Social Welfare through International Trade
Chapter 3: Price
Patients go out of country for a variety of reasons. An obvious reason is the difference in price. A few clinics abroad are more expensive than those in the metropolitan areas of Western Europe, Japan or the United States. Most charge significantly less. Expensive care in high-cost countries creates a market opportunity in countries that can keep their price competitive. This chapter is concerned with the lure of a lower price. It is divided into six sections. Section 1, ‘Comparative cost’, says why the prices of international tradables are not globally on a par. Section 2, ‘Willingness to travel’, asks to what extent the market is imperfect because the consumer is afraid of the unknown. Section 3, ‘Insurance’, assesses the impact of prepayment on the consumer’s preference for a foreign clinic. Section 4, ‘Out-of-pocket’, speculates that shoppers might be more cost-sensitive if they had to shoulder the whole burden for themselves. Section 5, ‘Care and cure’, illustrates the discussion of price-differentials with the specific case of long-stay retirement homes. Section 6, ‘Price and performance’, explains that price influences the quantity demanded, but that other things can do so as well. 3.1 COMPARATIVE COST The facts speak for themselves. Knee replacement costs US$48,000 in the US but US$15,900 in Canada and US$8500 in India. Heart valve replacement costs US$200,000 in the US but US$9000 in Malaysia. A full facelift costs US$20,000 in the US but US$1250 in South Africa. A...
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