How will the new prostheses benefit reductions make private health insurance more affordable?
The prostheses list benefit reductions are part of a large range of reforms currently being rolled out by the Australian government, aimed at simplifying private health insurance (PHI).
Reductions in minimum benefits for prostheses paid by all private health insurers in Australia took effect on 1 February 2018, saving consumers $1.1 billion over 4 years. With more reductions to be made next month and in 2020, the cuts are aimed at tackling rising PHI premiums.
What's changing for prostheses benefits?
The minister for health, Greg Hunt announced the changes back in October 2017, stating that the minimum benefits payable by private health insurers for almost all medical devices on the Prostheses List would be reduced (reductions vary by category). The 2018 round of benefit reductions has already saved private health insurers $188 million.
The changes put in place will reduce prostheses costs without reducing patient outcomes. In other words, the changes will not reduce the value of PHI to you as a consumer. The reforms aim to increase transparency and improve costs in a number of ways:
- Separating the cost of services from the cost of the prosthesis device.
- Although in the public sector, prostheses are mostly purchased in bulk, while private prices are based on a single purchase at a time, the reforms aim to bring the price of prostheses in PHI closer to what's paid in the public sector.
How will this affect you?
With PHI costs rising each year, the reductions are an important step to improve the value of benefits on the Prostheses List. Reductions in the minimum benefits of medical devices for common surgeries will deliver better value for money for you as a consumer. Not only will this put more money on your pocket, it'll benefit the insurance industry as well.
While the reductions will help stem the continued rise of premiums, the PHI industry has emphasised the need for continued action.
Will it impact your wallet?
These changes should help lower your premiums, but only if insurers keep their promise. It's essential that they pass on to consumers the savings that these reductions create. The Medical Technology Association of Australia has been more sceptical, issuing a warning to consumers, "Given the scale of the reductions […] 13.5 million members need more than just a 'trust us'.
Why are benefits for prosthesis changing?
Prostheses are an expensive part of the medical industry. In fact, expenditure on prostheses accounts for 14% of PHI hospital benefits paid annually. Private Healthcare Australia CEO Dr Rachel David has said that, "Prostheses List regulations have forced health funds to pay benefits for medical devices two to five times higher than the price charged for the same device to public patients."
A major issue then, is that Prostheses List benefits are generally inflated when compared to the equivalent prices paid for devices in the public sector. That's why the government has targeted prostheses, as it's clearly an area in need of reform. By reducing prostheses expenditure, there will be incentive for insurance companies to lower your premiums.
When's it changing?
The first change came into effect on 1 February 2018, with subsequent reductions being made at the beginning of February in both 2019 and 2020. Because it's such a huge overhaul, going through and calculating reductions, while ensuring the quality of service isn't compromised, takes time.
What else is changing for Australian healthcare?
These reforms are part of a major overhaul by the government targeting a whole range of issues surrounding private health insurance.
- Tiered hospital insurance. A new four-tier structure, with designations Gold, Silver, Bronze and Basic, will come into effect on 1 April 2019, with the intention of simplifying some of the complexities involved in PHI.
- Discounts for the young. There will also be improved discounts for 18- to 29-year-olds, better access to mental health services and cuts to some natural therapies to help stem rising insurance costs.