Sinners and Saints

 

Health Care Without Geographic Boundaries!

 

By Ernest Garfield

 

One of the great American myths is that we have the best health care system in the world!  In reality, treatment is dictated by health insurance and pharmaceutical companies, potential for law suits, the U. S. Food and Drug Administration, and a shortage of medical workers. 

 

Some health insurance companies are beginning to recognize the value of reduced cost and improved service of overseas treatment to their insured.  Blue Cross Blue Shield of South Carolina has a subsidiary that provides its members help with arranging travel and care in foreign locations.  According to Getahn Ward of The Tennessean, Aetna, United Health care and Blue Cross Blue Shield of Tennessee are exploring or offering a medical tourism product.

 

Some insurance companies in California embrace medical tourism to Mexico as a way to provide cost-effective treatment.  According to Michelle Matlock, Insure.com, the cost of a cross-border insurance program to insure a family of four in the U.S. by California-based Health Net is $631 a month; but if a family uses a physician in Mexico, the rate drops by more than 50% to $306 a month. 

 

To reduce our rapidly escalating cost of health insurance, overcome our shortage of health care personnel and improve health care service, insurance companies licensed in every state should provide coverage for medical treatment anywhere in the world. 

 

Participating in globalized access to health care is the only immediate solution that will allow a patient to receive the best and least expensive care, alleviate the shortage of U.S. medical workers and guarantee that employers save money for employee benefits.

 

Universal health care approved by Congress and our President Barack Obama is noble, but will clog our system badly.   Increased needs of aging baby boomers will create further strains!  Delays in treatment and inferior care will become standard unless we prepare our medical infrastructure. 

 

Health care has globalized.  The international competitive marketplace is rising to the occasion and introducing features and benefits to consumers and employers.  Comparable or superior medical outcome at lower costs than with our American system can be more readily available for middle to lower income citizens.

 

The World Health Organization ranks hospitals around the world.  The WHO report is a reflection of their assessment of health systems of 191 member states.  The performance assessment is based on a number of country-specific variables such as socio-economic, political and technological.  While WHO’s method of evaluation may raise questions, the U.S. nonetheless came in as number 37.  See Chart II to learn whose medical services are considered superior to ours.  In line with this, Americans trail 30 nations in life expectancy and the U.S. is 29^th in infant mortality.  These two dismal facts cannot be denied.

 

One of the major problems confronting our health care systems is that of the uninsured.  Congress offered its version of a solution.  There are around 45 million uninsured in the U.S.  While many are uninsured as a matter of choice, for most it is a matter of circumstance.  Many of the uninsured are foreign nationals who are here legally.  When they are admitted to a hospital, the hospital usually has to write off the care to bad debt and shift the cost to the insured paying for covered care.  The availability to an individual of low cost government guaranteed loans with strict underwriting standards, funded by financial institutions – not government funds, would allow and encourage immigrants to return to their country of origin for medical treatment.

 

Reuters reported that one out of six New Yorkers lacks health insurance, even though almost two thirds of these individuals are employed.  Many employers are dropping coverage or shifting costs to employees.  Few uninsured seek medical treatment until they are overwhelmed with a serious illness.  Dr. Thomas R. Frieden, New York City Health Commissioner, stated, “All of this adds up to people landing in emergency rooms with costly, devastating health problems that could have been prevented or treated.” 

 

According to Dr. Michael Horowitz of Medical Insights International, “Some 750,000 Americans sought offshore medical care in 2007, a number that is projected to rise to as many as 6 million in 2010.”  The Deloite Center for Health expects nearly 16 million to seek offshore medical care in 2015.

 

By comparison, according to the Deloitte Center for Health, 417,000 foreign residents traveled to the U.S. for treatment in 2007.  That number is expected to increase by fewer than 40,000 patients by 2010.  Cost is not the only reason for change in the direction of the flow of care seekers.  Often it is quality of care.

 

Medical tourism is gaining quick recognition in the United States. Although it is still quite new to Americans, the practice of traveling abroad to receive medical procedures is decades old in Europe, and has been practiced for hundreds of years in Asia.  And yet, few Europeans and Asians seek medical care in the U.S.

