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2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT
(MEDICAL DEVICE AND HUMAN TISSUE PRODUCT LIST AND COST
RECOVERY) BILL 2022
PRIVATE HEALTH INSURANCE (PROSTHESES APPLICATION AND
LISTING FEES) AMENDMENT (COST RECOVERY) BILL 2022
PRIVATE HEALTH INSURANCE (NATIONAL JOINT REPLACEMENT
REGISTER LEVY) AMENDMENT (CONSEQUENTIAL AMENDMENTS)
BILL 2022
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Aged Care,
the Hon Mark Butler MP)
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT
(MEDICAL DEVICE AND HUMAN TISSUE PRODUCT LIST AND COST
RECOVERY) BILL 2022
PRIVATE HEALTH INSURANCE (PROSTHESES APPLICATION AND
LISTING FEES) AMENDMENT (COST RECOVERY) BILL 2022
PRIVATE HEALTH INSURANCE (NATIONAL JOINT REPLACEMENT
REGISTER LEVY) AMENDMENT (CONSEQUENTIAL AMENDMENTS)
BILL 2022
OUTLINE
The package of three Bills supports the implementation of the 2021-22 Budget
measure, Modernising and Improving the Private Health Insurance Prostheses List.
This package of Bills is the first tranche of legislative changes to implement this
Budget measure. It is anticipated that further legislative and administrative changes,
including legislative instruments, will be required to fully implement the Budget
measure.
The Private Health Insurance Legislation Amendment (Medical Device and
Human Tissue Product List and Cost Recovery) Bill 2022
The Private Health Insurance Act 2007 (PHI Act) provides for the making of Private
Health Insurance Rules (and a schedule to these rules, known currently as the
Prostheses List) to specify the minimum and maximum benefits that private health
insurers are required to pay for items that are included in the Prostheses List.
The Private Health Insurance Legislation Amendment (Medical Device and Human
Tissue Product List and Cost Recovery) Bill 2022 (PHI Bill) amends the PHI Act to
better define the products that may be eligible for inclusion on the Prostheses List.
The PHI Bill amends the PHI Act to include definitions of medical device and human
tissue product that are aligned (where relevant) to the Therapeutic Goods Act 1989.
The practical effect of these amendments is to clarify that set benefits are only
payable for medical devices or human tissue products that meet these definitions (in
addition to other criteria which will be set out in the legislative instrument).
The measures in the PHI Bill are expected to create an environment that will assist in
reducing the prices paid by insurers. This will, in turn, put downward pressure on
private health insurance premiums, and improve the affordability and attractiveness of
private health insurance for consumers.
The PHI Bill also renames the current Private Health Insurance (Prostheses) Rules
(No. 3) 2022 (current Rules), made under the PHI Act, to the Private Health
Insurance (Medical Devices and Human Tissue Products) Rules (renamed Rules) to
better reflect its purpose and the types of products eligible for inclusion. The renamed
Rules will include a schedule to be known as the Prescribed List of Benefits for
Medical Devices and Human Tissue Products (Prescribed List) (PL).
1
The PHI Bill also updates the cost recovery arrangements authorised by the PHI Act
and the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007
(PHI Fees Act). This includes providing statutory authority for the Minister for
Health and Aged Care to establish fee for service cost recovery arrangements
consistent with the Australian Government Charging Framework (AGC
Framework).
The new cost recovery provisions established by the PHI Bill include the following
measures:
• amend the PHI Act to permit the making of rules to impose fees for activities
carried out in connection with the PL;
• provide for items to be removed from the PL, and for processing and other
activities to cease, where fees or levies remain unpaid;
• provide for late payment penalty, recovery, and waivers in relation to fees and
levies; and
• authorise the rules to provide for other matters in relation to fees and levies.
The PHI Bill also amends the Private Health Insurance (Transitional Provisions and
Consequential Amendments) Act 2007 to reflect the changes made to the PHI Act that
are consequential to the PHI Bill and the Private Health Insurance (Prostheses
Application and Listing Fees) Amendment (Cost Recovery) Bill 2022.
The Private Health Insurance (Prostheses Application and Listing Fees)
Amendment (Cost Recovery) Bill 2022
The Private Health Insurance (Prostheses Application and Listing Fees) Amendment
(Cost Recovery) Bill 2022 (PHI Fees Bill) amends the PHI Fees Act to rename that
Act and update the cost recovery arrangements under it.
This Bill provides for the imposition of a cost recovery levy on each kind of medical
device and human tissue product on the PL. The amount of the levy will be set by the
regulations. The Bill further authorises the making of regulations and rules to provide
for matters in relation to the levy. The existing application and listing fees under the
PHI Fees Act will be repealed.
This Bill also renames the legislative instrument that may be made under the PHI Fees
Act so it is consistent with the new name of the legislative instrument that may be
made under the PHI Act for medical devices and human tissue products.
These cost recovery arrangements are consistent with the AGC Framework.
The Private Health Insurance (National Joint Replacement Register Levy)
Amendment (Consequential Amendments) Bill 2022
The Private Health Insurance (National Joint Replacement Register Levy)
Amendment (Consequential Amendments) Bill 2022 (PHI NJRR Bill) amends the
Private Health Insurance (National Joint Replacement Register Levy) Act 2009 (PHI
NJRR Act) to reflect the renamed Private Health Insurance (Medical Devices and
Human Tissue Products) Rules that will be made under the PHI Act. This Bill also
addresses an incorrect reference to a Ministerial determination in the PHI NJRR Act.
2
Background
Current Legislation
The PHI Act regulates private health insurance products in Australia. Subsection 333-
20(1) of the PHI Act allows the Minister to make, by legislative instrument, the
Private Health Insurance (Prostheses) Rules (No. 3) 2022 (current Rules). The
Schedule to the current Rules is referred to as the 'Prostheses List'.
Division 72 of the PHI Act provides for the current Rules to specify the minimum and
maximum benefits that private health insurers are required to pay for items that are
included in the Prostheses List. These benefits are paid to a hospital when items
included on the Prostheses List are provided to someone with eligible private health
insurance as part of hospital or hospital substitute treatment. These benefits apply
where there is a Medicare benefit payable for a service associated with the use of the
item.
The PHI Fees Act imposes application fees and listing fees that are a tax, and sets out
who is liable to pay these fees and when they become liable.
The PHI NJRR Act imposes the national joint replacement register levy and provides
for the rate of this levy, and sets out who is liable to pay this levy and when they
become liable.
Prostheses List
In the context of the Prostheses List, the term 'benefit' means the reimbursement paid
to health consumers when they receive treatment. The benefit shown on the
Prostheses List is the set amount payable by private health insurers for the prosthesis.
The Medicare benefit is the amount payable by Medicare for the professional service
associated with the provision of the prosthesis, which is independent of the benefits
specified in the Prostheses List.
Despite the name 'Prostheses List', the list does not include devices such as external
limb prosthetics, external breast prostheses or implants used solely for cosmetic
purposes.
The list provides access to modern, innovative, and safe medical technology such as
cardiac and orthopaedic implantable devices that improve patient health outcomes and
improve the wellbeing of Australians.
Listing on the Prostheses List
Medical device sponsors and suppliers (collectively referred to as 'sponsors') may
apply to include items on the Prostheses List (known as 'listing'), including the
minimum benefit that would be payable by private health insurers for that item. If an
application for an item is granted and the relevant fees are paid, then the current Rules
must be varied or remade to list the item when the current Rules are next varied or
remade. The current Rules are remade or varied three times a year.
3
Sponsors play an important role in the development of the Prostheses List.
Applications from individual sponsors support the listing of innovative and diverse
devices on the Prostheses List. In addition, reductions in benefits for items in the
Prostheses List are implemented from time to time and these reductions improve the
value of private health insurance for consumers by reducing benefits paid for these
items. These activities support patient access to safe, effective and cost-effective
medical devices and also support the affordability of private health insurance.
Policy Issues
Scope of the Prostheses List
Increasing medical costs, increasing utilisation of health services (particularly by
older Australians and people with chronic disease) and declining private health
insurance participation rates (particularly by younger Australians) are challenging the
affordability and long-term sustainability of the private health insurance sector.
The cost of prostheses on the Prostheses List has been identified as a factor in the
rising prices of private health insurance premiums for consumers. It is agreed by all
stakeholders that prostheses prices paid in the public hospital sector in Australia are,
on average, lower than private hospital prices and the benefits paid by insurers.
In 2020-21, over 3.3 million prostheses were supplied at a cost to private health
insurers of approximately $2.2 billion. Expenditure on prostheses accounts for
14 per cent of private health insurance hospital benefits paid annually.
The current scope of the Prostheses List lacks specificity, as there are no distinct or
legislated limits on what is included in the Prostheses List. The lack of a legislated
definition of a 'prosthesis' (to be remedied by the inclusion of definitions of medical
device and human tissue product) can result in items being listed which could be
better funded by other avenues or are already funded through other means ('double
funded'). This ambiguous scope of the Prostheses List has also led to an increase in
complexity. Since 1997, the number of items on the Prostheses List has expanded
approximately tenfold. In 2021, there were over 11,600 billing codes and over 1,700
unique groupings.
Fees and Charges
The functions associated with assessing and administering Prostheses List
applications are cost-recovered activities. Charges for these activities have remained
largely the same since they were introduced in 2007.
The existing arrangements are not consistent with the AGC Framework, as the
charges do not reflect the minimum efficient costs of delivering the Government
services. These existing charges do not reflect the levels of effort, cost, and
complexity of current activities such as administration and evaluation associated with
the Prostheses List. Reform activities are being undertaken to rectify this, such as a
redesign of application pathways, which will be supported by the new cost recovery
arrangements.
4
Reforms
In the 2021-22 Federal Budget, the Australian Government committed $22 million
over four years as part of the Modernising and Improving the Private Health
Insurance Prostheses List measure. These reforms will be given effect through a
range of legislative and administrative changes. The legislative changes include:
• changes to primary legislation, and
• new or varied legislative instruments (regulations and rules).
It is anticipated that the majority of the reforms will be given effect through new or
varied legislative instruments.
The reforms include initiatives to realise savings for insurers, and ultimately
consumers, as well as structural reforms to facilitate a more streamlined operation of
the Prostheses List.
Overall, the legislative and administrative changes for the reforms will:
• modernise and improve the Prostheses List;
• better align the benefits set for medical devices on the Prostheses List for
private providers with the prices paid for those same devices in the public
hospital system;
• continue to guarantee that insurers will pay a set benefit for each relevant
medical device or human tissue product to ensure that patients continue to
have access to safe, clinically effective and cost-effective devices and
products;
• preserve clinician and patient choice in the private health system;
• narrow the gap between benefits payable under the PHI Act and public sector
prices;
• give the private healthcare sector and medical technology industry a
sustainable and predictable environment; and
• support innovation.
Consultation
The measures in the Bills have been developed following extensive consultation.
Consultation has included two legislative reform specific consultation papers, a series
of webinars, as well as consultation on a series of papers dealing with other related
key reform themes.
The Department of Health and Aged Care (Department) has engaged in significant
and ongoing stakeholder consultation since the reform work commenced on
1 July 2021. In August 2021, the Department released Consultation Paper 4(a) which
outlined the proposed scope, definition and purpose of the amendments and how they
will modernise and improve the Prostheses List. In September 2022, the Department
conducted a series of webinars with stakeholders and invited questions and comments
on the proposed legislative amendments.
5
Additionally, on 16 September 2022, the Department released Consultation
Paper 3(b) - Pathways for applications to the Prostheses List which included details of
the new proposed cost recovery model, including a draft schedule of indicative fees.
Following these consultations, the measures in the Bills were refined to reflect
stakeholder feedback. This includes amending the definitions of 'medical device' and
'human tissue product' to include more flexibility in their scope to allow for
exceptional circumstances and innovative new kinds of devices and products. Some
measures were also removed to allow time for further consultation and refinement.
On 4 November 2022, the Department released Consultation Paper 4(b) which
included three (3) Exposure Drafts of the 'first tranche' legislative changes and an
accompanying Explanatory Memorandum which outlined the intent of the most
notable amending items. The overall outcome of this consultation was support for the
legislative changes noting that the detailed changes to legislative instruments will
require significant consultation. Additional transitional provisions were developed
following this consultation to facilitate the introduction of the cost recovery levy,
amended cost recovery fees and the repeal of the existing application and listing fees
under the PHI Fees Act. These transitional provisions are designed to provide
continuity and certainty for those sponsors with applications that are in-flight prior to
commencement of the new cost recovery arrangements.
Financial Impact Statement
In the 2021-22 Federal Budget, the Australian Government committed $22 million
over four years as part of the Modernising and Improving the Private Health
Insurance Prostheses List measure.
The financial impact of regulatory costs of the measures in the Bills is estimated to be
a maximum of $1.81 million per year.
Regulation Impact Statement
The Regulation Impact Statement covering the measures in the Bills is reproduced at
the end of this explanatory memorandum.
6
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT
(MEDICAL DEVICE AND HUMAN TISSUE PRODUCT LIST AND COST
RECOVERY) BILL 2022
This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
The Private Health Insurance Act 2007 (PHI Act) provides for the making of Private
Health Insurance Rules (and a schedule to these rules, known as the 'Prostheses List')
to specify the minimum and maximum benefits that private health insurers are required
to pay for items that are included in the Prostheses List.
The Private Health Insurance Legislation Amendment (Medical Device and Human
Tissue Product List and Cost Recovery) Bill 2022 (PHI Bill) amends the PHI Act to
better define the products that may be eligible for inclusion on the Prostheses List.
The PHI Bill amends the PHI Act to include definitions of 'medical device' and
'human tissue product' that are aligned (where relevant) to the Therapeutic Goods Act
1989. The practical effect of these amendments is to clarify that set benefits are only
payable for medical devices or human tissue products that meet these definitions (in
addition to other criteria which will be set out in the legislative instrument).
The measures in the PHI Bill are expected to create an environment that will assist in
reducing the prices paid by insurers. This will, in turn, put downward pressure on
private health insurance premiums, and improve the affordability and attractiveness of
private health insurance for consumers.
The PHI Bill also renames the current Private Health Insurance (Prostheses) Rules
(No. 3) 2022 (current Rules), made under the PHI Act, to the Private Health
Insurance (Medical Devices and Human Tissue Products) Rules (renamed Rules) to
better reflect its purposes and the types of products eligible for inclusion. It is
intended that the renamed Rules will include a schedule to be known as the Prescribed
List of Benefits for Medical Devices and Human Tissue Products (Prescribed List)
(PL).
The PHI Bill also updates the cost recovery arrangements authorised by the PHI Act
and the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007
(PHI Fees Act). This includes providing statutory authority for the Minister for
Health and Aged Care to establish fee for service cost recovery arrangements
consistent with the Australian Government Charging Framework (AGC
Framework).
7
The new cost recovery provisions established by the PHI Bill include the following
measures:
• amending the PHI Act to permit rules to impose fees for activities carried on
in connection with the PL;
• enabling items to be removed from the PL, and for processing and other
activities to cease, where fees or levies remain unpaid;
• providing for late payment penalty, recovery of unpaid amounts, exemptions
and waivers in relation to fees and levies; and
• authorising the rules to provide for other matters in relation to fees and levies.
The PHI Bill also amends the Private Health Insurance (Transitional Provisions and
Consequential Amendments) Act 2007 to reflect the changes made to the PHI Act.
Human rights implications
The PHI Bill does not engage any of the applicable rights or freedoms as the Bill will
only:
• clarify the kinds of items which may be eligible for set benefits paid by private
health insurers;
• rename a legislative instrument to reflect this amended scope; and
• update the cost recovery arrangements for consistency with the AGC
Framework.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
The Hon Mark Butler MP, Minister for Health and Aged Care
8
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
PRIVATE HEALTH INSURANCE (PROSTHESES APPLICATION AND
LISTING FEES) AMENDMENT (COST RECOVERY) BILL 2022
This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
The Private Health Insurance (Prostheses Application and Listing Fees) Amendment
(Cost Recovery) Bill 2022 (PHI Fees Bill) amends the Private Health Insurance
(Prostheses Application and Listing Fees) Act 2007 (PHI Fees Act) to rename the
PHI Fees Act and update the cost recovery arrangements enabled under this Act.
The PHI Fees Bill provides for the imposition of a cost recovery levy on each kind of
medical device and human tissue product on the PL. The amount of the levy will be
set by regulations. The Bill will further authorise the making of regulations and rules
to provide for matters in relation to the levy. The existing application and listing fees
under the PHI Fees Act will be repealed.
The PHI Fees Bill also renames the legislative instrument that may be made under the
PHI Fees Act so it is consistent with the new name of the relevant legislative
instrument that may be made under the PHI Act for medical devices and human tissue
products.
These cost recovery arrangements are consistent with the AGC Framework.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms as the PHI Fees
Bill only:
• updates the cost recovery arrangements for consistency with the AGC
Framework; and
• renames a legislative instrument to reflect the amended scope of items for
which benefits are paid to a hospital by private health insurers.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
The Hon Mark Butler MP, Minister for Health and Aged Care
9
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
PRIVATE HEALTH INSURANCE (NATIONAL JOINT REPLACEMENT
REGISTER LEVY) AMENDMENT (CONSEQUENTIAL AMENDMENTS)
BILL 2022
This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
The Private Health Insurance (National Joint Replacement Register Levy)
Amendment (Consequential Amendments) Bill 2022 (PHI NJRR Bill) amends the
Private Health Insurance (National Joint Replacement Register Levy) Act 2009 (PHI
NJRR Act) to reflect the renamed Private Health Insurance (Medical Devices and
Human Tissue Products) Rules that will made under the PHI Act. This Bill also
addresses an incorrect reference to a Ministerial determination in the PHI NJRR Act.
Human rights implications
The PHI NJRR Bill does not engage any of the applicable rights or freedoms as the
only:
• updates references to a renamed legislative instrument to reflect the amended
scope of items for which benefits are paid to a hospital by private health
insurers (that is, medical devices and human tissue products); and
• addresses an incorrect reference.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
The Hon Mark Butler MP, Minister for Health and Aged Care
10
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT
(MEDICAL DEVICE AND HUMAN TISSUE PRODUCT LIST AND COST
RECOVERY) BILL 2022
Section 1 - Short Title
Section 1 provides for the short title of the Act to be the Private Health Insurance
Legislation Amendment (Medical Device and Human Tissue Product List and Cost
Recovery) Act 2022.
Section 2 - Commencement
Section 2 sets out when the Private Health Insurance Legislation Amendment
(Medical Device and Human Tissue Product List and Cost Recovery) Bill 2022
(PHI Bill) commences. The PHI Bill commences on 1 July 2023. This delayed
commencement provides for the orderly introduction of the new requirements,
including the making of relevant legislative instruments.
Section 3 - Schedules
Section 3 provides that legislation specified in a Schedule to this Bill is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other
item has effect according to its terms. This is a technical provision which gives
operational effect to the amendments contained in the schedules. Schedule 1 amends
the Private Health Insurance Act 2007 (PHI Act) and the Private Health Insurance
(Transitional Provisions and Consequential Amendments) Act 2007
(PHI Transitional Provisions Act). Schedule 2 amends the PHI Act.
SCHEDULE 1 -- Medical devices and human tissue products
Schedule 1 amends the PHI Act and the PHI Transitional Provisions Act to better
define the products that may be eligible for listing in the Private Health Insurance
(Prostheses) Rules (No. 3) 2022, which will be renamed as the 'Private Health
Insurance (Medical Devices and Human Tissue Products) Rules' (renamed Rules).
The PHI Bill includes definitions of 'medical device' and 'human tissue product' that
are aligned (where relevant) to the Therapeutic Goods Act 1989. The practical effect
of these amendments is to clarify that set benefits are only payable for medical
devices or human tissue products that meet these definitions (in addition to other
criteria which will be set out in the legislative instruments) (see items 2 and 3 and
definitions inserted in item 17).
