By Cameron Milne, Engage Cuba Summer Intern
Medicare has been losing money for decades. The government's obligation to provide Americans with reliable healthcare services has justified the national budget hemorrhaging taxpayer money. A study in 2010 looked at the profits of the nation’s largest health insurance companies and determined that “for every $1 made by the nation’s ten largest insurers, Medicare lost nearly $4.” Medicare hasn’t changed much since, and according to an article in the WSJ, Medicare “will begin to spend more than they earn by the end of this decade [...] and will exhaust its reserves by 2028.”
Medicare, simply put, is not sustainable. The program covers nearly 60 million beneficiaries and often fails to protect those beneficiaries from gap coverages that can be financially deadly. Healthcare reform attempts have been tantamount to a quick fix with duct tape, and they have done little to address the rising costs of inpatient and outpatient care. The time has come for healthcare reformers to push for solutions that reverse the impending collapse of the program without sacrificing quality healthcare.
One solution has been to enable Medicare beneficiaries to seek health services through “medical tourism,” which would alleviate the financial burden of rising domestic costs and would afford Medicare the opportunity to sponsor cheaper inpatient care. Of the medical tourism hotspots around the globe, Cuba remains the only one with a flourishing biotech industry, high reported statistics in population health, and advantageous geographical positioning. Medical tourism to Cuba also offers the opportunity to improve America’s relationship with Cuba at a time when cooperation has stalled.
I. Healthcare in Crisis
Medicare has long been a pain point for the government and its beneficiaries, Americans aged 65 and above. Take your average knee replacement for example--an operation that 10% of Medicare beneficiaries (7.2 million Americans) receive annually. The typical hospital charges for this procedure are $49,500, with an additional $7,500 operation fee. If there are no preexisting conditions that would require extra care/additional precautions, customized surgical instruments, or additional complications in recuperating, Medicare will subsidize 100% of the inpatient care. However, knee replacements require pre- and post-operative costs for office visits or lab work, physical therapy, and follow-up visits with the surgeon that all fall under the outpatient umbrella. Medicare typically pays for 80% of these fees. What Medicare doesn’t cover are the in-home accommodations that are often necessary for proper rehabilitation: safety bars and rails, shower bench, a toilet seat riser with arms, or stair gliders. If all things go according to plan, which rarely happens, you’d still pay $5,000 to $10, in out-of-pocket payments. And this is for just one knee replacement.
Some Americans still opt for private health insurance over Medicare, which affords them more flexibility in which doctors to choose from, shorter wait times for treatment, and improved facilities. These luxuries are more expensive than public health insurance, which would put those willing to pay at the top of any list. But private insurance rarely covers all of the necessary services, which results in expensive out-of-pocket payments for the insured. One might say these are the realities of healthcare in a capitalistic market, but it’s becoming harder to justify the increasing costs when the same operations and service quality is free in other countries.
Still other Americans go uninsured and pay the penalty under the Affordable Care Act (ACA) that requires all Americans to purchase health insurance. About 6.7 million Americans (4.5%) paid the penalty in 2015, together responsible for about 29 million dependents. The penalty was implemented to pressure more Americans into purchasing health insurance, but many admitted to not knowing how to shop for plans or said they could not afford one.
The current financial state of healthcare in the U.S. has led to many individuals taking cost-cutting strategies into their own hands. Based on a study at the University of Kansas, more Americans are now using Uber to get to the hospital rather than calling an ambulance to avoid costly fees, which has been recommended by medical professionals for low risk patients as it’s more affordable and causes less congestion than ambulances. And some of those who are acutely aware of inpatient costs--which can range to $15,000/night--are moving to nearby hotels.
Politicians like Bernie Sanders and Alexandria Ocasio-Cortez who have made universal healthcare a centerpiece of their platforms have turned up the pressure on healthcare reformers to make tangible progress quickly. But there’s one simple market-based solution that could appease all parties: medical tourism.
