Private Health Patients Are Paying More For Medical Devices

8 February 2016
According to the Private Health Insurance Industry, private patients are paying more that their public counterparts for many medical devices.

The Turnbull Government has announced that it will look to make thousands of medical devices ranging from pacemakers to pins and plates more affordable and accessible for patients in a move that will also reduce pressure on private health insurance premiums.

Minister for Health Sussan Ley announced that, as part of the Turnbull Government’s private health insurance consultation, prostheses reform would be made a “priority” through the establishment of an industry working group compromising health insurers, device manufacturers, hospitals, clinicians and consumers.

Current Pricing Structures

Currently, the Federal Government sets a fixed-price benefit that private health insurers are required to pay on behalf of their members for over 10,000 internal medical devices through the Prostheses List Advisory Committee (PLAC).

This in stark contrast to the public system, where there is no set price and greater competition around purchasing, meaning private health insurers are often paying twice as much for medical devices, which is then passed on to patients through higher premiums.

Ms Ley said there were examples where the current Government pricing process meant the same pacemaker cost double the price – or $26,000 more – if it was delivered through the private system rather than public.

Similarly, the price of key components for a common hip replacement cost as low as $4000 in the public system versus $6000 for private patients – a $2000 difference.

These costs, of course, are passed to private health insurance members in the form of higher premiums.

A welcome move

The Private Health Insurance Industry has welcomed the Government’s plan to reform prostheses pricing in Australia as an important step towards containing spiralling health costs, and keeping health insurance premiums affordable.

Private Healthcare Australia (PHA) Chief Executive, Dr Rachel David said reforming the Federal Government scheme, which establishes benefits for medical devices, will significantly reduce upward pressure on private health insurance premiums.

“The Prostheses List price regulations currently compel health funds to reimburse medical device prices at levels which can be up to five times higher for private patients as they are in the public system or in comparable countries, like France and Japan, ” she said.

“This is an unfair cost burden on private patients which the Government can address immediately, saving the Australian health system an estimated $800 million in expenditure every year, while preserving quality and access to healthcare.

“We are not talking about private patients getting a premium product and public patients getting a cheaper ‘home brand’ version – in most cases we are talking about exactly the same device.” she said.

Dr David said reforming medical device pricing so Australians pay no more than international consumers, was the key plank in PHA’s submission to the Government’s PHI Review, “Costing an Arm and a Leg”.

“There is an imbalance between who benefits and who pays with the value tilted towards the multinational manufacturers at the expense of Australian consumers and taxpayers. There is a lack of transparency into the true cost of prostheses in the health system.”

Prosthesis a popular health insurance inclusion

Treatments potentially involving prosthesis are sought after inclusions by many of the visitors to Canstar’s health insurance tables, with Cardiac, joint replacement and knee reconstruction leading the list.

What do health insurers spend on prostheses?

According to Private Healthcare Australia, prostheses benefits payments comprise approximately 14%  of total reimbursements by private health insurers and in 2014-15 totalled $1.9 billion. Prostheses benefits payments have been one of the fastest growing areas of healthcare expenditure over the past decade.

Prostheses Benefits Paid by Health Funds:

Ms Ley said the Government was already hearing “positive noises” from a number of insurers wanting to help reduce premium increases in 2016 for consumers to coincide with the Turnbull Government’s commitment to reform.

“Consumers have made it clear they don’t believe they’re getting value for money from their private health policies and we’re simply working with insurers to see if there is room to lower premiums based on their full financial position,” she said.

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