The "local-market bias" in consumption of health care

Aaditya Mattoo and Randeep Rathindran explain How Health Insurance Inhibits Trade In Health Care (Health Affairs, 2006).   Many medical treatments can be obtained abroad for a lot less than they cost in the U.S.  "Medical tourism" could be a big money-saver for Americans.  But there are obstacles:

Most travel is for procedures not adequately covered by home-country health insurance; this suggests that a key impediment to trade is the nature of existing health insurance plans. We find that most plans do not cover treatment abroad; if they do, the consumer must bear the full costs of travel and obtains only a fraction of any cost savings. Since the costs of travel are usually greater than any out-of-pocket savings, the adequately insured have little incentive to travel, which results in a strong “local-market bias” in the consumption of health care.

There is a simple solution: The terms of insurance coverage should be neutral to the location of the provider, and reimbursement should be based on the costs of treatment inclusive of travel costs. This would be sufficient to ensure that the consumer has an incentive to travel if, and only if, there were any gains from trade. 

There are two other things to think about:

First, the scope for trade will be greatly increased if providers in destination countries improve the quality of care and are able to credibly signal these improvements by obtaining accreditation from source-country health regulators. Second, destination countries will need to use at least part of the revenues from increased inflows of foreign patients to ensure improved health care access for their own poorer citizens.

Comments

[Jim is looking for senior citizen travel insurance]

Thank you for sharing this very informative article. I was wondering if senior citizen travel insurance is necessary for abroad medication or are there health insurance from the provider’s country that can cover this? I’ve been researching about this for my grandmother. We are considering having her medication abroad so that it will be cheaper. We found some very reliable doctors. I hope someone could help me. Thank you very much!