International Health Care Systems Supply of Medical Services

Medical Tourism: Good or Bad?

According to the Telegraph (‘Record numbers go abroad for health‘), “More than 70,000 Britons will have treatment abroad this year – a figure that is forecast to rise to almost 200,000 by the end of the decade.”  Many of these individuals are seeking treatment in countries such as India, Hungary, Turkey, Germany, Malaysia, Poland and Spain.  Why are these individuals going abroad?  Long wait lists and shortages of qualified clinicians (such as dentists – see May 9, 2006 post).

Ezra Klein notes that 100,000 Americans travel abroad for plastic surgery.  Why do they do it?  Here, wait lists and physicians availability are not the major motivators (living in Southern California, I can tell you that there is no shortage of plastic surgeons).   In the U.S., monetary cost is the major consideration for most patients who become medical tourists.

Thus, in both countries, people are trying to find better deals abroad.  Health care is expensive in the UK; not in monetary terms, but due to a high time cost from long waiting lists. Health care is expensive in the U.S.; not due to time costs from waiting lists, but from high monetary cost.

Megan McArdle of Asymetrical Information notes that Baumol’s Cost Disease is one explanation as to why health care is so much cheaper outside the OECD.

Health care systems suffer from Baumol’s cost disease: it’s a labor-intensive service that doesn’t offer huge scope for gains in labor productivity. The number of hours it takes to manufacture a car is consistently falling, but the number of hours it takes to perform doctor’s visits is roughly the same as it has always been. As a society gets richer, in order to attract workers, the labor intensive service has to pay competitive wages with the sectors where productivity is rising rapidly; that means that costs for labor-intensive services rise faster than the general price level.

Bangkok’s doctors are so cheap because a doctor making a modest wage by British standards can have an enormous house and a flock of servants to take care of him, putting him in the very top echelon of Thai earners. Nurses too, can make an American pittance and still live very well. As Bangkok gets richer, the servants and the gigantic house will not be so affordable–and neither will the health care.


  1. The definition of labor productivity in healthcare has to be different from any other industry. Maybe outcomes-based or patient satisfaction-based? Defining it this way, the reduction of hours wouldn’t necessarily be the goal. In fact, we would hope that more time is spent administering patient care.

    If viewed literally, we could possibly avoid Baumol’s Cost Disease through expansion of low-cost services, as in the case of convenience clinics or reducing licensing restrictions for nurses. This would not only allow physician labor to be more intensive, but also allow for it to be more time-intensive for those who demand it the most (the very sick or elderly).

    Controlling for quality, I believe medical care can be outsourced abroad like any other good. My personal experience with care in India has generally been positive. Even considering the shoddy facilities in some of the countries mentioned, you have to realize that Britons and Americans won’t ever come close to them. They will be taken care of at the Mayos and Cleveland Clinics of these respective countries at a much cheaper price. Then again, are we accounting for the time cost of flying and the price of the ticket!?

  2. Cortez frames the questions I will attempt to answer. He questions where free market or government regulation will fail or be futile, and I think we’ve already got an answer. Free market has spawned medical tourism out of price, quality and product because of demand. Government has already failed and should have failed because it never produces anything (except frustration). We can well hope they will stay out of it. Government only needs to regulate the legal and ethical questions, like illegal organ transplants.

    In the information age we should already have applauded how the free market is doing it’s job. As an owner director of a medical tourism company in India, America’s Medical Solutions, we must be very keen to judge what is good and what is bad because the word will be on the street faster than anything. And that means policing our own industry, and I think medical tourism companies are for that reason all the industry needs.

    Don Wood, Dir. Americas’s Medical Solutions,

  3. Medical tourism is becoming the magic mantra of sorts, primarily because a lot of Americans and Brits find it not only inexpensive to get their elective treatments done abroad, but also exciting since they get to take a vacation while they are at it. The growing trend of attracting international patients around the world has virtually evened the playing field. Patients around the world have more choices when it comes to choosing surgeons and physicians to treat them and their conditions. In the medical field, borders are dissolving.

    Today, people travel to distant locales like Singapore, Thailand and India for cosmetic, heart and orthopedic surgeries. They choose Brazil, Argentina, Mexico or South Africa for dental or cosmetic treatments. Many countries in the Far East are also beginning to tap the potential of this business proposition and are jumping onto the medical tourism bandwagon.

    To cut a long story short, medical tourism is the in thing today. And it’s a win-win situation for the patients as well as for two industries in the host countries, namely, the health industry and the tourism industry

Comments are closed.