The PHI Bill renames the relevant legislative instrument that may be made under the
PHI Act to reflect its purposes and the types of products eligible for inclusion in the
renamed legislative instrument (see item 18).
Schedule 1 of the PHI Bill also amends the PHI Transitional Provisions Act to reflect
the changes made to the PHI Act.
Part 1 of Schedule 1 - Amendments
Private Health Insurance Act 2007
11
Item 1 - Section 50-5
Item 1 amends section 50-5 under Part 3-1 of Chapter 3 of the PHI Act by omitting
the reference to 'Private Health Insurance (Prostheses) Rules' and substituting it with
'Private Health Insurance (Medical Devices and Human Tissue Products) Rules'. This
is a consequential amendment to reflect the new name of the legislative instrument
that may be made for medical devices and human tissue products (the renamed Rules,
see item 18).
Items 2 and 3 - Subsection 72-1(2) (table item 4, column headed "There must be
a benefit for ... ")
Items 2 and 3 amend the requirements that a complying insurance policy (that covers
hospital treatment) must meet in relation to benefit requirements under Part 3-3 of
Chapter 3 of the PHI Act. These insurance policy requirements relate to situations
where there must be a set benefit (minimum benefit and if relevant, maximum benefit)
for treatment involving medical devices or human tissue products.
Items 2 and 3 amend item 4 in the table to subsection 72-1(2) to omit references to
'prosthesis' and replace them with 'medical device' and 'human tissue product', and
to refer to a renamed legislative instrument (the renamed Rules). Together with the
definitions of 'medical device' and 'human tissue products' (see item 17), the effect
of these amendments is to clarify that set benefits are only payable for medical
devices or human tissue products (as defined). It is anticipated that to be eligible for
listing, items will also need to meet further criteria which will be set out in a
legislative instrument, in addition to meeting the legislative definitions of a 'medical
device' or 'human tissue product'.
The amendments mean that minimum benefits (and if relevant, maximum benefits)
continue to apply for the kinds of medical devices or human tissue products in the
renamed Rules. These benefits apply where the device or tissue product is provided as
part of hospital treatment or hospital substitute treatment covered under the policy in
circumstances in which a Medicare benefit is payable or in circumstances set out in
the renamed Rules.
The amendments in item 3 ensure that any relevant conditions in the renamed Rules
must be satisfied for the benefit to be payable in relation to the provision of medical
devices or human tissue products.
Items 4, 5, 6 and 7 - Subsection 72-1(2) (table item 4, column headed "The
amount of the benefit must be ... ")
Items 4 to 7 also amend item 4 in the table to subsection 72-1(2) to omit references to
'prosthesis' and replace them with 'medical device' and 'human tissue product', and
to refer to the renamed Rules. These amendments do not affect the amount of the
benefit. The benefit payable must continue to be at least the amount set out in the
renamed Rules and must not exceed the maximum amount (if any) set out in the
renamed Rules. The amendments align with the provisions for benefit amounts with
the kinds of devices and products for which benefits may apply (see items 2 and 3).
12
Item 8 - Section 72-10 (heading)
Item 8 is a consequential amendment to the heading of section 72-10 to reflect the
kinds of medical devices and human tissue products for which benefits may apply (see
items 2 and 3).
Item 9 - Subsection 72-10(1)
Item 9 is a consequential amendment to subsection 72-10(1) to reflect the renamed
legislative instrument (the renamed Rules, see item 18).
Items 10 and 11 - Subsection 72-10(1) and paragraph 72-10(1)(a) Items 10 and 11
are consequential amendments to subsection 72-10(1) and paragraph 72-10(1)(a) to
reflect the kinds of medical devices and human tissue products for which benefits may
apply (see items 2 and 3).
Item 12 - Subsection 72-10(2)
Item 12 is a consequential amendment to subsection 72-10(2) to reflect both the kinds
of medical devices and human tissue products for which benefits may apply (see items
2 and 3) and the renamed legislative instrument (the renamed Rules, see item 18).
Item 13 - Paragraph 72-10(5)
Item 13 is a consequential amendment to paragraph 72-10(5) to reflect the renamed
legislative instrument (the renamed Rules, see item 18).
Items 14 and 15 - Paragraphs 72-10(5)(c), (d) and (e)
Items 14 and 15 are consequential amendments to paragraphs 72-10(5)(c), (d) and (e)
to reflect the kinds of medical devices and human tissue products for which benefits
may apply (see items 2 and 3).
Item 16 - Subsection 72-10(6)
Item 16 is a consequential amendment to subsection 72-10(6) to reflect the renamed
legislative instrument (the renamed Rules, see item 18).
Item 17 - After section 72-10
Item 17 inserts new sections 72-11 and 72-12 in the PHI Act to define a 'medical
device' and 'human tissue product' for the purposes of the PHI Act.
Together with amending items 2 and 3, the practical effect of introducing the
definitions of 'medical device' and 'human tissue product' is to limit the kinds of
medical devices and human tissue products to those specific devices and products that
meet these definitions (in addition to other criteria which are expected to be set out in
the legislative instrument). Benefits are payable by private health insurers only for
these devices and products.
The current scope of the Prostheses List lacks specificity, as there are no distinct or
legislated limits on what is included in the Prostheses List. The lack of a legislated
definition of a 'prosthesis' (to be remedied by the inclusion of definitions of medical
device and human tissue product) can result in items being listed which could be
better funded by other avenues or are already funded through other means ('double
funded'). This ambiguous scope of the Prostheses List has also led to an increase in
complexity. Since 1997, the number of items on the Prostheses List has expanded
13
nearly tenfold. In 2021, there were over 11,600 billing codes and over 1,700 unique
groupings.
The new definitions address this ambiguity and clarify what kinds of items may be
eligible for inclusion in the renamed Rules, and for which benefits are payable by
private health insurers.
General use and consumable items, and medical devices or human tissue items
intended for use for diagnosis, prediction, or prognosis are ineligible for listing, as
these are not within the scope of the definitions. Many diagnostic devices are used in
an ambulatory setting within diagnostic imaging and pathology practice. The new
definitions clarify that these types of items are not eligible for reimbursement but
provide some flexibility in moving to the new requirements, with commensurate
transparency when this flexibility is used (see below).
The new section 72-11 also clarifies the meaning of an 'accessory' for the purposes of
the definition of a medical device. This definition is necessary to clarify the kinds of
medical devices and human tissue products for which benefits may be paid. The
inclusion of accessories in the definition recognises that some accessories are always
supplied and used with an implantable or surgically invasive device.
Medical device
The definition of 'medical device' in new section 72-11 is consistent with the
definition in therapeutic goods legislation (see section 41BD of the Therapeutic
Goods Act 1989) which regulates the quality, safety and efficacy of medical devices.
The definition in the PHI Bill varies from the definition in therapeutic goods
legislation in that it does not include medical devices used for diagnostic purposes.
This is because these kinds of devices are not intended to be devices or products for
which benefits are payable by private health insurers.
The new definition also includes in paragraph 72-11(1)(b) any instrument, apparatus,
appliance, software, implant, reagent, material or other article specified in the
renamed Rules. This provision applies irrespective of the requirements in paragraph
72-11(1)(a) of the new definition. It allows some flexibility in specifying the kinds of
medical devices for which benefits may be payable by allowing for benefits to be
payable for devices that do not meet the requirements in paragraph 72-11(1)(a). It is
intended that listing devices for the purposes of this paragraph would only be used in
exceptional circumstances, or where other mechanisms for prescribing benefits may
be impractical.
The flexibility in paragraph 72-11(1)(b) is needed to manage the wide variety of
medical devices currently available and the potential for new and innovative medical
devices to be developed in the future. The provision may also be of benefit in
transitioning to the new definition for a medical device, and for any reviews of current
listings. For transparency, the kinds of devices prescribed for the purposes of
paragraph 72-11(1)(b) would be set out in the renamed Rules.
14
Human tissue product
The definition of 'human tissue product' in the new section 72-12 is consistent with
the definition of 'biological' in therapeutic goods legislation (see section 32A of the
Therapeutic Goods Act 1989), which regulates the quality, safety and efficacy of
'biologicals'. The definition in this Bill varies from the definition in therapeutic goods
legislation in that it does not include human tissue products used for diagnostic
purposes or testing. This is because benefits should not be payable for these kinds of
products.
As with medical devices, the definition of 'human tissue product' also provides for
the renamed Rules to specify kinds of human tissue products that are within the
definition and provides for the renamed Rules to specify things that are not within the
scope of the definition (subparagraph 72-12(a)(ii) and paragraph 72-12(c)
respectively). These components in the definition are needed to provide flexibility and
transparency in managing the wide variety of human tissue products that are currently
available and the potential for new and innovative human tissue products to be
developed in the future. This flexibility may also be of benefit in transitioning to the
new definition and for any reviews of current listings.
It is intended that listing products for the purposes of subparagraph 72-12(a)(ii) or
paragraph 72-12(c) would only be used in exceptional circumstances, or where other
mechanisms for prescribing benefits may be impractical. For transparency, these
kinds of human tissue products would be set out in the renamed Rules.
Item 18 - Subsection 333-20(1) (table item 4, column headed "Private Health
Insurance Rules")
Item 18 amends the name of the legislative instrument that may be made for medical
devices and human tissue products. The new name reflects the kinds of medical
devices and human tissue products that would be included in the legislative
instrument and that prescribes the payable benefits.
The previous name for this instrument was the Private Health Insurance (Prostheses)
Rules (No. 3) 2022 of which Schedule 1 of these rules was called the 'Prostheses
List'. This created some confusion in that it included items that were not prostheses
and did not include, for example, prosthetic limbs, which was a common
understanding from the name of the instrument. The PHI Bill amends the name of the
legislative instrument to reflect the kinds of devices and products that are expected to
be listed in it. This improves the clarity and transparency of the PL scheme.
Item 19- Clause 1 of Schedule 1
Item 19 inserts references to definitions for 'accessory', 'human tissue product' and
'medical device' in Schedule 1 to the PHI Act which are new definitions inserted in
item 17.
Item 20 - Clause 1 of Schedule 1 (paragraph (f) of the definition of private health
insurance arrangement)Item 20 is a consequential amendment to the definition of
'private health insurance arrangement' in Clause 1 of Schedule 1 (the dictionary) to
reflect the renamed legislative instrument (the renamed Rules, see item 18).
15
Private Health Insurance (Transitional Provisions and Consequential Amendments)
Act 2007
Item 21 - Subsection 12(1)
Item 21 is a consequential amendment to remove the subsection numbering at the
beginning of subsection 12(1) as subsection 12(2) is repealed (see item 23).
Item 22 - Subsection 12(1)
Item 22 is a consequential amendment to subsection 12(1) to reflect the renamed
legislative instrument (the renamed Rules, see item 18). This amendment ensures that
prostheses under the pre-2007 scheme may continue to be listed in the renamed Rules
after commencement of the PHI Bill, without anyone needing to apply.
Item 23 - Subsection 12(2)
Item 23 repeals subsection 12(2) as the ongoing listing fee in section 72-15 of the PHI
Act is repealed (see item 3 of Schedule 2).
Part 2 of Schedule 1 - Application and transitional provisions
Item 24 - Applications made before commencement
Item 24 applies to applications made under the PHI Act before commencement. Item
24 provides that these applications are to be considered as if they were applications
made under subsection 72-10(2) of the amended PHI Act, including any legislative
instruments made under the PHI Act. This provides for an orderly transition to the
requirements in the new legislation.
Item 25 - Private Health Insurance Arrangement
Item 25 is a savings provision for paragraph (f) of the definition of 'private health
insurance arrangement'. It provides that the current Rules continue to apply for a
private health insurance arrangement.
SCHEDULE 2 -- Cost recovery
This Schedule amends the PHI Act to update the cost recovery arrangements to ensure
that they are consistent with the Australian Government Charging Framework (AGC
Framework). This includes providing statutory authority for the Minister for Health
and Aged Care to establish fee for service cost recovery arrangements consistent with
the AGC Framework. This includes permitting legislative instruments to impose fees
for activities carried out in connection with the renamed Rules.
These amendments do not impose any levies, as these are imposed under the renamed
Private Health Insurance (Medical Devices and Human Tissue Products Levy) Act
2007) (Levy Act). However, the amendments provide for:
• fees to be imposed under the PHI Act (item 4) for cost recovery of
Government services provided which are associated with the renamed Rules;
and
• matters relating to fees and levies such as liability, timing and means of
payment, and circumstances for payment (item 4).
16
Part 1 of Schedule 2 - Amendments
Item 1 - Paragraph 72-10(3)(b)
Item 1 repeals paragraph 72-10(3)(b) of the PHI Act and substitutes a new
paragraph 72-10(3)(b) to provide that any application for listing in the renamed Rules
is accompanied by any cost recovery fee that the applicant is liable to pay at the time
the application is made.
Items 2 and 3 - Paragraph 72-10(5)(b)
Item 2 repeals paragraph 72-10(5)(b) of the PHI Act and substitutes a new paragraph
72-10(5)(b) to provide that the applicant must pay to the Commonwealth any cost
recovery fee that the applicant is liable to pay in connection with the initial listing of a
medical device or human tissue product that is not already listed in the renamed
Rules. Item 3 inserts a note to provide that the Minister may, under section 72-25,
refuse to perform a function if the applicant fails to pay a cost recovery fee or levy
that is due and payable.
Item 4 - Sections 72-15 and 72-45
Item 4 repeals sections 72-15 and 72-20 and inserts the following new sections:
• section 72-15 (fees for certain activities);
• section 72-20 (delisting because of unpaid fees or levy);
• section 72-25 (refusing to carry out activities if a fee or levy is unpaid);
• section 72-30 (when fees must be paid);
• section 72-35 (payment of fees);
• section 72-40 (recovery of fees); and
• section 72-45 (other matters relating to fees).
New section 72-15 provides for the renamed Rules to specify cost recovery fees in
relation to activities in connection with the renamed Rules. As well as setting out a
number of fee related matters that may be specified in the renamed Rules, section 72-
15 specifies that these cost recovery fees cannot amount to taxation. This addresses
the constitutional limitation on the imposition of a tax.
New section 72-20 allows the Minister or the Minister's delegate to remove (delist) a
kind of medical device or human tissue product from the renamed Rules when a
person is liable to pay a cost recovery fee or levy and fails to pay this cost recovery
fee or levy in accordance with the requirements in the renamed Rules. This will be a
discretionary decision and does not require the removal of a listing of a kind of
medical device or human tissue product from the renamed Rules if a cost recovery fee
or levy is not paid. This discretionary power allows the Minister or their delegate to
retain a listing in the case of a cost recovery fee or levy that is not paid, for example,
where it is in the best interests of patients and clinicians.
This mirrors the previous section 72-15, which dealt with removal for an unpaid
ongoing listing fee. New section 72-20 extends this to provide that a listing in the
renamed Rules may be removed for an unpaid fee or levy, aligning with section 72-15
but with broader application to reflect that both fees and levies are payable.
Decisions to add or remove items from the legislative instrument (in this case the
renamed Rules) are ordinarily characterised as legislation-like decisions of broad
17
application, as decisions to list or remove items from the current Prostheses List are
made for items each time the legislative instrument is made or varied (which currently
occurs three times per year). That is, decisions relating to legislative instruments are
not directed to the interests of any individual persons. However, the provision that
permits removal of a listing for non-payment of fees or levies may be considered to be
a decision that has a particular effect on an individual sponsor.
New section 72-20 provides discretion because it would be inappropriate, for
example, to require removal of a listing for non-payment of cost recovery fees or
levies if this would adversely affect patient health. The provision therefore allows the
Minister to retain a listing where, for example, that is in the best interests of patients
and clinicians, even though the sponsor has not paid cost-recovery fees or levies.
The decision to retain or remove the listing for unpaid cost-recovery fees or levies is
an objective decision (as fees are either paid or not paid). However, the decision may
involve consideration of a significant public interest element for patients that require
treatment with the relevant medical device or human tissue products. The decision to
retain a listing would also require an evaluation of complex technical information
(scientific and economic) about the value of a medical device or human tissue product
in Australia's health system; for example, whether retaining a listing would be in the
best interests of patients and clinicians (rather than sponsors).
For these reasons, the decision to remove a listing for unpaid costs recovery charges,
while discretionary, does not lend itself to merits review. This approach is consistent
with the previous section 72-15 that provided for a discretionary power to remove a
listing for unpaid fees, where this decision was also not subject to merits review.
New section 72-25 allows the Minister, or the Minister's delegate, to refuse to carry
out activities for a person (the debtor) where the person is liable to pay a cost recovery
fee or levy and has not paid this cost recovery fee or levy. In practice, this may mean
that all requests associated with the debtor for any service related to applications for a
new listing in the renamed Rules or administration of an existing listing in the
renamed Rules may be refused until the cost recovery fee is paid. This provision will
prevent a debtor who has unpaid cost-recovery fees from incurring additional
liabilities. It will also reduce the likelihood that the Commonwealth will expend
further resources in relation to activities for that person where there is an outstanding
debt, and will encourage those persons to pay a cost-recovery fee or levy for which
they are liable.
The decision is discretionary because it would be inappropriate to mandatorily prevent
a listing or other activity to be carried out if this would, for example, adversely affect
patient health. Therefore, the provision allows the Minister to continue to carry out
activities for a person where, for example, that is in the best interests of patients and
clinicians, even though the sponsor has not paid cost-recovery fees or levies. Similar
to the decision under section 72-20, the decision to carry out activities may involve
consideration of a significant public interest element for those patients that may
require treatment with the relevant medical device or human tissue product. This may
involve an evaluation of complex technical information (scientific and economic)
about the value of a medical device or human tissue product in Australia's health
18
system; for example, whether the activities carried out would be in the best interests
of patients and clinicians (rather than sponsors).
For these reasons, the decision to not carry out activities for unpaid costs recovery
fees and levies, while discretionary, does not lend itself to merits review. This
approach is consistent with other Commonwealth legislation that provides for a
discretionary power to not carry out activities for unpaid fees or levies, where this
decision was also not subject to merits review; for example, section 406 Export
Control Act 2020 and section 99YYB of the National Health Act 1953.
New section 72-45 provides that matters relating to who is liable to pay a cost
recovery fee, methods for payment of cost recovery fees, timing for the payment of
cost recovery fees and refunding and remittance of cost recovery fees may be
specified in the renamed Rules under the PHI Act.
The other matters are standard provisions for imposing and dealing with fees.
Items 5, 6 and 7 - After paragraph 304-10(d), at the end of subsection 307-10(1)
and after paragraph 307-20(1)(b)
These items extend the existing levy related provisions in the PHI Act to include
levies imposed under the Levy Act. The amendments provide that levies under the
Levy Act are subject to the same requirements for payment and late payment penalties
as other private health insurance levies. Item 7 has the effect of allowing the Minister
to waive a late payment penalty in respect of the levy imposed under the Levy Act.
Items 8 and 9 - Section 307-30
These items provide that the Private Health Insurance (Levy Administration) Rules
may specify the persons who are liable to pay the levy imposed by the Levy Act.
Item 10 - Clause 1 of Schedule 1
Item 10 inserts references to new definitions of 'cost-recovery fee' and 'medical
devices and human tissue products levy' (see items 4 and 5).
Part 2 of Schedule 2 - Application and transitional provisions
The items in this part specify the application and transitional provisions for new cost
recovery fees under the Private Health Insurance Act 2007.
Item 11 - Definitions
Item 11 provides definitions for relevant terms used in Part 2 of Schedule 2 to specify
the application and transitional provisions.
Item 12 - Application provision - cost-recovery fees regarding listing
applications
Item 12 specifies that paragraphs 72-10(3)(b) and 72-10(5)(b) of the amended Act
apply to applications made under subsection 72-10(2) after Part 2 of Schedule 2
commences. This item makes it clear that sponsors who made applications prior to
commencement (who would have already paid the old application fee) will not
become liable to also pay the new application fee once new paragraph 72-10(3)(b)
takes effect. Similarly, this item clarifies that any new cost recovery fees that may be
19
payable before the initial listing under subsection 72-10(5) do not apply to
applications made before commencement.