II. Medical Tourism is a Promising Solution
Medical tourism emerged as a solution to costly domestic operations in the 1980s, when a small minority began to have inexpensive cosmetic or dental work done while on vacation abroad. The idea that this medical work could be done in tandem with a vacation evolved into a mass movement known as “medical tourism” that sought medical solutions that would otherwise be expensive at home. Private health insurance companies began to offer medical tourism packages to bypass financial barriers in the United States, as well as ethical constraints (stem cell research, etc.) It became the norm for certain types of orthopedic surgeries, leading a few medical professionals to assign a new term:
Today's "medical refugees," the term Smith uses in an article published in the Oct. 19  issue of The New England Journal of Medicine, are going to foreign countries for lifesaving procedures such as coronary bypass surgery and heart valve replacement, and also life-enhancing procedures such as hip and knee replacement. “People are desperate," Smith tells WebMD. "This illustrates the growing unaffordability of the U.S. healthcare system, even to people who are by no means indigent.”
Over the last decade, medical tourism’s reputation for cost cutting caught the attention of employers, who began seeking out medical tourism options to save on employer health plans. Furniture and auto parts manufacturer HSM enticed employees into accepting medical treatment abroad in hopes of saving on health insurance. The CEO told employees they could either receive their treatment in the U.S., where they could expect a copay, or they could travel to the country of their choice and receive a bonus of $2,500 on top of a free vacation. The employees who participated acknowledged saving $3,000 each on out-of-pocket payments, and the company saved $10 million over five years on 250 employee operations. Outsourcing operations where they are more affordable is an innovative business approach that can work to Medicare’s benefit.
Tens of thousands of Americans who are eligible for Medicare live abroad and have to travel back to the U.S. for medical care. The limitation of Medicare services abroad, according to Rand Health Journal, “may be viewed as a potential cost-saver for Medicare: Medicare is not required to reimburse costs incurred abroad” despite still collecting income tax on American citizens. But the healthcare savings generated by opening Medicare to medical tourism could offset the cost of offering benefits to eligible ex-pats.
Other incentives toward medical tourism are thwarted by the idea that other nations would be “stealing” our health business if the government foreign treatment for U.S. citizens. Opponents of medical tourism see enabling Medicare access in neighboring countries like Mexico as a slippery slope that would lead to aiding adversaries like China. This might be justified if the United States were exceeding the metrics of health quality and care of our rivals, but we fall flat against other OECD nations like Norway, Switzerland, and Canada, despite spending 50% more than the second highest-paying country in health care expenditures. It’s an indicator that the United States is paying far too much for our current healthcare and can no longer afford to overlook international plans to salvage an illusion of superiority.
The reality is that enabling eligible Medicare beneficiaries to receive treatment abroad saves American taxpayer dollars. Since expanding Medicare to other countries induces Medicare beneficiaries to substitute higher-cost U.S. healthcare services with lower-cost foreign providers, overall Medicare expenditures will be reduced. Richard Morais of the WSJ even suggests that this could even “help ease immigration pressure: long-term U.S. residents who were born in Mexico, and are interested in returning when they retire, would no longer be reluctant to do so for fear of losing their Medicare benefits.” With the pending retirement of 100 million Baby Boomers over the next three decades, and the anticipated growth of retirement abroad given the allure of less expensive cost of living, healthcare reformers should position these arguments in the frame of saving hundreds of millions in tax budgeting.
III. Why Cuba Makes a Good Candidate
The timing for international solutions under Medicare has arrived, and Cuba is the best point of entry: a pilot program for federally insured medical tourism and a political slam dunk. Despite common knowledge, Cuba’s healthcare system is not stuck in the 1950s. It has positioned itself among the world’s healthiest nations at a fraction of the cost, a result of socialist values that prioritize healthcare and free access to medical education. U.S.-Cuba relations have thawed under the Obama Administration, but since President Trump’s arrival, trade and travel restrictions were tightened. While the U.S.-Cuba relationship faces new challenges under the current administration, healthcare could open a new avenue for cooperation.
Many health professionals have hypothesized that Cuba’s culture of better health-seeking citizens, made possible by free counsel and treatment, is the underlying factor in their health quality achievement. Cubans are known for being more likely to see a doctor in the early stages of illness, be more honest with doctors, and take their prescribed medication. Cuba’s high number of doctors per capita affords them the ability to offer socialized medicine without excruciating the excruciating wait times of comparable government-subsidized health systems. Such features are illustrated by remarkable health statistics, including some that rival even OECD nations like Switzerland, Norway, and Denmark. Cuba reports similar life expectancy statistics as the U.S. (m/f; 77/81) as well as infant mortality rates (4.1 deaths/1000 people). Despite comparable outcomes, Cuba’s healthcare spending averages $813 per person annually, compared to $10,348 per person in the U.S.
