March 26 (Bloomberg) -- Antonia Siguenza, a 47-year-old purchasing agent living in Los Angeles, visited Mexico in 2006 with only one destination on her itinerary: Sanatorio San Francisco Hospital in Tijuana.
Siguenza made the trip after learning she needed surgery on a cyst. Having it treated in the U.S. would cost $800 out of her pocket under her insurance plan with Health Net Inc., in Woodland Hills, California. The company told her it would pay the entire bill if she had the procedure in Mexico.
Yielding to pressure from employers, health insurers such as Health Net, Aetna Inc. and Blue Cross Blue Shield of South Carolina are offering cost savings to policy holders who take their ailing backs, hips and knees to foreign countries for non- emergency medical treatment. Mexico has emerged as a favored place for American medical tourists because of its proximity and U.S. insurer incentives.
``People are voting with their feet, essentially,'' said Peter Maddox, 60, senior vice president of business strategy at Christus Health, a nonprofit health chain based in Irving, Texas, that owns six hospitals in Mexico. ``Employers are under huge competitive pressure globally. They are driving insurance companies to find alternative sources of care.''
About 180,000 Americans leave the country for medical treatment each year, said Josef Woodman, author of ``Patients Beyond Borders'' (Healthy Travel Media, 336 pages, $22.95). They spent about $2 billion on foreign health providers last year, Woodman said. He projected the total will climb 15 to 20 percent annually.
$2.2 Trillion
Driving the increase is a U.S. health-care system in which 47 million Americans don't have insurance. Total medical spending will outpace U.S. economic growth by about 2 percentage points a year, consuming $1 of every $5 spent by 2017, according to a study by economists for the government's Medicare program published in the journal Health Affairs.
Health-care costs made up 16 percent of the U.S. economy last year, totaling $2.2 trillion. That figure may double in a decade, according to the report.
To help curb the cost increases, employers and insurance companies are sending sick Americans to Mexico, Singapore and other emerging market countries where costs are lower.
Most of the insurer plans steering people to Mexico are offered in California and are designed for employers of Mexican immigrants, who dominate the ranks of those using the option. About 40,000 Americans traveled to Mexico for medical treatment last year, Woodman estimates.
Economic Forces
Medical tourism eventually may involve 4 million to 8 million Americans annually, or 10 to 20 percent of U.S. hospital admissions, said Paul Mango, a director in the Pittsburgh office of New York-based McKinsey & Co., who leads the firm's global health-care practice.
Lower salaries and cheaper supplies reduce health-care prices by 40 to 80 percent in Asia and Latin America, said David Boucher, an assistant vice president for health-care services at Blue Cross Blue Shield of South Carolina, in Columbia, South Carolina.
A hip replacement in Mexico or Thailand costs $12,000 compared with $43,000 to $63,000 in the U.S., according to a study by Christus Health published last year. Angioplasty, in which a surgeon uses a tiny balloon to open a blocked coronary artery, costs $10,000 in Mexico, compared with $57,000 to $82,000 at an American hospital.
Siguenza, who became a U.S. citizen after migrating to California in 1980 from Michoacan in southern Mexico, says she prefers returning to her native country for medical care because she saves money and receives better service than in the U.S.
Treatment in Tijuana
She initially had her cyst treated at a Los Angeles hospital. Her portion of the bill was $800, she said. When the incision failed to heal after several months and her U.S. doctor advised her to give it more time, she drove two and a half hours to get another opinion in Tijuana and elected to have a second procedure there.
Her cyst cleared up a few weeks after the surgery, she said.
``This has worked out well for me,'' Siguenza said. ``The attention Mexican doctors give me is better than it is here.''
Under her Health Net coverage, Siguenza pays a minimum of $20 to see an American doctor and nothing to go to one in Mexico. Admission at her local medical center costs at least $250, while staying at a Mexican hospital entails no out-of- pocket expense.
Siguenza's employer purchased Health Net's coverage for its 140 workers because of the Mexican care option, says Alba Pinedo, who with her husband owns Cisco Brothers, a furniture maker in Los Angeles.
Mexican Option
About 20,000 customers have the Mexican coverage, said Ana Andrade, vice president of Latino programs at the insurer. They save about 40 percent on premiums, she said.
Rudy Palacio, 53, a warehouse worker for Lakeside Poultry Ranch near San Diego, used his employer's Health Net policy to get knee surgery in a Tijuana hospital in April 2006. The operation and overnight stay at Hospital Guadalajara, a 45- minute drive from his home in the U.S., cost him $10 out of pocket. His medicines totaled $5. His right knee hasn't bothered him since.
``I could barely walk, and now I walk fine,'' said Palacios, who came to the U.S. in 1972 from the western Mexican state of Jalisco and became a citizen six years later.
