For now, however, I want to begin a review of the law of a number of popular medical tourism destinations for two reasons: first, if a choice of law provision ever comes under a serious challenge, a Court will need to understand what the alternative is and whether enforcing that choice of law provision will limit rights the Court believes local laws mean to preserve.  Second, in the absence of a choice of law provision, a defendant seeking to remove a case from a U.S. court to a preferred forum will need to rely on a motion for forum non conveniens and show that the proposed venue provides an “adequate alternative forum” where a plaintiff can still have his dispute properly heard and compensated.  Although the principles of a motion for forum non conveniens are easily set out, a careful client will want to know that U.S. courts have, in fact, already opined on whether a forum legal system is indeed adequate.

New Zealand and the Accident Compensation Corporation

In 1974, New Zealand adopted a unique, publicly funded, national no-fault accident insurance system which provides medical and wage compensation for almost any kind of personal injury, including personal injury caused through medical malpractice.  The awards are governed by a comprehensive regulatory mechanism and awarded through a straightforward administrative process. The compensation is dramatically less than what might be available from a sympathetic U.S. jury.  Compensation is limited, but all but guaranteed.

Only in the most wonton cases of deliberate injury is a private action in tort allowed in New Zealand courts.  Short of that, a citizen of New Zealand’s only choice is to file a claim with the ACC.  There are still administrative reviews if a doctor is accused of malpractice — professional charges that NZ physicians take very seriously — but very little chance of being personally sued for a bad outcome.  While a New Zealand hospital or physicians group might be able to arrange insurance to cover them against losses in a U.S. courtroom, it is far better to rely on a system which limits excessive awards and one for which they have already paid.

Despite the limited awards and administrative — rather than adversarial — process, Courts have shown no hesitation in dismissing cases brought in the United States in favor of resolution under the New Zealand ACC.

-  In Lueck v. Sunstrand Corp., 236 F.3d 1137 (9th Cir. 2001), following a fatal commuter airline crash in New Zealand, a number of plaintiffs sued the manufacturer of the landing gear in the federal courts in Arizona.  In upholding the lower court’s decision to grant the motion to dismiss for forum non conveniens, the appeals court went through an ordinary analysis for determining whether to dismiss.  Among other things, the court found that witnesses and evidence could be made available in New Zealand, that the courts in New Zealand were competent to handle the U.S. legal questions, and that defendants were willing to have their case adjudicated in New Zealand.

Still, to determine whether or not New Zealand’s compensation system was an “adequate alternative forum” even where the plaintiffs “candidly admitted that the impetus for the [U.S.] lawsuit [was] money” it was only necessary to establish that the forum “provide the plaintiff with some remedy for his wrong.”  Id. At 1144-45.  Indeed, it is only under  “’rare circumstances . . . where the remedy provided by the alternative forum .. . is so clearly inadequate or unsatisfactory, that it is no remedy at all,’ that this requirement is not met.’”  Id.

In a U.S. District Court case in Alabama, a group of New Zealand women suing for injuries related to silicone breast implants had their claims dismissed from a federal court in Alabama in favor of resolution under the ACC despite the fact that he ACC is an administrative remedy rather than a judicial one.  (In re Silicone Breast Implant Litigation, 887 F. Supp. 1469 (D. Ala. 1995).

The new health care law adds a new Section 2718 to the Public Health Service Act setting out that health insurance companies, starting in September 2010 and through the end of 2013, will be required to refund all enrollees the amount by which premium revenue expended for non-claims costs exceeds 20% for group policies and 25% for individual policies.

If anything, administering an overseas medical program would be more costly than handling domestic claims. But if the administration costs are identical on a per-procedure basis, the ratio of administrative costs to claims-payments begins to curtail the potential savings.

As an example, if a cardiac procedure in the U.S. costs $40,000 for the procedure and $10,000 to process, the insurer is then at the limit of its administrative overhead and would owe no refund to policy holders.  If, however, that patient can be sent to India for a procedure costing just $20,000, the ratio of administrative costs change substantially.  Instead of an acceptable $5,000 in administrative overhead (i.e., 20%), with no administrative savings by the insurer, it now has to bear 33% overhead (i.e., $10K overhead on a $20K procedure).

At the margin, fully $5,000 of the $20,000 in savings would have to be refunded to policy holders.  While the health insurer would save money overall, the cost advantage of taking the procedure overseas is dramatically limited by this provision.  Indeed, individual states would be allowed to set the percentage of allowable administrative overhead at less than 20%.

The federal regulations will indicate how this provision is implemented, but to maintain their competitive advantage, overseas medical tourism providers should begin to consider how to take on more of the administrative functions now operated by insurers.  But to the extent the federal regulations allow it, insurers will almost certainly look to limit their exposure to this penalty reimbursement clause.  A smart insurance company will look for ways to outsource administrative costs along with the medical procedures themselves.  A savvy medical tourism provider looking to keep their competitive advantage will do what they can to assist them.

This tax offers medical tourism providers an immediate 5% advantage on most elective cosmetic procedures. Indeed, the tax advantage alone on a potential $10,000 treatment program in the U.S. will now cover most of an airline ticket.  And since this is an additional administrative burden on the physician — who is now responsible for collecting and remitting the tax to the US Treasury — the 5% tax will likely result in a slightly-more than 5% increase in the cost of the procedure in the United States.

Moreover, this tax is immediately effective and retroactive to January 1, 2010.  While this may not already be in the minds of your potential clients, it is already a bottom-line expensive for your U.S.-based competition.

For now, though, I will start looking at the language itself.  To start, I am going make comments about some of the more obvious provisions: Section 9107, for instance, imposes a 5% tax on non-reconstructive cosmetic surgery.  That’s an additional price advantage right there.  On a $10,000 procedure in the US, tax avoidance alone will cover most of the airline ticket.  There are some interesting issues with dental procedures as well.  That said, to the extent you see a provision that catches you eye, make a note in the comments and I will move it up the list.

It wasn’t her money and she didn’t care to wait in line.  And thirty minutes later when they called my wife in from the waiting room, there was the woman being wheeled straight from the ambulance into a bed.  Not clear to me if that was medicare or a government-funded retirement health benefits or a woman very amenable to calls from collection agents, but she certainly had no expectation she was going to ever pay $1,500 for a three mile ambulance ride.

It’s one of the big problems in any health care system.  No one has any price sensitivity built into the system.  Indeed, a recent study shows that out-of-pocket health care expenditures in the United States has dropped from around 46% of all medical expenses in 1965 to just 11.9% in 2008.

But one of the great dynamics in medical tourism is the ability (or at least the attempt) to provide a service that is price competitive without any substantial sacrifice of outcome.  The issue for any medical tourism provider in the wake of the success or failure of U.S. health care reform (whether the Obama-style plan is enacted or not) is to be mindful of where the price sensitivity still exists.  If a patient in the U.S. has no expectation that he will have to pay out of pocket for an operation, he’s very unlikely to seek an alternative overseas, no matter how of other people’s money it might use.

Unclear how much these poor women were scammed out of, but if price competition from medical tourism can help patient who would ordinarily seek procedures from a reputable physician, it also — at least on the margin — can help avoid awful situations like this one.

There will always be quacks, here and abroad.  But if patients know about a procedure from a reputable physician overseas at a given price point, it is going to limit how much these butchers can squeeze out of folks who were apparently this desperate for an elective procedure.

A few thoughts on brain and spinal cord medical tourism in Korea.  Also, here.