[Senate Hearing 109-659]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 109-659

                   THE GLOBALIZATION OF HEALTH CARE:
             CAN MEDICAL TOURISM REDUCE HEALTH CARE COSTS?

=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             JUNE 27, 2006

                               __________

                           Serial No. 109-26

         Printed for the use of the Special Committee on Aging





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                           WASHINGTON : 2006 
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                       SPECIAL COMMITTEE ON AGING

                     GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
SUSAN COLLINS, Maine                 JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri            RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida                EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho                THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania          BILL NELSON, Florida
CONRAD BURNS, Montana                HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee           KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
                    Catherine Finley, Staff Director
               Julie Cohen, Ranking Member Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Gordon Smith........................     1

                                Panel I

Howard Staab and Maggi Ann Grace, patient and patient advocate, 
  Carrboro, NC...................................................     2
Arnold Milstein, MD, Mercer Health and Benefits, San Francisco, 
  CA.............................................................    18
Bonnie Blackley, corporate benefits director, Blue Ridge Paper 
  Products, Canton, NC...........................................    26
Rajesh Rao, CEO, IndUShealth, Raleigh, NC........................    34
Bruce Cunningham, MD, president, American Society of Plastic 
  Surgeons, Minneapolis, MN......................................    44

                                APPENDIX

Prepared Statement of Senator Herb Kohl..........................    55
Prepared Statement of Senator Ken Salazar........................    55
Statement submitted by the Joint Commission on Accreditation of 
  Healthcare Organizations.......................................    57
Comments from Rudy Rupak, founder and head concierge, 
  PlanetHospital.................................................    63

                                 (iii)



 
  THE GLOBALIZATION OF HEALTH CARE: CAN MEDICAL TOURISM REDUCE HEALTH 
                              CARE COSTS?

                              ----------                             



                         TUESDAY, JUNE 27, 2006

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 215, Dirksen Senate Office Building, Hon. Gordon H. Smith 
(chairman of the committee) presiding.
    Present: Senator Smith.

     OPENING STATEMENT OF SENATOR GORDON H. SMITH, CHAIRMAN

    The Chairman. Good morning. We welcome you all, as we 
convene this U.S. Senate Special Committee on Aging. Our topic 
today is the Globalization of Health Care: Can Medical Tourism 
Reduce Health Care Costs?
    We are glad you are all here. We are missing a few of my 
colleagues for one reason or another, probably also the 
difficulty of traffic in getting here today. Most of the routes 
into this place have trees laying over them right now.
    Medical tourism refers to the practice of patients seeking 
lower-cost health-care procedures abroad, often packaged with 
travel and sightseeing excursions. Today we will hear about 
medical tourism from witnesses whose perspectives range from a 
patient who had heart surgery in India to a self-insured 
company that is considering adding overseas hospitals as an 
option in its employee health plan.
    Time magazine reports that 55,000 Americans traveled last 
year to Bumrungrad Hospital in Thailand for a variety of 
elective procedures. Many patients report they would return 
again for care in the future.
    Patients are not alone in exploring foreign health-care 
options. The West Virginia legislature presently is considering 
options for encouraging State employees to travel abroad for 
less-expensive medical care. Three Fortune 500 companies are 
investigating the best places to outsource elective surgeries.
    With the globalization of health care evolving at a rapid 
pace, it is important that we pause to consider why this is 
happening.
    The ease of international travel and the growth in quality 
health-care facilities in developing countries certainly plays 
a part. But I believe frustration with rising health-care costs 
in the U.S. is also a contributing factor. American medicine is 
less and less competitive.
    Americans should not have to travel overseas to obtain 
affordable health care. Yet health-care costs in the U.S. 
continue to grow at a rate higher than overall inflation. For 
the Nation's 46 million uninsured, traveling overseas for low-
cost medical procedures, even with the added costs of travel 
and lodging, is now an understandably attractive option.
    You can see on the chart behind me the cost of many 
surgical procedures in foreign hospitals is significantly less 
than in the United States.
    While medical tourism may be attractive to patients who are 
unable to obtain health care at home, there remain many 
unanswered questions: Does lower cost equal lower quality? 
Could lower-priced medical care provided in developing 
countries drive down health-care costs in the U.S.? What will 
be the long-term impact of medical tourism on the U.S. health-
care system?
    To explore these and other related issues related to 
medical tourism, I am asking several Federal agencies, 
including the Departments of Health and Human Services, 
Commerce and State, to convene an interagency task force.
    As globalized health care becomes an increasing reality, we 
must carefully consider the implications for U.S. health care, 
trade and tourism and economic policies. The interagency task 
force will enable U.S. policymakers to reach informed decisions 
in response to this new trend.
    I am very pleased that our first panel of witnesses is 
Maggi Grace and Howard Staab. He traveled to India in 2004 for 
Howard's mitral valve replacement surgery. They will discuss 
their experiences in trying to negotiate costs with U.S. 
hospitals and also tell us of the care that he received in 
India.
    So, Howard and Maggi, thank you for being here. We are 
anxious to hear your testimony and to ask you questions. 
Proceed.