Deborah Brzezinski, 58, who owns Lakeside with her husband, had knee surgery about a month before Palacio and chose a U.S. hospital. Her procedure, which had her in and out on the same day, cost her $250 out of pocket and about $50 for medicines, said Charles Brzezinski, her husband.
Grocery Chain in Maine
While the Health Net policies cater mostly to Hispanics who live within driving distance of the Mexico border, similar provisions may become common in five to 10 years as U.S. medical costs increase and foreign hospitals raise quality, said Arnold Milstein, chief physician of Mercer Human Resource Consulting, in San Francisco.
``There are a number of employers that feel globalization can have a similar competitive effect on health care in the U.S.,'' said Charles Cutler, Aetna's chief medical director for national accounts.
Hannaford Brothers Co., a Portland, Maine-based grocery chain owned by Belgium's Delhaize Group, added an option Jan. 1 for the 9,000 employees it covers under an Aetna plan to have hip and knee replacements in Singapore. The option calls for paying business-class travel expenses for the patient and a companion to Singapore General Hospital and waiving as much as $3,000 of out-of-pocket expenses, said Peter Hayes, director of associate health and wellness for the grocer.
U.S. hospitals and doctors should take Hannaford's move as a wake-up call, Hayes said.
Push for Medical Tourism
``We're really trying to say that in a global market going forward, they really need to think how they can deliver services that are competitive,'' Hayes said. ``We're spending far more and getting far less. That's a paradigm that has to change.''
Employers are pushing health insurers to implement medical- tourism options, said Milstein, who testified before the U.S. Senate on the issue earlier last year. Insurance companies such as Hartford, Connecticut-based Aetna and Philadelphia-based Cigna Corp. are studying overseas options at the behest of employers.
``You can expect that the innovators are going to be in industries that are under survival pressure due to foreign competition,'' Milstein said.
Boucher, 49, of Blue Cross Blue Shield of South Carolina, has visited hospitals in Thailand, India, Turkey, Singapore and Mexico that promise high-quality health care at lower costs. His company signed an agreement with Bangkok-based Bumrungrad Hospital PCL as an option for members' out-of-network surgeries. It's the first step toward adding medical tourism as an option in his company's health plans, said Boucher, a former chief executive of two South Carolina hospitals.
Quality Concerns
Critics warn that medical tourism raises safety concerns as foreign hospitals lure patients based on lower costs. Overseas treatment also makes follow-up care difficult, said William Plested III, a past president of the American Medical Association, the largest U.S. physicians group.
``Price should not be the only concern,'' Plested said. ``Safeguarding your health is of utmost importance, and the decision of where and from whom to receive this care should not be arrived at lightly.''
Complicating the issue is the lack of data to support either advocates or critics of traveling abroad for medical treatment.
``It's very, very hard to put your finger on the number of problems that have arisen when Americans have sought medical care overseas,'' said Joel Miller, senior vice president at the National Coalition on Health Care, based in Washington.
Accredited Hospitals
Insurers are concerned about the quality of foreign hospitals and doctors, the safety of the blood supply and legal recourse in case of malpractice, said Jacquelyn Aube, vice president of product management at Cigna.
The Joint Commission, a nonprofit organization based in Oakbrook Terrace, Illinois, sets quality standards for U.S. and foreign hospitals and certifies those that meet its criteria. The group has accredited 15 hospitals in Turkey, 15 in Saudi Arabia, 11 in Singapore, 9 in Brazil and 2 in Mexico: Hospital San Jose and Christus Muguerza Alta Especialidad, both in Monterrey.
Aos Assurance Co., a Barbados-based start-up company, is offering malpractice policies for American medical tourists, working with Atlanta-based Crawford & Co. as a claims adjuster. The insurance pays settlements for malpractice without involving foreign courts or lawyers, said Paul Laverty, a former insurance consultant who co-founded the start-up company.
Malpractice Coverage
An American traveling abroad for medical care, for example, could purchase a $500 policy from Aos that would pay up to $100,000 in case of malpractice on a surgical procedure or spend $2,430 for coverage up to $1 million. Group programs could run from less than a dollar to $5 a month per employee, Laverty said.
For Mexico to take full advantage of its geography and gain in the medical tourism industry, the country must have as many accredited hospitals as countries like Brazil and Singapore, keep costs low even as quality rises and design a mechanism for handling malpractice cases, said Russell Bennett, vice president of Latino health solutions for Minnetonka, Minnesota-based UnitedHealth Group Inc. Those factors are beginning to converge, he said.
``I think that we're not more than three to five years away,'' Bennett said. ``Depending on how it plays out, it could move quickly.''
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