Offshore financial centres and medical tourism

By added on 23/09/2010

The banking crisis in the last three years has hit countries that depended on offshore financial services being attracted to them by taxation, laws and other benefits. Many have seen businesses leave. This is a key reason why places like Bermuda and The Cayman Islands have suddenly become interested in medical tourism. The Cayman Islands hopes to set up a hospital mostly for medical tourists from the USA.

According to the website Treatment Abroad the latest news from the islands is that the government is considering making organ transplants legal, so the hospital can target the long list of Americans needing organ transplants. While locals and organ transplant specialists are shocked at this news, it is not surprising as offshore financial centres have made their living by a liberal interpretation of national and international laws; attracting honest and some questionable financial organizations.

Many offshore financial centres are also expensive tourist destinations, and they have been hit a lot harder than most countries by the recession. Some of these countries seeing a decline in tourism and offshore finance are left with very little else bringing in income.

International consultant Mark Nestmann suggests that offshore financial centres are now less attractive for global banking and finance, as international pressure has forced OFCs into onerous compliance requirements while disallowing many advantageous features of their tax and legal framework. So the centres must look at alternatives, including medicine.  

Nestmann says, "In the USA, medicine suffers from excess regulation and litigation.  To avoid lawsuits, doctors practice defensive medicine.  In the EU, the prevailing socialized medicine model has led to rationing of care. In both systems, it is cheaper for governments to let you die, than to treat you with whatever state-of-the-art medications or procedures are available." He notes that medical schools have set themselves up in offshore centres.  So these countries should enact enabling legislation to establish themselves as favoured destinations for state-of-the-art treatment denied by medical bureaucracies in the USA and EU.

Nestmann adds that offshore financial centres have an existing infrastructure for captive insurance and other insurance products so could set up medical insurance, "Incentives can be put in place to allow doctors and patients to choose the course of medical treatment, rather than have the insurance carrier have a financial interest in your death (a potent moral hazard). Exploring new treatments or insurance options that aren't acceptable in other locations isn’t much different than financial products that aren’t acceptable in other jurisdictions."

Nestmann is being deliberately provocative to make his point that offshore centre countries have to look at new ways of earning money, and that if they want to encourage medical tourism, just setting up a hospital will not work unless they can find a way to offset their uncompetitive high-cost base by using their long standing flexibility with finance and the law.