  STATEMENT OF MAGGI ANN GRACE, PATIENT ADVOCATE, CARRBORO, NC

    Ms. Grace. Thank you, Senator Smith and members of the U.S. 
Special Committee on Aging. I appreciate the opportunity to 
testify before you today regarding health--care and the 
outsourcing of medical care to the developing world.
    We are here because in September 2004 I accompanied Howard 
to New Delhi, India, for the heart surgery he needed but could 
not afford in North Carolina, where we live only minutes from 
major medical centers of international reputation.
    Dr. Naresh Trehan replaced Howard's mitral valve at Escorts 
Heart Institute for a total cost of $6,700 as opposed to the 
estimated $200,000 at our local hospital.
    We stayed in India for 1 month. By early 2005, Howard was 
back at work full-time; his cardiologist in Durham reports that 
he is fine.
    The fact that everything turned out well for Howard and 
that India provides extraordinary medical care is not why we 
are here today. I am here to tell you how our own country's 
health-care system, supposedly the best in the world, failed us 
and why we were forced to travel halfway around the globe.
    The research I did that led to our choosing India does not 
make me an expert. But in the past few years, I have stayed in 
the hospital with my parents and friends on seven different 
occasions. I became an eye-witness to the difference in patient 
care between several American hospitals and at least one 
hospital in India.
    The discoveries I made compelled me to write a book 
entitled, ``State of the Heart: A Medical Tourist's True Story 
of Life-Saving Surgery in India,'' which will be published in 
2007 by New Harbinger Publications. In fact, I have asked 
Senator Clinton to consider writing the Foreword to my book.
    Companies are springing up all over our country to help 
patients travel to India or Thailand for medical procedures at 
a fraction of the U.S. cost. While I continue to assist these 
patients, my sincere ambition is to see the U.S. health-care 
system improved so that none of us find it necessary to leave 
our families and our doctors to receive medical treatment.
    In 2004, Howard went to his doctor for a routine physical. 
She was alarmed at the sound of his heart and ordered an 
echocardiogram immediately. The diagnosis: a flailing mitral 
valve with severe mitral regurgitation. We were shocked. Howard 
and his 31-year-old business as a carpenter/contractor were 
healthy, but Howard had chosen not to have health insurance.
    Howard is not the only one who, though healthy and 
physically fit all his life, will face an unexpected, life-
threatening diagnosis requiring immediate attention without 
health insurance in place. In fact, he is only one of over 46 
million Americans who remain uninsured, either by financial 
necessity, denial of coverage, or by choice.
    It is, of course, a mistake to say that our government does 
not provide these people with healthcare. We do. Only we do it 
in what may be the least efficient, the most expensive and 
least effective way possible: by refusing to provide any 
necessary care until a patient's illness becomes a medical 
emergency. Then we do not turn them away; only then do we foot 
the bill.
    I came to understand the absurdity of this system when 
Howard and I faced his diagnosis.
    I requested a meeting with the CFO of our local hospital to 
explore the entire cost of mitral valve surgery as well as a 
payment plan. Howard was encouraged to apply for Medicaid. But 
Howard was not broke; he is not indigent. He makes a living, 
and he pays his bills. We knew he would not qualify for 
Medicaid or any other hospital discount based on income.
    The hospital bill alone was estimated at $100,000. They 
expected half up-front. The valve itself, the surgeon, 
cardiologist, anesthesiologist, radiologist and pathologist, 
all billed separately, would bring the total closer to $200,000 
if there were no complications. The surgeon would also want 
half up-front.
    I knew that hospitals and doctors contract with insurance 
companies and agree to accept whatever the companies deem the 
``usual and customary fee'' for any given procedure. The CFO 
agreed that self-pay patients are responsible for inflated 
charges which are arbitrarily set by the provider.
    I offered to pay the hospital the full amount that any 
insurance company would pay, with a substantial amount up-front 
and the rest on a payment plan. The CFO said they had no way to 
do that. They were simply not set up to compromise in that way.
    I insisted that Howard could not be the only self-pay 
patient who faced the prohibitive cost of surgery. The CFO 
admitted he was not, but we were the first to come to him ahead 
of time and talk about it. Others, he said, ``Well, they wait 
until they are brought to the emergency room in an ambulance.''
    Where were we, a carpenter and an artist, to come up with 
$200,000 or even half up-front? If we had chosen to wait or if 
we had not found any alternative by turning to another country, 
I would have watched as Howard's mechanical valve problem made 
his heart work harder and harder until the exertion actually 
damaged his heart muscle and it began to fail.
    Of course, we would have preferred to stay in the Raleigh-
Durham area to be near our family and friends, but we had no 
intention of waiting until he was in heart failure. Yet this is 
all our local hospital offered us.
    I cannot imagine a worse way to pay for health care: to 
require our emergency rooms to take patients in and pay for 
healthcare for the uninsured and under-insured only when their 
health problems have worsened to the status of an emergency, 
when those problems are the hardest to fix and the care they 
receive will be as chaotic, expensive and risky as possible.
    After learning Howard's diagnosis, we tried to obtain 
health insurance for him. His applications turned up 
astronomical premiums for policies that promised to disallow 
any claims regarding his heart for a year or longer. Howard's 
cardiologist said he could not wait a year for his surgery so 
that the insurance company would help pay for it; his heart 
would not last that long.
    We explored every alternative suggested to us, from 
surgeons in Argentina, Mexico and Texas to a robot in North 
Carolina. We decided to put our trust in Dr. Trehan, a U.S.-
trained surgeon and founder of Escorts Heart Institute and 
Research Center, a state-of-the-art facility in New Delhi.
    He estimated the total cost of Howard's hospitalization, 
including all tests and doctors, would be under $10,000. We 
asked Howard's cardiologist for her blessing, applied for the 
appropriate visas, and flew to India.
    A friend created a Website, howardsheart.com, so I could 
communicate with our family and friends while we were abroad. 
The Website still draws global attention of patients, doctors, 
entrepreneurs, policymakers and researchers interested in what 
most call ``medical tourism'' and what we still consider to be 
the best option we had. We were not tourists seeking an exotic 
vacation while having inexpensive medical treatments. We were 
fighting for Howard's life.
    Our experience in India was successful. The total cost of 
our bill was $6,700 all-inclusive.
    Howard was the first American to have heart surgery at 
Escorts. The world was watching. The media--CNN, ``60 
Minutes,'' Bloomberg Magazine, The Washington Post, the Times 
of India and, most recently, Time magazine--would not be paying 
attention to an issue that was not of global concern.
    Here are some relevant observations.
    Insurance companies allow less than one-third of doctors' 
and hospitals' charges, and they pay only a percentage of that.
    Even if doctors discount their fees for self-pay patients, 
the hospital bill is prohibitive.
    The Center for Disease Control recommends innoculations for 
travel to specific countries. Insurance companies disallow 
claims for preventative immunizations for travel, yet they will 
cover treatment for those diseases if their insured subscribers 
might contract them overseas.
    Procedures are often available in developing countries 
years before the FDA approves them in the U.S. An example is 
the recent hip resurfacing that has just been approved.
    Highly skilled nurses in our hospitals are stretched beyond 
human limitations. Patients receive care based on degree of 
emergency. This means patients wait. During my seven stays in 
the hospital, I have changed bed linens myself, bathed and fed 
patients. I caught a disoriented patient climbing out of bed, 
tangled in her I.V. lines.
    We, as a country, value longevity over quality of life. 
Legislation supports this position. Looming malpractice suits 
keep doctors ordering tests and introducing extreme measures 
that are often unnecessary, unwanted, and always inordinately 
costly. Individuals who do not believe in prolonging life at 
any cost devote enormous amounts of their time and money to 
fight for the rights of their loved ones to end their lives 
with dignity. Choice is replaced with unwarranted expense for 
patients and health-care providers.
    In summary, if I were faced with the opportunity you now 
face, to heal a broken system of caring for the American 
people, I would begin with the end result. I would ask myself, 
what would a healthy nation look like? How can we make at least 
preventative care accessible and affordable? Why do we link 
employment with healthcare? What are the real costs of tests 
