Friday, May 25, 2007

Cost of Medical Diagnostics

A few months back I had an emergency room visit in Fairfax which set me back by a few thousand dollars. Since my insurance does not cover a lot I did not follow up my visit with further diagnosis. I wanted to wait to go to India to get it done because I was sure it would be cheaper there, and I was right (read about my experience here). Medical services do cost a lot less in India than in the US. I wonder what the reason is!! The machines are imported from abroad, so setup costs are the same I guess. There is certainly a labour component. But there were only two technicians in the procedure room. How much could that alone be? I guess there are a lot of regulatory hurdles in the US that add to the costs. Even so, there is some other component which is adding to costs in the US. With such huge price differences (MRI consultation $500, procedure $500 in the US, consultation $1, procedure $100 in India) and similar quality treatment no wonder medical tourism is becoming more and more popular. Even if the $2000 round trip ticket was added to expenses it would work out cheaper in countries like India. So, arbitrage would bring prices closer. But we do not observe that either which implies there is something missing from this picture. People do have the elephants and naked saints impression of India. They fail to realise how modern we are. That could be a reason why they do not want to travel here. Americans at least know that Indian doctors are pretty good, since several Indian born and educated doctors have made their mark in American hospitals. There is an information component to this lack of arbitrage. However, seems to me that there is an interesting economic phenomenon here that deserves some scrutiny.

1 comment:

lvprasad said...

Healthcare is already a big industry in india and would continue to be one of the pioneering fields here. Thank god i have never visited a surgery (local name for a hospital here) and the way these guys work, it really sucks. At times, i feel that there is too much of process and this red-tape is available only in welfare states. In India, as there is no question of turning into a welfare state, healthcare is readily available as long as you have money.