News & Trends - MedTech & Diagnostics

MTAA reveals concerns over prostheses list reforms in delivering value for patients and MedTech sector

Health Industry Hub | January 25, 2021 |

MedTech News: The Department of Health released a consultation paper seeking stakeholder feedback on the proposed options for the Prostheses List (PL) reforms and improvements. Submissions are due on 15 February 2021.

Health Industry Hub’s interview with the Medical Technology Association of Australia (MTAA) CEO Ian Burgess revealed insights on the two PL reform options presented by the Department of Health and the potentially significant impact on the Australian MedTech sector, patients, surgeons and hospitals.

Two broad concepts for PL reform have been put forward by the Department of Health for the consultation:

1. Consolidate the PL using Diagnosis Related Groups (DRGs) prostheses subcomponents, and revise benefit setting, with administration of benefit setting moved to the Independent Hospital Pricing Authority (IHPA).

2. Consolidate and redesign the PL with extensive changes to pre- and post-listing assessment and benefit setting processes, with administration maintained by the Department of Health.

Health Industry Hub: What is the purpose and scope of the current PL? How has MTAA assisted in shaping this?

Ian Burgess: The PL specifies a set benefit amount for listed prostheses. The PL benefit applies to appropriately covered privately insured patients that receive a prostheses as part of treatment, where there is a Medicare benefit payable for the service as part of their treatment. The PL benefit is used to determine the sum private health insurers are required to pay to hospital providers.

The PL ensures Australians have access to more than 11,000 life-saving and life changing medical devices. It is the foundation that allows Australians with private health insurance to access the latest and best medical devices.

The PL was first introduced because private health insurers would not consistently fund patients for vital medical technology. The PL is an essential part of the value of private health insurance itself. It enables Australians with private health cover to receive the best quality healthcare. A key component is that it ensures surgeons can choose the device that is best suited to an individual patient’s medical needs, without health insurance companies intervening and limiting that choice. Patients and doctors must remain free to make clinical decisions about what devices are most appropriate to use for each patient.

The MTAA has always been involved in shaping the PL including the strategic agreement with the Government that we entered into in 2017 to implement and develop reforms to the PL. Ultimately, it is the Minister of Health, who has the responsibility for ensuring patients have access to their choice of medical devices. We will be working closely with the Department of Health and the Minister through this current consultation process to ensure that we have appropriate reforms to the PL that maintains that surgeon / patient choice and access for patients.

Health Industry Hub: What are the strengths and issues of the current PL framework?

Ian Burgess: The key strengths are that it guarantees that insured patients have access to more than 11,000 life-saving and life changing medical devices. It ensures patients and doctors retain choice. Patients and doctors must remain free to make clinical decisions about what is most appropriate for each patient. The PL provides enormous value to patients, doctors and our health system, and to insurers and the value proposition of private health insurance itself.

MTAA’s strategic agreement in 2017 with the Government ensures that patients are gaining access to more medical devices at less cost. For example, certain cardiac devices are 30% cheaper now than a few years ago.

Private health insurers take issue with some aspects of the PL. The areas that insurers focus on are a very small proportion of the total PL. We recognise that all systems can be improved, including the PL. We fully support appropriate reform including simplification and administrative improvements, to ensure the best outcome for patients.

The latest Australian Prudential Regulation Authority (APRA) data shows that insurers have not paid one extra cent for devices, insurers are paying less. Patients are getting access to more devices for less.

When we are looking at improvements to the PL we have to recognise the current value and we must ensure that patients continue to get the benefits including guaranteed access and choice.

Health Industry Hub: Are key stakeholders representing the Prostheses List Revised Benefit Setting & Review Framework Industry Working Group (BSRIWG) in agreement of these or do opinions differ vastly? (Stakeholders include MTAA, industry representatives from MedTech companies, Australian Private Hospitals Association, Private Healthcare Australia, Consumers Health Forum)

Ian Burgess: Stakeholders representing the BSRIWG mostly agree on the PL issues and that the PL should be retained. For the most part the stakeholders are opposed to a move to a DRG model which is what private health insurers have been pushing.

It is important to note that clinicians and surgeons are not on the BSRIWG. However, MTAA pushed for clinicians to be involved in certain discussions.

In recent months, it has become clear that clinicians and surgeons are fully supportive of the retention of the PL and are very concerned regarding the push by private health insurers to move to a DRG system.

Health Industry Hub: What are the 2 options presented in the Department of Health consultation paper for a revised PL framework? What are the advantages and challenges of each option?

Ian Burgess: The first option – DRG system – has been pushed by private health insurers for quite some time. The second option is the retention of the PL with quite substantial changes.

The DRG system means abolishing the PL because it uses an average based funding mechanism to cover possibly multiple different types of medical devices. Shifting to a DRG could be disastrous for Australian patients and for our private health system.

There are a number of significant flaws with the DRG system. A DRG system will narrow choice for patients and clinicians, and therefore undermine the value of private healthcare and private health insurance. DRGs will strip patients and clinicians of their choice of device and it will be price rather than health which will become the primary decision making factor.

DRGs will also eventually lead to higher out of pocket costs for patience and for some hospitals. Not all patients’ clinical requirements will meet the arbitrary averages of a DRG as DRGs are based on average patient, average procedure and average device costs. DRGs put all of the risk of the case mix on the hospitals and effectively transfer insurance risk from private health insurance to hospitals.

In addition, DRGs will disincentivise the introduction of new and innovative medical technology into our private health system. An average payment will not encourage the use, by private hospitals, of higher cost products and innovative medical technology even though that technology may deliver better patient care and better patient outcomes.

There is also a raft of implementation issues and barriers with DRGs including a low level of data collection. There is no day hospital data and day hospitals are a growing space. Private hospitals continue to pull out of providing data, in some cases for fear it could be misused. The level of data coverage is currently below 60%.

The second PL option put forward by the Department of Health is far from optimal. It is marginally better than option one but more details are necessary. MTAA and our members are seriously concerned around the impacts of negative changes on the PL that would ultimately have the same impact of moving to a DRG system which is restricting patient and surgeon choice, limiting patients access to life saving life changing medical technology and restricting innovation and impacting on our MedTech industry.

Health Industry Hub: What is MTAA’s position on the PL reforms to ensure a thriving MedTech sector and enhanced patient outcomes?

Ian Burgess: We are developing a detailed proposal in response to the Department of Health’s consultation paper that will address those improvements to the existing PL and existing system.

All stakeholders – doctors, surgeons, hospitals, the MedTech industry and patient groups – recognise the value of the PL and are all concerned around the private health insurers’ push for a DRG system.

Private health insurers are advocating for a complete undoing of the PL, removing patient access and surgeon choice and replacing the PL with what, in effect, would be a managed care system that would be disastrous for patients, our health system and the Australian MedTech industry.

As we move forward, we need to ensure that all stakeholders work together to ensure that Australians retain the right to choose what medical device is implanted in their bodies, ensure that Australians continue to have the access to those life-saving and life changing medical devices, clinicians are not forced to recommend medical devices that do not meet their patients’ needs and that hospitals do not take on the private health insurers’ risk.

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