2.4 Trade in medical services faces many trade barriers

Figure 2.4 Trade in medical services faces many trade barriers

Mean share of economies with restriction (%) 0 10 20 30 40 50 60 70 Cross-border supply prohibitionInsurance coveragelimitations Cross-border transferslimitationsFDI restrictions Economic-needs test (suppliers)Nationality or residency requirements (board of directors)Labor market test/economic needs test (natural persons)Nationality requirements (natural persons) Residency requirements(natural persons) All Low-income Lower-middle-income Upper-middle-income High-income Source: World Trade Organization and World Bank, Services Trade Policy Database, http://i-tip.wto.org/services/. Note: The study, using 2022 data, covers 73 economies encompassing all income levels (9 high-income economies, 16 upper-middle-income, 28 lower-middle-income, and 20 low-income, as defined in World Bank classifications). Measures on foreign direct investment (FDI), economic-needs tests on suppliers, and nationality or residency restrictions on boards of directors refer to activities of private health establishments. Measures referring to natural persons cover medical doctors, dentists, nurses, midwives, and paramedic personnel. For some economies included in this study, data are being collected and are not yet publicly available.

Barriers to seeking care abroad and cross-border services. The nonportability of health insurance across borders may restrict trade in medical services. Trade in medical services often occurs when patients go to another country for treatment (mode 2, or consumption abroad). However, in many jurisdictions, health expenditure is covered through state-funded health insurance systems, where only domestic expenditures can be recouped except in exceptional circumstances—for example, when specialist care is not available domestically. National health systems increasingly encourage patients to seek medical care abroad to lower costs or reduce demand pressure. However, in many cases, the portability of public health insurance coverage is not assured (as shown in figure 2.4), posing a major impediment to trade through the movement of patients (mode 2) as well as to cross-border telehealth services. This is particularly striking in low- and lower-middle-income groups, where this is not assured for 45 percent and

29 percent of the economies, respectively. Cross-border payment limitations also represent an important barrier for low- and middle-income economies.

Telehealth—in particular, cross-border supply of health services (mode 1)—is either heavily restricted or not well regulated, with unintended restrictive effects.11 In some cases, regulation of electronic delivery of medical services is not well developed. In many others, electronic delivery is covered by health legislation that was not developed for that purpose, resulting in restrictive practices, particularly for cross-border supply. For example, nationality or residency requirements for health professionals may render cross-border supply impossible for many services. In 12 percent of the countries covered by available data, cross-border supply is identified as not possible. Even when it is allowed, it is difficult to identify what is permitted. Cross-border health services are also affected by restrictions on cross-border data flows and data localization requirements.

Barriers to foreign investment. Many barriers to the supply of medical services through commercial presence (mode 3) are horizontal, meaning they apply across sectors. For example, the medical services sector is often constrained by broad limitations on foreign investment. Many of the surveyed countries restrict foreign direct investment (FDI) (mainly with ceilings on foreign equity ownership), but the few restrictions specific to the medical sector are mainly in low- and lower-middleincome countries.

However, health is increasingly included among sectors where foreign investment is screened for national security considerations, particularly in high-income economies, which may consequently prevent foreign suppliers from entering their markets.12 Other restrictions concern economic-needs tests (particularly in low-income countries), limitations on the membership of boards of directors, staffing restrictions, or other horizontal policies affecting FDI, such as limits on the acquisition of land by foreigners and discriminatory taxes or subsidies.

Barriers to mobility of health workers. Many types of barriers hinder the mobility of health professionals (mode 4). The temporary entry of foreign professionals to provide services is often subject to quantitative limits. In the countries covered by the survey, entry is often allowed based on horizontal “labor market tests” (prevalent in high-income countries) that aim to determine that no local resources are available. Such tests are often discretionary, based on opaque criteria.

Other regulations pertain to registration or licensing and include discriminatory requirements or procedures that can constitute trade barriers, such as nationality requirements. Available data show that this is the case in a third of countries in the sample, mainly in the low- and lower-middle-income groups.

Domestic regulation and recognition of qualifications Regulatory requirements. Medical services suppliers face regulatory requirements to practice. To meet public policy objectives, the sector is subject to significant regulatory interventions (not considered “trade barriers” as described in the previous section).

For example, medical services may only be provided by “accredited professionals” or institutions, which implies a legal requirement to meet minimum requirements and qualifications and obtain authorization before they can provide services. The rationale behind regulatory requirements in the health sector relates in particular to the safety of patients and the effectiveness of care. At the same time, regulations applicable to medical services suppliers can lack transparency or predictability, or they may be applied arbitrarily, which can particularly affect foreign suppliers. Furthermore, regulations vary considerably across countries, which may hinder the mobility of medical services suppliers.

Transparent, predictable, and effective regulation is an important complement to medical services liberalization. The goal is to improve efficiency without compromising quality or other public policy objectives. Numerous countries have implemented regulatory reforms based on the good regulatory practices promoted by international agencies; such practices also apply to trade in medical services (Baiker, Bertola, and Jelitto 2021). Important measures refer to policy transparency and facilitative administrative procedures.

Available information confirms that some good regulatory practices have already been implemented in the national legislation of countries covered in this study, particularly regarding transparency (figure 2.5). For example, more than two-thirds of countries make publicly available (a) information on the licensing of health professionals and establishments, (b) monitoring of compliance with requirements, and (c) the allocation method mandated or described in the law or policy. However, many jurisdictions have yet to address several domestic regulatory issues, such as setting deadlines to accept or reject applications, submitting applications electronically, or telling unsuccessful applicants why they were rejected.

Recognition of qualifications. The recognition of qualifications earned abroad—a key issue for foreign medical services suppliers—requires a mechanism to verify the qualifications and competence gained by the applicant in a foreign country. Recognition can be achieved through harmonization or equivalence. Equivalence is the most common method and requires identifying possible gaps between foreign and domestic qualification requirements and appropriate compensatory measures (for example, additional courses or taking an exam).

Foreign qualifications for medical services are generally recognized in the surveyed economies. However, 20 percent of them lack laws or regulations to establish a process for recognizing degrees earned by health professionals abroad; the share is higher for low- and lower-middle-income economies. Of countries in the survey, 25 percent require foreign medical doctors to pass an exam, and 14 percent require them to obtain additional domestic education (figure 2.6, panel a). In 33 percent of countries, nurses, midwives, and other paramedical personnel must pass an exam (figure 2.6, panel b). The share is 56 percent in high-income economies. And 12 percent of countries require nurses and midwives to get additional domestic education.