David Williams: This is David Williams, CEO of MedTripInfo.com. I spoke today with Milica Bookman, who along with daughter Karla Bookman, wrote “Medical Tourism in Developing Countries.” While most of the authors of books on medical tourism take the perspective of the American consumer, this book examined things from the perspective of developing countries. Utilizing Milica’s training as a development economist and Karla’s as a lawyer, they tackle the nitty gritty of economic theory and legal reality.
Milica, thanks for joining me today.
Milica Bookman: Thank you.
David: Milica, you’re quite bullish on the prospects for medical tourism to drive the economic growth in developing countries. Can you tell me more about why that is?
Milica: Well, I’m bullish only in some cases. I think that medical tourism is not a strategy for economic growth for all developing countries. There are very few places in Africa or the Middle East where, at this point, I would say that it is a strategy for development. A few more in South and Central America but mostly, it is true of some Asian countries.
Let me back up a little bit to try to explain why I think that. All developing countries want economic growth. And all developing countries have had to look outside of their borders in order to drive growth. Even China that has a large domestic demand and a large domestic market has turned to outside markets.
And so I think that medical tourism, for some of these countries in Asia especially, they can use it as a source of growth. I think they will and I think they should. And as I say in the book, in Chapter five for example of the book, certain conditions have to be met. And as most of those conditions were not met, it’s not going to happen.
David: So, for the countries for whom the proper conditions are in place, what is the potential impact that medical tourism can have on them. Is it something significant? And in what sort of areas do you see an impact?
Milica: It can be huge. It can be huge because it can be one of the major sources of foreign currency, infusion of foreign currency into the country. And what that means is that, you know, there will be jobs, there will be investments, there will be a ripple-through effect in the economy.
There’s something called the multiplier which works itself through the economy which means that, you know, every dollar that comes in to the country can have several dollars’ worth of effect throughout the country as people have jobs and then they spend their income that they earned and then there’s more demand for other secondary goods and tertiary goods.
So, those countries such as Malaysia, India, Thailand, they really do expect and we do expect that there will be huge economic benefit.
David: One of the things that all those countries have in common is a lot of US trained physicians who in the past may have stayed in the US. Do you see any kind of reversal of a brain drain going on so that some of those physicians are coming back to their countries to work in the medical tourism sector?
Milica: Yes. There definitely is evidence of the reverse brain drain. But at this point, it isn’t huge. It’s not huge at all. I provide some numbers in the book. I actually don’t think that there’s going to be, in the short run, such a decrease in foreign doctors coming to the West, to the US, Britain and other Western countries for training.
And part of the reason why I don’t think there will be that decrease is that in order for medical tourism to be successful in developing countries, there will have to be a large number of Western trained doctors. So, in order to get accreditation, in order for Western patients to feel comfortable going to many of these countries, they’re going to want to see Western credentials.
David: When you evaluate the impact of medical tourism within a country, you use the terms “crowding in” and “crowding out”. Can you describe what those are and which one is likely to predominate?
Milica: OK. Just let me specify. I use those terms to talk about the impact of medical tourism on public health, not on developing countries in general. So, the impact on public health then can be both positive and negative and let’s, for a moment, see what those are. The crowding out effect would be the negative effect of medical tourism on public health.
In other words, the effect of decreasing resources for the poor population, decreasing the facilities that are available for the poor population because hospitals and doctors and everybody involved in the medical field is going to want to go into the more lucrative medicine namely medicine for foreigners, for cash-paying foreigners. The government might also experience distortion of its priorities because here’s this possibility of bringing in a lot of foreign currency which they would want to do and maybe they will favor the private medicine that caters to foreigners over the public health.
So in that way, we could say that medical tourism, which is flashy and lucrative will crowd out public health which is, you know, not very interesting. So, what you can have with the crowding out effect is the emergence of a dual medical structure. And let me just give you one example that we talked about in the book. In Malaysia, private hospitals have about 20% of the overall bed capacity in the country but they hire 54% of the doctors. And this is an example of how medical staff prefers to work in the private sector that caters to the foreigners rather than the public sector. So, that’s the negative crowding out effect.
The crowding in effect of medical tourism would refer to the way in which the existence of medical tourism actually helps public health in a country because it might improve and expand access to high tech facilities that poor or non-paying poor would otherwise not have. It might give them access to doctors and physicians and technology that they otherwise might not have. And of course, the most important thing about the crowding in effect is that medical tourism brings in profit and taxable income. And governments can tax that income and then redistribute it into the public health system.
And which of these will predominate? David, that’s hard to say. I think that depends on government policy.
David: Early on in the book you talk about dependency theory and how that applies to the case of medical tourism. Could you describe that a little bit? And also about the case of reverse dependency and whether that’s something that Western countries should be worried about.