and medical devices? What is a reasonable margin of profit? How 
can we take the terror out of healthcare for everyone involved?
    You have an opportunity to listen to and answer millions of 
Americans, not only the uninsured and the under-insured, but 
employers, insurance companies, hospitals, doctors, nurses, 
patients and family members who are screaming, ``Crisis.'' We 
are calling for help. Please don't send us away.
    Thank you.
    The Chairman. Maggi, you ask what is a reasonable profit. I 
can't help but think that the difference between $200,000 and 
$6,700 will put a lot of pressure on the $200,000 if Howard's 
story continues to go out. I mean, that is a staggering 
difference.
    I wonder if you can speak to the quality difference. I 
mean, obviously the result was as good as, I guess, you could 
hope for, because he was a U.S.-trained physician. I assume it 
was done in a hospital.
    Ms. Grace. An extremely state-of-the-art facility that is 
impeccable compared to the ones I have stayed in here.
    The Chairman. So when you went into that, there was no 
quality diminution between that and others that you had seen in 
the United States?
    Ms. Grace. Only in the reverse.
    The Chairman. It was better.
    What was the cost in terms of travel and time, lost wages 
and things like that had it been done here? What do you add 
onto the $6,700?
    Ms. Grace. Well, the longer version, which is in my written 
testimony, is that we were in the hospital a total of 3 weeks, 
both of us with three meals a day--well, when he could eat. I 
stayed with him. The quote of the $200,000 estimate was for a 
5- to 7-day stay and one surgery. So it would have been way 
more than that, had we been here to do that.
    The quality of care over there was extraordinary. It was 
quick. Howard never waited once for a test or for a prompt 
response from the nursing staff or the doctors.
    Of course, you know, he was the first American to be there, 
so there was this attention. But I never saw anything different 
for anybody else there.
    The Chairman. Were your physicians here--I mean, you said 
they released you to go and do this. Obviously that must have 
included that they would take you back when you came.
    Ms. Grace. Yes, sir.
    The Chairman. Did they warn you about anything that proved 
not to be true? I mean, were there things that they said, 
``Well, yes, but you are running a real risk if there is a 
complication. You won't have any legal recourse''? Or did you 
have legal recourse?
    Ms. Grace. People have asked us that since we came back. No 
one asked us in the few days before we left because we went in 
a very big hurry. I wasn't thinking about suing anybody if 
something happened to Howard, and I don't think he was. It was 
the farthest thing from our minds.
    In answer to your question about Howard's cardiologist, we 
were relieved when she said she had done her homework with her 
colleagues and found out that we were right, that India was an 
exceptional choice and that they were all U.S.-trained 
doctors--a lot of them were U.S.-trained doctors, and Dr. 
Trehan was of the highest reputation.
    She had no problem with us going, except Howard shouldn't 
have been traveling. So, we went with his medical records. I 
talked to all the pursers on the flight and made sure they 
understood that if he should go into some kind of shortness of 
breath or breathing problems or heart problems that they knew 
what to do.
    The Chairman. What airline were you on?
    Ms. Grace. KLM was in there, but I forget what we started 
on. American? No, Continental and then KLM. But I had to speak 
to each one so they knew what we were doing.
    The Chairman. Is this doctor in India and is India, as a 
nation, are they advertising to get more business like this?
    Ms. Grace. It is, in fact, just the opposite. I mean, I 
think they would like to think they are. But in terms of what 
we do in America to advertise, I don't think they are up to 
speed on it.
    They have a Website, but the Website isn't geared to 
respond to you in 24 hours. I think we have been accustomed to 
immediate response when we e-mail somebody or contact a 
Website.
    So they have patients from all over, from Britain and 
neighboring countries and Saudi and places like that. But we 
were the first Americans to actually persevere long enough to 
get through and go.
    The Chairman. I am interested in your comments about 
insurance and what they would pay for and what they wouldn't 
pay for.
    Now, you did not have insurance. Is that right, Howard?
    Mr. Staab. Correct.
    The Chairman. Now, if you had had insurance, would they 
have discouraged you from going over? Were you told that by 
insurance companies, ``Don't go to India; we won't pay for 
it''?
    Ms. Grace. Well, we learned that afterwards. But it didn't 
come when we applied for insurance. That was the first thing I 
did, was to try to see if we could get Howard a policy. Even if 
it would be, you know, enormous premiums, we thought it still 
could work out financially for the $200,000 and that it would 
be better. But then they would disallow anything related to his 
heart for a year, and he wouldn't have lived that long.
    The Chairman. I would think an insurance company would be 
very interested in lower expenditures for health.
    Ms. Grace. Well, the premium for Howard was $300-and-
something. I contacted my Blue Cross broker and just said, 
``What is it?'' He said, ``Well, it is about $300.'' Then I 
told him the mitral valve diagnosis, and he came back with 
$1,600 a month and no coverage for the heart for a year.
    So, we did the math on that and tried to figure out, if he 
had been paying $300 a month for all this time, would it have 
still covered the $200,000? Anyway, it was----
    The Chairman. But you paid out of pocket, and you got----
    Ms. Grace. With a credit card. They said, ``Do you have a 
Visa?'' So it was simple.
    The Chairman. Well, yours is an amazing story. You have 
published it through all the outlets you spoke of, ``60 
Minutes'' and--
    Ms. Grace. They contacted us, but yes.
    The Website still is this huge magnet, people find us 
somehow. I don't know if they are looking under--I never called 
it ``medical tourism'' until the publisher renamed my book. But 
I don't know how they found us.
    But as soon as the Times of India picked it up. The day 
after we arrived in Delhi, the Times of India picked it up. We 
had something like 2,000 hits on the Web site that morning. So 
it sort of spread like fire after that.
    The Chairman. I read Tom Friedman's book, ``The World Is 
Flat.'' Were you included in it? I don't recall.
    Ms. Grace. I don't know.
    The Chairman. You may need to add another chapter.
    Ms. Grace. We have been in several books. The Cato 
Institute included Howard's story in their book last year. 
Researchers have been calling from all around. People are doing 
doctoral work on this issue. So I expect we have popped up in 
places we don't even know.
    The Chairman. Well, you are making history here. We are 
thankful for your willingness to come and share this very 
remarkable story.
    Howard, you look great. Are you back to work now?
    Mr. Staab. Thank you very much. I am working full-time 
building homes and loving my days.
    The Chairman. Well, we wish you the very best.
    Mr. Staab. Thanks.
    The Chairman. You have added a great deal to the meeting of 
this morning and the Senate record. We thank you very, very 
much.
    Ms. Grace. Senator Smith, you asked me a question that I 
realized I didn't answer.
    The Chairman. Well, you can answer it.
    Ms. Grace. Well, it will just take me one second, and that 
was about the difference in quality of care.
    I think one of the most impressive things I have learned to 
tell myself is that if I have an elective procedure that is 
required--''elective'' meaning I am not in an ambulance--I will 
seriously consider going to India, even though I have Blue 
Cross-Blue Shield that would probably pay 80 percent. Because 
not only would it probably be cheaper than the 20 percent I 
would have to pay, but I believe the care would be far better 
than I would get here.
    The Chairman. That is----
    Ms. Grace. Thank you.
    The Chairman [continuing]. Quite a testimony. Thank you 
very much, both of you.
    Ms. Grace. Thank you.
    Mr. Staab. Thank you.
    [The prepared statement of Ms. Grace follows:]
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    The Chairman. We will now call up our second panel.
    They will include Dr. Arnold Milstein, who is the chief 
physician at the U.S. Health Care, Thought Leader at the Mercer 
Health and Benefits. He also serves as a MedPAC commissioner. 
He is consulting three Fortune 500 companies that are 
investigating options for offshoring elective medical 
procedures for their employees.
    We will also ask Ms. Bonnie Blackley, who is the benefits 
director for Blue Ridge Paper Products in Canton, NC. Blue 
Ridge is in the process of expanding its employee insurance 
plans to offer overseas health-care options.
    They will be joined by Mr. Rao. Mr. Rao is the CEO of 
IndUSHealth, a global health-care service company that arranges 
for Americans to obtain medical care in India. We are going to 
want to know about that advertising program.
    Dr. Bruce Cunningham is the president of the American 
Society of Plastic Surgeons and will be discussing patient 
safety issues.
    We appreciate so much all of you being here.
    Dr. Milstein, why don't we start with you?