Often overlooked is Cuba’s burgeoning biotech industry, whose growth can be compared to any venture-backed startup in Silicon Valley. For Americans, the concept of medical tourism in Cuba is unexpected, given that the United States was not even aware of Cuba’s biotech advances until 2011. The Roswell Park Cancer Institute in Buffalo, New York was the first to recognize the potential impact of joint research after a lecture given by a Cuban scientist. Roswell Park had begun collaborating with scientists from Havana’s Center for Molecular Immunology when the chief research scientist became aware of a Cuban drug for lung cancer known as CIMAvax. New York Governor Andrew Cuomo helped finalize a trade deal with Cuba in April 2015 after leading a delegation to the island. In 2016, the FDA granted permission to conduct early-stage clinical trial with CIMAvax, signaling a positive step for U.S.-Cuba normalization.
How Cuba developed a drug like CIMAvax under the constraints of the U.S. embargo puzzled many outsiders. Unlike the United States, Cuba operates on a closed-loop system, where drugs go through every stage of a process that would take years in the U.S.--research & development, preclinical development, regulatory agency approval, manufacturing, and commercial consumption. And because these drugs aren’t sold to anyone other than primary care physicians domestically, Cubans have access to cutting-edge pharmaceuticals that would cost Americans a small fortune. That direct line to primary care is the reason the “Valley of Death” doesn’t exist in Cuba, a U.S. byproduct of pharmaceutical conglomerates aiming their research at treating symptoms rather than curing diseases. Without the incentive to profit from treating chronic conditions, they are more pragmatic in their research, and health services are cheaper.
A country with an affordable supply of health services and qualified, innovative doctors is ready for Americans to begin investing in its biotech industry. Opening a new avenue for Medicare beneficiaries would be the cost-efficient decision for healthcare reformers and an opportunity for diplomatic progress to continue in a more fraught climate. The influx of U.S. “medical tourists” should also prompt a move to fully staff the U.S. Embassy in Havana in order to provide the additional support they may require.
While there have been no financial projections of the cost savings of medical tourism in Cuba, the price tags on high volume/high cost operations such as knee or hip replacement surgery are cheaper than in existing medical tourism hotspots for Americans: operations like hip surgeries in Cuba range from $3,930 to $5,100. Healthcare as it operates currently in the United States is not sustainable or affordable for most Americans, while international hospitals are increasingly eyeing the profitability of medical tourism from the U.S. Outsourcing common orthopedic surgeries to Cuba would save the U.S. government hundreds of millions in subsidies when compared to the price of the surgery in the United States ($49,500).
An expansion of medical services to neighboring countries would also provide those in need the chance to shortcut the FDA waitlist process, which takes 12-18 months on average to approve new drugs for commercial consumption. Few patients have the time or money to afford waiting.
A smart move for healthcare reformers would be to acknowledge the progress in Cuban biotechnology and open channels for joint research and medical tourism. The four private insurance companies based in the U.S. that currently offer medical coverage in Cuba have done little to promote the benefits of Cuba over the Philippines or India, which are more expensive and farther away. Our Cuban neighbors are a mere 90 miles off the coast of Florida, the state with the highest population of Medicare beneficiaries. Flights to Cuba are considerably cheaper than to Singapore or Mumbai. Acknowledgment from the U.S. government for Cuba’s advances in biotechnology and health quality would give way to medical tourism legislation that, one day, might enable Americans retired abroad to seek health services in their nation of residency.
As Barack Obama recently told an audience at the Nelson Mandela Annual Lecture in South Africa, “The only way to effectively address problems like climate change or mass migration or pandemic disease will be to develop systems for more international cooperation, not less.” As healthcare costs continue to skyrocket, we should begin to emphasize solutions that not only increase access, but strengthen international ties. They may be our best bet at giving Medicare a chance to survive.