Monthly Archives: February 2014

Beware the IRS: What to Know Before Using Medical Tourism for Group Health Plans

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From the ‘I didn’t know that department’:

Last week, I happened to find on my computer, a file I downloaded in late January entitled, Medical Tourism and Group Health Plans by Marcia Wagner, an ERISA lawyer in Boston. I am not sure when exactly Ms. Wagner wrote this article, but I was intrigued to find out what she had to say about medical tourism and group health plans.

Much of the first page of her article is basic information that is already known about medical tourism, and some of the data she presents may be debatable, but what I found on the second page was the most interesting part of her article.

The article was written in the form of a question and answer format, so the question at the top of page two, “Are medical tourism benefits taxable to participants?”, was what I focused my attention on.

According to Ms. Wagner, any amounts paid by a group health plan for the hospital stay and expenses associated with the medical procedure are not taxable to the employee. However, costs associated with transportation and lodging are unclear. Ms. Wagner states that costs associated with travel are treated as medical care, as are costs associated with lodging (provided there is not an element of personal pleasure, recreation or vacation).

Ms. Wagner cites IRS Code Sections 105(b), 213(d)(1) and 213(d)(2) as proof of this. These sections can be found in the following two IRS documents: Publication 502 – Main Content and Topic 502 – Medical and Dental Expenses.

If the group health plan pays these expenses, Ms. Wagner says, then the payments would not be taxable to the participant. This would go a long way to get employees on-board with medical tourism, yet there is a catch to this as we will soon learn.

This assumes, she continues, that with respect to lodging, there is no element of personal pleasure, recreation or vacation. However, in order to be exempt from taxation, the lodging must be essential for medical care and the medical care must be provided by a physician who is licensed and providing services within the US. (Code Sections 213(d)(2) and 213(d)(4). Therefore, Ms. Wagner states, the cost of most lodging in a foreign country would most likely be taxed to the employee.

This is where some employers may decide it is too risky and too burdensome to bother with to save some money on expensive surgeries.

In addition, if a doctor prescribes an operation or other medical care, and the taxpayer (i.e., employee) chooses for purely personal reasons [Emphasis added by Wagner]to travel to another locality for the operation or other medical care, Ms. Wagner writes, then medical care does not include the cost of transportation or lodging (unless as part of the hospital bill). It is Ms. Wagner’s opinion that any decision to travel to a foreign country for medical care would be considered by the IRS to be for purely personal reasons, especially if the participant receives a financial incentive. Here is where the catch comes in, as she states on the third page.

“Any incentives that group health plans or plan sponsors pay to participants electing medical tourism would be taxable to the participants.”

Ms. Wagner goes on to state that costs for travel and lodging would be taxable to the participant; yet without any guidance, the taxability of transportation and hotel expenses related to medical tourism is unclear currently. Meals, however, are a different story, as they are taxable if they are not part of inpatient care.

Finally, Ms. Wagner discusses the issue of prescription drugs. She says that the cost of a prescription drug is not taxable to the participant if it is a drug or biological which requires a prescription issued in the US by a physician licensed and performs the medical service in the US. Therefore, any prescriptions issued and filled in a foreign country would be taxable.

Ms. Wagner’s article goes on to discuss other issues with medical tourism and group health plans, but it would seem that the IRS has made it somewhat clear, if not yet definitive, that medical tourism under group health plans are taxable to the employee who elects to take advantage of this option offered to them by their employer. How companies currently engaged with medical tourism abroad for their group health plans are dealing with this issue is not exactly clear, and I have not found or heard of any company not doing so because of these IRS rules.

If there are anyone out there who does know how companies are dealing with this issue, it would be very informative to the rest of us. It would seem to this writer who is not a tax accountant, nor a tax lawyer, that until the medical tourism industry here in the US can figure out how to deal with this, they may find getting employers and their employees to choose medical tourism for health care will be difficult, if not impossible. Large employers may just pay the taxes themselves as a courtesy to their employees, but smaller employers may balk at doing so. And that is where medical tourism must look to attracting if it really wants to make an impact on health care in the US.