 STATEMENT OF ARNOLD MILSTEIN, MD, MERCER HEALTH AND BENEFITS, 
                       SAN FRANCISCO, CA

    Dr. Milstein. Thank you, Mr. Chairman.
    Several innovative large American employers asked me to 
assess the feasibility of using advanced hospitals in lower-
wage countries to provide non-urgent major surgeries. They 
intend to add them to their U.S. hospital networks and 
incentivize U.S. employees and dependents to use them.
    Large employers are pursuing this option for three reasons: 
first, lower cost. The typical combined facility and physician 
charges per surgery in these hospitals is, based on my 
international shopping observations, 60 to 85 percent lower 
than insurer-negotiated charges in the U.S.
    The Chairman. Sixty to 85 percent?
    Dr. Milstein. Yes. In exhibit A, I have shared the 
international prices that I have been able to obtain through 
phone calls on behalf of these large employers.
    Sixty to 85 percent cost reduction for major surgeries 
would easily offset travel, and first-class hotel costs both 
for the patient and an accompanying family member. It would 
also fund a sizable economic incentive for the patient and 
generate large residual savings for the sponsoring employer.
    The second reason is trusted quality-of-care accreditation. 
The Joint Commission, or JCAHO, accredits most U.S. hospitals 
for participation in the Medicare program. JCAHO also has 
accredited 88 non-U.S. hospitals via its Joint Commission 
International affiliate. Many of these hospitals offer board-
certified surgeons who trained at U.S. or UK teaching 
hospitals.
    The third reason is their sense of fiduciary 
responsibility. American human resource executives feel 
obligated to pursue any solution that would benefit both 
employer and employee. This obligation is felt most strongly 
among employers and labor unions with substantial numbers of 
lower- and lower-middle-income workers who can least afford to 
pay more for health care or for health insurance.
    The fastest percentage point rise in uninsurance among 
working adults is now in the middle quintiles of American 
working household incomes. In 2006, the average health spending 
for a working family of four exceeded the entire annual 
earnings of a minimum-wage worker. Two thousand four was the 
first year in which average state Medicaid spending exceeded 
state K-12 education spending.
    The outmigration of Americans for surgical care is a 
symptom, not a solution. The emotional benefit of close access 
to familiar physicians, friends and family will remain 
important for major surgeries. In addition, many other 
countries do not offer consumers meaningful redress for 
healthcare negligence.
    The interests of non-wealthy Americans and their employers 
would be far better served by a U.S. health-care system that 
aggressively and perpetually re-engineered its processes to 
deliver an internationally distinguished level of quality at a 
much lower cost.
    In their joint 2005 report, the National Academy of 
Engineering and the Institute of Medicine estimated that 30 to 
40 percent of current U.S. health-care spending is attributable 
to waste from insufficiently engineered processes of care 
delivery.
    However, until America's major public and private payors 
better collaborate in creating a profoundly more performance-
sensitive environment around American physicians and hospitals, 
well-engineered care delivery will remain purely conceptual and 
our hospitals will continue to fall short in international 
benchmarking of value.
    The most important first collaborative step in creating a 
more performance-sensitive domestic healthcare environment is 
public access in beneficiary anonymized format to the 
physician-identifiable full Medicare claims database. Its 
analysis by the private sector would rapidly enable American 
consumers and purchasers to identify and better reward surgeons 
and other American physicians who excel in efficient total 
healthcare resource use, as well as in quality.
    This, in turn, would send a transformative message 
throughout America's entire healthcare supply chain, including 
to hospitals and investors in new bio-medical technology. That 
supply chain is exquisitely sensitive to physician signals. It 
would be transformed by a new physician-mediated message that 
improvements in both affordability and quality will be rewarded 
best.
    By creating a highly performance-sensitive environment 
around our domestic health industry now, we can staunch and 
eventually reverse the flow of Americans traveling abroad to 
find more affordable care.
    The proximate root causes of American hospitals' loss of 
domestic market share are lower wages in less-developed 
countries and discriminatory pricing by global drug, device and 
equipment manufacturers. One step upstream in the causal chain 
is insufficient collaboration by America's public and private 
purchasers to mold a U.S. healthcare industry that delivers 
world-class value through superior process engineering.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Milstein follows:]
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    The Chairman. Doctor, what do you think of what Howard did, 
going to India like that?
    Dr. Milstein. I think it was a wholly reasonable response 
by a well-informed, value-seeking American consumer.
    The Chairman. The three Fortune 500 companies you are 
advising, would you advise them to look at Howard's option?
    Dr. Milstein. Yes, I would.
    The Chairman. But the point of your testimony, though, is 
America ought to fix its system so Americans don't have to go 
abroad.
    Dr. Milstein. Absolutely.
    The Chairman. Won't this growing competition have the 
downward pressure that will help to drive that?
    Dr. Milstein. I think it will. Although, you know, my sense 
of where we stand based on the Institute of Medicine estimates 
of 40 percent waste in current American health-care spending, 
you know, suggests we may need more than one source of 
pressure.
    The Chairman. Yes, exactly. I will probably have another 
question for you, but thank you very much.
    I think we are exposing to viewers on C-SPAN remarkable 
options that actually exist out there. Frankly, I can think of 
an awful lot of Oregon companies who are now looking to do 
these kinds of things and are negotiating union contracts where 
this is an option. They have no choice. Economically they can't 
sell enough of their widgets to pay for the rising cost of 
health care.
    I think one of your points is that it is not just from one 
price pressure on the system. It is drug companies. It is 
equipment suppliers. It is obviously cost of litigation. All of 
these things have upward pressure on American pricing.
    Dr. Milstein. Yes. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Bonnie Blackley, take it away.