 

In addition, Dr. Horowitz says, “It has been estimated that the global medical travel industry currently generates annual revenues up to $60 billion, with 20% annual growth.  McKinsey & Company and the Confederation of India estimate $100 billion annual revenue by 2012.  Often, this includes partnerships with large U.S. based medical institutions.  As examples, Duke Global Health Institute has medical services and educational partnerships in China, Singapore, Tanzania and Uganda; while Johns Hopkins and St. Jude’s operate facilities in Singapore.

 

This medical globalization trend will continue to increase as our population ages and the cost of health care continues to rise in America.  Dr. Horowitz correctly points out that medical, economic, political and social forces are shaping the emergence of medical tourism.  In any event, globalized medical care is huge business and will continue to grow with or without our approval or our voluntary participation.  All Americans need to hop a ride on this train!

 

We need to understand why the public looks for medical treatment outside of the U.S.  Most often it is the availability of quality care at a lower cost elsewhere.  Price advantage is, of course, a major selling point.  The cost differential across the board is huge: only a tenth and sometimes even a sixteenth of the cost in the U.S.  Open-heart surgery could cost up to $150,000 in the US; in India’s best hospitals it could cost between $3,000 and $10,000.  See Chart I.

 

However, at times the reason is as simple as an immigrant living here who wants to be near family in time of need or is comfortable returning to his or her country of origin for treatment.  Many immigrants do not see any difference between traveling out side of U.S. borders for medical care than do our own citizens that travel across state borders to receive better care or care from doctors “back home”.  Immigrants of all nations understand the medical care available in their country of origin and often prefer it.  We have approximately 8 million Green card holders in the U.S.

 

Many of our neighbors from the South would happily return to their country of origin for medical treatment if we facilitate travel between our country and theirs; and if we support insurance companies, as some are now doing, to pay for treatment outside of our borders.  Many Canadians living in the U.S. return to their country of origin for medical treatment.  Numerous self insured domestic corporations pay for care of employees in foreign locations; and most certainly, multi-national corporations generally have local employees, Americans or otherwise, treated in countries where their factories and businesses are located.  Dr. Horowitz’s figures do not include the multitude of Americans treated in other countries by virtue of location of employment.  It is estimated that there are 6.6 million Americans that live abroad.  They don’t run back to the U.S. for most treatments.

 

Hispanic Americans now account for 15% of our country’s total population.  It is notable that there are nearly fifty thousand Hispanic physicians and surgeons in the U.S.  This constitutes a base of bilingual medical professionals who can readily communicate with Latin American counterparts to coordinate care.  Many Hispanics are among the uninsured and underinsured.

 

Dallas based Christus Health, a not-for-profit Catholic system, established six hospitals in Mexico to serve Mexican residents who live in communities along the Mexico-U.S. border.  A move by all Americans to facilitate and promote cross border medical treatment would show concern for their well-being and simultaneously reduce our health care cost.

 

According to Dr. Luis R. Leon Jr., assistant professor of clinical surgery in The University of Arizona College of Medicine and chief of vascular surgery at the Southern Arizona Veterans Affairs Health Care System, foreign-trained doctors account for one quarter of all active U.S. physicians.  The American Association of Physicians of Indian Origin states that 60,000 are from India.

 

Many foreign hospitals have been told that American health insurance carriers plan to approve global medical care.  Large masses of Americans will go outside of the U.S. for health care when that happens. 

 

Dr. Robert M. Wachter, Associate Chairman of the Department of Medicine at the University of California at San Francisco, said in the February 2006 New England Journal of Medicine, “Four things seem certain: the outsourcing of health care will grow; it will challenge traditional arrangements between patients and both physicians and institutions; it will require rapid and thoughtful development of new ethical, legal and quality standards; and it will be controversial.”

 

I have been unable to find any elected official or political candidate in anywhere in the U.S. that is considering this obvious alternative of insuring Americans.  It is up to us to help them open their eyes!

