Greg Hunt announces reforms

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Health minister Greg Hunt has announced a raft of reforms to private health insurance and the pricing of medical devices.

The reforms (view complete list of reforms here) include the introduction of a Lifetime Health Cover discount, a further $300 million in savings from the Prostheses List along with a strategic agreement between government and the medical device sector, the introduction of product categories (Gold/Silver/Bronze), an extension in coverage for mental health services and the development of standardised clinical terminology.

The reforms have been welcomed by Private Healthcare Australia while the Medical Technology Association of Australia (MTAA) said its strategic agreement ends a "prolonged period of uncertainty".

“Today’s announcement is a major step in ensuring the sustainability of Australia’s highly regarded mixed private-public health system, by improving the value proposition for people at all stages of life," said Dr Rachel David, CEO of Private Healthcare Australia. "84% of Australians with private health insurance value the product and want to keep it, however their main concern is affordability."

She continued, “There are 13.5 million Australians with private health insurance and almost half of them have an annual income of less than $50 000. The measures announced by the Government with cooperation from industry and other stakeholders will go a long way towards addressing consumer concerns. Other central policy measures such as the PHI rebate allow a greater proportion of the population to access private health care, which benefits the wider community by reducing waiting times in public hospitals, which would be significantly higher without it.

“Keeping private health sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system,” said Dr David.

Dr David said government’s agreement to adopt a 'reverse Lifetime Health Cover' policy would be a major factor in addressing membership rates, while improving participation and affordability.

Under the change, insurers will be able to offer discounted private hospital cover to people aged 18 to 29. They will be able to offer premium discounts on hospital cover of up to two per cent for each year that a person is aged under 30, to a maximum of 10 per cent for 18 to 25 year olds.

In relation to the pricing of prostheses, minimum benefits payable for almost all medical devices listed on the Prostheses List will be reduced on 1 February 2018. Total estimated savings to private health insurers over the next four premium years (2018 to 2021) are more than a billion dollars.

Dr David said the reductions guarantee consumers would benefit with health funds pledging to pass on all savings through the next premium rounds announced April 2018 and April 2019.

“Addressing market failures in the medical device supply chain has been a major priority for health funds on behalf of their members. The Federal Government should be commended for tackling the corruption, rorts and kickbacks that over time became a feature of this system, leading to poor outcomes for consumers in terms of both cost and safety," she said.

MTAA CEO Ian Burgess said its four year agreement with government will provide industry with stability after what he described as "a period of sustained attack by the PHI industry."

He said, "MTAA endorses the intent of the Government’s wide-ranging reforms to increase PHI value and restrict premium increases for consumers."

According to Mr Burgess, “These cuts 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. 

“I thank the Minister for the constructive manner in which he approached negotiations and consulted openly with MTAA and the industry more broadly.

“The Prostheses List is a benefit to Private Health Insurance members 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 Private Health Insurance value proposition.

“We call on Private Health Insurers 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 this Agreement.

“Further, the Private Health Insurance industry should embrace an expansion of the Prostheses List and enable faster access to private market through rationalisation of the processes surrounding Health Technology Assessment. The value of insurance needs to be sustained and private patients should be given at the very least the same access to devices as patients in public hospitals," he added.