2019 health insurance reforms: Making the medical device industry more affordable

The reforms will produce savings of over $1.1 billion, passed on in full to the customer.

With health insurance premiums continuing to rise each year, the Australian government is rolling out a series of wide-ranging reforms aimed at bringing private health insurance (PHI) premiums down and simplifying the current system.

The changes will support sponsors and suppliers of medical devices. This is designed to benefit consumers, improve efficiency and reduce overall health insurance costs.

What's changing in the medical device industry?

The Medical Technology Association of Australia (MTAA) has committed itself to a four-year agreement with the government, promising to deliver a range of changes to the medical device industry which will help lower PHI premiums for Australians.

On 1 February 2018, the minimum price payable for almost all medical devices listed on the Prostheses List were reduced for insurers. The agreement will continue to reduce prostheses prices by $1.1 billion over four years. Importantly, the savings will be passed onto all PHI customers, not just prosthesis patients and this will help lower your premiums and improve your hospital coverage.

The agreement also ensures that industry innovation is recognised and invested in so that policyholders have quicker access to the best medical devices. The government has reduced the evidence requirements for some devices so that they reach your hospital faster.

Similarly, the agreement has increased the frequency of listing on the Prostheses List from two to three times per year. This gives customers faster access to technologies and increases the value of PHI for patients.

The changes also include a $30 million med-tech and biotech grants program, available for small to medium-sized enterprises and researchers. It supports the development of new and innovative device technologies, clinical trials and associated registries, researcher exchanges and workforce development.

What could be the impact of these changes?

While it may seem like the medical industry is the main beneficiary of this agreement, that's not necessarily the case.

Improving the medical device industry is a long-term solution to a far-reaching problem. Rather than looking at insurers or policyholders, the government is helping to lower overall costs by improving the effectiveness and efficiency of the medical device industry.

In other words, it's a bit like looking at the foundations of a structure in need of repair and getting to the route of the problem. By doing this, the government is helping to confront the mounting cost of prosthetic devices that insurers are forced to pay, which would otherwise be passed to you in the form of higher premiums.

Will it impact your wallet?

The initial 10% cut on the Prostheses List benefits has created savings of around $188 million. This was handed back to consumers in the form of a 1% lower premium hike in April 2018.

With cuts set to produce savings of around $1 billion over the next four years, large savings for PHI holders are likely in the coming years.

What caused these changes to the medical industry?

At the moment, prostheses (medical device) spending accounts for 14% of PHI hospital benefits paid every year. Benefits paid by PHI holders have increased considerably over the past 5 years, according to the 2017/18 survey by APRA, contributing to our overall insurance costs. Reducing prostheses expenditure places downward pressure on premium increases.

Similarly, the Prostheses List benefits are generally inflated when compared to the equivalent prices paid for devices in the public sector. This has been an issue of contention for some time now, one in which the government is now seeking to address.

When's it changing?

The first set of reductions came into effect on 1 February 2018. Further reductions will occur in 2019 and 2020 and there's another major set of reforms planned from 1 February 2022. The Prostheses List Advisory Committee (PLAC) will continue to work throughout this period in order to make the cost of medical devices fairer for privately insured patients.

What else is changing?

Picture: Unsplash

Was this content helpful to you? No  Yes

Related Posts

You might like these...

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site