High cost of medical devices pushes up insurance

15 Dec 2021Media Releases

Written by: Dr Rachel David, CEO, Private Healthcare Australia.

As Australia learns to live with Covid-19 and our health system manages a growing and ageing population, it is critical the federal government does all it can to keep private healthcare affordable for families.

Opinion polling confirms that the top healthcare concern for Australians with health insurance is the affordability of premiums long-term. As we approach the end of the year, none of Australia’s health funds wants to increase premiums by even one dollar next year. But health funds must manage rising costs in the private health system and factor these in when submitting premium applications to the government.

One of the largest factors contributing to rising premiums is the inflated price of generic medical devices and surgical items.

The federal government sets the prices of 11,000 items through the prostheses list and has acknowledged the system is outdated and that Australians are not paying a fair price. Expenditure on medical devices – paid for by health funds – is rising faster than any other cost in private hospitals.

Benefits claimed for generic medical devices are skyrocketing, rising at 2½ times inflation, and out of proportion to the number of procedures performed, including during Covid-19 lockdowns.

Dev­ices used in surgery, including hip replacements, knee replacements, shoulder plates and pacemakers, are 30 to 100 per cent more expensive in Australia compared with New Zealand, France and Britain.

In this year’s federal budget, the Morrison government promised to address Australia’s outdated fixed pricing system with a series of reforms, starting with the removal of general and miscellaneous items – such as surgical sponges and staples – that have no place on the list.

At this stage, the government has indicated only eight of the 400 miscellaneous items that were scheduled to come off the prostheses list will be removed.

Slow progress to adequately implement changes to the way medical devices are priced means premiums will be higher than they need to be next year, and it does not give health funds any confidence to manage these rising costs in the years ahead.

While people have taken out private health insurance during the pandemic, they are largely older, high-claiming Australians.

The viability of our community-rated system is dependent on having younger people as part of the mix.

A recent survey conducted by the Melbourne Institute revealed 15 per cent of Australians with private health insurance have dropped or reduced their cover during the pandemic, reflecting a downward trend in membership among the young.

The value of private healthcare was highlighted by the pandemic. Now more than ever, the federal government should appreciate the importance of a strong private healthcare system.

More Australians dropping out of private health insurance will place further pressure on our already struggling public hospitals as they deal with Covid-19 outbreaks now and into the future.

The federal government has the power to implement reform that would reduce premiums by 20 per cent next year, improving the affordability of private health insurance and easing the cost-of-living pressure on families.

Reforming medical device prices will reduce waste in the healthcare system and stop foreign multinational medical device companies price gouging our healthcare system.

After six long years of discussion and negotiation, it is time the federal government delivered a clear pathway to implementing its own budget commitment that stands to benefit 14 million Australians with private health insurance.

Also published on The Australian.