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Can Medical Tourism Relieve Stress in Workers’ Comp?

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That was the first thing that popped in my mind this afternoon when I read about a study in Australia that was first published in JAMA Psychiatry last week. That study, Relationship Between Stressfulness of Claiming for Injury Compensation and Long-term Recovery A Prospective Cohort Study, by Grant, O’Donnell, Spittal, Creamer, & Studdert was the subject of an article by Kathryn Doyle in Reuters Health. Robert Wilson was the person who brought the study to my attention when I received his “Bob’s Cluttered Desk” blog on WorkersCompensation.com’s Daily Report in my email this afternoon.

Both Doyle and Wilson’s articles, Stress of filing injury claims linked to poorer health later and Does Claims Stress Increase Disability? states that researchers at Stanford University found that the stress of filing a claim for an injury may actually increase the severity of the disability over the long term. A survey of accident victims found that stress often comes from confusion over the process, delays and related medical assessments. The researchers found, it was reported, that those who “were most stressed by filing a claim tended to have higher levels of disability years later”.

Doyle and Wilson both quoted David M. Studdert of Stanford as saying that, “The novelty of this study was to look within a group of claimants to test whether those who reported experiencing the most stress also had the slowest recoveries”. The researchers found they did, according to Studdert.

“A random selection of more than 1,000 patients hospitalized in Australia for injuries between 2004 and 2006. Six years later, 332 of the patients who had filed for workers’ compensation or another accident claim told the researchers how stressful the process had been.”

A third of the claimants, the study found, reported high stress form understanding the claims process and another third were stressed by delays in that process. A slightly smaller proportion, the study said, said repeated medical evaluations and concern for the amount of money they would receive were sources of stress.

Studdert and his fellow researchers made the point of recommending that programs such as workers’ compensation could be redesigned to respond faster and make it easier for patients to understand. I am relatively sure that had this study been conducted in the US, and with a cohort of native-born and foreign-born workers, the results might be somewhat the same. It is why I have repeatedly said in previous posts that having workers treated in home country or similar facilities where the language and culture are the same or nearly the same, would not only relieve much of the stress of filing a claim, but with dealing with the stress of surgery and recovery.

Doyle reported that negative attitudes from doctors, friends, family or colleagues, did not seem to be common sources of stress. People with the most stress tended to score higher on a disability scale and have higher levels of anxiety and depression, as well as lower quality of life, Doyle said the researchers reported in the JAMA Psychiatry paper.

David Studdert even said that, “While it’s intuitive that the compensation process is going to be stressful for some claimants, what is less clear is whether that stress has a substantial impact on recovery many years after the injury.” Studdert also said, “We were surprised by the size of the compensation effects on outcomes like level of disability and quality of life – they were fairly strong.”

Doyle also wrote that the researchers took into account that some patients seemed to be more vulnerable to stress from the start, they found that the link between claim stress and long-term recovery as similar but not as strong. Michele Sterling, who studies injuries and rehabilitation at the University of Queensland in Herston, Australia said, “There is much debate at the moment about the role of ‘systems,’ in this case ‘compensation systems’ on health outcomes. She was not involved with the study conducted by Stanford University.

Sterling went on to add that, “If it can be established which parts of the process causes stress and/or poor outcomes or recovery then the system could look at targeting these specific areas and improve them”. Finally, Sterling told Reuters Health that “Some insurance regulators are already trying to do this in some areas.”

It is interesting to note here that the study deals with severe injuries that required hospitalization. Whether they required surgery is not clear, but is probable. This is probably where medical tourism can play a role, because if the surgery is performed in a facility that treats medical tourism patients, and recovery can be made in serene and restful surroundings, then the level of stress of the patient would be that much more reduced, even if the process of filing a claim and going through the claims process is still stressful. That would certainly be true for patients suffering through harsh winters like the ones we are experiencing in much of the US this winter.

