Brendan Trembath Reports on the High Cost of Medical Devices in Australia

Station: 666 ABC Canberra
Program: AM
Date: 22nd August 2016
Time: 8:12 AM
Compere: Michael Brissenden
Interviewees: Dr Rachel David, CEO, Private Healthcare Australia; Dr Michael Gannon, President, Australian Medical Association
MICHAEL BRISSENDEN: Australia’s private health insurance industry has blamed rising health premiums on the high cost of devices such as pace makers and replacement hips and knees. The industry’s peak representative body has produced data showing a knee replacement costs three times more in Australia than in Canada. The industry is calling on the Federal Government to reform the pricing system. A review was announced by the Federal Government in February. Brendan Trembath reports.
BRENDAN TREMBATH: In 2006 the Federal Government fixed the price that health funds pay for common medical devices, including replacement hips and knees and defibrillators. Dr Rachel David, the Chief Executive of Private Healthcare Australia, maintains they were set at high levels by world standards.
RACHEL DAVID: Private patients in Australia, through their premiums, are still paying two to five times the real value, the real market value of the medical device.
BRENDAN TREMBATH: What are you calling for, then?
RACHEL DAVID: We want the Government to work with us on what we call Reference Pricing or a price mechanism to bring those benefits down in line with other hospital prices in Australia and benchmark prices around the world in comparable economies like Europe and the UK.
BRENDAN TREMBATH: More than 12 million Australians have private health insurance. There is widespread concern about rising premiums.
RACHEL DAVID: We’ve seen that in research that we’ve done, market research as recently as three weeks ago. That’s one of the main reasons why we’re urging the Government to make this change, because it will pass on any savings made by funds from prosthesis list reform into a reduction on the premium increase.
BRENDAN TREMBATH: The Australia Medical Association says Private Healthcare Australia has a case in some areas for reforming the system for pricing devices. AMA President, Dr Michael Gannon.
MICHAEL GANNON: We know, for example, that the public hospital system and the private hospital system can sometimes pay wildly different amounts for prostheses. So that just doesn’t stand up.
MICHAEL GANNON: Well I think that just- there might be rules that dictate exactly how the different systems buy the prostheses. You can make a case that, for example, it might be cheaper with economies of scale or transportation costs, licencing costs, why something might be cheaper in another part of the world compared to Australia, but that doesn’t stack up when you’re talking about two hospitals that might be across the road from each other.
BRENDAN TREMBATH: The example provided by the private health industry is that a replacement hip in Canada costs three times less than it does in Australia. Why can that possibly be the case?
MICHAEL GANNON: Well, some of the biggest manufacturers are in North America, so that might reflect some of the costs. But certainly, if there are differences why different hospitals, whether it’s the public systems versus the private system or different providers in Australia, can get these for vastly different rates, then we need to look at it.
MICHAEL BRISSENDEN: The AMA President Dr Michael Gannon with Brendan Trembath, and we approached the Federal Health Department for a response.
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