Dr Rachel David discusses medical device pricing reform on radio 5aa

Station: 5AA
Program: Mornings
Date: 19/8/2022
Time: 10:33 AM
Compere: Leon Byner
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LEON BYNER: Well, private health insurance is always a subject of much interest and there’s a federal budget arrangement which could add $41 to your premium. Now, I guess you’re saying well, why? So Private Healthcare Australia has written to every Federal MP lobbying for change to the prices that we pay for medical devices like hip and knee replacements.

Now, here is the rub. Did you know that we in this country pay sometimes 100 per cent more than those overseas? Why? Now, this has been the case for a while and my next guest, I know, has often raised this – the CEO of Private Healthcare Australia, Dr Rachel David. Rachel, we’ve made representations before on this and thanks for coming on – are we getting anywhere?

RACHEL DAVID: Look, thanks for that, Leon, and good morning. Thank you for raising this issue. And as you correctly said, this is something that health funds have been campaigning about for years. And in the 2021 Budget, which was brought down by the previous government, we really thought we were getting somewhere and we were on track to make some significant savings.

Just by way of background for your listeners, the problem is that generic medical technologies like the plate screws, hip and knee replacements and the lenses that are used in surgery, like some of those implants, the Commonwealth Government has set- for many years has set the prices for these. And for many years those benefits were set way too high relative to global prices and the prices in the public sector, so that Australians were paying 30 to 100 per cent more than most other countries, and that was being reflected in their health fund premiums. As health costs go up, so do premiums.

So, we’ve been campaigning for years to get these benefits down to a more reasonable level. And in the 2021 Budget we thought we were getting somewhere. We had a reasonable trajectory, although it was slow, to bring these benefits down to a more reasonable level and the intention being that we would pass every dollar back to our members in the form of a saving on the premium.

Now, just before the caretaker period, or the election campaign, the former Health Minister did a deal unilaterally with the big multinational med-techs to walk back some of those budget savings. We don’t know why, but what we do know is that that deal that he did will have the effect of costing taxpayers an extra $100 million per year and will add an extra $41 to the average premium. So we don’t think that’s on.

The particular element of the deal that is really egregious to us is that, basically, there’ll be a surcharge for medical technology supplied in the private sector of between 7 and 20 per cent, and no economic justification for that surcharge has been provided either by the former Minister, by the med-tech industry, or by the Department of Health. And that is just simply not on. There is no reason why private patients need to be paying more for the same thing.

LEON BYNER: So, have you taken this to the current Health Minister?
RACHEL DAVID: Yes. Look, we’ve had a discussion about it and what, and I think quite rightly, the current Health Minister, Mark Butler, is investigating the circumstances which led to a unilateral deal being done with the multinational big med-tech firms which excluded the payers in that arrangement, namely representatives of the taxpayer in the Department of Health and the health funds.

So we need to understand what happened. We need to understand whether there’s a rationale, in some cases, for private patients to pay more. But at this stage, no rationale has been produced, and that will just simply contribute to premium inflation which is the last thing that people need at the moment, is another upward pressure on health inflation.

LEON BYNER: So is it accurate to say that it’s adding $41 to your healthcare premium?
RACHEL DAVID: That’s correct.
LEON BYNER: Alright. And…
RACHEL DAVID: But not only that, Leon. The effect of this MOU is to slow down the reforms even further. So instead of the glide path that we had down to a more reasonable pathway, this has slowed it down further, particularly in some common treatment areas like the use of stents, which is a commonly used technology for heart disease. Those prices are going to remain at record high levels for another 18 months, and that’s also contributing to health inflation in a way that’s not appropriate.
LEON BYNER: So apart from that premium of $41 extra, what else will it mean for the consumer? What else is it going to cost them?
RACHEL DAVID: Well, I think one thing that we need to remember is that these costs compound year after year, so it’s not just a one off. As more people rely on the system for surgery, which we know is happening at the moment because of waiting lists and an ageing population; you know, as more people come into the system and need these procedures, the pressure increases year on year and it compounds year on year. So that, it’s not just a one off $41 – this is going to get bigger and bigger unless we put in place strong mechanisms to bring unnecessary inflation down in a sector that’s already suffering from inflationary pressures.
LEON BYNER: Well, now let’s give people an example of some of the rates that we’re looking at here for various procedures and some of the equipment. So a stent, which is a device used to unblock clogged arteries, it can cost a private patient, say $1699. Public hospitals, $800.
RACHEL DAVID: Yeah. So, it’s about half. And in a number of other countries it’s even cheaper than the $800. So we’re looking at about $400 per stent. This is-
LEON BYNER: [Interrupts] So, who’s going to make a decision to change this?
RACHEL DAVID: This is a federal regulator decision. It is a decision, ultimately, that sits with Mark Butler and his colleagues in Treasury and Finance.
LEON BYNER: I can’t imagine he wouldn’t be interested in doing something about this, because he’s normally sympathetic to these things.
RACHEL DAVID: Look, I think he has been saying the right thing – this is something that needs investigation. The health funds were completely blindsided by this secret deal that was done. So, I think it’s something that he has committed to looking into and trying to see if there is an economic rationale for putting pressure back on the private sector in this way. And I’m confident that if that can’t be found, then we’ll go back to the original pathway to bring premiums down in line and- with what they should be.
LEON BYNER: Well, I know that he’s making- when I say he, I’m talking Mark Butler, he’s saying that people can access affordable medicines and he’d like to keep that pretty much as it is, which means there’ll have to be vigorous discussions. You see, I’ll give some examples here. A plate that can cost a private patient $659, in the public sector costs $150. Now, on hearing that, most people would say, well, that’s not a bad deal.
RACHEL DAVID: That’s exactly right. And we’re not talking about new and innovative technology here. We’re talking about the type of technology that’s cheaply manufactured, made of cheap materials like nylon, ceramic, and titanium and has been available for decades. We’re not talking about the, you know, the rocket science end of the industry.
RACHEL DAVID: There is absolutely no reason that these things should be double, triple, or five times the price in the private sector.
LEON BYNER: Well look, we’ll keep a very close eye on this. That’s the CEO of the Private Healthcare Australia, Dr Rachel David.
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