STATEMENT OF BONNIE BLACKLEY, CORPORATE BENEFITS DIRECTOR, BLUE 
                RIDGE PAPER PRODUCTS, CANTON, NC

    Ms. Blackley. Senator Smith, thank you.
    Blue Ridge Paper Products in Canton, NC, is a paper 
products manufacturer. Our company was built by Champion 
International Paper in 1908.
    In May 1999, local union employees partnered with a venture 
capital fund to buy the assets. The employees' stake was 
financed through a 15 percent reduction in wages, and wages and 
benefits were frozen over the 7-year term of the buy-out 
agreement.
    We have about 2,100 employees, predominantly male, over age 
48, with decades of service and several health risk factors. 
They work 12-hour, rotating shifts, making it extremely 
difficult to manage health conditions or improve lifestyle.
    Our health-care claims costs at the end of 2000 was just 
over $13 million. At that time, we projected that if left 
unchecked, 2006 year-end costs would be $36 million.
    Since 2000, we have made plan revisions and developed and 
implemented several innovative cost-control programs. For 
example, we have an onsite medical center. We have put in 
population health management.
    These actions will result in 2006 claims costs of $24 
million. Though not the $36 million projected, health-care 
claims have increased over 75 percent since 2000.
    What is the impact of these claims on our bottom line? 
Since the union buy-out in 1999 to the end of 2005, we have 
paid out $107 million in health-care claims. Our company has 
lost $92 million since the buy-out.
    Even with our single-digit yearly cost increases, I can't 
help but think, if the provider community had responded to our 
requests for help over these past few years, we could have been 
a profitable company.
    Clearly, continued medical cost trend is unsustainable, 
even for financially sound employers with younger, healthier 
employees. Ever-increasing health-care costs have contributed 
to slower profit growth, lower wage hikes, a delay in hiring 
new permanent workers, and an erosion of employee benefits.
    We are very concerned about our ability to continue to 
provide retiree medical coverage, which is a bargained benefit 
for our hourly people. As a matter of fact, March 1, 2005, we 
eliminated retiree health coverage for our salaried employees.
    Employers are angry. We are fed up. We are desperately 
seeking relief from a system that ranks 37th worldwide in 
quality of care, but it costs more per capita than other 
industrialized nations.
    We do not get commensurate value for our health-care 
dollar. We are not treated as paying customers; are not 
reimbursed for medical errors and hospital-acquired infections. 
We are constantly told by health-care leaders that American 
health care is the best in the world, yet employees feel 
compelled to hire patient advocates. CMS announced in March 
that they plan to provide cancer navigators to certain patients 
as answers for coping with today's medical system.
    Employees are so desperate for health care that they are 
willing to commit fraud on employment and insurance forms to 
obtain coverage for themselves or ineligible family members. 
Why do we tie health coverage to employment?
    Running out of ideas on how to cut costs, a segment on ``60 
Minutes'' several months ago caught my attention. I began 
seeing articles in trade publications about medical tourism, 
which we like to call global health care, the uninsured and the 
under-insured having surgery at outstanding surgical facilities 
in other countries.
    The more I read, the more intrigued I became. Hospitals 
approved by Joint Commission International and compared to 
five-star hotels, surgeons credentialled in the United States, 
registered nurses around the clock, expenses 80 to 90 percent 
cheaper, and better outcomes. Why not?
    After reading about IndUSHealth, I contacted them to see if 
they would be willing to work with us to make our services 
available to our employees. IndUSHealth agreed to meet with our 
benefits task force. Initial shock changed to curiosity, 
curiosity to interest, and interest to an ``a-ha'' moment.
    IndUSHealth has helped us create a DVD that will soon be 
mailed to our employees. The DVD explains the process of having 
surgery in India and includes testimony from individuals that 
have been to India for surgery. The DVD message encourages 
interested employees to be part of an employee group that will 
be traveling to India in the near future as a part of our due 
diligence process.
    Surgery in India will not impact the benefit levels of our 
current plan. Whatever benefit plan is chosen by the employee, 
the option to have surgery performed in India is a personal 
choice. The benefit level for this option will be 100 percent 
reimbursement for expenses, plus an additional cash incentive 
to be used to cover the cost for a companion to accompany the 
member.
    Employers compete in a global marketplace with a global 
economy. We can address our health-care crisis, or we can 
outsource it. With healthy competition, our health providers 
will become more efficient and productive, provide better 
services and products, be held responsible for inferior 
service, or go out of business just like the rest of us.
    Thank you.
    [The prepared statement of Ms. Blackley follows:]
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    The Chairman. Bonnie, you described the employees' response 
to this. First, as I take it, it was somewhat shocked and 
offended maybe? Or necessity required that they listen and 
consider?
    Ms. Blackley. We have spent since 2000 educating our 
employees on the costs of health care. It is their company; the 
union actually bought our company. They are very aware of what 
our health-care costs are year to year.
    We have been out-of-the-box, innovative. This was another 
opportunity for our benefits task force to take a look at some 
unusual responses to health-care costs.
    After our task force meeting in which IndUSHealth was there 
and they explained the process, you could tell every slide that 
they showed, more and more people were going, ``Oh, my gosh, we 
never knew about this.'' I even had one guy call me after the 
meeting, and he said, ``Is it wrong to want surgery to go to 
India?'' We really had some excitement there.
    This sounds like a good deal. It sounds like excellent 
health care. It is affordable. This will save our company a lot 
of money.
    The Chairman. Was it an ESOP that the union did?
    Ms. Blackley. Yes, it was.
    The Chairman. The employees bought it.
    Ms. Blackley. Yes.
    The Chairman. Generally unions are very down on 
outsourcing, but they are obviously encouraging this 
outsourcing.
    Ms. Blackley. It is very unusual to have union members that 
also are owners. So a lot of times, I think they are at 
conflict. Even as our health-care costs have gone up, they want 
to keep their benefits. They know we are struggling to be able 
to afford to do that.
    As a matter of fact, we just bargained and negotiated with 
the union last week. I don't even know the outcome of those 
negotiations.
    But our folks are hurting. They have not had any wage 
increases for 7 years. They gave up 15 percent of their 
benefits in order to finance the company. We are really 
searching.
    We have had two employees in one of our locations that had 
to have major surgery. One was a heart valve replacement. The 
other was a transplant. They had worked for us less than 3 
months. Obviously some questions on their post-employment 
information were not correct.
    Folks are shopping for employers to see who has good health 
coverage so they can afford to have these surgeries. I think it 
is correct to say that people are putting these things off 
until it is absolutely an emergency.
    The Chairman. Can you describe the procedures? Is it heart 
surgery, cancer?
    Ms. Blackley. The heart valve replacement, we actually got 
a proposal from IndUSHealth. Here it was going to cost anywhere 
from $68,000 to $198,000. That was the range of costs that we 
received from the hospital.
    The proposal we got from IndUSHealth was for that patient 
and a companion. Here you would have been in the hospital 3 to 
5 days; there, 10 days with an 8-day recoup period at a resort. 
Everything included, travel, food, was $18,000.
    So we were looking at the difference between $18,000 and, 
best-case scenario, $68,000. So it is very attractive for 
employers to take a look at global tourism.
    The Chairman. Have the numbers of your employees increased 
dramatically going to IndUSHealth?
    Ms. Blackley. That was the first actual proposal that we 
have gotten. We have not actually rolled this benefit out to 
our employees yet. We will be doing that in the next few weeks.
    So until we actually roll this out to all of our employees, 
we have been looking at situations that we find out about on an 
individual basis to see if they might be a candidate for going 
to India. It is just a matter of time.
    The Chairman. Very good. Thank you so much, Bonnie.
    Mr. Rao.

