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News & Trends - MedTech & Diagnostics

‘Overpriced medical devices are a key factor in driving higher premiums’, says Private Healthcare Australia amid escalating management expenses

Health Industry Hub | November 30, 2023 |

MedTech & Diagnostics News: More than one million Australians have opted for private health cover since January 2020, according to the latest Australian Prudential Regulation Authority (APRA) data. The report indicates a significant increase in individuals seeking timely surgeries, mental health treatments, and flexible care options, with a striking 14.7 million people, accounting for 55.1% of the population, now covered by private health insurance.

The surge in health coverage has been accompanied by a dramatic uptick in hospital and extras claims, surpassing pre-pandemic levels in order to reduce the gap in the provision of delayed essential surgeries. The APRA report reveals health funds disbursing $23.2 billion in benefits during the year leading up to September 2023. This marks a 10.4% increase, amounting to $2.19 billion more than the preceding year.

Dr Rachel David, CEO of Private Healthcare Australia (PHA), expressed concern over the inevitable rise in premiums due to heightened utilisation and health inflation. She emphasised the need for collaboration among the government, health providers, and health funds to mitigate this issue.

Dr David stressed “It’s beyond belief that in these tough economic times, Australians are still paying the highest prices in the world for medical devices, between 30-100% more than in comparable countries, due to an outdated price setting arrangement with multinational medtech companies.

“Overpriced medical devices are a key factor in driving higher premiums. In the year to September 2023, health funds paid a record $2.335 billion in medical devices benefits. The number of medical devices funded by PHI over the past four years has increased by 13%, which is totally out of proportion to the 1.3% increase in medical services and the 3.7% increase in hospital episodes. This represents growth driven by the sales and marketing activities of the big surgical implant companies, and has had no proven impact on patient outcomes.”

The Medical Technology Association of Australia (MTAA) CEO, Ian Burgess, stated “APRA data shows that while the cuts to the medtech industry are continuing to provide savings to corporate health insurers – to the sum of $2.3 billion since 2017 – insurers are choosing to spend that money on themselves rather than pass those billions of dollars in savings on to their members through lower premiums.

“In fact, health insurers are paying less in benefits for medical devices – down 6% over the last quarter alone – while at the same time their ‘management expenses’ have grown by 12% to a total of $3 billion since 2022. This is on top of their profits, which have doubled in one year to a record sum of $2.2 billion in 2023.”

While health funds have strived to keep premium rises below inflation, Dr David noted the escalating challenge posed by the return of procedural medicine to pre-pandemic levels and the upward trend in health inflation.

“It’s simply not possible to pay the highest prices providers and stakeholders demand for goods and services in private health, and deliver affordable premiums. We will work with government to keep downward pressure on premiums, keep health inflation under control and reduce cost of living pressure for 14.7 million Australians.”

The PHA proposes cost-reduction measures including bringing the “Australian prices of generic medical implants and surgical supplies back in line with global market prices”, introducing a Code of Conduct akin to the pharmaceutical industry “to monitor the sales and marketing activities of the big surgical supply companies”, “removing low value and harmful medical devices and services from the market” and permitting health funds to cover evidence-based out-of-hospital care models.

Moreover, PHA is advocating for monitoring “out of pocket costs for specialist medical care, and policing illegal and inappropriate billing practices” and and implementing legislation to prevent ‘surprise billing,’ similar to the Biden administration legislation, to introduce penalties for failure to provide informed financial consent for private medical services.

Mr Burgess added “With the cost-of-living crisis continuing to spiral out of control, it is time government reined in corporate health insurers by forcing them to return the savings they’ve amassed back to their members. Enough is enough. People are really hurting out there – health insurers need to stop playing politics and pass on these savings now.”

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