Reforms to deliver lower prices for medical devices and lower private health insurance premiums

The Hon Greg Hunt MP

Minister for Health and Aged Care

The Morrison Government’s plan to make private health insurance simpler and more affordable for all Australians is continuing to move ahead through landmark reform of the Prostheses List.

The multi-year reforms are anticipated to deliver total savings of approximately $900 million for consumers and the private health insurance system through significant reductions in prices for medical devices.

This will be achieved by better aligning the prices of medical devices between private and public hospitals and delivering structural reforms that better focus the Prostheses List for the future on high-cost and innovative medical devices.

The List, established in 1985, sets the minimum price insurers must pay hospitals for a surgically implanted prosthesis received by a private patient in a privately insured episode of hospital treatment. Examples of prostheses are replacement hips and knees, cardiac implantable electronic devices, such as pacemakers, and human tissue.

Since 1985, the Protheses List has grown in both size and complexity, now including more than 11,600 items.

In 2019-20, more than 3.1 million prostheses on the list were supplied at a cost – to private health insurers – of approximately $2.1 billion.

The Government is reforming the list to better align prices in the private system with those paid in public hospitals, and comparable international markets. Prices for medical devices vary and recent analysis shows that they can be up to 145 per cent higher than the cost of the same items in the public health system.

These reforms will improve the affordability and value of private health insurance for Australians by keeping downward pressure on premiums, while still maintaining access to high quality medical devices.

These reforms will help to continue to deliver record lower premiums changes for consumers.

The Morrison Government’s ongoing reforms to private health insurance have contributed to the lowest annual average premium change for consumers since 2001, which will be 2.70 percent in 2022.

To support the implementation of the reforms, I have completed a Memorandum of Understanding with the Medical Technology Association of Australia (MTAA).

The Government recognises it is important to provide predictability for the medical technology industry and this MoU sets out a process to ensure a more seamless implementation of the reform arrangements and will ensure the commitment of the medical technology industry to the success of the reforms.

In particular, the MoU provides clarity to industry about how items on the List will be costed, setting in place a process to reduce the gap between the cost of medical devices in the public and private health sectors over three years.

The MoU also clarifies the process for the implementation of new funding arrangements for general use consumable items which will also delivers predictability for patients, hospitals and insurers. These items can be better funded through bundled funding arrangements which are being designed with the sector.

I thank all stakeholders – including consumers, private hospital networks, private health insurers, clinicians and the broader medical technology industry – for their continued commitment to these reforms and for engaging constructively with the Government for the benefit of Australians with private health insurance.

Further detail regarding the reforms is available at https://www.health.gov.au/health-topics/private-health-insurance/the-prostheses-list/prostheses-list-reforms-and-reviews

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