Item 13 - Transitional provisions - initial listing fees for applications granted
before commencement time
Item 13 applies to an application granted before commencement where the prosthesis
which the application relates to has not been listed in the Private Health Insurance
(Prostheses) Rules before commencement. Item 13 provides that paragraph
72-10(5)(b) of the amended Act applies to that application as if the reference to cost
recovery fee in that paragraph were a reference to the initial listing fee that the
sponsor is liable to pay in respect of the application.
These provisions have the effect of applying new paragraph 72-10(5)(b) (power to list
an item) to listing applications granted before commencement. In particular, subitem
13(2) requires the Minister to list the item only if the initial listing fee has been paid.
It also clarifies that, for such an application, the fee that has to be paid before listing is
not any of the new cost recovery fees but the old initial listing fee specified under
section 72-15 of the PHI Act as in force immediately before the commencement time.
Subitem 13(1) does not simply refer to applications for which the initial listing fee has
not been paid because the above transitional provisions need to apply also where the
sponsor has paid the fee before commencement, but the sponsor's item has not been
listed on the Prostheses List before commencement.
If an old initial listing fee incurred before commencement is not paid, subitem 13(2)
allows the Minister to rely on the amended subsection 72-10(5) to list this item. This
item may be listed even when the initial listing fee is paid by the sponsor outside the
14 days of being informed of the Minister's decision to grant the application specified
in subsection 72-10(5)(b) in the PHI Act as in force immediately before the
commencement time.
The above transitional provisions do not apply to applications that remain undecided
at time of commencement (e.g. where there has been no Minister's decision relating to
the listing of the item). After commencement, neither new paragraph 72-10(5)(b) nor
previous subsection 72-10(5) will apply to such an application, with the result that no
fee will be payable in order for the item to be listed.
Item 14 - Transitional provisions - ongoing listing fees imposed before
commencement time
Item 14 applies if:
• an ongoing listing fee is due and payable immediately before commencement;
and
• after commencement, the kind of prosthesis is listed as a kind of medical
device or human tissue product in the Private Health Insurance (Medical
Devices and Human Tissue Products) Rules.
In this circumstance, item 14 provides that subsection 72-20(2) of the amended Act
has effect, as if:
20
• a reference in that subsection to medical devices and human tissue products
levy in respect of the ongoing listing of the kind of medical device or human
tissue product included a reference to the ongoing listing fee; and
• the reference in paragraph 72-20(2)(b) to the Private Health Insurance (Levy
Administration) Rules were, in relation to the ongoing listing fee, a reference
to subsection 72-15(2) of the Private Health Insurance Act 2007 as in force
immediately before the commencement time.
This item is intended to provide for delisting an item where an ongoing listing fee
(due and payable before commencement) remains unpaid.
Item 15 - Transitional provisions - power to direct that activities not be carried
out
Item 15 provides that section 72-25 of the amended Act has effect as if:
• a reference in that section to a cost recovery fee included a reference to an
initial listing fee; and
• a reference in that section to medical devices and human tissue products levy
included a reference to an ongoing listing fee.
Paragraph 15(a) is included in case there is anything that the Minister may or must do
before listing an item. It is intended to enable the Minister to refuse to do such a thing
(in addition to withholding listing, as permitted by subsection 72-10(5)) if an initial
listing fee incurred before commencement remains unpaid. The power under new
section 72-25 would also be able to be engaged in relation to the sponsor regarding a
device other than the device to which the unpaid initial listing fee relates. A person
whose application before commencement is granted after commencement (after the
repeal of the existing PHI Fees Act) would not be liable to pay any initial listing fee
and therefore would not be caught by new section 72-25 due to paragraph 15(a)
above.
Paragraph 15(b) relates to items already listed and is included to cover activities that
may be carried out in relation to sponsors with listed items, other than delisting under
section 72-20. New section 72-25 would enable the Minister to refuse to carry out
those activities unless the sponsor has paid all outstanding amounts. Paragraph 15(b)
is intended to enable the same to apply where the amount that remains unpaid is an
ongoing listing fee rather than a cost recovery fee or the new levy.
21
PRIVATE HEALTH INSURANCE (PROSTHESES APPLICATION AND
LISTING FEES) AMENDMENT (COST RECOVERY) BILL 2022
Section 1 - Short Title
Section 1 provides for the short title of the Act to be the Private Health Insurance
(Prostheses Application and Listing Fees) Amendment (Cost Recovery) Act 2022.
Section 2 - Commencement
Section 2 sets out when the Private Health Insurance (Prostheses Application and
Listing Fees) Amendment (Cost Recovery) Bill 2022 (PHI Fees Bill) commences.
Sections 1 to 3 commence on the day the PHI Fees Bill receives the Royal Assent.
Schedule 1 to the PHI Fees Bill only commences if Schedule 2 to the Private Health
Insurance Legislation Amendment (Medical Device and Human Tissue Product List
and Cost Recovery) Act 2022 (PHI Amendment Act) commences. If Schedule 2 to
the PHI Amendment Act commences then the PHI Fees Bill commences on
commencement of that Schedule or the day the PHI Fees Bill receives Royal Assent,
whichever is the later date.
Section 3 - Schedules
Section 3 provides that each Act that is specified in a Schedule to this Bill is amended
or repealed as set out in the applicable items in the Schedule concerned, and any other
item has effect according to its terms. This is a technical provision which gives
operational effect to the amendments contained in the Schedule. Schedule 1 amends
the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007
(PHI Fees Act).
SCHEDULE 1 -- Amendments
Private Health Insurance (Prostheses Application and Listing Fees) Act 2007
The PHI Fees Bill amends the PHI Fees Act to rename the Act and update the cost
recovery arrangements under the Act, so these arrangements are consistent with the
Australian Government Charging Framework (AGC Framework) (item 3).
The PHI Fees Act, prior to these amendments, imposed application fees and listing
fees that constitute a tax, as well as who is liable to pay these fees and when they are
liable.
Item 1 - Title
Item 1 amends the long title of the PHI Fees Act to reflect the new cost recovery
arrangements, and to reflect that these arrangements are more appropriately
characterised as levies (rather than fees).
While the PHI Fees Bill amends the PHI Fees Act to more appropriately characterise
these arrangements as levies, this Act remains a taxation Act.
Item 2 - Section 1
Item 2 amends the short title of the PHI Fees Act to rename it to the 'Private Health
Insurance (Medical Devices and Human Tissue Product Levy) Act 2007' (Levy Act).
22
This reflects the new cost recovery arrangements, that these arrangements are levies
and that they apply to medical devices and human tissue products.
Item 3 - Sections 3 to 9
Item 3 repeals sections 3 to 9 and substitutes new sections 3 to 7 in the Levy Act.
Section 3 includes new definitions for the purposes of the Levy Act, which have the
same meaning as in the PHI Act.
Section 4 imposes a levy on each item listed in the Private Health Insurance (Medical
Devices and Human Tissue Products) Rules. The levy specifically applies to the
ongoing listing of each listed item. This means practicably that each Billing Code
listed within a financial year will establish a liability on the sponsor to pay the levy
amount for that year. Section 4 provides that the levy is imposed on a day specified by
the Private Health Insurance (Medical Devices and Human Tissue Products Levy)
Rules.
Subsection 4(3) provides that the levy amount imposed on each Billing Code will be
prescribed by regulations made under the Levy Act. This amount will be prescribed
by regulations made by the Governor-General under the Levy Act.
The purpose of the levy is to fund the activities associated with administering the
ongoing listing of items in the Private Health Insurance (Medical Devices and Human
Tissue Products) Rules (renamed Rules). The previous charges have been in place
since 2007 and do not reflect the current cost of administering the renamed Rules.
Prescribing the levies in regulations would allow the levy to be adjusted periodically
so that activities undertaken in connection with the ongoing listings in the renamed
Rules are fully cost recovered. Consistent with AGC Framework, the amount of any
prescribed rate would be set at a level that is designed to recover no more than the
estimated cost of administering the ongoing listings in the renamed Rules. A
requirement to this effect is in new subsection 4(4)(see below).
There will be a number of review processes associated with the implementation of the
new cost recovery framework, including processes for determining the amounts for
the levies. These processes would include consultation with stakeholders on:
• Cost Recovery Implementation Statements (CRIS) to be published annually
with financial summaries and estimates and will provide a mechanism
whereby stakeholders will be consulted by the Department about levy
amounts.
• Portfolio Charging Reviews conducted by the Department at least every five
years as required by the AGC Framework.
Subsection 4(4) specifies that in prescribing the amount of the levy, the Minister must
be satisfied that the amount is no more than the Commonwealth's costs in connection
with ongoing listing of each listed item. Practicably, this ensures that the levy amount
reflects the costs of cost-recovered ongoing listed activities.
Section 5 details the different levy amounts that may be prescribed in regulations
made under the Levy Act, including the amount or method for calculating the levies.
23
Section 5 provides that the amount of a levy may be nil and also provides that
regulations made under the Levy Act may provide exemptions from the levy.
A note has been included under section 5 to advise readers of the legislation that some
matters relating to levies are set out in the rules made under the PHI Act, specifically
the Private Health Insurance (Levy Administration) Rules. This includes matters such
as who is liable to pay the levy.
Section 6 provides that the Minister may make Private Health Insurance (Medical
Devices and Human Tissue Products Levy) Rules for the purposes of the Levy Act
specifying, for example, matters relating to a levy imposition day (subsection 4(2)).
Section 7 provides that the Governor-General may make regulations prescribing
matters relating to the Levy Act. This section provides for levy amounts to be set out
in regulations, consistent with subsection 4(3).
Item 4 - Application - financial year
Item 4 provides that section 4 of the Private Health Insurance (Medical Devices and
Human Tissue Products Levy) Act 2007 as amended by this Schedule applies in
relation to the financial year beginning on 1 July 2024 and each later financial year.
The above application provision is intended to clarify that:
• there will be no levy imposition day in the 2023-24 financial year; and
• the first imposition of the new levy will be based on the likely costs of
administering the list for the 2024-25 financial year as per new subsection
4(4). It is anticipated that the first imposition of the new levy would occur on
15 September 2024.
This provision is needed as otherwise, subsection 4(1) would be taken to impose the
new levy for 2023-24 to recover no more than the 'likely costs' for that year.
This will result in a gap between the old fees and the new levy, in that the actual
administration costs incurred in 2023-24 will not be recovered via the new levy.
Instead, those costs will form the basis of estimating the likely costs for 2024-25,
which will be recovered via the new levy.
24
PRIVATE HEALTH INSURANCE (NATIONAL JOINT REPLACEMENT
REGISTER LEVY) AMENDMENT (CONSEQUENTIAL AMENDMENTS)
BILL 2022
Section 1 - Short Title
Section 1 provides for the short title of the Act to be the Private Health Insurance
(National Joint Replacement Register Levy) Amendment (Consequential Amendments)
Act 2022.
Section 2 - Commencement
Section 2 sets out when the Private Health Insurance (National Joint Replacement
Register Levy) Amendment (Consequential Amendments) Bill 2022 (PHI NJRR
Bill) commences. The PHI NJRR Bill only commences if Schedule 1 to the Private
Health Insurance Legislation Amendment (Medical Device and Human Tissue
Product List and Cost Recovery) Act 2022 (PHI Amendment Act) commences. If
Schedule 1 to the PHI Amendment Act commences then the PHI NJRR Bill
commences on commencement of that Schedule or the day the PHI NJRR Bill
receives Royal Assent, whichever is the later date.
Section 3 - Schedule(s)
Section 3 provides that each Act that is specified in a Schedule to this Bill is amended
or repealed as set out in the applicable items in the Schedule concerned, and any other
item has effect according to its terms. This is a technical provision which gives
operational effect to the amendments contained in the Schedule. Schedule 1 amends
the Private Health Insurance (National Joint Replacement Register Levy) Act 2009
(PHI NJRR Act).
SCHEDULE 1 -- Amendments
Private Health Insurance (National Joint Replacement Register Levy) Act 2009
Amendments in this Schedule are consequential amendments arising from the change
of the name of the legislative instrument made under the PHI Act as set out in the PHI
Bill (see item 18 of that Bill). The new name of this legislative instrument is the
'Private Health Insurance (Medical Devices and Human Tissue Products) Rules'
(renamed Rules).
The PHI NJRR Act imposes the national joint replacement register levy and provides
for the rate of this levy, as well as who is liable to pay this levy.
Item 1 - Subsection 5(1) (definition of joint replacement prosthesis)
Item 1 repeals the definition of 'joint replacement prosthesis' as this is replaced with a
new definition of 'joint replacement device' (see item 2).
Item 2 - Subsection 5(1)
Item 2 inserts new definitions for 'joint replacement device' and 'Private Health
Insurance (Medical Devices and Human Tissue Products) Rules' in the PHI NJRR
Act. These new definitions reflect the new name of the legislative instrument made
under the PHI Act for medical devices and human tissue products, and the items that
may be include in that instrument, namely medical devices.
25
The new name of the legislative instrument is set out in the PHI Bill (the renamed
Rules, see item 18 of the PHI Bill).
Item 3 - Subsection 5(1) (definition of Private Health Insurance (Prostheses)
Rules)
Item 3 is a consequential amendment to repeal the definition of the previous name of
the legislative instrument made under the PHI Act.
Item 4 - Subsection 5(1) (definition of supplementary national joint replacement
register levy day)
Item 4 addresses an incorrect reference to a determination. The definition of
'supplementary national joint replacement register levy day' incorrectly refers to a
Ministerial determination under section 6 of the PHI NJRR Act. These determinations
are made under section 8A of the PHI NJRR Act and the amendment rectifies that
error.
Item 5 - Subsection 5(2)
Item 5 replaces the expression 'joint replacement prosthesis' with 'joint replacement
device' in subsection 5(2), which specifies the person that is a sponsor for a
prosthesis. These amendments are necessary to reflect the new definition (see item 2)
and the items that may be included in the legislative instrument made under the PHI
Act (the renamed Rules), namely medical devices.
Item 6 - Paragraphs 5(2)(a) and (b)
Item 6 replaces the expression 'prosthesis' with 'device' in the provision that specifies
the 'sponsor' for a prosthesis. The item also substitutes the new name of the
legislative instrument made under the PHI Act for medical devices and human tissue
products (the renamed Rules). These amendments are as a consequence of the
amendments in the PHI Bill, specifically the items that may be included in the
legislative instrument made under the PHI Act, namely medical devices.
Item 7 - Paragraph 5(2)(b)
Item 7 replaces the expression 'that prosthesis' with 'that device' in paragraph
5(2)(b). This amendment is also as a consequence of the amendments in the PHI Bill.
Item 8 - Subsection 5(3)
Item 8 replaces the expression 'prosthesis' with 'medical device' as a consequence of
the new definition of 'joint replacement device' (item 2) and amendments to the PHI
Act in the PHI Bill.
This provision provides that the Private Health Insurance (National Joint Replacement
Register Levy) Rules may provide that one or more classes of medical devices are
taken, or are taken not, to be joint replacement devices for the purposes of the
definition of joint replacement device. This ensures continued flexibility in specifying
those joint replacement devices on which a levy is imposed.
Items 9 to 13 - Subsections 6(1), 7(2), 7(3) and Section 7A
Items 9 to 13 replace the expression 'prosthesis' with 'medical device' in the
provisions that impose the levy (subsection 6(1)), the rate of that levy (section 7) and
who must pay the levy (section 7A).
26
These amendments are a consequence of the amendments to the PHI Act in the PHI
Bill, which replace the expression 'prosthesis' with 'medical device'.
27
Regulation Impact Statement
(RIS)
Improving the Private Health Insurance
Prostheses List
Office of Best Practice Regulation (OBPR)
ID number: 43619
1
Contents
Background..............................................................................................................4
History .....................................................................................................................5
Role of Government .................................................................................................5
Reviews and Reforms ..............................................................................................6
Stakeholder Perspectives ......................................................................................76
Consumers ..............................................................................................................7
Clinicians .................................................................................................................7
Hospitals ..................................................................................................................7
Medical Device Companies ....................................................................................87
Private Health Insurers.............................................................................................8
Government .............................................................................................................8
RIS Question 1: What is the policy problem you are trying to solve? ......................98
RIS Question 2: Why is government action needed? ........................................... 109
RIS Question 3: What policy options are you considering? ................................ 1110
Option 1 - Maintain the Status Quo ................................................................... 1110
Option 2 - Transfer administration of the PL to the Independent Hospital Pricing
Authority, using an activity-based funding approach .......................................... 1211
Option 3 - Retain the Prostheses List with Significant Redesign ........................ 1312
RIS Question 4: What is the likely net benefit of each option?............................ 1312
Option 1 - Maintain the Status Quo ................................................................... 1312
Option 2 - Transfer administration of the PL to the Independent Hospital Pricing
Authority, using an activity-based funding approach .......................................... 1413
Option 3 - Retain the Prostheses List with Significant Redesign........................ 1615
RIS Question 5: Who did you consult and how did you incorporate their feedback?
.......................................................................................................................... 1817
RIS Question 6: What is the best option from those you have considered?........ 1918
RIS Question 7: How will you implement and evaluate your chosen option? ...... 2018
Consultation ....................................................................................................... 2220
Legislation.......................................................................................................... 2220
Status of the RIS at each of the major decision points ....................................... 2220
Attachments ....................................................................................................... 2320
Appendixes ........................................................................................................ 2421
Appendix 1 ......................................................................................................... 2421
Regulatory Burden Estimate (RBE) Table .......................................................... 2421
Appendix 2 ......................................................................................................... 2623
Stakeholder Map ................................................................................................ 2623
Appendix 3 ......................................................................................................... 2724
2
Referenced Documents ..................................................................................... 2724
Appendix 4 ......................................................................................................... 2825
List of Defined Terms ......................................................................................... 2825
Page 3 of 28
Background
The Prostheses List (the PL) is the schedule to the Private Health Insurance
(Prostheses) Rules that helps ensure privately insured patients have access to safe
and clinically effective medical devices. Under Section 72-1 of the Private Health
Insurance Act 2007 (the PHI Act), private health insurers must pay at least the
minimum benefit accorded to each prosthesis listed on the PL:
• for which an insured person has appropriate cover;
• that are provided as part of an episode of hospital treatment or hospital-
substitute treatment; and
• for which a Medicare benefit is payable for the professional service associated
with the provision of the prosthesis.
Medical device sponsors and suppliers (collectively referred to as 'sponsors') apply
to list prostheses on the PL so the listed item may be reimbursed by private health
insurers.
Prostheses include surgically implanted prostheses, human tissue items and other
medical devices. Typical devices funded through the PL are hip and knee
replacements, pacemakers and vascular and cardiac stents.
The Private Health Insurance (Prostheses) Rules (as made from time-to-time) is a
legislative instrument made under the Private Health Insurance Act 2007. Schedule
1 of the Rules is known as the Prostheses List or PL.1 The PL sets out the minimum
benefits (or payments) a private health insurer must pay a hospital for listed,
generally surgically implanted, medical devices (or prostheses) when provided to
someone with appropriate private health insurance (PHI) as part of hospital or
hospital-substitute treatment, where there is a Medicare benefit payable for a
service associated with the use of the product.
The PL is in three parts:
• Part A--prostheses that satisfy the criteria for listing agreed by the Prostheses
List Advisory Committee (PLAC) and approved by the Minister.
• Part B--human tissue (includes products that are substantially derived from
human tissue where the tissue has been subject to processing or treatments,
and whose supply [however described, including trade, sell, give or gift] is
governed by state or territory law). Unless explicitly identified, human tissue
products are not addressed in this guide.
