MTAA Submission to the Private Health Insurance Consultation. December 2015

Transcription

1 MTAA Submission to the Private Health Insurance Consultation December 2015 MTAA Submission to the Private Health Insurance Consultation December

2 Level 12, 54 Miller St, North Sydney NSW 2060 Australia PO Box 2016 North Sydney NSW 2059 Australia P(+612) F(+612) Contents 1. Executive Summary About the Medical Technology Association of Australia Private Health Insurance in Australia... 7 MTAA involvement in Private Health Insurance... 7 Private Health Insurance consultation Industry innovation in Australia... 8 Federal and State Government initiatives Access to innovative medical technology The genesis of regulated reimbursement Regulation of the Private Health Insurance Industry Prostheses List expenditure Addressing growth in utilisation Consumer access to innovative medical technologies Custom made 3D printed devices Are Prostheses List processes complex? The importance of the Prostheses List to ensure certainty of patient access to innovative medical technology Medicare Benefits Schedule issues Clinical evidence and Health Technology Assessment Applications for new categories of medical technology Applications for products falling into existing Prostheses List categories Coverage with evidence development Exclusionary products Private patients in public hospitals Coverage of selected non-admitted hospital procedures The Private Health Insurance Rebate Broader health system reforms Telehealth and remote monitoring technologies Summary Recommendations MTAA Submission to the Private Health Insurance Consultation December

3 1. Executive Summary The Medical Technology Association of Australia (MTAA) welcomes the opportunity to contribute to the Private Health Insurance Consultation. The Australian Government is currently undertaking a number of reviews aimed at ensuring that Australians are able to access affordable, quality and timely health services into the future, no matter where they live in Australia. The reviews cover the Primary Healthcare system and the Medicare Benefits Schedule (MBS). This consultation and any plan for the health system must not be undertaken in isolation. The reviews reflect the different parts of the patient journey, which involves many people, organisations and processes. If the review outcomes are well co-ordinated this will help facilitate patient access to clinically and cost-effective innovative medical technologies at each stage of their life. MTAA is committed to supporting the value proposition of private health insurance for consumers and patients based on the following principles: The continuation of the Prostheses List, or contemporary medical device list, is the best regulatory system to ensure patient access and surgeon choice to the most clinically appropriate medical technology. Privately insured patients have a right to access innovative medical technology, regardless of where they live: rural, remote or urban locations. Only clinicians must exercise the prerogative to choose the most suitable medical technology for their patients in order to provide the most appropriate clinical care. Where medical technology is essential to the performance of a procedure covered by Medicare, a funding pathway must facilitate its availability to patients. MTAA supports the TGA s role as regulatory gatekeeper for use of high risk medical technology within Australia. While MTAA does not support duplication of this process for the private sector, it believes that a timely and fit for purpose Health Technology Assessment (HTA) process is appropriate to determine eligibility for reimbursement of new innovative medical technologies. HTA must be conducted using a whole of health systems approach. For innovative medical technologies where the clinical and/or economic benefits are not yet proven, it should be appropriate for stakeholders to collaborate in the generation of real world evidence to address a gap in the evidence available. MTAA supports the existence of fair and sustainable benefit determination and review processes that do not compromise the value of private health insurance in terms of patient access to treatment options and products available. MTAA Submission to the Private Health Insurance Consultation December

4 MTAA recommendations Recommendation 1 The Federal Government to commit to the continuation of the PL as the best regulatory system to ensure patient access and surgeon choice to the most appropriate medical technology. Recommendation 2 Representatives of affected stakeholders (PHA, hirmaa, APHA, CHA and MTAA, plus possibly AMA and CHF) be provided the opportunity to develop a process of review to be utilised by the PLAC and its Health Economics Sub-Committee. Recommendation 3 Deliberations on PL expenditure are balanced by consideration of the factors underpinning growth in utilisation and the longer term impact on PHI. Recommendation 4 Regulation of the reimbursement of medical technology includes non-implantable medical technology that meets agreed eligibility criteria, as well as continuing to cover surgically implanted prostheses. Recommendation 5 The listing of custom made devices on the PL is facilitated to reduce red tape and improve patient access. Legislative changes to enable PLAC to accept applications for custom-made devices for entry in the PL, even though they do not have an ARTG number i.e. custom-made medical devices can be lawfully supplied without the need for an ARTG entry, such as devices supplied under certain conditions as part of the Special Access Scheme or Authorised Prescriber Scheme. Custom-made medical devices are included in the ARTG, if the sponsor wishes to voluntarily do so, in a manner which is not prohibitive by time and cost. Recommendation 6 When an episode of in-hospital treatment, for which a Medicare benefit is payable for the associated professional service, is available in a private hospital, a PHI policy should facilitate access to the relevant medical technology necessary to support the treatment. Recommendation 7 ARTG listed MedTech products for which there is a product group already established on the PL, should be listed without further evidence requirements being imposed. Sponsors are provided the opportunity for conditional listing on the PL while CED occurs. Recommendation 8 Consideration is given to applying the government incentives to participate in private health insurance only to products that contain no excluded services. Exclusionary and restricted benefit products result in an increased administrative burden for hospitals as they introduce added complexity to claiming, billing and payment collection process. Hospitals are also exposed to additional financial risk particularly if it cannot be foreseen and confirmed whether a patient s policy will provide adequate cover. o Consumer information and awareness is critical in ensuring that products with less than comprehensive coverage are fully understood at the time of purchase and beyond. MTAA Submission to the Private Health Insurance Consultation December

5 Recommendation 9 Private health insurance should provide coverage for non-admitted hospital services needed by patients receiving standard clinical care outside of hospital and in the community and home settings, especially for those living in rural and remote areas. Patients should also be provided access to subsidised, clinically and cost-effective sub-acute care products that are essential for their care in the out-of-hospital and in the home and community settings. Appropriate and consistent coverage to be provided for an integrated and well-coordinated approach for delivering care across primary, community and specialist care services. Recommendation 10 Regulatory changes be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of: transparent policies with fewer exclusionary products innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services. Recommendation 11 Regulatory changes be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services, especially for those patients living in rural and remote areas. We welcome the opportunity to discuss this further with the Department of Health. Susi Tegen Chief Executive MTAA Submission to the Private Health Insurance Consultation December

6 2. About the Medical Technology Association of Australia MTAA is the national association representing companies in the medical technology industry. MTAA aims to ensure the benefits of modern, innovative and reliable medical technology are delivered effectively to provide better health outcomes to the Australian community. Member companies cover a broad spectrum of the industry in Australia, from subsidiaries of major multinational medical technology companies to independent distributors and small and medium sized Australian innovator companies. Medical technologies are products used in the diagnosis, prevention, treatment and management of disease and disability. Products range from consumable items such as bandages and syringes, to high technology implantable devices such as cochlear implants, cardiac defibrillators and orthopaedic joints, to diagnostic imaging and operating theatre equipment, to products which incorporate biological materials or nanomaterials. The industry is characterised by a high level of innovation, resulting in short life cycles for many products. Medical technology innovation is characteristically incremental in nature. Many medical devices undergo constant development based on feedback from medical practitioners and advances in other sciences relevant to medical technology. The Australian medical technology industry: had turnover of approximately $10.2 billion in (revenue is ~$11.8 billion if in vitro diagnostic (IVD) and dental products are included) includes over 500 medical technology companies with products listed in the ARTG is responsible for ~44,000 medical devices listed on the 2014 ARTG, estimated to represent between 500,000 and one million different devices employees more than 19,000 people is mainly located in NSW (55%) followed by Victoria (24%) and Queensland (12%) imported goods to the value of $5.59 billion and exported goods to the value of $2.23 billion in The medical technology industry compares favourably in turnover and size with other major Australian industries. The automotive manufacturing industry had revenue of $11 billion in the period , and employed 16,289 people, while the wine industry had revenue of $7 billion and employed 13,208 people in the same period. In , health spending in Australia was estimated to be $140.2 billion. Australian need for medical technology is growing largely due to the ageing population and increased prevalence of chronic diseases. The medical technology industry is a sector that invests heavily in research and development (R&D), including clinical research to demonstrate patient benefit. It has been estimated that high technology medical technology companies in the US devote upwards of 20% of their revenue to R&D. In Australia, the annual spend for R&D in for medical and surgical equipment manufacturing was $237 million, which was an increase of approximately $20 million (9%) from the previous year. Patent applications by medical technology companies provide a good indicator of innovation, and the number of Australian medical technology patent grants has shown a steady increase since These data are favourable and suggest that there is a strong culture of innovation in Australia. However, Australia ranks at the bottom of the OECD group of advanced economies in terms of collaboration between its university research sector and business, particularly small to medium enterprises. The track record of commercialisation of university research is equally poor. 1 Innovation systems flourish when they are built on a close foundation of engagement between the research and industry sectors and Australia has much work to do to improve 1 OECD Science, Technology and Industry Scoreboard 2013 MTAA Submission to the Private Health Insurance Consultation December

7 this environment. This important issue is being addressed through the Federal Government Industry, Innovation and Competitiveness Agenda, in particular, the Industry Growth Centre initiative, which we discuss in more detail in this paper. MTAA Submission to the Private Health Insurance Consultation December

8 3. Private Health Insurance in Australia A brief historical overview of Private Health Insurance in Australia, as well as a summary of current issues is provided in Attachment 1. MTAA involvement in Private Health Insurance The medical technology industry s involvement in the private health insurance sector has been predominantly in the acute care setting providing medical technology to support privately insured patients in both private and public hospitals. From the provision of consumable medical devices to the supply of capital equipment and hi-tech medical devices used in surgical procedures, the MedTech industry has a symbiotic relationship with hospitals and Private Health Insurers (PHIs) in supporting the health needs of privately insured patients. The reimbursement of surgically implanted prostheses is the only medical technology area covered by private health insurance, which is subject to government regulation and this will be covered in detail below. With the rapid changes in technology capability, this involvement does not need to be limited to the acute care sector. This submission will highlight the benefits of innovative medical technologies in that provide improved health outcomes for private patients. In addition the submission will address the disparity between privately insured patients in urban and rural and remote areas. Private Health Insurance consultation From Ministerial announcements, MTAA is aware that government has identified the consumer at the centre of deliberations and specifically wants to identify: opportunities to amend unnecessary or inefficient regulation, which add costs for consumers reform options which would enhance the value of private health insurance for consumers. MTAA has prepared this submission guided by these objectives and the content of the issues paper circulated prior to consultation with prostheses manufacturers at the roundtable held on 19 November Concurrent Government reviews The Australian Government is currently undertaking a number of reviews aimed at ensuring consumers are able to access affordable, quality and timely health services into the future, including reviews of primary healthcare, the Medicare Benefits Schedule (MBS) and the Private Health Insurance industry. Importantly, one of the main cost drivers for PHIs is the cost of managing patients with chronic disease in hospital; however, there is a role for technologies in the management of patients with chronic disease outside the hospital setting, which in turn will take the pressure off hospitals. The issues paper that was released by the Government also included two groups, rural and remote consumers and Aboriginal and Torres Strait Islander people that are not currently getting value from their private health insurance cover. This paper and any plan for the health system must not be undertaken in isolation. The private health insurance, primary healthcare and MBS reviews as well as the Federation white paper are not separate; they reflect the different parts of the patient journey. The patient journey has many people, organisations and processes as part of its flow, which includes the medical and allied health professions, Federal and State and Territory funding of services, industry that ensures access to clinically and cost-effective medical technologies and patients who trust that they will receive appropriate, co-ordinated care. Importantly, if consumers pay to be privately insured they must receive value for money. MTAA Submission to the Private Health Insurance Consultation December

9 4. Industry innovation in Australia Globally, the medical technology market was valued at US$349 billion in 2012 and is forecast to grow to US$455 billion by 2018, with a compound annual growth rate of 4.5% between The medical technology industry is a potential growth industry for Australia s future, as we have many of the necessary strengths from which to grow a strong domestic industry. These include a significant health and medical research capability, quality health system, stable finance system, skilled workforce and proximity to the growth markets of the Asia Pacific. Asia-Pacific healthcare expenditure will almost double in the next six years with the largest share coming from China, Japan and India. In addition, there are now more than 2.3 billion people aged 65 or older in this region, resulting in continually increasing patient demands for better healthcare services. 3 This presents significant market opportunities on our doorstep. What has been missing from Australia s core attributes to date to capitalise on these opportunities is a Federal Government framework or Blueprint to enable the industry to flourish. At just under 2% of the global market, the Australian Government, industry and academia need to work in partnership to build this environment, ensuring we have policies and regulatory systems in place that nurture innovation and access to the healthcare system. This will lead to the development of new start-up companies, as well as establishing a more sustainable environment for established companies encouraging investment, and ultimately growth. It will also result in local solutions to population health issues. The medical technology industry welcomes the Federal Government s intention to release an Innovation Statement before the end of 2015, expected to consider five important pillars; unlocking capital, access to Asia, greater collaboration, growing the talent pool, and government acting as an exemplar. This statement will send an important message to industry that Australia is a location to invest in research and development, and innovative businesses. Tangible policies in the areas of healthcare, industry development, taxation, skills, manufacturing and trade will be critically important to ensure the Innovation Statement actively improves the business environment for innovative medical technology companies, and provides certainty for future investment, ensuring there are market access pathways for them. In addition these policies will translate to improved health outcomes and social and economic benefits. By way of the NSW MedTech Knowledge Hub, MTAA has been working in partnership with academia and other stakeholders to develop a MedTech Blueprint (Attachment 2). The Blueprint proposal is a culmination of broad consultation between clinicians, academics and industry representatives to provide an overview of the policy challenges and goals that need to be addressed to achieve strong growth in the sector. MTAA has strongly advocated to Government that the imminent Medical Technologies and Pharmaceuticals Growth Centre, expected to be announced late this year or early 2016, be the appropriate vehicle to develop and implement the Blueprint as a roadmap for industry across the commercialisation value chain or through a relationship with SPARK Stanford Australia which will improve collaboration between research and industry. The areas identified for action in the Blueprint include: 1. Revitalising Research and Development implementing structures that realise commercial outcomes 2 MTAA Fact Book: 3 Frost and Sullivan Analyst Briefing: Top Five Growth Sectors in the Asia Pacific Healthcare Market, Rhenu Bhuller, Geeta Dhanoa, Nitin Dixit and Natasha Gulati, March 21, 2013 MTAA Submission to the Private Health Insurance Consultation December

10 2. Building a Workforce for the MedTech Industry 3. Navigating Commercialisation Pathways 4. Integration with health policy 5. Being part of the healthcare solution and population health planning 6. Building the manufacturing component and taxation 7. Exporting MedTech 8. Utilising Big Data. Sections 4 and 5 of the Blueprint with a focus on industry being part of the healthcare solution and integration with health policy are particularly pertinent for the Federal Government s consumer focused private health insurance review. The medical technology industry is not simply a provider of instruments, implants or diagnostic equipment. Medical technology companies manufacture and distribute healthcare solutions that treat disease and disability, deliver more effective treatment options, resulting in improved patient healthcare outcomes and quality of life. This enables patients to remain productive in society, working and volunteering as they age. The industry makes a significant contribution to the Australian economy through creation of new, highly skilled jobs and new export markets. 4 Medical technologies also allow people to remain productive in society, working or volunteering as they grow older. MTAA considers the medical technology industry as part of the solution to the challenges Australia faces in delivering healthcare services, as well as a major contributor to new innovative ways of delivering healthcare services. Not only does the medical technology industry offer solutions to current healthcare needs today, but it is continually researching and developing evolving solutions to the many health issues that Australia and the world will face in the future as people live longer. Building a sustainable healthcare system and a more sustainable medical technology industry can be complementary goals if the government is prepared to consider new models of care and drive the shift of healthcare delivery from the hospital to the home. Development of new technologies can be part of the solution to increasing costs and unsustainable healthcare services because technologies can change the way services are delivered. Many technologies have remote monitoring capabilities that enable care outside the hospital system, saving significant costs and improving healthcare delivery. In many cases the technology already exists. What is missing is the vision from the Government to establish systemic change that drives technology adoption as a solution. The healthcare reforms that are required to achieve this are covered later in the submission. A major barrier to development of new technologies is the lack of a reimbursement environment that enables patient access. Reimbursement policies that don t keep up with advancements in technology hamper innovation and subsequent industry growth as well as disadvantaging the patient. Industry and government must have an opportunity to engage in ongoing constructive dialogue to work together to resolve these complex policy challenges and overcome these barriers to growth. When approving a private health insurance premium increase in February 2015, the Minister for Health, Sussan Ley explained that the increase was due to the fact that the benefits funds 4 Department of Industry Tourism and Resources Skills Audit of the Medical Devices Industry, Deloitte Insight Economics 2007 MTAA Submission to the Private Health Insurance Consultation December

11 were paying to their members had increased by 7.4% over the previous year. Private health funds cite increases in individual technologies supplied by manufacturers and distributors of medical technologies as the primary cost driver. What is not emphasised is the fact that growth in expenditure on prostheses is being driven largely by underlying growth in utilisation, not growth in the price of actual prostheses. Ultimately, MTAA s goal is to build a reimbursement system that enables equitable patient access to innovative medical technologies, regardless of the geographic location of the patient. Generally, a benefit from a private health insurer will only be paid for an item listed on the Prostheses List (PL). Access and uptake of non implantable devices as well as those used for remote monitoring are inconsistently covered, if at all. Industry strongly believes the PL is the best regulatory system as its independence ensures patient access to the most appropriate medical technologies, not the technologies the private health insurance funds are willing to pay for. However, the PL criteria are outdated and need to be expanded to improve patient access to advancements in technology, including nonimplantable medical technologies, which are not currently covered. Comment: The Health Industry Forum, co-chaired by The Minister for Industry, Innovation and Science, the Hon Christopher Pyne MP, and the Minister for Health, the Hon Sussan Ley MP is an encouraging indication that the Government sees the need to discuss cross portfolio issues with a range of stakeholders from industry. However, in order to build a sustainable healthcare system and a more sustainable medical technology industry, an overview of the policy challenges and goals that need to be addressed to achieve strong growth in the sector needs to be developed. The MedTech Blueprint is the roadmap to position the MedTech industry for strong growth. MTAA encourages the Department of Health to work with the Medical Technologies and Pharmaceuticals Growth Centre to ensure that while the Federal Government is working to create an environment that nurtures innovation, the healthcare system is focused on improving the current system to ensure patient access to the technologies being developed and supplied. Federal and State Government initiatives A summary of key Federal and State Government initiatives focused on supporting industry innovation is provided in Attachment 3. MTAA Submission to the Private Health Insurance Consultation December

12 5. Access to innovative medical technology The MedTech industry is committed to supporting the value proposition of private health insurance for consumers and patients through the supply of hi-tech medical devices used in Medicare Benefit Schedule procedures performed in hospitals. This commitment is mostly enabled by the PL process, which has been in operation for a decade. This section will chart the genesis of the PL, its performance since its contemporary inception, and how it can be reformed to improve the value proposition for consumers and also contribute to making it more affordable. The genesis of regulated reimbursement It is worth observing that the PL had its origins in 1984 when access by orthopaedic surgeons to the most clinically appropriate joint replacements for their private patients was inconsistently supported by PHIs. While joint replacement had been evolving for some time, it had progressively become a mainstream solution to chronic joint pain roundly supported by orthopaedic surgeons. This issue of access was subsequently addressed in 1985 by government regulation through the establishment of a reimbursement list known as Schedule 5. Schedule 5 listed benefits (or a charge ), as well as the prosthesis. Due to concerns over the rate of increases in benefit levels, Schedule 5 was varied from February 2001 when the benefit to be paid in respect to listed prostheses was to be negotiated by insurers; however, patients were not to be charged out of pocket costs. The February 2001 changes did not satisfactorily address benefit growth leading to the implementation of the PL in 2005, which has been reviewed twice (the Doyle Review in 2007, and the Health Technology Review 2009 and implemented through to 2012) leading to its relatively mature state now, a decade later. In summary, the PL owes its origins to the need for patient access to the most clinically appropriate implantable medical technology prescribed by physicians, and the need to manage the growth in benefit levels. Regulation of the Private Health Insurance Industry The principles for best-practice regulation agreed by the Council of Australian Governments COAG 5 include: risk analysis cost benefit analysis assessments of compliance costs assessments of competition effects consultation There are important reasons why private health insurance should be the subject of stringent regulation, most notably to ensure consumers can take out private health insurance without fear of being discriminated against based on age or previous health history. It is also about ensuring the balance is struck between sharing risk and ensuring supply of adequate health products. Economic rationalists may make the argument that a deregulated healthcare market empowers the consumer arming them with the information they might need to make informed decisions about the healthcare services they may wish to gain access to. 5 Best Practice Regulation A Guide for Ministerial Councils and National Standard Setting Bodies October 2007 MTAA Submission to the Private Health Insurance Consultation December

13 However, healthcare services are not a standard consumer product and there are various interrelated systems that complicate this type of theory. If a consumer was to research a product and purchase it based on the reviews they had done and were still not happy with it, they would have the option to return it or discard it. It is difficult to imagine a scenario where a patient would shop around by meeting with several different surgeons or try out several different devices by having several operations. This is not a theory that would work in practice, particularly when considering the likely vulnerability and stress a patient might be experiencing in times of ill health and hospitalisation. It is during these times that consumers rely on healthcare professionals with expert knowledge to advise them on the most appropriate course of action to address their healthcare need. A Roy Morgan Image of Professions Survey released in April 2014 reported that nurses and doctors are rated as the most ethical and honest professions in the country. Ninety-one per cent of Australians aged 14 or over rate nurses as the most ethical and honest profession, closely followed by Doctors at 86%. This indicates consumers would prefer to rely on a healthcare system where a health care professional with expert knowledge is in a position to recommend and utilise the most appropriate healthcare service available on the market. Recommendation 1 The Federal Government to commit to the continuation of the PL as the best regulatory system to ensure patient access and surgeon choice to the most appropriate medical technology. Prostheses List expenditure The Australian Prudential Regulation Authority (APRA), previously the Private Health Insurance Administration Council (PHIAC) maintains detailed statistical data on the PL, which demonstrates that over the 10 years of operation of the PL: The growth in total benefits paid has been 8.5%; while The growth in average benefit per item has been 1.25%; whereas The growth in average benefit per item over the last five years ( ) has been 0%. Further, of the three elements of hospital treatment outlays, prostheses benefits are the lowest at 14.3% last financial year followed by medical benefits 15.8% and hospital accommodation benefits 69.9%. These statistics are provided in more detail in the MTAA Fact Sheet (Attachment 4). However, the following conclusions can be drawn: 1. Inflation in individual benefits has been effectively contained. 2. Growth in overall expenditure on the PL is being driven by increased utilisation or by more private patients accessing medical technology through their PHI policies. Regardless of official data, health funds have not publicly acknowledged the PL s achievement in containing inflation on benefits. As recently as 23 November 2015, Private Healthcare Australia in a press release unhelpfully facilitates confusion between prostheses expenditure and costs in stating that: The annual premium increase is necessary to ensure Funds can continue to provide members with access to quality medical treatment by covering the increasing costs of health care services, for example in the year ending September 2015 the MTAA Submission to the Private Health Insurance Consultation December

14 annual increase in prostheses costs was 8.9% compared with the average annual premium increase of 6.18%, Mr Fanner said. 6 Although more colourful in his language, hirmaa CEO Mr Matthew Koce in a media release dated 24 November 2015 unmistakably identifies his concerns regarding individual benefits: Manufacturers are operating under a broken regulatory system that allows them to profiteer off of (sic) Australian private health insurers, resulting in massive prices for basic prostheses. This pushes up premiums and hurts the hip pocket of ordinary Australians. This issue should be investigated by regulators and needs to be front and centre as part of the Federal Government s review of private health insurance. 7 MTAA believes that any debate on PL expenditure would best be informed by not misrepresenting or confusing product benefit growth with overall growth in expenditure. Whilst noting that neither PHA nor hirmaa proposes to dismantle the PL, MTAA acknowledges concerns raised by PHI funds regarding individual prostheses benefits. While MTAA for a number of reasons 8 does not get involved in the pricing of individual products with its members, it supports a robust but sustainable benefit determination process. MTAA recommends that the Prostheses List Advisory Committee (PLAC) should have available a group benefit review process that is accessible and open to applications from both PHIs, and MedTech manufacturers and distributors (sponsors) whereby benefits applying to specific product groups identified as having pricing discrepancies may be reviewed to address claims of inappropriate benefit levels. Enhancing the current system for benefit review for those products where there are apparent pricing discrepancies will limit the administrative and regulatory burden for the Department of Health (DoH) and its committees, and provide confidence to MedTech sponsors and PHIs that their concerns about pricing can be effectively addressed through the appropriate process. MTAA believes that any durable process needs the sign-on and support of major PHI stakeholders as well as agreement from DoH. Recommendation 2 MTAA recommends that representatives of affected stakeholders (PHA, hirmaa, APHA, CHA and MTAA, plus possibly AMA and CHF) be provided the opportunity to develop a process of review to be utilised by the PLAC and its Health Economics Sub-Committee. Addressing growth in utilisation In a report on factors causing increases in Hospital Table Benefits, by Dr Brian Hanning of the Australian Health Services Alliance (AHSA), an alliance of over 20 health funds, the foreword notes: concern that public understanding of the growth in health fund spending is so simplistic as to seriously detract from the industry's efforts to improve health services. 9 6 Private Healthcare Australia Press Release PHI: Value and Choice for Members, 23 November % is the annual increase in PHI expenditure on prostheses 7 We are hirmaa Media Release hirmaa calls for private health review to address a broken market for prostheses dated 24 November The Competition and Consumer Act is the principal reason 9 P3, Hanning B, Dr, Factors Causing Increases in Hospital Table Benefits paid by Health Funds Retrospective Analysis and Projections to Prepared by Brian Hanning Australian Health Service Alliance January 2010 for the Australian Centre For Health Research Limited (ACHR) MTAA Submission to the Private Health Insurance Consultation December

15 In reflecting on the complex issue of underlying factors contributing to annual increases in benefits paid, the foreword also notes that: These four factors make it clear that 'inflation', is a minor factor in the whole picture and illustrates the nonsense involved when journalists and others attempt to compare movements in benefits paid or indeed health fund premiums with inflation when the greatest reason for the increase in benefits is an increase in the number of hospital episodes. 10 MTAA appreciates AHSA candour, but believes that informed discussion on this point has been mostly absent in attempts to implicate MedTech companies as being the main drivers behind growth in prostheses expenditure. Should the broader Private Health Insurance industry ever reach the nirvana where they were satisfied with the benefit levels allocated to individual prostheses, they would still be left with the fact that: older populations need more health care and obviously have a larger number of admissions to hospital than younger populations, but we also know that as medical technology enables more conditions to be treated and keeps people alive longer and cure people who otherwise would have died, there are more procedures to be performed. 11 Utilisation driven growth will be a significant longer term problem for the viability of private health insurance, which deserves to be addressed as the outstanding issue that it is. Recommendation 3 MTAA recommends that deliberations on PL expenditure be balanced by consideration of the factors underpinning growth in utilisation and the longer term impact on PHI. Consumer access to innovative medical technologies For 30 years privately insured Australians have been assured of access to innovative surgically implanted prostheses, chosen by their physician and based on what their physician assessed to be the best clinical outcomes for their patient. MTAA believes that this contributes to the value proposition for consumers whereby it is a patient s surgeon rather than his or her health fund that controls such personal clinical decisions through financial levers. Two examples illustrating the benefits for privately insured patients with regard to access to innovative surgically implanted prostheses are outlined in Box 1. Since 2005 the PL processes have also conducted health technology assessment (HTA) on all applications to list new products. HTA has either been conducted by a Clinical Advisory Group (CAGs) of clinicians or two clinicians from a large panel of clinical experts. This product review is in addition to that provided by the TGA, the Australian regulatory gatekeeper for use of surgically implanted prostheses. The current PL includes over 10,000 products in 444 product groups, 739 product sub-groups with the option of an additional 342 product suffixes (denoting further clinical difference) providing a full range of clinician choice to clinically reviewed products. 10 Ibid p6 11 Ibid p5 MTAA Submission to the Private Health Insurance Consultation December

16 Box 1 The value proposition for private patients Intra-ocular lenses (IOLs) Intra-ocular lenses (IOLs) are implanted inside the eye to replace the eye s natural lens when it is removed during cataract surgery and provides a relevant case study. In the public sector usage of standard low cost IOLs (standard monofocal) predominate as they address the hospital s budgetary constraints whilst providing the intended outcome of cataract surgery i.e. the IOL treats the cataract and improves visual clarity and quality. Standard monofocal IOLs however, do not provide spectacle independence vision at near, intermediate and far distances as vision is monofocal and does not correct other vision problems, such as presbyopia and astigmatism. In the private sector privately insured patients can access optimal refractive outcomes, and both monofocal IOLs and advance technology IOLs (i.e. multifocals, which promote spectacle independence and Astigmatism-correcting IOLs that reduce the need for glasses/contact lens for distance vision) are used. Implantable cardiac devices (ICDs) Range Private patients have access to a greater range of devices with higher energy levels, timing and shock algorithms, battery and transmission capacities plus more lead options. All devices are accessible (made available through representatives' stock holdings) to the surgeon at the time of implantation to make sure that the right device and leads are available as per the surgeon's determination according to patient anatomy. Public hospitals have a limited range of devices and leads which do not have the full range of operating algorithms available. Implantation testing Private patient devices are supplied with all the materials and tooling to implant the device tested at implantation by the manufacturer to ensure the system is working correctly. Such resource needs to be supplied by general trained hospital technicians in public hospitals. Lifetime device testing As ICDs are active devices they require regular testing for the life of the device. For private patients a representative of the manufacturer attends each and every follow-up visit for the life of the device to make sure that the device remains optimally tuned for that particular patient under his changing disease conditions. This support is not provided to public hospitals unless requested as part of a tender process. Remote/home monitoring With the recent introduction of remote monitoring devices on the Prostheses List, all private patients have access to such leading 21st century technology which has the benefit of ensuring that cardiac events are picked up even between doctor's visits. In addition, clinical trials have shown that remote monitoring can potentially extend the device battery life meaning less exposure to replacement surgery for private patients. Remote monitors are usually supplied on a limited basis in public markets, if at all. MTAA believes that without the PL, consumers access to innovative medical technology would be unpredictable and not assured. MTAA bases this on the observation that when PHIs may exercise their prerogative to fund proven, clinically effective innovative medical technology that is not implanted in the body (and therefore not on the PL), the funds do not reliably or consistently chose to do so. This is particularly disappointing for consumers when the technology may provide better health outcomes and is immediately cost-saving. Examples that demonstrate this recalcitrance are: While Drug Eluting Stents (DES) are included on the PL, Drug Eluting Balloons (DEB) are not. Despite being more clinically appropriate for the patient in some circumstances as an alternative to a DES, and supplied at a lower cost, PHI funds have been reluctant to provide ex-gratia payments to cover the discrepancy. Without intervention by the fund, the use of a DEB will be a cost against the private hospital while any savings from DES not used will benefit the health fund. MTAA Submission to the Private Health Insurance Consultation December

17 Fractional Flow Reserve (FFR) guided Percutaneous Coronary Intervention (PCI) (pressure wires) - FFR measured with a pressure wire during angiography measures blood flow in diseased coronary arteries and determines where coronary stents should be placed. It has been demonstrated that 30% of stents are unnecessary and that better outcomes are achieved with fewer stents. There is financial disincentive to use a pressure wire in the private sector. In the private system, PHI funds either do not or only partially cover the cost of the pressure wire. Private hospitals do not routinely receive any additional benefit no incentive for the cost savings associated with the use of pressure wire. Medicare item number for coronary angiography with use of a pressure wire pays less than the item number for PCI and stent(s). Ablation catheters - with the current PL criteria, ablation catheters are not included on the PL and private health insurance covers only the patient s hospital stay, theatre time and professional fees but not ablation catheter leading to inconsistent funding required to perform these procedures. Therefore, if private patients are denied access to these procedures, they may be forced to seek treatment in the public health system. This will invariably add to the existing burden on public hospital waiting lists. See Box 2 (a), (b) and (c) which provides clinical evidence and costing issues for each of these technologies. MTAA Submission to the Private Health Insurance Consultation December

18 Box 2 Patient access issues for catheter ablation, fractional flow reserve guided percutaneous coronary intervention, and drug coated balloons A. Inequitable patient access to catheter ablation for the treatment of AF 12 Catheter ablation procedures receive funding from the Australian Government through the MBS - through a non-specific MBS item to cover all ablation procedures, whereby catheter ablation procedures for AF makes up only 30% of this item (Figure 1). With the current PL (PL) criteria, ablation catheters are not included on the PL and private health insurance covers only the patient s hospital stay, theatre time and professional fees but not ablation catheter leading to inconsistent funding required to perform these procedures. Therefore, if private patients are denied access to these procedures, they may be forced to seek treatment in the public health system. This will invariably add to the existing burden on public hospital waiting lists (Figure 2). Avoidable AF-related stroke and costs AF implicates around 15-25% of all ischaemic strokes and increases to 35% of strokes for those over 80 years old. 13 Stroke is one of the leading causes of death in Australia. 14 Avoidance of an AFrelated stroke is likely to save the Australian healthcare system at least $30,000 per patient for the first year. 15 Evidence shows that the risk of stroke after catheter ablation for AF can be reduced to that of the general population. 16,17 Figure 1. Catheter ablation for AF 30% of all MBS ablation services Catheter Ablation for AF Other Ablation Services Number of Services Year 12 Doolan et al. Poster presented at: 8th Asia Pacific Heart Rhythm Society Scientific Sessions, in conjunction with the 11th Asia Pacific Atrial Fibrillation Symposium; 2015 November 19-22; Melbourne, Australia. 13 Gattellari et al. Cerebrovasc Dis (4): ABS Causes of Death, Australia, Cadilhac et al. Stroke (3): Hunter et al. Heart (1): Bunch et al. J Cardiovasc Electrophysiol (8): MTAA Submission to the Private Health Insurance Consultation December

19 Figure 2. Hospital overnight admission for AF Number of hospital overnight separations 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Private Public Year Patients perspectives: Finding out that you have AF can be a sobering experience, but it needn t necessarily be a life sentence. AF can be fixed in many of us. AF was beginning to seriously affect my life to the point where I felt compelled to retire several years early. Sometime after that I finally heard about and underwent a completely successful ablation procedure, after which my quality of life was completely restored. Had I known about ablation before I retired, I would have been able to continue working for some years. AF was beginning to seriously affect my life until I finally heard about and underwent ablation, after which my AF completely disappeared. Source: MTAA VOT poster Value of Technology. Inequitable patient access to clinically and cost effective medical technology: Catheter ablation for atrial fibrillation. Poster presented at the MTAA Annual Conference: MedTech MTAA Submission to the Private Health Insurance Consultation December

20 B. Fractional flow reserve (FFR) to diagnose and treat coronary heart disease 19 In Australia (as in other countries) most coronary lesions are revascularised based on their angiographic characteristics, often without knowledge of whether the lesion is causing ischaemia or not. 20 Assessment of ischaemia using FFR is associated with improved clinical outcomes and provides potential cost savings gained through: Shorter hospital stay Lower non-fatal myocardial infarction Lower repeat revascularisation 21,22 Use of FFR measurement in the cardiac catheterisation lab saves money in both the public and private sector - where savings are seen over and above the improved patient care and outcomes which would have occurred with the better triage of patients for revascularisation. 23 However, uptake of FFR is low (Figure). Despite costs incurred with the use of FFR - cost of $A1200 per wire (2010/11) - use of FFR saves money. Mean savings in the public sector were $1200 per patient and in the private sector the savings were $5000 per patient (Table 1). Private health insurance funds may be expected to achieve significant savings by reimbursing the use of FFR. Figure 1. Low uptake of FFR measurement according to MBS data Angioplasty 30,000 25,000 With FFR measurement 20,000 MBS Services 15,000 10,000 5, Angioplasty With FFR measurement Year Source: Medicare Statistics 19 Value of Technology. Inequitable patient access to clinically and cost effective medical technology: Fractional flow reserve to diagnose and guide treatment of coronary heart disease. Poster presented at the MTAA Annual Conference: MedTech Harper and Ko. A new algorithm for the management of stable coronary artery disease incorporating CT coronary angiography and fractional flow reserve: how we can improve outcomes and reduce costs. Med J Aust (4): Available: 21 Park S-J, et al. Trends in the outcomes of percutaneous coronary intervention with the routine incorporation of fractional flow reserve in real practice. Eur Heart J : Pijls NH, et al. Percutaneous coronary intervention of functionally non-significant stenosis: 5-year follow-up of the DEFER Study. J Am Coll Cardiol (21): Murphy JC, et al. Cost benefit for assessment of intermediate coronary stenosis with fractional flow reserve in public and private sectors in Australia. Heart Lung Circ (9): MTAA Submission to the Private Health Insurance Consultation December

21 Table 1. Costs associated with treatment of the patient with or without the use of FFR in private sector PRIVATE (n=120) ITEM FFR COST ($) NO FFR COST ($) 38218* $0 $317, /38241* $691,600 $ /38306* $0 $952, /38306/38241* $360,500 $ /38243* $0 $131,500 CABG $209,000 $323,000 O/N STAY $31,475 $98,202 DAYSTAY $71,345 $39,052 DES $90,000 $296,250 BMS $6,000 $16,000 PW $159,900 $0 MIBI/SE $0 $21,000 Clopidogrel^ $49,000 $78,000 Total $1,668,820 $2,272,204 Cost savings gained through FFR use $603,384 Cost savings gained per private patient with FFR use $ Adapted from Murphy et al., *MBS item numbers attached to theatre fees: diagnostic angiography, diagnostic angiography and coronary intervention/ffr, FFR stent placement, coronary intervention without diagnostic angiography. ^Clopidogrel treatment for one year was added after stenting when the patient was clinically stable and had not had any other coronary stents within the previous 12 months. Abbreviations: BMS, bare metal stent; CABG, coronary artery bypass grafting; DES, drug-eluting stent; FFR, fractional flow reserve, MIBI/SE, MIBI scanning or stress echocardiography; O/N overnight; PCI, percutaneous coronary intervention; PW, pressure wire. Table 2. Economic analysis indicating that FFR measurement reduces costs due to reduction in stents implantation Treatment of CHD patient without FFR Treatment of CHD patient using FFR Cost per stent $3450 i $3450 Number of stents used per case iii Total cost of stents used per case iv $9453 $ Cost of pressure wire 0 $1360 ii Overall cost of stents and pressure wire per episode of care $9453 $ Saving $ Abbreviation: CHD, Coronary heart disease. i Benefit paid by health funds for drug eluting stents is $3450. ii Pressure wire costs $1360. iii An average of 2.74 coronary stents is used per case. This is reduced to an average of 1.93 coronary stents per case if FFR is measured first with a pressure wire. Source: Tonino et al., iv Cost of stents = cost per stent x number of stents used per case. 24 Murphy JC, et al. Cost benefit for assessment of intermediate coronary stenosis with fractional flow reserve in public and private sectors in Australia. Heart Lung Circ (9): Tonino PA, et al. Fractional flow reserve versus angiography for guiding percutaneous coronary intervention. N Engl J Med (3): MTAA Submission to the Private Health Insurance Consultation December

22 C. Drug-coated balloons Use of DCB has been determined to be clinically and cost-effective treatment option (Figures 1 and 2). However, unlike BMS and DES, DEB may not meet criteria for inclusion the PL because they are not permanently surgically implanted. This creates a persevere incentive to use a less clinically and cost-effective option because there is certainty of funding for devices on the PL. Lack of a funding pathway for DCB could effectively preclude clinicians from accessing this therapy, and could mean that therapy choice is restricted/limited to those therapies that rely upon devices that are funded through inclusion on the PL rather than what is clinically appropriate for patients. Impact of no funding pathway: current Commonwealth arrangements for assessing medical technology for reimbursement by Private Health Insurers are restricted to permanently implanted medical devices: the clinical benefits for patients and predicted cost benefits to private health insurers from the use of DCB may not be realised unless an appropriate funding pathway is established. The current fee-for-service models and reimbursement schemes create a financial disincentive for private hospitals to use DCB thus potentially limiting the uptake of a treatment strategy that is beneficial for both the patients and the healthcare system. 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Figure 1. Clinical (Target Lesion Revascularisation) - 24 months estimates PTA BMS DES DCBs DCBs* DCBs^ $11,400 $11,200 $11,000 $10,800 $10,600 $10,400 $10,200 $10,000 $9,800 $9,600 $9,400 Figure 2. Economic - 24-month Budget Impact Estimates PTA BMS DES DCBs DCBs* DCBs^ Abbreviations: BMS, bare metal stent; DES, drug eluting stent; DCB, drug coated balloon; PTA = percutaneous balloon angioplasty. Charts adapted from Pietzsch et al., ,27. DCBs* and DCBs^ - indicate new/advanced DCBs. 26 Pietzsch et al. Economic analysis of endovascular interventions for femoropopliteal arterial disease: a systematic review and budget impact model for the United States and Germany. Catheter Cardiovasc Interv (4): MTAA internal data MTAA Submission to the Private Health Insurance Consultation December

23 Testimony by Dr Nigel Jepson on 29 July 2014, cardiologist at Prince of Wales Hospital Randwick to the Federal Parliament s Community Affairs References Committee inquiry into Out-of-pocket costs in Australian health care explained practical difficulties created by the reluctance of health funds to cover the costs of the above technologies, some of which are: Cost shifting private patients to the public sector; Not providing optimal clinical care for private patients; Uncertainty for private patients at a vulnerable time. A transcript of Dr Jepson s evidence is included in Attachment 5. The extent of evolution of hi-tech medical technology was not foreseen 30 years ago when the regulation of the reimbursement of surgically implanted prostheses began. MTAA believes that as MedTech has evolved so too should the criteria for reimbursement with nonimplantable medical technology also eligible for reimbursement in the limited circumstances where it may be warranted. Suggested criteria for the inclusion of non-implantable medical technology used in operating rooms or catheterisation laboratories are included in Attachment 6. Recommendation 4 Regulation of the reimbursement of medical technology should include non-implantable medical technology that meets agreed eligibility criteria, as well as continuing to cover surgically implanted prostheses. Custom made 3D printed devices Custom made devices (CMDs) are not eligible for listing on the PL because the medical device regulations specifically state that CMDs do not require inclusion on the Australian Register for Therapeutic Goods (ARTG). CMDs are still required to fulfil all relevant Essential Principles for safety and effectiveness, but are not required to be included on the ARTG. While technically possible to list a CMD on the ARTG, the investment of time and money to do so in respect of a CMD for each individual patient would be prohibitive and makes this an unpractical solution because CMDs are by their very nature customised, oneoff devices. In practice, CMDs are usually funded in the private sector through PHI approved ex-gratia payments see the case example in Box 3 below. MTAA Submission to the Private Health Insurance Consultation December

