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How much will lowering the price PHI Funds pay for medical devices really lower premiums?

31 March 2016

We’ve heard a lot from the private health insurers attributing rising premiums to the cost of medical device technology. You’d think perhaps we were enemies – we aren’t.

You might also think that medical device costs represent the biggest ‘chunk’ of the healthcare budget – they don’t.

Private health insurance and the private hospital system are critical within the Australian healthcare system. We want to work with them to ensure that all Australians who might benefit from access to medical technology can.

For us, healthcare is a basic right. We want to see more people living well in the community, because when people live well, we all benefit. This won’t be achieved through taking a backward step in our approach to accessing medical technology. We’ve come a long way – do we want to be left behind now?

Since the implementation of the Prostheses List[i], the benefit paid per prosthesis has remained flat. For the last five years it has actually started to decline.

Any increase in benefit payments is driven primarily by an increase in use, and therefore an increase in the number of Australian receiving medical device technology. Surely this is a good thing – more people are receiving the medical technology they need. Isn’t that why PHI premiums are paid in the first place?

If you want to talk statistics consider this:

  • Benefits paid for prostheses have remained static at just over 10 per cent of total benefits paid by private health insurers across all expenditure categories[ii];
  • Prostheses benefits have also been a stable proportion of total insurer hospital expenditure at around 14 per cent[iii].
  • Medical technology comprises 2% – 5% of national health expenditure; however, appropriate use of medical technology reduces hospital stays by an average of 13%[iv].

We also know[v]:

  •  More than half of the current PHI holders (52%) would consider cancelling their policy if changes resulted in them being unable to access the latest medical technology through their insurance.
  • Slightly less than half (46%) would consider cancelling their policy if health insurance companies adopted a user pays approach in which policy holders would be required to pay extra to access the latest medical technology.
  • Two thirds of PHI holders (66%) would consider cancelling their policy if insurance companies increased premiums and reduced access to the latest technology.

So who will really win if there are cuts to the prices private health insurance funds pay for medical devices? Is it you? Do we really believe that savings will be passed on to consumers as lower premiums or will our ability to advance healthcare be compromised?

We agree there is room for Prostheses reform. Reform should be focussed on improving access to healthcare for those who need it, when they need it. It should also consider the complex healthcare system in which this care is delivered. It’s not as simple as a blanket cut to the prices private health insurers pay for medical technology for their members. Rushed changes impacting the delivery of healthcare have the potential to impact human health – this is simply not negotiable.

[i] The Prostheses List, administered by the Department of Health, lists the products, and the benefit amount, that private health insurers are required to reimburse ensuring access to medical technology for people with private health insurance.

[ii] Australian Prudential Regulation Authority (APRA) industry data.

[iii] Australian Prudential Regulation Authority (APRA) industry data.

[iv] Medical Technology in Australia: Key facts and figures 2014.

[v] Galaxy Research: Health Insurance Study, Commissioned 22-23 February 2016.

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