Quarterly update reignites debate over medical device pricing

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The latest quarterly release from the Australian Prudential Regulation Authority has renewed the fierce debate over the pricing of privately funded medical devices.

The APRA release covering the three months to the end of June confirmed the year-long impact of the COVID-19 pandemic.

"The industry reported a decrease in net profit after tax over the year to June 2022 (down 28.0 per cent to $1.1 billion) compared to the previous year," it said.

"This decline was driven by a fall in investment income, partially offset by higher insurance profits. The higher insurance profits were driven by a combination of modest claims experience due to COVID-19-related restrictions and movements in insurers’ Deferred Claims Liabilities, partially offset by measures taken by private health insurers to fulfil their commitments not to profit from COVID-19."

Hospital treatment membership increased by 2.1 per cent or 235,699 people during the year.

"The growth was broad-based, with membership in the 50+ age group increasing by 2.4 per cent or 112,942 persons and membership among the younger population (insured persons aged 20 to 49) increasing by 1.8 per cent or 74,294 persons," said APRA.

The release also includes data on the June quarter that clearly indicates the impact of the easing of restrictions on non-urgent elective procedures. Claim rose by 12.5 per cent increase and hospital episodes by 12.9 per cent.

APRA said this contributed to the industry incurring a $258.7 million loss in the June quarter.

Private Healthcare Australia (PHA) and Members Health used the release to call for reform of medical device pricing.

PHA CEO Dr Rachel David called on the federal government to "reverse a last-minute pre-election deal" between the former government and the medical device sector.

“Disappointingly and despite repeated efforts to bring about change, the cost of generic medical devices (prostheses) has been the largest healthcare claims expenditure growth area for health funds and the main driver of PHI premium increases and rising Australian healthcare costs,” said Dr David.

“The fact that medical device claims consistently continued to grow out of proportion to the number of procedures performed in hospitals during the COVID pandemic is evidence the pricing of medical devices in Australia’s private health sector is the single largest contributor to increasing PHI premiums."

Members Health CEO Mathew Koce called for the creation of a single centralised body to purchase medical devices for both public and private hospitals, similar to that in France.

"Members Health’s analysis of the data has shown that in some instances, patients can expect to be charged $5,000 more for an identical medical device in Australia than in France," he said.

However, the Medical Technology Association of Australia (MTAA) hit back with CEO Ian Burgess challenging the insurers on what he said was their push to abolish clinical autonomy and patient access to medical devices.

“MTAA and other health stakeholders are shocked that insurers continue to falsely claim they’re not profiting from COVID-19, while hoarding their COVID profits rather than returning it to consumers," he said.

“Insurers are doing this all the while making blatantly false representations to Members of Parliament about the impact on Prostheses List benefits on premiums, which any doctor, hospital or consumer advocate can tell you is not only not a contributing factor, but that prices of medical devices are continuing to fall.”