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Tuesday, 8 March 2005
Page: 16

Senator ALLISON (Leader of the Australian Democrats) (1:40 PM) —The National Health Amendment (Prostheses) Bill 2005 aims to introduce some cost control into private health care and reduce cost pressures on health insurance premiums. The government has argued that the growing costs to health funds of covering prostheses and medical devices over the past 10 years have placed substantial upward pressure on private health insurance premiums, and it is certainly true that health insurance premiums have risen. They have risen on average by about seven per cent over the past four years—a rate two to three times the consumer price index. In April 2002, they rose by 6.9 per cent; in March 2003, 7.4 per cent; in March 2004, 7.82 per cent; and in March 2005, 7.96 per cent. In fact, health insurance fees have risen 30 per cent since 2001.

One thing that has been constant as far as private health insurance is concerned is the increase in premiums. It is also true that, following the government’s deregulation of prostheses in 2001, the total benefits paid for prostheses have risen rapidly. In 1989-90, 15 years ago, prostheses accounted for 1.7 per cent of total hospital benefits, whereas they now account for 12 per cent of hospital benefits. In the two years from 2001-02 to 2003-04, the growth in prostheses costs has been 29 per cent. Having let the price inflation horse bolt from the stable, as it were, it is certainly not before time that the government has looked at this issue.

This is a reasonably complex bill which has the potential to introduce some cost savings for the health insurance industry and, consequently, for people who pay health insurance premiums. But there are risks for consumers. There is nothing in this bill that will guarantee that any savings made by insurance funds will be handed on to consumers; there is nothing in this bill that will guarantee that a patient is informed about their out-of-pocket costs; and, of course, there is a great chance that the consumers—the patients themselves—will pay more.

It would seem to be that there is general agreement amongst the majority of groups that reform is needed in relation to current arrangements for the provision of private health insurance benefits for prostheses. The bill tackles that issue by essentially proposing the introduction of a system similar to that used by the PBS to address pricing of drugs. With that system, the PBS pays for the least expensive clinically effective drug and, if companies insist on charging more than the benchmark price for a particular drug, the patient has to bear that cost. Similarly, this bill will introduce gap and no gap lists of prostheses. Prosthetic items whose price is considered by an industry committee to fall outside a cost-effective range will end up on the gap list. The idea is that suppliers will be more likely to agree to lower prices than face the possibility that their device may end up on the gap list and become unattractive to patients and their doctors when compared to similar devices that would not carry a gap. These lower prices will mean savings for health insurance funds, and extra costs associated with the devices on the gap permitted list will be met by the patient, not by the health fund, adding to the savings the funds will make.

The question is: will private health insurance premiums stop rising at the phenomenal rates of the last few years? The relationship between private health insurance premium growth and prostheses has clearly been one of the driving forces behind the legislation. It is thought that the growth in prostheses alone is responsible for two per cent growth in private health insurance premiums each year. However, as I said, there is no guarantee that this bill will have any substantial impact on controlling the costs for prostheses or, if it does, that these savings will be passed on.

There are three main drivers for increasing costs. First, there is an overall increase in volume due to advances in surgical techniques and anaesthetics. Prostheses are now put into younger and older people than previously and they are available for more conditions. This is not necessarily a bad thing as the use of prostheses can mean improved quality of life, overall savings in health costs due to shorter hospital stays and reduced recovery time following surgery. Secondly, the cost of prostheses has also been driven up by new technologies, including the development of prostheses for conditions which used not to exist and ‘me too’ technologies that essentially do the same thing as older versions but cost a lot more. Thirdly, price inflation also has had a role to play in increasing the cost of prostheses.

As I said, this legislation only deals with the latter issues; therefore it may have a limited impact on reducing costs to health funds and subsequently a limited effect on keeping premiums down. The government’s own projections of savings to expenditure on the 30 per cent private health insurance rebate from the effects of this bill are a very modest $24.9 million across the two years from 2005-07. The Parliamentary Library Bills Digest for this bill estimates that savings for 2005-06 represent less than one-half of one per cent of current expenditure on the rebate. Of course, there are many factors which impact on the premiums. The cost of prostheses is only one. Other factors are still likely to result in health insurance premium rises in the future.

