The Trend toward Retiring in Mexico:
Opportunity and Challenge for Policymakers
By Paul Crist, President, Americans for Medicare in Mexico, A.C.
U.S. Retirees are choosing Mexico in ever-larger numbers
In the past decade or so, Mexico has become an increasingly attractive destination for U.S. seniors considering retirement options. That trend is certain to continue, and grow, in the coming years and decades, as the Baby Boom generation reaches retirement age.
There are a number of important factors that contribute to this trend. First, Mexico has become the number one tourist destination outside of the U.S. for American travelers. As an increasing number of Americans are of Mexican heritage with familial and cultural ties to Mexico, and as the number of U.S. retirees increases (and thus increases the time they have for travel), Mexico is set to become an ever more popular tourism and retirement destination in the coming years.
Retirees that choose to reside in Mexico, whether of Mexican or other heritage, nearly always have visited Mexico numerous times as tourists. They know Mexico, and know that negative U.S. media coverage about Mexico is often slanted, sensational, and fails to recognize the size and diversity of Mexico. The firsthand knowledge of tourists eliminates the fear of living in Mexico.
For example, they are more likely than Americans who have never visited Mexico to know that “violence in Mexico” is really just about a 35 to 50-mile region along the U.S. border. They know that Mexico is blessed with great natural beauty; a warm and welcoming culture; appealing architecture that ranges from modern to Spanish Colonial; a range of temperate climates that appeal to different tastes; and a cost of living that is up to 60% lower than in the U.S. in many Mexican towns and cities.
For retirees, proximity to the U.S. (and thus, their children and grandchildren) and ease of travel between Mexico and the U.S., in addition to the aforementioned qualities, makes Mexico an ideal choice for retirement living.
In a 2008 study, the International Education and Research Center estimated that there are at least 800,000 U.S. expats living in Mexico. As many as a quarter of those expats is 60+ years old, and retired. U.S. demographics (the Baby Boomer phenomenon) virtually assure that number will grow significantly over the next decade or two. For developers of senior living facilities and communities, as well as for the Mexican government (working to foment economic development), this trend represents a tremendous opportunity.
What are the challenges?
This opportunity could be squandered if certain things don’t happen. In order to take advantage of this opportunity, Mexico must do the following:
• Federal, state and local governments need to work together with the private sector to ensure that the infrastructure is in place to provide the desirable housing; goods and services; and public utilities that will be required.
o Well-functioning roads, airports, water and sewage systems, electric service, and communications systems are obvious requirements.
o Many indirect services, such as education, need to be addressed. After all, U.S. retirees will need qualified health care professionals, accountants, attorneys, and other service providers. They are accustomed to a high level of service in the U.S., and education systems need to prepare Mexican citizens to provide the level and variety of service retirees will demand.
o Competent government administration is also a vital infrastructure issue.
Retirees will need to interact with immigration officials, local property tax officials, and others who provide government services.
Sensible, sustainable, and transparent local zoning and development planning and regulation are required in order to manage growth while maintaining and improving the attractiveness of urban areas. Without thoughtful and effective management of development, Mexican towns and cities may lose their attractiveness to American retirees.
• Mexico must do a better job of getting the message out to Americans that Mexico is a secure and healthy place to visit and to live. U.S. media tends to paint Mexico with a broad brush, and with a heavy dose of sensationalism. Good news is not “news” for the corporate-run U.S. news media.
o Bad news, such as drug cartel violence on the border, is what Americans hear about Mexico. Yet the U.S. media rarely mentions that the U.S. bears a great deal of responsibility as the largest market for illegal drugs and as the supplier of the guns that are being used in that border violence. They rarely make clear that the violence is not widespread throughout Mexico.
o Americans hear that Mexicans are dying of “swine flu,” and that schools and businesses are shut down. It was barely reported that public health officials worldwide were praising Mexico for taking early and decisive steps to stem the spread of the disease, and that there are now countries with more cases, and more deaths from the flu.
o Mexico needs to effectively combat the “blame Mexico first” mentality of the U.S. media and certain political interests and groups. This can be accomplished by addressing valid criticisms and by developing a powerful and positive public relations program.
• Health infrastructure will need to be expanded and improved.
o Mexico will need to expand the number of hospital beds available in some cities, and expand the number of health care providers.
o Improvements in medical records keeping are needed, and providers must improve their ability to work with third-party payers, including private insurance and foreign-government health care coverage. These improvements will not only benefit expat retirees, but will improve healthcare services for Mexicans as well.
