yet changes are underway in US healthcare which will be important to medical benefits plans and medical travel for Americans. It means that medical travel has a greater potential to be accepted as a mainstream benefit within US health insurance plans.

Changes in the US insurance markets – the Triple Aim

There are three main trends driving healthcare opportunities in the US for residents or medical travellers.  They form part of a much larger transformation happening in the US about the way that medical services will be paid for in the future (value-based care).  These trends are collectively referred to as the ‘Triple Aim’ and focus on:

  • Improving the patient experience
  • Improving population health
  • Reducing costs of healthcare1

Shifting to value-based care

Since the beginning of organised medicine in the late 19th century, government efforts to monitor and control quality as well as to control payments have centered on the service transaction. Each visit with the doctor, prescription and every visit to the hospital is recorded and this is what triggers a payment to the provider of care.

This method for tracking quality and paying for care (‘fee-for-service’) is deeply embedded in the US healthcare system.  Research has shown however that fee-for-service healthcare encourages unnecessary services, with high rates of avoidable injury and deaths as well as very high costs.

Value-based care is an attempt in the US to look at the delivery of care for the overall population as well as for specific segments. Here’s an example:

  • Instead of paying the doctor and hospital for each knee replacement surgery on a fee-for-service model, they are paid a fixed amount to manage the ‘orthopaedic health’ of the population in a community who may be at risk of needing knee replacements.

This would change the incentive from doing more knee replacements to performing fewer surgeries and looking for lower-cost, lower-impact alternatives.

This shift to value-based payment is huge for both providers and insurance companies. As hospitals and insurance companies work through the details of how to manage and pay for healthcare and medical services in this new environment, the appetite of the insurance companies to save money and reduce the amount of care increases.

Emerging models – travel to receive care

‘Centres of Excellence’ are emerging in the US as one model for achieving improved quality and outcomes as well as lower cost. Evidence shows that expert or specialist care, when performed with high frequency, improves outcomes and lowers costs; two of the three targets in the Triple Aim.

US employers and insurance companies are now encouraging their insured beneficiaries to travel to one of these Centres of Excellence, to get these specialised, high value services (e.g. for cardiac care, orthopedics, or cancer treatment). This “travel to receive care” model has the potential to disrupt the usual pattern of receiving healthcare services by consumers.

Should it matter if the patient is traveling from Dallas to Cleveland or Dallas to Cancun? US medical services consumers and the organisations that pay for those services will ultimately answer this question.

Musical chairs: insurance companies, providers & employers

Healthcare in the US is big business. Healthcare expenditure is estimated at US$3 trillion, larger than the nominal GDP of the UK, India or France, and given the scale of the industry, healthcare companies are regularly looking to acquire, divest and merge.  Looking at this activity offers the chance to analyse and predict the future of US medical travel. Take Amazon’s ambitions for example:

  • Why would a retail distributor purchase a pill packaging company? Amazon recently disrupted the retail pharmacy market by acquiring PillPack, a service that sorts, packages, and delivers prescriptions directly to consumers. Amazon is going through the expensive and laborious process of obtaining pharmaceutical distribution licenses in every state in the USA. This model makes sense because Amazon has the necessary distribution infrastructure and, by adding capabilities, proper licenses and systems, it can adapt that distribution system to the level of sophistication needed for prescriptions.

But why would Amazon join forces with JP Morgan Chase, a bank, and Berkshire Hathaway, a retail and utility conglomerate? And what does this partnership mean for medical travel?

Growing clout of employers

These three large companies (Amazon, JP Morgan Chase, Berkshire Hathaway) have created a new enterprise to control healthcare costs. As described in part one of this two-part series, 65% of the US population receives its health insurance coverage through employers, with many medium to large-size employers creating self-funded health insurance benefits packages.

By combining their efforts, these three employers now represent over 800,000 consumers ("covered lives"). This size and scale give this group enormous negotiation power with providers to reduce costs and tailor health and medical care to the precise needs of their employees and businesses.

Self-funded health insurance plans have been targeted by medical tourism destinations and providers for at least 10 years. Because these types of insurance plans are exempt from many state regulations, the hope was that large self-funded employers would be among the first to adopt medical travel as a benefit in order to control costs.

Up to this point, this has not materialised. Few self-insured plans have adopted medical travel benefits and for those that have, employees are slow to choose the medical travel option. While the early results are promising, achieving scale acceptance has been a challenge.

What is different now is the size of these alliances attempting to reduce costs and the convergence of the employers’ willingness to innovate.  What could be more innovative than medical travel?

