Everyone around the world is aware of the ongoing healthcare crisis in the United States. While people know some of the statistics, such as almost 50 million Americans are uninsured and the hundreds of millions that have health insurance continue to see costs rise, no one really knows the true cost of healthcare.
The recently released Kaiser Family Foundation report showed some scary facts of where healthcare in the US is headed. The average yearly cost of health insurance for an American family is now $12,680. That, in some cases, is almost twice the average annual income that people make in some countries where medical tourism is a destination. The average
American pays about $4,704 per year for a single health insurance policy. In some cases the employer pays for the cost of health insurance for the employee, but not for the family, which means an employee may have to pay as much as $7,976 per year to provide health insurance for their family. For those that don’t have group health insurance coverage provided through their employer, they must pay 100% of all their health care costs which can exceed $12,680 per year.
On a personal note, I am a healthy young American with no health conditions, and I rarely go to the doctor or hospital. The last time I went to the hospital that I can remember, is when I broke my leg playing football in high school. Even being healthy and almost never going to the doctor or hospital, my annual health insurance cost is around $5,760 per year for just my own policy.
If I need to go to the hospital or get surgery, I also have a $2,000 deductible plus coinsurance and other out of pocket expenses. Imagine the costs if I was not in perfect health! Each year my health insurance costs continue to rise, even though I am not using the coverage. It is slowly reaching a point where health insurance is totally unaffordable for the average American.
“We may be seeing the tip of the iceberg of a trend towards less comprehensive, skimpier insurance with higher out-of-pocket payments for working people,” said Drew Altman, president and CEO of the Kaiser Family Foundation. “That’s bad news at a time when workers are being hit by other economic pressures from declining 401(k)s to higher food and gas prices and problems paying the rent and mortgage.”
In 1988, 66% of US employers with 200 or more employees were providing retiree health benefits, where as of today, only 31% now provide that benefit. This is a clear sign that retiree health insurance is on the decline and eventually may be phased out.
The Economic Crisis
The US Economic Crisis is adding fuel to the fire. We are seeing large financial institutions failing. Fannie Mae, Freddie Mac, American International Group (AIG), Lehman Brothers, and others are all being bailed out by the federal government. Due to the financial crisis, the US government just did a $700 billion dollar bailout, but it is only a partial bailout. This means that only certain companies will see the funds. Others will simply receive no funds and go out of business.
This is a tiny band-aid trying to cover a gaping wound. Analysts predict that when the financial crisis is over the bailout estimated amount could easily be over $1 trillion US dollars. Some are saying that times are as bad or could shortly be as bad as the Great Depression seen in the United States many years ago.
As a result of the financial and economic crisis that is ongoing, many banks have started to cut credit offered to both businesses and consumers. Many US businesses operate on credit and borrow money from banks and financial organizations to pay for existing business expenses and/or to help finance long term business projects. Some of these businesses are forced to scale back their operations because of the lack of access to credit to continue doing business.
Some of these businesses will end up cutting and eliminating health insurance benefits or shifting costs to employees, and/or raising deductibles and coinsurance. Some may lay off employees, which will in the end significantly increase the number of uninsured people in America.
$700 Billion Bailout
No one has even addressed the effect that the $700 billion bailout will have on the American economy and also future proposed projects. Once this money is spent, it will have wiped out monies that were meant for other projects including healthcare and education. This means that while the concept of universal or national healthcare was not realistic, it will now be impossible to accomplish anytime for years to come, because there will be no money left for it.
It also means there will be less money available to fund Medicare and Medicaid. The $700 billion bailout simply means the healthcare crisis in the US will continue to worsen and there will be no resources for it. This bailout could cause more damage by speeding up the timeframe of when Medicare may not be able to be funded anymore, or result in cuts in Medicaid benefits.
A Bad US Economy?
In reality when the US economy is doing well, historically health insurance flourishes and grows significantly. Simply put, when the economy is great, employers are not concerned with the costs of healthcare. When the economy is in a decline and employers feel the pinch, employers look for creative ways to cut costs and save money.
Some employers will accomplish cutting costs by raising deductibles and coinsurance, some by shifting more of the cost of healthcare to the employee and their family, and some taking the step of simply eliminating offering health insurance to employees.
Medical Tourism as a Solution
I am a firm believer that 2009 will be the year of Medical Tourism in the United States. With the severe economic crisis we are in and severe health insurance crisis, employers and consumers simply cannot afford to overlook the significant 50% to 90% savings that medical tourism has to offer. As employers start raising deductibles for health insurance, this simply makes medical tourism incentives much more attractive to patients.
Some people in the medical tourism industry have stated that because of the US economic crisis less medical tourists will be traveling overseas because of less monetary resources to do so. I think it is the exact opposite. More Americans will travel overseas because the cost of plastic surgery, major dental surgery, and major medical procedures are simply too costly in the United States and their only option will be to travel overseas.
If you are the average American worker making $35,000 a year, and you are struggling to pay for gas and pay the mortgage each month on your house and you want or need dental implants, gastric bypass, or a knee replacement you will either make the decision to hold off getting the procedure done until the economy turns around and you have more disposable money, or decide to hop onto a plane and get the procedure done overseas.
Employers and Medical Tourism
As employers start to feel the effects of the financial collapse of large financial institutions, they are going to be forced to look at ways to be more creative in controlling their health insurance costs. Most employers have been trying consumer driven benefit plan designs or value based benefit designs.
But consistently, I am hearing from employers, health insurance agents, and insurance companies that these plan designs are not working. Employers are seeing little to no Return on Investment (ROI) from these plan designs and their health insurance premium costs continue to skyrocket.
Medical Tourism is the ultimate consumer driven tool that can immediately provide a return on investment for an employer and it is not a theoretical ROI, but one they can see in immediate hard dollar savings when an employee or dependent goes overseas.
As employers understand the high quality of care available overseas, they will implement this new “consumer driven” benefit, because it allows the employee or dependent to make an educated decision on where to go for medical care, based on quality, price, and ease of access, not just in the US, but wherever they want in the world.
Although the economic crisis is extremely bad for the US economy and Americans, it could be the door opener that exposes Americans and employers to the benefit of medical tourism and how it can help ease the economic crisis by lowering the costs of healthcare to both employers and their employees.
Jonathan Edelheit is President of the Medical Tourism Association with a long history in the healthcare industry, providing third party administration services for fully insured, self-funded and min-medical plans to large employers groups.