Private Health Insurance Industry Must Pass on Savings

Today the Medical Technology Association of Australia (MTAA) calls on the Private Health Insurance to deliver to their 13.5 million customers no more than a CPI increase next year given the scale of the savings they are receiving from reductions to the Prostheses List.

It’s critically important every cent of savings is directly passed through to their customers.

These cuts to the Prostheses List are significant and will impact on jobs and investment in the industry, however, the MTAA membership took the view the Agreement was in the best interests of the industry and ultimately patients.

Calls from the Private Health Insurance industry for further cuts to the Prostheses List in excess of those announced by the Government are not supported by any proper evidence and the Agreement with the Commonwealth reinforces this fact.

NIB chief executive Mark Fitzgibbon told The Australian the price cuts to the Prostheses List would drive down the average annual premium increase to the “low end of 4%”. Given last year’s premiums rose by an average 4.84% this means Private Health Insurance companies are seeking to deliver its customer less than a 1% reduction to premiums.

As recently stated by Private Health Insurance industry for every $200 million cut from the Prostheses List would translate into a 1% cut in premium price increases.

Today we have a CEO of a major Private Health Insurance company saying it will deliver to its customers less than 1%.

Private health insurers are receiving substantial benefits from these reforms. This is an industry that already gets $6 billion in taxpayer subsidies every year, has increased profits by more than 17% last year and has consistently increased prices above inflation every year. Premiums have risen by 55% since 2009.

MTAA commissioned PwC to undertake analysis of almost 80% of the Prostheses List expenditure and is the most comprehensive and robust data set that exists incorporating 6958 of the 10454 products.

The analysis shows that there is a differential of 15.3% between private and public price representing an estimated $305.7 million difference.

The Agreement, with the Commonwealth, will deliver more than $300 million in annual benefit reductions to medical devices listed on the Prostheses List, thereby delivering parity between the two markets.

This comes on top of the $86 million annual cuts in February 2017 to the benefit level for around 2,500 devices. Over the next four years this represents a $1.5 billion saving to Private Health Insurance companies.

We will be closely monitoring the impact to ensure patients continue to get access to life changing and life-saving medical technology.

For example, the Agreement recognises this with the creation of an industry working group to determine how lifetime support for active implantable cardiac devices should be funded following the reductions to the benefits for cardiac devices. These cuts will have an impact on the current level of servicing for cardiac patients.

Additionally, there has been practically no growth in the average Prostheses List benefit over 10 years meaning that in real terms, adjusting for inflation, medical devices are 20% cheaper than 10 years ago.

The Prostheses List is a benefit to Private Health Insurance customers that ensures no out of pocket costs for medical devices. It provides access to a wide range of technologies and is a key part of the value proposition of private health cover.

Ian Burgess, Chief Executive Officer of the Medical Technology Association of Australia.