The U.S. also needs to take a number of vital steps that will benefit both countries:
• The U.S. needs to address the issue of immigration seriously, and soon. The current policy has resulted in a large population of undocumented (labeled “illegal”) immigrants, mostly from Mexico. The failure of an orderly and efficient system for guest workers and for permanent resident immigration has fostered a climate of fear, racism, and distrust between Mexico and the U.S.
o The U.S. government, economic interests, and industry groups need to make clear to its citizens that immigration will be the only way to keep the American economy growing and government budget deficits under control over the coming decades as Baby Boomers retire, and begin collecting the Social Security and Medicare benefits they have been promised. Low birthrates over the preceding decades (and the trend is expected to continue), have not provided enough younger workers to replace older, retiring workers. Immigration will be essential. It should be orderly, planned, and fair to workers and their families. Human rights must be observed.
• The U.S. Congress, along with the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) must develop the administrative capacity to manage cross-border health care services for retirees that choose to live in Mexico.
o The ability to access health services covered by Medicare is the number one barrier faced by seniors considering retiring in Mexico, according to a number of surveys.
o In one survey of expats, undertaken by the Mexican ministry of Finance, 78.2% of respondents found that getting medical services covered in Mexico was difficult to extremely difficult; 66.1% paid for medical services from their own funds despite having coverage through Medicare or other U.S. payer
Healthcare coverage: The #1 concern for seniors considering a move to Mexico
That last item, cross-border administration of health care coverage, and particularly government coverage under Medicare and Medicaid for seniors, is what will be addressed in greater detail in the remainder of this article.
At the outset, it should be clearly stated that Medicare benefits provided to seniors living in Mexico is a win-win-win-win (yes, 4 clear winners) proposition.
• The Medicare Trust Fund (and thus the U.S. taxpayer) wins because it is absolutely beyond debate that health care services can be provided at lower cost in Mexico than in any region of the U.S. Medicare will save money by covering beneficiaries in Mexico.
• Retirees who choose to live in Mexico win, because they will have access to the covered services for which they have paid throughout their working lives, and which they have been promised by the full faith and credit of the U.S. Government.
• The Mexican economy wins, because an influx of expat retirees will buy homes, and require all types of goods and services. Good-paying jobs will be created in Mexico across a broad spectrum of economic sectors, most prominently in healthcare and construction.
• The U.S. wins because the pressure for Mexicans to emigrate in search of better economic prospects will moderate as economic opportunities in Mexico are enhanced. This will put U.S. policymakers in a much stronger political position to develop and implement an orderly and just system for immigration and guest workers, owing to moderating pressure and numbers of Mexicans attempting undocumented entry into the U.S.
Cross-border health coverage is neither new, novel, nor need it be complicated. Private insurers are increasingly offering health coverage options for international travel and overseas residency. The U.S. Department of State relies on private insurers to cover employees worldwide, using approved local healthcare providers. Citizens of France can travel almost anywhere, and be covered for emergency care (paid up to the cost for similar care provided in France). In fact, most Europeans are covered within the Euro-zone, thanks to virtually universal coverage in all E.U. countries and bilateral and multilateral coverage agreements.
Even the U.S. government currently operates a cross-border coverage program, called Tricare Overseas Program, for military retirees and their eligible dependents. There are many, many examples of cross-border healthcare coverage, thus neutralizing any arguments about the administrative difficulty of implementing Medicare coverage in Mexico.
The majority of seniors who now live in Mexico, and those who wish to do so, have paid into the Medicare program throughout their working lives, through payroll deductions. Many continue to pay for Medicare benefits through deductions from monthly Social Security checks and payment of Medicare Part B premiums. But, because they live outside of the geographical borders of the United States and its territories, they either have no access to Medicare benefits, or they must travel back to the United States in order to access services. Thus, a strong case can be made for Medicare in Mexico based on simple fairness.
Lack of access to covered medical care where they live has a number of consequences for seniors living in Mexico, and for the Medicare system.
• Nearly all expatriate seniors living in Mexico pay for routine outpatient care from personal funds. While the cost of that care is much lower than in the U.S., ample evidence has shown that lack of health care coverage tends to encourage delay in seeking care. That almost certainly results in:
o Some increase in high-cost inpatient care;
o Exacerbation of chronic illnesses and conditions;
o Poorer overall health outcomes such as healthy life expectancy;
o Frustration, expense, and stress for seniors facing health issues.
• In two separate surveys, it was found that more than 64% of American seniors now living in Mexico travel back to the U.S. when high-cost treatment or in-patient care is required, thanks to U.S.-based healthcare coverage including Medicare. Some percentage of that high-cost care could be avoided if primary care coverage were available in Mexico to expatriate seniors who are Medicare eligible.
o If seniors are in fact using their Medicare benefits as described above, the Medicare system is probably not saving money by refusing to cover medical costs for expats in Mexico, where they live.
Based on data from a number of sources, a strong argument can be made that providing Medicare benefits to eligible beneficiaries in Mexico would result in substantial savings to the Medicare Trust Fund.
