Prostheses list progress stalling

Private health insurers and manufacturers remain locked in a struggle over how medical devices should be priced.

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Rising hostilities between industry groups is making the process of reforming the way medical devices are priced in Australia rather sticky work.

It’s an age-old story of two industry groups locked in a zero-sum game.

The Medical Technology Association of Australia represents the manufacturers of medical devices, which run the gamut from metal plates to pacemakers.

Private Healthcare Australia represents private health insurers, which are currently required to pay set prices for whatever medical device the patient or physician chooses and cannot interfere in the decision process or decide to not cover the item.

Prices are set via the prostheses list and have historically been far higher than what other countries – not to mention Australian public hospitals – pay.

This is why, in the 2021 budget, the DoH committed to reviewing the list with the aim of making its prices more closely match what public hospitals pay.

Earlier this year, the MTAA signed a Memorandum of Understanding with then health minister Greg Hunt, in which the minister essentially promised certain measures.

For instance, any devices with a gap of less than 7% above the public hospital prices would not have to be reduced in price.

Devices with a gap price more than 7% above hospital prices would have to have that difference reduced by 40% in the first year of reforms, 20% in the second and 20% in the third, but no more than that.

This leaves a 20% “private adjustment factor” on the initial gap.

The MTAA argued that this would effectively and efficiently narrow the gap between public and private prices, a fact which PHA CEO Dr Rachel David refutes.

“The arguments [the MTAA] put up haven’t been accompanied by any granular evidence at all,” she told TMR.

“Take the 7% to 20% surcharge for the private sector – we haven’t seen one case of economic justification, or anything that would possibly justify that except that the big med techs asked for it.”

It’s worth adding here that health insurers stand to save about $90 million in the first year under the provisions set out by the memorandum.

This is slightly less than the $140 million saving projected before the agreement came out.

The PHA is now publicly challenging the validity of the memorandum.

“The fact that the Australian government was prepared to reach some kind of secret arrangement with the big med tech providers without discussing it with us, the payer, or any other stakeholder we find completely objectionable,” Dr David said.

“And we think that that decision needs to be reviewed.”

As reported by The Saturday Paper, the document may not even be considered legally binding given that it was made between the MTAA and Mr Hunt, not the MTAA and DoH.

New Health Minister Mark Butler is reportedly still being briefed on the current status of prostheses list reforms and is yet to determine the current government’s position one way or the other.

According to MTAA CEO Ian Burgess though, Mr Butler made a pre-election commitment to upholding the terms of the memorandum.

Other industry stakeholders, including the AMA, Consumers Health Forum and Members Health Fund Alliance (representing the non-profit health insurers) have all released statements in support of the MTAA-Hunt agreement.

“There’s only been one stakeholder that’s been trying to derail this process, and that is PHA,” Mr Burgess told TMR.

“And that’s been consistent all the way through this reform process.”

The position taken by the PHA in the reform process has been “extreme” and “obstructive”, he said.

Mr Burgess also outlined some of the reasons why devices would likely remain 7% to 20% more expensive privately.

“The public system has a more centralised procurement process where there is less choice,” he said.

“That provides volume-choice trade-offs, so greater certainty around volume for a supplier means less choices and less range, so it can be provided at a lower cost.

“With that competitive tender-based process in the public system, that lower cost is translated into a lower price.”

Other differences include the way freight and storage costs are managed by the private sector.

“In the private system, freight costs will be borne by the supplying company pretty well right until the time the device is in theatre,” the MTAA CEO said.

“But they have more centralised distribution processes within the public health system, so the supplier will take it to a hub and then from there, the public system bears the cost.”

Mr Burgess argued that there were significant reforms taking place already, with active contributions from a broad range of stakeholders.

“But we have one PHA that’s trying to derail the whole process,” he said.

“And in the process, trying to rewrite history and ignore the facts in terms of the motza that large corporate insurers are currently raking in.”