Milica: Dependency theory is an economic development theory that came out in the 1960s, 1970s. And if we first took the fact that less developed countries had been producing goods and exporting goods that the global economy doesn’t really, doesn’t keep on demanding; whereas the Western countries produce an export good that the global economy does keep demanding. Let me give you an example. Less developed countries in the ’50s, ’60s and early ’70s used to export a lot of raw material; food products, peanuts. I use the example of peanuts in our book.
David: Plastic surgery is not peanuts.
Milica: Right. Because what happens as global income, as the world gets richer and global income grows, people have more money all over the world; and they are going to buy more goods and services. But they are not going to buy that many more peanuts or food products. There is only so much food that you can eat as your income goes up. But what they will buy more of is automobiles, then VCRs and sort of technological goods; which are the goods the third world countries did not produce. So in that way dependency theory says that less developed countries will be dependent on the West for the manufactured technological goods and the West did not really depend on them for peanuts.
Now what we have is the possibility that the developing countries will be producing something that the West actually, really wants. And the West would want more of, as it gets wealthier and wealthier. And hence, you know, it is a product or a service that the West will depend on. Less developed countries will no longer have that kind of dependency on the West.
Now we may have reverse dependency. We may have a situation in which the more developed countries are starting to have dependency on less developed countries, for health care in the way they have it on petroleum for their economy.
David: What you saying is that even without medical tourism that may be happening to some extent with reliance on medical graduates, for example to fill positions in the US.
Milica: Sure. People have said that. People have definitely said that.
David: I have noticed that a lot of medical tourists or people who are traveling from the West to less developed countries to have care, have some kind of connection to that country already. Maybe they grew up there. Maybe they have family member from there, maybe their spouse is from there. Is that in fact the case and do you think that’s going to continue to be the predominant model?
Milica: That is the case. And I do not think that will continue to be the predominant model. And I will tell you why. Medical tourism took off in the last ten years, specifically because it was viewed by diasporas in the US and in England. In other words Indians who lived in England and South Americans who lived in the US; when they went home to visit their families they would do their medical care. Whether elective or not they would do their dental care; they would take care of their medical needs in their countries while on vacation.
That’s how it started. Then they would come back and they would tell their friends and neighbors, ‘listen I got such and such procedure at one tenth of the price that it costs here.’ And slowly other people are starting to go. But we are still in the stage where people tend to go where they have some kind of familiarity with the culture; whether it’s their direct involvement or because they traveled there or worked there or something. This is what I consider stage one of medical tourism. Which is the one that were in now. Which is one that has been extremely lucrative for many countries.
But it’s not the one that is really going to change the global health picture. The global health picture will change when people other than the diasporas travel to developing countries. In other words, it’s going to happen when employers and insurance providers get involved. Because then when you have that middle person, then it’s not just you, Mr. Smith, that is going on the Internet and finding a hospital all the way across the world, but rather if your insurance company is sending you there then it’s no longer going to be diasporas only.
David: I have noticed that you embrace the combination of medicine and tourism, and I wonder whether that has any impact on the adoption that you see from health plans. It may feel like it’s not a serious thing if they are offering tours as part of their benefit. Do you think medicine and tourism go together? And do you think that affects the uptake among the more traditional sector of health plan employers?
Milica: I think you raise a very important point. We are now in a situation where a lot of people are feeling we should change this term “medical tourism.” But nobody has come up with an alternative that everybody feels comfortable with. And at this point medical tourism has become a very popular term. I think you are right. I think that the tourism part of it makes it seem less serious.
But remember that it did start off as tourism. It did start off with people traveling, and the medical part was an add-on. And what’s happening now is that the medical part is becoming the primary reason for traveling.
And as Karla and I discussed in the book, a lot of medical facilities are offering these tie-ins. But increasingly, David, I think we want to see fewer and fewer medical touristic tie-ins and more and more people just going for their medical care. And the reason for that is that we are no longer talking about an industry that just does face lifts, or plastic surgery or even LASIK surgery and then you can go on a safari after that.
We’re talking about an industry that has been transformed and that is increasingly going to be supplying very high tech invasive surgery that people are not going to feel like going shopping or going to lie on a beach afterwards.
David: One of the things that seem likely to happen if medical tourism becomes very popular is that the big differences in prices across borders won’t hold up. You give an example of that with Serbian physicians in Italy that are charging people from Serbia and living in Italy rates that are comparable to what they pay in Belgrade because they worry about losing those patients who may get worked on when they go home. Is that a unique case or are we seeing other examples of that? Are there any other examples, for example, in the United States of competition on prices with foreign providers?
Milica: I don’t know of any specific cases. However I would assume that it is already happening and, yes, it will happen even more. Pricing is a very creative process that responds to supply and demand conditions. Since supply and demand conditions are dynamic so will the pricing process be.