24 Box 3 Custom made devices For convenience and to facilitate PHI approvals, the price of a custom made graft is based on the nearest off-the-shelf PL listed device. This may vary greatly depending on the clinical purpose of the device (e.g. an aortic aneurysm (AAA) main body graft PL benefit is $5,794 ranging to a benefit of $14,500 for a long thoracic graft). However, while cost is an issue, the more pressing concern is the requirement to request an ex-gratia payment from the insurer which potentially slows down treatment of the private patient. Note, in the public system, it would normally just require the head of the vascular department to approve the payment. The following is an example of the approval process covering a CMD endo-vascular graft. When a surgeon determines clinically that their patient is not suitable for treatment with a standard offthe-shelf device, the doctor will prescribe a custom made endovascular graft for a patient. The sponsor confirms to the surgeon that the graft is not on the PL and therefore the surgeon will need to request (on behalf of their patient) an ex-gratia payment for the device from the patient s PHI fund. Ex-gratia payments are discretionary payments for services not covered under the rules of the insurer. The surgeon will be required to clearly explain to the PHI fund the clinical scenario that necessitates the use of the CMD. Over the past 6-12 months, the sponsor has noticed an increased time to approval. While funds will generally approve these payments, review of the surgeon s request and the clinical documentation slows the approval process, resulting in delays to the manufacturing of the prosthesis. As CMDs will often take 4-6 weeks to plan, design and manufacture, further delays due to approval issues with the private insurer often extends the date of surgery, increasing the time in which the patient remains untreated and potentially at risk from aneurysm rupture. Delays in treating aortic aneurysms can be life threatening and the uncertainty of payment and whether the procedure will be covered can be a cause of great anxiety. As these are bespoke products for the individual patient, as a commercial manufacturer, the sponsor cannot start to manufacturer the product until certain that the procedure will proceed. In the public system, it is normally the responsibility of the director of Vascular Surgery to sign-off the payment for the custom made endovascular grafts. The relative ease for use of a CMD in the public system could be seen to create an inequity between public and private patients. This case study exemplifies the red tape involved in authorisation of CMDs for private patients that can by ameliorated by adopting the Proposed Criteria for Reimbursement of Innovative Technologies detailed in Attachment 6. 3D printing of devices is another method of manufacturing CMD and will increasingly be utilised to prove bespoke devices in circumstances where greater precision is required than can be provided by off the shelf devices (see Attachment 7). Note that MTAA believes that custom made technologies must be subject to HTA to confirm clinical suitability of technologies for patients. Recommendation 5 The listing of custom made devices on the PL should be facilitated to reduce red tape and improve patient access. Legislative changes are needed to enable PLAC to accept applications for custom-made devices for entry in the PL, even though they do not have an ARTG number i.e. custom-made medical devices can be lawfully supplied without the need for an ARTG entry, such as devices supplied under certain conditions as part of the Special Access Scheme or Authorised Prescriber Scheme. Custom-made medical devices should be able to be included in the ARTG, if the sponsor wishes to voluntarily do so, in a manner which is not prohibitive by time and cost. MTAA Submission to the Private Health Insurance Consultation December

25 Are Prostheses List processes complex? Some observers have remarked that PL processes are complex implying that complexity of itself implies unsustainability. MTAA believes that transparency has contributed considerably to breaking down the mystique and perceived complexity of HTA processes conducted by the PLAC and its subordinate committees, and is encouraged by the favourable culture within DoH supporting this outcome. While production of the PL can be labour intensive, staff costs are recovered from sponsors through application and listing fees, which have not been indexed into prostheses benefits and so have not been passed on to PHIs or consumers. PL processes have been operating for over 10 years and occasional perceptions of complexity have not detracted from its achievements or progress. The importance of the Prostheses List to ensure certainty of patient access to innovative medical technology MTAA believes that without regulated reimbursement of prostheses, private hospitals will face additional funding pressures from PHIs, which MTAA expects will bundle MedTech into case payments and contracts based on restrictive product group values. It is expected that this pressure will also be shared by surgeons drawn into accommodating such arrangements, especially if their clinical choice of product is compromised. PHIs behaviour in recent times indicates that deregulation of access to prostheses would be problematic. Examples of recent health fund behaviour include: the increase in exclusions in health fund coverage for health fund members without top hospital cover decline of ex-gratia approvals for clinically proven and cost saving non-implantable medical technologies health funds not covering for patient complications and readmissions. Medicare Benefits Schedule issues MTAA believes that when an episode of in-hospital treatment, for which a Medicare benefit is payable for the associated professional service, is available in a private hospital, a private health insurance policy should facilitate access to all elements necessary to support the treatment. Catheter ablation for atrial fibrillation is a case in point where appropriately insured patients may receive PHI benefits for hospital accommodation and medical services, but not for the critical ablation catheters which are not a prostheses and therefore not eligible for listing on the PL. Catheter ablation has been covered earlier in this submission and is fully explained in the Value of Technology report on Atrial Fibrillation (see Attachment 8). Also see Attachment 9 for case examples of where the MBS fails to support delivery of best value and quality healthcare. 28 Recommendation 6 When an episode of in-hospital treatment, for which a Medicare benefit is payable for the associated professional service, is available in a private hospital, a PHI policy should facilitate access to the relevant medical technology necessary to support the treatment. 28 MTAA Submission to the Medicare Benefits Schedule Review Taskforce Consultation Paper - 9 November Available at: MTAA Submission to the Private Health Insurance Consultation December

26 Clinical evidence and Health Technology Assessment MTAA believes that there is scope for streamlining HTA processes for the PL and therefore reduction of unnecessary processes or red tape and in some circumstances more timely access to ARTG listed products for consumers. This section will consider three areas: applications for new categories of medical technology applications for products falling into existing PL categories coverage with evidence development. Applications for new categories of medical technology MTAA supports the utilisation of HTA processes for consideration of applications for new medical technologies for which there is no appropriate product group on the PL. It will be necessary for CAGs or members of the panel of clinical experts to be satisfied that the new technology meets PL listing criterion 5, i.e. that the product has been compared to alternative products on the PL or alternative treatments and: (i) (ii) assessed as being, at least, of similar clinical effectiveness the cost of the product is relative to its clinical effectiveness. Importantly for new MedTech categories, a reimbursement amount will need to be determined. Applications for products falling into existing Prostheses List categories MTAA believes that the PL review of me-too medical technology (i.e. ARTG listed products for which there is a PL product group established with a prevailing group benefit) requires reconsideration. MTAA is concerned that additional evidence requirements for products in these categories 29 may be seen to establish differing standards for use in the public and private sectors and unnecessarily causing delayed access by privately insured patients. The benefits gained by this additional step for private sector access needs to be examined. MTAA recommends that ARTG listed MedTech products for which there is a product group already established on the PL, should be listed without further evidence requirements being imposed. Coverage with evidence development Where clinical and/or economic benefits are not yet proven for some innovative medical technologies, MTAA believes that consideration should be given to listing of products conditionally while evidence demonstrating their comparative clinical effectiveness is gathered. Coverage with evidence development (CED) should be conducted in collaboration with all relevant stakeholders. MTAA recommends that sponsors be provided the opportunity for conditional listing on the PL while CED occurs. Recommendation 7 ARTG listed MedTech products for which there is a product group already established on the PL, should be listed without further evidence requirements being imposed. Sponsors should be provided the opportunity for conditional listing on the PL while CED occurs. 29 The Prostheses List process requires additional clinical evidence relating to clinical effectiveness, supported by two years data, peer reviewed and published. MTAA Submission to the Private Health Insurance Consultation December

27 6. Exclusionary products Over the last few years there has been increasing trend for private health insurers to offer exclusionary hospital policies which do not provide members with cover for medical treatment for a range of acute or chronic health conditions (Box 4). There is an increase in new hospital policies offered by private health insurers with exclusions. Furthermore, the list of medical services that have been subject to exclusions has expanded to include a much larger list of services. Some of these newly excluded services include spinal fusion, scoliosis treatment, gastric banding and related services, access to insulin pump therapy, cochlear implant surgery and bone anchored hearing devices, and ear, nose and throat procedures (Box 5). It should be noted that exclusion of these particular services is not based on clinical evidence or effectiveness. This raises the question of whether the growing use of exclusionary products is a de facto mechanism for risk-rating privately insured patients. Box 4 Increasing trends in exclusions and restrictions in private health insurance policies 30 Note the significant increase in exclusionary products in March 2011 relative to March 2010 is partly due to a re-classification of policies between exclusions and restrictions by some insurers. Furthermore, there is a break in the excess and co-payment data in June 2007 due to a change in the definition used. While the data on exclusionary products pre and post March 2011 and the data on excess and payments pre and post June 2007 is not strictly comparable, the data over the entire period can be taken as a proxy for the overall trend. (a) This includes hospital policies with exclusions and restrictions, with exclusions but no restrictions, and with restrictions but no exclusions. (b) This includes hospital policies with restrictions with or without exclusions. (c) This includes hospital policies with exclusions with or without restrictions. 30 Private Health Insurance Administration Council (PHIAC). Risk sharing in the Australian private health insurance market.. Available: MTAA Submission to the Private Health Insurance Consultation December

28 Box 5 Example of exclusions and restrictions in Private Health Insurance policies 31, 31 HCF Basic Hospital PS Current as at May This product summary is created from the Health Fund Rules. MTAA Submission to the Private Health Insurance Consultation December

29 There are a number of issues with this increase in exclusionary products. One issue is that members do not understand the exclusions in their polices which results in increasing numbers of patients arriving in hospital unaware that they are not covered for the procedure they are about to have. This ignorance at the time of health care need is exacerbated by the set and forget attitude to private health insurance, brought on by factors such as apathy, perception of the difficulties of changing policies or insurers, or loyalty to the brand. Research conducted by PHIAC indicates that policies issued in recent years are more likely to include an exclusion or restriction than the broader population of policies already issued in the market. Hence, new policy holders are more likely to take out an exclusionary policy from the outset than existing policy holders are to downgrade their cover. In relation to issues of information and complexity, these newly excluded services (with the exception of gastric banding) are not referred to in the Standard Information Statements alongside the services that may have been typically excluded in the past. Instead, if other services are excluded, the Statement uses other services (see insurer for details) to inform the member, which defeats the purpose of providing this Statement to members annually. It is also difficult for doctors and their patients to understand which specific procedures are excluded by their private health insurer, as they all use different interpretations of what services are not covered under the broad headings of Cardiac and cardiac related services or Pregnancy and birth related services, for example. If private health insurers are to offer products with excluded services they should make available to doctors and patients the specific MBS items that are not covered, so the consumer is aware of their options as early as possible. Another issue is that exclusionary products force members to pay additional premiums for the highest level of cover or else join extensive public hospital waiting lists to receive treatment they need for the health condition - the latter, a result that is inconsistent with policy objective of private health insurance in easing the burden on public hospitals. This also raises questions around equality of access and improper discrimination. A further issue is one of value for the co-investment government and the taxpayer are making in private health insurance when both the government rebate on premiums and the Medicare Levy Surcharge exemption applies even when taking out an exclusionary hospital product. Recommendation 8 Consideration should be given to applying the government incentives to participate in private health insurance only to products that contain no excluded services. Exclusionary and restricted benefit products result in an increased administrative burden for hospitals as they introduce added complexity to claiming, billing and payment collection process. Hospitals are also exposed to additional financial risk particularly if it cannot be foreseen and confirmed whether a patient s policy will provide adequate cover. Consumer information and awareness is critical in ensuring that products with less than comprehensive coverage are fully understood at the time of purchase and beyond. MTAA Submission to the Private Health Insurance Consultation December

30 7. Private patients in public hospitals In both the National Health Reform Agreement and the Australian Health Care Agreements, the Commonwealth and States agreed that an individual is able to elect to be treated as a private patient in a public hospital and that public hospitals are able to charge for these private patients at a fee set by each State. Between and the number of private patients treated in public hospitals increased by 50% (an average increase of 8.5% per annum), and by , 10% of all patients in public hospitals were private patients, compared with 7.8% in Public hospitals earned approximately $1.37 billion of additional revenue from private patients in There are clearly strong financial incentives for public hospitals to continue to encourage the conversion of public patients to private patients. However, this is not the only driver. For example, surgeons receive a higher income from private patients and public hospitals believe that attracting these patients is important in order to recruit and retain highly skilled and experienced surgeons. Many insurers offer policies that only cover patients for treatment in a public hospital. These policies make sense in areas where access to private hospital services is limited, such as in rural and remote communities. As outlined earlier, across Australia, only 16% of hospitals located outside major cities are private facilities, and of the available inpatient beds outside major cities, only 24% are located within private hospitals. Unsurprisingly, the majority of patients needing hospital admission in these areas are treated within public hospitals. These policies seem incongruous however, where consumers are in areas serviced by private hospitals. While the Government provides incentives to encourage the purchase of private health insurance, there is no requirement for it to be used, and approximately a quarter of people with private health insurance choose to use the public system rather than the private system. This is driven by a variety of factors, for example depending on the nature of the condition for which they are seeking treatment, a patient may in fact receive better, more coordinated care in a large public hospital compared with a private hospital. This is due in part to the teambased model of care employed in large public hospitals, which places an importance on nursing and allied health services. Cost is another important factor, as patients may be faced with significant out of pocket costs following treatment in a private hospital. Each of these scenarios raises serious issues that both the Government and the Private Health Insurance industry need to address. The Government needs to work with the States and Territories to address the financial and other incentives that are driving the growth in private patients in public hospitals. It is also important that the Government carefully consider the value of continuing to subsidise empty or junk private health insurance policies, particularly those that exclude treatment within private hospitals, and are thus unable to reduce the pressure on the public hospital system. 32 King, D Private Patients in Public Hospitals. Sponsored by the Australian Health Service Alliance and the Australian Centre for Health Research. 33 Ibid MTAA Submission to the Private Health Insurance Consultation December

31 8. Coverage of selected non-admitted hospital procedures Private health insurance does not routinely cover medical services that are provided out-ofhospital. There are also inconsistencies in coverage of private patients receiving certain procedures, for example renal dialysis (Box 6). Therefore, many private hospitals are not willing to admit patients needing dialysis care. Some of these services were previously provided to admitted hospital patients, but due to developments in clinical practice can now be provided in outpatient, community or home settings. Additionally, many sub-acute care medical products needed by patients for appropriate clinical care (and in some cases, survival) out-of-hospital are not covered by private health insurance. In general, these items are consumable, single-use, non-implantable medical products, together with the hardware that the consumables are important for appropriate clinical care, particularly for patients requiring cancer treatment (radiation therapy and medical oncology), and chronic disease treatment and management e.g. chronic kidney disease, chronic wounds and diabetes (Box 6). Examples of sub-acute care medical products include: oxygen supplies/consumables compression hosiery, bandages and garments for lymphoedema continence products sleep apnoea devices renal (home) dialysis devices, consumables and set-up costs. Some products are provided at no cost to patients by healthcare practitioners who understand the need of the patient for the benefit that can be gained from use of a particular product. Recommendation 9 Private health insurance should provide coverage for non-admitted hospital services needed by patients receiving standard clinical care outside of hospital and in the community and home settings, especially for those living in rural and remote areas. Patients should also be provided access to subsidised, clinically and cost-effective sub-acute care products that are essential for their care in the out-of-hospital and in the home and community settings. Appropriate and consistent coverage to be provided for an integrated and well-coordinated approach for delivering care across primary, community and specialist care services. MTAA Submission to the Private Health Insurance Consultation December

32 Box 6 Private Health Insurance needed for medical technologies that are essential for the care of non-admitted patients in the home and community settings Renal dialysis Some PHI funds cover renal dialysis in a private haemodialysis unit, which can be at a stand-alone haemodialysis unit or part of a private hospital, or at a public hospital (private-in-public). However, there is inconsistency in the coverage provided by PHIs and/or the private hospitals. Currently funds do not cover private patients in a private hospital to do a patients peritoneal dialysis (PD) and thus not many private hospitals are willing to admit PD patients. Further, for private patients on home renal dialysis, private health insurance does not support home dialysis services being delivered by the private clinics i.e. nurses to visit patients in their homes to help with home dialysis and also train patients and provide the equipment for home dialysis, in which there is coverage for public patients. Diabetes There are over 1 million Australians living with diabetes. However, there are currently no price weights for non-admitted patients, despite the fact that self-management and structured care of patients with diabetes provided by multidisciplinary teams are crucial for improved health outcomes. Further, data from most current insulin pumps can be downloaded and shared between the person with type 1 diabetes and their healthcare team, which allows easier self-management of diabetes (during overnight) for patients, especially children and adolescents. Modern wound care devices (MWCDs) MWCDs such as wound closure devices, negative pressure wound therapy and antimicrobial wound dressings, offer many clinical and economic benefits over traditional or conventional treatments such as wet or dry gauze. MWCDs are associated with greater ease of application, reduced pain and anxiety for patients at dressing change, and reduced infection rates and procedural complications. As a result, MWCDs reduce the economic burden of chronic wounds in Australia by reducing hospitalisations and length of stay, reducing GP visits, enabling patients to remain in their own homes and avoiding residential aged care. Despite the significant clinical and economic benefits of MWCDs, access is limited, with patients and their families usually paying for these devices, where they can afford to since private health insurance do not reimburse MWCDs. Radiation therapy (RT) RT in Australia is mainly provided by private providers (clinics). Majority of patients receiving RT however, incur considerable out-of-pocket expenses as PHIs do not provide cover RT. PHI coverage of outpatient RT would improve access to RT services in Australia where currently only 1 in 3 cancer patients in Australia receive RT as part of their cancer treatment lower than the reported 50% of cancer patients receiving RT treatment in curative, adjuvant, or palliative setting National Cancer Institute Fact Sheet, US National Institute of Health Available at: MTAA Submission to the Private Health Insurance Consultation December

33 9. The Private Health Insurance Rebate The private health insurance rebate was introduced as an incentive to encourage more Australians to take out private health insurance by making it more affordable. It has been suggested that the cost of the private health insurance rebate is greater than the flow-on savings to the public hospital system and that large savings could be achieved by removing the rebate altogether, which could then be used to fund more public hospital beds for the chronically ill, as well as reduce public hospital elective surgery waiting times. The discontinuation of the private health insurance rebate is one of five Government funding reform options outlined in the Department of Prime Minister and Cabinet s Reform of the Federation 2015 Discussion Paper. 35 Specifically, the Green Paper includes an option (Option 2) where the Commonwealth would redirect funds that would have been used for the rebate, to establish an MBS-style hospital benefit scheme to fund a proportion of the cost of each hospital procedure, with the States and Territories asked to cover any gap between the benefit and the service cost. As the paper acknowledges, the impact of adopting this option on the private health insurance market would need to be carefully considered, including the impact on consumers through changes to premiums. MTAA is concerned that the adoption of such an option would have other undesirable consequences, including for patient access to innovative medical technology. As more consumers leave the PHIs following the discontinuation of the rebate, it will become more difficult for them to access new and innovative medical technologies in a bundled contractual environment in the public hospital system. Currently, in Australia there is a lack of a timely mechanism for the integration of new medical technologies into the classification and costing systems of public hospital services. The development of new medical technologies is highly iterative with follow-on generations of products emerging in months. Iterative development is led by feedback from clinician users, research and development undertaken by the developer, and changes in materials science. As a consequence of the rapid nature of product development, and to provide the opportunity for beneficial new technologies to be available to patients, funding mechanisms need to anticipate and provide for rapid technology upgrades. The current Australian Refined Diagnosis Related Groups (AR-DRGs) classification has not been as responsive to new technologies as it should be, and lags behind many other countries with Activity Based Funding models based on diagnosis related groups (DRGs). 36 The fundamental drawback of the AR-DRG system is the length of time it takes to develop or modify a DRG. A new technology cannot be accounted for in the AR-DRG classification until it is in widespread use and costing data is collected. Under the current arrangements it is likely to take two to four years before the appropriate funding is attached to the AR-DRG. In a medical technology environment where innovation takes place in a rapid timeframe, a system that may take more than two years to catch up is not supportive of timely access for patients to cost-effective technology, and contributes to budgetary pressures in hospitals by basing budgeting information on outdated data. Rather than discontinuing the private health insurance rebate, another option would be to link the rebate to specific performance indicators that funds would have to meet in order to continue to have their premiums subsidised with public money. This would reward funds that provide greater value for consumers, through more transparency in policies with fewer 35 The Reform of the Federation Discussion Paper Department of the Prime Minister and Cabinet. Canberra. 36 Scheller-Kreinsen et al. DRG-based hospital payment systems and technological innovation in 12 European countries. Value in Health (2011), 14(8): MTAA Submission to the Private Health Insurance Consultation December

34 exclusionary products, and may incentivise them to provide more innovative and costeffective services focused on the prevention and management of chronic disease, such as telehealth and remote monitoring services. Recommendation 10 Regulatory changes should be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of: transparent policies with fewer exclusionary products innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services. MTAA Submission to the Private Health Insurance Consultation December

35 10. Broader health system reforms In 2014, George Savvides, the then Managing Director of Medibank Private, Australia s largest private health insurance fund, stated that across the industry a relatively small proportion of patients, often termed frequent flyers, are responsible for a large proportion of an insurer s outgoing costs. 37 In the case of Medibank Private, he stated that approximately 2.2%of its 3.8 million members account for 35% of hospital and medical expenditure and 70% of this group have a chronic disease. 38 Recent statistics have shown that half of all Australians have at least one chronic disease, while one-in-five have at least two of the eight most common chronic diseases, including diabetes, cardiovascular disease (CVD) and mental health conditions. 39 In Australia and overseas, there is now a recognition that strengthening and improving the way in which primary health care is provided is vital to ensuring that the health system is able to adequately respond to current and emerging pressures, including the growing burden of chronic disease. Research shows that those health systems with strong primary health care are more efficient, have lower rates of hospitalisation, fewer health inequalities and better health outcomes including lower mortality, than those that do not. As such, MTAA strongly supports the current health system reform processes the Government is undertaking, including the work of the Primary Health Care Advisory Group. Increasingly, health services that have traditionally been provided in hospital are now able to be provided in the community, including within a patient s home. Increasing demand for healthcare resources and changing patient expectations are shifting many health services from the resource intensive hospital setting into more cost-effective home and community settings. Australia needs to find smarter, more cost-effective ways of delivering healthcare services outside of the hospital and aged care sectors. MTAA sees the rapid adoption of existing medical technologies and healthcare delivery systems, as well as the development of new technologies, as part of the solution. Specifically, medical technologies have the potential to facilitate greater patient participation, team-based care, better coordination of care, and more flexible care, and private health insurers are already involved in the funding of some of these technologies. Telehealth and remote monitoring technologies Terms such as telemedicine, telehealth and telecare have been used, often synonymously, to describe the application of modern information and communication technologies to healthcare. These broad definitions capture a range of technologies, from patient operated alarm systems often used in residential care, to technologies designed to allow for a virtual consultation with a health care professional, particularly in remote geographical areas, and technologies designed to allow health care professionals to monitor the health status and vital signs of individuals (usually in their home) in real time (remote monitoring). Remote monitoring can take many forms. Data can be relayed in real time (synchronous), or asynchronously where the information is stored and forwarded for review later. Data captured through remote monitoring can then be accessed by a GP, nurse, health coach, emergency medical service, or other healthcare provider for clinical review, care 37 Gardner J. Medibank Private boss George Savvides says people paying too much for a range of surgeries. Sydney Morning Herald, 16 October Available at: 38 Ibid 39 Australian Institute of Health and Welfare. Last updated August Available at: MTAA Submission to the Private Health Insurance Consultation December

36 management, and patient education. Monitoring technology can vary in complexity from simple monitoring of physiological data such as blood pressure, pulse, blood oxygen level, blood sugar or body weight, to implantable devices (such as heart pacemakers or defibrillators) whose functions can be monitored, and in some cases reprogrammed, remotely. Some monitoring devices can even self-activate to alert patients and caregivers that a test must be given or medication must be taken. Sophisticated monitoring functions that only a few years ago were found exclusively in hospitals and doctors offices are now available at home. The widespread consumer adoption of broadband and wireless in the home, combined with the proliferation of small, smart devices, serve as the foundation for the home as a hub of healthcare. This, in turn, can improve care for patients in all phases of life, from wellness to acute and post-acute care, to elderly patients who want to preserve their ability to live independently. The relationship is well established between continuity of care and better health outcomes, including reduced hospitalisations, enhanced quality of life, and increased patient satisfaction. The most important modifiable risk factors for chronic disease are poor diet, inadequate physical activity, and tobacco use. As a result, wellness and prevention efforts usually focus on eating habits, exercise, and smoking cessation. Research has shown that to sustain healthy behaviours, patients usually need a nudge and motivational support. Remote monitoring programs have begun to incorporate these ideas and techniques. Small devices, such as the Fitbit, are able to monitor movement and upload the data to a website where users can track their exercise, calorie consumption, and other metrics. Chronic diseases are typically characterised by acute exacerbations. It is during one of these acute events that the patient is likely to present either to their GP feeling generally unwell, or to the emergency department of their local hospital. The trajectory of chronic illness then becomes marked by increasingly shorter periods of stability between acute exacerbations. To assist in the early recognition of the often subtle signs and symptoms of deterioration, regular follow-up with their multidisciplinary primary care team is encouraged. The effectiveness of this model relies upon good communication between the patient, their GP, and the other healthcare professionals involved. By providing regular or continuous information on vital signs, remote monitoring can allow for more intensive management of an individual s chronic condition, which has the potential to reduce acute exacerbations, allow for quicker interventions, and improve long-term outcomes. Remote technology and telehealth technologies help facilitate multidisciplinary chronic disease management programs that provide education to encourage patient selfmanagement, ensure appropriate management of drug therapy, and facilitate collaboration within the multidisciplinary team. By enabling chronically ill patients to monitor and manage conditions at home, telehealth and remote monitoring technologies have the potential to reduce the demand on primary care providers. As personalised electronic health records become widely adopted in Australia, they will provide a repository for remote health monitoring data. Remote health monitoring, when coupled with electronic health records, has the potential to help primary care teams better manage patient and clinical workflow. Ageing safely at home is a challenge for many elderly patients, and as a result, a significant number end up relocating to long-term aged-care facilities. For many older patients decreased mobility, coupled with a lack of social support, impacts on clinic attendance. Home-based models of care can circumvent this problem but are costly in terms of travelling time for the health care professional, as well as reducing the number of patients that can receive care. MTAA Submission to the Private Health Insurance Consultation December

37 With the advent of sensors and broadband in the home, technologies and services are emerging to allow for healthy and safe ageing at home. The most common product serving this group of patients is the personal emergency response system, associated with the phrase, I ve fallen and I can t get up. Demand for products and services in this category are likely to increase dramatically with the ageing of the baby boomer generation. For caregivers, telehealth and remote monitoring technologies hold the promise of relieving them from stress and worry about the safety and wellbeing of elderly family members, as well as reducing the time spent transporting family members back and forth from doctors offices, or emergency rooms. In summary, telehealth and remote monitoring technologies have the potential to achieve considerable health system efficiencies and reduce costs in a number of ways. 1. Avoiding unnecessary GP, specialist and emergency room visits. 2. Reducing the number of hospital admissions. 3. Reducing or delaying nursing home admissions. 4. Reducing patient transport costs. There have been numerous telehealth and remote monitoring pilot projects, trials and programs undertaken both internationally and here in Australia that have demonstrated the benefits of these technologies for patients and the healthcare system. Outlined below are a few examples of these (Boxes 7-10). Box 7 VHA Care Coordination Home Telehealth program The Veterans Health Administration (VHA) in the US is one of the largest users of remote health services worldwide, and its VHA Care Coordination Home Telehealth program was developed to improve access for veterans with chronic diseases, to better and more timely care. 40 Patient data is monitored on a daily basis by care coordinators, who are then able to respond in a number of ways by: phoning the patient arranging a referral to the patient s doctor scheduling new appointments with VHA clinicians placing new orders for patient medications and helping the patient manage medications reminding the patient about clinic appointments developing solutions for technology-based problems. The VHA has set up 50 health management programs across 18 Veterans Integrated Service Networks. Numerous studies have now established that the program is cost-effective, and remote monitoring has been shown to reduce the number of bed days by 25% and the number of hospital admissions by 20%. One study has demonstrated that this program has been able to reduce the number of hospital readmissions for remotely treated patients with diabetes, who also had a lower rate of diabetes-related ambulatory care-sensitive conditions (conditions for which inpatient hospital admissions could potentially be avoided through better outpatient care). 41 These results highlight the potential benefits of receiving timely care through remote monitoring for diabetic patients in the wider community. In 2013, the VHA Care Coordination Home Telehealth program provided care to 608,900 patients (which amounted to 1,793,496 telehealth episodes of care), 45% of which lived in rural areas and may otherwise have had limited access to VA healthcare. The estimated saving was US$2 000 per patient per annum. 40 VA Telehealth Services. United States Department of Veteran Affairs, Available at: 41 Huanguang J et al. Long term effect of home telehealth services on preventable hospitalisation use. Journal of Rehabilitation, Research and Development (5): MTAA Submission to the Private Health Insurance Consultation December

38 Box 8 CSIRO NBN-enabled Trial In Australia, the CSIRO NBN-enabled Trial enrolled patients in five States and Territories, and provided them with a free internet connection and Telemedcare device, which allowed for video conferencing and vital signs monitoring through peripherals including blood pressure monitors, pulse oximeters and ECGs. 5 At-home monitoring of vital signs in older patients with chronic diseases led to significant savings over time in terms of MBS costs, PBS dispensing costs, costs associated with hospitalisations and average length of stay, and reduced mortality rates by up to 37%. 42 Specifically, the study demonstrated annual savings of approximately $8,000 in MBS, PBS, hospitalisation and visiting nurse costs. Home telehealth services on an annual subscription model, including internet connection, home telehealth device and nurse wages, can be viably offered for about $2,400 a year. Therefore, the use of home telehealth services in this study represented an estimated return on investment of between two and three. 43 The use of telehealth and remote monitoring technologies is particularly relevant to Australians living in rural and remote locations, and to Aboriginal and Torres Strait Islander people living in both remote and non-remote locations. These populations have poorer health outcomes, including a high burden of chronic disease, and the highest rates of potentially preventable hospitalisations. 44 A variety of factors contribute to poorer health status in these groups, including lower incomes, poorer educational outcomes, as well as health workforce shortages and reduced access to health services. 45 In 2013, there was a fall in full-time equivalent (FTE) medical practitioners as remoteness increased, from 426 per 100,000 population in major cities to 257 in remote/very remote areas. 46 A geographic index of access and need developed by the Australian Institute of Health and Welfare (AIHW) showed that for Indigenous Australians access to GPs relative to need worsened with increasing remoteness McDonald K. CSIRO NBN trial shows big savings with at-home monitoring. Pulse IT Magazine, 12 August Available at: 43 Ibid 44 Australian Institute of Health and Welfare (AIHW), Rural, regional and remote health: indicators of health status and determinants of health. Rural health series no. 9 Cat. No. HWE 40. Canberra: AIHW. 45 Bureau of Infrastructure, Transport and Regional Economics (BITRE), Department of Infrastructure, Transport, Regional Development and Local Government About Australia s regions. Canberra: BITRE. 46 Australian Health Ministers Advisory Council Aboriginal and Torres Strait Islander Health Performance Framework 2014 Report. AHMAC, Canberra. 47 Ibid MTAA Submission to the Private Health Insurance Consultation December

39 Box 9 Staying Strong Telehealth Project The Staying Strong Telehealth Project, an indigenous telehealth pilot conducted by community care organisation integratedliving Australia Ltd, addressed chronic disease management in rural and remote communities. 48 This project delivered a new model of care through telehealth monitoring of vital health signs for 136 older Aboriginal and Torres Strait Islander people across New South Wales and Queensland. Registered practice nurses (RNs) employed by integratedliving Australia Ltd worked with participants and their GPs to develop individual health and monitoring plans based on health needs, in particular for chronic disease. Using monitoring software and vital sign peripherals, participants monitored their own vital health signs. Data was then transmitted to the triage manager database, which prioritised readings for clinical triage. If a reading was outside the monitoring plan range, the triage manager would raise an alert and the nurse would coordinate the appropriate response, in consultation with the participant and their GP or health service. 49 The project has shown an increase in timely and accurate diagnosis, as well as in patient awareness and self-management. Under the project, the average weekly cost of delivering remote telehealth monitoring in participants own homes five days a week, was $ per participant, compared with $ per participant when in-home vital health signs monitoring was done face-to face by an RN who travelled to the participants home. 50 Therefore, the telehealth service model costs 40% of the face-to-face model. Box 10 The COACH (Coaching Patients on Achieving Cardiovascular Health) Program (TCP) The introduction of centralised state-wide coaching by Queensland Health using the well-regarded The COACH (Coaching Patients on Achieving Cardiovascular Health) Program (TCP) has demonstrated statistically significant improvements in cardiovascular risk factor status. 51 TCP is a standardised coaching program delivered by telephone and mail-out for people with, or at high risk of, chronic disease. Nurses coach people to achieve national guideline-recommended target levels for their particular risk factors and to take their medications as recommended. The program has been shown to reduce risk factors for CVD and Type 2 diabetes in both indigenous and non-indigenous Queenslanders. 52 Funding and reimbursement barriers Despite the fact that telehealth and remote monitoring technologies have the potential to achieve considerable health system efficiencies and reduce costs, little progress has been made towards their widespread adoption. One of the key barriers to the broad adoption of these technologies has been the lack of funding and reimbursement pathways, and it is clear that funding and reimbursement systems will have to change in order to incorporate innovation. In Australia, there is an opportunity to increase the adoption of telehealth and remote monitoring technologies by paying healthcare providers for quality and improved patient outcomes, rather than the volume of services they provide. Current reimbursement systems that are based on a fee-for-service model serve as a disincentive to the use of these 48 Staying strong through telehealth. integratedliving Available at: 49 Ibid 50 Ibid 51 McDonald K. Telephone-based COACHing reduces cardiovascular risk factors. Pulse IT Magazine, 16 February Available at: 52 Ibid MTAA Submission to the Private Health Insurance Consultation December

40 technologies. Many telehealth and remote monitoring technologies are caught in a vicious cycle. Public and private payers are unwilling to provide comprehensive access to these technologies, as the evidence base is derived largely from smaller pilot studies and trials, which they argue has limited applicability to the wider population. Importantly however, generating real word data generally requires some form of coverage and reimbursement to be in place. With regard to the implementation of telehealth and remote monitoring technologies, there are two key cost considerations. The first is the cost of the medical consumables or devices, and the second is the cost of the service (data transmission and monitoring). In the Australian public healthcare system, in many cases, the costs of medical consumables or devices are already funded via home care packages and medical consumables schemes. Privately insured patients are able to access implantable medical devices with remote monitoring capabilities that are reimbursed via the PL (e.g. implantable cardiac devices). However, peripheral devices such as glucometers for vital signs monitoring are not eligible for reimbursement via the PL. The costs associated with the provision of the service (data transmission and monitoring) are either inconsistently funded, or not funded at all. Medicare Benefit Schedule (MBS) items for telehealth were introduced in July However, the definition of telehealth was limited to video consultations. Geographical eligibility for telehealth items has been recently restricted. Consultations between GPs and patients in their home are not funded. Remote monitoring of vital signs is not funded. A range of medical devices can be used for telehealth and remote monitoring. In some cases a nurse, GP or allied health professional may be able to assess the data, but in the case of implantable medical devices a specialist would need to review the data. For this reason MBS item numbers need to be flexible enough to cover data monitoring by a range of health professionals. Recently, the Medical Services Advisory Committee (MSAC) recommended public funding of remote monitoring of implantable electronic cardiac devices by cardiologists (MSAC Application ), which was a positive step and acknowledgement of the health and cost benefits of these technologies for patients and the healthcare system. 53 MTAA proposes three options for the reimbursement of telehealth and remote monitoring services. Option 1: MBS item numbers based on existing items with an included loading for remote monitoring. Option 2: Capitated costing model, whereby a clinician is paid once per year per patient to provide the service. Option 3: Improved capitated model (flat fee per quarter). Proposed reimbursement models are designed to ensure that the overall budget impact is cost neutral and predictable. Option 1, whilst simple, may result in over-servicing of patients. Capitated models, on the other hand, ensure there is no over servicing as healthcare professionals are paid for a service regardless of the number of data transmissions or reviews undertaken. Option 2, the capitated costing model, is budget neutral proposing an annual fee based on current utilisation. The flat fee per quarter model, Option 3, proposes 53 MSAC Application Remote Monitoring of Patients with Implanted Cardiac Devices. Medical Services Advisory Committee, Available at: FinalPSD-Remotemonitoringforimplantedcardiacdevices-accessible.pdf MTAA Submission to the Private Health Insurance Consultation December

41 significant long-term cost savings to the Commonwealth, by limiting the number of claims and reducing unnecessary office visits. Telehealth services such as vital signs monitoring are not commonly funded by PHIs in Australia. It would be expected that PHIs would adopt telehealth and remote monitoring solutions, as they compete for members and look to develop innovative initiatives that provide cost-effective health solutions, which keep people out of hospital. However, there are few financial incentives for PHIs to fund such initiatives, as risk equalisation arrangements mean that any savings achieved as a result of a future reduction in claims are potentially lost to the individual insurer. Therefore, it is important that the Government is able to incentivise PHIs to offer such services, for example by making the provision of these and other services that are focused on chronic disease management, key indicators of fund performance, and linking these indicators to Government rebates. A number of PHIs in Australia offer members with chronic health conditions access to tailored telephone-based health coaching services. One example is BUPA, which offers members who have been admitted to hospital following a heart attack, stroke or for other cardiovascular events or procedures, access to the highly regarded COACH Program mentioned previously. 54 These programs help members to achieve relevant risk factor targets and reduce their risk of further complications, in order to avoid costly hospitalisations. MTAA supports the Australian Medical Association s (AMA) position that while these programs can be beneficial for patients, they generally work in isolation of the patient s usual GP, who is best placed to understand their care needs. 55 Therefore, they have suggested that rather than work in parallel or in competition with the usual GP, these programs should only be offered with their full knowledge and support. The potential for PHIs to be involved in chronic disease prevention and management in rural and remote areas is relatively limited. In , the rate of private health insurance was 57% in major cities, 48% in inner regional areas, and 41% in other areas (which includes outer regional, remote and very remote areas). Income is one of the strongest predictors of PHI uptake, and average incomes are lower in regional than in urban areas. In addition, PHI membership is less attractive to residents of regional areas due to the limited availability of private facilities. Across Australia, only 16% of hospitals located outside major cities are private facilities, and of the available inpatient beds outside major cities, only 24% are located within private hospitals. For those rural and remote consumers who are encouraged to take up PHI by the tax system, the provision of telehealth and remote monitoring services is one way that funds may be able to offer them better value. Recommendation 11 Regulatory changes should be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services, especially for those patients living in rural and remote areas. 54 The COACH Program. BUPA, Available at: 55 AMA Position Statement: Private Health Insurance and Primary Care Services Revised Available at: MTAA Submission to the Private Health Insurance Consultation December

42 11. Summary MTAA is committed to supporting the value proposition of private health insurance for consumers and patients based on the following principles: The continuation of the Prostheses List, or contemporary medical device list, is the best regulatory system to ensure patient access and surgeon choice to the most clinically appropriate medical technology. Privately insured patients have a right to access innovative medical technology, regardless of where they live: rural, remote or urban locations. Only clinicians must exercise the prerogative to choose the most suitable medical technology for their patients in order to provide the most appropriate clinical care. Where medical technology is essential to the performance of a procedure covered by Medicare, a funding pathway must facilitate its availability to patients. MTAA supports the TGA s role as regulatory gatekeeper for use of high risk medical technology within Australia. While MTAA does not support duplication of this process for the private sector, it believes that a timely and fit for purpose Health Technology Assessment (HTA) process is appropriate to determine eligibility for reimbursement of new innovative medical technologies. HTA must be conducted using a whole of health systems approach. For innovative medical technologies where the clinical and/or economic benefits are not yet proven, it should be appropriate for stakeholders to collaborate in the generation of real world evidence to address a gap in the evidence available. MTAA supports the existence of fair and sustainable benefit determination and review processes that do not compromise the value of private health insurance in terms of patient access to treatment options and products available. MTAA does not involve itself in pricing matters other than to encourage stakeholders to raise perceived inequities with the Department. MTAA Submission to the Private Health Insurance Consultation December

43 12. Recommendations Recommendation 1 The Federal Government to commit to the continuation of the PL as the best regulatory system to ensure patient access and surgeon choice to the most appropriate medical technology. Recommendation 2 Representatives of affected stakeholders (PHA, hirmaa, APHA, CHA and MTAA, plus possibly AMA and CHF) be provided the opportunity to develop a process of review to be utilised by the PLAC and its Health Economics Sub-Committee. Recommendation 3 Deliberations on PL expenditure are balanced by consideration of the factors underpinning growth in utilisation and the longer term impact on PHI. Recommendation 4 Regulation of the reimbursement of medical technology includes non-implantable medical technology that meets agreed eligibility criteria, as well as continuing to cover surgically implanted prostheses. Recommendation 5 The listing of custom made devices on the PL is facilitated to reduce red tape and improve patient access. Legislative changes to enable PLAC to accept applications for custom-made devices for entry in the PL, even though they do not have an ARTG number i.e. custom-made medical devices can be lawfully supplied without the need for an ARTG entry, such as devices supplied under certain conditions as part of the Special Access Scheme or Authorised Prescriber Scheme. Custom-made medical devices are included in the ARTG, if the sponsor wishes to voluntarily do so, in a manner which is not prohibitive by time and cost. Recommendation 6 When an episode of in-hospital treatment, for which a Medicare benefit is payable for the associated professional service, is available in a private hospital, a PHI policy should facilitate access to the relevant medical technology necessary to support the treatment. Recommendation 7 ARTG listed MedTech products for which there is a product group already established on the PL, should be listed without further evidence requirements being imposed. Sponsors are provided the opportunity for conditional listing on the PL while CED occurs. Recommendation 8 Consideration is given to applying the government incentives to participate in private health insurance only to products that contain no excluded services. Exclusionary and restricted benefit products result in an increased administrative burden for hospitals as they introduce added complexity to claiming, billing and payment collection process. Hospitals are also exposed to additional financial risk particularly if it cannot be foreseen and confirmed whether a patient s policy will provide adequate cover. o Consumer information and awareness is critical in ensuring that products with less than comprehensive coverage are fully understood at the time of purchase and beyond. MTAA Submission to the Private Health Insurance Consultation December

