The current health reform bills reportedly contain provisions that would allow administration officials to create prevailing wage and government worker classification policies. The effect of these policies would be to vastly increase the percentage of health care workers in unions, as is the case in Canada. As has been seen in other industries, greater unionization results in higher labor costs which translate into higher prices.
Given that medical tourism is already a growing practice, with reports of insurance companies paying for travel to low cost countries for some procedures, could this create added pressure on individuals to travel for joint replacements and cosmetic surgery?
Certainly, it's possible. The cost of hip replacement in India is $10-15,000, while in the US it's $30-50,000. Quality of care has improved in low cost countries as well. This situation is not unlike electronics and autos, where US labor cost disadvantages have created major shifts in production.
This trend could be cut short by greater government control over health care. A public option could easily restrict payments to non-US health care providers under the guise of safety. This would find broad acceptance from US government, physician, labor, and hospital groups.
However, this raises an interesting question- will consumers stand for this? It's possible this could go the way of public education- consumers trading control and choice for access by confiscating thousands of dollars and offering a "free" choice. But it's also possible that the prospect of creating a less efficient bureacracy (I don't think there's much controversy over that characterization of public schools) in healthcare may stall.
That said, the trend in healthcare will likely be more unionization, and higher labor costs. The idea that we're spending "too much" on healthcare may be more palatable when we consider an aging population that just wants to spend more on feeling better and living longer. But this population will certainly look for value, and travel for healthcare doesn't need to be limited to foreign dictators coming to the US for advanced care.
The beneficiaries of this travel could be Boeing (NYSE:BA) and perhaps some US hotel chains that set up shop near top foreign hospitals. While this may seem a tenuous scenario, who would have thought that, out of hundreds of millions of cellphones produced each year, not a single one would be produced in the US, with billions being invested in foreign manufacturing facilities and international logistics.
Disclosure: No positions