Interview with Private Healthcare Australia CEO Dr Rachel David about the cost of common medical devices

Station: 720 ABC PERTH
Date: 22nd August 2016
Time: 10:07 AM
Compere: Geoff Hutchison
Interviewees: Dr Rachel David, CEO, Private Healthcare Australia
GEOFF HUTCHISON: I mentioned that one of the biggest burdens to the hip pocket is private health insurance. In recent years health insurers have increased the cost of private cover by about six per cent a year, and for many it’s now simply unaffordable. The less people in the private system, the bigger the burden for our public hospitals. What’s driving those premiums up? Well it is certain procedures: the heart, the hip, and the knee. Dr Rachel David is the CEO of Private Healthcare Australia. Rachel, a very good morning to you.
RACHEL DAVID: Good morning, Geoff.
GEOFF HUTCHISON: You’ve wanted to bring this to our attention because we all complain when our private insurance premiums go up, but just what is creating such an impost here, Rachel?
RACHEL DAVID: Look, one big driver that we’ve been keen to inform folks about is that because of a quirk of Federal Government legislation, Australian private patients are paying between two and five times too much for prostheses or for medical devices which are used in common procedures like hip and knee replacement, lens replacements in the eye, and certain cardiac procedures. And this is directly influencing how high premiums are rising every year.
GEOFF HUTCHISON: The Australian newspaper quotes some of those costs this morning, saying that a defibrillator in Britain costs about $5315, in Australia it costs $67,000. A caesarean procedure that costs $6391 in Britain and is much cheaper, indeed, in Canada, costs more than $10,000 in Australia. A hip replacement, there will be plenty of people listening to this program who know this very well, in either Britain and Canada it will cost $8000, $27,000 in Australia. And knee replacements that might be $9000 or seven and a half thousand dollars in Canada are $23,000 here. Why is that so, Rachel?
RACHEL DAVID: Look, a big part of this is due to the price of those medical devices. And back in 2006, the Commonwealth Government fixed those prices at what is now known to be a world-high level. Since that time, the price of many commonly used devices that haven’t changed much since then have fallen. So that, for example, a common ceramic on metal hip replacement that’s sold routinely in Australia, if you were to have that hip replacement in a public hospital, the State Government pays $4500 for that, but if you have that hip replacement in a private hospital, your health fund needs to pay $11,000 for exactly the same device. Now we don’t think that’s fair to private health fund members, that’s putting upward pressure on their premiums. It accounts for about 14 per cent of the premium and it’s growing, and we think the Federal Government needs to do something about it.
GEOFF HUTCHISON: So do you go to the Federal Government and say this fixed price you’re charging is simply unfair and unrealistic today? And what is their response likely to be to that?
RACHEL DAVID: We’ve had some very constructive discussions with the Health Minister about this and I think we’ve got a- developed a broad understanding that both prices that were set back almost ten years ago need to be deflated in line with real market prices in Australian public hospitals and around the world so that our members, about half of whom have incomes of $50,000 a year or less, can get some relief from higher health fund premiums.
GEOFF HUTCHISON: If this doesn’t happen are we going to hear, as we’ve been hearing every year, your apologies that say well I’m sorry, there’s not much we can do about it, those private healthcare premiums are rising again?
RACHEL DAVID: Well look I think one of the big frustrations that health funds have is that a lot of costs, a lot of the input costs to the premium, are beyond their control. And one of the big ones, 14 per cent of the premium, is the cost of medical devices. This is made even more difficult when we know that a big portion of that is really just waste because it’s an artificial price that’s been set many years before it was realised that, you know, that these devices are common and the world prices are a lot lower.
GEOFF HUTCHISON: So what would the difficulty be here? And I’ve seen some of the quotes in The Australian story where, saying that changing the prostheses list, reforming it, is a no-brainer. Is there any reason why the Government wouldn’t seek to lower the prices on these devices and procedures?
RACHEL DAVID: Look, I think inevitably some of the device companies that have been used to getting very, very high prices in Australia compared with the rest of the world, are going to feel that this is- that this will create a period of difficulty for them. On the other side, however, you’ve got Australian health fund members, 13 million of them, that are really struggling. And some people are really making sacrifices to keep their private health every year, and we think that that needs to take priority at this stage.
GEOFF HUTCHISON: One of our listeners, this is Liz, saying I had a double knee replacement four years ago. The cost was $62,000, thank God we have health insurance. Is the reality here that one of the reasons why people have this kind of health insurance and this kind of private health cover if they can, Rachel David, is that they so fear the costs blowing out, and is enough being done to reign in, where possible, those costs?
RACHEL DAVID: Well look, I think that addressing the issue of inflated medical device prices in Australia is a good first step. There’s always the other issue of whether there are procedures that maybe not having [indistinct] in some of the healthcare that we do pay for, and the Health Minister is already addressing that with her review of Medicare.
GEOFF HUTCHISON: [Talks over] We’ve talked about that a lot, haven’t we, we’ve talked about that a lot. And I think that included things like arthroscopes for knees and that there is a- there is now a strong argument that some of these procedures should not be proceeded with in the way they used to, because the benefit is now seen to be maybe dubious?
RACHEL DAVID: Yes, that’s right. And obviously getting the right amount of medical evidence for procedures in surgery, where you can’t easily do a clinical trial, is very challenging. But I think with time we’re beginning to realise that some of the things that Medicare pays for are maybe not as valuable as others. But in those things that we know work, like knee replacements, and we know that hip replacements work, it is just ridiculous that we’re paying between two and five times what the rest of the world is paying for common medi- for commonly used medical devices.
GEOFF HUTCHISON: We’ll see what the response from the Federal Government will be. For now, thank you for talking to us.
RACHEL DAVID: Thanks very much, Geoff.
GEOFF HUTCHISON: Dr Rachel David is the CEO of Private Healthcare Australia.
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