Community Health Reform

Insurers caught out fudging facts again

Private health insurers have been caught out comparing apples with oranges yet again with Members Health chief executive Michael Koce using outdated and irrelevant data to misrepresent the facts about device pricing at the recent Health Insurance Summit in Sydney.

Mr Koce used data for 2016-1­­7 from the Private Hospital Data Bureau and the National Hospital Cost Data Collection published by Independent Hospital Pricing Authority (IHPA) in an attempt to compare prices for prostheses in the public and private sector. The information on costs for both these data sets is based on analysis of Australian Refined – Diagnosis Related Groups (AR-DRGs). One dataset is for private hospitals and one is for public hospitals and each are compiled by different agencies.

The 2016-17 data does not fully reflect the cuts imposed on prostheses across four main categories in February 2017, and also precedes the cuts implemented as part of the MTAA-Government Agreement signed in October 2017.

The latter cuts are estimated to be worth $1.1 billion over the life of the Agreement and resulted in the lowest premium increase in 19 years in 2019. This is even before a further round of Prostheses List benefit reductions under the Agreement, which will take place in February 2020. MTAA estimates that the February 2017 and Agreement cuts have delivered $450 million in savings already in the 2017-18 premium years, higher than forecast under the Agreement.

It is, therefore, inappropriate and completely disingenuous for Mr Koce to quote three-year-old statistics to make his case.

Furthermore, DRGs are not an appropriate tool to compare prostheses costs. DRGs are used to determine hospital funding in Australia. A DRG will not explain which prostheses was the best for the patient, including whether a more expensive one makes more sense based on the many factors that could impact treatment under that DRG. They describe averages, not specifics, and will not take into account legitimate differences in volume mix between prostheses use between public and private patients.

The numbers floated by Mr Koce are similar to those used time and again by the PHI industry in their attempts to get the device industry to temporarily rescue it from difficulties. MTAA has demonstrated that they are not correct, and by the time the last cuts under the Agreement are implemented in February 2020, there will be very little continuing justification for the comparison.

Private health insurers should rather pay heed to APRA’s recent warnings that “often [their] strategies are vague, fail to address the material risk or rely heavily on actions by others”, that “waiting for a third party to ‘serve-up’ a solution is not a defensible strategy” and that “APRA would expect that better prepared insurers are taking actions to improve the value of services for members”.

Insurers must focus on providing value – access to a comprehensive range of life-saving and life-changing medical devices, with generally no out-of-pocket costs for those devices, is a key contributor to the value proposition of private health.

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