     STATEMENT OF RAJESH RAO, CEO, INDUSHEALTH, RALEIGH, NC

    Mr. Rao. Thank you, Senator Smith. Thank you for the 
opportunity to testify on a topic that hits very close to home 
for us and why we have created this company called IndUSHealth.
    I am the CEO of IndUSHealth. It is a company based in 
Raleigh, NC. It provides a global health-care service. It 
addresses the problem of growing lack of access to affordable 
health care faced by an increasing number of our citizens and 
employers throughout the U.S.
    With health-care costs having grown to levels that were 
just unimaginable just a few years ago, there is a universal 
desire to exploit opportunities to stretch our health-care 
dollar.
    IndUSHealth provides one such attractive opportunity, by 
unlocking the gates to affordable health care. We offer high-
quality medical treatment and travel programs for U.S. patients 
desiring care in world-class hospitals in India as an 
alternative to what has become oppressively expensive care in 
the U.S.
    Why India? Well, there are several reasons. India is 
rapidly emerging as a world leader in global medicine, with 
over 150,000 patients having visited India for medical 
procedures from overseas.
    Super-specialty hospitals in India have made significant 
investments in the recent years to build and staff state-of-
the-art facilities with the latest equipment and consumables, 
many of which are, in fact, sourced by American companies.
    Not only have these hospitals introduced several amenities 
to cater to the unique needs of patients going from the U.S. 
and other international patients, they have also been able to 
attract several U.S.- and U.K.-trained physicians to return to 
India to practice at their facilities. With over 37,000 
physicians of Indian origin practicing in the U.S., many 
Americans are already comfortable with the talent and expertise 
of Indian physicians.
    The quality of care available at these leading hospitals is 
comparable to the best institutions in the U.S. With a focus on 
advanced research and having implemented processes that have 
helped them get accredited by the U.S. Joint Commission, these 
hospitals now boast outcomes that are amongst the best in the 
world.
    Top-flight, one-on-one nursing care is made available to 
patients around the clock. Their fluency in English allows 
Indian doctors, nurses and administrators to communicate well 
with American patients.
    Above all, India is able to offer a large and sustainable 
cost advantage. By bundling unique services that are geared to 
the unique needs of international patients, Indian hospitals 
are able to command premium price points, which, from our 
standpoint, still remain a mere fraction of the U.S. costs.
    When it comes to cost differential, there have been 
numerous cases where, expensive procedures, as the previous 
panelists have described, are available at somewhere between 10 
to 20 percent of the equivalent cost in the U.S.
    So what is the IndUSHealth advantage? Recognizing the 
opportunity to provide a meaningful solution to a growing 
problem, IndUSHealth has now formulated a well-structured 
offering that connects individuals and companies to affordable, 
high-quality health-care facilities overseas.
    We have established key partnerships with India's premiere 
hospitals and physicians that help us offer an integrated 
process while assuring the highest levels of service to our 
patients. We provide personalized case management and handle 
the complexities of dealing with health-care providers on the 
other side of the globe. We work with local physicians to 
assist with pre- and post-operative needs of the patients. We 
also take care of exchanging medical records and making travel 
arrangements for patients.
    Making sure that each patient is well-informed and assured 
of the highest standards of care at the lowest cost possible is 
an important part of IndUSHealth's offering.
    We have helped treat several patients overseas for a wide 
range of treatments. The majority of our patients have never 
traveled abroad, yet they have educated themselves and arrived 
at the conclusion that their needs will be best met outside our 
borders.
    They are always delighted and provide glowing testimonials 
of the level of care and attention that they receive all 
throughout the process. Their collective experiences have 
proven that it is indeed possible to overcome the perceived 
difficulties and emotional barriers that many Americans face 
when first exposed to this new concept.
    Our elderly patients are thrilled to have an option that 
keeps them from having to wait for Medicare benefits. Often 
taking care of their ailment sooner helps them improve the 
quality of their life and allows them to lead self-sufficient 
and independent lives.
    We coordinate with self-insured employers seeking to lower 
expenses by offering our services as an option to their 
employees. Statistically, since a relatively small number of 
cases result in the biggest expenditures, employers are able to 
save up to 20 percent of their medical costs even if a 
relatively small subset of their plan participants elect to go 
overseas for care. This helps them avoid the less attractive 
alternatives of reducing head-count or reducing profitability.
    So by paving the path for individuals and employers to 
access low-cost, high-quality health care in India, IndUSHealth 
is proud to play a key role in providing access to health care 
for a growing number of our citizens and to help them lead 
healthy, independent and productive lives.
    Thank you.
    [The prepared statement of Mr. Rao follows:]
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    The Chairman. Mr. Rao, what kind of medicine is provided to 
Indians? Is it a national health-care system?
    Mr. Rao. It is not. It is basically a private----
    The Chairman. Fee for service?
    Mr. Rao [continuing]. Fee-for-service system. So most of 
these hospitals have an obligation to price their services in a 
way that obviously caters to the large array of circumstances, 
including local care as well as people coming from overseas.
    The Chairman. Your facilities, have you built those and 
staffed them for the Indian nation or for this international 
market? Have you seen a niche here that you are trying to fill?
    Mr. Rao. We built this primarily to serve the needs of 
Americans, because we noticed that we are becoming less 
competitive as a country because of the challenges that we face 
in our health-care costs and how that translates to a burden 
for all of us. We are all ending up paying the increased costs 
in one way or the other.
    Employers, particularly, are challenged with having to make 
some very hard decisions on how to contain costs.
    The Chairman. How competitive would your services be for an 
Indian as against a hospital on the other side of the city? 
Would yours be more expensive?
    Mr. Rao. It would be more expensive. Mainly because it has 
got the added amenities built into it in terms of catering to 
typically a companion that goes with the patient, having a 
larger room at the hospital, providing for travel services back 
and forth, and creating an experience that basically makes the 
person feel like they have a concierge service, which the 
locals don't need because they have a support structure around 
them.
    The Chairman. Do Europeans use this, or just mostly you are 
marketing this to the American people?
    Mr. Rao. Our company's thrust is entirely in North America 
and for Americans and Canadians right now. There are others 
that serve other markets. For us, frankly, it is a whole 
different ball game if we want to try to enter and solve the 
needs of other citizens of other countries.
    The Chairman. What percentage of Americans, what percentage 
of Canadians are you serving?
    Mr. Rao. Right now, it is roughly 80-20, majority 
Americans, a smaller percentage of Canadians.
    The Chairman. Bonnie, I am wondering if you think your 
employees are going to use IndUSHealth. Obviously they have a 
brochure, a program, a slide show that shows them a facility 
apparently that is very much like what they would find in North 
Carolina. Do you think they are apt to take that?
    Ms. Blackley. I think that the DVD that we are going to 
send out to our employees is going to go a long way in 
explaining the process, showing how it works.
    We are also going to have a group of employees, volunteers 
that will be going to India in the next few weeks to take a 
look at it, to come back, so that employees, union members, 
management--we can actually get the word out as to what we saw, 
what we experienced, what did we believe is the quality of care 
in India.
    The Chairman. Mr. Rao, what kind of increases have you seen 
in this niche that you are filling? I mean, you don't have to 
tell me your sales, but have you seen a lot of growth?
    Mr. Rao. It has been tremendous. Compared to last year when 
it was in its infancy, just starting out, there has been a lot 
of interest now. The news stories are certainly helping people 
become aware of this faster. They are all anxious to know if, 
in their circumstance, they can take advantage of it.
    The Chairman. You obviously know part of the overhead of an 
American facility relates to malpractice insurance. What kind 
of assurances do you give, and what kind of recourse do 
patients have?
    Mr. Rao. Well, the Indian system also has a similar 
structure. The costs are much lower; the awards, in case of any 
kind of litigation, are also proportionately lower.
    So we inform patients of what they do and don't get in that 
system, and the fact that there are problems in the way the 
care was delivered overseas, they would have to deal with a 
foreign court system in order to----
    The Chairman. Well, your facility is subject to American 
law because you do business here and you have a headquarters 
here as well, I assume.
    Mr. Rao. We do.
    The Chairman. But your outcomes have been good?
    Mr. Rao. Yes.
    The Chairman. That is a very commendable model. Certainly, 
as somebody who believes in competition and who has dealt with 
it in his own industry, I salute you for your vision and your 
insight and your competitiveness.
    Mr. Rao. Thank you. It is delightful to be able to help 
people who have essentially run out of options. It is always 
wonderful to get engaged with them and prove that there is a 
way out for them.
    The Chairman. Would it be fair to say that most of your 
clientele are middle-class Americans? They are not 
necessarily--they are people who are running out of options who 
are looking, or who don't have health care, or who have a union 
plan that has this benefit but the cost is there, the co-pay is 
much higher, and then the union is saying to the company, 
``This is another option,'' and the cost is way down there. Are 
those your clients?
    Mr. Rao. That is primarily our client base, the middle-
class.
    There are also some unique treatments available in India. 
We do have folks from, a different standpoint try to access 
services that are just fundamentally not available here because 
either they are not yet FDA-approved or they are undergoing 
trials at this stage.
    So we do provide them a service, and we find that there is 
a lot of interest in that as well.
    The Chairman. Are you coordinating any of your services 
with India Air or the airlines generally to----
    Mr. Rao. Not yet. Right now we are keeping it very 
competitive because we find that, depending on when someone 
wants to go and what sort of specific travel preferences they 
have, it is very hard to get a single airline to really cater 
to all the needs out there. So we instead have a way to get 
them excellent, rates at any airline.
    The Chairman. But are airlines aware of medical tourism? 
Are they taking any interest in it? Are they providing any 
services to cater to it?
    Mr. Rao. The airlines, interestingly, have rules set up to 
take extra care of patients anyway.
    The Chairman. Anyway.
    Mr. Rao. So we can essentially piggyback on that.
    We are looking at concierge services, obviously, at the 
airports, at the destination. We provide that to our patients. 
At the transit points, we are looking into how the airlines 
could go the extra step for them.
    But they already have special services in place to cater to 
those that need extra care getting back and forth.
    The Chairman. Can you describe the breadth of the 
procedures you make available at IndUSHealth? Is it plastic 
surgery? Is it heart surgery? Is it----
    Mr. Rao. It has included plastic surgery. Although we had 
started out looking at cardiac, any orthopedic types of 
procedures, we have found that there has been a lot of interest 
in cosmetic and dental as well. There is a lot of interest in 
expensive dental surgeries.
    The Chairman. OK. Macrofacial surgery as well.
    Mr. Rao. That is right.
    The Chairman. Are your physicians, are they by and large 
U.S.-trained?
    Mr. Rao. They are. They are U.S.- and U.K.-trained for the 
most part.
    The Chairman. U.K.-trained. It is an amazing model. 
Congratulations on your success.
    Mr. Rao. Thank you.
    The Chairman. Bruce Cunningham

