Prabhudev Konana

Governments should have no role in promoting healthcare tourism since it negatively impacts the people they are supposed to represent. And the private sector needs self-regulation.

BUSINESS EDUCATION increasingly relies on case studies to develop managerial skills. Students often debate complex situations with different viewpoints, ethical dilemmas or social, environmental, and political ramifications. Here is a complex case for such a debate involving healthcare tourism. The entrepreneurs, medical community, and government agencies have to make choices that touch the national conscience. To what extent should Indian entrepreneurs and the medical community promote medical tourism? Should the government play any role in encouraging medical tourism?

The buzz in the Western news media is healthcare tourism and the role of India's medical establishment in providing affordable healthcare. According to the National Coalition on Health Care, there are 46.6 million uninsured Americans. The number of Americans travelling overseas for healthcare is increasing each year. Healthcare costs in the United States are skyrocketing. Insurance premiums and healthcare costs are growing at more than three times the overall inflation, averaging at least a nine per cent increase in each of the last five years. Even in socialistic medical systems such as in Europe and Canada, the wait for critical surgery is supposedly long and painful. The private healthcare system is so expensive that many have little option but to seek medical services from low-cost countries such as India. MedicalToursim.com calculates the cost for critical heart bypass in India is just 7.7 per cent of the cost in the U.S. The costs for other surgeries including hip replacement are less than 20 per cent of that in the U.S. Even after adding first class airfare and five star facilities, Westerners are better off seeking medical services in India (there may be some long term risks, which we will ignore for the time being).

The Indian medical tourism industry is in its infancy and the potential for growth is substantial. Obviously, capitalists are ready to exploit such opportunities and the massive cost differentials. And why not? Numerous state-of-the-art hospitals are popping up in major Indian cities to service foreign clientele.

But, here is the conundrum. In its latest report, World Health Organisation (WHO) identifies India along with other poorest nations in Africa and South Asia as having the greatest shortage of healthcare professionals. India has around 650,000 physicians with a density of 0.60 physicians per 1000 people. In comparison, the U.S. has 2.56 per 1000 and most Western nations have at least four times higher density of doctors than India. China has 1.05 physicians per 1000! More troubling is that India has a large numbers of patients with tuberculosis, malaria, AIDS/HIV, leprosy, and other contagious diseases. India lags far behind the Western world in average life expectancy and has much higher infant mortality rates. So, we can safely assume the demand for healthcare professionals in India far exceeds the supply.

India has low public healthcare spending. Based on WHO data, government spending as a percentage of total healthcare costs of most Western nations including the U.S. is higher than India's. In India, more than 75 per cent of the healthcare spending is in the private sector (for the U.S. it is 44.6 per cent). The percentage of out-of-pocket spending on private healthcare is a whopping 97 per cent. In the U.S., it is just 24.5 per cent and in most European countries it is even lower.

Thus, the massive gap between the demand and the supply and significantly higher private spending on healthcare raises numerous questions as medical tourism takes firmer roots. Private cost of healthcare services may rise since healthcare tourism amplifies the gap between the demand and the supply. The need for five-star hospital services and advanced medical devices will increase investment levels, which will force providers to seek higher revenue generating foreign clients. Since some of the major hospital groups are publicly traded, there will be greater pressure for increasing shareholder value. Since doctors' reputations attract patients, there will be a bidding war for well-known doctors. All this can be expected to increase the cost of healthcare services for the local population.

While various States and industry associations are aggressively promoting medical tourism, one needs to step back and ask ethical questions and consider social implications. Is it in the best interests of the nation? While the private sector has the right to pursue what is best for its shareholders and investors, what role should government play in promoting or encouraging medical tourism? How will medical tourism impact the large middle and upper income population that generally avoids government facilities?

There are stories of families spending their life savings to keep their loved ones alive. That is, healthcare is something that cannot be negotiated. That is why most Western nations have a socialistic system. In the U.S., there is a government-supported healthcare safety net for the poor and retirees. But, a socialistic payment system collides with a capitalistic provider system. Healthcare costs have become a national debate. As the percentage of senior citizens in the West continues to increase, there will be a greater demand for healthcare services that can impact the cost in India.

Some who believe in free markets and free trade including me to some extent will quickly argue that controlling medical tourism is regressive. But, consider the following hypothetical situation to evaluate the ethical dilemma. Let's assume a massively spreading disease creates global shortage of foodgrains such as wheat, rice, and lentils. Assume India too has severe shortage and prices increase rapidly. However, the global shortage makes it appealing for Indian traders to export to rich countries. Should India allow export of essential foodgrains for enormous profits? If you agree with the export ban, then you need to accept a ban on medical tourism given the abysmal healthcare access. If you think otherwise, how do you justify the skyrocketing costs that the common man has no way of paying? If you assume that this is the way things are, then you must also be prepared for social unrest, political upheaval, and violence! Thus, decisions under these complex situations cannot be purely for short-term economic gain. They have social and political ramifications. For that reason, the Indian government banned export of dal and lentil early this year to control rising prices.

Entrepreneurs and hospitals argue that a high-paying Western clientele can subsidise the cost of providing services for the local population. This is a sound argument if we ignore the severe shortage of medical professionals. Further, foreign clientele will expect more than the required resources since the long-term risks involved are higher. Thus, hospitals and doctors will spend disproportionately more resources for foreign (or wealthy) patients. It is hard to conceive how resources can be allocated for poor patients under severe deficit.

Healthcare is an essential service and, therefore, the government can interfere to impose constraints on healthcare tourism since it takes away capacity from the local population and imposes costs on the entire population. But, it then raises counter arguments. Where should the government impose constraints? Should the government prevent doctors and nurses from leaving the country? Since there is a severe shortage of teachers and professors, should the government prevent teachers from leaving the country? The same applies to engineers, scientists, and managers. Obviously, it is hard to draw a line.

Private investors and shareholders have the right to demand higher returns for their investments. Without this guarantee, capital markets will not function and entrepreneurs and businesses will have no incentive to take risks.

However, is it prudent for the government to support healthcare tourism? Should government allow unlimited medical tourism? Should the government impose taxes on medical tourism dollars?

Medicine is called a noble profession since it directly impacts people's lives. However, healthcare tourism is about providing access to those who can afford it. These actions can lead to severe negative outcomes. The entrepreneurs, the medical profession, and all the enablers such as industry associations and State governments need to tread carefully. This is a great case that tests the national conscience.

I feel strongly that governments should have no role in promoting healthcare tourism since it negatively impacts the people they are supposed to represent. Healthcare is an essential service and the government has the right to interfere in the event of scarcity. Democracy will force governments to avoid unaffordable costs or access. However, my views for the private sector are mixed. It is undesirable to impose constraints that may not be in the best interests of the shareholders. However, the medical community cannot turn a blind eye to the realities and the implications for overall costs. They need to balance their resources and openly commit access to the common man at subsidised rates. The private sector needs to self-govern with transparency and controls. If not, the government may reconsider non-profit status or impose taxes on revenues from medical tourism. Obviously, this is a case for socially responsible governance. The question we should pose to the entrepreneurs and the medical community is whether they will create transparency and standards for socially responsible medical tourism, or work only towards profits?