Robert Wilson’s take on this study is also interesting, at least to myself, since I was once involved with workers’ comp claims, and Auto No-Fault claims, and it was while I handled No-Fault claims that I encountered a claimant who exhibited extreme stress from having an accident with his limousine, which my company insured for Automobile insurance at the time.

This gentleman was from Egypt and was a Coptic Christian, whose job driving executives and business people in what are called, ‘black cars’, must have been stressful enough having to negotiate Manhattan traffic and hurried professionals. The fact that the accident occurred and he was unable to work as a result of it, caused him more stress, and by the time he came to our office to be examined by our medical expert, he broke down in tears right in front of my eyes.

Now I am someone who never wants to see anyone cry when they are hurt and cannot work, so before he saw our doctor, I spoke to the doctor and told him about this man. I appealed to the doctor out of human decency and out of our shared cultural heritage of caring for those who are suffering, since our culture has suffered a lot in our long history, but that is for another blogger to discuss. I cannot recall what the outcome of this man’s case was, as it was a long time ago, but I do hope that he found some solace in knowing that there were good people trying to help him.

Back to Robert Wilson.

Wilson was struck by the finding of the study where the respondents said that, “repeated medical evaluations and concern for the amount of money they would receive [Emphasis added by Wilson] were sources of stress.” Wilson reiterated something he has said many times, that people rarely ask how they can get better, but rather how much they will make.

Wilson believes that the system is not and was never designed to fully meet that goal. He says that the workers’ compensation industry needs a new identity and a focus on Return to Function. Some of the prescriptions he recommends are:

  • Changing the name of Workers’ Compensation to Workers’ Recovery, where recovery specialists would work with workers with the goal of restoring whatever function was possible to their lives.
  • Better communication, more clear explanations, and increased expectations for recovery can be instilled to those coming into the system

Finally, Wilson quoted from the source article about the study from Katherine Lippel, of the University of Ottawa , where she studies occupational health and safety law. Lippel said, “I think the point that needs to be made is that those managing these systems, insurers of workers’ compensation boards, or no-fault automobile compensation schemes, should realize that they are undermining their own mission of getting workers back on their feet if the process is unnecessarily stressful.”

Medical tourism cannot make the process of filing a claim or the claims process itself less stressful; that is the responsibility of the industry itself, the regulators of the system and the insurance companies that write the policies or the Third Party Administrators who handled the claims for the insurers or employers. What medical tourism can do, and should do, is to make the final stage of the claims process, surgery and recovery, as stress-less as possible, and to return the injured worker to a state of health similar to what they experienced before their injury. This would serve the medical tourism well and would win it many more supporters and more repeat customers.

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Thank you so much,

Richard

There Are No Words

There are no words I can add to the following post from Joe Paduda, so I will let him speak for himself today. All I will say is that I am very grateful for his recognition of me as a dedicated individual who seeks to change how workers’ compensation works in the US.

Here is Joe’s excellent post from today:

http://www.joepaduda.com/2014/02/i-heart-workers-comp/

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“We’re No. 1!”, NOT! — Why the US Health Care System is Not the Best in the World and Why Implementing Medical Tourism into Workers’ Comp Could Improve Outcomes

A discussion posted yesterday in the LinkedIn group, International Health Professionals – Certification and Education by the group manager, Scott Schneider, linked to a report by Bloomberg.com that ranked countries by the efficiencies of their health-care systems. The report titled, Most Efficient Health Care: Countries, listed 48 countries from around the world and ranked each country by three criteria:

  • Life expectancy (weighted 60%),
  • Relative per capita cost of health care (30%); and
  • Absolute per capita cost of health care (10%).