 

One solution to the health care problem is to return to the underlying American principle of free choice.   Where Do We Start? 

1.   Require insurance companies to expand to global health care coverage.

2.   Develop an appropriate liability level for medical malpractice for health care outside  of the U.S.

3.   Encourage and assist insurance companies to extend liability insurance coverage to patients who experience a medical malpractice overseas similar to the $1 million coverage provided by Barbados based AOS Assurance Company.

4.   Pass State and Federal legislation to allow Health Savings Accounts, Flexible Spending Accounts, Health Reimbursement Arrangements and other self-insured funds to be used on a global basis.

5.   Resolve the Hispanic issue by working with the Mexican Government, insurance companies and medical entities to encourage patients return to their country of origin for medical treatment should they want to do so.

6.   Pass State and Federal legislation to encourage banks to extend loans with a government guarantee, subject to strict underwriting rules and creditworthiness, to all seeking medical care outside of the U.S.

7.   Email the White House and Congress with your opinion. http://www.whitehouse.gov/contact

https://writerep.house.gov/writerep/welcome.shtml; http://www.senate.gov/general/contact_information/senators_cfm.cfm

Chart I

Comparable Costs

Procedure	United States*	India*	Malaysia*
Heart Bypass	$130,000	$11,750	$18,500
Heart Valve Replacement	$160,000	$11,000	$12,500
Angioplasty	$57,000	$11,000	$13,000
Hip Replacement	$43,000	$10,000	$12,000
Hysterectomy	$20,000	$5,000	$6,000
Knee Replacement	$40,000	$9,500	$13,000
Spinal Fusion	$62,000	$7,500	$9,000

                                                                                                                                * Approximate costs

 

Chart II

WHO Rankings

1	France	65	Uruguay	129	Peru
2	Italy	66	Hungary	130	Russia
3	San Marino	67	Trinidad and Tobago	131	Honduras
4	Andorra	68	Saint Lucia	132	Burkina Faso
5	Malta	69	Belize	133	Sao Tome and Principe
6	Singapore	70	Turkey	134	Sudan
7	Spain	71	Nicaragua	135	Ghana
8	Oman	72	Belarus	136	Tuvalu
9	Austria	73	Lithuania	137	Ivory Coast
10	Japan	74	Saint Vincent and the Grenadines	138	Haiti
11	Norway	75	Argentina	139	Gabon
12	Portugal	76	Sri Lanka	140	Kenya
13	Monaco	77	Estonia	141	Marshall Islands
14	Greece	78	Guatemala	142	Kiribati
15	Iceland	79	Ukraine	143	Burundi
16	Luxembourg	80	Solomon Islands	144	China
17	Netherlands	81	Algeria	145	Mongolia
18	United Kingdom	82	Palau	146	Gambia
19	Ireland	83	Jordan	147	Maldives
20	Switzerland	84	Mauritius	148	Papua New Guinea
21	Belgium	85	Grenada	149	Uganda
22	Colombia	86	Antigua and Barbuda	150	Nepal
23	Sweden	87	Libya	151	Kyrgystan
24	Cyprus	88	Bangladesh	152	Togo
25	Germany	89	Macedonia	153	Turkmenistan
26	Saudi Arabia	90	Bosnia-Herzegovina	154	Tajikistan
27	United Arab Emirates	91	Lebanon	155	Zimbabwe
28	Israel	92	Indonesia	156	Tanzania
29	Morocco	93	Iran	157	Djibouti
30	Canada	94	Bahamas	158	Eritrea
31	Finland	95	Panama	159	Madagascar
32	Australia	96	Fiji	160	Vietnam
33	Chile	97	Benin	161	Guinea
34	Denmark	98	Nauru	162	Mauritania
35	Dominica	99	Romania	163	Mali
36	Costa Rica	100	Saint Kitts and Nevis	164	Cameroon
37	United States of America	101	Moldova	165	Laos
38	Slovenia	102	Bulgaria	166	Congo
39	Cuba	103	Iraq	167	North Korea
40	Brunei	104	Armenia	168	Namibia
41	New Zealand	105	Latvia	169	Botswana
42	Bahrain	106	Yugoslavia	170	Niger
43	Croatia	107	Cook Islands	171	Equatorial Guinea
44	Qatar	108	Syria	172	Rwanda
45	Kuwait	109	Azerbaijan	173	Afghanistan
46	Barbados	110	Suriname	174	Cambodia
47	Thailand	111	Ecuador	175	South Africa
48	Czech Republic	112	India	176	Guinea-Bissau
49	Malaysia	113	Cape Verde	177	Swaziland
50	Poland	114	Georgia	178	Chad
51	Dominican Republic	115	El Salvador	179	Somalia
52	Tunisia	116	Tonga	180	Ethiopia
53	Jamaica	117	Uzbekistan	181	Angola
54	Venezuela	118	Comoros	182	Zambia
55	Albania	119	Samoa	183	Lesotho
56	Seychelles	120	Yemen	184	Mozambique
57	Paraguay	121	Niue	185	Malawi
58	South Korea	122	Pakistan	186	Liberia
59	Senegal	123	Micronesia	187	Nigeria
60	Philippines	124	Bhutan	188	Democratic Republic of the Congo
61	Mexico	125	Brazil	189	Central African Republic
62	Slovakia	126	Bolivia	190	Myanmar
63	Egypt	127	Vanuatu
64	Kazakhstan	128	Guyana