• Part C--prostheses that satisfy the criteria for listing on Part C. These criteria
specify that a prosthesis will be listed in Part C if it is
i. insulin infusion pump;
ii. implantable cardiac event recorder; cardiac home/remote monitoring
system
iii. a cardiac ablation catheter;
iv. a mapping catheter for cardiac ablation; or
v. a patch for cardiac ablation.
The PL is updated three times per year (1st March, 1st July and 1st November).
There are approximately 11,000 items listed on the PL, with the majority of these
being in Part A. Based on the current grouping scheme, there are 1,700 possible
groupings for devices on the PL. The current listing process can take up to seven
1 Available at www.health.gov.au/resources/publications/prostheses-list
Page 4 of 28
months if an application is successful. The Department processes approximately
1,500 applications to the PL per year (new and amendment applications.
While the Government administers the PL and its arrangements, it is not a direct
funder of PL benefits. In 2015-16, there were approximately 2.5 million prostheses
used in the private system, at a cost to insurers of approximately $1.9 billion. By
2019-20, over 3.1 million prostheses were used in the private system, at a cost to
private health insurers of approximately $2.1 billion. Despite the average cost per
prostheses used reducing over time, from $789.46 in 2015-16 to $673.18 in 2019-
20, total expenditure has continued to grow.2
History
The PL was introduced in 1985 to regulate the price of prostheses paid by patients
with PHI and reduce public hospital waiting lists for procedures involving surgically
implanted prostheses. From 1999-2001, in response to concerns raised by the PHI
industry about the rate of increase of benefits, prostheses benefits were
deregulated.3 Under these arrangements, there was still a defined list of products
for which insurers had to pay a benefit, but insurers and medical device companies
were responsible for negotiating prices. PL benefits almost doubled between
2000-01 and 2002-03.4
In response, new arrangements were announced in April 2003, which came into
effect on 31 October 2005.5 These arrangements ensured independent clinical
advice would be part of determining the clinical effectiveness of a device. Further
changes have been made to the administrative arrangements since this time.
Role of Government
The Minister for Health and Aged Care has the authority to decide which products
should be included on the PL, the benefit associated with that listing and any other
conditions which may apply. The Minister has delegated these responsibilities to a
number of people within the Department of Health (the Department).
The Department has responsibility for administering the PL. This includes managing
applications from medical device companies (sponsors), setting benefits for
prostheses, administering the legislative framework associated with prostheses and
supporting the relevant advisory bodies, in particular, the eight Clinical Advisory
Groups (CAGs) and the PLAC. The PLAC is a non-statutory committee with
responsibility for advising the Minister for Health and Aged Care (or delegate) on
the appropriate listing and benefits of prostheses on the PL, taking into account any
advice received from CAGs.
The CAGs (and the Panel of Clinical Experts for those areas of the PL where no
CAG exists) assess applications, with a particular focus on the criteria for listing and
appropriate groupings. The CAGs are expected to advise PLAC on the clinical
effectiveness of each product, as compared to other products used for the same or
similar purposes.
2 Analysis of APRA Data, refer Attachment B.
3 Pg. 9, Senate Inquiry Report, Price Regulation Associated with the Prostheses List
Framework, 11 May 2017, referencing the Department of Health's submission to the inquiry.
4 Ibid.
5 Ibid, pg. 10.
Page 5 of 28
One of the considerations PLAC and the Minister take into account when
considering whether a product should be listed is whether the product is listed on
the Australian Register of Therapeutic Goods (ARTG). The ARTG is a database of
therapeutic goods within which medicines and medical devices must be entered as
'registered' or 'listed' goods before they may be supplied in, or exported from,
Australia. The ARTG is administered by the Therapeutic Goods Administration
(TGA) who has responsibility for regulating therapeutic goods including prescription
medicines, vaccines, sunscreens, vitamins and minerals, medical devices, blood
and blood products. This includes consideration of safety aspects of devices.
Further information on the current listing process and the roles and responsibilities
can be found on the Prostheses List: Guide to listing and setting benefits for
prostheses.6
Other government agencies, such as the Department of Veterans' Affairs and
Defence may have an interest in the PL arrangements, but do not have a direct role
in the administration of medical devices.
Reviews and Reforms
The PL has been reviewed on a number of occasions, including:
• an independent review of the prostheses arrangements in October 2007, the
Review of the Prostheses List Arrangements (Doyle Review);
• Review of Health Technology Assessment in 2009 (HTA Review);
• Industry Working Group on Private Health Insurance Prostheses Reform
(PHIIWG) in 2016; and
• The 2017 Senate Inquiry into Price Regulation Associated with the
Prostheses List Framework (Senate Inquiry).
Many of these reviews have indicated the need for reform, particularly noting the
rising cost of PHI premiums, but there has been little consensus between
stakeholders on how reforms should be made.7
In 2017, the Australian Government entered into a Strategic Agreement with the
Medical Technology Association of Australia (MTAA Agreement). This agreement
aims to:
• support a stable and sustainable medical device sector;
• reduce the time to market for medical devices;
• ensure Australians have access to safe and cost effective medical devices in
the private sector; and
• improve the PL arrangements.
In addition to agreement on a series of benefit reductions, a number of Industry
Working Groups (IWGs) were established to consider various options for reforming
the PL. The Revised Benefit Setting & Review Framework IWG (BSRIWG) was
tasked with considering alternative benefit setting and review arrangements. The
BSRIWG met eight times between 2018 and mid-2020, discussing many options for
reform, their merits and potential downsides. During 2020, the University of Sydney
prepared a report8 based on the discussions of the BSRIWG, outlining possible
6 www.health.gov.au/resources/publications/prostheses-list-guide
7 Ibid, pg. 17.
8 Report of the Revised Benefit Setting & Review Framework Industry Working Group,
www.health.gov.au/resources/publications/revised-benefit-setting-and-review-framework-
industry-working-group-meeting-communiques
Page 6 of 28
options for reform. The proposal builds on this earlier reform work and review
activities, and the work of the BSRIWG.
In addition to the formal consultation processes associated with the aforementioned
reform and review activities, the Department has sought broad stakeholder
agreement through a recent consultation process (see Attachment A for the
consultation paper).
Further the Department regularly meets with stakeholders to discuss PL issues,
including through targeted, one-on-one consultations.
Stakeholder Perspectives
As outlined in the Senate Inquiry Report, the framework within which benefits for
prostheses paid through PHI is complex, opaque and involves multiple
stakeholders.
Consumers
For the most part, consumers have two choices in the prostheses reimbursement
space; they choose the level of PHI coverage they purchase and they choose the
clinician who will be implanting the device into them. Few consumers actively
contribute to the decision-making process around choice of devices accepting their
specialist is best placed to determine the device necessary. Consumers, however,
bear the burden of high prostheses cost through higher PHI premiums.
Clinicians
Clinicians are primarily responsible for choosing the appropriate device to use.
There is no financial impact on the clinician as a result of the choice of the device
used. While choice of device is often considered the key component in PHI's value
proposition, a recent Australian Orthopaedic Association National Joint
Replacement Registry (AOA NJRR) report shows that choice of device does not
always lead to the best clinical outcome.9 The choice of device may be influenced
by a number of factors including clinical evidence and the training a clinician has
had with a particular device.
Hospitals
Aside from providing the infrastructure and health services for the episode of
hospital care and the relevant medical procedure, the hospital's primary role in the
PL arrangements is to purchase the device(s) the clinicians have chosen to use
from the medical device company. The hospital may not have control over which
device is used. Following supply, the hospital seeks reimbursement from the private
health insurer. Hospitals generally purchase devices at an amount equivalent or
lower to the PL benefit, making prostheses costs a 'pass through' cost for the
hospital.
Hospitals procure other medical supplies that are not subsidised through the PL and
for these products, normal procurement processes apply, operating within a
competitive market (although market distortions can occur because of rebate
arrangements that are discussed below).
9Harris et al. Outcomes of hip and knee replacement surgery in private and public hospitals in
Australia. ANZ J Surg 89 (2019) 1417-1423. doi: 10.1111/ans.15154
Page 7 of 28
As part of the private hospital sector, there are 357 private day hospitals across
Australia, accounting for 22 per cent of separations in the private hospital sector,10
some of which are able to specialise in certain procedure types, such as
ophthalmology or gastroenterology.
Medical Device Companies
Medical device companies manufacture and/or distribute the prostheses used in
medical procedures and sell these to hospitals. In the context of the PL, medical
device companies are often called 'sponsors' and apply to the Department to list
their products on the PL. Application and listing fees apply. Following assessment,
the product is allocated to one of approximately 1,700 groupings, each group being
a group of similar (or interchangeable) products that will attract the same PL benefit.
For new or novel products where there is no existing comparator on the PL, and
hence no applicable group, a more detailed Health Technology Assessment (HTA)
will be undertaken to determine clinical and cost-effectiveness and thus the PL
benefit. Sponsors may choose not to list the device with that benefit if they believe it
is not viable for them to do so.
Although arrangements between the hospital and the device companies are
generally commercial-in-confidence, it is recognised that the PL benefit is the
nominal purchase price for many devices and there may be in some instances little
negotiation on price between hospitals and suppliers. However, there is concern
that rebate arrangements exist whereby the PL benefit is returned, in part, to the
hospital by the device company when agreed volumes are met or other products
are purchased. Other stakeholder groups have accused device companies of
gaming the system to maintain profit margins.11
Private Health Insurers
Private health insurers are obliged to pay the minimum benefit amount listed on the
PL for a prosthesis provided to one of their policy holders, during an insured
episode of hospital or hospital substitute care. The insurer has no control over the
process in which a device is selected by the clinician and/or private hospital and will
be required to pay for prostheses even where cheaper or more effective alternatives
were available.
Government
As outlined above, the Department is not directly involved in the purchasing, supply
or reimbursement of prostheses. The Department administers the PL in accordance
with the legislative framework, but has little to no visibility of the commercial
arrangements which may be in place between the various stakeholders, and little or
no authority to mediate disputes between hospitals and insurers, for example.
The Department of Veterans' Affairs (DVA) is akin to an insurer in that it funds
medical devices through its support for veterans. It is understood DVA hospital
contracting arrangements reference the PL benefit amounts.12
10 Day Hospitals Australia, Infographics, https://www.dayhospitalsaustralia.net.au/wp-
content/uploads/2019/07/Day-Hospitals-Australia-Infographic-3.pdf
11 For example, Medibank says reform of device pricing 'essential', Health Dispatch, 30 March
2021, https://healthdispatch.com.au/news/medibank-says-reform-of-device-pricing-essential
12 Commonwealth Ombudsman, Health Insurance Premium Increases Fact Sheet,
https://www.ombudsman.gov.au/publications/brochures-and-fact-sheets/factsheets/all-fact-
sheets/phio/health-insurance-premium-increases
Page 8 of 28
RIS Question 1: What is the policy problem you are
trying to solve?
Increasing medical costs, increasing utilisation of health services (particularly by
older people and people with chronic disease) and declining participation rates
(particularly by younger Australians) is challenging the affordability and long-term
sustainability of the PHI sector.
The cost of prostheses on the PL has been identified as a factor in the rising price
of PHI premiums for consumers, including through the aforementioned reviews. In
2019-20, over 3.1 million prostheses on the PL were supplied at a cost to private
health insurers of approximately $2.1 billion.13 Expenditure on prostheses
accounts for 14 per cent of PHI hospital benefits paid annually.
There is evidence that benefits paid through the PL are often inflated when
compared to average prices paid for equivalent devices internationally or compared
with Australian public hospitals. For example, the price of some drug eluting cardiac
stents is up to five times higher on the PL relative to New Zealand ($2,484 versus
$525). It is agreed by all stakeholders that prices paid in the public hospital sector in
Australia are, on average, lower than private hospital prices and the PL benefits
paid by insurers. The Independent Hospital Pricing Authority's (IHPA) December
2019 report Prostheses Costs in the private and public sector (not published)
estimates that for 2017-18 this gap was 130 per cent. Further analysis in 2019-20
indicates the gap was up to 145 per cent for some devices.
A likely cause of the disparity in pricing is that the minimum benefits set through the
PL act as a floor price. There is little incentive for price negotiation between
hospitals and device companies. Instead, there is incentive to move as many items
on to the PL as possible because of the mandated benefits for listed items. This can
lead to a number of market distortions including preferential use of PL items over
equally effective and lower cost non-PL items or equipment.
Through the 2017 MTAA Agreement, a series of one-off benefit reductions were
introduced over four years (2017-2020). The reductions were estimated to save
insurers a total of $1.1 billion. While this action reduced the average benefits paid
for devices listed on the PL (from $775 in 2017-18 to $670 in 2018-19), over the
same period utilisation grew above average (8.6 per cent in 2018 versus forecast
5.7 per cent), eroding any reduction on prostheses costs to insurers.
There is growing concern that the scope of the PL lacks specificity, meaning there
are no obvious limits on what is included in the PL. The lack of a legislated
definition of a 'prosthesis' potentially allows items to be listed which could be better
funded by other avenues, or are already funded through other means ('double
funded'). This can be seen primarily in the General Miscellaneous category of the
PL. This category includes items such as infusion pumps and haemostatic devices
which, while being clinically useful products, may not meet the general
understanding of what a 'prosthesis' is in terms of the PL.
The ill-defined scope of the PL has also led to an increase in complexity. Since
1997, the number of items on the PL has expanded nearly tenfold. In 2021, there
are over 11,600 billing codes and over 1,700 unique groupings.
13APRA Statistics, Private health insurance prostheses report, June 2020 (released 18
August 2020)
Page 9 of 28
The activities associated with assessing applications are cost-recovered activities
and have remained largely the same since they were introduced in 2007. Currently,
there are three fees payable with respect of prostheses applications (with the
exception of items listed on Part B):
• a $600 application fee for each new application (excluding amendments,
deletions of listings, or duplications, expansions, compressions or transfers
of existing billing codes;
• a $200 initial listing fee payable when a product is first listed on the PL
(excluding products that were listed as a result of duplicating, expanding,
transferring or compressing existing billing codes); and
• an ongoing listing fee of $200 per billing code, paid twice a year (excluding
those that were added to the most recent PL as a result of an application to
list a new prosthesis).
The current arrangements do not reflect the current Australian Government
Charging Framework, nor do they reflect the complexity with some applications,
particularly amendment applications.
RIS Question 2: Why is government action
needed?
As outlined above, the Australian Government has intervened in this market since
1985. The period of deregulation in 1999-2001, where PL prices significantly
increased, showed that government intervention in this market is needed in some
form.
The reforms intend to align the prices that are paid by private health insurers for
prostheses (medical devices) used in privately insured hospital treatment to the
prices for prostheses in the public hospital system. This will put downward pressure
on PHI premiums and, in turn, improve the affordability and attractiveness of PHI for
consumers.
The PL has been the subject of multiple reviews, all of which identified the need for
reform. The MTAA Agreement introduced a series of benefit reductions (between
2017 and 2020) and established three IWGs to consider various options for
reforms.
The reductions were estimated to save insurers a total of $1.1 billion. While this
reduced the average benefits paid for devices listed on the PL (from $775 in 2017-
18 to $670 in 2018-19), over the same period utilisation grew above average (8.6
per cent in 2018 versus forecast 5.7 per cent), eroding any reduction on prostheses
costs for insurers.
Given the complexities in the relationship between the various stakeholders, it has
historically proven difficult to reach consensus on specific issues relating to the PL
and its administration. A change that benefits one stakeholder may negatively
impact one or more of the other stakeholder groups. Government action is needed
to help balance the changes across the stakeholder groups.
It should be noted, however, that the success of any government action will depend
on factors outside the government's control, including factors such as changes in
patterns in utilisation of devices, the timely provision of appropriate data from states
and territories, and cooperation from other stakeholder groups. While this is an
Page 10 of 28
identified concern, the Department will put steps in place to minimise the risk
associated with these wherever possible. These concerns do not outweigh the need
for government action.
After contributing to the reform process for many years, stakeholders expect
reforms to be forthcoming. Failure to act would further entrench the existing
inefficiencies and inflated prices that are supported through the current PL
arrangements.
RIS Question 3: What policy options are you
considering?
Through the IWGs established under the MTAA Agreement, a number of possible
benefit setting and review arrangements were considered. Building on these, three
options are being put forward.
There are two key principles that the Department is keen to ensure are maintained,
regardless of which approach to reform is taken:
1. No out of pocket costs for prostheses for patients; and
2. Maintained choice of devices for clinicians and patients.
Option 1 - Maintain the Status Quo
This option would maintain the status quo. Medical device companies would
continue to submit applications to the Department to have their products listed on
the PL in one of 1,700 possible groupings. Regardless of the complexity of the
application, it would continue to be subject to internal departmental triaging,
assessment by clinicians and CAGs and consideration by PLAC. Following a PLAC
recommendation, the Minister (or Minister's delegate) would continue to decide
whether a product is suitable for listing and the Prostheses List Rules are updated
to reflect the new listing.
There is currently no certainty around the definition of a prosthesis and the listing
criteria are somewhat opaque. As such, in maintaining the status quo, opportunities
for scope creep of items on the PL will continue.
PL benefits would continue to be set at rates significantly higher than the public
prices, linked to the current benefit amounts which, for the most, were not set using
HTA principles, i.e. the PL benefit may not reflect a cost-effective price.
The 'set and forget' model of benefit setting would be maintained, and there would
be little changes to PL benefits over time. This would place increased pressure on
PHI premiums and erode the value proposition of PHI for consumers.
No formal review or compliance functions currently exist and as such there will
continue to be limited scope for monitoring the clinical or cost effectiveness of
devices and their appropriate use after they are listed.
While this option would maintain the status quo, some changes would still be
required. Through a linked proposal (Streamlining Health Products Digital
Pathways), the IT system platform would be adapted to be used to administer PL
applications. Similarly, given the PL cost recovery arrangements do not align with
the current Australian Government Charging Framework, the cost recovery model
will need to be updated to ensure fees reflect the services provided to individual
Page 11 of 28
organisations. Current application fees, which have not changed since 2007 will
likely increase.
Option 2 - Transfer administration of the PL to the
Independent Hospital Pricing Authority, using an activity-
based funding approach
This option would provide for the Independent Hospital Pricing Authority (IHPA) to
set the prostheses benefit and cease the Department's current administrative
processes associated with the PL benefit setting and listing process. The
prostheses benefit would be set by IHPA using an activity-based funding approach.
Around 400 Diagnosis Related Groups (DRGs) (more if necessary) would replace
the 1,700 PL groups. IHPA and the Department have previously advised
stakeholders that additional DRGs could be developed if needed.
The DRGs currently developed, managed and used by IHPA to determine funding
amounts for public hospital episodes of treatment, including prostheses costs,
would be used to regulate prices for prostheses used in the private sector.
Currently, public hospital funding is based on grouping services into one of about
700 DRGs, with about half involving the use of prostheses.
There would be no need for medical device companies to apply to list a product on
the PL, rather it would be automatically eligible for reimbursement when it is listed
on the Australian Register of Therapeutic Goods (ARTG), that is, when it can be
legally supplied in Australia.
The main functions of the Independent Hospital Pricing Authority (IHPA) are:
• to determine the national efficient price for health care services provided by
public hospitals where the services are funded on an activity basis;
• to determine the efficient cost for health care services provided by public
hospitals where the services are block funded; and
• to publish this, and other information, for the purpose of informing decision
makers in relation to the funding of public hospitals.
As part of its functions, IHPA collects information on prostheses costs in the public
sector and can undertake some analysis on the differences prostheses costs in the
public and private sectors. As part of this option, IHPA would be well placed to
monitor patters of use (utilisation and expenditure) for prostheses costs. The data
collected could also be used to inform reviews if there were identified concerns.
The Department acknowledges the feedback received from stakeholders that the
existing DRGs do not reflect the complexity of the ophthalmic procedures performed
in the private sector. For novel, high cost medical devices not readily
accommodated in existing DRGs (or for procedures such as ophthalmic
procedures), it would be possible to create a new DRG. It is envisaged the initial
benefit for these new DRGs could be set through a HTA undertaken by the Medical
Services Advisory Committee. After an agreed period of usage, this item would then
be subject to the regular benefit reviews as other DRGs.