44 Recommendation 9 Private health insurance should provide coverage for non-admitted hospital services needed by patients receiving standard clinical care outside of hospital and in the community and home settings, especially for those living in rural and remote areas. Patients should also be provided access to subsidised, clinically and cost-effective sub-acute care products that are essential for their care in the out-of-hospital and in the home and community settings. Appropriate and consistent coverage to be provided for an integrated and well-coordinated approach for delivering care across primary, community and specialist care services. Recommendation 10 Regulatory changes be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of: transparent policies with fewer exclusionary products innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services. Recommendation 11 Regulatory changes be implemented to encourage PHI funds to become more innovative, and provide greater value for consumers, by linking Government rebates to fund performance indicators such as the provision of innovative and cost-effective services focused on the prevention and management of chronic disease, including telehealth and remote monitoring services, especially for those patients living in rural and remote areas. MTAA Submission to the Private Health Insurance Consultation December

45 Table of Attachments Attachment 1 Private Health Insurance in Australia Attachment 2 The MedTech Blueprint building a strong industry for Australia s economic and social future Attachment 3 Industry innovation in Australia Federal and State Government initiatives Attachment 4 MTAA Factsheet What is Driving Increased Expenditure on Prostheses? Attachment 5 Senate Community Affairs References Committee Out-of-pocket costs in Australian healthcare Attachment 6 MTAA proposed criteria for reimbursement of non-implantable and Custom- Made Devices (NICD) Attachment 7 MTAA Value of Innovative Technologies Custom-made Medical Devices: 3D Printing Technology Attachment 8 MTAA Value of Technology Inequitable patient access to clinically and cost effective medical technology: Catheter ablation for atrial fibrillation Attachment 9 MTAA Submission to the Medicare Benefits Schedule Review Taskforce Consultation Paper 9 November 2015 MBS Case Examples MTAA Submission to the Private Health Insurance Consultation December

46 Attachment 1 Private Health Insurance in Australia In 1952, The Hon Earle Page, Minister for Health in the Menzies Coalition Government, introduced the National Health Act 1, which has governed the private health insurance industry over the last 50 years, with various amendments. The private health insurance industry is heavily regulated. A central concept in the provision of private health insurance since its inception has been community rating. This is a principle to safeguard consumers against discrimination and stipulates all consumers of a particular premium level pay the same premium, regardless of their age, location or state of health. There are also no incentives offered to consumers unlike their car or home and contents insurance policies for example, which provide no claims bonuses : it is just one rate for all members. It can be argued community rating is unfair to people who make limited claims on their cover and are subsidising other people whether they are aged, chronically ill or make poor lifestyle choices. However, it could also be argued that the system promotes fairness and ensures elderly people or chronically ill people can access insurance at a generally affordable rate. Community rating requirements mean the private health insurance industry must seek approval from Government for all premium changes and they must also satisfy legislative requirements for coverage of policies, minimum benefits and maximum waiting periods. Funds provide quarterly financial reports to an industry regulator, the Australian Prudential Regulatory Authority (APRA) (formerly the Private Health Insurance Administration Council) and there is also a Private Health Insurance Ombudsman who offers a complaints resolution referral service. By way of background, a universal publicly funded healthcare system was first introduced by the Whitlam Government in 1975 and supplemented by a government owned private health insurance organisation, Medibank Private, established by the Fraser Government. The Hawke Government renamed Medibank as Medicare in Since this time, successive governments have introduced a range of incentives to encourage consumers to take up private health insurance, including: In 1999, a 30% government rebate was introduced for consumers taking out private cover and was increased for those over the age of 65 in 2005 In 1998, funds were required to recognise consumer waiting periods for consumers transferring between funds In 2000, Lifetime Health Cover loadings were introduced to encourage people to take out cover before their 31 st birthday and maintain it over time In 1995, the Medicare Levy was increased to 1.5 per cent, from 1.4% in 1993 it was originally set at 1% in 1984 and applied to everyone except those on the lowest incomes and a surcharge levy of an additional 1 per cent was introduced in 1997 for high income earners who were not privately covered 2 Introduction of the private health insurance incentive scheme in 1997 was designed to encourage low income earners to take up private cover through subsidies of specified amounts A Short History of Changes to the Medicare Levy. Available at: 887%22 May 2013

47 Attachment 1 The current environment The Rudd Labour Government introduced changes to the rebate stipulating that from July 2012, the tax rebate for private health insurance would be means tested. Individuals with incomes below $ now receive a 30% rebate and the subsidy gradually reduces to zero for incomes greater than $ Leading up to this time, the private health insurance rebate was growing at 6% per year and reached $5.56 billion in It can be argued that the rebate sustains a viable private health insurance industry, which supports private hospitals, patient choice and relieves pressure on the public system by those who can afford to contribute to their healthcare costs. It can also be argued that $5.56 billion is a significant investment that could be directed towards other forms of care in the public system or to schemes such as the National Disability Insurance Scheme. Anecdotally, the reasons consumers take out private health cover is so they or a family member don t have to wait for surgery in the event of an urgent in-hospital medical treatment and so they are able to choose their own medical specialist. However, there is increasing evidence to suggest Australians are becoming unsatisfied with the services available to them under their private health insurance cover. Premiums are rising due to an ageing population and the onset of chronic illness resulting in consumers paying higher premiums and receiving lower benefits. The Private Health Insurance Ombudsman released its yearly State of the Health Funds 3 report, in April 2015 demonstrating a 34% increase in complaints about exclusions and restrictions on levels of cover compared to the previous year. According to Private Healthcare Australia policies were dumped and were downgraded between February 2012 and December In this context there is ongoing debate about what the role of private health insurance should be and what changes can be made to ensure consumers can get value for money from their cover. 3 State of the Health Funds Report, Private Health Insurance Ombudsman, Australian Government 4

48 Attachment 2 The MedTech Blueprint building a strong industry for Australia s economic and social future

49 Attachment 2 Contents Introduction: 2 Aims of the Medical Technology Industry Blueprint 3 Issue one: Revitalising R&D - realising commercial outcomes 4 Issue two: Education Building a workforce for the MedTech industry 5 Issue Three: Navigating Commercialisation pathways 6 Issue four: How do we integrate with health policy 8 Issue five: Being part of the Healthcare Solution now and in the future 9 Issues Six: Building the manufacturing component 10 Issue seven: How do we export Australian MedTech? 11 Issue eight: Where are our spokespeople? 12 Do we have the data? 13 Blueprint Implementation 14 Conclusion 14 The MedTech Blueprint 1

50 Attachment 2 Introduction: This blueprint presents an overview of policy challenges and goals to develop strong growth in the MedTech industry for Australia s future. The MedTech industry is well regarded for its contribution to patient health, and provides significant economic value to research and development of new devices. This leads to better and more cost effective health care services, and supports manufacturing, employment, trade, benevolence and community sponsorship. Our vision is to grow a strong industry for Australia s future by working with Government, industry and stakeholders to create the right business environment for innovation, deliver sustainable healthcare and grow Australia s share of the $10 billion global market. The NSW Government, committed to health and economic development, has supported the Medical Technology Knowledge Hub to develop the concept of the MedTech Blueprint. The next stage in the process will be to develop detailed blueprint implementation strategy. The Australian Government s commitment to the Medical Technologies and Pharmaceuticals Growth Centre may provide the appropriate vehicle to undertake development of this national implementation plan, in partnership with industry and state governments. When implemented, this will deliver strategies to address the industry s priorities and provide the foundation on which the industry can develop and prosper. Key stakeholders include: Medical technology companies Healthcare professionals State governments The Australian Government Consumer groups Regulators Researchers Policy makers Investors Venture capital providers Universities and other educators Medical, think tanks and other key influencers Medical Technologies and Pharmaceuticals Industry Growth Centre Other Industry Growth Centres(eg Advanced Manufacturing) The detailed implementation plan will also involve a thorough desktop review of industry documentation and published research on the medical technology industry. In addition, it will include other industries which have developed strong growth strategies and achieved them, focusing on international best practice, and particularly markets where there has been substantial or rapid industry growth. Our vision in developing the MedTech Blueprint was to identify clear recommendations to progress a strong industry policy platform. This work can then be built on and leveraged, to more strongly position the industry while avoiding duplication of effort on MedTech, health and economic strategies. The development of this document has been informed by a consultation process involving industry, medical, education, government and community representatives. Consequently, it provides a strong guide to the questions which will emerge during broader and more detailed consultation. 2 The MedTech Blueprint

51 Attachment 2 Aims of the Medical Technology Industry Blueprint The medical technology industry delivers a broad spectrum of products to Australian healthcare, ranging from bandages, syringes and disposable gloves to pacemakers and hip and knee prostheses, through to the most advanced surgical implants. The attached Fact Book produced by MTAA provides a detailed dataset on the industry s contribution. Despite the significance of our industry, there is limited awareness of the broad economic and social benefits from medical technologies. In addition, there is an assertion from government and other sectors most notably the private health insurance sector - stating that MedTech in Australia is expensive, and that there should be greater restrictions on pricing. There is a negative focus on some product categories, with calls for greater regulation or higher barriers to market entry. There have been occasions when Government Ministers, Senators and MP s have referred to medical technologies simply as one of the cost drivers of the health system, without quantifying the consequence of that investment in terms of quality of life and productivity. Our industry needs to be able to provide a more wholistic picture of the benefits of that investment, and what the consequences are in terms of keeping people healthy and productively living, working and participating in the community. While these criticisms have not gained extensive purchase with regulators or the broader community, they limit the capacity of the industry to effectively prosecute growth plans. In particular, the pursuit of red tape reduction, amongst other goals such as developing capacity in emerging MedTech companies and ultimately a growth plan for manufacture of medical devices. We have identified as our core aims of the blueprint: Government and community awareness of the significant economic and social impacts the MedTech industry makes be improved The MedTech sector should emerge from its particular corner of the healthcare system, where it is regarded as a device supplier, instead becoming recognised as an integrated contributor in what we would term total healthcare The industry identify growth paths to fill in its current gaps, to support the total healthcare goal through an uninterrupted MedTech ecosystem which includes R&D, manufacturing, regulation, reimbursement, clinical investigations and export There are a series of complicating factors which hamper our pursuit of these outcomes, including: 1. MedTech companies deal with stakeholders, including doctors, regulators and payers on a product basis, which can make for narrow relationships 2. New technology takeup is often slow, with decision-makers anchored to traditional products, and resistant to the cost of incrementally-better technologies the desire to implement innovations is therefore all about cost reductions at the point of sale versus efficiency and desirable clinical outcomes for the long term 3. We have a consequent vulnerability that consumer exposure to our brands is much greater in the event of failure than success 4. Australia suffers an imbalance in trade in medical technology where almost all of the technology we manufacture is exported and most of what we use is imported - our aim is to increase our global market share 5. While Australia has powerful success stories such as ResMed and Cochlear, our manufacturing base is relatively small, which is a crucial gap in our footprint. 6. The regulatory and reimbursement systems that enable patient access have not kept up with the pace of technology Ultimately our aim is to establish the optimal business environment for the MedTech sector by implementing policy structures and market access tools that enable an efficient and supportive infrastructure to support strong industry growth. The following pages identify priority issues we consider should be key areas for development and implementation of a MedTech Blueprint. The MedTech Blueprint 3

52 Attachment 2 Issue one: Revitalising R&D - realising commercial outcomes Medical technology is at the epicentre of health innovation. It is built into the DNA of our industry that new design, invention and customisation are the only guarantee of competitive advantage and corporate sustainability. However, it is well documented that Australia faces major challenges in translational research from our investment in R&D. In Australia invested $9.2B (0.44% GDP) in R&D and $5.5B was allocated to research in the health and medical area. 5.5% of university publications are in the top 1% of citations and Australia registers in the top five nations for Medical Technology publication impact. However, for every $1 billion invested in Research and Development in Australia, we only produce two start up companies with University owned intellectual property. In 2012, Australia had just 14 spin out companies. 1 In summary, Australia does not have the right policy structures in place to gain a commercial return on its investment in research and development by way of new jobs, new export markets and access to state of the art technologies. Flinders University Medical Device Partnering Program is an exceptional example of an initiative designed to foster university/industry collaboration supporting development of cutting edge medical devices. These kinds of programs need to be rolled out more widely across Australia to realise commercialization opportunities. In addition, as many of our largest companies are subsidiaries of multinationals, they carry out research in their head office markets as well as in countries that have tax incentives and access to clinical trials. 1. There is a further tendency to move innovation projects to manufacturing hubs, so that designers can work closely with builders in refinement of novel products and updated editions 2. Compared to pharmacy and medical services, there is limited medical technology R&D taking place in Australian universities and research centres Nonetheless, Australia continues to provide a strong opportunity for research and new product design; our universities produce large numbers of scientists, technicians and industrial designers; State governments are developing medical technologies strategies and the Commonwealth Department of Industry is establishing growth centres in Medical and Pharmaceutical Industry as well as Advanced Manufacturing. 1 Australian Innovation System Annual Series, Department of Industry and Science industry/office-of-the-chief-economist/publications/pages/ Australian-Innovation-System.aspx# The industry has recently worked effectively with key campuses, including Macquarie, Flinders and Monash University to better develop capability in Med Tech R&D. However, there is general agreement within the research community that the current competitive funding schemes for research in Australia, such as those administered by the ARC and NHMRC do not encourage collaboration between the public and private sectors. 2 Therefore, there is a need to develop appropriate incentives focused specifically on fostering collaboration between research organisations and industry to drive commercial outcomes. The assessment of research performance is still dominated by a focus on indicators such as: Manuscripts published in high impact peer reviewed journals Research students (masters and PhD) enrolments and completions Success in securing competitive public research grants (ARC and NHMRC) Areas to consider: MedTech R&D should form part of a total healthcare research strategy. This could be used to provide a multisector perspective to the Commonwealth Government and its research agencies. 1. An audit of current R&D, to provide a benchmark 2. A comparative audit of overall healthcare research, both public and private in Australia; 3. International comparison of R&D output in terms of how many companies are created from government investment in research in other countries and what are optimal models to accelerate commercialisation 4. Identification of sector-wide limitations to R&D, including: Intellectual property issues; market analysis and commercialisation capabilities; base technology; and education 5. Review of the distortions inherent in different university rankings for NHMRC/ARC grants, and industry-sourced funding 6. A desktop survey of international best practice solutions to address these limitations including consideration of how competitive public funding schemes could create incentives for collaboration between public and private sector 7. Development of a co-operative pathway for some shared basic science, in line with National Health Priorities and the issues outlined above. This would be an open innovation network, and we would hope it would involve external groups including universities, research centres, CSIRO and ANSTO 2 Advisory Council on Intellectual Property 2012, Collaborations between the public and private sectors: The role of intellectual property, Final report, Canberra 4 The MedTech Blueprint

53 Attachment 2 8. Exploration of hierarchical tax benefits for R&D, sequencing from: a. Simple R&D rebates b. A greater rate for a commercialised patent c. A further increment for job creation stemming from that patent d. Sustainability increments for maintenance of such jobs in Australia 9. Clear data tracking for such investment This R&D programme, by following from the cooperative and priority goals outlined above, should naturally support the total healthcare paradigm. The purpose of this exercise is to commence the vertical integration of the Australian MedTech industry into a complete Med Tech Ecosystem. This would be assisted by government policy changes to current funding formulas for universities including mechanisms such as, but not limited to: Peer-reviewed manuscripts co-authored with industry partners Collaborative, contract and consultancy research projects completed Number and survival of spinoffs Number of patents and license agreements Research students who have completed industry placements / training Research students employed in industry following graduations Issue two: Education Building a workforce for the MedTech industry Tied into the R&D and manufacturing challenges, the Australian MedTech industry faces a shortage of graduates with key skillsets. More importantly, even where graduates in engineering, lab science and manufacturing do specialise in healthcare, they rarely have specific knowledge of Medical Technology. This problem is compounded by the attraction of appropriate graduates to overseas jurisdictions where combined R&D and manufacturing is occurring. The Knowledge Hub wishes to identify how we can work with universities and vocational education providers to develop a Med Tech specific course. Versions of this do currently exist, but we are keen to broaden the offering. This would particularly focus on graduates who can specialise in MedTech specific: Design and innovation Engineering Manufacturing, packaging and logistics Device delivery support Healthcare policy, planning & Health Technology Assessment Economics and compliance Business skills, innovation and entrepreneurship In addition, programs that link graduates to clinicians, end users and commercial operators. In keeping with the total healthcare theme, we would note that these graduates will not simply have skills in their specific area, but will understand the entire ecosystem, as well as broader healthcare requirements. For example, a designer who does not understand cardiac disease will not develop a competitive new stent. Alongside these courses, we would also like to see development of university and vocational offerings to assist with update and career development for those already in the MedTech sector. This will also assist us in retaining employees. In Australia research has traditionally been conducted in the university sector. Approximately 60% of all Australian researchers are employed in higher education with another 10% employed in research agencies. Only 30% of Australian researchers are employed in the private sector, in contrast with 80% in the United States, 64% in Switzerland and 70% in Japan. 3 3 Science, Technology, Engineering and Mathematics in the National Interest: A Strategic Approach, Office of the Chief Scientist, July 2013 The MedTech Blueprint 5

54 Attachment 2 Areas to consider: 1. The workforce skills study being developed as part of the NSW Knowledge Hub to undertake an audit of current skills gaps and requirements in the industry 2. Structured engagement with universities and schools to influence the curriculum and the number of students studying maths and science 3. A survey of international approaches to building Med Tech capability, both from outside, and within the industry 4. A survey of other Australian industry sectors who have effectively worked with educational providers to upscale capabilities 5. Identification of potential partners, including education providers and innovation centres 6. How the industry might assist this through targeted scholarships and work experience 7. How we might leverage our think tank, R&D and education approaches to create the most robust ecosystem 8. Consider models such as the Chris Gilbey Transition Project at University of Wollongong designed to connect students with business that are net users of science and engineering PhD candidates. Ideally graduates from MedTech specialisations would enter the full scope of healthcare, including the regulatory space, and hospital services. We believe that the industry needs exchange with other employers across healthcare to best integrate and refine our offering. Issue Three: Navigating Commercialisation pathways The McKeon Strategic Review of Health and Medical Research Australia notes that Australia does not reap the full benefits of medical research output, due to lack of support for early clinical projects and an immature commercialisation environment. The Australian Government spends around $8 billion per year on research, however only 1.5% of this figure is spent on commercialisation. 4 International evidence indicates positioning people and organisations with a range of different skill sets in a collaborative structure can largely mitigate the issues which prevent commercialisation of medical technology. The main reason for this is that all aspects of commercialisation overlap and a company is most efficient when it can define early in the process what the end user wants and how to get the product to that stage. Because Australia doesn t have these structures in place commercialisation rates are low and most medical technology is imported and distributed by companies that are sales and marketing experts. Policy leadership and development is needed to foster industry innovation and growth by putting into place mechanisms to support and accelerate commercial outcomes from public investment in research. The Blueprint implementation plan will need to address potential impediments to technology transfer for commercialisation, including solutions to: lack of commercial experience lack of institutional support for commercialisation decision making structures and attitudes researcher attitudes and experience difficulty in finding industry receptors lack of resources. 5 4 Australian Government Science, Research and Innovation Budget Table 5 Australian Research Council, Commonwealth Scientific and Industrial Research Organisation and National Health and Medical Research Council, National Survey of Research Commercialisation (2002), The MedTech Blueprint

55 Attachment 2 Areas to consider: The Blueprint implementation plan will need to refer to industry policy efforts in the following areas and recommend new and complementary approaches, where relevant, to improve our commercialisation successes: Implementation of the Federal Government s industry growth centre initiative for med tech and pharma designed to improve collaboration, increase commercialisation, prioritise skills strategies as well as the Entrepreneurs Infrastructure Fund Implement Federal Government s election policy to Protect and Streamline Health and Medical Research Funding, in particular focus on streamlining clinical research trials - global competition for clinical trials is increasing all the time and Australia risks losing its competitive advantage if approval processes are slow and cumbersome and costs are increasing Consider implementation of tax proposals that create incentives for business investment in Australia the Australian Innovation and Manufacturing Incentive is a tax proposal that provides a reduction on any profits derived from the commercialisation of qualifying IP in Australia, either via licensing or manufacturing and sale of products incorporating qualifying IP at a rate of 10%. This would create an endto-end tax regime to secure Australia s global competitiveness for the future and drive growth in an industry that is part of the solution to major challenges in health care delivery in the future Support emerging companies and SMEs there is no mechanism that enables government to buy back the results of their innovation, the Small Business Innovation Research program in the United States encourages domestic small businesses to engage in Federal Research and Development activities to increase private sector commercialisation of innovations derived from Federal government research and development this is the missing link that the Australia Government needs to consider to generate a return on their R&D investment Each year Federal agencies in the United States with R&D budgets that exceed $100 million are required to allocate 2.8% of their R&D budget to these programs Access to finance is consistently a major barrier to SMEs navigating commercialisation pathways many other countries implement government guarantee loan schemes which could be explored as a mechanism for addressing this barrier In addition, at a little over 2% of the global market it is not sustainable for the industry, home-grown or otherwise, to meet unique regulatory requirements in Australia that create additional costly barriers. Pursuing regulatory reform to follow on from the recent Australian Government changes to third party assessment 6 will need to be addressed in the Blueprint implementation plan Developing IP and R&D mechanisms that will attract international investment and projects into Australia for IP 6 See MTAA white paper on third party conformity assessment () The MedTech Blueprint 7

56 Attachment 2 Issue four: How do we integrate with health policy As noted above, one of the greatest challenges for the MedTech sector is that we are regarded as device manufacturers and suppliers instead of part of the solution to healthcare service provision. This is part of the total healthcare message, that medical technology is part and parcel of a more complete set of health choices: in some cases it is a choice between surgical or medical solutions; in some, a new technology tips the balance towards new surgical techniques; and in some cases, new technology radically changes the world experience of an otherwise healthy patient. Medical technology does not just deliver surgical efficiency, or patient mobility. It may deliver the ability to return to work, to care for grandchildren, volunteer or to become self-sufficient and productive. However, as with other components of total healthcare, we are currently funded through a separate silo, administered by the Prostheses List Advisory Committee and its implications for private hospitals, State Government hospitals, outpatient services and the Private Health Insurance Administrative Council. This tends to separate Med Tech from primary care, which is funded through its own distinct mechanisms of the Pharmaceutical Benefits Scheme and the Medical Benefits Scheme. Other hospital and allied health services, as well as health prevention, have their own distinct funding sources. While we recognise that this is a more than ambitious goal, we believe there is room to move in how health funding choices are made: rather than having fixed funds for different contributions to health outcomes, there should be greater opportunity to demonstrate the value of Med Tech in a but-for context. Areas to consider: How do we value the total contribution of MedTech on a but-for basis, to support our baseline total healthcare approach (this is not to say that we discount other components of healthcare delivery, but we want our starting point to be the total value outcome in which we are participants? Given this evidence, how might we more effectively integrate and blur the lines between healthcare funding silos, so that MedTech is part of the solution, not just the cost? How do we value broader, non-health benefits of our technology, particularly: a. More general economic effects, such as workforce participation and tax contribution b. Sustainable health benefits, for example mobility benefits for chronic disease management c. Less tangible benefits, including productivity and quality of life How does this fit into the data & communications strategies outlined below? The MTAA is well aware of the inertia in health funding structures, and the extreme difficulty of changing the various algorithms for Health Technology Assessment (HTA) and funding. However, in this case, we would like to describe both practical and optimal approaches, to illustrate how some of our contribution is lost in the gap. Areas to consider: Ultimately, our goal is to build a reimbursement, or payment system that enables equitable patient access to innovative medical technologies, regardless of the geographic location of the patient. Generally, a benefit from a private health insurer will only be paid for an item listed on the Prostheses List (PL) The PL criteria is outdated and limiting as well as being a significant barrier in improving patient access to medical technologies. In addition there are inconsistencies across funds and even within the same fund across different hospitals. Consequently, privately insured patients may be denied access to innovative technologies with are available in the public sector Development of an Essential Care List; establish a subsidised list of cost effective and clinically effective medical products that support improved health management in the home setting Consider models similar to the Health Technologies Adoption Program at the National Institute for Health and Care Excellence (NICE) in the UK who s role is to help the National Health Service (NHS) adopt innovative technologies such as surgical implants, diagnostic and remote monitoring services which have already demonstrated clear benefits to patients The organisation works directly with industry and the NHS in order to improve technology uptake and develops adoption guidelines that detail how the health system can sustainably introduce technologies for clinical use by outlining what the barrier might be. Its role is also to provide advice to manufacturers of innovative medical technologies to navigate the complexities of the NHS to improve market access. 8 The MedTech Blueprint

57 Attachment 2 Issue five: Being part of the Healthcare Solution now and in the future Along with the specific National Health Priorities, the five policy areas in which we should be most prominent are: 1. Chronic Disease Management (CDM), including: ischaemic heart disease; diabetes; chronic obstructive pulmonary disease; and osteoporosis 2. Lifetime health prevention, to avoid chronic disease 3. Ageing, including its links to CDM 4. Remote and indigenous health, including rheumatic heart disease and other CDM 5. Disability care Each of these is a broad contextual driver of current health policy, and the increasing costs in these areas are a primary source of downward pressure on healthcare suppliers. We are also particularly interested in the best way to engage with alternative approaches to high-burden healthcare funding, including through private health insurance approaches to patient management, and the National Disability Insurance Scheme. Some of these are areas in which MedTech has a clear direct role (e.g. diabetes management) and some are areas in which we have a more oblique interest (health prevention). However, we believe that in order to tell the total healthcare story, we need to be clearly engaged in total lifetime health, particularly the most prominent issues of the day. Areas to consider: 1. Identifying the specific role of current and emerging Med Tech in each of these areas, with a focus on CDM, to emphasise that our devices are not one-time consumables 2. Assessing the gaps in each category which might be addressed with new technologies, including digital and tele-health, remote monitoring and assistive technologies to provide a priority set for member R&D 3. Suggesting programmes, particularly in ageing and disability, where we might increase access to prostheses and other Med Tech, to potentially partner with the NDIS and other disability groups 4. Providing policy commentary on how Med Tech is used differently or more innovatively in overseas jurisdictions for better health maintenance outcomes 5. Describing the role and potential role of Med Tech in preventive health, including mobility, injury recovery, bariatric surgery and others 6. How do we work with medical and consumer groups, data providers and policy specialists to fit these approaches into the three issues outlined above? Our goal is to elucidate how the industry can better deliver innovative and cooperative solutions to reduce the burden of CDM, ageing, disability and poor health choices on both individual sufferers, and the health funding system. The MedTech Blueprint 9

58 Attachment 2 Issues Six: Building the manufacturing component The MedTech sector is far from alone as an industry which imports the majority of its manufactured product. While MedTech creates large numbers of jobs in Australia each year, most of these are in marketing, sales, distribution, compliance and device support. We have manufacturing successes, but they are a minority of our technology. This will not be rapidly overcome. Traditional forms of manufacturing, the art of converting raw materials into finished products, has an observed tendency to gravitate to cheap labour and other factors of production, or to highly beneficial taxation regimes: neither of these is an area in which we wish to compete. However, advanced manufacturing does represent an opportunity for competition in Australian manufacturing and can be improved by changing the way manufacturing integrates with the research community and improving the efficiency of our innovation system. It is important to note in the context of the decline of the automotive industry that many auto component suppliers are looking to diversify into alternative sectors for survival and that under the appropriate circumstances MedTech fits within this description. Some auto component manufacturers in South Australia have already transitioned. Export If this diversification is not supported and encouraged we risk losing the knowledge and skills base in manufacturing and we may not have the future capacity to engage in advanced manufacture at all. Importantly this diversification needs to be closely linked to R&D to be successful. Policy Skills The digitisation of the product development process means we are seeing design, production planning, engineering, manufacturing, and services merging into one unit instead of being sequential Advanced manufacturing is about variability, complexity and extensive customisation with high value add. It usually involves low volume, high-value manufacturing with a customer and export focus, allowing manufacturers to provide a customised solution to the market. It also requires new and advanced skill sets meaning close integration with educational institutions is a critical platform. One anchor point for manufacturing must be an R&D hub, and the tax sequence is one mechanism for encouraging incentives for business investment. Although a rapid turnaround in Australian manufacturing is difficult to imagine, creating a thriving advanced manufacturing base is a critical component of a MedTech Ecosystem, which can be illustrated as: Finance Reimbursement Clinical Investigations Manufacturing Regulation 10 The MedTech Blueprint

59 Attachment 2 Within this ecosystem, there are a number of functions in terms of staff development, compliance and marketing, but the core story is of a pathway from Australia s prowess in basic science, through a fully realised industry, to export markets. This is consistent with Australia s competitive advantage in education and high technology, and our status as a trading nation. To address the manufacturing component, we would suggest: 1. Augmentation of the R&D strategy elements above, including both tax and open innovation, to identify how they can attract and keep manufacturing 2. Consideration of manufacturing promotion in the development of bilateral and multilateral trade pacts 3. Assessment of made in Australia benefits, including: a. Customisation for local use b. Quality assurance and tracking, which also has potential export impact 4. Options for contract or component manufacturing, wherein: a. Australian factories would make some high-tech components (coatings, PCBs) b. Australia would become an end-point assembler of important components Despite the practical difficulties to manufacturing growth, it remains an important element to be considered in the blueprint implementation strategy as part of the overall ecosystem. Areas to consider: 1. The Australian Government s Industry Innovation and Competitiveness Agenda has highlighted advanced manufacturing as one of five targeted growth areas to foster collaboration between research and industry, the MedTech industry has an important role to play in driving growth in advanced manufacturing and driving private sector engagement in this initiative will be critical. 2. Identifying opportunities by way of free Trade Agreements and other trade agreements Issue seven: How do we export Australian MedTech? Globally, the medical technology market was valued at US$349 billion in 2012 and is forecasted to grow to US $455 billion with a compound annual growth rate of 4.5% between Although comparatively small on a global scale, the medical devices industry in Australia is highly innovative. The Australian medical devices industry has pioneered niche products such as non-invasive blood glucose monitoring systems, continuous positive airway pressure (CPAP) devices for sleep apnoea, long wearing night and day contact lenses, melanoma detection devices, transdermal insulin delivery devices, diagnostic technologies for sleep disorders, neurophysiology and cardiology and the world s first bionic eye and brain monitoring system. 8 However, new sets of challenges and new ways of doing business are emerging. Many economies are dealing with the challenges of ageing populations, people living longer and the subsequent demand on the health care budget. The demand for health goods and services is growing fast, particularly in emerging economies with ageing populations and a growing middle class with higher quality healthcare expectations. Customers now demand more in financial, convenience and health terms. MedTech companies must focus more on service and business model innovations that meet new industry demands rather than on incremental product improvements. 9 While clinical efficacy is a must, the true value in MedTech today is a company s ability to provide information services and other assistance to solve additional problems such as improving diagnostic, increasing operating room efficiency, reducing length of hospital stays, monitoring patients remotely and keeping people out of hospital. 10 Australian companies need to be part of the international discussion and research and global supply chains. Small companies also need strategic assistance to connect with global supply chains. We would like to see an extension of open innovation, whereby multinationals cooperate with SMES to: Develop new products Undertake HTA and pre-market activities Identify and develop new markets 7 Evaluate MedTech World Preview 2013, Outlook to 2018 the Future of MedTech 8 Austrade Medical Devices ICR 9 PWC, Health Research Institute MedTech Companies Prepare for an Innovation Makeover, October ibid The MedTech Blueprint 11

60 Attachment 2 If industry can identify pathways for a shared approach across a single device or disease solution, rather than an acquisition, then it will more likely build domestic manufacturing and provide inspiration for future researchers. This process should involve the broadest possible spectrum of healthcare professionals to ensure we are providing solutions which support value, better outcomes and the principle of total healthcare. Alongside this, we would like to explore how Australian suppliers might follow healthcare exporters, such as the hospital and aged care service providers who will enter China under the provisions of the new ChAFTA (China Australia Free Trade Agreement); health planners working in the Middle East and South East Asia and healthcare service providers operating in the Pacific, Middle East and the United States. Areas to consider: What business models are working effectively overseas a)desk research discovering what works in other countries and assistance provided to assist exporters b) Strategies that Australian exporters can use to integrate these models effectively Identification of regulatory issues and reimbursement pathways in international jurisdictions International collaboration opportunities for researchers and companies a)to understand market entry points b)to understand future direction Working with multinationals How does this integrate with broader Australian export strategies including those of Austrade Issue eight: Where are our spokespeople? At its simplest, the challenge for the MedTech industry is to energise an external group of stakeholders to become supporters of our industry. A broad swathe of potential stakeholders can be identified, including: GPs and specialists, who should promote the growth of MedTech because of its contribution to the success of their patients, and the efficiencies it delivers to their practices Health policy influencers, including consumer groups, for the investment we make in R&D to provide better quality health outcomes Payers, both Government and Private Health Insurers, who are getting better return on investment in terms of disease management Employees, with the sector in total engaging some 19,000 people in work during 2013 State and National Governments, with revenues from $10 Billion in turnover in the past year The MedTech industry is a substantial contributor to the nation s health, representing only around 4% of health expenditure. A recent report commissioned by AdvaMed found that medical technologies generate economic returns that are substantially greater than their costs in terms of benefits to patients and ensuing productivity from improved quality of life. 11 The industry delivers a critical community benefit by maintaining an inventory of over 1 million products, which is unparalleled by any other technology sector. At the same time, MedTech is a major employer group, and a substantial investor in research and development. Our first challenge is therefore to identify a structure and associated campaign to have others fly our flag. We would posit six questions to be addressed in the blueprint implementation plan on this challenge: 1. How do we best cooperate with other industry associations, such as Medicines Australia, the Pharmacy Guild, the Australian Medical Association and the Medical and Allied Health Colleges to develop a common message around the benefits of medical technology? 2. How might we extend that to particularly promote our message through trusted community contact points, particularly pharmacists, general practitioners, nurses, physiotherapists, optometrists, dentists and allied health care professionals 11 Healthy Savings; Medical Technology and the Economic Burden of Disease, July 2014, Milken Institute, July The MedTech Blueprint

61 Attachment 2 3. What does our extended narrative sound like? In particular, how can we provide substance to the multi-sector cooperation by describing the true integration of medical technology as part of total healthcare? 4. What is the optimal path for engagement with community groups specifically disease and disability spokespeople to highlight the contribution of new technologies? 5. Given that payers will always be the most resistant to our message, how do we best establish a dialogue on pricing and efficiency, to minimise the conflict between suppliers, users and funders? 6. Do the Knowledge Hub and its partners currently have the correct skillset to deliver this type of engagement? This is very much a structure and strategy requirement: we are not looking for a complete communications campaign, though matching of messages to stakeholders is required. The overriding goal is a shared narrative. Do we have the data? In order to describe our Total Healthcare role, we need to better understand where MedTech sits, and how it integrates into lifetime health delivery. This will support our target narrative that MedTech is not a device industry it is a partner in medical and wellness services. To develop this, we may need to reach out to a set of experts, including: Health policy professionals Health economists Scientific researchers, both on and off campuses Demographers Commercialisation specialists Health educators Specialist stakeholder groups, e.g.: rural health; indigenous health; aged care We should identify not only the dataset and potential providers, but a long-term structure within which the industry can ensure it has the information to provide both positive narrative, and compelling arguments for change. In addition industry wants access to data to be in a position to develop the healthcare solutions for future healthcare challenges. Areas to consider: 1. To facilitation the cooperation and communication described in Issue One above, what are the key data and evidence we will require over the next 5-10 years? 2. Which datasets are most apposite to annual renewal and reporting, to track performance and contribution? 3. How do we align these to the Commonwealth s current nine National Health Priority Areas? 4. Who are the recognised experts to provide this (note, we have a strong preference that they should be from Australia)? 5. What are the relative pros and cons of the MedTech industry variously: a. Establishing its own think tank to fund and gather relevant information b. Establishing a study centre along with other industry participants and stakeholders to examine the total healthcare policy approach c. Working with a specific university to establish a MedTech research focus d. Working with existing research groups, such as the George Institute or the Grattan Institute e. More selectively commissioning reports from key experts? The MedTech Blueprint 13

62 Attachment 2 6. When we have the data we seek, what are our parameters for: a. Publishing it ourselves b. Focusing on refereed publication by the contributors c. Using it primarily as background for industry submissions? 7. How do we establish credibility with the experts nominated above? Blueprint Implementation The medical technology industry makes a significant contribution to Australia s economy through job creation and export markets and to Australian society by developing products that improve our length and quality of life. Australia has many competitive advantages to growing a prosperous industry including a significant health and medical research capability, quality health system, highly skilled manufacturing workforce, stable finance system and access to the growing middle class markets in Asia, projected to grow up to 25% over the next ten years. In the future this region will be home to the majority of the world s middle class meaning there will be increasing demand for goods and services in health and aged care within our region. Industry and government could work together more strategically to take advantage of these growth opportunities to develop the industry to its potential. The Blueprint will drive and support the industry s continued contribution to, and integration of, the Australian population s health needs, research & development opportunities, industry development, communications, rural and remote health care, indigenous health, finance, trade, manufacturing, education, employment, ageing and social services, small and medium business needs. The Blueprint s detailed implementation plan will emphasise the decisions made in each of these areas and how they impact the development of the Med Tech industry, exemplifying why a whole of government approach to realising its potential is needed. It will detail the significant challenge we face in healthcare delivery now and in the future, considering the costs of an ageing population, the increase in chronic diseases, coupled with the community s desire for improved health care delivery. It will explain how the MedTech industry is well placed to be part of the solution to this, indeed, a partner in holistic planning and integration. That solution lies in our ability, in particular, to develop technologies with remote monitoring capabilities which enable health care services for people in the community, outside the hospital system, saving significant costs and improving healthcare services. It will also describe the steps required to make the MedTech industry a thriving industry for Australia s future by establishing a more effective entrepreneurial, collaborative and commercialisation culture within a deregulated business environment, allowing it to be competitive and thrive in a global market. Development of the implementation plan will require significant further wide and targeted consultation and support by government and all aspects of industry for its success. As mentioned we believe it should operate as the roadmap for the Federal Government s Industry Growth Centres to develop growth centres in areas with competitive advantages, such as MedTech and Pharma as well as to improve the efficiency of the regulatory system. The implementation plan will also take into account and work with existing initiatives already supporting the industry including: New South Wales Medical Device Fund and Medical Device Commercialisation Training Program New South Wales Medical Device Knowledge Hub designed to operate as a vehicle for collaboration between academia, industry and government Victoria s Medical Technology strategy focused on enhancing linkages and relationships between key players across the industry South Australia s Manufacturing Works strategy which drives the transition from the traditional manufacturing sector to advanced manufacturing South Australia s Medical Technologies Program which supports the Medical Device Partnering Program a collaboration between industry, research and end-users Tasmania population health planning to enable healthcare solutions through innovative technologies Finally, implementation will involve determining the most effective ways to integrate current work into a whole of government strategy to support each component of industry development including research, product requirements, engineering and design, clinical investigations, manufacturing, regulatory approval, sales, marketing and export. Conclusion The MedTech Industry has great potential to be a strong industry for Australia s future, underpinned by high skilled employment. In order to prosecute a strong growth plan, the MedTech industry needs to address each of its policy and regulatory challenges. This blueprint identifies issues and offers the framework for the development a national implementation plan. The Medical Technologies and Pharmaceuticals Growth Centre is a likely vehicle to realise this aim, and we will continue to progress this possibility. 14 The MedTech Blueprint

63 Attachment 3 Federal and State Government initiatives Federal Government The Federal Government industry led Growth Centres initiative has been identified as the centrepiece of the Government s new approach to industry policy, changing the way governments support industry development. Medical Technologies and Pharmaceuticals are one of the five focus areas of the Growth Centres and the objectives are to enhance innovation, productivity and competitiveness by focusing on areas of strength and ability in our economy. The Growth Centres will receive $225 million in Australian Government funding over the four years from 2015/16 to 2018/19 and will drive action plans on skills, collaboration, commercialisation and deregulation. Often the path of a medical technological innovation to reimbursement is long and complex. From a business perspective, these hurdles increase risk and can lead to new innovations being abandoned hampering innovation and the patient s ability to access state of the art technology. Resolving these issues will be crucial to ensuring economic success in the industry in the future, above all ensuring patients have access to the best treatments for them. Working in partnership to solve complex healthcare market access challenges, such as regulation of medical devices and reimbursement pathways that ensure patient access to innovative technologies are critical components of building a stronger MedTech industry in Australia. NSW Government The NSW Government has identified the medical technology industry as one demonstrating competitive advantage and is supporting this potential growth through two key initiatives. The NSW Medical Device Fund, developed by the NSW Office of Health and Medical Research, is a competitive technology development and commercialisation program open to individuals, companies, public and private hospitals, medical research institutes, universities, other public sector research organisations and the medical devices industry to take local innovation to market. The Fund is also focused on increasing the uptake of NSW medical devices by the healthcare system, where they are cost effective and contribute to improved patient outcomes. More than 26 million has been awarded to 16 new medical technologies since the Medical Device Fund began in 2013, potentially creating new companies and new innovations that will either provide new healthcare services or improve existing ones. The NSW MedTech Knowledge Hub, an industry led initiative developed by the NSW Department for Industry has enabled industry to collaborate with stakeholders in the research and policy areas to develop growth opportunities for the sector. Industry has received just under $ in funding to date through a competitive tender process to undertake initiatives that improve collaboration, foster commercialisation and drive growth opportunities. The initiatives include developing the MedTech Blueprint proposal, a skills analysis to inform policy on improving access to skilled workers, and implementation of a

64 Attachment 3 Business Mentoring program between students and industry leaders increasing awareness of the career paths in the medical technology industry. In early 2015, MTAA engaged Deloitte Access Economics on behalf of the NSW MedTech Knowledge Hub to undertake a major skills analysis of the current and possible future skills gaps in our industry to inform policy development on STEM (science, technology, engineering, mathematics) initiatives being developed by the Federal Government in the primary and secondary education system. The Australian MedTech industry employs more than 19,000 people nationally, many of them highly skilled. A 2007 report commissioned by the Department of Tourism and Resources, Skills Audit of the Medical Devices Industry, completed by Deloitte Insight Economics found there were skills gaps in regulatory affairs specialists, reimbursement specialists, product R&D engineers, business development and project management personnel as well as sales and marketing, particularly in relation to export sales and market development. 1 Access to skilled workers is still a significant barrier facing companies across the spectrum in the medical technology industry today. Consequently, an industry development initiative identified as part of the Blueprint process is building a workforce for the MedTech Industry. The report will be released towards the end of this year or early next year, and the Knowledge Hub has also been funded to develop a communications strategy around the findings connecting industry leaders with potential future employees in schools, VET providers and universities, increasing their awareness of the MedTech Industry as a potential career pathway. Victorian Government There is also industry development activity occurring in Victoria and South Australia to develop the medical technology industry, based on the decline of the automotive sector and a displaced workforce who have transferrable skills to advanced manufacturing. In May 2015, the Victorian Government announced a $200 million Future Industries Fund to support high growth industries demonstrating competitive advantage. Six priority sectors were identified as having the potential to create highly skilled, high wage jobs, one of them medical technologies and pharmaceuticals. The Future Industries Fund will support companies in these six high growth industry sectors to compete in the global market place through three grant programs; manufacturing, sector growth and new energy jobs fund. Companies can apply for grants to support projects that create new jobs and stimulate industry investment. South Australian Government The South Australian Government s Manufacturing Works program is focused on positioning the state s economy to transition from traditional forms of manufacturing to advanced manufacturing. Launched in October 2012, Manufacturing Works is a ten year strategy that outlines government initiatives and programs to help industry capture market opportunities and achieve growth. The Medical Technologies Program supports the early stage 1 Department of Tourism, Industry and Resources, Skills Audit of the Medical Devices Industry October 2007

65 Attachment 3 development of new commercially viable medical and assistive devices through collaboration between industry, researchers and government. State governments are working in partnership with industry to identify their role as a facilitator of industry growth and as an advocate to the Federal Government to ensure the policy and regulatory levers at the Federal level are being addressed to complete the circle in the commercialisation value chain. If this is not addressed, highly skilled jobs and innovative companies in the very industries the Federal Governments is trying to support will go offshore to countries where innovation environments are better developed and the public sector are skilled at positioning industry to develop the solutions to public sector challenges. In summary, this investment and effort to accelerate industry growth based on establishing collaborative models between industry stakeholders will be negatively impacted if we do not work in constructive ways to overcome complex healthcare access policies to ensure there is a market place for the innovation that is being developed. The focus must be on building a modern reimbursement pathway that ensures patient access and surgeon choice to innovative technologies that improve health outcomes, not ensuring patient access to technologies that private health insurance funds are willing to pay for.

