Prostheses pricing reform needed

The Australian Government will look to make medical devices ranging from pacemakers to pins and plates more affordable and accessible for patients.


Minister for Health Sussan Ley announced that, as part of the Government’s private health insurance consultation, prostheses reform would be made a “priority” through the establishment of an industry working group compromising health insurers, device manufacturers, hospitals, clinicians and consumers.


Currently, the Federal Government sets a fixed-price benefit that private health insurers are required to pay on behalf of their members for over 10,000 internal medical devices through the Prostheses List Advisory Committee (PLAC).


This in stark contrast to the public system, where there is no set price and greater competition around purchasing, meaning private health insurers are often paying twice as much for medical devices, which is then passed on to patients through higher premiums.


Ms Ley said there were examples where the current Government pricing process meant the same pacemaker cost double the price – or $26,000 more – if it was delivered through the private system rather than public.


Similarly, the price of key components for a common hip replacement cost as low as $4000 in the public system versus $6000 for private patients – a $2000 difference.


Ms Ley said the Government also wanted to ensure the current pricing for prostheses was not unnecessarily holding up new innovative devices and technologies being made available to patients, or preventing new manufacturers from competing in the market.


“That’s why I will be asking all players involved in the medical devices supply chain to sit down together and provide me with a clear, mutually-acceptable model for prostheses reform that will maintain strict safety requirements whilst delivering better access and affordability for consumers,” she said.


Additionally, Ms Ley recently wrote to private health insurers asking them to resubmit their premium increases for 2016 based on their full financial position, not just the amount of member claims and benefits paid out.


Ms Ley said, “A big problem at the moment is the current premium approval process focuses on how much insurers pay out to their members through claims and benefits, when we know insurers are holding an additional $5.1 billion capital in their pockets.


“The question I am therefore now asking insurers is: Do they have some capacity to use this excess capital to deliver premium relief for their customers this year while we work with them to deliver longer-term structural reform?”


5 February 2016.