STATEMENT OF BRUCE CUNNINGHAM, MD, PRESIDENT, AMERICAN SOCIETY 
              OF PLASTIC SURGEONS, MINNEAPOLIS, MN

    Dr. Cunningham. Chairman Smith, thank you very much for the 
opportunity to appear today. My name is Dr. Bruce Cunningham. I 
am a board-certified plastic surgeon. I am the chairman of the 
Department of Plastic Surgery at the University of Minnesota. I 
am currently the president of the American Society of Plastic 
Surgeons, ASPS.
    I want to thank you for the opportunity to appear today. 
Perhaps as a provider, my viewpoint might be a little bit 
different than some of the viewpoints of the policymakers.
    The American Society of Plastic Surgeons is the largest 
organization of board-certified plastic surgeons in the world, 
with over 6,000 members.
    We have probably discovered cosmetic medical tourism long 
before these other movements have been described and have noted 
the attention that has been paid to it. We are concerned about 
the growth of it, particularly in the area of elective cosmetic 
surgery.
    Although numerous factors are likely involved in the growth 
of medical tourism, there is at least anecdotal evidence to 
suggest that patients considering care outside of the States 
are basically doing it with the motivation of price-saving.
    ASPS has a long-standing commitment to enhancing patient 
safety and improving the quality of care for our patients. We 
believe that some of the best plastic surgeons in the world are 
our board-certified members here in the United States.
    For those who choose to go overseas for elective surgical 
procedures, however, there are a number of critically important 
issues to consider. We believe patients should make this 
decision very carefully, in essence, caveat emptor, buyer 
beware.
    Without a complete understanding of the medical standards 
for the health institution or facilities, the medical 
providers, their surgical training and credentials, and also 
the post-operative care associated with surgery, a patient can 
be ill-informed and, worse, at significant risk.
    Foremost, it is important to realize that surgery is 
serious business, and cosmetic surgery is no different from 
other surgical procedures. Every surgery, including cosmetic 
surgery, has a degree of risk. As a board-certified plastic 
surgeon, I manage and reduce these risks every day. It is part 
of my overhead.
    Patients who choose to travel abroad for a cosmetic surgery 
vacation, with price as a driving force in their decision, may 
be making an exceptional decision that could increase their 
risk factors. These patients are susceptible to unwanted and, 
in some cases, disastrous outcomes.
    I am personally well aware of cases which are reported in 
the media and which confront myself and my colleagues and other 
physicians of patients returning to this country with 
disfigurement and nearly fatal infections associated with 
unaccredited hospitals and unlicensed providers.
    Patients simply cannot make informed decisions about 
medical care or establish a proper patient-physician 
relationship from a travel brochure.
    Some medical tourism trips are marketed as vacations. Risks 
may increase as procedures are performed during cosmetic 
surgery vacations. Although enticing, vacation activities are 
often not appropriate for recovery after any kind of surgery. 
Precautions and appropriate care must be received in order for 
the patient to properly heal and reduce the possibility of 
complications.
    Infections are the most common complication seen in 
patients that go abroad for cosmetic surgery. Other 
complications can include unsightly scars, blood collections, 
and unsatisfactory results. Travel combined with surgery can 
also significantly increase the risk of complications, such as 
blood clots following the long flights required to reach these 
overseas destinations.
    Complications can also occur during surgery in even the 
best hands and may require acute care and hospitalization. An 
important consideration is whether the quality of the health-
care institution and the medical provider is truly comparable 
to what the patient would receive at home. In some cases, as we 
have seen, the answer may well be yes. In other cases, the 
patient may be taking a large gamble with their health care and 
well-being.
    As the profit margins of these overseas operations 
increase, less scrupulous and qualified individuals would be 
tempted to enter the market, which is certainly what we have 
seen in cosmetic surgery.
    Also in many cases, post-operative care is nearly as 
important as the procedure itself. How will this care be given, 
by whom, and for how long following these surgical procedures?
    The potential for post-surgical complications, as with any 
surgery, present particular challenges for the medical tourism 
patient. What happens to the patient once they have returned 
home if they have a complication or if they are unhappy with 
their results? Do they fly back to the site where they had 
their procedure? This is not likely in many cases.
    Do they have insurance coverage for complications resulting 
from elective procedures overseas? Patients should be aware 
that their insurance company likely will not cover 
complications for their procedure, a fact that we have learned 
from elective cosmetic procedures.
    Surgical training and credentials as well as facility 
standards may not be verifiable in all cases. In order for 
cosmetic surgery to be performed safely, it requires the proper 
administration of anesthesia, sterile technique, the latest 
instrumentation and equipment, as well as properly trained 
surgeons.
    Patients need to ask a lot of questions and may not be able 
to get the answers.
    Is the practitioner providing the medical procedure 
appropriately certified? For instance, in some cases we have 
become aware of, a physician with training and credentials in 
internal medicine should probably not be performing surgical 
operations like abdominoplasty, face lift, breast augmentation 
or breast reconstruction. In the U.S., the American Board of 
Medical Specialties provides the gold standard for verification 
and training.
    For some developing third-world countries, there are no 
credible processes for verifying physician training, education 
and experience. Further, there are no U.S. laws that protect 
patients or mandate the training and qualifications by 
physicians or the facilities in which they practice. There may 
be no legal recourse for surgical negligence by the physician 
or the facility.
    An important question to ask is whether the facility is 
accredited or licensed. In the U.S., there are rigorous rules.
    Although there may be many skilled and qualified physicians 
practicing all over the world in outstanding surgical 
facilities, ASPS cautions patients to consider these critically 
important patient safety issues before making a decision based 
solely on price. Patients should have all the information they 
need to make a truly informed decision and one with their best 
health in mind.
    So we hope that this discussion is helpful to the committee 
in considering this important issue. We commend you and the 
other committee members very soundly for initiating this very 
interesting discussion, which will hopefully lead to a greater 
awareness on the part of the public.
    Thank you.
    [The prepared statement of Dr. Cunningham follows:]
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    The Chairman. Well, Dr. Cunningham, you make some very 
important points, and we value those.
    I am wondering, do you ever--now, as I understand it, the 
American Society of Plastic Surgeons, you are the board, you 
are the one that certifies the competence of a physician.
    Dr. Cunningham. We only accept board-certified plastic 
surgeons as members.
    The Chairman. In your association.
    Dr. Cunningham. It is the board, which is one of the 24 
American Board of Medical Specialty Board, which actually 
certifies throughout the country.
    One of the issues we have, even in this country, is that 
there are boards that aren't AKC-registered boards, if you 
will. A member of the public cannot determine from the colorful 
language written in Latin on the diploma on the wall whether 
this is a real certification or not.
    Perhaps in these smaller pilot programs, very highly 
licensed and credentialled organizations and surgeons are being 
used. But as the profit spreads through this nascent industry, 
there will be much greater temptation for less-qualified 
partners. How will we verify that?
    The Chairman. Does the board certify plastic surgeons who 
later go and practice in places like India?
    Dr. Cunningham. We certainly certify plastic surgeons who 
go on volunteer missions throughout the world. I would imagine, 
with respect to the issues of licensure, an American-trained 
plastic surgeon could receive licensure in India or any 
European----
    The Chairman. So that doesn't disqualify them, moving and 
practicing in another country?
    Dr. Cunningham. Absolutely not, not at all.
    The Chairman. That is a very, very good point.
    Mr. Rao, do you have board-certified surgeons, plastic 
surgeons?
    Mr. Rao. Absolutely.
    I think Dr. Cunningham brings up some excellent points in 
terms of why the public needs to be aware of the quality issue 
and the safety issue. That is one of the reasons we have taken 
express steps to assure that in all aspects of our 
relationships with our providers we are dealing only with the 
best of the best. We don't allow for any kind of lapses in 
terms of quality at any given point.
    But, yes, indeed, many of the physicians are indeed U.S. 
board-certified. They have, in fact, gone back to India and 
helped raise the bar over there, which is an important aspect 
of why it has become more attractive in recent years.
    The Chairman. I imagine you recognize the value for 
American patients of having American certification from the 
different boards that provide this assurance, quality 
assurance. I assume that that is the case if America is your 
niche.
    Mr. Rao. Absolutely. That is why I think the Joint 
Commission has played an important role in making sure, at 
least at all touch points with the patient, that the hospitals 
have processes in place that match, if not exceed, you know, 
the average hospitals here.
    The Chairman. Dr. Cunningham made a very good point about 
the value of a relationship with a patient and knowing them. Do 
you do teleconferencing before a patient ever goes to India? Do 
you ever have a teleconference where they know who is going to 
be doing the surgery and it is discussed with them?
    Mr. Rao. Absolutely. That is one of the things that some of 
the patients like to do, is be able to talk to their doctor via 
teleconference and make sure they are comfortable with who they 
are working with----
    The Chairman. OK.
    Mr. Rao [continuing]. What their credentials are.
    The Chairman. Mr. Milstein, are those the kind of things 
that you advise Fortune 500 companies to insist upon as they 
consider some of the medical tourism?
    Dr. Milstein. Yes, that is part of our due diligence 
process, verifying the hospital is, for example, Joint 
Commission-accredited and that the physicians performing the 
procedures can indeed document board-certification status in an 
advanced country.
    The Chairman. Bonnie, does the union member ask those 
questions? I mean, Dr. Cunningham makes a really good point. We 
don't know what to ask. I mean, half of it is written in Latin 
up there on the----
    Ms. Blackley. Oh, they certainly do. I think that they are 
very savvy medical customers, much more so than you would 
think.
    What has been the length of time that you have spent with 
your doctor at your last physician's visit?
    The Chairman. Your point is that that hasn't been so great 
either?
    Ms. Blackley. I think the normal visit is from 4 to 6 
minutes. You probably waited for a couple hours before then.
    Why is alternative care so popular and billions and 
billions being spent? People are searching. Even in my family, 
I went misdiagnosed for several years--so did my daughter--and 
had severe ramifications because of not being diagnosed 
correctly.
    I have story after story after story from my employees on 
the poor quality of treatment that they have received, either 
no diagnosis or a misdiagnosis. We really have a crisis in this 
country. We are not getting quality health care. Yet it is 
unaffordable.
    We are searching. We are looking in other areas. We have 
got to work with providers and hospitals here to make our 
system better.
    We have tried to do that at Blue Ridge Paper Products. We 
met with a medical practice across the street from the mill 
before we put in our medical center. The first thing they told 
us when we walked in the door was, ``Don't ask us to discount 
our prices any more. Oh, by the way, we have got a problem with 
your onsite diabetes program.'' We worked with six other large 
employers in western North Carolina to try to work with our 
local hospital on a better discount. At least give us the same 
discount as you give the large carriers that are in that 
region. They told us if our utilization did not remain where it 
was, they would even take away that discount.
    We have done a lot to try to work locally with our 
providers, to no avail. They don't have to work with us. They 
will readily admit that they do cost-shifting and that they 
don't have the answer. I had one physician tell me, ``Well, if 
it is a death spiral, then I am going to make all the money I 
can while I can.'' We need our system here in the United States 
to wake up. We need it to become better. We need to work as a 
team. If the carriers and the providers, the employers and the 
employees can all work together--we have tried that approach. 
It has not worked in our community.
    The Chairman. Dr. Cunningham, obviously your association is 
aware of this new and apparently growing competition. Is that 
the case?
    Dr. Cunningham. Certainly, we are aware of it. We have seen 
it for many years with patients, again, opting for better price 
and going to Mexico, going to Costa Rica and elsewhere, Brazil, 
to get cosmetic surgery.
    Frankly, the risk/patient-safety side of it is becoming a 
global problem, just as the world is flattening, and we have 
heard that part of it discussed today.
    This issue of people from Germany leaving a higher-cost, 
higher-provider network and going to, say, emerging Russian 
republics, Turkey and other countries, where the standards, as 
I have said, just cannot be verified to have this kind of 
surgery, and then coming back to Germany, to France, and being 
a burden on that health-care system.
    I am touched by the economics of it. I am touched by the 
stories that we have heard today. We clearly need to change the 
system. I agree with Dr. Milstein. This is a symptom, not a 
solution.
    A hundred and fifty thousand patients going to India hardly 
touches the surface of the problem we meet here. But, you know, 
on the other hand, these people are coming back. They are 
presenting a burden for our health-care system. They are 
prevailing on the goodwill of everyone to take care of them, 
and that is probably not fair either.
    The Chairman. I understand, Doctor, that ironically your 
segment of medicine, plastic surgery, really does not have an 
insurance overlay. It is really fee-for-service all the time, 
isn't it? I don't know of many insurance policies that cover 
plastic surgery.
    Dr. Cunningham. Well, plastic surgery has two major 
components: the cosmetic part, in which case, you are 
absolutely right.
    The Chairman. I should clarify. I mean cosmetic.
    Dr. Cunningham. Then the reconstructive part----
    The Chairman. Reconstructive is usually related to cancer 
and things like that----
    Dr. Cunningham. Right.
    The Chairman [continuing]. It would include those.
    Dr. Cunningham. In the reconstructive part, we are in the 
same boat. You know, we are finding it is harder to provide 
services for our patients because frequently they are denied 
coverage or their coverage is marginal, and they have to make 
difficult decisions about whether to have a breast 
reconstruction.
    I mean, we recognize clearly that the problem is in the 
system and that it is a system problem that needs to be dealt 
with on a system level.
    The Chairman. We have all seen these T.V. programs of 
horror stories of plastic surgery outcomes, of people who are 
addicted to having plastic surgery.
    I wonder, Mr. Rao, do you see people coming over with that 
addiction? Do you stop and tell them, ``There is enough here 
already; stop''?
    Mr. Rao. We do. We tend to, you know, be conservative and 
err on the side of trying to make sure that we don't have 
people that are going there, that basically shouldn't be going 
there, such that it could be almost risky for them.
    But another very important point is, that fundamentally we 
are facing a situation where, to whatever degree medical 
tourism grows, it is never going to create the level of 
competition that physicians and hospitals here will ever have 
to worry about.
    Because, as it is, we know that the providers are busy 
today, and they are going to get busier because we are all 
growing older and we are all relying more on the system to take 
care of our needs. The number of doctors entering into the 
system is shrinking. It is not growing proportionately.
    So given that, I don't believe we will ever run into a 
situation where everyone just chooses to go. It is always going 
to be a smaller percentage of folks that will go. Those that 
have needs that have emerged to the point where they have no 
other options will go.
    So, in essence, it will be a healthy form of competition 
that gets introduced into the system and not one that basically 
goes out of control.
    I do agree with the fact that there may be some 
unscrupulous operators that come in and start lowering the bar. 
But we, as an organization, take it as our responsibility to 
make sure that anyone that comes through us is not going to 
face any such circumstance.
    Because the doctors themselves are very, very risk-averse. 
We are finding that in cases where we feel something might be 
acceptable, the doctors in many cases have pushed back and said 
no.
    So that is a very good sign, because they are saying, ``We 
don't want to take chances with this. You know, our reputations 
are on the line. Our hospitals' brands are on the line. We 
don't want to take any chances.''
    So it is going to be self-governing from that standpoint. 
But that doesn't mean that we don't need regulation to look 
closely at how this trend evolves.
    The Chairman. Well, let me conclude this hearing with just 
an expression of real appreciation for the contribution each of 
you have made here.
    This is a very important topic. You should know that, 
thanks to C-SPAN, there are many people watching you today. A 
large number of seniors follow the work of this committee. You 
have added measurably to their understanding and their options.
    We also want to say how glad we are that Howard Staab had 
such a great outcome and that he is here and healthy.
    We thank you, Maggi, for your testimony here today, as 
well.
    All the best. Have a great afternoon. Try to stay dry. We 
are adjourned.
    [Whereupon, at 11:35 a.m., the committee was adjourned.]
                            A P P E N D I X