Issues around the scope of the PL would be considered when defining what is
eligible for inclusion in a DRG. Once set, the ongoing scope creep would no longer
be an issue. This option allows for benefits to be set and continually reviewed using
IHPA's well developed administrative processes.
Page 12 of 28
Option 3 - Retain the Prostheses List with Significant
Redesign
This option would retain the PL as a list of regulated prices for prostheses, but with
significant redesign to reduce the number of separate device groups and benefits,
and align PL benefits with the prices paid for devices in the public hospital sector.
Medical device companies would continue to apply to list their product on the PL
with the application process enhanced and streamlined supported by more intuitive
application forms and guidance material. A review will be undertaken to determine
whether most assessments could be undertaken by Departmental staff supported
by clinical advice. Cost recovery fees would be applied to align with the current
Australian Government Charging Framework.
Like Option 2, this option would see the scope of the PL better defined with a view
to funding high value specific purpose medical devices used in medical procedures
(e.g. hip prostheses, pacemakers and stents) through this mechanism,
complementing other payments made by insurers to hospitals for the balance of an
insured patient's hospital care. As a consequence of clarifying the scope, general
use items used in a range of surgeries and in-hospital care (e.g. drug delivery and
skin closure devices) would be removed from the PL and funded through existing
case-based payments.
The current PL would be streamlined and consolidated using an agreed
methodology so that devices with similar intended use and/or health outcome would
be grouped together and attract the same benefit. This would support a benefit
setting model where the price of the PL items would be benchmarked to public
hospital pricing, using advice from IHPA who would have an active role in benefit
setting and ongoing benefit reviews.
Formal review and compliance functions would be introduced, supported by
legislation. In total, up to five pieces of primary legislation and at least that many
pieces of subordinate legislation would need to be updated to give effect to this
measure.
RIS Question 4: What is the likely net benefit of
each option?
Option 1 - Maintain the Status Quo
Maintaining the status quo would maintain the inequitable stakeholder relationships
that currently exist in the market. Private health insurers and consumers will
continue to be impacted by the current prices of medical devices on the PL. There
is unlikely to be any impact on hospitals, medical device companies or clinicians.
Apart from revising cost recovery arrangements, there is no benefit to the
Department in administering the PL.
Responses to the recent consultation paper released by the Department indicates
general agreement from the sector on the need for reform. While there was no
consensus on a preferred option for reform, stakeholder are unlikely to support no
reform action being taken.
If no changes are made to the current PL and its management, the gap between
private and public prices for medical devices will be maintained and likely increase.
This in turn, is likely to put further pressure on PHI premiums adding to the issue of
Page 13 of 28
affordability of PHI for consumers. However, as this option maintains the status quo,
there will be no changes to the regulatory burdens associated with the PL process.
Health
There are no anticipated health impacts associated with this option. Consumers and
clinicians could still have access to the entire range of prostheses currently listed on
the PL. There will be no change to clinical outcomes.
Economic
There are no direct economic impacts associated with this option, with the
exception of revised cost recovery model fees, to align with the Australian
Government Charging Framework. The high PL benefit price will continue to place
pressure on insurers, and therefore may have broader economic impacts as the
viability of insurers is threatened.
As previously identified, even maintaining the status quo would require updates to
the current cost recovery model with medical device companies would see an
increase in the fees payable with the listing (and ongoing listing) of devices on the
PL. The quantum of such changes would be identified through standard cost
recovery processes.
Changed Behaviour in Market
There are no anticipated impacts on existing market behaviour as a result of this
option on hospitals, insurers, medical device companies, clinicians or consumers.
Option 2 - Transfer administration of the PL to the
Independent Hospital Pricing Authority, using an activity-
based funding approach
The DRGs currently developed, managed and used by IHPA to determine funding
amounts for public hospital episodes of treatment, including prostheses costs, can
be used to regulate prices for prostheses used in the private sector with
administrative efficiency. The implementation process for this option would not be
onerous as it uses an existing grouping structure and does not require significant IT
changes for government. Beyond the legislative timing, timing for this option would
need to take into account PHI premium round cycles, PL application cycle
timeframes, and would need to allow sufficient time to re-negotiate hospital
contracts.
Medical device companies would no longer have to apply and pay an application
fee to be listed on the PL. This administrative burden would ceases entirely.
Following TGA approval, devices would automatically be eligible for reimbursement
when it is listed on the ARTG. Private hospitals, clinicians and consumers would
continue to access prostheses as they do now.
This option was canvassed in the public consultation and was opposed by the
Consumers Health Forum, clinicians, private hospitals and medical device
companies. They are concerned about the unintended consequences of a move to
averaged pricing which they believe will limit clinician choice and increase the
likelihood of out of pocket costs for patients. The Department notes these concerns,
however, while there may be a push for more lower cost devices to be used, the
most appropriate device from the patient and clinician's point of view will still be
paramount.
Page 14 of 28
There is a high risk of stakeholder push back with this option, however the costs to
implement this option are less than Option 3 outlined below.
This option may require consultation with states and territories regarding any new
functions conferred on IHPA. While IHPA currently has the authority to provide
advice to Government on prostheses costs in the public and private sector, the
Department needs to explore what legislative changes would be required to invest
IHPA with sufficient authority to administer prostheses benefit setting arrangements.
It is anticipated that up to five pieces of primary legislation and at least that many
pieces of subordinate legislation would need to be updated to give effect to this
measure.
Health
There are no anticipated health impacts associated with this option. Despite
concerns expressed by stakeholders, consumers will continue to have access to
devices that suit their clinical needs, as chosen by clinicians. The Australian
Government is committed to ensuring consumers have access to safe, clinically
effective and cost effective prosthetic items, chosen by their clinicians. In this
context, it is important to remember that the PL is a reimbursement mechanism, but
there is nothing to prevent something that has a lower benefit than the purchase
from being used if it is appropriate for the clinical needs of the patient (assuming it
can be legally supplied in Australia).
Economic
By referencing to average public hospital prices, PHI outlays for medical devices
will be reduced, with positive impacts on PHI premiums. Revenues for medical
device companies for in-scope devices will be reduced.
Medical device companies are not universally supportive of this model, however,
they would benefit from reduced 'time to market' by removing the need to apply to
list their product on the PL, potentially allowing them access to the private hospital
market earlier than anticipated (immediately following listing on the ARTG).
Unlike Options 1 and 3, it is likely that this option would see a significant reduction
to the fees and charges that would be payable by medical device companies,
though some levies may still be payable particularly with respect to the National
Joint Replacement Registry (NJRR). The reduction in fees is primarily is due to the
fact that they would no longer need to apply to be listed on the PL and there would
be no application requiring assessment.
Feedback from the recent consultation process (not published) indicated there
might be an element of shifting the risk of increased costs from insurers to
hospitals, who would still be required to purchase the device required by the
clinician, regardless of whether it costs more than the DRG benefit. Conversely,
hospitals would benefit if their purchase price was lower than the DRG-derived
benefit. Because of the 'give and take' involved in this process, it is not anticipated
that there will be an impact on out of pocket costs for consumers.
A submission to the Senate Inquiry14 discussed the medical device market. This
submission noted that in a real market, a supplier may lower its price, reducing its
14 Pg. 2, Applied Medical, Submission to the Senate Inquiry into Price Regulation Associated
with the Prostheses List,
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Pro
sthesesListFramework/Submissions
Page 15 of 28
profit margin on existing sales, however, it does so in the hopes of increasing sales
volumes to generate profits over a larger number of markets. In the already
regulated environment of the PL, there is no incentive for a sponsor to seek a lower
benefit than its competitors and the choice of which product is used is generally
made by someone (a clinician) who has no financial interest in the transaction. This
option would introduce genuine competition in the market, as device companies
would be encouraged to provide competitive prices or higher quality products. For
this reason, this option is not likely to lead to device companies leaving the market,
nor will it act as a deterrent to entering the market in the first place.
Changed Behaviour in Market
Currently, not all hospitals regularly negotiate prices for prostheses, rather private
hospitals often see devices as a 'pass through' cost. That is, the hospital purchases
the prostheses at an amount equivalent to the PL benefit. The hospital does not get
a choice in the type of device used, as the clinician is responsible for this choice. As
the clinician is the customer for both the hospital and the medical device company,
practically, there is little incentive in the current practice for hospitals and device
companies to negotiate device prices.
Moving to a DRG model should incentivise hospitals to negotiate prices for devices.
Many hospitals, particularly the smaller day hospitals, have advised they do not
have sufficient bargaining power to negotiate with large device companies, nor do
they have sufficient staff or IT systems to support this model. While it may be true
that some smaller private hospitals might not have sufficient bargaining power on
their own, this does not take into account that some belong to groups of private
hospitals (increasing the volume of devices purchased), or the specialisation that
can occur in the smaller facilities (allowing for negotiation on a smaller range of
products, rather than needing to negotiate across the entire PL). The Department
and IHPA had previously identified that support may need to be provided to assist
with the data capabilities for smaller hospitals, particularly in the day hospital sector.
Option 3 - Retain the Prostheses List with Significant
Redesign
As with Option 2, this option would achieve the objective of reducing the disparity
between public and private prices and would therefore, have a positive impact for
private health insurers and consumers. Private health insurers will benefit from
lower benefits (prices) for medical devices which they have committed to pass on to
savings to consumers.
While this option is also intended to reduce the price disparity between public and
private hospitals, it was the preferred option of many stakeholders, excluding
private health insurers. The risk of stakeholder push back is less than that for
Option 2, however the costs to implement this option are higher.
This option will impact all stakeholders within the sector, specifically:
• Consumers in relation to lower the PHI premiums;
• medical device companies will transition to more streamlined administrative
processes and revised fees;
• private health insurers will see a decrease on PHI premiums while still
providing a value proposition to consumers;
• private hospitals will need to review future contract arrangements for
medical devices; and
Page 16 of 28
• the Department will administer a more efficient and streamlined PL
application process.
This option may require consultation with states and territories regarding any new
functions conferred on the IHPA. Regulation will be reduced over time by reviewing
and reducing the requirement for all listing changes to be considered by the PLAC,
and by reducing the number of groups and different prices through simplification of
the PL.
Health
There are no anticipated health impacts associated with this option. Consumers will
continue to have access to devices that suit their clinical needs, as chosen by
clinicians. As previously identified, as the PL is a reimbursement mechanism, there
is nothing that prevents a prostheses from being used even if the benefit and
purchase price do not align.
Economic
By referencing to public hospital prices, the PL benefit will reduce over time,
reducing the pressure on PHI premiums. Revenues to medical device companies
for devices listed on the PL will be reduced.
Medical device companies are more supportive of this model than Option 2. As the
goal is similar to Option 2 (reduce the gap between public hospital and private
sector pricing) the impact on revenues will be similar. The administration of the list
by the Department will be enhanced, with increased scrutiny of devices ahead of
listing and regular post market review. Hence the regulatory burden for medical
device companies will be increased. The additional Departmental resources will be
funded by industry through increased fees and charges. It should be noted that the
MTAA Agreement anticipated changes to the cost recovery model. Anecdotally, it
has been suggested that device companies would generally accept the higher fees
providing they could see efficiencies or improvements in the listing process. Smaller
device companies would likely notice the impact of the increased fees more than
the larger, multinational companies. This will be considered in the development of
the revised cost recovery model.
Private hospitals, particularly day hospitals, have expressed concern about a
revised scope for the PL which would see many general use (consumable) items
ineligible for PL benefits. Hospitals and insurers will need to cover the shifted cost
of these, through revising existing payment contracts and case-based payment
arrangements. Discussions about appropriate compensations are underway. It
should be noted that these changes would not prevent these items from being used
in a procedure, rather it would just change the mechanism by which they are
reimbursed.
There would be minor impacts on public hospitals when providing care to privately
insured patients, as public hospitals currently benefit from the higher prices on the
PL (and hence benefits paid) relative to the actual public hospital purchase price.
Feedback from the recent consultation process (not published) indicated there
might be an element of shifting the risk of increased costs from insurers to
hospitals, who would still be required to purchase the device required by the
clinician, regardless of whether it costs more than the reduced PL benefit, though
this was raised primarily with respect to Option 2. However, it is anticipated the
purchasing arrangements will continue to be a pass through system.
Page 17 of 28
Changed Behaviour in Market
Unlike Option 2, this model is largely aligned with the status quo, so there will be
little changed behaviour in the market. Hospitals may choose to negotiate prices as
they would benefit from doing so if they can retain the margin between the
mandated PL benefit and the purchase price.
Like Option 2, this option would incentivise private hospitals to provide additional
information to IHPA. IHPA will work with affected hospitals to promote and
encourage the provision of data, particularly for day hospitals. This could have a
regulatory impost.
As with Options 1 and 2, if a medical device company chooses not to list a product
with the reduced benefit amount, they can choose not to engage with the PL. There
is a possibility that device companies may inflate public hospital prices to influence
the revised benefit amounts. This is not considered to be a significant risk given the
competitive tender arrangements that underpin hospital procurement in the public
sector.
As formal review and compliance activities will be introduced, there may be an
increased regulatory burden associated with this option. While all identified
stakeholders may be required to contribute to this process which may have a time
and cost impact, it is not anticipated this will significantly change day-to-day
arrangements for industry, other than to ensure greater cooperation and
compliance.
RIS Question 5: Who did you consult and how did
you incorporate their feedback?
As earlier identified, the PL has been reviewed on several occasions, most of which
have had a component of stakeholder consultation. Key stakeholders, including the
Australian Medical Association, MTAA, Private Healthcare Australia (PHA),
consumer groups/representatives and private hospitals have all been involved in
our consultations. Feedback from a broad range of earlier consultation was also
considered in drafting the Consultation Paper released on 18 December 2020,
which closed for comment on 15 February 2021. The paper sought feedback about
better defining the scope of the program, reducing prices and consolidating the PL.
It offered Options 2 and 3, outlined above, for reform.
Eighty submissions were received in response. There is broad agreement that
reform is needed. However, opinion remains divided about which option would work
best. Most support using reference pricing to the public sector to close the gap
between average prices paid in the public sector and average PL prices. There is
also strong support for a clearer definition of scope for the PL and many agree that
some items have been incorrectly listed. There was less feedback about
consolidating the PL. Those stakeholders that did comment generally supported a
less complex grouping structure. Consumers provided little technical input but want
to be assured that any change won't impact adversely on patient out of pocket
expenses. Neither option has this intention or likely outcome.
In developing the options, consideration was given towards all issues raised in the
submissions noting that each option proposed provides varying degree of impact
and benefit for each of the stakeholder groups.
Page 18 of 28
Additional consideration of stakeholder views is outlined below:
• The proposal to retain but consolidate the PL and introduce a price setting
model based on public sector reference pricing was preferred by the MTAA,
private hospitals and clinician groups.
• Private hospitals and device companies generally oppose confining the
scope of the PL.
• Private health insurers are strongly supportive of moving prostheses funding
to a bundled payment model administered by IHPA and based on the AR-
DRG classifications. Many insurers already use this system in negotiating
hospital contracts for the non-prostheses and non-medical aspects of
hospital funding.
• Through PHA, insurers have offered to put safeguards in place to maintain
clinician choice if this is the model implemented. As outlined in media
articles,15 PHA has suggested that where a more expensive device than the
average model is required, the devices could be subject to increased
reimbursement where a clinician makes a declaration form. Such safeguards
would not be needed if Option 3 is implemented as there will still be a
defined list of products that can be used and reimbursed.
• PHA has also offered to compensate hospitals for the perceived loss of
revenue from removing general use items from the PL, which could take
place under both Options 2 and 3. As the timing, quantum and mechanism
for any compensation associated with the removal of general use items is
dependent on implementation of Government's preferred option, the details
of this are still being finalised.
• The medical devices industry argue that PHI buys choice for consumers and
many responses to the consultation paper raised concerns that Option 2
would limit clinician choice of devices (in that they would be encouraged or
required to use lower cost products equal to or lower than the DRG amount,
even when it may not be the most clinically appropriate).
It should be noted, however, that there is no evidence that greater choice of devices
leads to improved clinical outcomes. Evidence from the AOA NJRR demonstrates
that for hip and knee replacements, patient outcomes are better in public hospitals
where choice may be more limited than private hospitals. Public hospitals use
'proven performers' over new, unproven prostheses that may be preferred by
private sector clinicians. This indicates that in some cases, greater choice can lead
to negative health outcomes.
The Department regularly meets with stakeholders about the PL, including PL
reforms. While not explicitly captured in the above, these discussions have assisted
the Department in explaining and clarifying the two reform options to stakeholders,
and to better understand and address the concerns raised. Feedback from these
meetings have been incorporated into the design and implementation plans for both
reform options.
RIS Question 6: What is the best option from those
you have considered?
Based on the existing inefficiencies and financial impacts associated with
maintaining the status quo, Option 1 is not feasible and should not be considered as
an option moving forward.
15For example, Groups issue joint call for 'practical reform' of Prostheses List, February 23,
2021, https://healthdispatch.com.au/news/joint-statement
Page 19 of 28
Both Options 2 and 3 aim to close the gap between public and private sector pricing
in three to four years, however stakeholder opposition for progressing Option 2 is
less likely to receive support of stakeholder and is not feasible in the short term.
Based on the analysis of the options outlined above, Option 2 is likely to offer the
highest net benefit in the longer term. However, most stakeholders are opposed to
the DRG model at this time (with only insurers clearly supporting this model).
Stakeholder opposition means that progressing option two (DRG) is not feasible in
the short term. Therefore, Option 3 may offer a greater net benefit in the short-term.
While more complex to implement and administer, implementation of Option 3 could
commence from February 2022, and achieve the aim of closing the gap between
public and private sector pricing in three to four years. Therefore, Option 3 can be
considered the best option of those considered, noting that further investigation of
Option 2 should continue to occur.
Should Option 3 be implemented, the Department has proposed to continue
exploring the DRG option, particularly through a review at year three of this reform
process. This review would be intended to explore whether Option 3 has achieved
its stated aims particularly with regards to benefit reductions. Based on this review,
the Department will revisit whether DRGs would be a more desirable approach for
government and stakeholders, and may provide further advice to government at
that time.
RIS Question 7: How will you implement and
evaluate your chosen option?
Implementation would commence following Government decision, with concurrent
activities would include the following elements:
a. better defining the scope of the PL and removing ineligible products;
b. reducing the gap between PHI prices and public sector prices for the same
prostheses, over a maximum of four years, with a review of revised
arrangements in year three to update the Government on the progress of the
reforms;
c. streamlining listing of new devices by reviewing whether the PLAC and its
sub-committees can be ceased, moving the assessment process to the
Department;
d. improving the administration of the PL, by consolidating the existing
grouping structure using an agreed methodology so that devices with similar
intended use and/or health outcomes would be grouped together and attract
the same price (benefit);
e. improve administration of the PL by reviewing the functions and membership
of PLAC;
f. improving post-listing scrutiny including an enhanced program of utilisation
reviews and the establishment of a compliance program;
g. updating cost recovery arrangements;
h. amending legislation to give effect to the changes;
i. supporting implementation of the Government decision by developing a
high-level principles-based multilateral agreement endorsed by all
stakeholders to reflect the commitment of all parties to work together
towards long-term sustainability of the PL and PHI.
Page 20 of 28
Implementation will be undertaken by a dedicated internal Taskforce led by the
Department, which will coordinate reforms and improvements over a four year
period (see Attachment B, Tab 1 for additional detail on the implementation).
An initial preparatory and transition period will commence from May 2021 and will
continue until the end of the MTAA Agreement in February 2022. This includes the
establishment of a Departmental Taskforce, and necessary preparatory work,
including a range of legislative changes. Subject to the passage of legislation,
changes to PL prices will be implemented in stages. Concurrently, the Taskforce
will develop an improved grouping structure and conduct a review of the functions
and membership of PLAC.