According to a report by the Kaiser Family Foundation, Medicare spent on average $6,255 per beneficiary on health items and services in 2005 (in the U.S., since Medicare is currently not available outside of the 50 states and U.S. territories).
Based on my own research, as well as that of others, many healthcare procedures are 70% to 80% cheaper in Mexico. On average for a broad “basket” of treatments and procedures, Mexican health care costs certainly do not exceed 35% of U.S. costs.
Without doubt, the requirements of additional medical and financial records-keeping, certification to international standards and improved administration will add some costs to Mexican healthcare providers, and place some upward pressure on medical services pricing in the market. However, both the Mexican government and the health care industry are already pursuing these innovations. Those modest cost increases are already occurring for high-quality healthcare providers in many urban markets in Mexico.
One factor driving improvements in administrative capacity and international certification in Mexico is the desire to attract a booming medical tourism market. Mexico competes principally with Brazil, India, Singapore, Thailand, Costa Rica, and the Philippines for a share of the estimated $30 billion (and growing) medical tourism market, which comes overwhelmingly from the U.S. While Mexico currently lags behind Southeast Asia in healthcare infrastructure, it is already the preferred destination for dental and cosmetic surgery. A number of U.S. hospital companies are investing in Mexican healthcare facilities, in part to tap the medical tourism market. Significant investments in medical facilities, certification to international standards and physician training, along with much easier travel routes from the U.S., means Mexico is likely to overtake Southeast Asia in more complex medical procedures such as orthopedic and cardiovascular surgeries in the near future. Whether or not Medicare reimbursement comes to Mexico, these innovations are occurring, and will undoubtedly add some modest cost to services, at least for some providers. But Southeast Asian competitors for medical tourism dollars have successfully kept prices low. Even in the unlikely scenario that Mexican prices climbed to 50% of U.S. prices, the potential for Medicare savings would still be large.
Consider the following:
1. Assume only 20,000 enrollees in a Medicare Demonstration Project in Mexico.
2. Assume the worst case scenario that Mexican health care costs Medicare 50% of U.S. costs.
3. Assume the Kaiser Family Foundation’s 2005 Medicare per-beneficiary spending of $6,255; and
4. Assume that currently, 64% of Mexico’s expatriate seniors are travelling back to the U.S. for major medical care, but all would remain in Mexico for care if it were covered there. (In health policy terminology, there is currently a 64% Medicare utilization rate, compared to a likely 100% utilization rate if seniors could obtain covered care in Mexico, where they live).
Number of Enrollees
Per-Beneficiary Medicare Cost
20,000 U.S.A. $6,255 (based on Kaiser study cited) 64% $80,064,000
20,000 Mexico $3,127 (50% of above per beneficiary cost) 100% $62,540,000
As the chart shows, and based on the assumptions stated, an enrollment of 20,000 beneficiaries living in Mexico could save the Medicare Program over $17.5 million per year! Over a five-year period, that’s $87.6 million in savings for only 20,000 enrollees! It represents a per-beneficiary savings of 21.9%. There are currently no Demonstration projects underway that show a potential to save the Medicare Program as much.
So, why is it so difficult to get Medicare coverage in Mexico?
• If healthcare coverage is the number one concern for seniors considering retirement in Mexico;
• If Medicare can save money by providing coverage to eligible beneficiaries living in Mexico;
• If health outcomes can be improved by providing Medicare coverage to seniors living in Mexico;
• If both the U.S. and Mexico would benefit by lowering barriers for retirement in Mexico;
• If Mexico, through a public-private partnership, is ready, willing and able to provide the quality and quantity of healthcare that will be required;
• If the administrative hurdles to providing cross-border health care benefits are not difficult to overcome;
What is keeping Medicare from being provided in Mexico? The only obstacle is existing Medicare legislation and political action to change it.
Americans for Medicare in Mexico is working to obtain required Congressional authorization for a pilot project (known as a Demonstration Project in the Medicare legislation) for Medicare coverage in Mexico.
Medicare legislation currently provides the Department of Health and Human Services (HHS), under the Centers for Medicare & Medicaid Services (CMS), the authority to develop and implement Demonstration Projects within the 50 states that test Program innovations. The purpose of these Demonstration Projects is to test innovations that result in lower Program costs; improved health outcomes for beneficiaries; streamline administration and management; and improve beneficiary satisfaction. Demonstration projects typically run for 3 to 5 years on a limited basis, and if successful based on the criteria, as determined by independent health policy experts, the innovations may be rolled out on a wider scale.
It seems clear that a Medicare Demonstration Project in Mexico would be successful on most, if not all of the required criteria. It is time to urge Congress to pass legislation authorizing the development and implementation for this sensible and needed program.
For more information,
Paul Crist, President
Americans for Medicare in Mexico
Tel: 1-866-388-2689 (toll free from the U.S.)
(+52)322-222-4793 (in Puerto Vallarta, Mexico)