Analyzing Patient Choices for Routine Procedures in U.S. Versus Overseas Before and after Affordable Care Act
Operations and Supply Chain Management
Date of this version
medical tourism, rational choice, affordable care act, offshoring
Low prices and good medical care have caused an increasing number of Americans to travel abroad for affordable health care (medical tourism). This study analyzes the viability of medical tourism as an alternative to United States (U.S.) hospitals for routine surgical procedures by considering the total charges paid by U.S. insurance companies and by patients (out of pocket) to hospitals. A mathematical model based on rational choice theory is developed to approximate the most-favorable decisions for both patients and payers, and this is illustrated through an example involving the decision to undergo coronary artery bypass graft (CABG) surgery in India or the U.S. Before the Affordable Care Act (ACA), medical tourism positively offset the total treatment charges associated with CABG procedures, some fully insured and underinsured patients would often opt for overseas treatment. After the enactment of the ACA, more fully insured patients and more people from a much smaller set of underinsured patients may opt for overseas CABG treatment. This paper finds that the ACA pushes individual decisions closer to the system optimal situation, and that if the U.S. health-care industry is unable to eliminate waste and inefficiency and thus curb rising costs, it will continue to lose surgical revenue to foreign health providers.