66 Attachment 4 MTAA FACTSHEET What is Driving Increased Expenditure on Prostheses? Recently, the private health insurance industry has suggested that there is a need for reform of prostheses pricing under the Prostheses List (PL) arrangements, citing the growth in prostheses expenditure over the last 20 years. The purpose of this factsheet is to identify what factors are driving this increase in prostheses expenditure by health funds. The Australian Prudential Regulation Authority (APRA) is an independent statutory authority that regulates the private health insurance industry in Australia, and MTAA has drawn on its statistical collections to produce this factsheet, providing information on trends in the three components of hospital treatment supported by private health insurance, including prostheses. Specifically, the factsheet presents information on trends in the benefits paid by health funds and the volume of prosthetic devices used in hospital treatment. As PL arrangements reflecting both the listing and benefit amount for prostheses began in November 2005, statistical data covering the new arrangements has been used. As outlined in Table 1, since 2005 a greater proportion of total hospital benefits have been paid for hospital accommodation and medical services, compared with prostheses. Table 1: Hospital accommodation, medical and prostheses benefits as a proportion of total hospital treatment benefits Hospital accommodation benefits Medical benefits Prostheses benefits % 15.6% 13.7% % 15.7% 14.2% % 15.8% 14.3% Source: Australian Prudential Regulation Authority The average benefit paid by insurers for prostheses increased steadily between 2005 and 2007; however, there has been little growth in average prostheses benefits since 2007 (Figure 1). The number of prostheses paid for by insurers (volume) has been growing steadily since The growth in the volume of prostheses items, average price per item and total prostheses benefits paid since 2005 is shown in Table 2. 1 MEDICAL TECHNOLOGY FOR A HEALTHIER AUSTRALIA

67 Attachment 4 Figure 1: Number of prostheses used and average prostheses benefit paid ( ) Source: Australian Prudential Regulation Authority Between 2005 and 2015 the average annual growth in the volume of prostheses used was 7.4% per annum. Over the same period, the average annual growth in the average benefit paid per item increased by 1.2% per annum, compared with 2.7% per annum for the CPI All Groups and 4.7% per annum for the CPI Health Component. Between 2010 and 2015 there was no growth in the average cost per item, suggesting that prices for prostheses may be falling in real terms. This suggests that the growth in expenditure on prostheses is being driven largely by underlying growth in volume (utilisation) rather than growth in the price of prostheses. Table 2: Average annual growth rates for prostheses Growth in average benefit per item (price) Growth in volume (number of items) Growth in total benefits paid 2005 to % 7.4% 8.5% 2005 to % 7.0% 9.4% 2010 to % 7.8% 7.7% Source: Australian Prudential Regulation Authority CONCLUSION PL arrangements have limited growth in individual benefits to a level below inflation Growth in overall expenditure by health funds on prostheses is due to increased volume (utilisation) 2 MEDICAL TECHNOLOGY FOR A HEALTHIER AUSTRALIA

68 COMMONWEALTH OF AUSTRALIA Official Committee Hansard SENATE COMMUNITY AFFAIRS REFERENCES COMMITTEE Out-of-pocket costs in Australian health care TUESDAY, 29 JULY 2014 CANBERRA BY AUTHORITY OF THE SENATE

69 INTERNET Hansard transcripts of public hearings are made available on the internet when authorised by the committee. To search the parliamentary database, go to:

70 SENATE COMMUNITY AFFAIRS REFERENCES COMMITTEE Tuesday, 29 July 2014 Members in attendance: Senators Bilyk, Di Natale, McLucas, Moore, Reynolds, Siewert. Terms of Reference for the Inquiry: To inquire into and report on: The out-of-pocket costs in Australian healthcare, with particular reference to: a. the current and future trends in out-of-pocket expenditure by Australian health consumers; b. the impact of co-payments on: i. consumers' ability to access health care, and ii. health outcomes and costs; c. the effects of co-payments on other parts of the health system; d. the implications for the ongoing sustainability of the health system; e. key areas of expenditure, including pharmaceuticals, primary care visits, medical devices or supplies, and dental care; f. the role of private health insurance; g. the appropriateness and effectiveness of safety nets and other offsets; h. market drivers for costs in the Australian healthcare system; and i. any other related matter

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72 WITNESSES STANKEVICIUS, Mr Adam, Chief Executive Officer, Consumers Health Forum of Australia... 1 RAI, Ms Priyanka, Policy and Communications Officer, Consumers Health Forum of Australia... 1 McAULIFFE, Mr Andrew, Executive Director, Australian Healthcare and Hospitals Association... 9 TOBIN, Mr Patrick, Director, Policy, Catholic Health Australia... 9 ROOT, Ms Josephine Mary, National Policy Manager, Council on the Ageing (COTA) Australia SKINNER, Ms Marie Denise, Senior Policy Adviser, National Seniors Australia OWLER, Associate Professor Brian, President, Australian Medical Association TRIMMER, Ms Anne, Secretary-General, Australian Medical Association BREADON, Mr Peter, Health Fellow, Grattan Institute DUCKETT, Dr Stephen, Director, Health Program, Grattan Institute BOTHAMS, Mr Peter, Vice President, Occupational Therapy Australia BROOME, Dr Kieran, Chairperson, Queensland Divisional Council, Occupational Therapy Australia BUTLER, Ms Annie, Assistant Federal Secretary, Australian Nursing and Midwifery Federation THOMAS, Ms Lee, Federal Secretary, Australian Nursing and Midwifery Federation BOLAND, Ms Justine, Head, Statistics and Communication Group, Australian Institute of Health and Welfare WATSON, Dr Diane Elizabeth, Chief Executive Officer, National Health Performance Authority WEBSTER, Dr Adrian, Head, Expenditure and Workforce Unit, Australian Institute of Health and Welfare JEPSON, Dr Nigel Stuart, Private capacity ROSS, Mr David, Director Healthcare Access, Medical Technology Association of Australia BARTLETT, Mr Richard, Acting Deputy Secretary, Department of Health CAHILL, Ms Fifine, Acting First Assistant Secretary, Medical Services Division, Department of Health COTTERELL, Mr Simon, Acting First Assistant Secretary, Portfolio Strategies Division, Department of Health CREECH, Mr Paul, Assistant Secretary, Pharmaceutical Benefits Division, Department of Health CULLEN, Professor David, Chief Economist and Head, Strategic Policy Unit, Portfolio Strategies Division, Department of Health McNEILL, Ms Felicity, First Assistant Secretary, Pharmaceutical Benefits Division, Department of Health COMMUNITY AFFAIRS REFERENCES COMMITTEE

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74 Tuesday, 29 July 2014 Senate Page 1 STANKEVICIUS, Mr Adam, Chief Executive Officer, Consumers Health Forum of Australia RAI, Ms Priyanka, Policy and Communications Officer, Consumers Health Forum of Australia Committee met at 08:32 CHAIR (Senator Siewert): I declare open this public hearing and welcome everyone here today. This is the second public hearing for the committee's inquiry into out-of-pocket costs in Australian health care. The committee has received 99 written submissions to this inquiry, and I thank everyone who has made a submission. Welcome and thank you for your submission. I understand information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. Mr Stankevicius, I think this is your first time in front of this committee. Mr Stankevicius: Second, maybe third. CHAIR: It must have been one that I wasn't here for; I think it is the first time for references. Mr Stankevicius: Yes, you are correct. CHAIR: I invite you to make an opening statement and then we will ask you some questions. Mr Stankevicius: Good morning and thank you for the opportunity to speak to the committee this morning. CHFA, as you probably know, is the national peak body representing Australia's healthcare consumers and, as I am sure you are aware, our research polling and consumer surveys highlight the significant concern amongst healthcare consumers and the broader Australian community about ever-rising, out-of-pocket costs in health care. This concern was underpinned by a growing mountain of reports and analysis, including the latest Australia's health 2014 report by the AIHW which highlights just how heavy the cost burden is for Australian consumers. The report highlights that the largest share of non-government health funding that is, $24.3 billion came directly from individual consumers, while private health insurance funded another $11.2 billion of healthcare expenditure. Importantly, most of this private health insurance contribution to healthcare expenditure would also have been funded by consumers through the premiums that they pay. Consumers, as you would be aware, are already paying a very high price for primary care, which is that critical gateway to our healthcare system, critically important to early intervention, to regular health monitoring, to disease management and to many other out-of-hospital services. We cannot afford to underestimate the significant role which primary health care plays in reducing hospital admissions, thereby reducing taxpayer cost and consumer detriment. Another recently released international survey by the Commonwealth Fund of New York showed that, while Australia's overall health expenditure growth is near the lowest in the Western world, we are near the top when it comes to what individuals have to pay out of their individual pockets. The Commonwealth Fund research indicates that 25 per cent of Australians already report out-of-pocket medical bills at more than $1,000 a year, comparable only to the most cost-wracked American healthcare consumers in the study that was undertaken by the fund. Even without the government's proposed copayments both for MBS and for PBS, we know that consumers are delaying essential treatment due to out-of-pocket costs. ABS data from 2012 tells us that nine per cent of adults will delay or not collect medical prescriptions due to cost, and our own national survey supports this finding, with nearly two-thirds of respondents to our survey indicating that they had at some point delayed seeing a medical practitioner, nearly half of them citing cost as a contributing factor. Mounting evidence shows that those who most rely on universal access to health care are the ones that are hardest hit, the most alarming outcome of the burden of rising out-of-pocket costs. In the past few months since the budget's release, we have seen the emergence of several significant pieces of research which continue to highlight the implications of copayment on a range of grounds. The final report by the now disbanded COAG Reform Council notes that in , in the most disadvantaged areas of Australia, 12.4 per cent of people delayed or did not fill a prescription, and this is twice the rate found in the least disadvantaged areas of Australia. This number also rises sharply for Indigenous Australians, with one-third reporting they had delayed or not filled a prescription and one in eight reporting they had delayed going or did not go to a GP due to the burden of cost. Interestingly, the same report from the COAG Reform Council highlighted that one in five Australians said they had not seen a dentist because of cost. This dangerous trend of delayed visits to medical practitioners, unfilled prescriptions and unbooked diagnostic referrals not only leads to a deficit in appropriate treatment but will also lead to a higher likelihood of a health system which will have to bear the increased costs of a higher rate of hospital admissions and emergency COMMUNITY AFFAIRS REFERENCES COMMITTEE

75 Page 2 Senate Tuesday, 29 July 2014 department visits. Recent research by a number of academics from some of Australia's leading universities found that the length of a visit in a hospital emergency department could rise by anywhere between six minutes and three hours if the proposed GP copayment were introduced. We know that spiralling out-of-pocket costs for consumers are also associated with a marked decline in overall health. Studies have shown that, following the January 2005 increase in PBS copayments, there was a significant decrease in dispensing volumes observed across 12 of the 17 medicine categories, including anti-epileptic medication, anti-parkinson's treatments, combination asthma medicines, insulin and osteoporosis treatments. Importantly, we also know that the copayment increase had a particular impact at that time on medicine utilisation by concessional patients. We know from our research that is the research, the polling and the survey that has been provided to the committee that consumers are faced with very difficult choices when their healthcare costs increase. They will reduce or stop taking medicines or essential treatments. They will reduce or stop visits to the GP or to specialists to which they are referred. They have to make the choice between buying less food and using less heating in winter a particularly difficult choice in places like Canberra and other choices which could potentially have longer term serious health consequences. It is simply not a choice that consumers should have to make, and I put that on the table before the committee. While we share the government's concerns about the ongoing sustainability and cost-effectiveness of our health system and you would be aware that we have published quite significant contributions to the debate in terms of ways in which we can more efficiently and effectively manage healthcare funding we think that there should be a discovery of ways in which we can address this issue without further burdening healthcare consumers with increased or more extensive out-of-pocket costs. While it is easy, I suppose, to think of this debate in terms of very large numbers and costs government funding in the billions and individual co-contributions or out-ofpocket costs for consumers in the thousands it tends to obscure the real issue, and that is that, behind every outof-pocket cost, there is a consumer. There is an individual consumer that is having to make a very difficult choice, in a lot of circumstances. It is important to remember that when we are talking about health care we are talking about a system that is set up to respond to people who are hurt. People are in pain with disease, sometimes curable and other times chronic. People experiencing those kinds of traumatic or life-changing events are ones that, hopefully, most of us in this room will not have to experience. We expect our health-care system to respond swiftly, safely, and equitably, with compassion and competence, to assist those people to rebuild their lives and continue on their life's journey. That is what the system should be about. This is not a system that has been built as an ATM for multinationals or professionals. This is a system that is built around consumers. Surely it is reasonable, then, that the decisions taken in this system should be based on the needs of the people presenting before practitioners and not on the capacity of those individual consumers to pay. In our submission we have included excerpts from some of the stories shared with us by consumers as part of our survey. I hope they highlight for you the real people who sit behind the big figures and the very complex discussions in this debate. Accessibility and equity of their future health care depends on the decisions you make here. Thank you very much. Senator DI NATALE: Thank you very much, Mr Stankevicius and Ms Rai. To provide a bit of context, I know that we have focused significantly on the issue of the GP co-payment, but the referral was made prior to the budget and prior to the fact that we were considering a GP co-payment. In your view, leaving the GP co-payment aside, what are the areas you think have the most impact on consumers? There are a number of out-of-pocket expenses. We have seen AIHW data dental, medications, medical services and so on. Which of those areas do you think are the most significant in terms of the impact they have on consumers? Mr Stankevicius: It's interesting, isn't it? The ones where we are seeing the largest impact, particularly from the AIHW data, are those that are not government supported. They are things like dental, significant aids and appliances things like the oxygen tanks and the wheelchairs and those kinds of things which have an absolutely critical impact on people's ability to live their lives, but they are not covered in any of those systems. You would have seen in The Sunday Telegraph on the weekend, particularly Senator DI NATALE: I do not normally read the Sunday tele, so you will have to describe it to me! Mr Stankevicius: in rural areas of Australia, the growing impact of the cost of travel to get to and from medical procedures, particularly if they are intensive, and the way in which a number of our hospitals across the country are now using their parking in the same way airports are using their parking. That is to make a lot of COMMUNITY AFFAIRS REFERENCES COMMITTEE

76 Tuesday, 29 July 2014 Senate Page 3 money. Some of the surveys they had of costs, in both Sydney and Melbourne, were talking upwards of $30 and $40 a day in some hospital car parks, which is a significant contribution if you are a managing chronic disease and have to go there five days, for a week, over a month-long period. There were some quotes in The Sunday Telegraph article from consumers talking about having to juggle between food or medication and parking their cars. In a hospital context, those are not decisions people should be having to make. It is both the health related costs but also the accessibility costs, which are those travel and parking expenses. Senator DI NATALE: In your co-payment submission Empty Pockets you talk about the problems with the safety nets in the existing system. You describe, I think quite accurately, some of the inherent problems within our very complex system of safety nets. We obviously have the two main MBS and PBS safety nets, but we also have a system of tax-expense offsets and so on. It is very complex. Do you have any suggestions for what a more rational approach to the problem of safety nets might look like? Mr Stankevicius: I can give you a little bit of an introduction and then I might hand over to Priyanka to talk about it. Certainly, one of the challenges that we saw in the legislation committee's inquiry into the Medicare safety net bill was not only that we are going to have a 12-month period where it goes up and then comes down, which will cause much confusion to both consumers and practitioners, but also that the carve-outs that we are seeing proposed in the simplified system will make it much more difficult and much more complex for consumers to actually reach the threshold in working out when it is they have hit the safety net. So, while the system of application might be simpler, if that is the government's intention, the range of things that will not be included in contributing to the threshold will be much more difficult to navigate. That is one of the things where we would say, 'If you're talking about simplicity, let's really make it simple.' It should be straight up and down and easy to work out. If we are talking about voluntary health expenditure, particularly if consumers in those circumstances are planning surgery which is not urgent or if they are saving for a particular kind of treatment that should be part of that informed financial consent, they should know when and how they might hit the threshold. I think one of the issues that we mentioned in the safety net inquiry was that it should not be a system that can be gamed by professionals for their financial benefit; it should be just so consumers can receive the service that they need. Ms Rai: One of the biggest issues we have is that, at the moment, safety nets are designed to address one-off, acute interactions with the healthcare system, so it is annual expenditure. But we are seeing the burden of disease shift to more chronic disease management, so it is ongoing expenditure. For consumers to have to deal with the Medicare safety net only after the expenditure has been incurred puts a heavy burden on people, especially those with conditions like asthma and diabetes, who need the assistance as and when it occurs. The other issue that we have is that it does not really address inequity in the system. It does not people identify on the basis of income level or carer status, but it does not accurately target those who have difficulty affording health care, so it does not take into account, say, people with disabilities with carers who are also a part of the healthcare system. The target of the safety net is only the individual, so we would like to see a more integrated safety net. But that discussion seems to have been superseded by what we are seeing at the moment, where the safety net is actually going to be increased, the threshold is going to go up and the tax offset is going to be phased out. So, if you take it in the context of rising co-payments in failing safety nets, we are really hitting the consumers from both ends. Senator DI NATALE: One of the purposes of this inquiry is to try and come up with some recommendations for government that might address the issues you have talked about. You are suggesting an integrated safety net, one that would combine, for example, PBS and MBS. I am just thinking of some general principles here and trying to tease them out. Rather than a number of different safety nets, you suggest one integrated one. We would need to think very carefully about the exclusions that is one of the issues. Mr Stankevicius: Absolutely. Senator DI NATALE: We would need to think carefully about the potential for health professionals to, to use your words, game those safety nets. Providing consumers with real-time assistance as opposed to basically getting assistance well after they have incurred the expense is another consideration. Mr Stankevicius: As Priyanka mentioned, we currently have a system that is set up for mostly short-term, acute, episodic kinds of care. What we need to recognise in all of these debates we particularly pointed this out in relation to the proposed GP co-payment, but it also applies across the PBS stuff is chronic illness. We cannot guarantee that every person with a chronic illness will be out of work. In fact, a large number of them are not. So they are not going to be concession card holders by virtue of having a chronic illness. Therefore, the system is COMMUNITY AFFAIRS REFERENCES COMMITTEE

77 Page 4 Senate Tuesday, 29 July 2014 failing to respond to those people who have those high and complex needs but are not on concession cards. That is where I think we have to find a much better policy response. Ms Rai: One of the suggestions we have made is to look at different ways to do health financing. At the moment, as Adam mentioned, it is a fee-for-service system, but maybe it should be patient centred where, depending on what the consumer needs, that is how the health system responds. Some innovative models being considered in the UK involve public funds, where each individual has their own health fund based on how and when they access the system. Especially with chronic disease it is something we have trialled in Australia with the diabetes program. Those are funding models that hold some promise and it is probably time to have a larger discussion around how we can adapt to that. Mr Stankevicius: Obviously there are the models in terms of aged care and now the NDIS models of doing individual support packages, essentially. And maybe it is time we actually had a look at that for health care. Senator McLUCAS: Thank you very much for your very comprehensive submissions. I particularly commend you for the comments you made that we have to remember that this health system is about consumers and that we can talk in big figures and numbers, but let's focus on who is going to be affected by any change. You were talking about groups of consumers you are particularly concerned about. And I think I heard you say that one in three Aboriginal and Torres Strait Islander people have delayed filling prescriptions. Mr Stankevicius: Yes. Senator McLUCAS: Can you talk more about that cohort Aboriginal and Torres Strait Islander people where they are, what they are delaying? And are we talking about people in urban settings and remote communities? Perhaps you could just give the committee a bit more of an understanding of how out-of-pocket costs will affect access to health care by Aboriginal and Torres Strait Islander people. Mr Stankevicius: I think I would start by making two points before I look at the data a bit more. Firstly, the information comes from the COAG reform council, which no longer exists, unfortunately. So, that level of independent and impartial analysis of the data will no longer be available, which will seriously impact on the way in which we respond to it in the future. Secondly, particularly in the out-of-pocket discussion, we have had a lot of debate about potential over-servicing and the fact that a financial impost on consumers at point of service might reduce over-servicing. We know that among Indigenous Australians there is massive under-servicing, and that is one of the serious concerns. So, any of the data that we look at in terms of Indigenous Australians needs to be looked at in the context of quite significant under-servicing, both in metro and in rural and regional communities. The COAG reform council data talked about one-third of Indigenous Australians reporting that they had delayed or not filled a prescription because of cost and one in eight that they did not go to a GP because of the burden of cost. Ms Rai: We also have the National Health Performance Authority's Healthy communities reports. They say that between five and 15 per cent of patients in different Medicare Local areas basically remote and regional have delayed or not filled a script because of cost. We put this data in front of the committee for the pharmaceutical benefits bill. I think what is important to consider is that, especially with the PBS, the latest Medicare data shows that 89 per cent of PBS prescriptions actually go to concession card holders. So, that is the kind of volume you are talking about. When you are talking about a co-payment, these are the people who are going to be hit the most the most disadvantaged and the most rural and remote areas. These are people who are already finding it hard to cope with the system, and we are putting up additional barriers for them. Mr Stankevicius: And one of the challenges is obviously that the government has announced that it is rolling over the funding for Aboriginal Medical Services for a year while it undertakes a review of the funding model. Particularly in the context of Closing the Gap, we need to be very closely watching what happens with that review and how that impacts on the future delivery of Aboriginal Medical Services which are, frankly, a lifeline in a lot of those Indigenous communities. Senator McLUCAS: That is where I was heading. Is there any way you can split the data that you have in order to identify where a person has access to an AMS and where they do not? On the current funding model, one would imagine that people had very easy access to AMSs in remote areas, provided that they have people there whom they can go and see. CHAIR: They would also get access to section 100 Senator McLUCAS: And section 100 drugs. Mr Stankevicius: Absolutely. COMMUNITY AFFAIRS REFERENCES COMMITTEE

78 Tuesday, 29 July 2014 Senate Page 5 Senator McLUCAS: So, the data would say to me that if you could carve out those people who can get into AMSs, then the problem is so much heightened for people who cannot get to an AMS. Mr Stankevicius: Yes, exactly. Senator McLUCAS: Is there any way to carve that out? Mr Stankevicius: I know you have the National Health Performance Authority on this afternoon. I think that is a perfect question for them, about carving out the data. The Medicare Locals I have talked to across the country, and also the National Rural Health Coalition, say that their services, regardless of whether they are AMSs, Medical Locals or private practices out in rural and remote areas, all face the same challenges, and that is a lack of health professionals who are willing to work in those areas. We have tried all sorts of things in the past. We have tried bonded schemes and training facilitation and incentive payments a whole range of things. I think, again, it is probably time to step back and say that we have had two decades of trying a whole range of different things and we need to look at this very, very differently. On the thing I mentioned to Senator Di Natale about patient transport costs, again, that article highlights the fact that it is almost a quarter of what members and senators get paid as travel allowance, per kilometre, for petrol usage. I think it is less than a quarter of what members, senators and senior public servants get for an overnight stay in a capital city. They were not able to find one place in Sydney I think they got $43 for a patient overnight stay if they were coming from a rural area to get treatment in a hospital. If we cannot actually get the professionals out to those areas, if we are not even able to facilitate getting people to our urban centres to get the treatment they need, then those people are in this very dark spot between having a diagnosis, in some cases, and not being able to access the treatment they really need. I know we have looked at rural and remote health a lot over the past two decades, but there is a real challenge there that I think we need to be very serious about. Senator McLUCAS: I am trying to get to the correlation between delayed access to primary care and increased hospital costs over time. Has anyone done any work around that? Mr Stankevicius: There have been a few papers published on the conversation recently by consortia of academics. We can certainly get the links and provide them to the secretariat. Senator McLUCAS: Fantastic, because I think a lot of us talk about it, but I do not know that we have the data that says, 'We know that if a person delays a diagnosis of X we can expect that the increased costs to the health budgets of states and territories and of the Commonwealth will be Y.' We know implicitly that that will happen, but we need to now put a figure on it. Mr Stankevicius: I am not sure that they have the figure; they certainly have the hospital figure, but I am not sure that they have a health-system kind of figure on delayed access to treatment. Ms Rai: There is some international research in the US, on removing the co-payment on essential medication like statins, and the savings to the system were about $1 billion. So, there are savings when you make access easier. Senator McLUCAS: So, the converse is that the costs will go up. Ms Rai: Yes. Senator REYNOLDS: Thank you very much for your comprehensive submissions. Being new to this committee I found them very informative and very easy to read, so thank you very much for that. I have a couple of questions really of clarification and perhaps to get just a little bit more information, further to some of the information you have provided already. As I read your submission, the total cost and the percentage of out-ofpocket costs have remained pretty steady with the increase in the cost of health care. It has remained pretty constant at about 17 per cent of the 100 per cent cost of health care. So, the real issue, as I read your submission, is the increasing total cost of health care. And a lot of your submission relates to ways of reducing the cost. So, you are not actually saying that the Commonwealth should be paying more, percentage-wise, of the rising cost of health, but you are trying to drive down the total cost. Currently the taxpayer is paying about 83 per cent, and people are paying 17 per cent out of their pockets. You are not saying that the Commonwealth should be paying more percentage-wise, but you want the total cost driven down, with the measures that you are proposing in here. Mr Stankevicius: Well, the Commonwealth is not paying 83 per cent, because private health insurance is also in there. Senator REYNOLDS: What is the breakdown of percentage? You have out-of-pocket as 17 per cent Ms Rai: On the data that we have it is about $24 billion that consumers are paying out of their pockets, plus another $11 billion coming through private health insurance. Overall, although I do not have the percentage for you, the figure is pretty substantial. COMMUNITY AFFAIRS REFERENCES COMMITTEE

79 Page 6 Senate Tuesday, 29 July 2014 For us, yes we do want overall health spending to be more efficient. But we also want that percentage to go down because at the moment that percentage compromises areas where there are no government subsidies. So it is pharmaceutical spending, which consumers pay entirely out of their own pockets, and dental, which, again, is the largest burden and then, as Adam mentioned, aids and appliances. So where consumers bear the cost, it is a large cost. Senator REYNOLDS: But basically the percentage for consumers is still about 17 per cent, so the percentage that we all pay out of our own pocket has not increased? Mr Stankevicius: Which is much larger and more significant than the majority of OECD countries, including France and the UK. Senator REYNOLDS: Do you know how it compares to increases in average weekly earnings? This 17 per cent and the $1,000 or so Mr Stankevicius: We have not done that. Senator REYNOLDS: It would be interesting to find out whether average weekly earnings have been rising more than an increase in people's out-of-pocket expenses. Ms Rai: We do have some data on the sustainability of the system. We know that the proportion of recurrent health expenditure for medicines especially has grown from 11.7 per cent to 14.2 per cent. This will be in our next submission to the committee. The growth has actually mostly related to medicines for which there is no government subsidy. So while the broader data is 17 per cent, when you break it down and you look at it in the context of what consumers are paying the most, we know that the burden is more on people who are more vulnerable and who are sicker so it is chronic disease. Mr Stankevicius: And we know from the AHW that the item that is highest on the list of out-of-pocket expenditure is non-pbs medication. Ms Rai: If you put the number up at a higher macro level, it is 17 per cent. But as you continue to break it down, that is where it highlights where the system is failing and those are critical areas. Senator REYNOLDS: You also mentioned the various statistics in delayed visits or non-visits to doctors. Have you broken that down further into the type of illness that they delayed? What percentage would be coughs and colds that they are not going for? Or which ones would be for more serious illnesses? Mr Stankevicius: That data is not collected. Senator REYNOLDS: Because that is obviously quite significant if people are delaying for chronic or for serious illnesses or whether they are delaying for the more minor coughs and colds or things that they could perhaps go to the chemist for. Mr Stankevicius: Again, I would ask you to ask the department this afternoon about the robustness of its data collection in this area because it is one of the key issues we often come up against in making exactly the differentiations you are talking about. However, it is important that what comes in as a small ailment may turn out to be a chronic disease, may turn out to be cancer. So we cannot just assume that every visit for a dot that has turned brown on your forehead that may seem minor in the beginning is not the start of a cancer discussion. Senator REYNOLDS: But again, there is no evidence to say they might have gone two or three times. We have had evidence before that people and particularly elderly people will sometimes go to the doctor when it is not clinically necessary but for other reasons. Mr Stankevicius: We have converse data that shows that Indigenous people, particularly young men, are not going to the doctor the number of times they should be just to get those basic regular health checks. Ms Rai: But we can draw some parallels from the last co-payment for PBS where we saw this happen. We do know that when the co-payment was introduced in the 2005 increase, the volumes in 12 out of 17 essential categories went down that is, essential medications like anti-epileptic medicines, anti-parkinsons. Looking at that trend, we could assume that if a GP co-payment was introduced, similar categories would take a hit. Senator REYNOLDS: You also cited hospital visits could increase from six minutes to three hours. What information did you quote? There are going to be many other stresses, as you know, or reasons for going to the emergency room. So on what basis was that extrapolated? Six minutes to three hours is quite a wide variant. Mr Stankevicius: The research consortia that has done that data and we will provide that. Senator REYNOLDS: Based on what assumptions? Mr Stankevicius: We will provide the link to the research to the committee for your information. COMMUNITY AFFAIRS REFERENCES COMMITTEE

80 Tuesday, 29 July 2014 Senate Page 7 Senator REYNOLDS: You also talk about dealing with costs as being one of the real ways to drive down out-of-pocket costs. Your recommendation that the 'government further accelerates price disclosure measures to reduce' can you explain that a bit further? What does that actually mean? Ms Rai: We have accelerated price disclosure. We have got it down to 12 months from 18 months, but other countries like the UK have shorter time frames. So they check the price within three months and they benchmark it. There is research by the Grattan Institute, who are also appearing here today, that shows there are about $500 million or more that can be saved every year if we frequently check how much we are paying, what is the cost to the Commonwealth of accessing these medications, and there are significant savings to be had. Last year when this happened we ran a campaign we still are running that campaign and there is information on our website. We pay significantly higher for a lot of essential drugs like statins et cetera and that margin can be reduced. Senator REYNOLDS: I just want to understand this mechanism: so the price disclosure, is that to provide visibility so that the companies reduce their prices, or so that we can ask for a reduced Mr Stankevicius: Yes. Senator REYNOLDS: It is because it makes it visible? Ms Rai: Yes, it is visible; you check more often. So rather than waiting 12 months to collect the data and then check what the price difference is that you are paying, you check more frequently. Senator BILYK: Thank you for your submissions. I was particularly interested in the survey that you did where you commented that one-third of consumers delay necessary health treatment in order to avoid costs. Have you got any research or evidence that might tell us how this might particularly impact on children from low socioeconomic backgrounds? I am thinking about things like a parent with a child that has a runny nose and an earache that delays going to the doctor because it is going to cost them money it could be, 'Do I take the child to doctor or do I feed it?' with this extra co-payment and the ongoing effect that missing something like that, not getting treatment for something like that, might have on that child's whole life. Mr Stankevicius: We have a few examples of that in our survey, but certainly in the literature. A lot of the media that you will have seen, where they are bringing to light some of those consumer stories, talk about two impacts. There is the impact that you referred to, Senator, about delaying treatment and then what the consequence of that might be if it is more serious, but what we are seeing in the media is more that parents are delaying their own access to health care in order to be able to fund access by their child. Parents are often delaying their consumption of food so that they can pay for health care for their children. So they are really making those tough choices and for a healthcare system in a modern country in this world, we do not think that those are the kinds of decisions that parents should have to make. Senator BILYK: No. In your submission to the National Commission of Audit, you recommended that the government 'further accelerate price disclosure measures to hasten cost reductions'. That is recommendation No. 1. Can you just explain that to me how you think that would work? Mr Stankevicius: That was also Senator Reynolds's question just then. Ms Rai: Essentially we feel there are more savings to be had if the government is essentially checking the price it is paying more frequently. The Grattan Institute, which is appearing later today, has proposed that there should be an independent authority of benchmarking that takes place. It thinks that can save us an additional $500 million every year, which would be about $2 billion in the four-year estimates. That is a considerable amount of savings, which you do not then have to take out of consumers' pockets. Mr Stankevicius: It is important to add that a few months ago our edition of Health Voices, which is our journal, was called 'Better bang for your buck'. We had quite a number of health, health-financing and economist experts give their views on how we can reduce costs right across the healthcare system. Certainly Grattan was one of those, but there is quite a range of others. That was sent to all members and senators, but if you would like a copy, we can provide another to the committee. It really is the Senator BILYK: That would be helpful. Like Senator Reynolds, I am new to this committee, so it would be really helpful to get some background. Mr Stankevicius: Absolutely! I will certainly get that to you. Ms Rai: There is information currently on our website. CHAIR: Sorry, we are running really short of time and Senator Moore wants to ask questions. Senator MOORE: I have a general question about the research. You would have seen the range of submissions we have received for this inquiry and people are quoting left, right and centre a lot of common research. In your opinion and I know it is a matter of opinion is there a common theme in the research that we COMMUNITY AFFAIRS REFERENCES COMMITTEE

81 Page 8 Senate Tuesday, 29 July 2014 have in the processes. Looking through your bibliography with the range of things, a lot of it is American, as you say and as many other submitters have said. But when we are talking about an issue where there are contested views, as there often are, the volume of research that we have in this area from the consumer's point of view, is their common ground or is it still an open slather? Mr Stankevicius: I think almost all of the commentators would agree that the most significant impact of outof-pocket costs is on people on low incomes, is on older people and is on those with chronic illnesses. Those are the three areas or three sectors of people that always get the hardest. I think there is almost universality in terms of the research and the conclusions. Certainly what I have heard the college and the AMA talking about is what we have been talking about Senator MOORE: Yes, they quote similar sources in their submissions. Mr Stankevicius: Exactly. It doesn't matter whether the international research is from the Commonwealth fund or from the COAG Reform Council, there is that kind of uniformity of view about who it hits the hardest and obviously in that context who has the least ability to pay those ever-growing out-of-pocket costs. Senator MOORE: One that caught my eye and I have not followed it up is Kiil, A, and Houlberg, K, in your submission. The heading of their title is: How does copayment for health care services affect demand, health and redistribution? A systematic review of the empirical evidence from 1990 to It is a catchy title but in terms of the process, can you on notice give me the information, because when we are looking at is as an overall view of the impact of co-payment, it just seemed to luscious to have one that actually said that they are doing a systemic review. I would like to get back something on notice about that. I will print it off and reared myself, too. CHAIR: Sorry, I have to cut you off. We are running behind time. That question asked for a response on notice. Are you able to send us the matters you have taken on notice by Thursday? Is that too much of an ask? Mr Stankevicius: No, we will be able to do that. CHAIR: There are some links you have undertaken to send to us and other bits and pieces. If you could send us by Thursday, that would be great. Thank you. Mr Stankevicius: Thank you. Ms Rai: Thank you. COMMUNITY AFFAIRS REFERENCES COMMITTEE

82 Tuesday, 29 July 2014 Senate Page 9 McAULIFFE, Mr Andrew, Executive Director, Australian Healthcare and Hospitals Association TOBIN, Mr Patrick, Director, Policy, Catholic Health Australia [09:12] CHAIR: The committee welcomes representatives of the Australian Health Care and Hospitals Association and Catholic Health Australia. Thank you for your submissions. I understand information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I invite you both to make an opening statement and then we will ask you some questions. Mr Tobin: We are very pleased that this inquiry has been called. Certainly it has been an issue that has been of growing concern to us over a period of time. Before I focus specifically on the cost of health treatment, we at Catholic Health Australia have a strong commitment to making sure that the needs of the poorest and most disadvantaged members of our community are looked after. All of our submissions and our commentary is focused on that principle. The other thing that I would like to start off by saying is that as a group representative of hospitals 10 per cent of hospital beds and in the public and private sectors as well as age and community care one of our objectives would be to actually keep people out of hospital. So we would like to reiterate the submissions that were strongly put about needing to address the social determinants of health. We do note that the Senate inquiry last year made five recommendations unanimously across all parties. We would like to see those addressed, because that is very important in actually keeping people healthy and obviously reducing health costs. The other comment along those lines is, again, the need to focus on preventative health. I notice that the AMA president last week at his Press Club address noted that Australia's expenditure on preventative health, which is very low at around 1 per cent, compares quite poorly with countries like New Zealand. So we really need to do much more to keep people as healthy as they can for as long as possible. Recognising that ultimately people do need to come into contact with the health system, our concern about outof-pocket costs at the moment is that their impact is random and depends very much on the sort of condition you end up with. We have heard from consumers and all the other submitters about people with chronic disease. It also depends where you are geographically and whether you have access to doctors who bulk-bill, whether you are in a regional area and whether you incur large costs in seeking treatment. We would like to see a much more consistent approach to out-of-pocket costs so that people who end up with the wrong type of disease do not end up paying very substantially as a lottery. We are not necessarily against co-payments but the health system at the moment has a lot of embedded co-payments. The impact of co-payments for people on lower incomes with aggressive conditions is much higher. We support a rationalisation of the safety net, which has also been said by everybody else who made submissions to this inquiry. It is very complex and we were pleased that in the recent budget the government did actually look at simplifying some of those safety nets, although we do notice that there are savings from the rationalisation process. I think we do need to have a good hard look at how we look after people. The last thing is that we do recognise that over time there are pressures on the health system. You have to look at the demographics. We are going to have a smaller percentage of the population as taxpayers in the next 10, 20 or 30 years. We know that the costs of treatment are increasing very rapidly and we do need to have a conversation as much as we can about how we operate the health system so that it operates as efficiently as possible. We are certainly up for a conversation about how we do make savings. People have alluded to pharmaceuticals. There are probably a lot of treatments that might be unnecessary at the moment or not providing good value for money or involve duplication. The other thing is that the funding system is fragmented and based on episodic treatment. We really need to look at more fundamental system reform. I will leave it at that at the moment. Mr McAuliffe: I will not reiterate what has been said by various other witnesses so far other than to comment that we support the statements that have been made around the importance of focusing on prevention and the need to rationalise, improve and simplify the safety net arrangements. Senator Moore mentioned the importance and the variation in the data, and the evidence that is available on this topic. We feel that having good, robust data is a critical component. A major policy change warrants robust modelling and analysis. Indeed to support this, as we mentioned in our second submission, I believe the AHHA sought additional data from the Department of Human Services and the Department of Health not just on the number of individual item numbers or services that are bulk-billed but on the actual people as the previous witness stated, the actual individuals affected by these changes to policy. We sought that data under an FOI application, as it is not publicly available routinely. That request was denied on the basis that the data basically did not exist and that production of the data would represent a substantial and COMMUNITY AFFAIRS REFERENCES COMMITTEE

