Domestic Medical Tourism is Taking Off

In my book, Priceless, I made a bold claim: Employers can cut their health costs in half if they will do three things:

  1. Establish a generous Health Savings Account and let employees pay directly for all primary care.
  2. Establish special HSAs for the chronically ill, giving them the opportunity to manage their own care.
  3. Direct elective surgery patients to low-cost, high-quality hospitals (which may require travel to another city); if the employee chooses to go to some other hospital, he must pay the full marginal cost of the more expensive choice.

The last suggestion is the most radical. Not only that, is it really practical? The international medical tourism market is not a secret. Patients fly from around the world to India, Thailand and Singapore for high-quality surgical procedures. Most of these patients are not Americans, however. Every once in a while we hear about a U.S. employer encouraging employees to travel for care. But these activities seem to be few and far between.

Until now. The state of Alaska is gearing up for medical tourism is a big way. According to the Anchorage Daily News:

The high cost of many medical procedures in Alaska is driving a major insurance company, Premera Blue Cross Blue Shield, to offer coverage that pays airfare, hotel and other expenses for members to undergo the same treatment in Washington state at less cost…

The travel benefit will be available for a set list of procedures, including knee and hip replacements, breast lumpectomies, laparoscopic gall bladder removal and cardiac angioplasty.

This is no small change. Premera has about half the insurance market in the state. There’s more:

Going up to Alaska
Where…a man can be free

The National Education Association Alaska health plan, with 17,000 members in 27 school districts, contracted with a company called BridgeHealth to find doctors and hospitals outside for such surgeries as knee and hip replacements and set up the trips for members who want the service, said Rhonda Kitter, the NEA health plan’s chief financial officer.

Because of anticipated savings from this program, NEA Alaska members did not have an increase in insurance premiums this year, Kitter said.

The state of Alaska, which already pays for some medical travel, is about to become more aggressive about it, perhaps paying the travel costs of a companion to travel with a patient undergoing surgery.

What’s spurring medical tourism in Alaska is the state’s above-average medical costs. Turns out that physicians in Alaska get paid significantly more than physicians in the lower 48. From a study by Milliman come these examples:

Knee replacement in Alaska, $7,265 average allowable doctor’s fee.
Knee replacement in North Dakota, $2,269. In Washington, $2,288.
Insertion of a stent or tube in your coronary artery in Alaska, $4,487.
Insertion of intra-coronary stent in Washington, $1,331. In Idaho, $1,391.

Domestic medical tourism is not new. It’s just been below the radar screen. Previously I wrote about Canadian patients coming to the United States for procedures they cannot conveniently get in Canada. They typically get package prices and for a knee replacement they pay about half of what Americans using private health insurance pay.

Another innovative service provided by MediBid lets providers bid to provide the care that patients need.

Patients must be able to pay cash. They fill out medical questionnaires; they can upload their medical records; and they can request the procedure they need. The patient’s identity is kept confidential until a transaction is consummated. MediBid-affiliated physicians and other medical providers respond by submitting competitive bids for the requested care.

Business at the site is growing. For example, last year the company facilitated:

  • More than 50 knee replacements, with an average of five bids per request and some getting as many as 22. The average price was about $12,000, almost one-third of what the insurance companies typically pay and about half of what Medicare pays.
  • Sixty-six colonoscopies with an average of three bids per request and some getting as many as six. The average price was between $500 and $800, half of what you would ordinarily expect to pay.
  • Forty-five knee and shoulder arthroscopic surgeries, with average prices between $4,000 and $5,000.
  • Thirty-three hernia repairs with an average price of $3,500.

MediBid facilitates the transaction, but the agreement is between doctor and patient, both of whom must come to an agreement on the price and service.

One key component of all this is the willingness to travel. If you ask a hospital in your neighborhood to give you a package price on a standard surgical procedure, you will probably be turned down. After the government suppression of normal market forces for the better part of a century, hospitals are rarely interested in competing on price for patients they are likely to get as customers anyway.

Just to be fair, here is the other side: In Anchorage, a spokeswoman for Providence Health and Services Alaska and Alaska Regional Hospital said the hospitals believe it is better for care to be received close to home.

“We caution those who might leave the state for surgery to consider issues like follow-up care, being far away from family and friends during the recovery period, and the fact that if there are complications from the procedure, their physician here at home may have concerns with treating the outcome of a procedure they were not involved in initially,” she said.

Comments (16)

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  1. Poloa says:

    Great blog….

