THE Medical Technology Association of Australia (MTAA) supports efforts to improve the value and affordability of private health insurance (PHI), and particularly greater transparency and clarity for consumers, but we have concerns about the unintended consequences of the proposed changes.

For example, providing standard clinical definitions to enable coverage comparison between policies is useful for consumers. Additionally, grouping policies in easy to understand categories – Basic, Bronze, Silver and Gold – from 1 April 2019 sounds good in theory.

But a range of health care stakeholders have expressed serious concerns around the categorisations negatively affecting consumers and the unintended consequences that could flow on.

The unintended consequences of these changes are simple:

  • The reform process may not be in the best interest of patients. It was all about ensuring PHI maintains its current profitability. The Deloitte modelling that informed this outcome assumes that the PHI industry would maintain profit levels of 11.5%. Why was that the starting point, instead of greater transparency, more choice and benefits, and lower premiums for consumers?
  • Some surgical interventions that consumers commonly rely on, including joint replacements; insulin pumps (for which there is no public hospital alternative); pain therapies, such as spinal cord stimulation; and intraocular lenses would require the highest and presumably most expensive level of cover, despite many of these procedures being available today to people holding lower levels of cover.
  • This could lead to a further reduction in the number of people with PHI or a reduction in the number of people covered by effective health insurance that properly covers them for their needs. In either case, there is a risk that further burden would be placed on public health services for elective surgery, and that there will be increased waiting lists for common procedures, such as joint replacements. What consultation has occurred with states and territories regarding the impact this will have on public hospitals? What is the anticipated impact on public hospital waiting lists due to these changes – how many procedures will now move to the public system?

Our industry agreed to cuts in the benefits paid by insurers for life-saving medical devices on the Prostheses List. These actions resulted in cuts to the medical devices industry of around $1.1 billion over 4 years and underpinned the lowest premium increase in 17 years in 2018.

We believe the choice of life-saving medical device to address a health condition and supported by a patient’s physician is one of the core value propositions of PHI.

But limiting chronic pain management options to Gold only effectively curtails access to a clinically effective treatment option for many Australian private health consumers. Moreover, the categorisation of chronic pain in Gold is inconsistent with the development of a national action plan on chronic pain management to improve the quality of life for the millions of Australians living with pain, their families and carers.

Limiting access to therapies such as spinal cord stimulators for the management of chronic pain undermines the government’s declared intent to address opioid dependency among Australians with chronic pain.

Management of ongoing chronic pain represents only 0.4% of total PHI hospital benefits paid by insurers in 2014–2015. The Deloitte report in 2017 found in their sample of PHI hospital products that 100% of products currently classified as basic, medium and top provided benefits for chronic pain procedures on a no restrictions basis.

As the majority of people with PHI are currently covered for chronic pain procedures, this suggests that a large proportion of these people will lose this cover or be forced to upgrade to Gold to continue receiving this cover. There are also limited services provided in the public hospital system for this clinical category which may have implications on patient access and health outcomes.

Current spinal cord stimulators use novel waveforms that are paraesthesia-free, meaning patients can drive and sleep with the therapy. This has led to improvements in functional outcomes, such as returning to work and quality of life measures. Spinal cord stimulation is a viable alternative to spinal fusions, and the latest evidence shows significant improvements in long term patient outcomes for back and leg pain.

A January 2017 study sponsored by Abbott, which develops and manufactures spinal cord stimulators, found average daily opioid use declined or stabilised for 70% of patients with chronic pain who received a stimulator, compared with opioid use before the implant.

Restricting insurance coverage for this proven therapy, which can restore Australians with chronic pain to productive life, undermines the value of private insurance for consumers, particularly for Australians in physical jobs who do the responsible thing and insure themselves against the risk of chronic injury.

Joint replacements is another procedure that has been categorised as Gold, which will have the likely impact of limiting patient access to this procedure and pushing people onto the public waiting list. Data from the Australian Institute of Health and Welfare (AIHW) indicate that the proportion of patients (compared with the total population) with total hospital insurance cover reduced from 65% in people aged 55–59 years to 27% in those aged 85 years or over. This is presumably an affordability issue. Many of the conditions that will be limited to Gold-tier insurance products predominately affect older Australians who are more sensitive to increases in the price of their policies.

