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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?
- Tiered health insurance. A new four-tier structure, with designations of Gold, Silver, Bronze and Basic, cames into effect as of 1 April 2019. This is part of the government's campaign to simplify PHI, making it easier for you as a customer to understand.
- Discounts for 18- to 29-year-olds. Under-30s can now earn up to a maximum of 10% off their health insurance premiums.
- Better access to mental health services. Patients in need of mental health services are now eligible for a one-time upgrade to their cover without the need to serve the normal waiting period.
- Natural therapy cuts. Cuts to some natural therapies to help lower overall insurance costs.
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