Are Doctor’s Fees Threatening Private Health Insurance in Australia?

Australia has a universal healthcare system (Medicare).  There is also has a private health insurance option that covers admissions into private hospitals.  It is understandable that most Australians who are not health economists (unlike yours truly) would consider themselves sufficiently covered for a private hospital admission if they had taken up private health insurance.  The Australian current affairs program ‘4 Corners’ has explored how many Australians find themselves with substantial out of pocket costs when faced with a private hospital admission despite having paid for private health insurance.  See the 4 Corners episode here.

The unexpected out-of-pocket costs explored by 4 Corners were a result of some doctors charging far in excess of any available Medicare or private health insurance rebates available.  Perhaps unsurprisingly, the highest out-of-pocket fees were charged in the most affluent areas of Australia.  The program demonstrated how devastating unexpected costs can be to people already in a vulnerable state and in a highly unequal bargaining position.

Due to a quirk of the Australian Constitution, neither the Government nor Private Health Insurers are in position to regulate doctors’ fees.  The 1946 referendum amended the constitution so that the powers of the Commonwealth Government were extended to provide various social services.  This included the Pharmaceutical Benefit Scheme which had previously been held to be unconstitutional.  The amended clause outlined the Commonwealth’s power for

‘The provision of maternity allowance, widows’ pensions, child endowment, unemployment, pharmaceutical sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription), benefits to students and family allowances.’ (my italics)

The 2018 impact of this is that essentially doctors can charge what they like.  It has been suggested that Medicare could limit rebates to those services which are provided at less than a capped fee.  This seems a neat solution which in no way limits doctors’ ability to charge as they see fit, but, does not result in a public subsidy for doctors that are deemed to be overcharging.

In the past year, there has been significant attention paid to the cost of private health insurance premiums.  Much of the blame has been laid at the door of the cost of implantable medical devices.  Last year the Australian Government reached an agreement with the medical technology industry to reduce the annual cost of implantable medical devices by $300 million which is expected to have a favourable impact on premiums. Arguably out-of-pocket medical fees do far more to damage the value proposition of private health insurance than incremental premium increases.

Surgeons operating in private hospitals enjoy excellent facilities, are able to exercise choice in their use of devices and are highly remunerated.  While most surgeons do not charge excessive fees, those that do may be causing significant damage to the market they work in.

One Big Thing not to overlook if you are completing an initial application to the Medical Services Advisory Committee (MSAC)

Manufacturers of innovative technology are often eager to have the medical procedure for their new technology included on the Australian Medical Benefits Schedule (MBS).  This is the list of procedures, tests and consultations which the Australian Medicare System will subsidise. The MBS is fundamental to the Australian health financing system and is a prerequisite for coverage by private health insurers for hospital procedures.  Additionally, devices cannot be included on the Australian Prostheses List if there is not an associated MBS item number.

It must be remembered that the MBS is a system of subsidies for procedures performed by doctors and other health professionals.  It is the fee charged by these professionals that is being subsidised. Therefore, the input of these professionals is key to determining whether a new procedure is eligible to be assessed by MSAC. It is a requirement that a ‘statement of clinical relevance’ from the professional body that represents the health professionals who will be providing the new service.  MSAC requires that the professional body ‘generally accepts the proposed service as a ‘necessary’ treatment and not simply treatment that is regarded as convenient or desirable’.

This requirement can be challenging for new procedures and technologies, particularly if they are for small populations, or alternatively they may be performed by members of several different associations.  It sometimes creates a ‘chicken and egg’ situation where a procedure is not performed frequently in Australia primarily because there is no MBS item number, and consequently, for some procedures, they are little known.

Education of the people who will be performing the procedure that includes new technology is key.  Relationships with key opinion leaders in the relevant profession are essential if a new technology is to be understood and acknowledged.  Understanding these key relationships is essential. Without this, very deserving technology, that may offer substantial clinical and economic good to Australians, may struggle to get past the first hurdle.

Please contact us at info@medtechnique.com.au for assistance with MSAC applications

Prostheses List Reform Update

The cost and value of private health insurance is always a hot topic for consumers. For the past several months there has been a very vocal campaign, mainly in the Murdoch press, highlighting the prices paid by private health insurers for implantable devices included on the Prostheses List. Rightly or wrongly, increases in private health insurance premiums have been blamed, in a large part, on implantable devices.

The press campaign has taken place in an environment where private health insurance was already the subject of a government review. A key focus of the review was Prostheses List reform. The Prostheses List regulations require that a private health insurer must pay a specific benefit for an implanted device that is included on the list. The private health insurance industry has maintained that the price of prostheses is too high compared to the public hospital system and to other countries. The medical device industry maintains that this comparison is overly simplistic and that prices have been cherry picked. The Minister Sussan Ley established the Industry Working Group (IWG) on Private Health Insurance Prostheses Reform to establish some consensus on appropriate reform. A key term of reference was

‘Creating a more competitive basis for the purchase and reimbursement of prostheses and devices, including consideration of options for implementing new pricing arrangements such as price referencing and price disclosure models and identifying specific products and categories of products which may present opportunities for immediate benefit reduction’

The final report of the IWG can be found here.

Minister Ley has acted immediately on the report by reducing the benefits paid for cardiac devices and intraocular lenses by 10 percent and for hip and knee prostheses by 7.5 percent. Across-the-board cuts were not considered appropriate. This is a far cry from the 45 percent decrease that the private health insurance industry was calling for and is a measured response made under considerable political pressure.

Implications for suppliers of medical devices?