The countries were then scored on each criterion; the scores were weighted and summed to obtain their efficiency scores. Relative cost was defined as health cost per capita as a percentage of GDP per capita. Absolute cost was defined as total health expenditure, which covers preventive and curative health services, family planning, nutrition activities and emergency aid. The countries chosen had populations at least five million, GDP per capita of at least $5,000 and life expectancy of at least 70 years of age.

The data was acquired from the World Bank, the International Monetary Fund, the World Health Organization and the Hong Kong Department of Health, and is current through November 2013, according to Schneider.

As seen in the table below, each country is ranked by their efficiency score, and each country’s life expectancy, health-care cost as a percentage of GDP per capita, and their health-care cost per capita are shown as well.

The US is ranked 46th overall, with an efficiency score of 30.8, just below that of Iran (yes, that’s right, Iran – you know, the country that calls us ‘The Great Satan’). US life expectancy is 78.6 years, which places it below Chile and above the Czech Republic, in 23rd place. Health-care cost as a percentage of GDP per capita for the US is 17.2%, which is the highest of all countries listed, so at least in one aspect we are number one, just not in the way most Americans think, especially those in the workers’ compensation industry who have criticized this writer for daring to suggest that medical tourism belongs in workers’ compensation because it promises lower cost health care with equal or better outcomes than what the American system provides currently.

Finally, the US is not number one in health-care cost per capita, but second at $8,608, just behind Switzerland at $9,121. While we are not the most expensive health-care system, we certainly do not get a lot of efficiency from the money we are spending. It is interesting to note that many of the countries with a higher efficiency score than the US are some of the major players or rising stars in the medical tourism industry. One major player that is not mentioned is India and one rising star that is not listed is Costa Rica. In the case of India, their population is certainly greater than five million, but it is likely that GDP per capita is not at least $5,000 and that life expectancy is less than 70 years of age. According to NationMaster.com, Costa Rica’s population was 4.57 million as of 2011, but their GDP per capita was $11,296.06 as of 2010.

So whenever you hear someone say “We’re No. 1”, especially when they are talking about health care, you can tell them, “no, we’re not”, and give them data to back that up. Chauvinism and exceptionalism are dangerous attitudes to hold at any time, but when a person’s health is at stake, and the need for care is not emergent, then perhaps it would be wise and prudent to consider alternatives to expensive surgeries that do not guarantee better outcomes just because they are more expensive. The old adage, “you get what you pay for” does not necessarily apply to health care, and the data bears that out. It is time the workers’ compensation industry admits it.

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IME Doctor Selection — What to Know Before Providing Medical Tourism Services to Employers or Insurance Companies in Workers’ Comp

Perhaps one reason why medical tourism has yet to penetrate the ‘Iron Curtain’ that surrounds the American workers’ compensation system is that unlike health care, workers’ compensation is very adversarial in nature and by design.

To illustrate, imagine a worker gets hurt on the job and goes to his boss to file a claim. Now, the boss has to have someone in his office file the necessary paperwork to the appropriate state agency and the employer’s insurance carrier to get the claim processed. If the employee loses more than seven days of work (the typical length of time is called a ‘waiting period’ in most states), the employee begins to collect benefits, and if the injury is serious, will hire an attorney to represent him in all future litigation and adjudication of his claim.

The employer too will get an attorney, either through his insurance company, or on his own. Finally, the insurance company will also have an attorney to represent their interests in the claim process, especially if the employer has a separate firm defending them. What then takes place in the course of the claim is a “three-ring circus”, with the injured worker in one ring, the employer in another, and the insurance company in the third and final ring. And you wonder why it is so screwed up?

Alongside all of these parties are companies that assist the employer or the insurance company to reduce their claims costs or to figure out the best way to minimize the losses to the insurance company’s bottom-line that a major workers’ compensation claim will likely cause the insurer.