Maybe not all healthcare is local

Research on patient/consumer choices in healthcare and medical services confirm that, even when given evidence that the hospital or doctor farther away is better and/or less expensive, consumers tend to choose local options. With their employers and their insurance companies urging them to travel, more and more consumers may in the future find quality, value, and even adventure in travelling elsewhere to receive medical services.

Employers are steering employees to Centres of Excellence farther away from home. Employees have to be educated about the health, financial, and other benefits of traveling for healthcare services. In the US, the education process is slow. Many Americans have never travelled outside the US, do not have passports, and are cautious about travelling. These attitudes are substantial barriers for the older age group who are most likely to need health care older however may be lower for younger people who tend to consume less medical care. The US market may have to “age” before medical travel is taken up to a greater extent. 

The slowly growing role of the consumer

One of the obstacles to achieving the Triple Aim has been the passive, disengaged consumer. If healthcare is business, then consumer choice and market forces are the surest ways to make the markets for health and medical services more efficient. While Americans are savvy consumers in virtually every category, when it comes to medical care, there is a tendency to become passive and accepting. Only about 12% of patients request a second surgical opinion.2 

Middle-age and older consumers are following traditional provider choice patterns, consuming health care services locally.3 Younger consumers are pushing for change; they want to know as much as possible about their conditions, how much things cost, data about outcomes, and how to access providers online. They are forcing insurers and providers to adapt. And this trend represents an opportunity for medical travel.

The medical travel opportunities

What do these trends represent for destinations and providers who want to see an increase in the health and medical travel markets? Here are some key concepts and opportunities for those looking to expand the international medical travel market.

  • Direct to consumer channel:  With more access to more information available via more devices and channels, consumers in the 21-38 age group are more receptive to messages about health and medical services. They place more weight on facts and data and are more accepting of medical travel than any previous generation. They are willing to go to their employers and request – even insist – on changes to medical benefits plans if they are convinced of the value in those changes.4 The consumer marketing channel may be a very efficient way to reach the markets for employer-sponsored health plans.
  • Employer channels: With the growing number of self-funded health insurance plans among employers as well as the increased acceptance of the Centres of Excellence model, employers are becoming more open to disruptive change. Employers are conservative in their thinking about medical travel; however, the tremendous pressure to control cost and improve efficiency may produce modest results in terms of broadening the medical travel option.
  • Hybrid Management Options: In the space between the employee, the employer, and the insurance company, a group of hybrid benefits management firms is emerging. These come in many different shapes and sizes. Some target specific illnesses like orthopedics or cancer care, while others target specific workplace issues, such as injuries or obesity. These hybrid benefits management firms are open to exploring the benefits of medical travel to their customers (employers or insurance companies) and consumers (employees/patients). Combined with the Centres of Excellence model, these management approaches can look outside the United States for viable options for their clients.

Looking ahead

The enormous complexity of the US health insurance market has so far been responsible for the lack of acceptance of medical travel. Insurance companies are focused on controlling risk and the risks associated with medical travel have not been well defined.

The growing pressure to achieve the Triple Aim is creating new market dynamics, such as the emergence of value-based payment, the growing clout of employers who pay for health insurance, as well as emerging hybrid benefits management models. These forces are creating greater opportunities for medical travel to be accepted as a mainstream benefit within US health insurance plans. While opportunities do exist, they remain modest, requiring patience and continued learning as the landscape changes, creating further disruption and additional opportunities.

About the authors:

Elizabeth Ziemba, MPH JD is President of Medical Tourism Training Inc., the first training company in the medical travel markets and co-host of The Medical Travel Show, a serial podcast on medical travel topics.

Irving Stackpole RRT MEd is President, Stackpole & Associates Inc. a strategic marketing firm and co-host of The Medical Travel Show. Mr. Stackpole managed a self-funded health insurance plan while an executive with Tenet Healthcare.


1 Institute for Healthcare Improvement; See: http://www.ihi.org/Engage/Initiatives/TripleAim/Pages/default.aspx

2 Patient-Initiated Second Opinions: Systematic Review of Characteristics and Impact on Diagnosis, Treatment, and Satisfaction. See: https://www.mayoclinicproceedings.org/article/S0025-6196%2814%2900245-6/fulltext

3 Bhandari, N., Scanlon, D. P., Shi, Y., & Smith, R. A. (2018). Why Do So Few Consumers Use Health Care Quality Report Cards? A Framework for Understanding the Limited Consumer Impact of Comparative Quality Information. Medical Care Research and Review. https://doi.org/10.1177/1077558718774945

4 Moore, et al., Choice Matters: How healthcare consumers make decisions, (and why Clinicians  and Managers  should care). Oxford University Press 2018

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