  • While price cuts are never welcome, Australia remains a stable, well developed and profitable market in which to do business.
  • The IWG reports recommends that the Prostheses List criteria be revised so that cost effective non-implantable and 3D printed devices can be included. This is very welcome but will take some time to implement and will likely be opposed by insurers.
  • That there is likely to be a requirement of some form of price disclosure to for suppliers in the future to promote competition. Any program is yet to be developed and would again take some time

For information on the Prostheses List please see www.medtechnique.com.au

Physician Reimbursement Australia – Changes to the Medical Services Advisory Committee (MSAC) Application processes.

The Medical Services Advisory Committee (MSAC) is the body that advises the Australian Minister for Health on evidence relating to the safety, effectiveness and cost-effectiveness of new medical technologies and procedures. In order for a doctor or other health professional to be reimbursed under the Australian Medicare system for a new procedure or new consultation an application must be made to MSAC.  The application process can be quite prolonged and arduous for applicants.

In an effort to improve the process but maintain the same rigour in the assessment of applications the MSAC secretariat has instituted some process changes along with a new website.  The reforms are an attempt to tailor the ‘pathway’ of an application depending on the complexity of the application and the ‘novelty’ of the service or technology.  There is a 52-page document that outlines the new Process Framework.  However here are a few highlights that will have relevance for new applicants.

  1. New Application Form

The new application form is more complex and requires more up front information than the old application form and will require more resources to complete.  Once it is submitted, it will be determined whether the application is suitable to progress.  An initial ‘verification of the availability of evidence for assessment’ is made.  At the moment how this actually happens is a little murky, however the intention appears to be that if evidence is obviously insufficient to achieve a successful outcome then the application should not proceed.  From an applicant’s perspective it is better to get a quick ‘no’ than a long slow ‘no’ so this step may be considered as an improvement.  It appears from the Flowchart of the process that most applications are expected to proceed.

  1. PICO Confirmation

Formerly known as the ‘Decision Analytic Protocol’ or the ‘Protocol’, this document outlines the clinical and economic questions that need to be answered in order to determine whether the new procedure or technology should receive public funding.  It follows the format of Population/Patients, Intervention, Comparator, Outcome’.  This document was previously developed by the applicant.  The new process requires that this is outsourced to a Health Technology Assessment (HTA) group with ‘close consultation’ with the applicant.  There is no cost to the applicant for this.

 

While this process is too new to judge its success, it will be essential that the contracted HTA group thoroughly understands the new technology.  If not mistakes may be built into the application process at the earliest stage.

 

  1. Consultation

There are mandated points of consultation between assessment groups and the applicant.  There has certainly been an effort to improve communication.  Recent experience has certainly shown that the MSAC Secretariat is demonstrating a willingness to be flexible and open that is very welcome.

For those who would like to delve more deeply into the changes, the MSAC Reform Key Differences Table is very useful.

While it is yet to be seen what differences the reforms will make to applicants, an MSAC application will continue to be a considerable undertaking.  Our advice is to always undertake a preliminary assessment of the available evidence before embarking on the process.  Please see www.medtechnique.com.au for more information.

 

 

Will there be any changes in the Australian Medical Device Market Post Election?

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Those of us living in Australia have endured a seemingly interminable, quite boring, election campaign.  While health and the Australian Medicare system has been a campaign issue, there has, not surprisingly, been little discussion about medical technology specifically.

It is naturally easier to predict how the Government will deal with the medical device market if returned.  There are several reviews and policies that have already been implemented and it is anticipated that these will continue.  The most worrying to the suppliers of implantable medical devices is the proposed reform of the Prostheses List.  There was considerable concern that the industry was facing an arbitrary across the board cut to Prostheses prices.  This blunt instrument with the threat of possible damaging unintended consequences has been avoided with a more consultative approach being taken by the Minister with the formation of the Industry Working Group on Private Health Insurance Prostheses Reform.  An outcomes statement from the group can be seen here.  It is not certain what form changes to the Prostheses arrangements will take but reform of some sort is very likely.

Labor does not specifically mention Prostheses in their ‘100 Positive Policies’ document however there is plenty of discussion about reducing waste and managing cost.  If elected, it can be assumed that Labor would certainly not be averse to Prostheses Reform.

The review of the Medical Benefits Schedule is supported by both major parties with Labor also committing to establishing a Centre for Medicare and Healthcare Innovation to ‘trial, evaluate and implement new payment and service delivery models that aim to reduce health expenditure while improving the quality and safety of care’.

Both parties have policies to invest in new primary care initiatives that aim to keep patients with chronic illnesses out of hospital, albeit with different names and different funding commitments.  These programs offer real opportunities for innovative technologies particular remote monitoring, diagnostics and wearables.  See Coalition Policy and Labor Policy

Happy Voting!

Further Reading May 2016 Newsletter

What is the Medicare Rebate Freeze?

The Health Minister, Sussan Ley spectacularly bungled the discussion about the Medicare Rebate Freeze this week.  This article by Associate Professor Helen Dickinson explains the history of the rebate freeze and the ramifications of decreasing reimbursement for general practitioners. Please click here for more information.


Medical Services Advisory Committee Reforms (MSAC)

The proposed MSAC reforms have now been implemented despite a large degree of uncertainty about how the process will operate and how the reforms will affect timelines.  The change that will most immediately impact sponsors of new technologies that require a new procedure to be included on the Medicare Benefits Schedule, is the new application form.  The application form is a substantially more complicated document and will require a greater input of resources to complete.  Essentially the barrier to enter the MSAC process has been raised.  For advice on the new process and assistance with application forms please see www.medtechnique.com.au.


Be Prepared!

Considering the costs and time involved in submitting an application to MSAC, an assessment of the probability of the application being successful is very useful.  Increasingly Medtechnique Consulting is being approached to conduct feasibility studies into the possible success of proposed reimbursement applications in Australia.  It is always wise to access the chances of a successful application before investing time and money into complex applications.  Please click here for more information.