83 Page 10 Senate Tuesday, 29 July 2014 unreasonable diversion of the department's resources. That raises a number of issues. Firstly, we are concerned that the collation of data that is fundamental to the evaluation of the implementation of a major policy change is to considered to be an unreasonable use of resources. We are also concerned about the evidence that the policy was developed on and the advice that had been received. Furthermore, on a more practical point, the concern is that if a co-payment process is introduced, the information provided was that GPs would quite easily be able to identify who had already reached the safety net. We query how that can be possible, when we have actually been told that the data does not exist at that person based level. We are just really confused, honestly, about how the GP in the surgery is going to understand or know how many times this person has been bulk-billed and whether they have reached the safety net. Another area of high out-of-pocket expense is the area of dental services. The previous government introduced the child dental benefits scheme concept and also allocated funding for additional adult public dental services, which was supported by the current government. The children's dental benefits scheme was introduced on 1 January, and those benefits can be accessed through either the private or the public sector. Public sector access was limited to 12 months prior to a review of continuing access. We are now five months away from the end of the year and there has been no progress on the content of that review, what will be looked at and how it will be undertaken. So the public dental services are in a bit of a no-man's-land as to whether or not they will be able to continue to access that service. A critical point there is that benefits accessed through the public sector under that scheme had to be bulk-billed. If that does not continue under the public sector, that activity will shift to the private sector, where there is no cap on any co-payments that could be applied. So there is a potential risk there of significantly increased co-payments as well. Finally, the other aspect was the additional funding that was allocated for adult public dental services, which was to be implemented on 1 July this year but has been deferred for 12 months. Again, if that does not proceed there is potential that that will push more people back out into the private sector, with the costs that occur with that. Senator McLUCAS: Thank for your original submission and then the supplementary submission; I think the timing of this inquiry was handy. The first issue I wanted to go to was whether either of you had any comment on the correlation of cost between delayed primary care, delayed access to GPs, and increased hospital costs over time. It is the same question that I asked the Consumer Health Forum. Do you have any comments on that? Mr McAuliffe: I have not got it with me at the moment, but I can certainly provide you with some recent publications on that issue. One that comes to mind was a study done in the Northern Territory which looked at the costs associated with in-patient care for renal conditions versus community based care. Not surprisingly, the costs associated with in-patient care were significantly higher. The inevitable result of delaying preventative and community-based care or the absence of that care is hospital admission and the increased costs associated with that. I am happy to provide that sort of data to you. Senator McLUCAS: Thank you. We believe that there will be an increased cost for delayed treatment. It is important to put some meat around that so that people know that this is not going to improve the sustainability of our health system; in fact, it has the potential to make it less sustainable in the future. Mr McAuliffe: Certainly overseas evidence suggests that as cost barriers increase it is the preventative care that is avoided first when people have to make those decisions. We know that investing in prevention is a far more cost-effective mechanism than just treating the subsequent disease and illness that occurs. The application of evidence based preventative programs is clearly a more cost-effective mechanism. Senator McLUCAS: Thank you. The other issue that your submission raises is the impracticality of emergency departments charging. This has been raised with me by many people, but I think we need to talk through why it is impractical. If I turn up at an emergency department and I have been in a car accident, are you going to get my Medicare card or my credit card? Is it around those questions? Talk us through that. Mr McAuliffe: If the ambulance pulls up at the front door, no clinician is going to be looking for the patient's wallet as the first step. I think that is an issue well down the track. The ability to swipe a credit card is not going to be a primary issue for those critical patients. It is probably the less critical ones. There is a lot of discussion about GP type attendances at emergency departments should they be there or not? When we think about what is a condition that could have been seen in a primary care setting, we can filter that down to people who have not arrived by ambulance; they have actually come under their own steam. They have not been referred by somebody else either a GP, another doctor or somewhere else in the hospital and they do not end up getting admitted. It is actually not a big group of people that fit all those criteria. COMMUNITY AFFAIRS REFERENCES COMMITTEE

84 Tuesday, 29 July 2014 Senate Page 11 So, if we are talking about whether we can filter down and identify those people so that a copayment can be applied to them, the last criterion I mentioned there was, 'Don't get admitted,' so you have actually done everything before you can make that determination of whether or not they were a general practice patient. There is an issue there, of course, about financial consent. If you are not going to tell people that you are going to charge them until after they have incurred a cost, is that a fair thing to do? Senator McLUCAS: The other patient type that still fits into that ambulatory but not admitted category is groups of people who do fit the GP type attendance definition but have been in a football game and have a big abrasion or require being attended to, but a GP would not have the capacity in most practices to do the fixing up that is required. Mr McAuliffe: Particularly where that fixing up involves multiple providers. It may be an assessment by the doctor and an X-ray; maybe it is broken and needs a plaster done, or it needs some follow-up. Maybe it is an ankle that is not broken or torn but needs some physio follow-up. So there is where you start getting that accumulation of multiple contributions that are going to direct people. You mentioned the footballer on a weekend, who may not be able to access that combination of services anywhere other than the hospital. Senator McLUCAS: Thank you. Now I want to go to your request of the department. Can you walk me through that again so that, when we talk to the department this afternoon, we can be very clear on what you have asked for and what they have refused. Mr McAuliffe: Sure. The bulk-billing data that gets referenced regularly talks about 80-plus per cent of services being bulk-billed, and that is actual services, so it is the individual item number that gets bulk-billed. What we were particular interested in is how that translates into actual people: how many individuals are bulkbilled all the time, sometimes or never at all, and where are they? What is the distribution of the bulk-billing services? We know that there is this magic 80-plus percentage, but where is it? So we put in that request. Because it is not available through the publicly available datasets on the Medicare data that is available through the internet, we submitted that as an FOI, asking for a breakdown of the number of people who are bulk-billed sometimes, all the time or never. As I said, the response was that that collection of data did not exist in a single place and that it would take significant effort to collect it and it was not considered to be a worthwhile exercise, therefore. We responded to all the relevant ministers indicating our concern that this was not available and, frankly, that they deserved better support and data in order to inform their decision making. Senator McLUCAS: Why did you want that data? What would it have helped you to understand? Mr McAuliffe: What it would have indicated to us is, I guess, a greater granularity of the impact of the application of a copayment. A lot of talk was that GPs already make these decisions about whether this person can afford to pay. We do not know how many people they think cannot afford to pay, who they are regularly or always bulk-billing. We do not know if GPs are making that decision, other than anecdotally. Senator DI NATALE: Just to understand this a bit better, 80 per cent of the bulk-billing services, we know, is a global figure. It does not tell us anything about the individual patient. It may be that an individual patient gets bulk-billed for their second and third visits but not for their first visit. We do not know that. It does not tell us in what areas. It does not give us the sort of information we might need to know with a concession card holder versus a non-concession card holder and what the difference will be, in terms of a co-payment, for those two groups. We are looking at the figure in totality rather than looking at the individuals. Is that what you are getting at? Mr McAuliffe: That was summarised much better than I did; thank you. Mr Tobin: It is not just about GP bulk-billing. I guess one of the things that gave us concern was when we started seeing reports from the National Health Performance Authority, particularly the variation between different Medicare Locals on the percentage of people who were not going to see a GP, were not filling scripts, were not going to see specialists and, amazingly, emergency department attendance one Medicare Local district was as high as 29 per cent, whereas the average was much, much less than that. It says to us that the figures we see from AIHW are very much global figures. When you actually drill down to specific geographic locations or when it comes down to an individual family, we know the average out-of-pocket cost is $1,100 per person, so you multiply that by the numbers of people in the family and that is already several thousand dollars spent. Quite clearly, some are exposed to much higher costs than that. That is our concern. As part of this process, if we can reach a much better understanding of who is paying out-of-pocket costs and what the impact is that will help us work on ameliorating those, going into the future, I think this whole data issue is absolutely crucial to the outcome of this inquiry. COMMUNITY AFFAIRS REFERENCES COMMITTEE

85 Page 12 Senate Tuesday, 29 July 2014 Senator BILYK: The other thing you mentioned in your submission was the fact that there was no modelling data made available by the government or the department in regard to the co-payment expecting to reduce GP attendance by one per cent in the first year. Did you try to FOI any of that sort of stuff? Mr McAuliffe: We did not try to FOI that, but those statements were made at the Senate estimates committee hearings by the department officials and, I believe, by the assistant minister. Mr Tobin: That is probably another area that we would like to see more work on. I know anecdotally that some of our pathology services associated with our hospitals reported quite a significant drop in tests shortly after the budget announcement, and that seems to have recovered. There is quite a cohort in the community that is very sensitive to very small price change, so I think whatever ends up going through the Senate, if there are additional co-payments, we do need to monitor the impact of those very carefully. If the co-payments do not end up going through the Senate we still have an ongoing issue which was the genesis of this inquiry over 12 months ago. We do need to do much more work on the impact of existing and potentially new co-payments. Senator DI NATALE: We get that level of data through the PBS. We just do not get it with the MBS. Is that right? For example, we can compare the impact of the co-payment on concessional versus non-concessional patients in a way that we cannot with the MBS. The data issue has come through in both your submissions. We potentially could be embarking on what is a big change to Medicare. As we have heard in the previous evidence, there is a lot of speculation about the impact. We do not have very good evidence in some areas, although I think we probably have enough to make an informed judgement. But what you are saying here is that, even just from the perspective of an evaluation, we are doing something that allows us to really evaluate in a way that perhaps no other jurisdiction has been able to do the impact of a copayment on the provision of medical services for different people. In fact, we will know almost conclusively at the end of that, if we are collecting the data appropriately, what the impact really is. That would be a huge contribution to the body of international evidence. Would you agree with that? I am not advocating for it. I am only saying that if this were to proceed then it should only proceed when there is a commitment to ensuring that there is a thorough evaluation. Mr McAuliffe: In order to evaluate it effectively you need that baseline data. As you suggested, we are effectively talking about the RAND study on a national level. We have that baseline data of who is doing what now, so we can make a change and see what happens. Mr Tobin: It is absolutely important that if that does happen that the cohorts we examine are sufficiently finegrained so that we can see what the impact is, particularly on people at the bottom end. If there are additional copayments introduced and they have an adverse impact, particularly at that bottom end, then certainly our advocacy would be very strong. If you have the evidence then hopefully governments would be in a position to modify what is introduced. Senator DI NATALE: Going back to this issue of utilisation of emergency departments as a response, the other thing you mentioned in your submission, Mr McAuliffe, was that there have also been concurrent changes with the national partnership agreement. Can you just talk to that. Mr McAuliffe: The previous government introduced the national emergency access targets as well as the national elective surgery targets. There was a national partnership agreement which provided funding to assist hospitals to achieve those targets. They were waiting time related targets. Senator DI NATALE: Just to understand that, it was an incentive to ensure that somebody who goes to an emergency department is seen within a particular time frame? Mr McAuliffe: Yes, so they are out of the hospital within a four-hour period. That funding has now ceased. The NPA was wound up early as a result of the recent budget. So we have a situation in the emergency department of the removal of that incentive to achieve those targets and there is also then the additional potential impact of flow of patients from the general practitioners into the emergency department. So effectively it is a demand double whammy on the emergency department. A financial incentive is not the only driver of good performance within the emergency department, but it was the processes and practices that were able to be supported by that additional funding that will make the difference. Senator DI NATALE: So it is a double whammy. Mr McAuliffe: Absolutely. Senator DI NATALE: I think the question of the safety net was raised in your submissions. Do you have any comments to make about that? I assume you both heard the previous discussion about the safety net. Would you agree with the commentary that was made previously? COMMUNITY AFFAIRS REFERENCES COMMITTEE

86 Tuesday, 29 July 2014 Senate Page 13 Mr McAuliffe: Yes, certainly. We put a number of hours into analysing what the impact of the changes was going to be, which demonstrates just how complicated it was to work out what the swings and roundabouts were. We would certainly support anything that would simplify that process and make it consistent across the various systems that exist. Mr Tobin: We would support the principles that were enunciated previously. I think the fundamental principle should be that the safety net needs to be designed around the consumer. At the moment, the safety nets have been designed by different parts of our siloed system and so, as well as being difficult to understand, if people have to separately qualify for different aspects of a particular safety net then that just makes it much harder. We do recognise that this may not be as easy a task as it sounds, because obviously a whole range of other factors come into play, including the opportunity for providers to potentially modify the way they provide services once they know that a patient has qualified for the safety net. But, fundamentally, we do need to ensure that people are not falling through the cracks, and certainly at this stage that would appear to be the case. As to some of the areas that are not covered by Medicare at the moment, such as allied health: again, some of those are areas where greater contact with allied health practitioners could potentially end up keeping people much more healthy, particularly those who have multiple chronic diseases. So I think it is important that we have a robust discussion about the safety net. Senator BILYK: In page 3 of your submission you state that there is little evidence that the cost of developing a system for tracking the number of co-payments made by an individual is being considered, and also that attempts to obtain this type of data for general practice services have been rebuked on the basis that it is not yet available and yet it is supposed to be able to jump into place and start working. Can you make some comments on that for the committee, please. Mr McAuliffe: I think you have just made the point yourself, really, that this is a process that is meant to be in place to support this change of policy, and it is not yet, and it needs to be in there quickly. We know that development of that sort of information system and particularly the interconnections between multiple information systems so we are talking multiple systems and data collections that the data needs to be teased out of is not a small task. It would be impressive, to say the least, for that to be available in time for the commencement of the co-payment model. Senator BILYK: I do note also that you say the co-payment policy is rapidly becoming an evidence-free zone. That is a statement; you do not have to comment on that. You do comment, though, that clinicians in New Zealand, where co-payments are required for primary care, are calling for the system to be reviewed because of the negative impact on vulnerable patients. Can you just expand on that a bit for us? Mr McAuliffe: Again, it provides some evidence to back up some of the summaries that have been made about who the vulnerable people are. Clearly, the clinicians in New Zealand are seeing the patterns that we have described, where the people with chronic disease, the elderly and those at the lower socioeconomic level are the ones who are deferring their treatment or, as has been said, are not getting their prescriptions filled, or are making that decision about, 'Do I worry about this funny chest pain that I have or do I make sure that my kids are being seen?' Senator BILYK: As to that system in New Zealand and I am sorry; I do not know anything about the system in New Zealand; presumably, it is fairly similar to what is being suggested? Mr McAuliffe: It is more of a mixed system in New Zealand, where there is a combination of some fee-forservice payment and some capitation payment. So it is a blended model. Senator BILYK: But it still has a negative impact on vulnerable people? Mr McAuliffe: Yes, it certainly does. The increase-in-co-payment side of it was having that negative impact. Senator REYNOLDS: I have a question for Mr Tobin. In the beginning of your report, you make the generic point that you think that those who should be able to pay for their health care do, and those who cannot should have higher subsidies. I am just wondering about the practical implications of that. How do you see the balance of that? For people who are on higher incomes, are you saying that they should have higher co-payments, or are you saying that they should have more private health insurance that should cover more services, such as GP services or others? What are the practical solutions that you are looking at that sit behind that? Mr Tobin: There are probably a couple of ways to come at that. Firstly, as to people on lower incomes, I think we need to absolutely make sure that they are protected from being exposed to costs that actually mean that they do not seek treatment when they need to. As you go up the income scale, obviously, to some degree, people encounter more costs because providers change their billing patterns if they know that people are on higher COMMUNITY AFFAIRS REFERENCES COMMITTEE

87 Page 14 Senate Tuesday, 29 July 2014 incomes. Basically, there are three ways people contribute to the health system. One is through the tax system. If you have a progressive taxation system then people on higher incomes do pay more. People also can contribute through private health insurance and they make provision through premiums and quite a lot of people have opted to purchase products that have a high front-end deductible or have exclusions so people can make contributions there. Then of course there is the out of pocket. Again we go back to the evidence. We need to have a look at the way people behave. We do know that people on higher incomes are less deterred from accessing services than people on lower incomes. I think, whatever the mix, we need to make sure it is evidence based. I think that is probably the key to where we come from. As I said before, we do know we have some very strong demographic challenges facing us. When I look in the mirror I wonder who is going to pay for my health care when I am no longer a taxpayer. Again we have not in this country had a really robust discussion about the role of private health insurance how it contributes and whether it should or should not. We make decisions that on the edges change either for or against a greater role for private health insurance. We should have a much more deliberative conversation about what that role should be. Just going back to the demographics, whether people in my age group should be making a greater contribution to my future care at some stage through some sort of health savings account is another discussion. We are not advocating all of those things; we are advocating we need fairly urgently in this country to have a much more robust, mature conversation about future use and access to health care and how it is going to be paid for and by whom. That is probably a long answer to a short question. Senator REYNOLDS: Thank you. That was a very comprehensive summary of the current situation and some of the options. None of them are easy options clearly, but where do you see some of the solutions lie? You clearly think that the people who can pay should pay. They are already paying more, as you point out, through taxes and health insurance. People on higher incomes might have more children or people with chronic illness in their family so their capacity to pay might be different to others. Where do you see some of the solutions lie? Mr Tobin: Just going back to my previous answer, I think we do need to have a discussion about future demand. Senator REYNOLDS: Okay. Just to clarify that: so you are not advocating for any particular solution; you are just advocating more discussion about the options? Mr Tobin: Yes. I know in this country there are some fairly strongly held views across the ideological spectrum and people are entitled to hold those but I think it is really important we have a much stronger evidence base before we make decisions to go off to more public provision or more private provision. Certainly a lot of people made the comment that the system and the ratio we have at the moment seems to work well. Whether it can work well with future demographic changes ahead of us is one of the questions that we have. For us one of the big problems with the current system is that it is very fragmented, particularly between funders. You have the Commonwealth providing some funding for primary care and aged care, you have state governments that partly fund their hospitals but get a Commonwealth contribution, you have private health insurers and you have individuals. A whole lot of effort goes into each of those funding sources trying to push patients to somebody else's responsibility for funding and that is not necessarily in the best interests of the patient. So we would like to see a much more consistent single funding stream. It could be through the public sector through pooling some of those resources or it could be through what was articulated as Medicare Select in the Christine Bennett health reform commission, where health insurers with a public subsidy risk rated cover the whole gamut of health care. I think that again is something we need to have a look at certainly, that incentive to fragment: 'We're the Commonwealth; we're going to make some changes and ask the states to pick up more, or vice versa, or push people off into private health insurance.' We need to be going back to the patient and having much more comprehensive coverage. Sorry, Senator Siewert. CHAIR: We have gone over time, but I know we started late. Mr McAuliffe, do you have a very, very short comment? Mr McAuliffe: Absolutely less than a minute. One thing I would just like to put on the record is that I think, in parallel with the discussion about who pays, we also need to have the discussion about what we are paying for. There is a lot of activity that goes on which is not necessarily evidence based which can consume a large amount of money and resources and time, and that is a strong area where savings could be made. I refer the committee to thee Choosing Wisely program in the USA, where over 50 professional colleges have identified between five and 10 clinical activities that really do not need to be done and provide that guidance to their clinical colleagues. That is the sort of path that we need to be going down here. Rather than getting caught up in who is paying, we really need to look closely at what we are paying for. COMMUNITY AFFAIRS REFERENCES COMMITTEE

88 Tuesday, 29 July 2014 Senate Page 15 CHAIR: Thank you. Senator McLUCAS: Mr McAuliffe, yes, that is a very important point, but I think we need to be clear that there is a difference between what some people are calling 'overservicing' and your point Mr McAuliffe: Yes, absolutely. Senator McLUCAS: that is, activities that are not clinically recommended, really. Mr McAuliffe: Yes. It is a quality versus quantity sort of issue. Senator McLUCAS: Yes. There has been language around overservicing that I think we do need to unpick. It is a shame we do not have time to talk about that, too. CHAIR: Yes. Thank you very much for your evidence today and for your submissions. They are very much appreciated. Mr McAuliffe: Thank you. COMMUNITY AFFAIRS REFERENCES COMMITTEE

89 Page 16 Senate Tuesday, 29 July 2014 ROOT, Ms Josephine Mary, National Policy Manager, Council on the Ageing (COTA) Australia SKINNER, Ms Marie Denise, Senior Policy Adviser, National Seniors Australia [9:52] Evidence from Ms Skinner was taken via teleconference CHAIR: I welcome witnesses for the Council on the Ageing and National Seniors Australia. I understand both of you have been given information on parliamentary privilege and the protection of witnesses and evidence. Thank you for your submissions. I invite you both to make an opening statement and then we will ask you some questions. Ms Root, we will start with you. Ms Root: Thank you, Senator, and thank you for the opportunity to address the committee. COTA is a consumer organisation; we represent the views of older people. We welcome this inquiry, because last year, before the federal election, we surveyed 900 people about what the key issues were for them in the lead-up to that election, and 78 per cent of them put access to affordable and quality health care as their No. 1 issue. So, obviously, older people are concerned about health care. They raised with us some broad issues highlighting affordability, raising the issue of how much they pay out of their incomes for health care and issues around how much they pay for Medicare those that were not bulk-billed raised this; and I take the point about the rate of bulk-billing and PBS co-payments. They also raised dental health and access to allied health services, to physiotherapy and podiatry, and the cost of that. If they were one of the ones who had private health insurance and over 40 per cent of old people actually do have ancillary private health insurance they still raised the issue of the gap between what their private health insurance gave them back as a rebate and what they actually had to pay. So, even when they had taken some steps for self-provision, they still felt that they were being asked to pay extra amounts. The other thing they raised which I think is relevant here is the issue of transport costs as part of health costs. I think it may be of interest to the committee to note that the National Aged Care Alliance did a paper on transport as part of healthcare costs some years ago, which I am happy to provide to the committee if anybody wants it. NACA at the time was pushing for transport costs to be included in any estimate of health care. For older people, healthcare costs probably more so if they live in a regional or outer metropolitan area can be quite significant. For people living in rural and remote areas, what we have seen and this was highlighted by people to us is a shift in many states from state government provision to the individual, because state governments have taken the decision to consolidate service provision in several hubs, and people have to come in. I used to work in Queensland Health, and that was certainly a policy of the Queensland government to put more specialist services into a few places and expect people to come into them. So, if you are not going to reimburse people's costs, you are actually asking them to bear more of the cost of that health provision. So it is an efficiency for the state government to do it that way, but at a cost to the individual, and people highlighted that. There was a lot of media speculation on MBS and PBS copayments, and we started to get a steady stream of people contacting us with concerns about what this would mean for them, on how they were going to pay for them and on the quality of their life. When the budget was brought down, that stream turned into a flood, it has to be said, with a lot people contacting us thinking, first of all, that the GP copayment was going to come in straightaway and that they should stop going to see their doctor now. They did raise the issue about having to make choices about whether they would go to the doctor and whether they would get their script filled. I think it is important to remember that older people come into the three groups that have been identified by other speakers; in fact, they have the triple whammy of being vulnerable because they are older, they are on low incomes on the whole, and they have chronic diseases. So those are the three things that mean that copayments are going to have a negative effect on you, and older people are going to get all three. In our submission, we give some facts and figures which have been repeated by others. I think it is fair to say that the copayments around dental are a critical issue for older people. The oral health of older people in this country is probably disgraceful, to say the least. They just cannot afford it. Keeping dental services out of Medicare and out of government funding is a key issue for older people that we think needs to be looked at. We just think that any additional copayments for GPs or for PBS will just make it worse. People are already struggling, and it will just make their decision making more difficult about whether they get a procedure or not. I am happy to take questions. CHAIR: Ms Skinner? COMMUNITY AFFAIRS REFERENCES COMMITTEE

90 Tuesday, 29 July 2014 Senate Page 17 Ms Skinner: Thanks for the opportunity to present to the committee. I think that earlier speakers have raised several things that we also might have raised, so I will try to cut back on what I was going to say. I certainly support most of what was just said from the perspective of COTA. From our perspective, we have a couple of surveys that have been completed with members where they have raised things that concern them in terms of the cost of their health care, so I might just go through some of those. We are a member-based organisations for people aged 50 or over, up towards 200,000 members, and they participate frequently in a number of surveys our Productive Ageing Centre conducts. Australians aged 50 and over generally report financial stress when they meet the cost of their health care. Research in 2012 revealed that 570,000 people aged 55 and over spend more than 10 per cent of their income on health, while about 250,000 would spend more than 20 per cent of their income on health. That represents significant financial stress for that latter group, particularly for those people that are on low incomes and, as Jo indicated, a lot of older people are on low or fixed incomes. On average older Australians spend $350 per quarter on out-of-pocket healthcare costs. But that burden is magnified tremendously for people with chronic health conditions, particularly as they also tend to have lower incomes. People with five or more chronic conditions indicated that they spend $882 per quarter almost six times as much as those with no chronic conditions. We also have real concerns about the exclusion of some health care from Medicare. Dental care and allied health services and emerging treatments are excluded from universal health access. When you add that to the long waiting lists for elective surgery, that all places great pressure on the budgets of older Australians, whose need for those services increases with age. Our members who responded to the survey have indicated that they are not hopeful of any improvements in affordability of their health care in the future. In 2012, we surveyed 2,000 older Australians and only four per cent thought they would be more satisfied five years into the future while 45 per cent thought they would be less satisfied and almost a quarter were not able to really make a statement of what they thought would happen in terms of the affordability of the services they required. We also note that the healthy communities report on consumers' access to services in Medicare Local areas around Australia revealed concerning levels of deferral of services due to cost, and we have noted that in the responses that we have had from our members. When we surveyed people in 2012, approximately one-third of them recorded affordability of health insurance and health care as their primary concern regarding health services in Australia. Their top concerns were: lack of access to the Pharmaceutical Benefits Scheme this would have come from people who were fully funded retirees and did not have concessional access; lack of access to the Medicare safety net 45 per cent of people nominated that; long waiting times for treatment were nominated by 34 per cent of respondents; and the staffing levels in various health care services were also nominated. Those worries increased as the respondent's age increased. The only other thing that I would like to raise initially is that the current system whereby people access several appointments and individual fee-for-service treatments really go against the most efficient use of the healthcare services, and management of patients with chronic diseases would definitely be enhanced by a more comprehensive approach to health services and support. I note that some of the earlier speakers have raised the issue of making sure that those services are evidence based. We think that an integrated patient centred focus could reduce progression of chronic disease to acute events and the avoidable hospitalisations that happen now when people either do not have comprehensive care or defer their care. That could include a move away from a fee for service and a greater reliance on complementary models of care. Some of the earlier speakers have mentioned the proposed co-payments for both Medicare and the Pharmaceutical Benefits Scheme. I would like to put on record that, prior to the federal election when there was considerable media comment on proposals for co-payments for GP services, National Seniors members responded to a survey prior to the federal election, commenting on the possibility of paying a $6 co-payment for the bulkbilled services with the safety net that applied to what has been proposed. People on concession cards were exempted and families with children would cease paying the co-payment after 12 visits. Responses indicated that people were aware of the increasing cost, and many, including people who identified themselves as pensioners, were willing to make a small co-payment. However, we proposed a small co-payment for the GP service but we did not propose extending that to all the GP referred services. We do think that that is going to place considerable pressure on people's currently stretched finances, in addition to the extension to the Pharmaceutical Benefits Scheme safety net and also the co-payment for the Pharmaceutical Benefits Scheme. We are quite concerned about the extent of those co-payments. They go way beyond what we suggested our members said they might be willing to pay. They were willing to pay a $6 copayment for some GP services as long as safety nets protected the vulnerable and people with concessions. COMMUNITY AFFAIRS REFERENCES COMMITTEE

91 Page 18 Senate Tuesday, 29 July 2014 Senator DI NATALE: Thank you for your submissions. One of the areas that has received attention in most of the submissions is the area of dental care. It explains a significant proportion of the growing out-of-pocket costs that patients are experiencing, particularly older Australians. I am interested in how we address that issue. We have heard from earlier witnesses about some of the inefficiencies in the system and that there are potential savings to be made. But, if we are going to meet the demand for dental care, really that requires revenue from somewhere if we believe that out-of-pocket costs are a barrier to some people getting treatment. The question for me is: would both organisations support, for example, a small increase in the Medicare levy if it were to result in perhaps vulnerable groups low-income earners or concession card holders being able to access dental care or potentially a universal system of access to dental care? Ms Root: Our members supported the increase in the Medicare levy to fund the NDIS. We got very strong feedback that people were in favour of that. I think older people would probably support an increase in the Medicare levy for dental if it were actually hypothecated if it were shown to be spent on dental and not just absorbed into general revenue or consolidated revenue. The issue, I think, is that you would actually have to increase the Medicare levy quite significantly to pay for a dental scheme. I do not know the numbers, but I think we have a mistaken view of the cost of dental treatment because we look at what private dentists charge and we think that is what it has to cost. I know Andrew from AHHA knows much more about dental than I do, so he could possibly answer this question better, but I think people would support it. Our members would probably support it. They do take out private health insurance very often to deal with dental health. The area of dental health where we have a particular unmet need and a particular crisis is dental care for older people who live in residential care. We probably need to find a way to address their needs that would not be a feefor-service approach. There is a lot of evidence that that group is very disadvantaged and has terrible oral health. Ms Skinner: I guess the question there is: do we assume that just increasing the Medicare levy is what is required for people to access dental health service? We already know that the Medicare levy does not cover all of the current costs for those eligible services. I think everyone would support that service becoming part of medicare access to health because, after all, the evidence is there that dental health has a big impact on health which is not made up of separate bits. Additionally, people with chronic health conditions, which do tend to be in higher levels in older people, definitely have poor oral health and require [inaudible]. They are the group who are missing out the most with the affordability issue. I certainly support what Jo said about people in aged-care services who definitely do not receive the oral health services they need. In terms of increasing the Medicare levy, if people could see a direct link between increasing that levy and being able to access more affordable dental health [inaudible], I think they would support it, but I do not believe it would fund it adequately. In the recent report, I cannot remember if the figure was $10 billion or $10 million extra needed to fund poor oral health. I was trying to find the figure in my submission, but I cannot put my hand on it quickly. Senator DI NATALE: Yes. We do not need to go into the details yet, but there are various models that have been proposed anywhere from $5 billion to $10 billion. Less than a one per cent increase in the Medicare levy would fund most of the models that have been suggested. But I am just interested. We had a presentation earlier which talked about how people with the capacity to contribute should. The question, though, is that there are other ways of funding health care rather than simply 'user pays'. The message I am getting from both of your submissions is that there is absolutely a willingness to engage in the funding discussion if people could see a direct correlation in where their tax contributions go. So I was interested in that. The other thing is the question of the safety net. You both, I think, referenced Medicare safety nets and the PBS safety nets. Do you have any suggestions for how the safety nets might be improved to help your members? Ms Root: The first thing I would say is that I think we need to have an integrated safety net one that people understand and where they can monitor for themselves where they sit in relation to that safety net. I think one of the problems with safety nets is that there might be an incentive for people to push up the costs in the same way that, when you give subsidies for things, it just encourages the provider to increase the costs so you meet the safety net quicker. I think there are issues around that. An integrated safety net has been discussed by all the previous speakers. Health care, visiting your GP and getting your medications are really all part of the same thing. I am not sure why they are treated as separate safety nets. Ms Skinner: We have suggested a combined safety net in a couple of our earlier submissions and I think in this one as well, although I cannot be sure of that. The only thing to say there is that I agree with what Jo said in terms of them being able to be understood. The one Medicare safety net that is proposed has various exclusions and caveats that are very difficult for individuals to understand. Even if you understand what it says, you have to then apply it to your own personal situation to see what the impact is on you. We now have a situation where COMMUNITY AFFAIRS REFERENCES COMMITTEE

92 Tuesday, 29 July 2014 Senate Page 19 safety net benefits are going to be calculated at 80 per cent of the out-of-pocket costs, there is a cap on the total benefit paid and you have a whole range of services that are going to have caps on them. It is very difficult for a person who is in an acute health situation and who has to get lots of tests and specialist appointments along with their normal GP services to understand the difference between what they are paying as an out-of-pocket expense and what is actually going to be counted towards the safety net. It is very difficult to understand and work out. Senator DI NATALE: I have one last question, around private health insurance. Ms Skinner, you report that your members value private health insurance, and they give a number of reasons for why they believe it is important. In the commentary in the submissions, there were some examples of people who have had what appear to be unpleasant experiences. One in particular, I think, mentions the $5,000 out-of-pocket after a couple of procedures were done. Is the question of out-of-pocket expenses for surgical procedures for people with private health insurance something that your members are concerned about? Ms Skinner: Definitely from the perspective of National Seniors members. Those statements that are included in our submission are definitely typical. We asked people to give us facts before we did the submission, and we got numerous responses. These are typical of the kinds of responses that we got. It was not unusual for people to speak about being out of pocket for amounts in the thousands of dollars. They all mentioned that, if they had gone on a wait list for the actual procedure if it was elective surgery or if they had gone with a cheaper type of treatment, they were concerned that the advice was that there was a best treatment or a gold standard of treatment. In the case of men with prostate cancer, that appears to be a significant concern. Many of them have indicated that they would sit down and make decisions about going with what was indicated to them was less than the gold standard, because of the cost. So we are definitely getting messages from people. Also, in a couple of those little comments that we provided there, you can see that in some cases an individual out-of-pocket might be a few hundred but then you have five or seven of them, and that really starts to impact on the disposable income of people who are either fully-self-funded retirees on a fixed income or people who are maybe pensioners or partpensioners who have just got a little bit of a safety net that they have saved somewhere, and the moment they get an acute health condition that just gets decimated. Senator DI NATALE: Were they adequately warned? Were they warned about the out-of-pocket costs? Are people aware that this is coming? Ms Skinner: I think that when they go to see health practitioners, their main concern is, 'What kind of treatment am I going to have to have?' and it only dawns on them as they navigate the system just how much it is going to add up to. In many cases, if they have private health cover, they can ring their health insurance provider, and they do get given an approximation of what it will cost, but that is quite difficult for people when they are at a stage when they have only just found out they have a condition and they need treatment for it. Many of them mentioned that. Could I just add that people who need to have significant dental treatment are also talking about several thousands out of pocket. Senator McLUCAS: Thank you both for your submissions. In both the submissions, you make reference to the question of the sustainability of the health system. As to the co-payments that have been proposed in the budget, the government says that they need to be introduced so that our health system will be more sustainable. Given that you represent the largest population that will be paying those co-payments, and, potentially, the most vulnerable, can either of you comment about the fact that the money from this co-payment, that is going to be charged to people who attend our doctors, who use our pharmaceutical scheme, or who require pathology and diagnostic imaging, will be going to the Medical Research Future Fund. Would you like to comment about the equity question? In fact, is this a sustainability measure, as the government has suggested? Ms Root: On the issue of the GP co-payment, which is the one that is going to the medical research fund, I think that that is not reducing health expenditure; it is just redirecting it to a different purpose. And it is not one of the measures that is repairing the budget, because it is simply going to be spent somewhere else, so it is not a decrease in expenditure overall. The feedback that we have had from our members is that, whilst they see the need for research, that research is not going to benefit many of them, because the lead times, until the research fund actually starts to spend any money, and until it actually brings about any change in any treatments, are going to be long term. I think there is a deal of resentment that they are being asked to fund something that they believe, as they have said to us, that government should fund from other sources if they think research needs to be done. So that is the feedback we have had from our members. Ms Skinner: I guess there are a couple of things to raise there. The first is a bit of a philosophical one. As a society, are we wealthy enough to be able to put funding towards health care for the entire community? And how serious is it, in terms of people needing to be charged co-payments? And, as I said earlier, while our members were supportive of a co-payment for their GP visit, it did not extend to the full referred services that any GP might COMMUNITY AFFAIRS REFERENCES COMMITTEE

93 Page 20 Senate Tuesday, 29 July 2014 recommend for a patient. On top of that, they had not indicated that they were willing to pay additional pharmaceutical benefits co-payments. So I do not think there is full support for that wide range of co-payments. Additionally, it probably will hit people with chronic health conditions who may not necessarily have concession cards eligibility and that is among older people, but it will also hit those with concession cards. As to the other question, with regard to the research: I think a lot of the researchers have come out themselves and said, 'We really welcome this; it is necessary and it is important work, but we do not want it to happen to the detriment of vulnerable people in the community.' Senator McLUCAS: Thank you. I think that questions the arguments that the government has put as to why you would introduce a copayment. Ms Root, in your oral presentation you talked about the stream turning into the flood. I have to concur with that. This was in reference to people calling you and wondering whether or not the GP tax had already been introduced. Are you still getting those calls? Ms Root: We are still getting a few not that many. I think people do not understand that the copayment has to go through the House of Reps and the Senate. They do not understand that it is not in action. It is interesting. I went to pathology myself the other day, and they have a big notice on the pathology door saying: 'We are still bulk-billing all patients. There is no copayment.' So they obviously feel the need to reiterate that to people. We are still getting a few people. It is often put in the context of the copayment and then potential changes to the pension and potential changes to something else, and older people are feeling that their lives have changed. I think self-funded retirees and people who were on the Commonwealth Seniors Health Card and who get concessions on their pharmaceuticals and their medical payments but have lost income are feeling particularly that this is just an extra impost that they really do not think they are going to be able to meet within their budget. Senator McLUCAS: I got a text from my pathology provider just the other day telling me that bulk-billing is still available at all of their pathology centres no copayment required. Ms Skinner, are you getting the same sort of contact from your members around questioning about whether or not it is happening? What sort of information can you provide to us? Ms Skinner: We had quite a few when we sent it out to members and asked what they thought of the copayment. That led to us proposing that people might be willing to accept a $6 GP visit copayment as long as there were safety nets. But then, after the budget came down, we had quite a lot of inquiries from people, and it was not just about health; it was also about the potential changes to the pension in We had to spend a lot of time explaining to people that this was not necessarily in law yet and that therefore there was going to be a period of time before that would be passed. So people were a little bit confused and thought it was happening straightaway. That number of inquiries has dropped significantly, I would say, in the last month. So yes: people were concerned. We have been doing our best to explain the situation to them, and the number of inquiries has dropped off. Senator McLUCAS: Are either of you also hearing stories about people not attending their doctor already? Ms Skinner: We get that all the time, and that has been a theme that has come out in the studies that the Productive Ageing Centre have conducted. People are telling us that they definitely either defer visits to their GP until they can afford to pay for them, defer filling a prescription or put off taking some recommended treatment. That has been consistent, I think, in surveys over the last several years. Ms Root: We have no evidence that people are doing it more. The other thing I would say is that, in talking to groups of older people about budget changes and everything, there has been a misunderstanding about the proposed copayment. A lot of older people think it is only for people who are bulk-billed and they have not quite worked out that actually, even if you are not bulk-billed, you will still effectively be paying extra because you will lose the MBS $5 and you will have to pick that up. So it may be an invisible charge to start off with until people look at how much they paid and how much they get back. I had a group of older people who said, 'Oh yes, it's fine for people who are bulk-billed to pay.' Then, when you say, 'Actually, you're going to pay extra as well,' there is a bit of a change of attitude. Senator McLUCAS: Yes, I think the government has a bit of work to do to try to explain this to the community. Thank you both. CHAIR: Thank you very much. I do not think either of you took any questions on notice, did you? Ms Root: No. Ms Skinner: No, we did not, but can I just make one very short comment: I did not mention the need for people with low or impaired vision to actually get support services, and I think that is a group of people who have been missing out a lot in terms of services and it would improve their quality of life and might even reduce accidents and unnecessary hospitalisations. So I just wanted to mention that as well. COMMUNITY AFFAIRS REFERENCES COMMITTEE

94 Tuesday, 29 July 2014 Senate Page 21 CHAIR: That is a good point. Thank you very much. You did not provoke any other questions, so I would get going while the going is good! We will now suspend for a short break. Proceedings suspended from 10:25 to 10:40 COMMUNITY AFFAIRS REFERENCES COMMITTEE

95 Page 22 Senate Tuesday, 29 July 2014 OWLER, Associate Professor Brian, President, Australian Medical Association TRIMMER, Ms Anne, Secretary-General, Australian Medical Association CHAIR: Welcome. Thank you for your submission and your time today. Has information on parliamentary privilege and the protection of witnesses and evidence been provided to you? Prof. Owler: Yes. CHAIR: I invite you to make an opening statement, and then we will ask you some questions. Prof. Owler: Thank you. Good morning. I am a neurosurgeon as well as the President of the AMA, and I understand I am one of the few practising doctors actually appearing before the committee. I think the committee does have a very challenging inquiry on its hands. I understand the initial reason for the inquiry was generated by concerns about increases in out-of-pocket costs. The AMA's submissions show that outof-pocket costs are a feature of the Australian health financing system that is not growing at a faster rate than other health costs, nor have out-of-pocket costs for health care increased as a proportion of health expenditure. Importantly for my members, the AMA's submission highlights that less than 12 per cent of individuals' out-ofpocket costs are for medical services. This is contrary to the common misperception that all out-of-pocket costs are for medical expenses. I acknowledge that there are individuals who because of various circumstances have incurred large out-of-pocket costs for their health care, and I urge the inquiry to explore some of those circumstances in detail so that we can truly understand how that has happened, because, as our submission points out, the vast majority of health care provided in Australia is provided at no cost to the patient. That brings me to the next challenge for this inquiry. The committee and the community are faced with an issue of social policy and an about turn on policies that have incentivised medical practitioners to bulk bill healthcare services to a health policy that forces everyone to charge a co-payment. The AMA has always encouraged its members to set their fees to cover their practice costs and to include a component that reflects their professional expertise and training. As Medicare rebates have not kept pace with increasing costs, they do not cover doctors' fees to the same extent that they did in the past and patients have out-of-pocket costs in more situations. The AMA supports co-payments in health care. They are a natural feature of the Australian healthcare system. Doctors are free to place their own value on their service, and governments and other insurers are able to limit the benefits they pay for services they cover. But the co-payment model proposed by the government is poorly designed and is inflexible. It will have unacceptable impacts on vulnerable patients and for their doctors and implications for healthcare policy. An acceptable model would be one that does not strip money out of Medicare rebates. The AMA accepts that governments will wind back their contributions to health care; successive governments have been doing that since Medicare started by using an indexation rate that is not geared to labour costs. Now is not the time to strip money out of primary health care. It is the time to invest in primary care to ensure sustainability of the healthcare system. People need access to general practitioners to know what their healthcare needs are. General practitioners need access to pathology and imaging services in order to diagnose conditions early and put treatment plans in place. The committee's inquiry now has the opportunity to explore if the right copayment model is going to be implemented. Thank you. CHAIR: Thank you. Senator McLucas. Senator McLUCAS: Thank you very much for your submission and for appearing here today. Professor, on questioning in the Senate on many occasions on the question of budget measures and the GP co-payment, Minister Nash has regularly said that the GP can decide whether or not to charge a patient the GP co-payment. You talked about sustainability of medical practice. Is it realistic to say the GP can decide whether or not they will pass on the $7 co-payment? Prof. Owler: I think the fundamental question here is really whether it is feasible for a medical practitioner to bulk bill in those circumstances. The problem that we have is that there is a cut to the Medicare rebate. For nonconcession patients the $5 cut to the rebate means that, if they do not charge the co-payment, the doctor will be $5 worse off. That is out of a $36 co-payment to start with. For patients who are under a concession who would under this plan receive what is called the low-gap incentive, not only would they lose the $7 co-payments but they would also lose the low-gap incentive. For patients in metropolitan areas, I understand that then adds up to $13. For patients who are in regional areas, of course, there is a $9 low-gap incentive, so it is an extra $3, or $16. It is not feasible for a practice to run under circumstances where they decide to accept such a cut to the rebate that they would otherwise have received. I think one of the flaws in the proposal is the fact that it ignores the COMMUNITY AFFAIRS REFERENCES COMMITTEE

