Private insurers say prosthesis price gouging must end

Australians with private health insurance are forking out millions in overpriced medical devices despite a government commitment to bridge the chasm between public and private costs.

Australians are continuing to pay huge costs for outdated technologies says Private Healthcare Australia chief executive Rachel David.

Australians with private health insurance are forking out more than $780m for overpriced medical devices and implants, with industry leaders denouncing the current regulatory framework as crooked and outdated.

As healthcare costs continue to climb across Australia, individual private health consumers face increased premiums of more than $100 a year because of the exorbitant costs associated with medical devices registered under the national Prostheses List.

New pricing analysis for 2018-19 reveals that privately insured Australians continue to pay huge mark up prices for “the most common implanted devices”, while the public system is charged only a fraction of the cost.

Research by the Members Health Fund Alliance (MHFA) shows privately insured prosthesis costs for heart and pacemaker related procedures are set almost four times higher than the public system. Costs for back and neck surgeries are seven times more expensive, with private insurers paying $4779 compared to approximately $736 in public.

And prices are only set to rise, according to figures produced by the MHFA, as private health insurers spent a total of $2.1bn on prosthesis benefits in 2019-20, showing a cost increase of $20m since 2018-19.

“We’ve had review after review about changing the cost settings for the Prostheses List in private health, but that time has passed,” said MHFA chief executive Matthew Koce, who argues urgent measures should be taken to replicate “best-practice pricing in the health system”.

Under the current regulatory framework, the commonwealth sets fixed costs for private health insurers across different categories of the Prostheses List – which contains more than 11,000 medical devices and implants – whereas pricing in the public system is governed by competitive tender.

“At the moment we have a situation where hospitals can go out to market and tender for medical devices and private health can’t … undergoing life-changing hip surgery, cataract or heart operations in the private system shouldn’t come with a licence for big companies to print money at the consumer’s expense,” said Mr Koce.

Similar research by MHFA, which compares the costs of devices in France and Australia in 2021, shows private insurers in Australia are paying about $4000 more for the same products.

Components for hip replacements were between 148 to 210 per cent more expensive in Australia than in France, while pacemakers ranged from 23 to 81 per cent more expensive.

“It’s especially disappointing that Cochlear, an iconic Australian-born company, is charging up to 84 per cent more in Australia than in France,” Mr Koce said.

But aside from the enormous price hikes, critics of the current system fear the framework also muzzles attempts at innovation.

“Australians are continuing to pay huge costs through taxes and premiums for outdated ‘generic technologies’ on the Prostheses List,” said Private Healthcare Australia chief executive Rachel David.

“Innovative products are more expensive to produce and there is no incentive for big ‘Med Tech’ to innovate in design or supply chain in Australia when the price of older technology is set so high.”

Dr David said reform of price settings would take undue pressure off premiums, the public hospital system and keep private healthcare affordable. “The government committed $22m in additional resources in the budget to help unwind this system … but what we need now is action,” Dr David said.