5AA Mornings program interview with Dr Rachel David on the impact of the Prostheses List on premium increases

Station: 5AA
Program: Mornings
Date: 31/3/2021
Time: 10:07 AM
Compere: Leon Byner
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LEON BYNER: We often talk about private health insurance, and I know that there are many who say: look, whatever the premium is, I’ll pay. But then there are many others who say: hang on a minute, I’m in a very limited income, I don’t have the financial resources, I’ll go to the lowest level or maybe forego it altogether. But there’s something that I want you to know that is not necessarily out there, and that’s why I want to tell you. The current system we’ve got, especially about medical devices – now, medical devices and the prices of them are the largest driver of premium increases. Alright? Now, I note that the Grattan Institute’s Professor Stephen Duckett has talked about the pricing of these devices, which, by the way, is controlled by the government, and his words are that it’s part Soviet era price control and part Monty Python sketch. So that’s what he’s saying. But apparently, because the government sets the price of these devices, they’re 30 per cent higher than in countries like New Zealand, the UK, France, South Africa. Okay. So that kind of gives you a perspective of where we’re at.

So let’s talk to the Private Healthcare spokesperson, Dr Rachel David. Rachel, thanks for coming on today.

LEON BYNER: So, the 2.74 per cent increase that we’ve seen is due to, what, devices?
RACHEL DAVID: Yes. Well, look, it’s the lowest premium increase that we’ve seen in many years but it’s really disappointing that premiums had to go up by that much at all in a year where so many Australians have had real problems as a result of this pandemic and are doing it tough. And one of the only things that, in fact, the only cost that grew for health funds during that time was the cost of these commonly used medical devices, and it just wouldn’t be happening. The Federal Government regulates the price, but that price is 30 to 50 per cent higher than in comparable countries around the world.
LEON BYNER: How would you attribute that as to the reason why?
RACHEL DAVID: Well, look, it’s an historical system, which has just been let go for a number of years and has got out of control. So, you know, there are about 12,000 different bits and pieces on this price list that the Federal Government regulates…
RACHEL DAVID: …and there’s no mechanism to effectively review those prices or actually remove things from the list that might not be effective anymore.
LEON BYNER: So there are 11,000 medical devices, as I understand it, on this list. So who determines the price of them?
RACHEL DAVID: The Federal Government does. They’ve got a committee that that looks at the prices. But historically, there has really not very much control placed on those prices, particularly reviewing them relative to other countries. And so what we’ve got now is a situation where Australians, through their health insurance premiums, are paying 30 to 50 times more for commonly used things like the plates and screws that you use to fix bones, artificial hips, artificial lenses, and even things like the little stents that go in your heart if you’re at risk of a heart attack. We pay five times as much in this country for those than in New Zealand or the UK.
LEON BYNER: But it’s the same device though. We’re talking here about-
RACHEL DAVID: It’s the same thing. It’s nothing different.
LEON BYNER: Yeah, we’re comparing apples with apples, yeah.
RACHEL DAVID: Nothing special. They’ve been on the market for years. This is not new technology. This is generic technology. But what this overpricing is doing is it’s putting upward pressure on premiums in a year where the cost of everything else went down because of [indistinct].
LEON BYNER: I want to ask you something. You’re an advocate for the private health sector…
RACHEL DAVID: That’s correct.
LEON BYNER: …You’ve obviously had discussions with the Federal Government on this. What do they say? What do they say?
RACHEL DAVID: Well, look, they are, particularly the Federal Department of Health, is very keen for reform to take place. So we’ve given them a roadmap for reform that would enable them to reduce the prices, but at the same time, provide patients with a full range of medical devices that they get now, and in fact, a more- a higher quality and a safer system than we have now. But the problem is we’re up against some very powerful vested interest in the big med tech companies from overseas. And, you know, they have much greater lobbying power, unfortunately, than the Australian health funds, which are, by comparison, quite a small sector.
LEON BYNER: But that doesn’t explain why New Zealand, a smaller country than us, right, they get a better deal. Why?
RACHEL DAVID: Well, they’ve got a different system. They’ve got a system where the health funds and the government are able to actually benchmark prices against the rest of the world…
RACHEL DAVID: …and put in place- you know, they are very proactive in saying: well, this is what we’re prepared to pay. And they have no difficulty whatsoever sourcing the full range of medical devices at a lower price.
LEON BYNER: So what would be the difficulty of us following that lead?
RACHEL DAVID: Absolutely no difficulty. But at the moment, health funds are spending $5.5 million every day on medical devices, and of that amount of money, $2 million is shipped offshore in excess profits for the big med tech companies, and that doesn’t happen anywhere else in the world.
LEON BYNER: So whose job is it to rein this in?
RACHEL DAVID: Well, it’s actually the Federal Government’s job. It’s the Morrison Government’s job to change the system. We have no control whatsoever as health funds about overpaying these claim(*).
LEON BYNER: So really, they’ve done some very successful lobbying, haven’t they?
RACHEL DAVID: Well, that’s right. They have more resources and they have- they’re obviously a lot bigger industry than Australian health funds. We’re talking about global companies that are worth, you know, close to $500 billion compared to our sector here in Australia, which is $25 billion. So- but really, I think, in the interests of Australian patients, doctors and hospitals, we need to get some of this value back, and we need to be able to reduce premium to- particularly for things like gold hospital cover to remain affordable.
LEON BYNER: Rachel, thank you. That’s the CEO of Private Healthcare, Dr Rachel David.

This is a really interesting debate, isn’t it? Because it’s a view that if New Zealand, much smaller than Australia, can get a much better deal – now, okay, they’ve got a different system. But it seems to me that the people in our bureaucracy that negotiate these deals haven’t been very good hard bargain drivers, it appears. We’ll keep an eye on this because it affects us all.

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