96 Tuesday, 29 July 2014 Senate Page 23 concept that medical practices and patient profile vary tremendously across the country, so, for those practices that are in high-bulk-billing areas like, for instance, the western suburbs of Sydney and are providing very good medical care in those centres, if they continue to bulk bill and do not charge a co-payment, the feasibility of those practices certainly comes into question. It also compromises the quality of the care and the time that can be feasibly spent with each patient. You might say that is tough luck to the doctor, but at the end of the day it is about the services that those doctors are providing to that community. It is the people in that community that will be most affected if this copayment proposal comes in. Senator McLUCAS: I asked the department when we previously met if the department has done any modelling I used the word 'modelling' and probably should not have or analysis of what it will mean for various types of practices around the country. We have moved more now to a multidoctor practice, but it is pretty predictable that you will have six or eight doctors in a practice. The department has said to me it is not feasible to try to make a judgement of what it will mean to the viability or feasibility of that practice. Has the AMA done any of that work? Do you have any comment on whether or not it is able to be done? Prof. Owler: It is certainly able to be done. You can take representative practices from various situations and model various rates of bulk billing and the types of patients how many concession patients that practice would typically see compared to non-concession patients, for instance and we know that the types of practices and models that they run vary tremendously. So one of the tasks that we have been doing in looking to an alternative model is asking our GPs from various areas to provide information and test what an alternative model might mean for those various practices. I think we do need to recognise the fact that practice models vary, but I also think we need to value the sorts of practices that are currently taking place in disadvantaged areas, because they are providing a very important service for patients in those areas. Senator McLUCAS: It has been put to me that, in practices where the client group is mixed income, what a GP would have to do would be to, essentially, bulk bill their lower-income patients. Then, to ensure the practice remains viable, the co-payment for the patient who may have more income will have to be higher. Is that potentially what will happen? Prof. Owler: I can say that is a description that grates on GPs. It has been suggested that the co-payment is a windfall for general practice with the $2 extra per consultation. I do not think any GP will describe that necessarily as a windfall for their practice. And then the windfall is supposed to be used to dole out the government's social policy to subsidise those people who cannot afford to pay. That is not the way that the health system should work. I know people give the example that that is the way it worked back in the 1960s, but it is We should have a health policy that is suitable for the types of practices that take place today, not the sort of health practices and GP surgeries that were run back in the 1960s. Senator McLUCAS: Finally, there is the question of overservicing and the notion that has been put out there that we go to the doctor too much and doctors overservice patients. Does the AMA have a view on what the real level of overservicing is if it exists at all? Prof. Owler: I think that, where there is a case of true overservicing where there is an intent to do the wrong thing, there is a professional services review, a process that the AMA contributes to and that appears to work well. That is the appropriate way to manage that. I think the notion that people see their GP too much is a false one. We know that the biggest challenge facing Australia in its future for the sustainability of the healthcare system is the burden of chronic disease. As we live longer and live with more chronic diseases, there are going to be more of those to manage and the GP is going to be the key person who is going to manage those people's chronic disease to keep them well and keep them out of hospital. As I have said on many occasions, encouraging people to see their GP is a good thing. The GPs are the answer to the sustainability of the healthcare system. They are not the problem. Senator McLUCAS: You have also spoken about the sustainability of our health system. In Senate questions Minister Nash regularly says the health system is unsustainable. For the record, could you tell us your view about the sustainability of our health system? Prof. Owler: That is a narrative that has been used very much in the past 12 months and even before that. There is no evidence that our healthcare system is unsustainable. When we look at the proportion of the federal budget that has been spent on health care, in 2006 it was 18.1 per cent. In the last federal budget it was 16.1 per cent. In fact, it has actually gone down. So, while the overall amount might be going up, it is certainly not out of control. The federal government's proportion of money that they contribute to the overall health spending in Australia is still 41 per cent, and it has been between about 40 and 43 per cent for the past 10 years. Our COMMUNITY AFFAIRS REFERENCES COMMITTEE

97 Page 24 Senate Tuesday, 29 July 2014 percentage of funds spent as a percentage of GDP in this country for total health expenditure has been at around nine per cent, below the OECD average; and, again, it has changed little over the past 10 years. The past 10 years' average, I think, was 8.9 per cent. It has gone up from 20 years ago, when it used to be seven per cent, and 40 years ago, when it was six per cent; but, again, our economy has changed. As this nation becomes a more prosperous and modern nation, it should spend more of its GDP on health care. As I said recently, health care, economically speaking, is a superior good and something that should be valued. That is something we are going to need to do if we want to maintain and, indeed, improve the standard of health care in this country. Senator McLUCAS: Thank you. Senator DI NATALE: The purpose of this inquiry was to look at the broad issue of out-of-pocket healthcare costs. Obviously the budget has put the issue into much sharper focus through the co-payment, so I will limit much of what I say to the issue of the co-payment. The government says that doctors can still bulk bill if they want to bulk bill a patient. What is your response to that? Prof. Owler: We can still bulk bill, but the doctor has to wear the costs of that. As I said in one of the previous answers, it is not feasible and economically viable for doctors to continue to absorb a reduction in the Medicare rebate by bulk billing patients, particularly those in disadvantaged areas where they have many patients who truly cannot afford to pay. We know that there are many vulnerable patients in our community. In aged-care it is going to be very difficult to even collect a co-payment. For instance, many of those patients do not have a wallet or they have dementia. It is going to be difficult for people with mental health conditions. It is going to be difficult in Indigenous areas for Indigenous Australians to pay the $7, particularly in remote communities. It is difficult when you have young families, with a number of people coming in together for vaccinations, where there are going to be multiple copayments. The problem here is that, particularly for practices in disadvantaged areas with lots of young families, doctors are going to be asked to bulk-bill a lot of patients and they are just not going to be able to economically sustain that loss of income into their practices. Senator DI NATALE: What impact did your members perceive when the announcement was made in the budget that the government would seek to introduce a co-payment? Do you have any evidence from your members to suggest that there was an impact on general practice simply from the announcement of a co-payment? Prof. Owler: Yes, as has been reported in the media, but we have also had our own instances where people have told us that the number of people attending their practices dropped and their waiting rooms were not as busy as what they usually were. In fact, many practices took the unusual step of sending SMS messages to people to remind them that the co-payment had not come into effect. It is hard to know what the long-term effect of that will be, but it certainly seemed to have an impact at that stage. We know that the costs of accessing a GP are a significant impact on people accessing health care, even when we have an 81 per cent bulk-billing rate, because the practices will vary in their location. We know that between five and six per cent of patients overall do not access or defer accessing a GP because of the costs associated with going to a GP. I understand that percentage increases in disadvantaged areas. I would have to come back to you with a number I cannot recall whether it is eight per cent or 12 per cent but it does go up. Senator DI NATALE: We have had evidence put to us by a number of witnesses that primary care is a very efficient part of the system and that overservicing is not really a feature of the system and, where it happens, it is isolated and it is dealt with through a process. It always struck me as strange that there is a view amongst some people that someone would choose to sit in a roomful of sick people reading magazines, maybe from the last decade, for fun. It always struck me as a strange case to make. Do you think there are areas of the system where efficiencies could be made and, if so, where are they? Prof. Owler: I think the biggest area of costs is still in the public hospital system; it is not in primary health care. I pointed out recently that one of the ironies of this budget was that there was a system being put in place a structural reform in the form of activity based funding that was designed to look at inconsistencies and inefficiencies like unwanted clinical variation. It forced clinicians to look at the way patients were being treated in hospital and how long they stayed and the pathways those patients were on. This budget signalled the end of the National Health Reform Agreement and, with that, the commitment to 50 per cent of growth funding to the states coming from the Commonwealth the very thing that was designed to end the blame game between the states and the Commonwealth. Moving away from the incentives to have an activity based funding system is ironic, because that was actually designed to look at savings, a nationally efficient price to drive efficiencies. That is where I think we would be better to concentrate our efforts. COMMUNITY AFFAIRS REFERENCES COMMITTEE

98 Tuesday, 29 July 2014 Senate Page 25 Senator DI NATALE: Are you suggesting that we have gone in the opposite direction to the direction in which we should be heading when it comes to funding hospitals? Prof. Owler: I think we have gone in the opposite direction both in primary care and in funding hospitals. The activity based funding method for hospitals has flaws and there are dangers there as well, but it was actually about not an open-ended funding model but increasing transparency and trying to get better efficiency and effect from the money we were spending on our public hospitals. In primary care, again we are going the opposite way. By putting up financial barriers, particularly to those who are elderly, those who we really want to access their GP, we are actually providing a disincentive for people to access primary care, which is all about keeping people well, managing their chronic disease, preventative health care and keeping people out of hospital. A catchcry that is often used is, 'We need to do more preventative health care,' but what we are interested in is actually seeing the commitment to doing that and encouraging people to see their general practitioner. Senator DI NATALE: What you think is going to happen to the funding of public hospitals now that we have packed up the National Health Reform Agreement? Prof. Owler: From 2017, the contribution from the Commonwealth to public hospitals will be CPI and population growth. We know that most state health budgets probably grow by around five to six per cent. CPI and population growth will give a figure that is much less than five per cent. I think it will have a significant impact on public hospital funding, particularly for smaller jurisdictions like Tasmania, which have very much smaller economies. They will have much more difficulty in funding their state budgets and state health budgets. Senator DI NATALE: A submission from the Royal Australasian College of Surgeons went to the issue of charges by some surgeons, and it was reported today. What do you say to the proposition that there are some medical specialists who are charging extraordinary fees, well outside what is considered to be a reasonable fee for a particular procedure, and how should we be dealing with that? Prof. Owler: I accept that there are instances where that is occurring, and the AMA is also concerned about those practices. We do not support those practices. I think a limited number of people are actually doing this. If we look at in-hospital medical services, 89 per cent of those services are done at no gap, so there is no out-ofpocket expense to the patient from the doctor. Senator DI NATALE: That is across the board with all consultants? Prof. Owler: That is across the board. Four per cent are done under what is called known gap. That usually means a few hundred dollars. And seven per cent attract a gap. Some doctors charge a gap, because we know that the MBS has not kept pace even with inflation. It has increased by about 2.48 per cent per annum on average over the past more than a decade. Of course, our practice costs have continued to increase. Many of the health fund schedules rely on the MBS. Some doctors do charge a gap, and their practice models and practice costs will vary, so that is very reasonable. Certainly the AMA schedule is well above the schedule fee. There are those patients who are charged a gap, and we have done a lot of work to encourage the use of informed financial consent. On the rare occasions when we have been contacted by people after they have been charged what we would consider to be an exorbitant fee, it is the case that most of those patients have been through a process of informed financial consent. I think we need to do some education; I think that is the key part of this health literacy and education in relation to the health system and the fees that people charge. It is not possible to put up on a website all of our fees and be able to look at it like you are buying a dishwasher and work out which doctor you will go to the basis of the fee that they charge. The experience and qualifications of many doctors will vary. Their practices will vary. Really, you need to see a patient, understand what their problem is, then formulate with that patient the best plan of management. If two different surgeons see the same patient, they may come up with two very different operations which will attract two very different fees. This is not uncommon. They are both very proper operations for that patient to have, but the different training and experience of that surgeon, for instance, might dictate two different things. So really you can only advise a patient on what you think the best course of management is once you have seen them and know what the condition is for that particular patient. Many of us will adjust our fees, particularly for people that we know will have difficulty in paying any sort of out-of-pocket expense. This is a relationship that is often formed between the doctor and the patient. If people have the experience where they come across what they consider an exorbitant fee, they should request a second opinion. Just like they do if they have a clinical issue, they can ask for a second opinion in relation to the fees as well. COMMUNITY AFFAIRS REFERENCES COMMITTEE

99 Page 26 Senate Tuesday, 29 July 2014 Senator REYNOLDS: In your submission, I was interested to read that one of the primary drivers of cost was 'the volume of treatment provided during episodes of care'. Would you talk a little more about that driver of cost and how you see that could be addressed. Prof. Owler: Sorry, you might have to direct me to that. Senator REYNOLDS: You say: There is now much Australian data that identify the volume of treatment provided during episodes of care is the most significant driver of rising health care costs Prof. Owler: I think what that is referring to is not just the medical costs associated with that care but also the other costs that come into play with an episode of care. An episode of care might be, for instance, a hospital admission, but there are a lot of other services that we now provide for patients, including things like physiotherapy, occupational therapy, the use of a pharmacist and a whole bunch of other allied health professionals. There is an increase in the volume of services that are provided per episode, so it is not just one fee but multiple fees across different providers. Senator REYNOLDS: There has been a lot of discussion in a lot of the briefs about out-of-pocket expenses and you are saying that 13 per cent of those are medical costs directly. Are you talking about doctors' fees? Prof. Owler: Yes, that is right. That is medical services, whereas, of course, there are out-of-pocket expenses for people's health care that comes from other providers but also costs for medications and even pharmacy type products. Senator REYNOLDS: In a lot of the reports, they quote these OECD figures in various different ways around where Australia ranks in comparison to other OECD countries. I would like to know how you would describe outof-pocket expenses, because what is not clear in any of these submissions so far is whether we are actually comparing like with like in other OECD countries. Is it the same basket of services in how we are compared with other OECD countries? Is it the same level of service for the same types of medical provisions? Prof. Owler: It is difficult to compare across different countries with different healthcare systems, but we have tried to compare contributions to health care from, for instance, government sources whether they be, in our case, federal or state and private health insurers and then what is actually paid by the patient. It is difficult to compare because we have different healthcare systems in terms of the types of services that are accessible and can be provided. I guess if you would like more detail on that we would be happy to come back with it. Senator REYNOLDS: Okay, thank you. Also, you speak about the ability of doctors to charge this new copayment and what you see as some of the challenges, but, as you said, your doctors obviously already charge copayments. I was not quite clear about how these additional disadvantages will come in place, given that they already do charge co-payments. Would you clarify further the current system of co-payments. The inference I took from what you were saying is that up to $46 a visit is different from what the government is proposing. Where does the disadvantage come in, given that you already have $46 versus $7? Prof. Owler: As I said, the profiles of the practices vary quite a lot. We know that there are some practices that charge co-payments. They have the infrastructure to do so and the patient profile is such that they generally can afford to pay a co-payment. But there are areas and groups of patients for whom the co-payment will represent a barrier to accessing health care. So you have difficulty in charging all of those patients a co-payment because you know that they will not turn up to access their health care. The other issue is particularly around the pathology co-payment. The co-payment proposal, as you know, is not just for general practice but for pathology and diagnostic imaging. For pathology, 50 per cent of patients are not actually seen by the pathology provider. The specimen is collected, for instance, by someone else, whether it be a GP or a practice nurse or someone else, and is then sent to the pathologist. So, if you ask the pathologist to raise a $7 invoice and then send it out to every patient, it is probably going to cost just as much to try to collect the copayment as you will receive back. So there are very practical implications from having a pathology copayment, for instance. Senator REYNOLDS: In response to one of the previous questions, you said that it was possible to do some of the modelling in terms of the impacts of this on individual practices. Have you done some of that modelling yet? Prof. Owler: The minister and the Prime Minister have asked us to come up with an alternative, and we have been working through doing that. Yes, we have been doing some of that modelling. Senator REYNOLDS: Do you have any results of that modelling yet? COMMUNITY AFFAIRS REFERENCES COMMITTEE

100 Tuesday, 29 July 2014 Senate Page 27 Prof. Owler: Obviously that is more appropriate to share with the minister and Prime Minister once the full proposal is worked up. Senator REYNOLDS: There has also been some discussion of numbers of delays of visits to doctors, but there was no information about what type of illnesses were involved whether these delays were for coughs and colds or those sorts of illnesses, or whether people were delaying going to the doctor for more serious illnesses. Do you have any information on that or any visibility of that? Prof. Owler: No, we do not have any of those sorts of details. Senator REYNOLDS: So, while there might be some evidence that there are delays, it is not clear whether it is for serious illnesses? Prof. Owler: No, we do not know if it is for minor things, but we do not know if it is for more serious illnesses either. Senator REYNOLDS: Thank you. We have also had a lot of discussion today and in some of the previous submissions about the current funding model and about various ways to realign health spending, and you have touched on some of that today. I am just wondering whether you have any more input in terms of how you see where we should be looking. Prof. Owler: I think there is very much a broad consensus that we need to do more to invest in primary health care, but that should not be to the detriment of our public hospital system and the capacity of our public hospital system. We still need those beds and we still need the ability to treat people in hospital. I think we probably need to be more cautious and more wise in the way that we spend the resources. There has been a lot of discussion about aspects of treatment such as futile care. That is not denying people treatment, but we need to do more to make sure that, when we do provide treatment, it is actually the sort of treatment that people want. Senator REYNOLDS: In your submission and others, a theme coming through is that one of the biggest challenges in health is obviously that people are getting more elderly and sicker, and there is that volume of very costly medical support. You talked about getting people out of hospital, and other people have talked about that. So where do you see the future of dealing with this changing profile of the burden on the healthcare system? Prof. Owler: I think we need to value general practice much more than we have been doing. General practice, I think, has been undervalued in terms of low rebates and a competitive drive towards bulk-billing in many instances. There are some, I guess, competitive practices that have been driving that. I think what we need to do is encourage more quality general practice so encouraging general practitioners and rewarding them for spending more time with patients to do that chronic disease management. While you might say that we have all these sicker patients, in fact having a chronic disease does not necessarily mean that you are sick. If you manage properly, you can keep people well and manage them with that chronic disease. While the amount and burden of chronic disease will increase as we have an ageing population Senator REYNOLDS: When you say we do not value them enough, are you saying that we do not have enough that we need more GPs or is it the fact that we do not have the systems in place for them to provide that primary chronic illness support? Prof. Owler: I think we do not value them economically, but I do not think we value them in terms of the policies that we have been developing. CHAIR: I have to move on. Senator Bilyk, you have one question a short one with a short supplementary. Senator BILYK: You never said 'short', Chair. CHAIR: And then I have Senator Moore with one. Senator BILYK: Thank you for your submission and for appearing today. I am the only Tasmanian here today, so I am interested in your comments with regard to Tasmania and any additional problems that come out of the process the government has suggested bearing in mind that we have a higher proportion of people over 60, we are a rural and regional area, and we have problems with accessing GPs in a whole lot of areas. Perhaps you could give me a bit of an overview, very quickly, of the impacts you see this having on Tasmania. Prof. Owler: I was in Hobart on Saturday, at the Tasmanian Health Conference, and I made a couple of points to the media there. Having performed a review of elective surgery in Tasmania last year, I am well aware of the fact that people in Tasmania wait much longer for their elective surgery and that the performance of the health system is actually poorer in Tasmania than it is in many other jurisdictions. I think the challenges for funding its public hospital system are very acute. The changes to the budget from 2017 are going to mean a real problem in terms of Tasmanians being able to continue to access public hospitals, and they will have no hope of developing COMMUNITY AFFAIRS REFERENCES COMMITTEE

101 Page 28 Senate Tuesday, 29 July 2014 their health system in the future or of addressing some of the inequities that currently exist in Tasmania and its health system. For the issues to do with general practice, we know that Tasmania has a higher burden of chronic disease and higher smoking rates, and we need to do more to encourage preventive health care and chronic disease management. That is why I think the co-payment is probably going to affect Tasmanians more than it affects people in other jurisdictions. Senator BILYK: We also have a higher incidence of issues such as multiple sclerosis and things like that. So people with multiple sclerosis, as an example, would probably be quite concerned about the impact on their treatment and costs. Prof. Owler: I think the future for Tasmania requires a long-term funding commitment from both the state and the federal government to address the problems that currently exist in Tasmania and for its future. Senator MOORE: I am interested in the ongoing discussion between the AMA and the government and governments on issues around health. Has the issue of out-of-pocket expenses been a debating point or a discussion point over the last few years with the AMA and with the government in the various models of consultation that you have with governments? Prof. Owler: It has certainly been a point of discussion around the GP and pathology diagnostic imaging copayment. I think it is something we are very conscious of, and whenever any health policy comes up, the issue of out-of-pocket expenses may well come up. We had a period not that many years ago where we did a lot of work around informed financial consent to address some of those issues. Senator MOORE: Yes, four or five years ago, I think it was. Prof. Owler: Yes, that would be about right. Senator MOORE: You released your policy, and it is now on your website. That was a key point at that time. Prof. Owler: Yes, that is right. The profession, and certainly the AMA, has tried very hard to make sure that we do as much education as possible for our own members, to make sure that that is adhered to. But we also advocate on behalf of our members that they should be able to charge a fee that they feel is reasonable to cover their expenses and also their professional service. CHAIR: Thank you very much for your evidence today. It is much appreciated. We have gone over time, but there was a lot of interest in what you had to say, so I helped facilitate that. Thank you very much. Prof. Owler: Thank you. COMMUNITY AFFAIRS REFERENCES COMMITTEE

102 Tuesday, 29 July 2014 Senate Page 29 BREADON, Mr Peter, Health Fellow, Grattan Institute DUCKETT, Dr Stephen, Director, Health Program, Grattan Institute [11:19] CHAIR: I welcome Dr Stephen Duckett and Mr Peter Breadon from the Grattan Institute. Thank you for your submission. I would like to check that both of you have been given information on parliamentary privilege and the protection of witnesses and evidence. Dr Duckett: Yes, we have. CHAIR: I would like to invite one or both of you to make an opening statement, and then we will ask you some questions. Dr Duckett: The share of health spending paid directly by Australian patients is unusually high in international terms, and it is growing fast. Further increasing patient out-of-pocket costs is the wrong way to save money. It will reduce service use after all, that is what it is designed to do; there is no dispute about that. The policy issue is about the trade-offs being made: what services, to what patients, will be reduced. The more that socalled necessary services are reduced, alongside unnecessary ones, the worse the outcome will be. There could be health consequences and increased long-run costs. The Grattan Institute's submission to this inquiry showed that many people already miss out on health care because of cost. Five per cent skip GP visits, eight per cent do not go to a specialist, eight per cent do not fill their prescription and 18 per cent do not go to the dentist. Although wealthy households pay more for health care than poorer households around $30 per week compared with $19 per week poorer households spend a much higher proportion of their income on health care; the median is three per cent, compared with one per cent in the higherincome households. People who use more types of services also pay more. Those figures are averages. Some households spend much more. In one in 10 of the poorest households that pay out-of-pocket costs, those fees eat up over 20c in every dollar of the household budget. The co-payment argument is even weaker when it comes to prescribed medicines. Co-payments here clearly do not target unnecessary care. PBS co-payments apply to medicine a doctor has ordered. Unless the doctor is wrong, it is necessary. If government thinks doctors are getting it wrong, the solution is not to charge their patients more; instead, it should focus on improving prescribing practices. These changes will put patients' health at risk and do little to balance the budget. For example, the PBS changes would only raise an estimated $450 million in , and this money is earmarked for a medical research fund, not the budget bottom line. There are much fairer and safer ways to cut PBS spending. Grattan Institute analysis shows that we could save $580 million a year that is $130 million more starting today, by matching the prices the government pays in England for just 20 drugs. Instead of shifting costs onto patients, this would save money for both patients and the government. It is a rare example of a way to improve health by spending less. With the abolition of the Pharmaceutical Benefits Pricing Authority the government took a welcome first step in improving how the government buys drugs. But we should go much further. We previously called for a fully independent expert pharmaceutical pricing authority to help Australia get a much better drug deal. In the meantime, the government should consider a one-off price cut on all generic drugs. Increasing co-payments will hit the most vulnerable. An alternative policy on PBS pricing will save more money than the PBS co-payment charge, without this collateral damage. Similarly, abolishing bulk-billing will hit the most vulnerable and may increase costs in the medium to longer term. It is not a good policy solution and should not be pursued in any form. Rather, new policies that strengthen safety-net protection should be developed, which are economically responsible but also socially just. The budget has sparked a debate about whether co-payments should go up. They should not. But we should be talking about the problems with the system and how to improve it. The safety net is complex, is fragmented and has gaping holes, and that needs to be addressed. It is important that we are fiscally responsible in health care, as in every area of expenditure. But in ensuring our financial rectitude we need to look first to where we can save money without impacting adversely on patients. The budget proposals jump too quickly to a cost-shifting solution when there are cost-saving opportunities that have not been pursued. Senator REYNOLDS: Thanks very much for your submission and the figures you provided, Dr Duckett. They are very interesting. I have a few questions in relation to some of the detail that sits behind some of them. The first one is in relation to the OECD figures. A number of other people have quoted those figures that are in your report, and they have quoted them in different contexts and taken different meanings from them. Is the OECD comparing the same standard of services? If you have one look at our percentage, it looks like it is the COMMUNITY AFFAIRS REFERENCES COMMITTEE

103 Page 30 Senate Tuesday, 29 July 2014 median it sits somewhere in the middle of the OECD figures. But are we comparing the same services and the same standards of service in other countries? Dr Duckett: No. The OECD figures we report and I presume others are reporting are about health expenditure. The OECD have standard definitions of out-of-pockets and so on, and I could quote the definitions if you like. Senator REYNOLDS: That is alright. I am happy for you to provide that if you like. Dr Duckett: It is reporting of expenditure. These figures do not report quality of services. In our submission we compared countries which are roughly similar to Australia in terms of GDP per head. We put aside the Mexicos of the world, which have very high out-of-pockets, and just compared like countries to address to some extent the question that you are raising. Senator REYNOLDS: So like countries but countries but countries that have got very different health systems and very different funding mixes for out-of-pockets, private and public. I am just wondering the validity of these figures if we are not actually comparing the same level of services. We are paying roughly 17 per cent of the total health expenditure out-of-pocket at the moment; but is that for a much higher quality of service than someone who might be paying 15 or 20 per cent but for a very different level of service? Dr Duckett: I cannot speak to all of the countries. I have done some work in Ireland and some work in Canada. Canada is spending about 15 per cent on out-of-pockets and their health system is very similar to ours. Australia's Medicare was modelled on Canada's. Australia is at the high end. Senator REYNOLDS: I have noted through your figures and others that, while the cost of health has been increasing, the percentage of out-of-pocket has not changed proportionally very much at all. While the out-ofpocket expenses are increasing they are not increasing in proportion to the total health cost. If you think there should be a different funding model, if out-of-pocket costs should be decreasing, who pays the corresponding cost of the increases? Dr Duckett: I do not think that is an issue we addressed in our submission. What we said was that we do not think out-of-pocket costs should be increased. Obviously one of the issues with out-of-pocket costs and with fund sources is that there are basically three sources of health funding: health insurance, out-of-pockets and government funding. Obviously if out-of-pockets are to reduce then either health insurance would increase or government funding would increase. Senator REYNOLDS: But you have said in your conclusions that there are other ways to cut costs. I am just interested to know what you are looking at. Dr Duckett: For example, in our opening remarks we addressed the issue of the PBS co-payment, which the government has estimated would save $450 million a year when it is fully implemented. We estimate that you could save more than that by reducing the prices we pay for PBS drugs to the equivalent of those that they pay in England, and you would save $580 million a year. So you would save $130 million more than the government proposal. Senator REYNOLDS: Okay. Are there any other suggestions? Dr Duckett: Yes. In other Grattan Institute reports we have estimated there is $1 billion to be saved in public hospital services. We have also estimated about half a billion to be saved in changing workforce mix. So there are lots of areas where savings could be made in our system. Senator REYNOLDS: We have had some discussions and some figures in relation to delayed visits to doctors and evidence of that. Have you got any further information on that? We have not have had any evidence in relation to what types of visits they are. Are people delaying visits for coughs and colds or are they delaying visits for the more serious illnesses? Dr Duckett: In our submission we quoted that sort of information, and there are two data sources for that. One is the Australian Bureau of Statistics patient experience survey, and one is the Commonwealth Fund international health survey. In neither of those do they ask the patients what they did not go for. Senator REYNOLDS: There has also been some anecdotal evidence or suggestions that this co-payment would result in anything from six-minute to three-hour delays in public hospitals. Obviously those figures are quite varied; have you had a look at the basis on which those assertions are made? The suggestion was that these co-payments are going to be the sole driver for those increased waiting times whereas clearly there are other drivers. Have you had a look at that area at all? Dr Duckett: No. I saw the reports about the increased waiting times in emergency departments, but we have not done that analysis ourselves. The government have stated that they estimate about a million visits will not COMMUNITY AFFAIRS REFERENCES COMMITTEE

104 Tuesday, 29 July 2014 Senate Page 31 occur as a result of the co-payment for medical services. So what you have to do is make some assumption about what proportion of those million visits would have gone to an emergency department and I have not seen any government modelling on that. Senator REYNOLDS: The AMA say that the co-payment generally that is charged sits somewhere around $46 a co-payment that doctors already gain. How do you feel about co-payments generally? Is it just this one that the government is proposing that you have issues with or do you have issues more generally with doctors charging co-payments and the quantum of co-payments they already charge? Dr Duckett: I thought the average co-payment was less than the $46. I thought it was around the low- to mid- 30s $32 or $35. Senator REYNOLDS: If you could check on that, but one of the figures we were provided with today in their submission was around $46. Dr Duckett: That might be across all doctors rather than just GPs. The number I was quoting was the GP number. We have not addressed the issue you raised in our submission. When I go to a GP, I pay a 30-something or $35 co-payment. But that is partly (1) I can afford it and (2) that is what the GP that I go to charges. So it is partly about convenience. What we are concerned about and what we focus on in our submission is the impact of co-payments on the most vulnerable in our society not people like myself. I am very concerned about the impact that co-payments have on the most vulnerable. Senator REYNOLDS: You have no concern about the current process of co-payments; it is just what the government is proposing? Dr Duckett: I have not looked at that in great detail. I did work in Canada and in the province I worked in it was illegal for doctors to charge any co-payment and that is generally the case across Canada. So you can actually have a system where you do not have any co-payments. That is not we are proposing, but it is an alternative policy strategy. Senator REYNOLDS: Are you saying it is not the co-payments per se; it is the details of the scheme the government are proposing, and presumably you have some proposals on how they can improve it? Dr Duckett: What we are objecting to, I suppose, and what we are opposed to is that the government proposal abolishes bulk-billing, which is a fundamental component of Medicare. That means that no patient, no person, is able to see a doctor without paying a fee and that puts a financial barrier in front of everybody in Australia in a way that has not been the case before. Senator McLUCAS: Thank you for the submission and for appearing today. Minister Nash has regularly said in the Senate that it is up to the GP as to whether they charge a co-payment. You have said very clearly that that will not happen. On what basis do you say that? Dr Duckett: I heard Professor Owler's comments earlier. The government has put a significant financial disincentive in front of doctors from bulk-billing. The government has proposed to abolish the bulk-billing incentive, which Mr Abbott when he was health minister introduced, and proposes to replace it with a low-fee incentive. If a doctor bulk-bills, they are about, I think, 30 per cent worse off than they would otherwise be. So it is a significant financial disincentive in front of GPs. The government has designed a system which places a significant disincentive in front of general practitioners from bulk-billing, so it is hard to say that the GP can actually continue to bulk-bill and have a viable practice. Senator McLUCAS: Do you see that there could be changes in practice behaviour if this co-payment were introduced? I am particularly thinking of practices in low-income areas where a lot of the patients would be on low or very low incomes. Do you see any potential change to practice behaviour that could occur if this were introduced? Dr Duckett: You would expect providers to respond to the financial incentives. That is what the government's proposal is designed to do to change doctor behaviour in either billing or service delivery. Senator McLUCAS: In your submission you say: The Commission of Audit argued that co-payments have two benefits: raising revenue from patients and reducing demand for unnecessary or overused services. Then you go on to talk about that that will happen but the beneficial services will also be either deferred or not taken up. Dr Duckett: As I said in my opening remarks, the proposal will reduce the number of visits, which is what is expected. The proposal will reduce government outlays, which is what it is designed to do. The problem is always COMMUNITY AFFAIRS REFERENCES COMMITTEE

105 Page 32 Senate Tuesday, 29 July 2014 going to be distinguishing necessary from unnecessary or making sure that the patients who miss out are the right patients. The evidence that we have seen is that this is very hard to do. Senator McLUCAS: Very hard to do or Dr Duckett: Probably impossible to do I suppose. Senator McLUCAS: It has been put to us that those who will carry the greatest share of the co-payment cost will be the sickest and those who are most remote. Would you agree with that? Dr Duckett: We show in our submission that people who use more services pay more out-of-pockets across all types of services, so you would expect then that they will be the hardest hit that is figure 12. Also we have shown in other figures that those in poorest health have a greater financial burden, which again is to some extent what you would expect. Senator McLUCAS: Figure 13 shows people not bulk-billed by remoteness. The remote and the very remote figures are the highest. Dr Duckett: Yes. Senator McLUCAS: I asked one of the other witnesses about Aboriginal and Torres Strait Islander people. One of the earlier submissions showed that Aboriginal and Torres Strait Islander people are disproportionately not bulk-billed. I think that is right. Dr Duckett: If they go to an ordinary practice. Senator McLUCAS: That is the point I am trying to now disaggregate. Dr Duckett: The Aboriginal medical services would. The very remote figures are affected by that because everyone who attends an Aboriginal medical service would be bulk-billed. Senator McLUCAS: That is correct. Is there a way to disaggregate the bulk-billing rates of Aboriginal and Torres Strait Islander people by visits to an AMS or a non-ams service? Dr Duckett: Yes, the government could do that. Senator McLUCAS: Good. Thank you. Dr Duckett: Sorry, I was too hasty. What we have reported here is not Aboriginal versus non-aboriginal; it is just total Senator McLUCAS: No, but it was in another earlier submission. Dr Duckett: I do not think the government could do Aboriginal specific bulk-billing rates. I do not think they could do that. It would be hard to do because Aboriginals are not identified in the Medicare statistics. You might be able to get a surrogate measure by seeing whether they ever visited an Aboriginal medical service and then link them, but it would not be perfect. Senator McLUCAS: We have also been trying to tease out what the effect of this measure would be on health costs over time. How will deferred or delayed access to GPs now play out in terms of total health costs over time? I think your figure 15 is probably the best way of describing it. Can you talk us through that? Dr Duckett: We have two sorts of information in our submission. One is figure 15, which looks at the GP per 100,000 population or per 1,000 population across Australia as a measure of GP access and then looks at the costs of hospitalisation. We found that in general, where there are more GPs, if you go to hospital you have a lower cost, taking more or less everything else into account. We think that is consistent with the view that where there are fewer GPs, people present later in the course of a disease and that leads to higher hospital costs for the admission. This gives you a hint that, if people defer going to a GP, there might be further costs. We also report on work that others have done about various sorts of pharmacy interventions or drugs that people do not take as a result of changes in the co-payments. Senator McLUCAS: Just to help me to understand this figure better, if I follow the line that is going that way, is that the way I do it? Dr Duckett: Each little diamond is a Medicare Local area in Australia, so you have some Medicare Local areas such as in the suburbs of Sydney, which are on the extreme right of that diagram, where they have a lot of GPs per 1,000 population; and you have some Medicare Local areas in Australia which have fewer GPs per 1,000 of population on the left-hand side. Then you have the cost of going to hospital on the vertical axis and, when you plot them against each other, you end up with that scatter plot which analytically what we estimated is that there is a relationship there. Senator McLUCAS: So, essentially, it is more than $2,000 per hospital separation between the outliers. COMMUNITY AFFAIRS REFERENCES COMMITTEE

106 Tuesday, 29 July 2014 Senate Page 33 Dr Duckett: Yes, roughly, but the impact is small but significant in that that line has a very flat slope which shows on average there is a small but significant impact of having more GPs in reducing costs and reducing hospital costs for a person who gets admitted to hospital. Senator McLUCAS: Sustainability the question of the health budget in Australia being sustainable: the government argues that we have to do this because our health system is unsustainable. Do you have a comment about that assertion? Dr Duckett: Australia has one of the most efficient health systems in the world. We are below the OECD average in health expenditure and above the OECD average in life expectancy. Although we have increased our spending on health over the last decade or so, we have actually dramatically reduced the death rate from people who die from conditions that the health system might be able to address. When you are looking at sustainability, you look at both how much you spend and what you get for your spending. We have got a very good health system in international terms. In terms of the future, obviously, we expect health expenditure to increase as the country gets wealthier and practice changes happen, but the changes are occurring very, very slowly and so there are things we can do, like I mentioned to Senator Reynolds earlier, about improving efficiency that we should be doing. Senator McLUCAS: You are saying that this will happen slowly, but there is a view that this burden of ageing is coming down upon us. Is that something that the committee should be concerned about? Dr Duckett: I don't like talking about the burden of ageing. I have got an elderly mother and, if I use the expression 'burden of ageing' in her hearing, I would get into serious trouble. Senator McLUCAS: I have that in very big inverted commas. Dr Duckett: The term I use is that we are not facing a silver tsunami where we are going to be overwhelmed by this ageing but a grey glacier. After all, we age a day every day so it is not as if we somehow age 10 years in a day. I don't think the system is unsustainable, and there are things we can and should put in place. We obviously have to address this change in the composition of disease and the importance of chronic disease and so on. That is something we need to prepare for and take action on but we do not have to take hasty decisions and quick-fix solutions. Senator McLUCAS: Thank you very much. Senator DI NATALE: To put the problem in perspective again, we heard from the AMA previously that outof-pocket healthcare costs are stable as a proportion of what we spend on health. That for me does not answer the primary question, which is: what is the impact on ordinary consumers? With health spending increasing faster than GDP, and the proportion of out-of-pocket costs remaining stable, its impact on the household budget is serious and getting worse, because, as a proportion of household income, out-of-pocket costs must be growing. Does that follow? Dr Duckett: Yes. We addressed this in our submission. Out-of-pocket costs are increasing, because total health expenditure is increasing and there has been a real increase in out-of-pocket costs over the last five years, for example, for surgical procedures about a 25 per cent real increase in out-of-pocket costs. That is in our figures 3, 4 and 5. Senator DI NATALE: To simply say that, because it is stable as a proportion of health expenditure it does not actually mean anything for an ordinary person is really beside the point. If it is increasing in real terms then the amount you spend on health care is increasing as a percentage of your household budget. Dr Duckett: Yes. So, for example, in figure 6, we show that for GP fees there has been a 37 per cent real increase in patient contribution for service in remote Australia. Senator DI NATALE: As a former secretary to the Department of Human Services and Health, you would have an opinion on this. We heard from the department at a previous hearing that Australia's ranking in international terms is open to challenge and that, for example, a significant proportion of out-of-pocket costs come from non-pbs medicines and complementary medicines and so on. I just want a response from you. Is the profile of where we are spending our money significantly different from that of other nations? Dr Duckett: I have not seen the OECD figures broken down into source, so I cannot comment on that. Senator DI NATALE: Okay. We might ask the department to provide us with some evidence before that. My other question relates to data limitations. Do you agree with the proposition that we really need to get much more fine-grained data not just about total bulk-billing rates but about bulk-billing for particular demographics? Is it possible to do that? COMMUNITY AFFAIRS REFERENCES COMMITTEE

107 Page 34 Senate Tuesday, 29 July 2014 Dr Duckett: I think there is ample opportunity to produce better data in the health system. It is a tragedy that we do not publish more information of the information we already hold about MBS use, about PBS use. I was the author of a submission developed by the Academy of the Social Sciences. We submitted to the previous government and also to this government arguing for much improved data release to help in the analysis of the Australian health system. Senator DI NATALE: You talk about the impact of the co-payment, and there is a fairness question here, but let us put that aside and talk about what the GP co-payment that has been proposed in the budget is going to save. Obviously there is a saving from the revenue from the co-payment itself, but there is also the saving from people who will not go and see a GP that is, from a decrease in the total MBS expenditure. You suggest that that may be offset by other costs, which are probably in two categories. Some people might use the emergency department a much more expensive way of delivering health care. Also, when people get sicker they need more expensive treatment, so it is a false economy. I think you went as far as to say that it may even cost us more to implement this measure than it saves. Dr Duckett: Yes, it really depends on what we think is going to happen to the million people who are not going to go and visit a GP. If one in five of those people go to an emergency department I think it is even fewer than that there are no savings to total government expenditure, Commonwealth and state. I think it is with one in five there is no saving to Commonwealth government expenditure. If some of those do not go to an ED at all, and defer, then, depending what happens to them, their total costs could increase. If I use the PBS example, there has been work done in Western Australia, I think, where an increase in the PBS co-payment led to a substantial number of people not taking their statins, for example, which in turn can lead to higher cholesterol and sickness and death. Senator REYNOLDS: Can I clarify? You just said a million people. Did you mean a million visits? Dr Duckett: Sorry; a million services. Senator DI NATALE: My last question is about the issue of safety nets. Again, we have heard the criticism recurrently I think you address it in your submission is well that they are just administratively too difficult and they do not perform the function that they are intended to perform. You also suggest you are looking to come up with some recommendations for how the question of safety nets could be addressed and they could be improved. Do you have any obvious advice that might be of benefit to this committee? Can I also suggest that, depending on the timing of your work in this area, it might be useful to receive a supplementary submission. Dr Duckett: No, we are not able to do it within the timing that you have suggested, because it needs to be done in a financially responsible way. Basically Senator DI NATALE: Are you suggesting we are not going to do that? Dr Duckett: We have to do modelling to look at the various impacts. Senator DI NATALE: Yes. Dr Duckett: I am following here a recommendation from the National Health and Hospitals Reform Commission, where we said that you need to look at the combined impact on a family of medical, pharmaceutical and other costs in looking at a co-payment, and so we want to look at some more integrated co-payment. If you think back, the co-payment structures for both MBS and PBS were introduced when we lived in a paper-andpencil era. Now we are in a computer era and so we could actually think of a much more sophisticated copayment design. We have not done that yet, but it is work we plan to do. Senator DI NATALE: Safety net design, you mean? Dr Duckett: Sorry; safety net design. It is something we want to look at over the next six months, but it is not something to do in the next six days. Senator DI NATALE: That would be helpful. Thank you. CHAIR: That is all, I think. Yes. I would get out while the going is good, before people dream up more questions! Thank you very much for your time today and for your submission. They are both really helpful to the committee. COMMUNITY AFFAIRS REFERENCES COMMITTEE