One such company is Amaxx Risk Solutions, Inc., and the Principal, Michael Stack has written a short article recently on WorkersCompensation.com’s Workers Comp Blogwire, about how an employer or insurer can help their case by having the adjuster choose the right IME doctor. An IME, or Independent Medical Exam is usually ordered by the insurance company or the injured worker’s lawyer to determine if the injury is compensable, that is, able to be paid for by the insurance company.

The article, Your IME Doctor Selection Can Make or Break Your Case, advises employers and insurers on how to get the adjuster to choose the right doctor for the independent medical exam. Back in April, I wrote an article about how self-insured employers can choose the right adjuster, now Michael Stack’s article tells employers and insurers what to do when needing a good IME doctor.

According to Stack, adjusters choosing the wrong IME doctors are one of the common errors he notices in workers’ comp files. Choosing a practicing specialist is the best IME doctor, he says. For example, if there is a tough wrist injury surgery ordered and you need to see if the surgery is related to the comp case, then using a general orthopedist who no longer performs surgery or who is not board certified is not the best choice. A practicing physician who still performs many surgeries, especially wrist and hand surgery as a specialist, and is up-to-date on the latest techniques and practices is the better choice, Stack says.

This error is due to the fact, Stack writes, that the adjusters are not familiar with their territory. This maybe because they are in a different state, are new to claims, or have a habit of letting the IME marketer choose the doctor, especially when the marketer does not know anything about the case.

However, he adds, if your goal is to get a post-operative patient back to work and you are only interested in work restrictions, then many doctors would suffice. Treating doctors are hesitant to put their post-op patients back to work based on the history the claimant gives them at the appointment. Not educating the doctor about light duty programs is why an IME is needed. An IME is a valuable tool for the adjuster, so you need to choose the correct one early and stick with them, Stack goes on to say.

Using a nurse case manager when the employer or insurer is not familiar with the IME doctors in the area is another recommendation Stack makes. These nurse case managers have seen a lot of these doctors because that is the territory they work, and they can also attend the IME and follow up with them after the appointment to see that all of the employer’s questions are addressed.

Lastly, the wrong IME opinion is not worth the paper it’s printed on says Stack. If your doctor has zero credibility, when the litigation begins, you will be in trouble. He advises to take the time when you choose that first IME doctor, because if he is a general occupational medicine doctor, and he is up against a well-respected specialist, your defense will not be solid. A doctor who still treats and operates and is up-to-date with all techniques and trends will give you a real defense, Stack says.

Why is this important for the medical tourism industry to know?

It is important because before any facilitator can offer their services to self-insured employers, or employers who purchase workers’ comp insurance, or insurance companies wanting to save money on expensive surgeries, knowing what goes on in a workers’ comp claim will mean a better outcome for the patient, and more customers for the facilitator.

It will prove to the employer or the insurer that the facilitator is not just selling them a paid vacation for their injured employee or claimant, but a real alternative to high-cost medical care in a facility with the same or better quality than what is available locally.

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I’d like to get to know you better, so please complete the form below and let me know who you are, where you are from (country and city, please), and what you like about my blog.

Thank you so much,

Richard

Why A New Trend Of Azure Collar Workers Are Outsourcing Their Medical Needs

Just so you don’t think that I am a lone voice in the wilderness about medical tourism and workers’ comp, here is a blog post from 2008 that echoes my writing, even before I had the idea. It is time the workers’ comp industry woke up, dropped their opposition to and disdain for, medical providers in other countries. Do you mind it when your loved one goes into a local hospital and is treated by a doctor who was born, raised and even educated elsewhere? Why is it okay for them to treat your loved one here, but not okay for them to do so in their home country, and in hospitals equal to, or better than what exists here? American exceptionalism is killing this country because it refuses to acknowledge that people in other countries are just as smart, bright, talented and capable as our own doctors. In fact, it is downright insulting to anyone’s intelligence, doctor, nurse, patient, or layperson to think that. The world is globalizing, and workers’ compensation in the US will not stop it. Health care, like all industries, is adapting to a global world. It is high time the workers’ compensation industry does the same.