Based on 2017 Australian Orthopaedic National Joint Replacement Registry data, osteoarthritis is the principal diagnosis for all five types of partial knee replacements (at 98.9%) and primary total knee replacement (at 97.6%). The AIHW reports that in 2014–15, 2.1 million Australians had osteoarthritis, with the prevalence of the condition rising sharply after the age of 45 years and being greatest in patients aged 80 years and over. There was a rise of 38% in total knee replacements from 2005–06 to 2015–16.

Using the figures from the Deloitte modelling, joint replacements will reduce from 12.10% of all private health hospital benefits to 11.40%, even allowing for the impact of adverse selection, which assumes that some consumers will upgrade to Gold cover to retain coverage when the reforms take effect. This equates to reduction in total hospital benefits of $128 million for this clinical category. Applying the average hospital benefit paid by insurers for the episode of care for an individual joint replacement (around $30 000, this includes the prosthesis, surgeon and hospital costs), it can be estimated there will be around 4300 fewer patients accessing joint replacements in the private system.

The primary cause of joint replacements is osteoarthritis, which is the second biggest cause of disability in Australia. To prevent an upsurge in the disease burden of osteoarthritis, patients will be forced to join waiting lists placing a further burden on an already stretched public health system. It is unclear what consultation has occurred with state governments to meet this challenge.

Currently, 61% of all joint replacements performed in Australia are provided in the private system. Between 2003 and 2016, the number of hip replacements undertaken per year has increased by 73.7% (p 54). Between 2003 and 2016, the number of knee replacements undertaken per year has increased by 111.5% (p 166). This is a reflection of our ageing population directly resulting in increased utilisation of prostheses. In addition, Australians are remaining active and living longer.

Artificial joints now last longer and have reduced revision rates. The most recent annual report from the Australian Orthopaedic Association National Joint Replacement Registry (NJRR) shows that since 2003, there has been a 31% decline in revised hip procedures and, since 2004, there has been a 16% drop in revised knee procedures. According to the NJRR this has already saved about $600 million over the past 10 years by encouraging wise prosthesis choice.

The patients most likely to require insurance for knee replacements are those most likely to be unable to afford the ongoing purchase of a PHI policy that meets their needs, particularly, if low and medium tier policy coverage of these conditions is removed. Patients on existing low or medium tier insurance policies will need to either upgrade to Gold coverage or be left with no alternative but to join the waiting list for treatment in the public system.

MTAA understands that some insurers have provided verbal assurances that these existing policies will continue to be offered to customers after 1 April via the use of “plus” products. However, this commitment has not yet been provided in writing and, even if it was, it would not be binding. MTAA is concerned that any non-binding commitment will lead to insurers reducing coverage to minimum levels due to the impact of antiselection.

More and more Australians are already turning away from PHI because it increases their cost of living, they can’t understand what is and isn’t included in their policy, and they can’t see the real benefit.

The medical device industry believes in the value of PHI and we believe the real value for policy holders is the value our industry delivers – being able to access the very best medical technology selected by their physician. Everyone should be concerned by the unintended consequences this product categorisation could have on our health care system all in the name of ensuring PHI maintains its profitability.

Ian Burgess is the Chief Executive Officer of Medical Technology Association of Australia, the national association representing companies in the medical device industry.



The statements or opinions expressed in this article reflect the views of the authors and do not represent the official policy of the AMA, the MJA or MJA InSight unless that is so stated.

One thought on “Knee, hip replacements: impact of private health insurance changes

  1. Sandra says:

    I am now 71 and have been paying health insurance continuously since I was seventeen with the same insurer. I have had 2 children and one knee replacement in that time. Having paid out far more than that claimed, I will be devistated if I can’t claim for the other knee to be replaced (now due). It also makes me angry that those who have only been on PHI for a few years (and of senior years) are entitled to the same rebates as myself.

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