Here’s why you are paying $140 a year too much for health cover

Australians could make substantial savings on their health cover if the government reforms the way it prices medical devices a major report has found.

EXCLUSIVE

Australia is paying $1 billion a year more than other countries for medical devices like hip and knee replacements, and it is driving up the cost of health fund premiums.

Premiums could be $140 a year lower if we had more competitive pricing, health fund lobby group Private Healthcare Australia said.

On average Australians are paying two and a half times more for medical devices than patients in eight comparable countries a new report has found.

Australia pays 70 per cent more than New Zealand for a hip replacement stem, and 30 per cent more for a drug eluting stent used to open clogged arteries, a report by consultancy group Mandala revealed.

Germany paid the least for the 46 devices that were compared and their prices were just 22 per cent of what Australians pay, the report said.

A hip stem used in a hip replacement costs $3258 in Australia but just $1187 in France, while hip replacement cementless cups cost Australians $2398 but just $923 for the French.

A drug eluting stent used to treat narrowed arteries costs $1100 in Australia but just $832 in New Zealand.

Hip replacements cost more in Australia. Picture istock

Under Australia’s health system the federal government sets the price health funds must pay for more than 11,000 medical devices through a convoluted bureaucratic system called the Prostheses List.

In other countries like Germany, Austria, Sweden and Italy a third party agency buys the devices and they are incentivised to drive prices down, the Mandala report found.

“All of these markets secure value for money by using competitive tendering and bundling. Australia’s Protheses List is an anomaly in this landscape, with no competitive pricing mechanisms and no bundling of payments,” the report found.

Source: Australia’s Surgical Surcharge: How Australians are paying too much for medical devices through the Prescribed List of Medical Devices (Mandala)

In the 2021 federal budget, the Morrison government introduced a program to slowly reduce health insurers medical device costs to the prices paid by public hospitals.

As a result of the deal Australians would still be paying the highest prices in the world, but it would have reduced costs by more $1 billion over four years — and brought down premiums.

Months later, however, that deal was watered down in a Memorandum of Understanding (MOU) between the government and the medical device industry.

As a result at least 4996 medical devices will have a surcharge of 7-20 per cent under the changes made by former Health Minister Greg Hunt.

Dr Rachel David, Chief executive of Private Healthcare Australia, the health fund lobby group, at Parliament House in Canberra. Picture Kym Smith

Private Healthcare Australia is calling on the Albanese government to urgently review the cost of medical devices.

“Repeated attempts to reform medical device pricing in Australia have been thwarted by the lobbying power of a handful of big multinational medtech companies who see Australia as their most profitable market,” the organisation’s chief executive Dr Rachel David said.

The Medical Technology Association of Australia has argued the reforms are delivering savings to insurers of more than $900 million at the same time as insurers have made some of their highest profits ever in recent years.

It has also claimed insurers were trying to overturn a guarantee that private patients could have their choice of which medical device their doctors used because they wanted to “put profits before patients”.

Originally published as Here’s why you are paying $140 a year too much for health cover