Health costs are about to be 20 per cent higher

Australians are set to pay more for healthcare cover after private hospitals and medical device companies objected to planned reforms.

Exclusive: Health fund premiums will be 20 per cent higher than they should be from April next year because major reforms were watered down, the insurance industry claims.

Australians pay hundreds of millions more for medical devices like hip and knee replacements than patients overseas, due to an antiquated pricing system.

In addition health fund members are forking out for a range of 400 miscellaneous items like glues, screws and surgical sponges which funds argue should be covered in hospital operating theatre costs.

News Corp revealed last year how a tiny 8mm bolt costs health fund members a staggering $1023 when a competitor product costs $45 and a similar bolt cost just $2.64 at Bunnings.

Health funds claim the combined effect of these miscellaneous charges is adding $1000 to the cost of a standard knee or hip replacement and as much as $200 a year to private health premiums.

Private hospitals and medical device companies are the major beneficiaries of the overpayment system and it adds to the cost of private health cover.

Health fund premiums are set to rise next year. Picture istock

In the federal budget, the government outlined reforms to the system and was on track to save $290 million by removing miscellaneous items from the pricing list.

Under a second round of reforms to take effect in July 2022 the price of medical devices like hips and knee replacements, stents that keep open arteries and lenses used in eye surgery were to be benchmarked to cheaper public hospital prices.

The combined savings, according to Private Healthcare Australia chief executive Dr Rachel David, would have reduced health fund premiums by 20 per cent next April.

However, after private hospitals and medical device companies objected to the changes and with an election loomingthe reforms have been pared back.

“The department has said only 8 of the 400 miscellaneous items will come off which means funds will save only $15 million a year,” Dr David said.

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

Premium applications are already expected to be lower than usual because health funds have saved close to $2 billion from Covid surgery bans but they would have been driven down even further if the government reforms had proceeded in full.

“Premium applications for next year have already gone in and they will be 20 per cent higher than they would have been,” Dr David said.

A spokesperson for the Minister for Health and Ageing Greg Hunt said “the statement that reforms have been abandoned could not be more incorrect, any journalist who would write that would look very silly when the reform process is completed shortly”.

“This year we are hopeful with these reforms we will be able to deliver the lowest price change in 21 years.

“This process is expected to be completed in the coming week.”

Private Hospital Association chief Michael Roff has said health funds saved $1.8 billion as a result of surgery bans during Covid and should pass these savings back to members.

He said the proposed reforms could mean the privately-insured would end up with out of pocket expenses for surgery or find the only place they could have some procedures was in a public hospital.

Originally published as Health costs are about to be 20 per cent higher