108 Tuesday, 29 July 2014 Senate Page 35 BOTHAMS, Mr Peter, Vice President, Occupational Therapy Australia BROOME, Dr Kieran, Chairperson, Queensland Divisional Council, Occupational Therapy Australia BUTLER, Ms Annie, Assistant Federal Secretary, Australian Nursing and Midwifery Federation THOMAS, Ms Lee, Federal Secretary, Australian Nursing and Midwifery Federation [11:52] CHAIR: Welcome. I will just check that you have all been given information on parliamentary privilege and the protection of witness and evidence. Yes? We have your submissions. Thank you. I would like to invite each organisation to make an opening statement, and then we will throw to questions. Ms Thomas: Thanks very much. It is great to be here. Really Dr Duckett has stolen our thunder this morning. I will just make a very brief opening statement. Obviously the current out-of-pocket health costs in Australia are excessive already and well above those of most similarly wealthy countries. We have heard Dr Duckett talk about that this morning. These costs place an unnecessary and unreasonable cost burden on many households, particularly economically disadvantaged households. Over the last decade, individual health costs as a percentage of household expenditure have increased significantly. Our members are concerned that this burden will significantly worsen if many of the government's proposed budget measures for health are implemented, particularly for those who are currently disadvantaged. We consider that, rather than shifting costs onto individual patients, a better way is to contain healthcare costs while continuing to improve outcomes. Mr Bothams: Thank you for the opportunity to appear this morning and to discuss with the committee some of the issues relating to out-of-pocket healthcare costs facing consumers across occupational therapy services. Occupational Therapy Australia is the professional association and peak representative body for occupational therapists. As of April 2014, there are 16,000 registered occupational therapists working in Australia. By way of background, OTs occupational therapists are health professionals whose role is to enable their clients to participate in meaningful and productive activities. Occupational therapists are part of the allied health workforce and work in a variety of settings including private clinics, schools, aged-care facilities, hospitals, universities, rehab services, mental health services, community health centres, medical clinics and local government agencies. We work solo and also as part of broader allied health teams. OTs provide health care, vocational rehab, physical and mental health therapy, and serve the community through a number of state and Commonwealth government funded initiatives. It is our role in the delivery of these Commonwealth funded programs and the out-of-pocket expenses our clients face in these programs that is the focus of our submission and will be the focus of my remarks today. After surveying our membership, it was quite clear there were three specific Commonwealth funded initiatives through Medicare that our members believed had the most significant out-of-pocket costs. These were chronic disease management and the delivery of services such as home modifications, better access to mental health care and access to allied psychological services. Our submission details a number of areas where costs are not covered in the existing 20- to 30-minute rebateable session structure. That includes researching the best equipment for the person, report writing, travel to like client locations, and home visits and follow-up visits. They are important aspects of our service delivery and built into our fee structures, which often are higher than the government's rebate. These and many more costs are often passed onto clients and become out-of-pocket expenses. Our submission also provides a number of recommendations that, once implemented, would also be a good first step in addressing these consumer out-of-pocket expenses. One practical measure is government facilitating greater stakeholder involvement in understanding the real costs of providing these services to the community, particularly those consumers in rural and remote areas. Occupational Therapy Australia believes that government needs to initiate more opportunities for providers to engage with government around the actual cost of service delivery. This can be done, we believe, within existing structures such as Medicare Local or primary health organisations. Using them in this feedback process to ensure that OTs and other allied health professions can have routine and regular feedback around the delivery of services in local communities would be an effective local way of sorting out the problems in service delivery. Though we did not specifically refer to the government's proposed GP levy in our submission as it was completed before the budget, Occupational Therapy Australia has since commissioned research into the impact we believe it will have on OT and broader allied health services. Occupational Therapy Australia is concerned that increasing the out-of-pocket costs for primary health care will discourage those who are most in need, but COMMUNITY AFFAIRS REFERENCES COMMITTEE

109 Page 36 Senate Tuesday, 29 July 2014 unable to afford it, from seeking treatment from a doctor. This may have significant repercussions for our patients who at present can only access our Medicare rebateable services via a GP referral. Thank you again for the opportunity to appear this morning. Occupational Therapy Australia believes that together with the correct action we can address these out-of-pocket expenses for consumers and ensure the longevity of these programs. Doctor Broome and I are happy to address any further questions the committee might have. Senator DI NATALE: In its submission, the Grattan Institute's list of recommendations talked about the necessity to update workforce roles as a way of improving efficiency in the system. Even though it was not necessary the focus of your submission, I am interested in hearing from you whether you think there is potential to deliver services more efficiently or at least as efficiently but at a lower cost to the taxpayer. If so, what might those areas be? I am a happy for Ms Thomas or Mr Bothams: I guess we can talk about you are asking about scope of practice to some extent? Senator DI NATALE: Yes, that is basically what I am asking about. It is something we have not raised through the course of the inquiry, and I think it is worth hearing some perspectives on that. Dr Broome: From a scope-of-practice perspective, there are obviously ways that are being looked into at the moment. One of those would be, for example, allied health assistance. And although we can see a large benefit in those sorts of roles, there are limitations to the tasks that they can do from a safety and quality perspective and so we still need to ensure that there is that sort of supervision from occupational therapists. I guess there are other changes that are also occurring all of the time to try to improve efficiency, like telehealth and just improving the way we do services. Senator DI NATALE: Do you see a greater role for occupational therapists in the system? Can you see areas where you could add value, maybe deliver services at a lower cost to the taxpayer? Dr Broome: There is lots of research to suggest that occupational therapists can take on a wide range of roles, and a lot of those are shown to be cost-effective things like falls management, providing chronic disease support and those sorts of roles. Ms Butler: We make reference to this briefly in our submission, but of course the federation has long advocated for some advanced roles for nurses, and the Grattan Institute and some of Stephen Duckett's work would agree with us. We are principally talking about nurse practitioners, and you would be aware of these roles. Currently we have 1,000 nurse practitioners endorsed in Australia working principally in urban environments and major city hospitals. We would like to see great extension to this program; we would like to see many more nurse practitioners in and we are continuing to do work on this and with various other organisations wider geographical areas because there is, we believe, an enormous contribution that can be made by nurse practitioners, particularly in rural environments and remote areas. There are limited numbers of people working out there, but, as you are probably aware, there are many rural centres that have no access to GP services currently. They need to seek treatment from their hospitals. They could be better managed, more cheaply managed by effective nurse practitioner roles. Senator DI NATALE: I want to ask also about the role of private health insurance. We have heard today and certainly in our previous hearing that there are a number of people who find themselves on a particular pathway or trajectory, often unknowingly, and before they know it they are faced with significant out-of-pocket costs because they assumed their private health insurance would cover the services that are being provided. So there are a couple of questions that I would like to ask about that. You talk about the role of public subsidy of the private health insurance system. Are you suggesting that we would get better value if we redirected the subsidy that currently goes to private health insurance premiums I think it is now over $5 billion and reinvested that directly into the public health system? Ms Butler: That is definitely what we are suggesting. It is a long held position of the federation that we have an effective public and private health system in place. We do not support public subsidy of the private health system and, therefore, withdrawing those funds is not making them available to the better operation of the public system. There are two ways in which that public subsidy occurs: there is the rebate for private health insurance; there is also the contribution that is made to a range of tests and other features of the private health system that happens through the MBS. Ms Thomas: Also, as a follow-up to that: if we were to redirect the money that is paid as the rebate to the public hospital system, then we would equally have to the remove the penalty for not having private health insurance. COMMUNITY AFFAIRS REFERENCES COMMITTEE

110 Tuesday, 29 July 2014 Senate Page 37 Senator DI NATALE: You do not think it has achieved its stated aim of taking pressure off the public hospital system? That was the reason it was introduced, the private health insurance subsidy. It was basically introduced as a the rationale was, 'We need to do this; we need to support people who take out private health cover so that we can take the pressure of our public hospital system'. Ms Butler: We do not have evidence that indicates that. In the Australian Institute of Health and Welfare submission to the inquiry, and no doubt in their evidence, the data suggests that there has not been a massive increase in the uptake of private health insurance either. We have not got evidence to support that it has, in fact, relieved pressure in the public health system, particularly when you have a significant number of people using their private health insurance in the public health system, and that is being encouraged. Senator DI NATALE: Yes. Ms Thomas: I do not have the figures to hand, but I think that prior to the rebate it was about 20 per cent of the population that had private health insurance and post the rebate's implementation it increased, but not so significantly as to produce the sorts of benefits that you are indicating. Senator DI NATALE: Or that were suggested at the time. Ms Thomas: That were suggested, I beg your pardon, yes. Senator DI NATALE: Yes. Ms Thomas: So I am not sure that those figures are not right, but it was somewhere around there, I think. Senator DI NATALE: Yes, and there were a number of other things occurring at the same time. There was the Lifetime Health Cover penalty for not taking up private insurance, which was probably more likely the driver than the rebate. Ms Thomas: Yes. Mr Bothams: We also would not have any figures on that, but a number of occupational therapy services just are not available through private health insurers. You would have to ask the individual private health insurers as to why that would be, but generally people cannot claim occupational therapy services through Senator DI NATALE: Can you give me an example of the sorts of things that are not covered? I would have assumed that was one of the benefits of having private health insurance for the non-mbs covered services. Mr Bothams: I worked as an occupational therapist in Central Queensland and did home visits, and very much from a preventative framework for example, doing a home visit after somebody had had a diagnosis of Parkinson's disease to work out if they might need some bathroom modifications. For something like that, some health insurers would cover that but there would be a number of health insurers that do not even have occupational therapy on their list of services available from rebate. Senator DI NATALE: Just excluded completely from the premiums? Mr Bothams: Yes. Senator DI NATALE: That is interesting. I did not know that. Senator McLUCAS: Thank you for your submission and for attending today. We have been trying to predict the future if these co-payments were introduced, and the research that you referred to, Mr Bothams, might be helpful here. I asked Dr Duckett if he had a view about whether there would be changed practice behaviour in a GP practice. I do not know whether you have ideas about what might happen if the GP co-payment and other copayments were introduced in a practice. I think that is where your research might head us, but do you have any observations that might inform the committee about what could happen? Mr Bothams: We probably have a similar view to Dr Duckett in that we would like to see accessibility to GPs available particularly for the most vulnerable. There are people in our society who are able to afford a co-payment but certainly for a lot of people that we work with people who are on pensions and particularly people with mental disorders it is already a significant challenge to access GPs. I work in a public mental health service in Central Queensland obviously, I represent Occupational Therapy Australia today and in that role one of our big pushes is to try to engage our consumers with GPs because we know that people with mental illness die a lot younger than the general population. It is a significant challenge already to get those people engaged with a GP. A lot of them are on disability pensions, they do not have access to transport and there is not a lot of bulk-billing GPs available, so it is already a challenge to get those people engaged. We would be concerned that a co-payment may add an extra barrier to people accessing GPs. COMMUNITY AFFAIRS REFERENCES COMMITTEE

111 Page 38 Senate Tuesday, 29 July 2014 Ms Butler: We would have a similar view and we would, again, support Stephen Duckett's comments on this, particularly the aspect of the removal of bulk-billing and that it will be set up, it would seem, such that it will not be financially viable or even possible for some GPs. Our areas of concern are obviously for the disadvantaged but also particularly for those in rural areas because they already have less access and they wait longer times. There is a recent COAG report with a lot of information about this. There is a much lower ratio of GPs to population out there. Already, those GPs tend to charge higher fees. There is less bulk billing out there. We see that that will increase the disadvantage that already exists. Removing bulk billing entirely is not going to be the solution for this problem. Senator McLUCAS: Moving then to what a GP practice might change in the way it operates, Minister Nash really says that the GP could make a choice about whether or not they bulk bill. All the evidence we have received to this point in time is that that is not a choice. But there may be a change of billing behaviour, a change of practice behaviour in GP practices that I would like to tease out with you. Mr Bothams: Sorry, what is the question that you would like to tease out? Senator McLUCAS: Do you predict that there could be changes in the way the GPs run their businesses, run the services for their patients? It has been put to me that GPs will be forced to move to shorter consultations in order to carry the cost in rural areas of up to $16 per Medicare item No. 23. Mr Bothams: I do not think we would have the research or the evidence to comment on that but we would reiterate that it is already difficult for our consumers to access GPs, so any additional barrier would have deleterious effect on their health and wellbeing. Ms Butler: Again, we are probably not best placed to talk about practice behaviour changes but already those sorts of pressures do exist, where GPs may be forced to spend less time with people. It has been made fairly clear that it is not really going to be financially possible for many GPs. The thing is that there will be GPs who will just ignore it and will not charge patients at all. And there may be some concern about the types of patients that they then want to have on their patient list as well. Ms Thomas: I think this is an interesting question because whilst I think we on this panel have all agreed that we are probably not best placed to answer it, I wonder about the operational aspects of the practice in the implementation of this. In thinking through the business side of it, putting the care aspect aside, there would need to be significant operational changes to accounting systems. As for the safety net around 15 visits, when do you reach 15 visits? How would 15 visits be tracked? I think there is a lot operationally that a practice would need to consider if this were to go ahead. So that is one issue. The care issue is one from my perspective I am not best placed to answer but certainly from a business perspective I run a big business I think there would be significant impact. Ms Butler: One of those impacts could be how they use other people in their practices, which may be reduction in staff including practice nurses. When you set up a practice and you have practice nurses and other staff there, of course there are a number of financial requirements. So in offering a wider range of services and practice nurses form a very important role in the primary care role in preventative health that is run in GP practices including immunisation and those sorts of things there could be significant changes. Senator McLUCAS: A lot of GPs have made the move to multidisciplinary teams. Some of those services are not Medicare rebatable but they are covered by the cost of the practice. If the total pie has been shrunk by that much, the opportunity to bring in a dietician or bring in an OT or have a practice nurse who can run sessions with families for example, I dare say, will be limited. The opportunity for growth in that type of practice would be curtailed. Ms Thomas: And I wonder whether it is the preventative health aspect that would be truncated? So you deal with urgent situations of people being sick and needing X, Y and Z rather than putting in place those systems that assist the community in health prevention activities. Senator McLUCAS: And develop health literacy as well. Mr Bothams, the research that you have commissioned, what question is it answering? Mr Bothams: I guess the research has been around consulting with a number of our members. I do not have the specific information from the research here but we could certainly forward you some of that information that we found from researching a number of our members who are working in these rebatable areas. Senator McLUCAS: I am very impressed that you had a Cairns OT in your submission. Mr Bothams: Yes, she is a very good OT. COMMUNITY AFFAIRS REFERENCES COMMITTEE

112 Tuesday, 29 July 2014 Senate Page 39 Senator REYNOLDS: I have a question for both of you. You may have heard that I asked the AMA a question because they identified in their report that the highest driver of costs was what they called the 'volume of treatment' during individual episodes of care. They identified that that was obviously for the elderly, for people in rural and regional areas and because of changing treatment methodologies. Their solution was more GPs or more recognition for GPs to assist with that. I was very interested, in that context, that practitioner nurses and, as you said, Mr Bothams, OTs also could have more of a role in that. Some of the other evidence we have had is that it is not just about the cost but is also about how we are treating the changing profiles of people as they age. In that context of cost pressures and new ways of treating these longer, more complex episodes of care, it struck me when you were talking about practitioner nurses and GPs that we might be able to assist not only to provide better care to the most vulnerable but also perhaps take some cost pressures off. Maybe GPs are not the only solution? Mr Bothams: One of the things we referred to in our submission was the need to have a multidisciplinary case review or some kind of discussion following the assessment. At present there is only funding available for actually going and doing the individual work with the consumer. But we think and the nurses would agree that having some capacity and potentially some funding to have a multidisciplinary discussion to improve communication, to make sure there is not duplication of roles and that the money is being spent efficiently, to us, would make good sense. So there would be some time built in to have that discussion with the allied health providers and any other health providers that are engaged in the care of the consumer. With the shift to more allied health providers being used through Medicare, I guess the traditional model would have been that all of those allied health providers might have worked at a community health facility or been in the same publicly funded facility. I have noticed in my past 15 years of practice that people are a lot more isolated in their practice. I suppose when you are a private practitioner that isolation is quite pronounced. So we would certainly be interested in having the opportunity to have that communication and to get some compensation for that. Dr Broome: A multidisciplinary team is going to be quite powerful if you get the right people with the right qualifications and skills. In our submission, we alluded to the issue of making sure that people understand the different contributions that health professionals can make. From an occupational therapy perspective, for example, we know that in mental health we have some of our members saying that GPs do not necessarily understand the specific contribution that occupational therapists can make. They send referrals to places where it often ends up at the OT at the end of the day anyway, so that is something that could be improved. Ms Butler: We obviously would agree, having said previously that we should have a better and wider use of nurse practitioners. You could have a lot of care being provided economically. We have a couple of good examples. When we say that, we are not trying to discount other professionals and we agree that the strongest approaches are with good multidisciplinary teams. We have a couple of really great examples of where nurse practitioners work in particular environments, a couple of them really closely with GPs. They are sort or transitional aged care nurse partitioners. What that means is GPs do not go and do home visits as they used to, they do not go and visit nursing homes the way used to and they certainly do not go as often as they used to. We could be using nurse practitioners much more often. We only have a couple of really limited examples of a nurse practitioner who does go and visit the nursing home and is responsible for aged care residents. The GP does not have to come as often but they liaise when a truly highly medical need rather than general health nursing needs is required. Those sorts of examples could be really expanded. Those sorts of nurse practitioners also work in really effective roles in emergency departments where we have a number of them now across the country. People might be admitted and a nurse practitioner intervenes and assesses the treatment and can decide whether that person really needs to be admitted. They go to a lower level before admission so it is actually concentrating on preventable admissions, preventing problems before those higher medical needs are accessed and used. Senator REYNOLDS: I have heard from Western Australia that a lot of the evidence from public hospitals is that a lot of the admissions through the emergency department are elderly people who are unable to get exactly that sort of care in the age residences, which is exacerbating significantly their health issues. Ms Thomas: One of the issues in the aged care sector is that GPs that access the sector are a bit few and far between. That is also impacted by a lack of registered nurses on every shift. Often standard operational procedures in a residential facility are that if somebody is off-colour, looks off-colour or is very sick, you call an ambulance. So yes, there is a higher proportion of older people from residential facilities who make their way to COMMUNITY AFFAIRS REFERENCES COMMITTEE

113 Page 40 Senate Tuesday, 29 July 2014 an emergency department for a variety of reasons. The evidence that Ms Butler has just given around nurse practitioners is that it has decreased the number of transfers to hospital. Senator REYNOLDS: Which would then obviously take some of the pressure off public hospitals and the emergency departments. Ms Butler: If you are interested, we can probably forward you some information. Unfortunately, it is extremely limited because we just do not have enough people working in these roles at the moment. There is a very keen nurse practitioner in New South Wales who has actually collected some evidence of her practice and the cost savings she has made. Senator REYNOLDS: I would like that forwarded, thank you. Mr Bothams, you were talking about the value of education for the public in terms of the actual cost of health services. In what context were you thinking of that? Mr Bothams: One of the recommendations in our submission is around the public being more aware of the services that are available through Medicare and having a better understanding of the services that occupational therapists can provide. Our association has a role to play in building the profile of what we can do. In talking to our recommendation, we were specifically referencing that we would really like GPs to have a better understanding of the services that occupational therapists can provide. I think there was some evidence that there has been some funding recently cut around the Dr Broome: The education that is provided around that Senator REYNOLDS: Better service selection by GPs and by individual consumers, I guess. Mr Bothams: Yes. In the recent budget, there was a $4½ million cut around better access to mental health. We were, I guess, disappointed that that came through, because part of that money was to educate GPs about the services that occupational therapists and the other allied health professions can provide. We would certainly like to see continued funding for education for GPs. Dr Broome: We would also like to educate on the potential out-of-pocket costs that consumers might be facing. Our submission indicates that a lot of our therapists said that, when people access these services and then get the bill at the end of the day, it may not have been explained to the full extent. At many levels they might experience those costs, and they are quite large and they have a bit of a bill shock when they receive them. Senator MOORE: A recommendation of the OTs in their submission is: The government convene regular feedback opportunities for service providers to provide input into the real costs of delivering these programs That seems bleedingly obvious to me, but I would like to know why you included that in your submission. I would also like to hear from the ANMF and the midwives, who have been so involved with discussions with government. The issues that we are discussing have generated over 100 submissions from people who think they are important. How would you put in some kind of regular process between any government and people who are involved in health provision to ensure that this kind of discussion is maintained? You put it in your submission, so perhaps the OTs could respond first and then the midwives. Mr Bothams: To expand on that, we thought that there is a really good opportunity to do that through the Medicare Locals for the next 12 months and then also the Senator MOORE: That does seem rather short term. Mr Bothams: Yes, and the primary health networks following that, because we know that there is a commitment for the primary health networks to be established. We do not know exactly how they will look, but we certainly see that there is an opportunity to have that dialogue through whatever primary health network is established. I am currently on a clinical leaders group for the Central Queensland Medicare Local and certainly that has been well run and there is an opportunity there to feed in through that service and for them to potentially have a link back up to the department and the minister. Senator MOORE: Do these issues of out-of-pocket costs come up in those discussions? Mr Bothams: No, they have not come up at that particular clinical leaders group, but there are existing structures already in place. Those clinical leadership groups are not necessarily in place to provide feedback to the government; the purpose of those groups is to get some collaboration and communication happening in each Medicare Local area, and they are in place in each of the Medicare Locals. So I suppose we would say that there is a track record there of Medicare Locals being able to establish clinician groups, where feedback could potentially be provided about such things as out-of-pocket expenses or any other feedback that the government wanted or that professions wanted to give. COMMUNITY AFFAIRS REFERENCES COMMITTEE

114 Tuesday, 29 July 2014 Senate Page 41 Senator MOORE: So you are actually asking for them to do more than what they are doing. My reading of your submission is that this kind of provision of information about the costs and these issues about service provision and what happens is not happening now. So you are saying that the mechanism of the Medicare Local, which has been established for local discussion, could be expanded such that the issues you raise in your submission could then go to government. Mr Bothams: Yes, I guess we are saying that that is a potential role that the Medicare Local or primary health networks could have. Senator MOORE: Ms Thomas and Ms Butler? Ms Butler: Sorry, we may be slightly confused about the question. Senator MOORE: My question is: how can these discussions about the issues that you have raised in your submission be communicated to government? The OTs put a specific recommendation in their submission: The government convene regular feedback opportunities for service providers to provide input into the real costs of delivering these programs That was their recommendation. I asked the AMA whether there is regular discussion between the AMA and governments about a range of issues which could include out-of-pocket expenses and they said yes. The OTs just said that their view is that the Medicare Local arrangement could be expanded to include what they regard as a regular feedback opportunity. From your perspective, in your profession, how do you think a regular feedback opportunity could operate? Mr Bothams: Could I just add that we would welcome any opportunity to have regular contact with senators or Senator MOORE: I was hoping you would go there. CHAIR: We are over time. Senator MOORE: We have not had the nurses' response yet. CHAIR: I know. Could you answer that and then that is it. Ms Thomas: We would welcome regular contact with governments around the whole issue of health. We advocate on a daily basis for patients in a range of settings and for the important factors not only about their health but also about the way they are going to pay for it. So we would welcome a mechanism of regular consultation around this issue. Ms Butler: I would just add that that is particularly related to things like costs, because we often do not get asked those questions and we have a lot to offer, we believe, in that domain. CHAIR: Thank you. On the additional information that people have said they could provide, is it possible to have that by Thursday? Ms Butler: Yes. CHAIR: That would be very much appreciated. Thank you very much. Thank you for your time and your submissions. Proceedings suspended from 12:31 to 13:22 COMMUNITY AFFAIRS REFERENCES COMMITTEE

115 Page 42 Senate Tuesday, 29 July 2014 BOLAND, Ms Justine, Head, Statistics and Communication Group, Australian Institute of Health and Welfare WATSON, Dr Diane Elizabeth, Chief Executive Officer, National Health Performance Authority WEBSTER, Dr Adrian, Head, Expenditure and Workforce Unit, Australian Institute of Health and Welfare CHAIR: Welcome. Thank you for your submissions. I invite both organisations to make an opening statement, and then we will ask you some questions. Dr Watson: Thank you for the invitation to appear before this Senate inquiry. I would like to begin by outlining the role of the National Health Performance Authority in providing insights into health care in Australia and then outline some information that I think is most directly relevant to your terms of reference. The performance authority was established as a Commonwealth statutory body in 2011 under agreements by all governments. According to our act, we monitor and report on the performance of hospitals and primary healthcare organisations right across the country. Our agency bases its reports on almost 50 indicators of performance that have been agreed by the Council of Australian Governments. The list of indicators is available in a document called the Performance and Accountability Framework, which is on our website. The information across those indicators as well as additional contextual information to allow you to understand the profile of populations living in communities across the country is available on our MyHealthyCommunities website. This work is on the website and of the authority and is unique in the country in the sense that we are the only agency that publishes nationally consistent information against these indicators at a very, very local level. At the same time, while this information provides a wealth of information a collage of information to understand how people across the country experience the Australian healthcare system, that information is still about diverse populations and local communities and therefore cannot be used to easily understand a person's experience with their healthcare system. Because it is also information that is about a cross-section in time that is available on our website and only for a few measures over the last couple of years, it is not easy to detect relationships around cause and effect. We are an expert data agency and our efforts go into publishing information that makes, as fair as is possible, comparisons across our hospitals in the country as well as across local communities in different states and territories. We have undertaken extensive procedures to ensure the accuracy of the calculations that I present to you today. We have also taken into consideration where there may be differences in data collection, for example, that might skew our comparisons. We are also very transparent where caveats are necessary around our data and I will bring that to the table today if it seems to me to be relevant at the time. As a Commonwealth public service organisation we are not a policy body and, accordingly, my comments and contributions today will really be confined to the data that has been collected, analysed and published by our agency in accordance with our statutory responsibility. Our submission really focuses on a number of reports that we have released, most particularly towards the middle to late part of 2013, that have looked at local variation and measures of patients' and the population's use of GP services, as well as their experiences with GP and local care in the community sector. These are measures in our performance and accountability framework. So, first, I will provide some observations about GPs and adults' experiences with costs relating to accessing GPs and, second, a finding from a report in the area of pharmaceuticals. In , the most recent year for which we have released data on this particular topic, among adults who saw or needed to see a GP for their own health in the preceding 12 months, the percentage of adults who self-reported that they did not see or delayed seeing a GP due to cost varied across local communities in the country, as measured by Medicare Local catchments, and was estimated to be from one per cent up to 13 per cent. In the area of pharmaceuticals, according to the most recent data that has been released on our website for , among adults who were written a prescription for medication by a GP for their own health in the preceding 12 months, the percentage of adults who delayed filling or did not fill a prescription due to cost across Medicare Local catchments varied anywhere from five to 15 per cent according to our estimates. The nation has surveyed adults through That information will be made available by the performance authority for small areas later on this year. We are still in the process of doing calculations for that most recent period of data collection. Thank you. Dr Webster: I am aware that our data in the context of this inquiry has been included in many submissions and has been discussed already, so I will not go into too much detail. I am assuming that you have all seen the COMMUNITY AFFAIRS REFERENCES COMMITTEE

116 Tuesday, 29 July 2014 Senate Page 43 submission and are aware of who we are as an institute and our role. But I will talk a little bit more about how we pull together the out-of-pocket expenditure what we actually call expenditure by individuals as a source of funds. We do this as a part of our annual process of collecting health expenditure information, which we pull together from a wide range of different data sources, more than 80-odd, both at the federal government level and the state and territory government level. Some local government data and a lot from the private sector are particularly relevant to this conversation. We do that in accordance with OECD requirements and standards in relation to the collection. We are responsible for providing that data to the OECD each year and to the WHO and others for use in international comparisons. I think we have a very strong reputation internationally for being leaders in the field of being able to collect national health accounts to a degree of detail and comprehensiveness that, frankly, many countries struggle to be able to do. You will see in the table on the last page of our submission that there are in fact many countries in the OECD that are not able to estimate out-of-pocket expenditure at all. Many of the ones that do, struggle with that. We do it as a part of a process to get a sense of the overall magnitude and scale of out-of-pocket expenditure or individual expenditure and as a part of the whole picture of health expenditure. Our main focus is to be able to track that over time. To do that, we have to pull together data, disproportionate I suppose in relation to other sources of funds, from the private sector. This is a problem. We do not often have great transparency as to how that data is collected or what is included or excluded. We try to pursue that as best we can. Here we are specifically talking about sales in supermarkets, pharmacies, healthfood stores and these types of industries that are not part of any centralised government data collection or anything like that. It does represent its challenges in terms of producing accurate estimates, estimates that are able to be looked at in a lot of detail to really pick apart specific issues. But we are confident that the information we put out gives a sense of an accurate level of scale, magnitude and trends over time of the out-of-pocket or individual expenditure component, as it does with the rest of the components of expenditure. Just to pick up some of the key statistics from our submission, which, having watched some of the sessions this morning, I know you are already aware of, out-of-pocket expenditure has been increasing in real terms. People are definitely paying more that is, taking into account inflation and having adjusted for the medical expenses rebate out of their pockets than they were in the past. It has been increasing as per person, so it is not just about population growth. Per person, we are also spending more. It has not been increasing as a proportion of total expenditure. So whilst growth has been strong, growth across the health sector has been strong. We are above the OECD median. However, as I have already pointed out, there are many countries that do not provide data or that are just beginning to. These improvements are occurring over time. There are a lot of issues when comparing our data at this type of level of disaggregation with other countries. Another issue that I think has already been brought up is one of the largest components of this category of individual expenditure and that is medications. It makes up about 40 per cent of the individual expenditure. That is all I want to say by way of an introduction. Senator BILYK: Chair, can I just clarify something? CHAIR: Yes. Senator BILYK: With respect to table 3, what was the source of that information? Do you actually collect that information yourself? Dr Webster: This is the international comparisons you are referring to? Senator BILYK: Yes. Dr Webster: We collect Australia's data and provide that to the OECD and then they will give us information. We do make some of these calculations ourselves based on an OECD method and using some of their input data. It is not necessarily as straightforward as them giving us the information, but it is consistent with what the OECD published. Senator BILYK: But do you collate that data out of ABS stats? How do you do it? Dr Webster: The Australian data? Senator BILYK: Yes. Dr Webster: As I said, that collection comes from around 84 different data sources, including the national minimum dataset on government health expenditure, which the states and jurisdictions provide to us each year. They are committed to providing that data, which essentially comes from their centralised accounts of what they have spent through the year on health goods and services, as well as the Department of Health's annual report information, costs and information COMMUNITY AFFAIRS REFERENCES COMMITTEE

117 Page 44 Senate Tuesday, 29 July 2014 Senator BILYK: Thank you. I just was not clear when reading the page. Dr Webster: That is a very comprehensive collection. Senator BILYK: It is. CHAIR: Senator Bilyk, your questions have provoked other questions in the same area. So I figure that we might as well deal with those and then we will move on to the next topic. Is that okay? Senator Di Natale, you indicated you had questions. Senator DI NATALE: Yes, much along the same topic. When you actually segregate the data and you have your public hospitals, private hospitals et cetera, are they standardised areas that are, again, used by other OECD countries? Dr Webster: The OECD has developed something called the System of Health Accounts, which is a very fine level of detail around coding expenditure information. As I said, we get information from a large number of sources and we code all that down to what is known as the SHA System of Health Accounts coding level. That is done by function so hospitals and also subcategories underneath hospitals in terms of admitted patient care, non-admitted, mental health et cetera. There is quite a sophisticated degree of disaggregation. Senator DI NATALE: So you can actually compare each of those individual areas across the OECD? Dr Webster: In some cases. As with a lot of this, the more disaggregated you get, the less reliable it is. Many countries have a lot of what I would describe as a top-down approach to doing this. We have a bottom-up approach in the sense that we get data in many areas not in some areas but in many areas of a very fine level of disaggregation and we aggregate it up. They take a total budget figure that comes from a province or a jurisdiction and try to disaggregate that based on population data or some other means of doing it. It is a more of a top-down approach. So there are a lot of issues with comparing that at a fine level. Senator DI NATALE: I have one specific comparison. The one that leaps out is the huge 'other medications' category. I was interested in seeing how we compare on that specific measure with other OECD countries. Dr Webster: I would have to take that on notice. That level of analysis is not something that we have done. Senator DI NATALE: If you could take that on notice, that would be great. Dr Webster: I would caution that it may not be very fruitful because a lot of the countries do not actually collect it at that level. They would just have an out-of-pocket expenditure level. Senator REYNOLDS: Thank you for the additional information. You obviously heard this morning that we have had questions about this. As I understand it, what you have said is that you are able to use their assessment criteria very effectively but other nations in the OECD are not as capable as we are to do that. That then makes the utility of this information very interesting in terms public health policy. If we are comparing apples and oranges I just wonder what the utility of these facts are. They have been quoted quite authoritatively by other people appearing here today. Where it says we are fifth, what does that mean, given that other countries are not using the same assessment criteria in the same way we are? In terms of providing a GP service, surgery or hospital care, there are obviously different standards of care. If we are paying a little bit more percentage wise than someone else but the standard of care is much higher, is there any way of measuring that in this? Dr Webster: There are two sorts of data sources that I would like to talk to in that regard. There is the OECD work. They try to pull together the expenditure information and, by and large, they look at that at a high level and they try to produce country rankings to give people a sense of where they sit in the overall expenditure. As to whether we are fifth or 10th or 15th, it is a bit hard to tell but we are probably not 30th and we are probably not first. They take that information and look at health outcomes information. Obviously, the OECD reports have a wide range of information not just about expenditure but also about all the key indicators of health. As Dr Duckett and others have mentioned, we are known for a system that is relatively efficient. In terms of the dollars spent for the health outcomes achieved, we do well. Senator REYNOLDS: That is just telling us about our own information. That is interesting to know but, in terms of any comparison internationally, we have different health systems, different contribution rates and different costs of health care, so it is not that instructive in doing an international comparison. That is what I am interested in. Dr Webster: That is an international comparison. That judgement about relative efficiency is comparing us to other nations that perhaps spend a similar quantum of dollars but do not achieve the same health outcomes. COMMUNITY AFFAIRS REFERENCES COMMITTEE

118 Tuesday, 29 July 2014 Senate Page 45 Senator REYNOLDS: For me, what was more interesting was the share of total health expenditure. We are in the middle. Is that correct? Dr Webster: A little bit above. Senator REYNOLDS: I have one question on that. You talked about costs increasing in real terms and per person but not in terms of the total health share. Have you had a look at how that relates to increases to average weekly earnings? In terms of people's capacity to pay, are we sitting above or below increases in average weekly earnings? Dr Webster: We look at something called the household final consumption expenditure. That is a measure of what households spend rather than earn. There has been a slight increase from around 2.7 per cent to 3.2 per cent over the last 10 years in the proportion of household expenditure being spent on out-of-pocket health costs. Senator REYNOLDS: Did you say that it has gone from two per cent to 3.7 per cent? Dr Webster: It has gone from 2.7 per cent to 3.2 per cent. We have not as yet looked at that comparison directly. There is some complexity in doing that work to look at individual expenditure as a proportion of income. Over the last couple of years we have started to look at government expenditure as a proportion of tax revenue, and we have started to include that. The next extension of that work is to look at individual incomes. Senator McLUCAS: After first telling you I did not have a definitional question, I do. CHAIR: Well do that and then we will continue. Senator McLUCAS: Like Senator Di Natale, I am interested in 'all other medications'. Is there a definition of 'all other medications' that you could provide us? Dr Webster: Certainly. I can give you a bit of a sense of the breakdown of what makes up 'all other medications'. There are a number of components that we include. The key ones are medications provided through pharmacy and medications provided through supermarkets. There is another component that we try to estimate which relates to other providers like health food stores and those types of agencies. That is the over-the-counter medications. In addition to that there are the 'under co-payment' prescriptions that is, they are a PBS listed item but the overall price does not exceed the threshold. There are private prescriptions Senator DI NATALE: Does that include 'all other medications' the under co-payments? Dr Webster: That is correct, and there is a small 'other' component. The largest component which is why I was focusing on it is the over-the-counter medications, which is the pharmacy, supermarkets and health food stores component. Senator MOORE: Is that complementary medicines vitamins and that sort of stuff? Dr Webster: Complementary medicines is not a definition that we use. It is a really difficult one to pin down. Senator MOORE: Vitamins? Dr Webster: Some elements of vitamins are certainly included in that. Senator MOORE: That is included in that? Dr Webster: Yes. Senator DI NATALE: You are going by outlet. I think we are more interested in the actual product. Dr Webster: That refers to the data sources, in the sense of where we get it. We happen to create that categorisation because that is where we can get data from. There is a data collection, Aztec, which we use to get pharmacy information. We use RetailWorld to get supermarkets and there is another data source for that smaller health food sector. I can talk in a little more detail if you like. The over-the-counter medications component is about 63 per cent of the total 'all other medications' category. So two-thirds of the 'all other medications' relates to that over-the-counter component. Senator DI NATALE: But you cannot break that down further according to what those medications are whether they are paracetamol, non-steroidals et cetera? Dr Webster: To a degree we can. This is where we are very reliant on the data providers. We do not necessarily get the data broken down. We certainly do not get it broken down from Aztec. We get a whole category, but they do provide us with a list of inclusions and exclusions. We do not get a sense of scale of different components. To give you a sense from the pharmacy kind of things, it includes analgesics, allergies, digestive care and eye care. I can provide the committee with this list, if you would like. There is first-aid and sports medicine, natural health, sexual health, smoking cessation, sports nutrition, weight management, foot care and eye care. I do not know whether I repeated anything, but I certainly said them all there is cough and cold. COMMUNITY AFFAIRS REFERENCES COMMITTEE

119 Page 46 Senate Tuesday, 29 July 2014 Senator DI NATALE: Do you have a breakdown, percentage wise, for each of those? Dr Webster: No. Senator DI NATALE: You just list them. You don't have: 'That's 60 per cent; we don't know how much of that is paracetamol and how much of it is natural health products.'? Dr Webster: No. Senator DI NATALE: Senator McLucas, is that what you are interested in as well? Senator McLUCAS: I am a bit unsure of what the other 40 per cent are. Dr Webster: Twenty per cent is the under co-payment prescriptions, and private scripts are around 10 per cent so 30-odd per cent is related to those other things. Senator McLUCAS: What about a non-prescribed I am wanting to use the word complementary again; I do not know what language you use to describe a self-prescribed vitamin or mineral? Dr Webster: That is where we are subject to how the industry categorises these things. There is no government system for categorising these medications into different buckets. As I said, we get a certain level of information from pharmacies the list I just related to you. We do not have much detail underneath that. In relation to supermarket sales there is a little bit more detail published. We have not looked at that in detail; we still take it at a sub-categorisation-type level. If you would like, I can give you a bit of a sense of the things that are included in the supermarket element. It is a more comprehensive list of the pharmacy, but it is very similar in terms of analgesics, antacids, antiseptics, fluid replacement, rheumatic rubs there is a long list. Senator MOORE: Can you provide us with that list? Dr Webster: Yes, absolutely. Senator DI NATALE: Just to be clear, that is in that 60 per cent. The 60 per cent includes pharmacies, supermarkets basically, what you would call over-the-counter medications, which include vitamins, paracetamol it is all lumped into that 60 per cent figure. Dr Webster: Yes. Senator McLUCAS: What about weight loss products? Dr Webster: Dietary supplements would be the term you are referring to. Yes, that is included in the supermarket collection. Senator McLUCAS: When we get the list we will have a good read of it. Senator MOORE: I would have thought dietary supplements for weight loss would be separate. Dr Webster: That is right. That is the closest category that we have that relates to the senator's question. I absolutely agree that there are number of different products that do not necessarily fit in that table. Senator McLUCAS: Dr Watson, I have been asking various witnesses today about the correlation between the potential of a delayed or deferred attendance or of nonattendance at a GP and potential hospital costs over life. Dr Duckett gave us a very interesting analysis of your material, I think it is, that shows that costs of separation at a hospital can be up to nearly $2,000 different between Medicare Local collection areas where there are high percentages of GPs per population and areas where there are very low percentages of GPs. Have you seen Dr Duckett's interpretation of your data? Dr Watson: I did not hear the testimony this morning. I was on a flight to Canberra this morning, so I was not privy to the presentation. Senator McLUCAS: Have you seen his material, though? Dr Watson: I looked briefly at it. I did not read his whole submission, but I read it for about 10 minutes. Senator McLUCAS: Do you agree with his methodology, that that is a way of indicating the potential cost of nonattendance at a GP? Dr Watson: I am sorry, I cannot pass judgement on his methodology without hearing his presentation or seeing the documents. I would say that the information that we have released to date from the authority to provide us insights on the dynamics of local health systems as they play out in diverse ways across the country and the diversity of experiences that people have with their healthcare system is information that is in cross-section, meaning it is at a point in time over the course of a year, in most instances. We have only released information for a few years. When you take that information to understand relationships with health systems, they are relationships that exist only within the year. They are not causal-effect relationships, using the information in this COMMUNITY AFFAIRS REFERENCES COMMITTEE

