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Report reignites medical device cost debate in Australia

A new report commissioned by the private health insurance (PHI) industry states medical devices used in surgery in Australia cost more than many other developed countries. In 2022, prices on the Prostheses List (PL) were reportedly 67% higher than those in New Zealand for 25 common devices.

However, the MedTech industry’s peak body – representing some of Australia’s main ophthalmic device suppliers – says the data shows a continued decline in what health funds are paying for medical devices, largely due to a March 2022 deal signed with the previous government committing to a phased reduction in prices paid for PL devices.

Mandala Australia’s report – instigated by Private Healthcare Australia (PHA) representing 20 health funds – says Australia is paying some of the highest prices globally for medical devices through the PL. 

For a selection of 46 frequently used devices, the report said Australia paid more compared to the UK, New Zealand, France and Germany. The UK pays 71% of what Australia does, France less than half, and Germany around 22%.

“Australia’s relatively distant geography and small market size have been used to justify expensive prices, but countries that are similarly distant from international manufacturers such as New Zealand pay less for their medical devices, despite having an even smaller market size than Australia,” the report said. 

“In 2022, prices on the PL were 67% higher than those in New Zealand for 25 common devices (including IOLs). Given an overall expected price reduction of 13% by 2024 through adjustments to the list, Australia’s PL will still be up to 46% more expensive than New Zealand for this selection of devices.”

The government has been keen to reform the PL and better align prices in the private system with those paid in public hospitals – and comparable international markets.

Before leaving power, former Federal Health Minister Mr Greg Hunt signed a Memorandum of Understanding (MoU) with the Medical Technology Association of Australia (MTAA), the latter acknowledging it had a role to play in reducing private health premiums. 

The document provides clarity about how items on the PL will gradually reduce in price, establishing a process to reduce the gap between the cost of medical devices in the public and private sectors over three years. The multi-year reforms are anticipated to deliver savings of $900 million for PHIs to pass on to consumers. 

But PHA said this “last-minute MOU” effectively put a 7-20% surcharge on medical devices for private patients. The body is calling for the current government to review the agreement. 

Recently, however, MTAA CEO Mr Ian Burgess said the data showed PL reforms were continuing to deliver significant savings to health insurers, which now total more than $2.1 billion since 2017.

“What we are seeing is a continued decline in the benefit levels for medical devices, delivered by the MedTech industry, but which are yet to be passed on to consumers by corporate health insurers in full,” Burgess said.

“Despite the increase in utilisation, Australian Prudential Regulation Authority’s data shows that the total benefits paid for medical devices dropped by 8.9% in March 2023, compared to December 2022 – a clear result of the ongoing reforms to the Prostheses List. 

“The MedTech industry is continuing to play its part to help ease cost-of-living pressures for Australians, it’s well time a mechanism was introduced by government to compel corporate insurers to pass on the savings, delivered by our industry, to consumers.”

Additional data PHA provided, from a separate 2022 report, shows the higher cost Australians can occasionally pay for IOLs. For one premium IOL, the Australian price was $934, while in South Africa it was $322, Germany $516, Sweden $765, Austria $960 and Italy $1,133.  

More reading

One item at time – Prostheses List reforms

MedTech Industry sounds alarm at Prostheses List ‘regrouping’ reforms

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