The Taskforce will be supported by IHPA and clinical experts. IHPA will manage the
data collection, price setting and price review process. The current listing
arrangements, managed by the Department of Health would continue alongside the
Taskforce reform work.
Reducing the disparity between the costs for devices in public and private hospitals
(as assessed by IHPA) and the continued viability of PHI (as assessed by the
Australian Prudential Regulation Authority) would be indications the reforms were
having a positive influence.
Page 21 of 28
Consultation
Consultation with internal and external stakeholders will be ongoing throughout the
preparatory and implementation phase of the reforms.
This will include:
• a new multi-lateral framework to guide the reform work (MTAA, PHA,
Australian Medical Association, and the private hospital sector);
• Steering committee with relevant portfolio agencies (up to 4 per year);
• Stakeholder workshops (up to 2 per year); and
• Consumer forum.
The Department will continue one on one targeted consultation with those
stakeholders impacted by these reforms. Further details are provided at Attachment
B, Tab 1 and Appendix 2.
Legislation
Both Options 2 and 3 will require significant legislative amendments (additions,
amendments, repeals), including to the following:
• Private Health Insurance Act 2007
• Private Health Insurance (Prostheses Application and Listing Fees) Act 2007
• Private Health Insurance (National Joint Replacement Register Levy) Act
2009
• National Health Reform Act 2011
• Private Health Insurance (Prostheses) Rules
• Private Health Insurance (Prostheses Application and Listing Fees) Rules
• Private Health Insurance (National Joint Replacement Register Levy) Rules
• Private Health Insurance (Complying Products) Rules
• Administrative Arrangements Orders
• PHI Delegations
The legislative arrangements will need to give effect to, among other things:
• Legislative authority for IHPA to undertake data collection activities relating to
PL benefit setting;
• Definitional issues about which products are eligible for reimbursement;
• Revised cost recovery arrangements in line with the current Australian
Government Charging Framework; and
• Appropriate data sharing arrangements to give effect to these processes.
In addition, Option 3 will require a legislative framework to support the review and
compliance functions, and a more prescribed listing and de-listing process.
Status of the RIS at each of the major decision
points
This RIS was prepared concurrently with the advice provided to government when
direction and authority was being sought on the future of the PL. There have been
no major decision points leading up to the development of advice to government,
therefore the RIS was not used to inform key decisions prior to government
consideration of the options contained herein. However, information used to
prepare the RIS (in particular the referenced documents outlined below) has been
provided in various forms to the Minister for Health and Aged Care, and his office,
throughout the policy development process.
Page 22 of 28
An announcement is possible immediately following government decision, at which
point the RIS will be considered final.
Attachments
Attachment A: December 2020 Consultation Paper
Attachment B: Regulatory Costing Table
Page 23 of 28
Appendixes
Appendix 1
Regulatory Burden Estimate (RBE) Table
The below RBE's have been calculated on the maximum costs associated with
undertaking the required tasks. That is, it assumes the time associated with certain
activities is at the higher end of the scale, and that 100 per cent of medical device
companies or sponsors would contribute to any process. The actual RBE is
therefore likely to be significantly lower than the figures outlined below.
Further, consistent with the Regulatory Burden Measurement Framework, the
regulatory costs below do not include any changes to the quanta of fees and
charges as a result of changing cost recovery arrangements, nor any indirect costs
that may result from changes in market behaviour.
Option 1 - Status Quo
No change in annual regulatory costs as a result of maintaining the status quo.
Average Annual Regulatory Costs (from business as usual)
Change in Business Community Individuals Total
Costs ($ Organisations change
million) in cost
Total by
$- $- $- $-
Sector
As this option maintains the status quo, there will be no changed to the regulatory
burden associated with this option. The lengthy application process will be
maintained. There will be no change in data requirements and no change to review
or compliance activities.
A revised cost recovery approach may still need to be introduced even though the
status quo would be unchanged. This is due to the fact the current cost recovery
arrangements are not consistent with the Australian Government Charging
Framework.
Option 2 - Transfer administration of the PL to the Independent
Hospital Pricing Authority
This option will see a decrease in regulatory burden associated with the removal of
the current application process, both a saving in terms of time completing the form
and a reduced time to market. These changes will benefit the medical device
sector. No review or compliance activities will be introduced. Private hospitals may
notice changed requirements for data processing arrangements.
Average Annual Regulatory Costs (from business as usual)
Change in Business Community Individuals Total
Costs Organisations change
($ million) in cost
Total by
$0.99 $ $ $0.99
Sector
Calculations and assumptions are documented in further detail in the attached excel
document.
Page 24 of 28
While it does not factor into the RBE, it should be noted that cost recovery
arrangements may not be applicable if this option is implemented.
If the Australian Government Charging Framework applies to some or all of the
activities associated with Option 2, it is anticipated this will be much less than that
proposed in Option 3.
Option 3 - Retain the PL but with significant redesign
There are some minor savings associated with the efficiencies in the application
and listing process for medical device companies, but these are offset by enhanced
health technology assessment for novel devices and other innovation, increased
data provision requirements for hospitals and increased compliance and review
costs.
Average Annual Regulatory Costs (from business as usual)
Change in Business Community Individuals Total
Costs Organisations change
($ million) in cost
Total by
$1.81 $ $ $1.81
Sector
Calculations and assumptions are documented in further detail in the attached excel
document.
While not included in this section, it should be noted that the activities associated
with this option would remain cost recovered. It is anticipated, but not yet
quantifiable, that this option would attract a higher rate of cost recovered fees than
Options 1 and 2. This increase would be as a result of several factors, including:
• Increased administrative effort for the Department in processing applications
and listing devices;
• Updates to the cost recovery model to align with the Australian Government
Charging Framework; and
• The introduction of formal review and compliance activities.
No offsets have been found for the regulatory impacts associated with this option.
While this option almost doubles the regulatory burden of Option 2, this is the
preferred option for the majority of stakeholders, including hospitals who will notice
the increased cost associated with increased data reporting.
Page 25 of 28
Appendix 2
Stakeholder Map
The below is a high level stakeholder map provided for illustrative purposes only. It
does not include all stakeholders nor all engagement types. It is anticipated the
level of influence and impact will change throughout implementation.
Page 26 of 28
Appendix 3
Referenced Documents
1. October 2007, the Review of the Prostheses List Arrangements (Doyle
Review);
2. Review of Health Technology Assessment in 2009 (HTA Review),
https://www1.health.gov.au/internet/main/publishing.nsf/Content/AF68234CE9
EB8A78CA257BF00018CBEB/$File/hta-review-report.pdf
3. Industry Working Group on Private Health Insurance Prostheses Reform
(PHIIWG) in 2016, Industry Working Group on Private Health Insurance
Prostheses Reform (PHIIWG) in 2016
4. 2017 Senate Inquiry Report, Price regulation associated with the Prostheses
List Framework,
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Commu
nity_Affairs/ProsthesesListFramework/Report
5. 2017 Strategic Agreement with the Medical Technology Association of
Australia, https://www.health.gov.au/resources/publications/agreement-
between-the-government-and-the-medical-technology-association-of-australia
6. Independent Hospital Pricing Authority's December 2019 report Prostheses
Costs in the private and public sector (Not published)
7. Harris et al. Outcomes of hip and knee replacement surgery in private and
public hospitals in Australia. ANZ J Surg 89 (2019) 1417-1423. doi:
10.1111/ans.15154
8. Prostheses List: Guide to listing and setting benefits for prostheses,
www.health.gov.au/resources/publications/prostheses-list-guide
9. December 2020, Report of the Menzies Centre for Health Policy, University of
Sydney, on proceedings of the Prostheses List Revised Benefit Setting &
Review framework Industry Working Group (BSRIWG) and options for reform,
https://www.health.gov.au/resources/publications/options-for-a-revised-
framework-for-setting-and-reviewing-benefits-for-the-prostheses-list-report
10. APRA Statistic, Private health insurance prostheses report, June 2020
(released 18 August 2020
11. December 2020 Discussion Paper, Options for Reforms and Improvements to
the Prostheses List (Attachment A).
12. 30 March 2021, Medibank says reform of device pricing 'essential', Health
Dispatch, https://healthdispatch.com.au/news/medibank-says-reform-of-
device-pricing-essential
13. Commonwealth Ombudsman, Health Insurance Premium Increases Fact
Sheet, https://www.ombudsman.gov.au/publications/brochures-and-fact-
sheets/factsheets/all-fact-sheets/phio/health-insurance-premium-increases
14. Groups issue joint call for 'practical reform' of Prostheses List, February 23,
2021, https://healthdispatch.com.au/news/joint-statement
Page 27 of 28
Appendix 4
List of Defined Terms
Defined Term Meaning
AOA NJRR Australian Orthopaedic Association National Joint
Replacement Registry
ARTG Australian Register of Therapeutic Goods
BSRIWG Revised Benefit Setting & Review Framework Industry
Working Group
AR-DRG Australian Refined Diagnosis Related Groups
CAG / CAGs Clinical Advisory Group(s)
Department, The Department of Health, unless otherwise stated
the
Doyle Review The Review of the Prostheses List Arrangements
DRG Diagnosis Related Groups
DVA Department of Veterans' Affairs
HTA Health Technology Assessment
HTA Review Review of Health Technology Assessment in 2009
IHPA The Independent Hospital Pricing Authority
IWG / IWGs Industry Working Group(s)
MTAA Medical Technology Association of Australia
MTAA Government's Strategic Agreement with the MTAA
Agreement
PHI Private Health Insurance
PHIIWG Industry Working Group on Private Health Insurance
Prostheses Reform
PL Prostheses List
PLAC Prostheses List Advisory Committee
Senate Inquiry 2017 Senate Inquiry into Price Regulation Associated with
the Prostheses List Framework
Page 28 of 28
Consultation Paper:
Options for reforms and
improvements to the
Prostheses List
December 2020
`
Table of Contents
INTRODUCTION 3
PURPOSE 4
HOW TO LODGE A SUBMISSION 4
OVERVIEW - CHALLENGES AND OPPORTUNITIES 65
UNDERSTANDING THE CHALLENGES 86
UNDERSTANDING THE OPPORTUNITIES 1712
OPTION 1: CONSOLIDATE THE PROSTHESES LIST USING THE DIAGNOSIS
RELATED GROUPS (DRGS) MODEL AND SET BENEFITS WITH REFERENCE TO
THE PROSTHESES PRICE COMPONENTS OF RELEVANT DRGS, WITH
ADMINISTRATION MOVED TO THE INDEPENDENT HOSPITAL PRICING
AUTHORITY (IHPA). 1914
OPTION 2: CONSOLIDATE AND REDESIGN THE PROSTHESES LIST WITH
EXTENSIVE CHANGES TO PRE- AND POST-LISTING ASSESSMENT AND
BENEFIT SETTING PROCESSES, WITH ADMINISTRATION OF BENEFIT SETTING
SUPPORTED BY THE DEPARTMENT OF HEALTH. 2116
OVERVIEW 2116
CONCLUSION 2317
Page 2 of 30
`
INTRODUCTION
The Australian healthcare system operates under a mixed model of
private and public health and hospital services. Australians with private
health insurance may choose to receive treatment as private patients in
either private or public hospitals. For privately insured patients with
appropriate health cover, private health insurers are required to pay set
benefits for prostheses (medical devices) when they are provided in
prescribed circumstances.
Prostheses include surgically implanted prostheses, human tissue items
and other medical devices.
The Private Health Insurance (Prostheses) Rules (as made from time-to-
time) is a legislative instrument made under the Private Health Insurance
Act 2007. The Schedule of the Private Health Insurance (Prostheses)
Rules is known as the Prostheses List (PL).
The PL specifies a set benefit amount for listed prostheses. The PL benefit
applies to appropriately covered privately insured patients that receive a
prostheses as part of treatment, where there is a Medicare benefit
payable for the service as part of their treatment. The treatment can be
delivered in a private or public hospital, or in a hospital-substitute
setting. The PL benefit is used to determine the sum private health
insurers are required to pay to hospital providers.
The Australian Government (the Government) is committed to ensuring
consumers have access to safe, clinically effective and cost effective
prosthetic items, chosen by their clinicians. The
Therapeutic Goods Administration (TGA) is responsible for regulating the
safety of medical devices, including prostheses, in Australia. The Minister
for Health and the Department take advice on the clinical and cost-
effectiveness of prostheses from the Prostheses List Advisory Committee
(PLAC). The arrangements for including products on the PL help to ensure
that benefits paid by insurers are relative to clinical effectiveness. The
purpose of clinical assessment for the PL is reimbursement, not
regulation.
The PL has undergone a number of changes since it was introduced in
1985. The current reform considerations were initiated in 2017, when
the Australian Government entered into a Strategic Agreement with the
Medical Technology Association of Australia (MTAA). Through the
Agreement, each party agreed to:
• promote the sustainability of privately insured health care through
rebalancing the costs of medical devices to privately insured
patients, to help keep private health insurance affordable for all
Australians;
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• support a viable, innovative and diverse medical technology sector
in Australia and local jobs; and
• improve the value of private health insurance for consumers by
reducing benefits for prostheses on the PL.
The Government subsequently commissioned a number of Reviews and
constituted a number of Industry Working Groups to inform options for
improving the PL. The Revised Benefit Setting and Review Framework
Industry Working Group (BSR IWG), was tasked to develop a revised
framework for setting and reviewing benefits for devices on the PL. The
BSR IWG report was published on 16 December 2020. The work of the
BSR IWG provides an important contribution for the Department of
Health to develop detailed reform options for the Government to
consider, in collaboration with stakeholders.
PURPOSE
This aim of this paper is to inform Government considerations around
the direction and implementation of options for PL reform.
This consultation document is not a Regulatory Impact Statement but is
intended to solicit information for the development and implementation
of policy decisions. Genuine and timely consultation is an Australian
Government requirement contained in Principle 4 of the Australian
Government Guide to Regulatory Impact Analysis.
A number of related documents have also been made available publicly.
These may be of interest for anyone seeking to understand the broader
context for reforms to Private Health Insurance and the PL.
Consultation paper: Private health insurance reforms - second wave
Options for a Revised Framework for Setting and Reviewing Benefits for
the Prostheses List
Review of the General Miscellaneous Category of the Prostheses List
HOW TO LODGE A SUBMISSION
Feedback on this paper is requested over the coming nine week period
and by no later than close of business on 15 February 2021 by email to
the Prostheses Reform mailbox: prosthesesreform@health.gov.au.
Please note that feedback received after this date may not receive
consideration.
The Department is seeking information and comment on any issues that
respondents consider relevant to the proposed reform options.
Respondents are free to comment on issues in addition to the specific
matters raised in this consultation paper. The Department welcomes all
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feedback, including additional measures to address issues detailed in this
paper.
Submissions may range from a brief comment or short letter outlining
your views on a particular topic to a much more substantial document
covering a range of issues. Respondents should support their submission
with evidence.
Each submission and comment, except where supplied in confidence, will
be considered for publication on the Department's website, and if
published, remain indefinitely as a public document.
If respondents would like their feedback to remain confidential, please
mark it as such, or indicate which sections should be confidential, and
which are appropriate for publication. It is important to be aware that
confidential feedback may still be subject to access under freedom of
information laws. The freedom of information process usually includes
consultation with the respondents prior to a decision about the release
of information.
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OVERVIEW - CHALLENGES AND OPPORTUNITIES
Increasing medical costs, increasing utilisation of health services
(particularly by older people and people with chronic disease) and
declining participation rates (particularly by younger Australians) is
challenging the affordability and long-term sustainability of the PHI
sector.16
The Government recognises the important role that medical devices play
in the overall health of Australian patients and the need to maintain a
stable, sustainable and innovative medical device sector.
In 2019-20, over 3.1 million prostheses on the PL were supplied at a cost
to private health insurers of approximately $2.1 billion.17 Expenditure on
prostheses accounts for 14 per cent of private health insurance hospital
benefits paid annually. The cost of prostheses on the PL has been
identified as a factor in the rising price of health insurance premiums for
consumers.
Reform and improvement to the prostheses listing arrangements could
put downward pressure on private health insurance premiums for
consumers. Engagement across the health sector throughout the 2017-
20 review period confirms there is broad agreement that the PL can, and
should, be reformed. Whilst there is less consensus on the method of
achieving reform, three key areas been identified as priorities:
• Price (particularly relative to the public hospital sector)
• Scope and definition
• Consolidation of the list
The key aim of any reform is to create a more transparent basis for
purchase and reimbursement of medical devices and better relate the
benefits paid by private health insurers for prostheses to actual public
and private sector prices. This is intended to reduce pressure on private
health insurance premiums for consumers, and in turn improve the
affordability and attractiveness of private health insurance for
consumers.
The main policy levers available to effect change in the private health
setting include encouraging competition and deciding which health care
interventions will be publicly funded. Within that context, two broad
concepts for reform have emerged:
1. Consolidate the PL using Diagnosis Related Groups (DRGs)
prostheses subcomponents, and revise benefit setting, with
16
Commonwealth Ombudsman, Health Insurance Premium Increases Fact Sheet
17
APRA Statistic, Private health insurance prostheses report, June 2020 (released 18 August 2020)
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administration of benefit setting moved to the
Independent Hospital Pricing Authority (IHPA).
2. Consolidate and redesign the PL with extensive changes to pre- and
post-listing assessment and benefit setting processes, with
administration maintained by the Department of Health.
Implementation for any reform would occur following the scheduled
cessation of the Agreement with MTAA on 31 January 2022, in an
appropriately staged manner.
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UNDERSTANDING THE CHALLENGES
Addressing price disparity between the private and public hospital
sectors
Benefits paid through the PL are generally inflated when compared to
average prices paid for equivalent devices in other settings. Multiple
reviews (Doyle 2007; HTA 2009; Sansom 2015; Clarke 2017) have found
that the PL framework has led to higher average prices for devices used
in the private sector compared with public hospital and international
prices. IHPA's December 2019 report Prostheses Costs in the private and
public sector estimates that for 2017-18 this gap was 130 per cent.
A likely cause of the disparity in pricing is that the minimum benefits set
through the PL act as a floor price. There is little incentive for price
negotiation between hospitals and device companies. Instead, there is
incentive to move as many items on to the PL as possible because of the
mandated benefits for listed items. This can lead to a number of market
distortions including preferential use of PL items over equally effective
and lower cost non-PL items or equipment. The very complexity of the PL
with over 11,000 billing codes and 1,700 price groupings exacerbates
these distortions.
In February 2017, the Government reduced minimum benefits by 7.5% to
10% for some high cost, high use device categories (cardiac, intra-ocular
lens, hip and knee prostheses). In October 2017, the agreement with the
MTAA included a series of further benefit reductions across the PL
between February 2018 and February 2020. These were estimated to
reduce outlays by a total of $1.1 billion over four years.
Whilst significant savings have been achieved, due to the impact of
COVID-19 it is not clear if the total savings target has been met. However,
the reduction in benefit payments by private health insurers have been
smaller than expected because of higher utilisation growth (8.6% in the
2018 premium year versus forecast 5.7%). A significant proportion of the
above-average utilisation can be attributed to the General Miscellaneous
category, where annual use increased by 18.4 per cent in 2018-19.
The combined impact of reduced benefits and changing patterns of use is
reflected in the changes to the annual average benefit. The average
benefit per device reduced from $775 in 2017-18 to $670 in 2018-19, but
subsequently increased slightly to $673 in 2019-20.
The ability to predict the timing and savings impact are some of the
advantages of this approach to price control. However, the outcome has
differential impacts on the medical technology sector, noting that the
benefit reductions agreed with MTAA applied to all medical technology
companies, MTAA members or not. Without changes to the underlying
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system for setting and reviewing PL benefits, one-off reductions are likely
to be eroded over time. Relevant factors that continue to drive above
trend growth include: the increasing scope of the PL; and increased per
item pricing for mature technologies, enabled by the PL's complex
classification system.