There is concern about informed consent and out-of-pocket costs for patients. The new arrangements have the potential to substantially increase out-of-pocket costs for prostheses for privately insured individual consumers. I say ‘potential’ because we do not know how many of the roughly 9,000 items currently listed would end up on the gap permitted list. The more items that go onto the gap permitted list the greater the likelihood that people will face a gap. There is also a risk that allowing the introduction of gap permitted prostheses might lead to a differential quality of care based on ability to pay if prostheses that end up on the gap permitted list are of a higher standard than the non-gap prostheses.

At this point in time it is not known how many frequently used devices which would previously have been provided at no cost to privately insured consumers will attract that gap payment. It is assumed that the vast majority of prostheses will be on the no gap list. The government suggests it will be 80 per cent but, of course, that cannot be guaranteed. It is guaranteed that there will be at least one product with no gap for each procedure related to an MBS item. But, if patients choose to have other medical devices or prostheses, they will pay more.

Like legislative arrangements concerning other potential gaps, such as doctors or hospital costs, there are no legislative requirements to ensure informed financial consent. We are well aware of the many cases of people who believe that having private health insurance will give them cover for the cost of their treatment, only to find that, when they do go for treatment having made that decision, they are faced with substantial bills. The 2004 Private Health Insurance Ombudsman report states that consumers generally do not have a good understanding of how much it costs to be treated in a private hospital. If a health fund member finds they are not fully covered by their health insurance, the amount of money involved can come as an unpleasant surprise.

PHIAC statistics for the June quarter of 2004 showed that around 20 per cent of in-hospital medical services provided to patients involved out-of-pocket costs. That means a substantial minority of people are already facing out-of-pocket costs, and we can assume from the complaints made to the ombudsman that some of these people have not been well informed about these costs. The AMA has made strong statements that it is not the responsibility of doctors to ensure that patients are informed about the costs that flow to them because of the existence of the legislation. But the question is just whose responsibility it is. Hopefully, as part of a clinician’s decision-making process they will take into account the cost effectiveness of particular prostheses when deciding which is right for a patient. It is essential that doctors are well informed.

Failure to obtain informed consent can have substantial consequences for consumers and there is clearly good intent among industry stakeholders to ensure that patients are appropriately advised and informed of any potential gaps they may face. Given that there is no legislative requirement for independent monitoring or review of the adequacy of informed financial consent procedures following the introduction of these processes, it would seem important that there is this element in the new arrangements.

Independent review of the extent of out-of-pocket costs faced by consumers for their prostheses would be very valuable, particularly given experience with the PBS system and the high proportion of people facing premium charges for medications. The Democrats will support the Labor amendment that puts in place that review. We will also support the call for this legislation to cover prostheses implanted by a podiatric surgeons. I understand Senator Lees will move that amendment. As we have argued before, there is evidence that treatment outcomes for foot conditions treated by podiatrists and podiatric surgeons are in many cases better than when these conditions are treated by orthopaedic surgeons and other types of physicians. Podiatric surgeons may also provide a more cost-effective service than orthopaedic surgeons. Patients who wish to use the services of a podiatric surgeon should not be forced to use orthopaedic surgeons or pay out-of-pocket costs simply because their health insurance fund does not have coverage for a prostheses if it is implanted by a podiatric surgeon.

In conclusion, it is encouraging to see the government beginning to address the issue of cost control in the private sector. We hope that this is the first of many such measures along these lines. The 2004 OECD paper examining private health insurance in Australia reported that private funds do not exercise control over the quality, quantity or appropriateness of care provided and private health insurance has led to an overall increase in health utilisation as there are few limits on expenditure growth. If the government is to continue with its obsession with privatisation of health care, despite the plethora of evidence that the greater the degree of privatisation in health, the greater the cost of health care to the population as a whole, it at least has the responsibility to make sure that costs are contained within that sector.