 

Abolish State Corporate Income Tax on Financial Institutions

 

 

Abolishing state corporate income tax on financial institutions would be viewed wrongly!  Opponents would label it as Arizona’s version of a bank bailout. 

 

Yet, the cost would be negligible and every Arizonan would benefit financially!  Each of us would get an annual pay raise ranging from $4,000 to $6,000 or more – an increase in total per capita personal income annually of $19 to $38 billion.  State personal income tax revenue would increase by $248 million to $525 million.

 

Changing out-dated laws that determine the flow of bank deposits in and out of Arizona will help balance our state budget and transfer wealth to our citizens!  Our neglect to recognize today’s financial realities because of political fear has reduced tax revenues, stunted per capita income growth, eliminated job opportunities, halted economic potential and stifled capital availability for small businesses in Arizona.

 

States that recognize the effect of corporate income tax on financial institutions and make provisions have outstripped economic growth in Arizona.  We live in a competitive world!

 

Wyoming is 6^th in the U.S. in per capita income at $45,705; Washington is 12^th at $41,751; Delaware is 17^th at $39,817; Nevada is 20^th at $38,578; South Dakota is 25^th with $36,935; and Arizona is 40^th with $32,935. 

 

Wyoming beats us by $12,770 per person; Washington by $8,816; Delaware by $6,882; Nevada by $5,543; and South Dakota by $4,000.  These are real dollar differences that affect Arizonans’ standard of living and purchasing power.  We can give an annual pay raise to every Arizonan if we eliminate all corporate income tax on financial institutions. 

 

Financial institutions, as an example, will flock here if we put banks on a level playing field with credit unions.  Credit unions do not pay Arizona income tax.  Arizona chartered banks do.  But believe it or not, because none of the big banks are headquartered here, our local banks paid a scanty $20 million in state income tax in 2008 and very little if at all is due for 2009 towards our $9.6 budget.   

 

Compare the differences in the amounts of bank assets housed in Arizona, Nevada and South Dakota to see the effect if we abolish the tax!  Banks in Arizona held a combined $61.8 billion in deposits as of June 30, 2004.  Five years later, June 2009, the growth reached only $82.3 billion, a 25% increase, in spite of one of the greatest economic booms ever experienced by Arizona.  During this same period of time Nevada banks grew from $40.7 billion in deposits to $195 billion, a growth of more than 479%. 

 

Nevada, population 2,495,529, a much smaller state than Arizona, altered its corporate income tax so financial institutions raced to set up subsidiaries and headquarters in a tax haven.  They took their wealth and high paying jobs with them to Nevada.

