Just last month, the Guardian reported that the Australian competition watchdog’s review of the private health insurance industry found Australians were forced to cough up $23.9 billion in premiums last financial year – that’s $834 million more than they had to pay in 2016/17.
The Guardian also reported that “the number of people with hospital-only or combined health cover fell 0.9 percentage points to 45.1%, while the proposition of policyholders with extras-only cover rose to 9.2% from 8.9%”.
The association representing Australia’s private health insurance industry, Private Healthcare Australia (PHA), has continued to assert that private health funds are delivering record health benefits for Australians, despite their decision to increase premiums for their customers.
PHA has points to a number of factors for the price hikes, including blaming medical technology (MedTech) innovators for the prices they charge for medical devices. However, PHA appears to have conveniently ignored the Agreement MedTech innovators reached with the Commonwealth Government to deliver $1.1 billion in savings, over four years. This enabled MedTech innovators to singlehandedly deliver, for Australians, the lowest increase to their private health insurance premiums in 17 years.
Another tried and tested argument rolled out by the PHI industry is that Australians are charged up to three times more for medical devices than their British and New Zealand counterparts. MedTech innovators, however, argue that the variations in prices for medical devices reflects the differing market environments, supply chains, economies of scale and contrasting reimbursement systems from country to country.
So do Australians really pay more for the same devices? Let’s take a look:
In 2016, one of Australia’s largest PHI companies, Bupa, acknowledged the difficulty in comparing the prices of devices in one country to another. When asked why Australians are having to pay up to $400 more a month for private health insurance than consumers in countries like Britain, Bupa said the “private health market in Britain was ‘very different’ (than Australia’s market), with insurers able to pick and choose customers and force patients to seek their approval before being referred to a specialist.”
The structure of healthcare systems in individual countries, the split between private and public healthcare and the source of funding impacts the price of prostheses, making it impossible for prices to be the same across different countries.
A simple example of these difference can be found when comparing the incentives for the public hospital sector and the private hospital sector and the services they provide. Public hospitals are incentivised to provide necessary and efficient care at the lowest possible cost through, what is called, Activity Based Funding (ABF). As a result, purchasing of prostheses occurs through centralised tenders which trade off prostheses choice against prostheses volume (either directly or indirectly), with control about what is available to the hospital being made by hospital administrators.
The private hospital sector, however, is not constrained by ABF and clinicians rather than hospital administrators make the decisions about services and care provided, including the types of prostheses they would like to use. These different incentives influence the different patterns of use and the economies of scale that are possible.
So, while some countries may appear to have comparable healthcare systems to Australia, but when they are analysed in a greater depth, they can actually be completely different.