                              ----------                              


                Prepared Statement of Senator Herb Kohl

    Thank you, Mr. Chairman, for holding today's hearing. We 
welcome all of our witnesses and look forward to their 
testimony.
    ``Medical tourism''--or the practice of traveling to other 
countries to receive discounted medical procedures--is taking 
off in the United States, raising a number of questions for 
this panel. What is driving health care costs to such a height 
that Americans are seeking care overseas? How has the crisis of 
the uninsured in this country reached such a peak that some 
find foreign travel for medical procedures more practical than 
health insurance? Finally, how are we protecting Americans who 
do travel overseas from fraud, incompetent providers and most 
importantly poor health outcomes?
    The United States accounts for $1.7 trillion of the $3.3 
trillion spent annually for health care worldwide yet ranks 
37th worldwide in quality of care. Even more unsettling: there 
are 45 million Americans without any form of health insurance. 
As we hear from our witnesses today about Americans who have 
chosen to escape our health care system, we are also reminded 
of the how much we have left to do to provide every American 
with affordable, quality health care here at home.
    I look forward to hearing from our panel on both the 
benefits and risks of medical tourism. Again, thank you, Mr. 
Chairman, for holding this important hearing.
                                ------                                


               Prepared Statement of Senator Ken Salazar

    Chairman Smith and Ranking Member Kohl, thank you for 
organizing yet another hearing on an emerging phenomenon: 
medical tourism.
    It is clear that the emerging industry of medical tourism 
not only impacts America's seniors but thousands of others who 
travel abroad to obtain both elective and non-elective surgery. 
It also impacts the families of these patients, their American 
doctors (if they have access to regular medical care), and the 
U.S. health care and health insurance industry.
    I find this topic both fascinating and disconcerting.
    I am pleased that the quality of care in places like India, 
Thailand, and Malaysia has evolved so that Americans feel 
comfortable going under the knife for complicated surgeries 
like bypass surgery or more routine surgeries like knee 
surgery.
    However, I also believe that we must examine the root cause 
of this phenomenon: the rising cost of health care and frequent 
unavailability of affordable health insurance.
    I have introduced legislation with Senator John McCain, the 
National Commission on Health Care Act (S. 2007), which will 
undertake a fresh review of health care in the U.S. with one 
goal: implementing the best ideas to provide real solutions for 
the millions of Americans trapped in this Nation's health care 
crisis.
    While medical tourism may be included in the discussions of 
the Commission, I believe there are additional policies that we 
can implement that are not as drastic as encouraging 
individuals to travel across oceans for a hip replacement.
    Today, over 46 million Americans, including over 766,590 or 
19% of Coloradans, lack health insurance. Despite this, the 
cost of health care is rising--pricing out more and more 
Americans. By 2015, we are expected to spend $1 of every $5 of 
our GDP on health care.
    Of course, not all of the 46 million are able to catch a 
flight to Delhi or Bangkok for medical care. That said, I do 
realize that our health care crisis has caused thousands of 
middle class Americans, who cannot afford health insurance and 
do not qualify for Medicaid and Medicare can, to travel abroad.
    I am very interested in hearing from our first panel--Mr. 
Howard Staab and Magi Grace--about they came to travel to India 
for cardiac surgery.
    In this week's Time Magazine, the cover story ``India 
Inc.'' illustrates the intensity of the growing medical tourism 
industry, by documenting the growing number of medical schools 
and hospitals that have popped up in the last decade.
    It has led to a dramatic transformation of mid-sized cities 
like Mangalore, India, where the medical schools number five, 
and there are at least four dental schools and 14 physiotherapy 
colleges.
    These new hospitals are fueling an industry that is 
expected to be at least a $2 billion annual industry by 2012. 
Today, according to the best statistics available to us today, 
over 100,000 foreign patients traveled to India in 2005 up for 
just 10,000 in 2000. These may not all be Americans, but we 
have every reason to believe that Americans are a significant 
percentage of this number.
    In the West, a country that is closer in proximity--
Mexico--provides Americans retirees, including Coloradans, with 
access to access to inexpensive cosmetic and dental procedures.
    What does this mean to our health care industry? What steps 
are we taking to ensure that Americans are protected and 
accessing high-quality care? How is the health insurance 
responding to this growing trend?
    I hope that the panelist on our second panel will help us 
reveal answers to these questions. Most importantly, I hope we 
can better determine if medical tourism can help us in solving 
the root cause of our health care crisis: the rising costs of 
health care.
    Again, thank you Chairman Smith and Ranking Member Kohl for 
holding this hearing.
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