As well as setting benefits, it is important to continually review the
benefits to ensure they are appropriately pegged to the prices used in
comparable settings. In general, once items are listed on the PL there is
no structured mechanism for regularly reviewing the benefits paid for
these items. The PL has been criticised as having a 'set and forget
mode'18. Without sustainable reform, there will continue to be higher
prices paid in the private sector versus the public sector and
internationally.
Improving scope and definition: which items should qualify for a benefit
It has never been intended that the PL should be a mechanism for private
health insurance funding for all medical devices or medical consumables
used in an episode of hospital care.
However, there is growing concern that the scope for the PL is not well
understood, meaning there are no obvious limits on what is included in
the PL. The lack of a legislated definition of a 'prosthesis' potentially
allows items to be placed on the PL which could be better funded by
other avenues, or are already funded through other means ('double
funded'). Indeed, the use of the word "prosthesis" to describe a medical
device implanted during a medical procedure, seems at odds with the
dictionary definition. This highlights the need to improve the current
definition, without narrowing the scope such that the PL excludes
clinically valuable innovations that are best funded through this
mechanism.
The table below (see pages 9 and 10) outlines the range of current
definitions in use across the various programs which have a medical
device component, including the definitions applied to the PL.
While there is no legislated definition of prosthesis, the guidance
documents that underpin the administration of the PL arrangements
make clear that the products that are listed on Part A (the main part of
the PL) should have the following features;
(i) they must be implanted or remain within the body, and
(ii) they must have a therapeutic purpose.
The eligibility for some items, such as joint replacements, pacemakers
and cardiac stents, is well understood. Similarly, it is also well understood
18 Senate Inquiry into Price regulation associated with the Prostheses List Framework (2017)
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that devices such as external limb prosthetics, external breast
prostheses, or implants used solely for cosmetic purposes are not eligible
for the PL. In many cases these items are funded through other
programs, such as the National Disability Insurance Scheme.
Advancements in technology mean that the PL has expanded over time
to accommodate a wide range of devices, not all of which are
permanently implanted. These exceptional products are listed on Part C
of the PL and include insulin infusion pumps and cardiac home/remote
monitoring systems.
However, there is evidence of items being included on the PL which
arguably do not meet the criteria that the product be implanted (a term
which itself has been variably interpreted). One example is topical skin
adhesive products used to close wounds.
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The BSR IWG reviewed current PL arrangements and reform options over
eight meetings held between April 2018 and February 2020. Although the
BSR IWG did not reach agreement on the scope of the PL going forward,
it did agree the factors which should be considered as important matters
to take into account when making listing decisions for the PL. These
include:
1. The current scope of general cover under private health insurance (hospital
versus hospital-substitute care)
2. Demonstration of clinical effectiveness and cost-effectiveness as a precursor to
listing and benefit setting
3. Avoidance of duplicated payments (e.g. medical services that include
diagnostics that are funded through the MBS and/or medicines that are funded
through the PBS)
4. Recognition that the PL is not the only mechanism for funding medical devices
(and other therapeutic products) that are used in hospital care, but the PL
should complement other hospital funding so as to avoid gaps in funding.
5. Avoidance of perverse behaviours prompted by access to PHI benefits rather
than pursuing more efficient care (e.g. hospital admission for diagnostic tests
which are more appropriately rendered in the community).
6. Ensuring that privately insured patients are not exposed to out-of-pocket
expenses for use of a device listed on the PL. 19
19
Report by The University of Sydney reflecting discussions of the Revised Benefit Setting & Review
Framework Industry Working Group, pg. 14
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Medical Device and Prostheses Definitions
Ordinary The ordinary meaning of 'prostheses', as given by
Dictionary the Macquarie Dictionary, is:
Meaning 1. the addition of an artificial part to supply
a defect of the body.
2. such a part, as an artificial limb.
Therapeutic TGA defines a medical device as:
Goods (a) any instrument, apparatus, appliance,
Administration software, implant, reagent, material or
other article (whether used alone or in
combination, and including the software
necessary for its proper application)
intended, by the person under whose
name it is or is to be supplied, to be used
for human beings for the purpose of one
or more of the following:
(i) diagnosis, prevention, monitoring,
prediction, prognosis, treatment or
alleviation of disease;
(ii) diagnosis, monitoring, treatment,
alleviation of or compensation for an
injury or disability;
(iii) investigation, replacement or
modification of the anatomy or of a
physiological or pathological process or
state;
(iv) control or support of conception;
(v) in vitro examination of a specimen
derived from the human body for a
specific medical purpose;
and that does not achieve its principal
intended action in or on the human body
by pharmacological, immunological or
metabolic means, but that may be
assisted in its function by such means; or
(aa) any instrument, apparatus, appliance,
software, implant, reagent, material or
other article specified under
subsection (2A); or
(ab) any instrument, apparatus, appliance,
software, implant, reagent, material or
other article that is included in a class of
instruments, apparatus, appliances,
software, implants, reagents, materials or
other articles specified under
subsection (2B); or
(b) an accessory to an instrument,
apparatus, appliance, software, implant,
reagent, material or other article covered
by paragraph (a), (aa) or (ab); or
(c) a system or procedure pack.
Therapeutic Goods Act 1989, s41BD
`
Medical Device and Prostheses Definitions
TGA defines an implantable medical
devices as a medical device (other than an
active implantable medical device) that is
intended by the manufacturer:
(a) to be, by surgical intervention, wholly
introduced into the body of a human
being, and to remain in place after the
procedure; or
(b) to replace, by surgical intervention, an
epithelial surface, or the surface of an
eye, of a human being, and to remain in
place after the procedure; or
(c) to be, by surgical intervention, partially
introduced into the body of a human
being, and to remain in place for at least
30 days after the procedure.
Therapeutic Goods (Medical Devices)
Regulations 2002
Independent For cost purposes:
Hospital Prostheses costs are defined within IHPA's
Pricing National Hospital Cost Data Collection
Authority (both public and private collections) to
(Prostheses) cover goods and services used in the
provision of services to implant
prostheses, human tissue item and other
medical devices that are:
• specified on the Prostheses List; or
• assessed as being comparable in function
to devices of on the Prostheses List.
For intervention purposes:
Specific types of prostheses can be
identified with individual episodes of care
through their encoding as interventions
using the Australian Classification of
Health Interventions (ACHI). For example,
the ACHI Code 41617-00 identifies
'Implantation of cochlear prosthetic
device'.
PL Legislation No specific definition of prosthesis
Part B - Human tissue prosthesis means: a
product that is substantially derived from
human tissue where the tissue has been
subjected to processing or treatments and
the supply (however described, including
trade, sell, give or gift) of which is
governed by State or Territory law.
Private Health Insurance (Prostheses
Application and Listing Fee) Rules 2018,
Definitions
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Medical Device and Prostheses Definitions
Part C - the listing criterion is that the
kind of prosthesis is:
(i) an insulin infusion pump;
(ii) an implantable cardiac event recorder;
(iii) a cardiac home/remote monitoring
system;
(iv) a cardiac ablation catheter;
(v) a mapping catheter for catheter
cardiac ablation;
(vi) a patch for cardiac ablation;
(vii) a monopolar device for surgical
cardiac ablation;
(viii) a bipolar device for surgical cardiac
ablation;
(ix) a system for surgical cardiac ablation;
or
(x) a probe for surgical cardiac ablation.
PL Guide 1. The product must be entered and current
('Criteria for on the Australian Register of Therapeutic
Listing') Goods
2. The product must be provided to a person
as part of an episode of hospital
treatment or hospital-substitute
treatment
3. A Medicare benefit must be payable in
respect of the professional service
associated with the provision of the
product (or the provision of the product is
associated with podiatric treatment by an
accredited podiatrist)
4. The product should:
a. be surgically implanted in the patient and
be purposely designed in order to
i. replace an anatomical body part; or
ii. combat a pathological process; or
iii. modulate a physiological process; or
b. be essential to and specifically designed
as an integral single-use aid for implanting
a product, described in (a) (i), (ii) or (iii)
above, which is only suitable for use with
the patient in whom that product is
implanted or
c. be critical to the continuing function of
the surgically implanted product to
achieve (i), (ii) or (iii) above and which is
only suitable for use by the patient in
whom that product is implanted; and
5. The product has been compared to
alternative products on the Prostheses
List or alternative treatments and
i. assessed as being, at least, noninferior in
terms of clinical effectiveness; and
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Medical Device and Prostheses Definitions
ii. the cost of the product is relative to its
clinical effectiveness.
Consolidation to improve efficiency and transparency
The current PL includes a complex and opaque classification system. The
complexity is exacerbated by the continual growth of the PL. Since 1997
the number of items on the PL has expanded nearly tenfold. The most
recent PL (November 2020) consists of 11,300 billing codes that are
allocated to one of 1,700 groupings. Each billing code may have multiple
distinct items listed underneath it.
Number of Number of
Billing Codes Unique
Groupings
Part A 10,484 1,683
Part B 759 4
Part C 62 37
Total 11,305 1,724
Prostheses
List
The current process results in a significant administration burden.
Considerable resources are required to maintain the current list with its
myriad of interdependencies, as well as managing the increasing flow of
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new requests. There is little opportunity for enhancements, such as
digitisation, or compliance. The outcome is an assessment process that
does not meet sponsors' needs for timely and efficient processes, nor the
insurers' needs for applications to undergo sufficient scrutiny to ensure
high quality and consistent decision-making.
The key issues which arise again and again in relation to the
administration of the system are the lack of transparency in how
decisions are made, and limited integration between health regulation
and funding systems. These issues persist despite a number of reviews,
over an extensive period, which have recommended greater
transparency and better coordination and integration of health systems.
In addition, there is no consistent approach to setting benefits for listed
devices. Minor differences between devices, without demonstrated
health impact, are recognised and differentially priced. For many devices,
rather than paying benefits for the whole device, each of the component
parts attract a benefit. For instance there are 38 price points for
orthopaedic screws (ranging from $60-$474) in one category, with little
or no evidence of differing performance or patient outcomes.
Case study
There are a number of external fixation systems used in complex
fracture management.
Each system can involve use of multiple components (screws,
bolts, struts, rings etc.). For one company's system, the
components are classified under 16 billing codes with PL benefits
ranging from $45 to over $2000 per code. In turn, each code has
under it up to a dozen items or 'catalogue numbers' (e.g.
different bolts), each of which can be billed multiple times.
Data from two comparable external fixation systems indicates
there is a difference in the median benefit paid by insurers of
more than 40 per cent:
Product A
The median number of billing codes billed per patient is 44 with
PHI benefits paid of $31,816. The public hospital price is $15,900.
Product B
The median benefit per patient is $13,608.
The Review of the General Miscellaneous Category of the Prostheses List
found evidence to suggest some products were being reclassified into
different groupings (largely adding or changing suffixes) without any
evident change to the product itself or the benefit to the patient. In some
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instances, this has resulted in the minimum benefit amount for the item
increasing by up to 400 per cent.20
UNDERSTANDING THE OPPORTUNITIES
It has been broadly agreed by stakeholders who participated in reform
discussions through industry working groups that the overall purpose of
the PL should be to provide privately insured patients with access to
beneficial and cost effective medical devices (prostheses) used in a
medical procedure as part of an episode of hospital or hospital-substitute
care.
As well as maintaining this purpose, a key objective of PL reform is to
close the gap between public hospital and private hospital pricing for
prostheses. A secondary aim is to streamline the arrangements to reduce
complexity and the associated administrative burden of managing well
over one thousand PL applications, amendments and listings each year.
Two options are presented below but both have some common
elements, as follows.
Improved Definition of Purpose and Scope
It is proposed that the following prerequisites for mandating payment of
a private health insurance benefit for a funded prostheses be retained:
• The prostheses must be approved by TGA and listed on the
Australian Register of Therapeutic Goods.
• The prostheses must be provided to an appropriately insured patient
during an episode of hospital or hospital-substitute care.
• The prostheses must be provided during a medical procedure for
which a Medicare benefit is available.
In addition, it is proposed that benefits be payable for specific purpose
medical devices where the intention of the accompanying medical
procedure is to remedy disease or dysfunction through use of the specific
medical device (e.g. hip replacement, stent, balloon angioplasty). The
device should not be one that is used as an adjunct to the procedure (e.g.
sutures, haemostatic agents, adhesives).
It should be noted that this definition no longer requires that the device
be implanted but retains the requirement that the device be therapeutic.
The focus is on the device being one that is intended to remedy a medical
condition.
A consequence of confining scope as proposed would be that most
general use medical devices and consumables would no longer be funded
20
Review of the General Miscellaneous Category, pg. 30
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through the PL, but would continue to be funded through other
mechanisms, such as contracts between insurers and hospitals.
Appropriate use
No changes are proposed to the Medicare Benefits Schedule or medical
payments by insurers with either option.
These reforms will not impact on the regulation of medical devices by
TGA. However, both options contemplate better use of post market
review to identify and address concerns about unexpected growth and
variation in the use of devices.
Medical device registries, in particular the National Joint Replacement
Registry for joint replacement prostheses, will continue to be important
tools for addressing safety issues and prompting appropriate clinical use.
QUESTIONS
What, if any, general use products should continue to be funded though the PL
and why?
Should there be an "exceptional circumstances" list (akin to the current Part C)?
If so, what types of products should be listed and why?
How should general use items be transitioned to other payment arrangements
in a phased manner? What time period and should some items continue to be
listed for longer than others? If so why?
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OPTION 1: Consolidate the Prostheses List using the Diagnosis
Related Groups (DRGs) model and set benefits with reference
to the prostheses price components of relevant DRGs, with
administration moved to the Independent Hospital Pricing
Authority (IHPA).
Overview
IHPA would take over responsibility for setting and revising private
prostheses benefits, within the current (or modified) DRG classification
system.
Currently there are over 1,700 device groupings for the PL. In contrast,
public hospital funding is based on grouping services into one of about
700 DRGs, with about half involving use of prostheses. Using these
existing groupings (and any additional private sector DRGs), IHPA could
set a private health insurance benefit for the prostheses component of
each DRG initially based on reference pricing against the current public
hospital prostheses cost for that DRG. IHPA would have the ability to
develop specific private sector DRGs and to adjust the benefit to take
account of any significant disparity between the current private and
public hospital prostheses DRG cost, caused by reasonable differences in
usage patterns.
It would also be possible to include an additional premium in the benefit
to recognise the additional costs of providing a larger range of prostheses
for choice by private patients, and to recognise different approaches to
device purchasing between public and private hospitals.
Private health insurers would be required to pay PL benefits set by IHPA
for use of in-scope prostheses. However, insurers and hospitals would
continue to negotiate payments for the non-prostheses component of
the episode of care.
Medical costs are not impacted by this reform.
Following the initial price setting exercise, IHPA, would review and reset
benefits using its existing system for collecting hospital level pricing data.
Private hospitals would negotiate prices with device sponsors to supply
necessary medical devices and costs data would be periodically reported
to IHPA.
For novel, high cost medical devices not readily accommodated in
existing DRGs, IHPA could determine the need for health technology
assessment (HTA) and a new DRG (current process). Concerns about
access to these novel technologies could be addressed by creating a
special time-limited list with the initial benefit set through HTA,
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conducted by the Medical Services Advisory Committee (MSAC). MSAC
would continue to evaluate new medical services that use novel devices
and hence provide advice about benefit setting.
For most medical devices used in medical procedures, once TGA
approved, the device could be used by clinicians and hospitals without
further assessment, with DRG defined benefits payable.
IHPA would monitor patterns of use (utilisation and expenditure) and
could undertake post market reviews (with or without the involvement
of MSAC) if there were identified concerns. TGA would retain its
responsibility for managing safety concerns.
It is anticipated that the gap between public hospital and private hospital
prostheses costs would be closed over some years, through staggered
annual 'benefit per DRG' reductions.
How this option addresses the key aims for reform
The DRG infrastructure provides a ready-made mechanism for simplifying
administration. The 700 DRG groups (about half of which already have a
device component) would replace the 1,700 PL groupings that currently
exist. The ongoing IHPA data collection cycle, which also captures costs,
ensures a sustainable approach (setting and reviewing the benefit) for
managing pricing.
Anticipated stakeholder impact
The reform aims to close the gap between public and private hospital
prices with consumers benefitting from moderation of private health
insurance premiums and faster access to new devices on TGA
registration, without the need for an additional reimbursement
assessment process. Otherwise consumers and clinicians should be
unaffected by these changes provided there continues to be reasonable
choice of devices and the reform does not lead to higher out of pocket
expenses. As the reform aims to reduce costs, there may be adverse
impacts on device companies, offset by the ability to bring new products
to market faster for private patients without the need for separate PLAC
assessment. Private health insurers will need to ensure that appropriate
funding to hospitals continues for necessary medical devices and
consumables that may no longer be funded through the PL or this model.
Regulatory Burden Estimate
This option reduces red tape through dismantling current assessment
and listing processes. It encourages hospitals and device companies to
negotiate on price. Access to new medical devices will occur sooner.
What are the longer term opportunities
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This reform could be a stepping stone to the private sector wholly
moving to a DRG payment system. This wider reform could only be
developed in the context of overall private health insurance and hospital
funding reform and is outside the scope of this paper.
QUESTIONS
Should the public/private gap be closed completely or instead allow for relativity
that favours the private sector? If so why?
What evidence is there that choice of prostheses in the public sector is more
limited than the private hospital sector? Is there any evidence of difference in
outcomes in the public and private settings?
How should concerns about maintaining choice be addressed?
What safeguards should be adopted to prevent patients being exposed to out of
pocket expenses for prostheses?
What market distortions would be continued or created by this proposal and
how can they be addressed?
OPTION 2: Consolidate and redesign the Prostheses List with
extensive changes to pre- and post-listing assessment and
benefit setting processes, with administration of benefit
setting supported by the Department of Health.
Overview
The PL would be redesigned but continue to be administered by the
Department of Health.
The objective of the reform would be similar to option one with the gap
between prostheses pricing in the public and private sectors
progressively closed. This would be achieved through consolidating the
list into a smaller number of pricing groups, with new groups requiring
justification supported by clinical evidence, generally assessed by MSAC.
The new arrangements would also include much-enhanced assessment
of applications through increased cost-recovered resourcing and better
use of health technology assessment; as well as an ongoing review of
benefits, potentially through regular approaches to market.
At a minimum, redesign could entail:
• revising the legislated definition of a prostheses and refining the
listing criteria to reflect the scope discussed above. A more
confined scope would mean that most general use items including
medical consumables would no longer be funded through the PL.
• redeveloping and enhancing the HTA process for assessment and
benefit setting, including continuing with recent reforms that mean
that MSAC has a greater role in evaluating novel devices or
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incremental changes to existing devices where price premiums are
sought.
• introducing ongoing review and benefit setting using a combination
of reference pricing (principally to the public sector), mandated
price reductions and tendering.
• monitoring trends in PL usage and expenditure and undertaking
post market reviews as necessary, akin to those undertaken for
pharmaceuticals and medical services.
• developing a compliance program to enable proper scrutiny of
disputed and anomalous claims.
These reforms could be introduced in a staged manner from February
2022, with the consolidation and initial benefit setting processes
occurring during 2021.
Enhanced administration and the necessary increase in Departmental
resourcing would be funded though re-based cost recovery fees.
How this option addresses the key aims for reform
The DRG infrastructure described in option one provides a ready-made
mechanism for consolidating groups on the PL and simplifying
administration. Option two has the same objectives as option one and
achieves this through similar means but by building a new system that in
many respects, mirrors what is done by IHPA already. Both options
require a new approach to grouping and benefit setting.