 

As of June 2009 Arizona had only 2 locally chartered banks (both owned by out-of-state interests) with branches out of state.  The 2 banks had 21 out-of-state branches that controlled $741 million out-of-state deposits. 

 

Nevada by comparison had 4 banks with 1,040 out-of-state branches that controlled more than $180 billion out-of-state deposits.

 

South Dakota, with a population of 781,919 enticed a Citibank subsidiary to move there.  Subsequently, South Dakota went from $15.7 billion in deposits in 2003 to $86.8 billion in 2009, a 553% increase.  Their deposits increased by $12 billion from 2008 to 2009.   A much, much smaller state than Arizona now has more in deposits than does Arizona.  An added bonus is that South Dakota has 6 banks with 3,495 branches that control $304.7 billion out-of-state deposits.

 

Both South Dakota and Nevada have developed extensive information about the value financial institutions bring to their respective states in the way of economic dynamics, including added taxable wages from job creation.  These states have benefited from favorable tax treatment that is an attraction to major financial institutions.  Even tiny Delaware, with a population of 853,904, has $170.6 billion in deposits and 5 banks with 1,045 out-of-state branches that control another $77.3 billion out-of-state deposits.   

 

The wealth controlled in the states of Nevada, South Dakota and Delaware is a phenomenal amount on a per capita basis.

 

Yes, we can blame some of our per capita lag on our immigration issue!  But, our problem stems more from legislative neglect of the power of receptive finance laws.  This forces our citizens to earn such a small income.  Further, our local control of bank assets has gone from 95% at the time I was Arizona State Treasurer down to about 4% to 5%. 

 

We need to keep Arizona money in Arizona!  Here our money will generate greater sales tax revenues.  Our deposit growth is currently limited and Arizona deposits are sucked out of state.  We no longer control our own economic destiny in Arizona.  Decisions are made for us by out-of-state money centers.  We can reverse this trend by providing a statutory environment that will encourage businesses and banks to headquarter here or to move subsidiaries to our state.

 

We formed the Arizona Financial Institutions Task Force in 2006 to help State Senate Majority Leader Chuck Gray address bank related economic solutions for Arizona.  Senator Jim Waring has been a regular attendee.  I am chairman of the Task Force. Candace Wiest, President & CEO of West Valley National Bank, a former member of the San Francisco Federal Reserve is our Vice-chair.  Our members are highly successful local business people and community bank presidents.  Our mission:  To provide an independent assessment of opportunities for financial institutions to improve the business climate in Arizona.

 

Our Task Force believes we will act as a magnet to major global financial firms that want to locate to the U.S. as well as to out-of-state banks and their subsidiaries if we eliminate state income tax as an obligation for locally headquartered businesses.  Financial institutions with sizable state corporate income tax expenses would trip over themselves to move their headquarters to Arizona because this change would increase the value of their charters and therefore the value of their stock.

 

Can you imagine the money multiplier effect we are losing by not retaining control over our own deposits?  Each dollar reproduces itself by 4 to 10 times when loaned locally.  It is like giving Arizona our own printing press.  Our state is losing out on the maximum multiplier effect that bank dollars can create while other states benefit from what should be ours.

 

In addition, without charging state corporate income tax, we may encourage some of the big guys that Congress is bailing out of their holes with billions of our dollars to move here.  I believe we can capture some of that money for Arizona.

 

Per Capita Personal Income

	2009	State		2008	State		2007	State		2006	State		2005	State
		Rank			Rank			Rank			Rank			Rank
Arizona	32,935	43		34,339	41		34,365	36		33,423	36		31,491	36
Delaware	39,817	17		40,375	18		39,932	18		39,046	15		37,001	14
Nevada	38,578	20		40,936	17		40,930	15		39,231	14		38,117	11
South Dakota	36,935	25		38,644	25		36,428	27		33,718	31		33,117	26
Washington	41,751	12		42,747	13		41,919	11		39,550	13		36,734	16
Wyoming	45,705	6		48,580	5		46,726	6		44,677	5		39,446	6
Source: U.S. Dept. of Commerce, Bureau of Economic Analysis.  Released March 2010.