  2. Devon Herrick says:

    Health policy wonks will probably shudder at the thought that mere consumers can reduce medical expenditures by 50% by doing what consumers do in every other market — shop and compare prices. Left-of-center policy wonks probably assume that price controls and monopsony buying (i.e. single-payer) is required to control costs to that degree. Yet, there are so many examples of where savings an easily be had for the taking. CT scans in Dallas vary in price from $400 to $8,000 — depending on where you get them and how you pay for them. Knee replacements vary from upwards of $100,000 in a few instances, to $12,000 when paying cash through a competitive bidding process like Medibid or North American Surgery.

  3. Larry says:

    We need consumers to aggressively push for price and quality transparency. Notwithstanding all the arguments about accuracy, etc. we need consumers to demand prospective price and quality information in health care. What isn’t accurate, or well done, will get fixed as it sees the light of day.

  4. Brian Williams. says:

    I imagine more medical tourism would increase competition, and hopefully decrease prices back at home.

  5. Jordan says:

    Just to play the devils advocate.. Doesn’t it make sense that physicians would get paid more for setting up shop in Alaska? It’s a beautiful place, but i’m sure there has to be financial compensation to attract physicians.

  6. Greg Scandlen says:

    Now, if we can get rid of CON and Sen. Grassley’s restrictions on physician-owned hospitals, we might see a real market develop.

  7. Kent Lyon says:

    This reminds me of the “good old days”. About a quarter of a century ago, the famed heart surgeon, Denton Cooley, faced bankruptcy when the Houston economy collapsed and he had $300 million dollars in Houston real estate. He pulled himself up by the bootstraps, however, to pay his debts. He began offering cut rate packages($10,000) for coronary artery bypass surgery when the going rate was $25,000. His package included hotel stay post operatively for recovery and surgical followup. Patients were flying in from around the world. Dr. Cooley had a large number of operating rooms, a lot of surgical fellows to assist, and he cranked out a large number of proceedures a day, and made enough money to pay off his debts. Medical tourism indeed. It’s a time honored tradition. I have a friend (a physician) who’s wife needed bilateral hip replacements. He researched the proceedure and wound up flying to Belgium for the surgery, where he could get ceramic hips that were preferable for his wife. His insurance covered part of the costs, but even with the travel and recovery time in Belgium, the cost to him was less than having the proceedure done locally. Plus, they got the surgeon that had done more of the proceedures than anyone else in the world.

  8. Vicki says:

    Nice idea. Good post.

  9. Buster says:

    It never ceases to amaze me how little (if anything) health plans do to steer enrollees to lower-cost providers. I once pondered this question at a conference, and a guy from Humana said it’s in deference to “patient preferences.” That’s not a good answer — my preference is to hold down my premiums and my cost-sharing, not the convenience of going to one facility rather than going a block farther to save $1,000.

    I also asked this question to a former regional president at a large health insurer and he said it’s because the self-insured employers doesn’t realize this is happening — and haven’t put a stop to it.

  10. Robert Kramer says:


    Remember Kramer’s rule of seven; do the right thing to the right patient in the right place, at the right time for the right reason, by the right person (doctor) at the right price. If you can get rid of the greed, the unnecessary procedures, the hospital charges to provide huge profits in a not for profit system, the insurance needs for profit, then you wouldn’t have to send patients from Alaska to Washington or from Illinois to India or from Texas to Thailand. The cost is not where, but by whom and for what reason are the metrics that drive up cost. The overuse of diagnostic procedures, the greed and intellectual dishonesty of physicians, and the demise of primary care are the culprits. Why go to Mumbai when you can go to Mayo?

    Dr Bob Kramer.

  11. DONALD MACKAY says:

    What are the operating costs in physicians’ offices in Anchorage compared to those in Washington state? If a patient has surgery in Washington and experiences a complication requiring additional surgery, will the insurance company pay for the costs to return the patient to Washington for additional care? What if the complication is life-threatening?

  12. Ender says:

    Maybe this will increase competition and, lower prices.

  13. Alex says:

    If we can also examine why costs are lower in some areas we can start to lower costs (hopefully) across the board.

  14. Robert says:

    Get a surgery AND a trip across the country? What a deal!

  15. Lucy Hender says:

    Those are some astonishing numbers regarding how much physicians get paid in Alaska compared to how much they get paid in the rest of the U.S. I wonder why the big difference? @Jordan: I think, and hope, the reason goes far beyong the beauty of Alaska’s landscapes…That would be a vague justification to such difference in prices.

  16. frank timmins says:

    Lucy Hender notes the astonishing difference in prices in Alaska vs. the lower 48. I think most people would be even more astonished at the differences in prices for certain medical procedures in a given urban zip code right here in River City. It is all about having the ability to “shop around” or having someone do it for you.

    Of course, there is a lot of capital (both political and economic) expended that does what it can to camouflage true medical costs, and make sure transparency and competition remain as mere lip service to those of us in the Great Unwashed.