Anticipated stakeholder impact
Consumers and clinicians may favour option two because it appears
familiar and builds on the status quo. However, following benefit setting
reform, the same issues around potential choice and patient out of
pocket expense may emerge. Hence, like option one, there is need to
adopt safeguards for patients. Currently the very high PL benefits mean
that there are no patient out of pockets. Medical device companies will
be most impacted by the reform if it is effective in reducing the disparity
between public and private sector pricing. Hospitals may be concerned
that general use items will no longer be funded though the PL and hence
private health insurers would need to ensure that clinically necessary
devices and consumables are adequately funded.
Regulatory Burden Estimate
It is expected that there would be increased cost for medical device
companies and perhaps other industry stakeholders through increased
cost recovered fees. With more HTA and new compliance processes
there is likely to be increased administrative burden and cost for medical
device companies.
QUESTIONS
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What advantages or disadvantages does option two have over option one?
What groups structure should be used and why? Examples include grouping by
episode of care, procedure or device?
Would it be possible to use IHPA's DRG grouping structure as part of reforming
the PL under this option?
If benefits are set through commercial tenders (for existing products and
categories), how frequently should those tenders occur?
If benefits are set through reference pricing, should this include public hospital
prices and international prices? Which countries should be referenced, how and
why? For public hospitals, how would reference pricing be supported outside the
IHPA framework, and should this include averaging?
How should compliance be supported to ensure companies accurately identify
referenced prices?
CONCLUSION
It is accepted that no stakeholder will be supportive of every element of
any reform option. These proposals have been developed following
extensive review of the existing system through Industry Working Groups
set up under the 2017 Agreement between the Government and MTAA.
In addition to the specific questions outlined, stakeholders are invited to
indicate their support for or disagreement with specific elements of the
reform options (with reasons and evidence) and suggest ways that the
option can be improved. It is recognised that through this public
consultation, a hybrid reform model may emerge.
The regulatory costs below are considered to be the maximum cost of any
regulatory impact. It is likely the actual cost will be much less than the maximums
Option 1 - Status Quo
quoted below.
No Change to regulatory burden. Existing inefficiencies will remain.
Option 2 - DRG model
Administrative Costs - Removal of application process
Average number of hours for
Number of new applications per medical device companies to Hourly rate (default rate
year1 complete application2 has been used)3 Total4
1496 1 $ 73.05 $ 109,246.28
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1. This uses information captured from the Prostheses List Management System (PLMS) for both new and amendment applications. Only includes two
years' worth of data as previous benefit reductions applied required dummy applications to be made for each item subject to benefit reductions, skewing
the figures for other years.
2. Estimate based on the complexity of the form. Supporting information should already be collected as a result of seeking to TGA approval.
3. Default hourly rate used
4. This figure represents potential (maximum) savings associated with the removal of the application process.
Delay costs - removal of waiting for listing (automatic listing after TGA approval)
per item delay cost (lost Total delay cost per year
Yearly Prostheses List spend5 7 month Prostheses List spend6 revenue)7 (lost revenue)8
$ 2,090,564,414.29 $ 1,219,495,908.33 $ 410.13 $ 347,791.93
5. 3 year average prostheses expenditure based on APRA data.
6. Timeframe between applying to list a product and it getting listed (assuming it is recommended for listing) can be up to seven months, assuming the
applications are received within one week of the application closing date (as per usual processes). Therefore the delay in potential lost revenue could be
as much as 7 months worth of revenue
7. Calculates the per item delay cost based on the 7 month PL spend and the average number of prostheses used
8. Total potential savings from the removal of the 'delay cost' when the application process no longer exists and a product is elgible for reimbursement
once TGA approved.
Increased costs associated with changed data processing arrangements
Estimated Effort for Changed Data Total Increase in Data
Processing Arrangements Hourly rate (default rate Collection/Reporting
Number of Total Prostheses Used 9
(hours)10 has been used)11 Activities for Hospitals
2,973,423 19822.82 $ 73.05 $ 1,448,057.00
9. Number of total prostheses to reflect the number of data entries that will need to be made by private hospitals when reporting their data
10. Assumes a rate of 30 seconds data entry required for each prostheses used, with a .2 per cent reduction as some hospitals already provide
this inofrmation voluntarily
Other Assumptions
11. No review or compliance functions will be introduced.
12. Assumes negligible changes to Private Health Insurers, Clinicians, Consumers
13. Does not include any consideration of the regulatory burden of hospitals negotiating device costs with insurers. As an average price model, the DRG
model allows both low and high cost devices to be used. Any negotiation hospitals choose to do will be in their benefit.
Total Regulatory Cost Option 2 $ 991,018.79
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Option 3 - Redefine the Prostheses List
Administrative Costs - Streamlined listing process
Number of new applications per year1 Average number of hours taken Hourly rate (default rate
to complete application 2 has been used)3 Total
1496 0.5 $ 73.05 $ 54,623.14
1. This uses information captured from the Prostheses List Management System (PLMS) for both new and amendment applications. Only includes two years'
2. This assumes the new IT system, assessment pathways, grouping structures etc will simplify the application process by 50%.
3. Default hourly rate used
Compliance & Review
Costs Assumptions
1. Assumes any input from device companies, insurers, hospitals etc would require a similar level of details for a new application, though with additional
time to collect more contemporary data or evidencce if needed.
2. Assumes the complexity of the review or compliance activity would be a sliding scale, with a broader generic review/compliance activity requiring
less detailed input from a greater number of people, and a specific, single-item review/compliance activity requiring significant input from one
supplier.
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Mar-15 Jun-15
Prostheses Number of Prostheses Prostheses
Category prostheses Benefits paid $ Benefits paid $
Number of
Ave $/item Ave $/item
prostheses
Ophthalmic 66,889 $19,815,267 $296 80643 $24,462,120 $303
Ear, Nose &
Throat
7,697 $6,368,557 $827 8412 $7,038,755 $837
General
Miscellaneous
172,607 $49,892,811 $289 188201 $54,867,191 $292
Neurosurgical 6,242 $13,151,258 $2,107 7366 $16,188,351 $2,198
Urogenital 8,615 $6,738,333 $782 9800 $7,930,694 $809
Specialist
Orthopaedic
111,753 $45,758,310 $409 124440 $51,502,279 $414
Plastic and
Reconstructive
18,045 $3,544,034 $196 18077 $3,780,237 $209
Cardiac 13,644 $85,712,067 $6,282 14861 $97,255,866 $6,544
Cardiothoracic 1,473 $4,863,027 $3,301 1601 $5,132,554 $3,206
Vascular 17,435 $12,520,215 $718 20079 $15,165,007 $755
Hip 24,944 $50,546,779 $2,026 26972 $54,221,445 $2,010
Knee 26,654 $56,532,808 $2,121 30834 $65,811,232 $2,134
Spinal 41,529 $32,132,874 $774 48085 $37,940,736 $789
Other 52,627 $53,197,885 $1,011 57673 $59,944,024 $1,039
Total 570,154 $440,774,227 $773 637044 $501,240,492 $787
Sep-15 Dec-15
Number of Prostheses Number of Prostheses Number of
prostheses Benefits paid $ prostheses Benefits paid $ prostheses
Ave $/item Ave $/item
75500 $22,999,341 $305 78,123 $23,855,027 $305 67,350
11955 $7,811,615 $653 11,686 $7,553,406 $646 6,907
187093 $54,935,270 $294 192,190 $56,714,981 $295 172,874
7417 $16,332,046 $2,202 7,209 $16,728,663 $2,321 6,307
9419 $8,470,061 $899 9,736 $8,486,214 $872 8,958
122683 $51,967,286 $424 121,265 $51,187,900 $422 110,571
18052 $3,988,531 $221 20,538 $4,282,310 $209 18,165
14052 $90,381,200 $6,432 14,231 $93,370,432 $6,561 13,568
1502 $4,806,013 $3,200 1,561 $5,005,143 $3,206 1,423
20206 $13,868,762 $686 18,868 $13,940,265 $739 16,284
26781 $54,167,621 $2,023 28,600 $58,328,324 $2,039 25,101
30181 $63,774,291 $2,113 33,277 $70,580,020 $2,121 27,889
48621 $38,076,065 $783 48,572 $37,351,456 $769 42,210
58828 $61,474,065 $1,045 65,219 $68,236,858 $1,046 58,815
632290 $493,052,168 $780 651,075 $515,620,998 $792 576,422
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Average Prostheses Cost / FY
FY No Prostheses Benefits Paid Avg Cost
15-16 2,528,109 $1,995,841,428.63 $789.46
16-17 2,661,557 $2,090,886,035.97 $785.59
17-18 2,699,064 $2,091,925,257.79 $775.06
18-19 3,104,255 $2,081,485,131.89 $670.53
19-20 3,116,950 $2,098,282,853.18 $673.18
3 year average 2,973,423 $2,090,564,414.29 $706.26
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Mar-16 Jun-16 Sep-16
Prostheses Number of Prostheses Ave Number of Prostheses
Benefits paid $ Ave $/item prostheses Benefits paid $ $/item prostheses Benefits paid $ Ave $/item
$20,473,988.46 $304 83,613 $26,141,189.34 $313 80077 $24,851,967 $310
$5,830,949.00 $844 8,373 $7,032,332.00 $840 10945 $6,547,101 $598
$50,338,601.07 $291 197,255 $58,544,187.17 $297 196121 $57,454,346 $293
$13,581,974.94 $2,153 8,133 $18,925,122.21 $2,327 8168 $18,273,685 $2,237
$7,128,728.00 $796 10,252 $8,603,723.00 $839 9801 $8,174,884 $834
$45,751,339.21 $414 126,607 $52,415,171.05 $414 128557 $53,328,201 $415
$3,722,283.78 $205 18,715 $4,080,216.25 $218 20401 $4,605,370 $226
$88,373,790.82 $6,513 16,717 $99,298,076.95 $5,940 16720 $98,283,825 $5,878
$4,788,575.00 $3,365 1,457 $4,830,744.35 $3,316 1474 $4,988,962 $3,385
$12,480,189.25 $766 19,334 $14,795,669.15 $765 19938 $14,944,911 $750
$50,985,224.00 $2,031 28,263 $57,467,102.23 $2,033 27512 $55,964,049 $2,034
$59,138,310.67 $2,120 32,222 $69,062,746.00 $2,143 30522 $65,306,053 $2,140
$32,102,152.38 $761 50,068 $37,564,773.05 $750 49774 $37,916,933 $762
$62,667,236.54 $1,065 67,313 $71,043,867.11 $1,055 70070 $71,001,938 $1,013
$457,363,343.12 $793 668,322 $529,804,919.86 $793 670080 $521,642,224 $778
Dec-16 Mar-17 Jun-17
Number of Prostheses Number of Prostheses Number of Prostheses Number of
prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item prostheses
81734 $25,905,116 316.9442 72,751 $22,607,365 $311 87,082 $25,822,598.26 296.532 84284
12665 $8,048,222 635.4696 7,869 $5,890,626 $749 8,175 $6,413,714.00 784.5522 10374
209122 $61,344,859 293.3448 192,173 $58,020,984 $302 213,640 $65,230,633.67 305.3297 204652
8813 $21,418,109 2430.286 7,247 $17,016,988 $2,348 8,052 $18,900,088.93 2347.254 7999
10054 $8,765,288 871.821 9,260 $6,666,171 $720 10,005 $7,935,959.20 793.1993 9458
129286 $55,799,520 431.5975 118,281 $49,275,155 $417 132,893 $56,131,039.02 422.3777 131828
21750 $4,948,020 227.4952 21,537 $4,797,832 $223 20,319 $4,877,067.69 240.025 20345
17441 $101,180,893 5801.324 16,677 $92,663,850 $5,556 17,782 $91,830,986.06 5164.266 17286
1523 $5,177,683 3399.661 1,294 $4,542,707 $3,511 1,526 $5,189,269.17 3400.57 1365
20727 $15,439,273 744.887 18,686 $14,602,790 $781 21,204 $16,236,031.00 765.706 19919
30542 $62,560,415 2048.34 27,529 $54,708,928 $1,987 29,140 $54,903,891.68 1884.142 28129
33740 $71,473,847 2118.371 30,840 $63,523,127 $2,060 33,381 $65,996,010.05 1977.053 31079
48774 $37,882,584 776.6963 47,804 $36,497,050 $763 51,572 $39,958,665.00 774.8132 48280
61264 $65,646,309 1071.532 63,772 $63,035,181 $988 71,058 $71,418,187.95 1005.069 71560
687435 $545,590,139 793.6607 635,720 $493,848,753 $777 705,829 $530,844,141.68 752.086 686558
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Sep-17 Dec-17 Mar-18
Prostheses Number of Prostheses Number of Prostheses
Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item
$24,854,683 $295 87630 $26,231,978 $299 77826 $22,578,244 $290
$6,211,308 $599 11048 $7,014,865 $635 7673 $5,427,630 $707
$61,662,877 $301 220790 $71,132,420 $322 208274 $61,474,720 $295
$19,748,503 $2,469 8532 $21,357,978 $2,503 7675 $18,030,600 $2,349
$8,057,987 $852 9611 $8,083,667 $841 9783 $7,749,201 $792
$54,566,718 $414 130220 $56,759,611 $436 123035 $51,916,693 $422
$5,133,194 $252 23582 $6,353,692 $269 23079 $5,851,068 $254
$88,934,761 $5,145 18406 $95,181,209 $5,171 17285 $81,924,605 $4,740
$4,501,734 $3,298 1446 $5,061,202 $3,500 1463 $4,985,112 $3,407
$15,305,605 $768 20869 $16,061,753 $770 19344 $14,023,705 $725
$52,660,387 $1,872 30552 $57,485,579 $1,882 27754 $50,686,708 $1,826
$61,241,644 $1,971 34998 $68,221,712 $1,949 30435 $58,269,680 $1,915
$36,079,534 $747 53385 $40,691,729 $762 48647 $37,111,496 $763
$70,345,173 $983 79563 $78,677,578 $989 66484 $65,656,575 $988
$509,304,107 $742 730632 $558,314,973 $764.15 668757 $485,686,037 $726
Jun-18 Sep-18 Dec-18
Prostheses Prostheses
Number of Prostheses Benefits Number of Number of
Benefits Benefits
prostheses paid $ Ave $/item prostheses paid $ Ave $/item prostheses paid $ Ave $/item
92,824 $26,582,393 $286 90752 $26,711,479.74 $294 92,692 $27,103,393.83 $292
8,453 $10,367,545 $1,226 10341 $9,237,604.00 $893 10,728 $7,292,675.00 $680
245,776 $67,932,900 $276 245288 $64,783,752.81 $264 259,065 $70,540,330.40 $272
9,140 $22,684,597 $2,482 8560 $21,387,773.96 $2,499 8,607 $20,406,658.62 $2,371
10,240 $8,480,287 $828 9383 $7,488,538.80 $798 9,889 $8,041,814.10 $813
140,065 $57,047,564 $407 141045 $57,278,638.49 $406 139,099 $58,118,499.42 $418
22,771 $6,155,731 $270 21464 $5,922,871.18 $276 25,785 $7,915,310.67 $307
19,155 $84,875,136 $4,431 19776 $83,667,616.07 $4,231 20,319 $84,541,691.70 $4,161
1,494 $4,784,543 $3,203 1616 $5,326,160.42 $3,296 1,738 $5,750,683.11 $3,309
21,636 $15,551,287 $719 20579 $15,080,296.65 $733 21,246 $15,206,667.44 $716
30,106 $54,051,100 $1,795 28810 $51,082,261.80 $1,773 30,792 $53,811,180.02 $1,748
35,193 $65,687,848 $1,867 30890 $56,965,521.86 $1,844 35,676 $65,057,993.50 $1,824
55,721 $40,535,940 $727 51790 $36,649,649.32 $708 56,094 $39,325,419.93 $701
79,373 $76,387,673 $962 76500 $64,772,039.02 $847 81,565 $71,095,343.91 $872
771,947 $541,124,544 $701 756794 $506,354,204.12 $669 793,295 $534,207,661.65 $673
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Mar-19 Jun-19 Sep-19
Number of Prostheses Number of Prostheses Number of Prostheses
prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item
82,537 $23,696,855.12 $287 93,995 $27,284,075.14 $290 95,085 $27,668,533.16 $291
7,593 $7,316,565.26 $964 7,986 $8,892,275.17 $1,113 10,528 $8,285,100.15 $787
245,629 $64,840,169.56 $264 298,573 $79,120,340.12 $265 286,253 $74,806,423.99 $261
7,992 $18,074,286.16 $2,262 9,516 $21,946,802.24 $2,306 9,129 $21,174,614.46 $2,319
9,508 $6,889,287.46 $725 10,575 $8,381,197.46 $793 9,837 $8,256,081.02 $839
134,171 $56,119,913.02 $418 154,163 $64,605,688.29 $419 154,125 $66,295,635.45 $430
24,049 $6,857,563.50 $285 22,933 $6,901,801.07 $301 23,994 $7,182,845.50 $299
20,356 $83,662,428.16 $4,110 23,693 $95,007,086.05 $4,010 23,546 $94,554,410.78 $4,016
1,457 $4,729,379.47 $3,246 1,672 $5,980,213.70 $3,577 1,687 $5,656,785.93 $3,353
20,152 $14,379,642.97 $714 22,423 $15,532,941.15 $693 23,623 $16,674,930.13 $706
28,642 $50,213,390.46 $1,753 32,830 $56,110,019.34 $1,709 30,623 $52,872,496.16 $1,727
33,253 $61,117,857.38 $1,838 36,865 $66,543,151.98 $1,805 34,721 $62,782,095.91 $1,808
52,133 $38,123,737.02 $731 52,987 $41,020,741.77 $774 54,922 $41,395,780.44 $754
67,139 $60,166,247.27 $896 51,344 $47,409,609.83 $923 67,763 $60,691,804.08 $896
734,611 $496,187,322.81 $675 819,555 $544,735,943.31 $665 825,836 $548,297,537.16 $664
Dec-19 Mar-20 Jun-20
Number of Prostheses Number of Prostheses Number of Prostheses
prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item prostheses Benefits paid $ Ave $/item
93,666 $27,313,333.96 $292 82,920 $22,719,425.54 $274 60,496 $16,207,566.26 $268
10,889 $8,477,972.12 $779 7,843 $8,444,219.20 $1,077 4,212 $4,913,141.79 $1,166
294,555 $76,190,581.89 $259 268,676 $69,979,899.22 $260 222,170 $58,967,319.63 $265
9,338 $22,302,467.79 $2,388 8,148 $17,872,985.72 $2,194 7,145 $14,353,084.69 $2,009
10,397 $8,706,695.31 $837 10,411 $7,835,157.87 $753 8,472 $5,267,944.39 $622
154,228 $68,729,296.08 $446 142,547 $60,463,842.70 $424 122,995 $49,955,010.20 $406
26,812 $8,740,692.64 $326 25,335 $8,765,949.50 $346 17,404 $5,439,070.20 $313
23,868 $95,898,086.00 $4,018 22,837 $89,798,076.56 $3,932 22,855 $88,141,921.19 $3,857
1,804 $5,888,982.97 $3,264 1,805 $5,480,492.31 $3,036 1,695 $5,946,453.01 $3,508
22,837 $16,800,918.35 $736 21,545 $14,836,028.58 $689 20,954 $14,145,241.93 $675
32,848 $57,229,761.42 $1,742 29,981 $50,410,289.10 $1,681 25,510 $41,784,971.48 $1,638
38,879 $69,950,102.51 $1,799 34,132 $60,504,543.66 $1,773 25,944 $45,453,975.93 $1,752
59,847 $44,691,658.69 $747 53,057 $39,462,557.35 $744 49,352 $36,301,637.56 $736
80,814 $73,648,839.34 $911 70,379 $64,416,431.14 $915 61,512 $57,548,690.24 $936
860,782 $584,569,389.07 $679 779,616 $520,989,898.45 $668 650,716 $444,426,028.50 $683
Application volumes as per PLMS
7 APPLICATION TYPES 2020 2019 Average
Create 940 590
Amended 698 763
TOTAL 1,638 1,353 1,496
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