So we are likely to see a lot more competition in pricing, in areas such as Southern California where there are more substitutes for people. You’re not going to see it someplace where people don’t have any alternatives, but if they do have an alternative to easily get on a plane or easily get in a car and cross the border, yes, suppliers will be more flexible in their prices.
Moreover, I think that we will also see creativity in the packages that are offered, not just the price, but something that I think is very amusing and we’ve already seen in Thailand, is that hospitals are offering frequent-flyer miles along with their procedures. So this is a kind of price competition, they’re not going to decrease price but they’re offering you something else instead.
David: You pointed out an interesting situation that is faced by by American retirees who are overseas, which is that they can receive their Social Security benefits — and perhaps they’re living in a low-cost place where that Social Security check goes farther than it would at home — and yet Medicare, which they would also qualify for, won’t pay for their health care out of the country. Is that a distinction that is likely to end or to be eroded, and what sort of impact do you think that might have if it does
Milica: I suspect, in the long run, that it will have to change, but I do not think that the US government is going to be at the forefront of accepting medical tourism. I think that it’s going to be private insurers that are going to be at the forefront – they are more flexible, they are more concerned with the bottom line… You see, what the government would have to do, in order to pay for medical services outside of the country, is almost have to admit that the government is incapable of providing health care for its own population. That’s hard to do and I don’t see that coming very soon. I think it’s going to come from the private sector before it comes from the government.
David: Today it’s a relatively limited number of Americans, or Westerners in general, that are traveling to these less-developed countries and receiving high-quality and low-cost medical care. If there were to be a significant part of the demand from the US that is actually fulfilled abroad, is there actually the capacity, either now or in the foreseeable future, to handle a significant amount of the demand that would be ensuing? What kind of impact would that have on the pricing levels and how service is delivered?
Milica: OK. There’s a lot in that question, so let’s start off with the first part of it, and that is that I do think that there would be certain bottlenecks that would have to be resolved. Let me tell you one of the things that comes to mind first, that is that health care in developing countries is regulated. It is regulated by the international community, and hospitals and medical-service providers that want to be centers where foreigners come, they have to uphold certain international standards, and they will want to be accredited.
In order for the international community to accredit them and to make sure that they pass these standards, there are a lot of steps to go through. It takes a long time. We’re talking about probably over a year to several years for the accreditation process to be completed. Under those conditions, it takes time, so I see that as one of the major bottlenecks that will occur.
The second bottleneck will be in capacity in developing countries – health capacity in terms of beds, in terms of hospital facilities, in terms of doctors, etc. If there were a really large sudden increase in demand, I don’t know that many countries outside of Singapore, India and Thailand, at this moment, could satisfy the demand.
Finally there’s going to be a bottleneck insofar as the infrastructure in many developing countries is probably lagging behind. By infrastructure I mean, for example, transportation. How are all these large number of people going to get to their destination? So I think that if the increase in demand is slow then adjustments will happen gradually, but if there is a very large increase in demand, such as if suddenly several major US health insurers decide to start experimenting with medical tourism, then we might see that there are some bottlenecks.
David: You mentioned at the start that medical tourism is a good economic-growth strategy for certain countries, as long as they meet the proper conditions, and quite a few of those countries are in Asia, maybe there are some in the Americas… I was in Singapore and very impressed with what they were doing there in terms of a strategy from the whole country standpoint, and you see other organized Asian countries – India to some extent, Thailand, even the Philippines, Malaysia…
When you look at the Americas at least I don’t see the same kind of organization, and this isn’t specifically in health care. But do you see real opportunities in Latin America, which is obviously much closer, in general, to the US market geographically? Will those countries eventually catch up and be able to surpass the Asian countries because the Asian countries, no matter what they do, aren’t going to become closer to the US?
Milica: Well, I don’t know if they will catch up and surpass, because as Central and South America develops its medical-tourism capacity, the Asian countries aren’t going to be sitting still – they’re also going to be developing. So, you know, everybody may be developing and I don’t know that the gap will close between the two.
I do think that there is a problem in the Americas right now, and that is that Central and South America simply does not have the capacity, in terms of beds and in terms of clinics, facilities and people, the capacity that Asia has. Moreover, they don’t have the same standards. Let me just give you an example: if we look at the number of hospitals that are JCI accredited, Singapore has 13 JCI-accredited hospitals, Costa Rica has none, Mexico has none…
So, for the American patient who is thinking about where they are going to go, sure, Mexico is closer, but there is this whole quality concern that they are going to think about. Moreover, just to give you another example about this, when you think about the Singaporean hospitals, those 13 JCI-accredited hospitals, they all have websites where everything is in English. That makes people very comfortable. Brazil has some JCI-accredited hospitals, but only one has a website in English.
Milica: So, even though Brazil is closer, it seems as though it’s culturally less accessible.
David: I’ve been speaking today with Milica Bookman, who is author of “Medical Tourism in Developing Countries”. Milica, thank you very much for your time.
Milica: Thank you, David.