120 Tuesday, 29 July 2014 Senate Page 47 way. He may have combined it with other information to start to detect causal relationships but, I am sorry, in not having seen his presentation this morning I obviously cannot provide comment. Senator McLUCAS: I am certainly not asking you to analyse his work. Senator REYNOLDS: Dr Watson, in relation to the causal implication is that you are talking about, we have heard a lot of evidence that there will be a million well, not a million visits to GPs that will not happen. There has been no evidence at all to say whether they are visits that relate to coughs and colds or to more serious conditions. For us to make sense of what that actually means and what the impact of it is, is there any research that might give us an indication of what these nonattendances or delayed attendances relate to? Obviously, if they are for coughs and colds where people can go to the chemist and get some medication that is quite different from somebody who might have a more serious condition but is not going to see the GP. Dr Watson: The National Health Performance Authority creates geographic information so that we can understand this diversity across communities. The information that is best created to understand causal effect relationships is through evaluation or research. There are systematic reviews on the impact of co-payments that follow people across time when you alter the degree to which they have co-pays. That is the evidence that would be most applicable to your question, but we do not produce that evidence. Senator REYNOLDS: You don't have access to any evidence? We have heard varying numbers. Does either of you, perhaps, have any evidence of the numbers involved or of the causes? Dr Webster: The closest articles that we would have access to that would enable one to estimate what you are talking about is the reason for encounter, why people show up in a GP clinic. We have included that work in our disease expenditure database, which looks at the health expenditure bucket by disease, including in primary health care. The problem we have is that the Medicare data that is collected it is for the MBS does not tell you why somebody went. So there is not good longitudinal information that actually tells you why people show up at GPs or what happens to them. There is the BEACH dataset, the Bettering the Evaluation and Care of Health dataset, which has been running for a long time and certainly has a lot of value in this space, but there isn't a national repository that really allows you to nail that. Senator REYNOLDS: People are quoting numbers at the moment, but it is bit of a guesstimate, really. Dr Webster: It is not for me to make that judgement. I think that people do a lot of good research and that research requires consideration and evaluation on its merits. I am speaking here about what we get as a national collection systematic collections. Dr Watson: That is an important point, because there is a lot of research here and internationally that you can get from the people who have made submissions to you. But the national collections are separate for separate purposes that is a very important point. Where you have information about encounters, we might know why the encounter occurred but it is missing information about the health status of individual. Where we might have information about an expenditure for an individual it is missing the information about their health status and whether they just saw a GP or they are about to go into hospital. So it is only when you are able to put that information together that you can understand the longitudinal experiences and begin to understand causal and effect relationships. That is where we as a country are shy in information systems. Senator McLUCAS: I might come back to the question of how can we fix that somewhere down the track. When you did the analysis of the Medicare Locals the one per cent to 13 per cent delayed or deferred because of cost did you then go the next step and say, 'What is the underlying reason for this?' Is that your work? Can you do that? Dr Watson: The information system that we use to understand people's views on the cost barriers, the implications of those barriers and their utilisation patterns is self-report from national surveys that began with a sufficient sample size in 2010 and 2011 and so we have taken that information down to local levels to describe their experiences with care at a local level. For each local level there isn't sufficient statistical power to understand the implications of that experience. You could do that nationally, but I am not aware of a report yet that has been released with that analysis but in my view it would have to be done at a national level test sufficient statistical power to watch those people as they report their experiences over the last year and to do the analysis that you are interested in. Senator McLUCAS: Did you also potentially look at the socioeconomic status of each Medicare Local and make a judgement about there being any correlation between the economy of that area and the potential nonattendance? Dr Watson: That collection of information is from just over 26,000 people in the country. At the nation level, the information exists on the ABS website about across the country varying by socioeconomic status by region et COMMUNITY AFFAIRS REFERENCES COMMITTEE

121 Page 48 Senate Tuesday, 29 July 2014 cetera. When we take those 26,000 individuals and put them into almost 60 catchments or small geographic communities in the country, there is only enough statistical power to describe their experience but not to break it down into subpopulations yet again. Senator McLUCAS: When you gave evidence around use of pharmaceuticals, you said between five and 15 per cent delayed, was that due to cost? Dr Watson: I would like to read the question to you exactly so you understand the questions that people were asked. This is data from the most recent period where it is available at the local level. We are still analysing the , so this is This is adults who were written a script for medication by a GP for their own health as self-reported by them, the cost barriers in the preceding 12 months, so the percentage of adults who delayed filling or did not fill a prescription due to costs across Medicare Local catchments ranged from a point estimate of five to a point estimate of 15 per cent depending on the local community. So we have released the information for each of the local communities, but that is the range from the point estimates of communities with the highest to point estimates of communities with the lowest. Senator McLUCAS: For the applicable year, are the variations across the 'did not attend GP' and 'did not fill a prescription' similar? Dr Watson: You would have to put the information side by side, which I haven't done but you can. You could do that by looking at NR report, the one in the submission for the 2011 data. You could do that by comparing page 68 to page 62 with one caution, because we are data experts: it may not be the same people. It is a geographic population so up to 15 per cent, the communities with the highest, reporting cost barriers for pharmaceutical. Under cost barriers to GPs, 13 per cent report that, but I cannot tell you today whether they were the same people do you see what I mean? Senator McLUCAS: I do, so 26,000 people divided by 61 Medicare Locals are you saying the sample is too small to really be comparing? Dr Watson: You could do it at the nation level, but we haven't and I am not aware of a report yet that has used that data at a nation level to understand the connections that you would like to understand today. Senator McLUCAS: A final question around datasets: MBS and PBS have some of the most powerful sets of data in the world in my view. Why can't we link de-identified MBS and PBS datasets? Dr Watson: My understanding of MBS and PBS data linkage AIHW may like to comment about this too, because it has directly relevant experience is that there are legislative hurdles to jump. We are crossing those as a nation, which my colleagues can speak to because they are amongst the first to be able to have authority vested in them to be able to make those linkages. Ms Boland: The legislation as currently written precludes the linkage by a Commonwealth agency of MBS and PBS data, so we are currently doing a range of linkage work where we can link one with the two. You can link Medicare data to a group of people and separately you can link PBS data to that group of people but we as a Commonwealth agency cannot actually bring those two together. Senator McLUCAS: You should. Senator REYNOLDS: Dr Watson, in relation to the information on the datasets you talk about the 26,000 population that you are drawing on for the delays in prescription and doctor visits I am wondering how stratified the 26,000 is across the whole Australian population or have those 26,000 come from those catchment areas and in that case I am wondering how representative they are of the entire Australian population demographically. Dr Watson: The data for the 26,000 is an ABS collection, so they are responsible for the data collection. They collect it to be representative of geographic communities and to be representative of the diversity of the Australian population. When we established the National Health Performance Authority in the last couple of years I hired specialists in what is called small area analysis, so my team have worked with the ABS team to understand and only release information where both teams agree that we have sufficient robust estimates for small area estimations. There are some communities in the report where we put a little NP, which means 'not published'. That means there are people in those communities who participated in the survey but they are insufficiently representative of their small community for the results to be released for that community. Their data will be used in larger areas of aggregation so that we are representing those communities when we are looking at reporting information at the state or at the national level. Senator REYNOLDS: So it is not just geography though? You are saying it is by age, income and a lot of other socioeconomic factors? COMMUNITY AFFAIRS REFERENCES COMMITTEE

122 Tuesday, 29 July 2014 Senate Page 49 Dr Watson: At the nation and the large area of geography there is work that is done to ensure representativeness across the diversity of people in the country. At the small area we focus predominantly on age and gender representation. Senator McLUCAS: When you use the word 'community', what does that mean? Dr Watson: A geographic catchment. Senator McLUCAS: So a Medicare local catchment area? Dr Watson: Yes. The information I have presented today is at the Medicare local catchment. We take information to the smallest level of geographic aggregation as possible. In the survey information the ones you are interested in around cost barriers we take it down to the Medicare local catchment, with some exceptions where we have found that the point estimates are insufficiently accurate to release. There is other information on our website that will take MBS information for example, around visit patterns down to even smaller areas or geographic communities up to 300 areas of communities or catchments 'statistical areas' we call them in the country. We have taken information where possible even down to postcode. We have done that in the last two years in the area of immunisation to tell people about community risk in local communities. Sorry, my language of communities is transcending various sizes of geography: from Medicare local catchments to what is called SA3s 300 units of geography and in some instances down to postcode. Senator DI NATALE: I have a few more questions about table 1 in the area of expenditure. You talk about public hospital services there and 4.5 per cent of the out-of-pocket costs come from public hospital services. I am interested to know what the source of that is given that public hospitals do not charge a fee. What is the basis of that 4.5 per cent? Dr Webster: Those public hospital services, importantly, do not just include the admitted patient services, so it is a lot of the non-admitted patient services provided by hospitals, such as hospital in the home or other services provided outside for which there can be Senator DI NATALE: Like dialysis and that sort of stuff? Dr Webster: Dialysis is in our footnotes there; exactly, yes. Senator DI NATALE: That seems quite high. Do you know what the main source of that might be? Dr Webster: I do not have that information available. Senator DI NATALE: Perhaps you could take that on notice. I would be interested to see that. Patient transport is not included, is it? Dr Webster: That is a separate line; the third line down is patient transport services. Senator DI NATALE: Yes, it is sorry, I missed that. What sources patient transport? Does it include ambulance? And what about vehicle travel and the current programs that exist at a state level to capture private vehicle use? Dr Webster: There is some inconsistency between the states as to how that is collected and reported, depending on how it is funded, in a sense, by the jurisdiction. Sometimes a hospital might contract a provider to do that and it might be rolled up within the hospital expenditure and therefore would not necessarily appear as a patient transport service. In other cases, where it might be a specific state funded program that cuts across all hospitals, it is more likely to be captured as a patient transport service. But, by and large, that is ambulances. Senator DI NATALE: Again, just to be clear, we have seen roughly a 15 per cent increase over the 1999 to 2010 period 2.7 to 3.2 in terms of household expenditure. Dr Webster: Yes. Senator DI NATALE: I would be interested in any commentary you might have on the impact of copayments and I think this goes to Senator Reynolds's point of necessary versus unnecessary visits. There is not very good Australian data, but there is the RAND study and other international literature reviews. Do you have any comment on some of those larger studies which have demonstrated that you see a reduction in both necessary and unnecessary visits? Is that something you have had any involvement in addressing? Dr Webster: No, it is not something we have looked at. Senator DI NATALE: I have just a few more questions about the issue of data collection. I want to go specifically to MBS item numbers. This came up in one of the previous witness submissions. It was about the information about bulk-billing data and MBS item numbers. Is it possible to get information that reflects on patterns for individuals? For example, some people will be bulk-billed for every visit. Other people will be bulk- COMMUNITY AFFAIRS REFERENCES COMMITTEE

123 Page 50 Senate Tuesday, 29 July 2014 billed maybe not for the first visit but for subsequent visits. Some people will never be bulk-billed. Can we collect information about those sorts of patterns? I suppose my first question is, is it possible to do that? Dr Webster: My understanding of the Medicare dataset is that that may be possible. However, you would probably be best talking to DHS, or the health department. They are the owners of that data. There may be issues I am not aware of that would prevent that type of time-series analysis being conducted following individuals over time. Senator DI NATALE: And linking MBS item numbers to demographic information healthcare card holders or other factors can we do that? That should be fairly straightforward, shouldn't it? Dr Webster: Yes. That sort of stuff gets done pretty routinely. Senator DI NATALE: But that is not accessible, is it? Ms Boland: That is not something we do, no. Again, it would probably be a health department analysis, or DHS. Senator DI NATALE: Another question is around looking at average fees charged per item number. Are those sorts of questions also better directed at the department? Dr Webster: Yes. Ms Boland: Yes. Senator DI NATALE: Okay; I am happy to leave it there. Senator McLUCAS: I was asking witnesses earlier today about the visits not bulk-billed by remoteness data. Dr Duckett uses it in his submission, but it is also in a number of others as well. The number of not-bulk-billed attendances in the very remote areas is still very high. My judgement would be that that is the location of most of the Aboriginal Medical Services, which are all bulk-billed. Is there any way to disaggregate the very remote and AMS and non-ams data? Ms Boland: Again, I would suggest the health department. We do not get detailed Medicare data at the AIHW, so it is not something we would be able to do, Dr Watson: We have released at the 300 units of geography, so, statistical area 3 information on MBS funded GP visits and bulk-billing rates, but that is just for MBS; it does not have other providers of care. Senator McLUCAS: Sorry I am not following you. You have MBS data by very remote Dr Watson: If, for example, a local health service was providing care and not billing MBS, then we do not have the information. Senator McLUCAS: From my understanding, though, I think AMSs still use MBS items and bill Medicare. Dr Watson: If that is the case in a community that you are interested in then you could look at our data and you will see the full MBS bulk-billing rates, both at the Medicare Local catchment and SA 3. Senator McLUCAS: I will have to have a look. Thank you. CHAIR: I think you both took on notice to provide further information. Would you be able to provide that by Thursday? Is that possible? Dr Webster: Yes, I think so. CHAIR: Thank you. That is much appreciated. Thank you very much for your submissions and for your time today. It is much appreciated. COMMUNITY AFFAIRS REFERENCES COMMITTEE

124 Tuesday, 29 July 2014 Senate Page 51 JEPSON, Dr Nigel Stuart, Private capacity ROSS, Mr David, Director Healthcare Access, Medical Technology Association of Australia [14:12] CHAIR: I welcome representatives from the Medical Technology Association of Australia. Thank you for your submission. Is there anything you would like to add about the capacity in which you appear? Dr Jepson: I am a cardiologist. I work at the Prince of Wales public hospital in Sydney. I treat both public and private patients and in the context of the issues of device and access I am here to speak really on behalf of my patients and the process. CHAIR: I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I would like to invite you to make an opening statement and then we will ask you some questions. Mr Ross: The Medical Technology Association of Australia represents manufacturers, exporters and suppliers of medical technology products in Australia. Generally these are products registered with the Therapeutic Goods Administration and include such items as orthopaedic hips and knees, pacemakers, cardiac stents and intraocular lenses. I should state at the outset that I am not a healthcare professional, although I have been involved in reimbursement policy for over a decade with MTAA and in consultation with the government. Dr Jepson is a clinical specialist, and he will explain his involvement shortly, but suffice it to say that while he is a user of our medical technology he has no formal relationship or involvement with MTAA or industry. The focus of the MTAA submission that was provided in May is privately insured patients and their ability to access surgical medical technologies by means of health fund reimbursement. This is mostly achieved through the government's prostheses list, a disallowable instrument listing which surgically implanted prostheses must be reimbursed and the amount to be reimbursed by the health funds with respect to eligible patients. Products listed on the prostheses list have undergone health technology assessment by clinical experts and benefit validation by health economists prior to listing approval by the Minister for Health. But, today, we increasingly have advanced medical technologies, which are used in surgery but not left in the body and which are not eligible for reimbursement through this process because they are not prostheses. This means that health funds are not obliged to reimburse such devices, even though they may be clinically more appropriate for the patient and may be cost saving for the health fund. If a health fund declines to provide reimbursement for these medical technologies by means of ex gratia payments, the hospital will usually be prevented from passing on its cost to the patient because of conditions imposed through Hospital Purchaser Provider Agreements. So, in effect, the health fund can, by financial control, influence clinical practice and the patient can do nothing about it. We have raised this with the Department of Health, but we acknowledge that it is difficult to provide them with the sourced evidence that they seek because the same HPPAs also impose confidentiality requirements on hospitals. MTAA proposes that, in the first instance, health funds should be required to reimburse clinically proven, nonimplantable medical technology used in surgery. If the rigor of the prosthesis list were to be applied to these devices, we believe that patient co-payments would normally not be a factor in their supply. Secondly, health funds should be prohibited from preventing consumers exercising their prerogative to choose a co-payment in the event that their clinical needs are not adequately met by their private health insurer. I would now like to hand over to Dr Jepson to provide his opening remarks. Dr Jepson: Thank you. To further clarify, I am a procedural cardiologist. I am director of the coronary care unit and clinical trials at our public hospital at Prince of Wales in Sydney. I am also medical director of our cardiac theatres at the Eastern Heart Clinic on-site at Randwick. We perform procedures, diagnostic and therapeutic, which are really catheter based so it is pinhole as opposed to minimal invasive as opposed to conventional open cardiac surgery; it is an evolution of care. We treat public and private patients. The sorts of procedures you may be familiar with angiograms, taking pictures of arteries of the heart, putting balloons and stents in blocked arteries, pacemakers and the like. Importantly, I have no conflict of interest with this process. I have no relationship to MTAA or with the industry medical device companies beyond providing some consultation service. Additionally, I provide an independent position of authority on the topic. I am involved with the Cardiac Society of Australia and New Zealand. I am the New South Wales representative of their board. I am also on the interventional council. I present regularly and operate overseas. I attend international meetings. I also operate in the Asia-Pacific area on a volunteer basis teaching. COMMUNITY AFFAIRS REFERENCES COMMITTEE

125 Page 52 Senate Tuesday, 29 July 2014 In relation to the devices, medical technology, the armamentarium, I have for my patients, public and private, comprise both permanent prostheses and devices which are not left in the body permanently and this is both for diagnosis and for treatment. We have a wealth of evidence base from randomised trials supporting diagnostic, therapeutic, permanent and temporary devices, and they are enshrined in our domestic and international guidelines for best practice. Therefore, the clinician requires both categories and the decision for any device will be dictated by the individual clinical circumstances and the patient with the view of best practice. But only the former, the permanently implanted devices, are reimbursable, resulting in a significant limitation in access to our patients too often to best practice. Under these circumstances, what do we do? Some health funds provide ex gratia payments, however most do not for most devices. In circumstances, patients may pay all or a proportion but most health funds prevent this. As a result, not infrequently some private hospitals will absorb some of the unfunded device costs. More commonly, an alternative investigative or treatment pathway is selected. Increasingly, these patients are transferred to public hospitals and put on a public hospital waiting list to incorporate these devices. And not infrequently, unfortunately, patients can be advised by health funds to try another doctor or another private hospital. In these circumstances, the health fund not the clinician is really dictating management. What is the scope of the problem here? Speaking very briefly, I will talk about one example cardiovascular disease. I am a procedural cardiologist. Really, what that means is that I am a plumber of small pipes I fix blocked coronary arteries with balloons and stents, from the outside in, from the wrist artery and from the groin artery in patients who are invariably awake or certainly not under full general anaesthesia. Is that relevant? Yes, it is. Cardiovascular disease it is the leading killer in the Western world, by a long way, and certainly in Australia. We have 50,000 deaths per year, estimated, from cardiovascular disease due to this blockage of the coronary arteries. That is a third of all deaths in Australia. That is one death every 12 minutes. As you may be aware, coronary blockage is associated with chest pain and heart attack syndrome as the most common manifestations, with an enormous burden of disease, healthcare expenditure and outcome. Part of the therapy, as I said, is this catheter based treatment, and there are approximately 40,000 balloon stent procedures performed in Australia every year. So increasingly we are going for the less invasive versus the conventional cardiac surgery. So many of the tools in the armamentarium of the interventional cardiologist fall into this category of non-reimbursable. There is just one I want to illustrate. As we have evolved, the default device in fixing blocked coronary arteries, both in a planned and in an emergency situation, is a metallic stent. In 2014 these are very sophisticated, very small mesh-like devices that incorporate a drug which is released over several months. So the stent prevents the artery shrinking down again and the drug prevents scar tissue growing into the stent. This has supplanted balloons and plain metallic stents, so we have a drug-eluting stent. But the preference in the future, from the medical point of view, from the scientific point of view, is to have no permanent implants in the coronary artery. The more the metal, there is a potential for problems, often very late, with re-narrowings or clot re-blockages. So we have devices. Now we have fully bio-absorbable stents. They are actually scaffolds made of the same material as dissolvable sutures, so they do all the things of a stent but, after two years, they have gone. They give the drug; they prevent the re-narrowing; but they are not a permanent implantable device. Here is a particular problem. We have also got balloons that can deliver a drug almost a local drug delivery to have the same end but without a permanent implantation. These devices are very much enshrined in evidence base. Certainly the drug coated balloon is enshrined in guidelines in Europe and North America with high strength of recommendation or level of evidence. The national institute of clinical excellence in the UK, which is very much a financially driven organisation understandably in the NHS realises the cost efficacy. The frustration as an operator, as a clinician, working in the public and the private sector, is that we do not have these devices, and there are many other tools, such as drills, delivery catheters and suction catheters, that we do not have which are very much evidence based. Included in this and it is in the documentation which is provided is a device called a pressure wire, which I will not go into too much detail about; suffice to say: this is the one device that could have an enormous cost impact in my subspecialty in helping to decide which patients in fact do not need a stent, because up to 30 per cent of patients with stable coronary disease are receiving stents that may not be indicated, not that they are inappropriately put in but based on a more sophisticated strategy of investigation, again enshrined in guidelines associated with superior clinical outcomes adopted globally in the Western world and increasingly in South-East Asia. But in our position we are severely underresourced and the device is grossly underutilised. In summary, technology in my part of the world and that obviously relates to many other areas of medicine continues to evolve greatly, moving to the less invasive. In this regard, the prosthesis listing rules and definitions COMMUNITY AFFAIRS REFERENCES COMMITTEE

126 Tuesday, 29 July 2014 Senate Page 53 are increasingly anachronistic for the sorts of devices we are talking about. They are based on a permanent implant and really they are economically non-viable for most private institutions and there is a move for these hospitals to eliminate these procedures without a reimbursement mechanism, increasing public hospital waiting times and potential for out-of-pocket expenses. These patients have private health care, if they are able to and are willing to pay, but, because of these anomalies, there is really no benefit financially and therapeutically to having a premium for many, many years. So it is a force of frustration and confusion very much for the patients, their families and obviously for the clinicians and the systems of care responsible for them. Thank you for your attention. CHAIR: Thank you. Senator Di Natale, do you want to kick off? Senator DI NATALE: Yes. I am going to try and dumb it down a bit, because it is a very complex area. Can you tell me if I am right in the way I describe it. I have been referred to a cardiologist because I have got a problem with my heart, a blockage in one of my arteries. If a permanent stent is inserted, whether it is done publicly or privately, if a little bit of metal is left behind there is no problem: the insurer will pay for it or the public hospital system will pay for it. We have these new technologies now available where, rather than put something in and leave it there, we can put something in, give it a little blast with a balloon and some medication and other fancy stuff, and take it back out. Because it is not permanently implanted, there are different funding arrangements. If you, as my cardiologist, send me to have something done in a private hospital, the problem will arise that the contractual arrangements between the private health insurer and the private hospital will determine whether it is covered or not. I imagine what would happen in some instances is that the private health insurers will say to the hospital, 'Well, we're giving you a fee for this that's supposed to include all of this; that's supposed to be part of the cost,' and the hospital will say, 'Well, actually, no; this is very expensive, and this was never part of the deal that we signed onto when we struck the arrangement.' In that case, it may be an additional cost that is borne by the patient. So basically the health insurer says, 'No, we're not paying for it, because it should be up to the hospital to take care of it,' and the hospital says to the health insurer, 'No, that's not the deal we struck with you guys,' so it is the patient who is left bearing the cost. If, on the other hand, I went to a public hospital, this would all be taken care of if I happened to be seen in time and to be lucky enough to get the procedure done there. In fact, if I saw you, the cardiologist, and you recognised that my private health insurer is not going to cover it, you might send me to the public hospital anyway and I would get it done there. Does that summarise what you have described? Are there any big problems with what I have said? Dr Jepson: For the overview definitely, but for the specifics not necessarily, because a lot of these devices and just the tools for deciding whether you need the stent in the first place are expensive and are not reimbursable, and a lot of the agreements between the health funds and the providers certainly in our experience prevent the patient actually paying the gap. So you are right that the expectation is that it will either not happen or be absorbed in the public hospital. The reality of the matter is that, wearing my public hospital hat, we have so much money to provide pacemakers Senator DI NATALE: So little money, you mean? Dr Jepson: Yes, that is exactly right. So it is the same argument: there is an issue of waiting lists and there is going to be the issue of that therapy actually being delivered, despite the fact that it is very well enshrined in global guidelines. Senator DI NATALE: So there is good evidence for it. Dr Jepson: Yes. It is not because grandfather thinks it is good, as in years gone by; it actually makes a difference. It is often cost saving. Senator DI NATALE: But the interesting thing for me is that I can go into a public hospital and potentially get one of these things done. I accept that there is rationing even within the public system, and I might be lucky to get it done, but I can get it done; it is not going to cost me a cent. We subsidise private health insurance to the tune of over $5 billion. Somebody takes out a premium and says, 'I'm paying for this.' They make sacrifices to be able to afford it, yet in that circumstance it may be that it is just not covered as part of the arrangement between the private health fund and the hospital, and the person is still out of pocket. Mr Ross: If I could just try to explain it and put a few dollars to it, a drug-eluting stent is listed on the Prostheses List at $3,450, and the pressure wire that Dr Jepson mentioned is less than $1,400. A pressure wire can determine which of multiple lesions do not need to be stented, so you would only have to identify one lesion that did not need a drug-eluting stent and you would be ahead. COMMUNITY AFFAIRS REFERENCES COMMITTEE

127 Page 54 Senate Tuesday, 29 July 2014 Senator DI NATALE: You are saving money. Mr Ross: Yes. But the hospital is left to pay for the pressure wire. The patient cannot pay for it, and clearly it is a better outcome for the patient if they do not put in extra wire stents that are not required. Senator DI NATALE: Why can't the patient pay for it? Mr Ross: Because, with the hospital purchaser provider agreements, most hospitals are prevented from passing on any costs for therapeutic procedures in hospital. Senator DI NATALE: Yes, okay. Mr Ross: We have discussed this with the Department of Health in the HTA Consultative Committee as a policy issue, and it is very difficult to get the data to demonstrate the extent of this problem, because the same HPPAs prevent the hospitals from sharing that data, because it is confidential. Senator DI NATALE: This is a very specific example; this is about interventional cardiology. But are there examples similar to this in other areas that you could cite? Mr Ross: There are similar areas caused by other problems. For instance, to be reimbursed on the Prostheses List, you have to be on the ARTG. So, if we are talking about a custom-made device, it cannot be reimbursed; it depends on ex gratia payments. You might have a custom-made, bifurcated stent because the patient actually does not meet the dimensions of the off-the-shelf stent. So that is not reimbursed. We have 3-D printing of devices which will be coming along very shortly. They will be custom-made. They cannot be reimbursed as things stand at the moment. So it is these issues that will be facing us downstream. There is another example here of a radiological tissue marker which is used in cases of vacuum assisted breast biopsy. This tissue marker is worth around $100 and the uptake in public hospitals is about three times what it is in private hospitals because of this issue of patient co-payments. The patient might be better off with this tissue marker, but does not have the prerogative to pay for it in many circumstances Senator DI NATALE: Because of those agreements? Mr Ross: Yes. So there are a range of problems across a number of products. Senator DI NATALE: Thank you. Senator McLUCAS: Senator Moore and I have just been discussing whether it is a definitional problem for only permanently implantable devices that can be reimbursed. Is that in legislation or is it on the ARTG is it in the agreement between hospitals and the private health providers? Mr Ross: I am not sure quite sure I understand your question. Senator MOORE: What is the status of the prosthesis list, because when I will read your information the thing that struck me was the determining factor was whether it was on the prosthesis list or not. Mr Ross: Yes. Senator MOORE: The items you are describing are of a technology that have moved beyond that phrase 'permanently implanted'. In your discussions with the department, because it would go back to the department's process, what is the limitation to actually extending the approval list to these new types of technologies? Mr Ross: It is a definitional issue. We believe the criteria should be expanded to cover those things. We are not asking for exemption from the HTA or from the benefit review process, but we would like to see the criteria expanded. The Department of Health through their HTA Consultative Committee, which is a stakeholder policy advisory group, has failed to come to agreement on this particular issue. The health fund representatives have one view and the remainder seem to have another. They are obviously opposed to being told what to reimburse. That is the issue for them. I think that in recent years there has been a degree of opposition developing to the prosthesis list itself. The prosthesis list began in 1985 Senator MOORE: Yes, you gave us a bit of a history in your submission. Mr Ross: as schedule 5, not because it was too expensive the hips and knees but because the health funds were not reimbursing what the orthopaedic surgeons felt they needed to implant. Dr Sheppard was involved in that heavily at the outset. Do we want to leave it to the health funds to determine what they will reimburse to support appropriate procedures for patients? Clearly we do not believe that that is the case. Perhaps Dr Jepson has got a view on that, too. Dr Jepson: It comes back to the things that we were discussing. Certainly from a coronary, cardiovascular disease point of view there are a number of devices which are not approved which we use regularly which are not necessarily $3,450 for drug-eluting stent but which are absorbed public and private: things like the pressure wire COMMUNITY AFFAIRS REFERENCES COMMITTEE

128 Tuesday, 29 July 2014 Senate Page 55 really make a difference prognostically. It would make a big difference to health care expenditure across the board. The other big procedure that is in the documentation is the problem with the commonest cardiac rhythm that we see as cardiologist and that patients face atrial fibrillation. The other device I am a plumber, these are the electricians, but doing the ablation procedures, which can be potentially curative for atrial fibrillation, these catheters are between $8,000 and $10,000. This is a big source of problem for patients, depending on which health fund they are in. They are actually not being treated and they are having to go onto lengthy waiting lists for public hospitals. Certainly we are experiencing that increasingly at our hospital and it is a problem for the public sector the failure to deliver therapy for these patients with their health funds. Senator MOORE: So, Dr Jepson, something has gone through a process of testing that it is safe. Certainly from this committee's perspective, we have had a number of inquiries around different prosthesis and we had an extended one on the hip process and the background to the register for hips, which brought out a lot of issues about the safety and efficacy of different processes. But from our point of view, if a procedure or device is safe and it has proven to be safe, then we look at the process we use to approve it. The prosthesis list that we have got before us seems to have the limitation of the permanent implantation. So it would seem that if that were overcome none of the other issues would be relevant, because then it would be a standard refundable process. Is that right? Dr Jepson: That is correct. Still, obviously efficacy, cost-benefit clearly will still be a part of the process, but this is a prohibitive hurdle. Senator MOORE: It at the moment, the way you describe it is that the public hospital scheme is being overburdened because of the process that is now occurring in private hospitals. Dr Jepson: It is not just simply that they wait longer and they invariably get these devices they do not. From a public hospital administrators point of view, these are esoteric devices. We can treat everybody, they will just wait longer. There are less therapies. Senator MOORE: We have had evidence in previous inquiries from the private health insurance groups about their concern about different practitioners using particular devices that were unnecessary, that they had their favoured ones, that that actually cost more because they were not using the ones that had already been proven and standardised. That was the argument that they gave to us in a previous committee. What you are saying is that that is not a case in this case. It is not someone's favoured little trick; it is actually an established practice which has gone through everything else. It is just that it is not on the list and because it is not permanently implantable. Dr Jepson: That is correct. Yes, I am sure there are individual circumstances of this, that and the other, but from an evidence base, from a guideline, from a cardiac society point of view, we are very mindful of how these things should be presented and adopted. That is the big problem I have and we have. Senator MOORE: We need to get information from the department about exactly what the process is to change this to actually do that. At the moment it is a limitation to a patient's choice Dr Jepson: Correct. Senator MOORE: Not only is it is it a limitation to that choice, even if they want to pay for it, they cannot, which is a bit different to some of the other things we have heard: it has been the way that costs are blowing out to individuals. This one, even if I was a patient at a private facility and my doctor told me about this process, I could not get it if I was at the hospital. Dr Jepson: That is right, yes. Senator MOORE: That is a different circumstance to what we have heard before. We will talk to the department about it. Thank you very much even for the information, about one 10th of which I understood in the third one, which was the medical document. But it all goes back to that prosthesis list, doesn't it? Dr Jepson: Yes, in my mind. Senator McLUCAS: Does it also go to the ARTG, though, particularly for the devices that are manufactured specifically for that individual? Mr Ross: The custom-made devices? Senator McLUCAS: That was the second point you are making, Mr Ross, I think. Mr Ross: Yes. The companies are authorised by the TGA to supply the items, but because they are custom made the process would be prohibitive in time and money to get each item custom made entered on the ARTG. Senator McLUCAS: You just couldn't do it, no. COMMUNITY AFFAIRS REFERENCES COMMITTEE

129 Page 56 Senate Tuesday, 29 July 2014 Mr Ross: So the surgeon who orders the item to be custom made and the hospital must liaise with the health fund to get an ex gratia payment to cover it. In a lot of cases it is covered. In some cases it may not be. It creates a lot of paperwork. Also, generally speaking from a manufacturer's point of view, they will be reimbursed at the equivalent on the prosthesis list, which is manufactured in numbers, whereas this one is made specifically for the patient and obviously there is a higher cost involved. Senator MOORE: So that is where the out-of-pocket costs comes in in that case: when there is a gap between what they are reimbursed at what they have to pay, not just a limitation to getting it at all? Mr Ross: Well, they might be prevented from paying that out-of-pocket cost in the matter of custom-made devices as well, in which case the company might absorb the additional cost and just charge the amount from the prosthesis list. Senator McLUCAS: What is the growth in custom-made devices? I expect it is Mr Ross: It is relatively small in number, but it is a problem. Senator McLUCAS: With 3-D printing coming in Mr Ross: I mentioned that because it is on the horizon. It is not really an issue that we have yet, but I foresee that we will need to be prepared for it in the future. Senator MOORE: Are there limits to the ex gratia payment you were talking about? Mr Ross: The health funds will not always provide it. In fact, I have extracts from letters from health funds here which say, 'We remind you of your obligation under the HPPA with respect to devices and services already deemed bundled and the restrictions on charging our members payments for any such items.' Another one says, 'Please be advised that under our hospital purchaser provider agreement the hospital may not charge the abovementioned member for this device.' So they might pay part of it, they might pay all of the value of the device or they might not pay for any of it all. They might claim that it is covered already under HPPAs, which is an issue for the hospitals that Senator MOORE: So the ex gratia payment is determined by the private health insurance? Mr Ross: It is, yes. Dr Jepson: It varies from fund to fund and from device to device. They will individually tackle the sorts of devices we have spoken about today. CHAIR: Thank you very much for your submissions and your time today. COMMUNITY AFFAIRS REFERENCES COMMITTEE

130 Tuesday, 29 July 2014 Senate Page 57 BARTLETT, Mr Richard, Acting Deputy Secretary, Department of Health CAHILL, Ms Fifine, Acting First Assistant Secretary, Medical Services Division, Department of Health COTTERELL, Mr Simon, Acting First Assistant Secretary, Portfolio Strategies Division, Department of Health CREECH, Mr Paul, Assistant Secretary, Pharmaceutical Benefits Division, Department of Health CULLEN, Professor David, Chief Economist and Head, Strategic Policy Unit, Portfolio Strategies Division, Department of Health McNEILL, Ms Felicity, First Assistant Secretary, Pharmaceutical Benefits Division, Department of Health [14:42] CHAIR: Welcome. I remind senators that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of them to superior officers or to a minister. This resolution prohibits only questions asking for an opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim. I understand information on parliamentary privilege and the protection of witnesses and evidence has been provided to you all. We have not received a submission from the department yet. We were hoping that we would have one by now. We talked to you, Mr Bartlett, in Melbourne and we did think that there had been ample time to provide us with a submission. Mr Bartlett: I can only apologise for the fact that we have not been able to get you one. We are anticipating that we will get you one in the next couple of days. We have had a few competing priorities, not least of which the significant number of answers to estimates questions on notice that have been finalised in the last few days and involved many of the people who are here. So our apologies for the delay. We had hoped to get it to you by now, but we will get it to you soon. CHAIR: That would be much appreciated. Of course, we were unable to see it to then ask you questions about it, so I expect there may well be questions following on from the receipt of your submission if we do not cover them today. Senator MOORE: I am disappointed that you have used Senate estimates responses as an excuse for not providing a submission to an inquiry that you had several weeks to provide a submission to. I am just asking, as we have asked many times at Senate estimates, if there is a process for need and delay. I totally understand the work priorities of the department. It would have perhaps been useful to have contacted the secretariat and explained this process. My understanding is that it was not until the secretariat contacted the department today that we were advised of any delay in receiving a submission. I have just been advised that that is not true. Did you contact the secretariat to explain the delay? Mr Bartlett: No, we did not. We made what I would describe as our best endeavours to try to get you a submission before this hearing. We have been unable to do so, for which I have apologised. Senator MOORE: Using the Senate estimates process as one of your excuses Mr Bartlett: As you quite rightly said, there are a range of competing priorities. But I would highlight, as I did at the beginning, that we received over 500 questions on notice through the Senate estimates process. The overwhelming majority of them were directed at the medical benefits and pharmaceutical benefits areas, which are the two key areas involved in the preparation of this submission and which are appearing at this inquiry. And there are, as you would understand, other work pressures. It was mentioned not as an excuse but just as one example of a range of competing priorities we have. Again, our apologies for the fact that we have not got you the submission. It was certainly our intention to do so. I regret that we have not been able to. Senator MOORE: Mr Bartlett, it is pleasant to have the answer but it would have been an effective process to have told the committee before a quarter to three on the day of the hearing that we were not going to have a submission. We do not usually have capital punishment in this committee, so there would have been an acceptance that we would not have it. That would have been better than being told at the last minute. I am sure senators will have questions without it, but it is unprecedented that we did not get a standard response, whereas it is not unprecedented to have some delay of responses to Senate estimates questions. COMMUNITY AFFAIRS REFERENCES COMMITTEE

131 Page 58 Senate Tuesday, 29 July 2014 CHAIR: Did you want to make an opening statement? Mr Bartlett: I made one last time, so I do not think I need to go over it again. Senator McLUCAS: I daresay you had people watching today, Mr Bartlett, when the Australian Health and Hospitals Association made some commentary around trying to get some data from the department on individual use of bulk-billed MBS items. Can you explain to the committee why that FOI request was refused? Mr Bartlett: You are asking the wrong department. The FOI request was made of the Department of Human Services. I would also say that some of the information that they were seeking has been provided for a number of electorates in response to questions on notice from Senator Wong. As the Department of Human Services quite rightly indicated, information is not routinely available. It has to be specifically prepared. There are a variety of ways in which people can get information from the Department of Human Services. Some of them involve a cost. Senator DI NATALE: I have a number of questions around that. I am just wondering if all we are going to get from you is that it is not a question for you; it is a question for the Department of Human Services. Mr Bartlett: In terms of the specifics about why the FOI was not Senator DI NATALE: No, not that. I meant more general questions about MBS data and so on. Mr Bartlett: We can take questions on MBS data, but the issue was Senator DI NATALE: It was just a point of clarification. So your answer specifically related to the FOI request? Mr Bartlett: Yes. Senator DI NATALE: Good. Senator McLUCAS: I go back to another question the AHHA put to us. It has been stated that the introduction of the co-payment is expected to reduce GP attendances by one per cent per year. Their assertion is the basis for this claim is unclear as no modelling data has been made available by the government or the relevant departments. Can you give me some understanding of where it was arrived at that GP attendances would reduce by one per cent per year? Mr Bartlett: As I indicated at estimates, in coming up with an estimate the department took into account a range of information available to it, including evidence from overseas about the effects of co-payments, the size of this co-payment as compared to a number of the others and a range of other things, and on that basis, as the minister indicated, it essentially saw a one per cent reduction in the rate of growth in GP consultations. So GP consultations continue to grow, but the estimate is that they will grow less rapidly than they would have without the co-payment. Senator McLUCAS: So a one per cent reduction in growth rather than one per cent overall. That makes sense. Mr Bartlett: I should be clear. It is not a one per cent reduction in the rate of growth literally. It does not go from 3.96 to It is a one per cent reduction in the rate of growth, so it will go from approximately 4.5 to approximately 3.5. Senator McLUCAS: Can you explain that again please? How does that work? Mr Bartlett: The assumption that was made in terms of the estimate was that the model that we have essentially says that GP consultations are growing at around 4.5 per cent per annum. The estimate that has been made for this is that GP consultations will grow in the first year that it is introduced by about 3.5. I would have to check to ensure that I am not talking about 4.56 or something, but they are in the right order of magnitude. Senator McLUCAS: Okay. Let's go back to the modelling that you have done for this. What overseas studies or data were used? Mr Bartlett: There are two main papers that have been done. I think both have been referred to today. One is the RAND study. The other is the Keel and Hillberg paper, which is effectively a meta-analysis of a range of copayments which have been introduced in a variety of countries around the world and what their effects have been. Senator McLUCAS: In the overseas experiences was there also the impact of the loss of the bulk billing incentive and the replacement of that bulk billing incentive with a low-gap incentive payment? This is quite unique, I think. Mr Bartlett: It is. That is why I said what had been done was an estimate based on, in effect, professional judgement that took into account a range of factors. As you quite rightly point out, each system is unique. There are a range of things going on here which are not replicated anywhere else. The number reflects a judgement about a likely impact, but it is a judgement and an estimate for those reasons. COMMUNITY AFFAIRS REFERENCES COMMITTEE

132 Tuesday, 29 July 2014 Senate Page 59 Senator McLUCAS: Can that work be provided to the committee as part of your submission so that the committee can have a look at what assumptions have been made and what thinking goes into making a guess about what it is going to do? Mr Bartlett: I think we have just taken you through what we have done. I do not know that there is anything we can provide you that is going to provide you with further clarity about that. As I have said, it was an estimate that reflects a professional judgement based on a range of evidence. Senator McLUCAS: Who did that? Not by name, but did someone just say, 'Right, I reckon it's going to be growth down by one per cent'? Did a group of people come to a view on that? Mr Bartlett: Like most estimates processes, you go through a process and you work out what you think a reasonable outcome is based on a range of inputs. That is what has happened here. CHAIR: Does anyone else want to chase that particular issue? Senator BILYK: I am a little bit confused. What was the actual process? Mr Bartlett: It is like any other process where you develop a policy. Senator BILYK: No, what was the process? What did you actually do to get to the result you got to? Mr Bartlett: You are asking me to provide you with detail about a budget process. I cannot do that. Senator DI NATALE: No, what sort of analysis was done when you were looking at the RAND study and the lit review. What did you actually do? Mr Bartlett: Essentially what you would do with any piece of evidence: you have a look at it and see how relevant you think it is and what it has to tell you. The difficulty with a fair amount of the overseas evidence is that a fair amount of it is confounded. The RAND study, as I have gone through previously, looks at three levels of co-pays which are significantly higher than what is envisaged here. It is a relevant input, but it is not a determinant of input. Senator DI NATALE: Did you have someone working on it for a couple of days? Was it a few weeks work? Mr Bartlett: It was a budget process. As I have said to you before, I could not go into the detail of a budget process. Senator DI NATALE: Okay. Did you look at other impacts apart from the impact on GP services other impacts on emergency departments and elsewhere? Mr Bartlett: As was answered in estimates, we did not make an estimate about impacts on emergency departments. Senator REYNOLDS: Earlier we heard evidence from the Grattan Institute that as a result of this new copayment there would be a million fewer GP visits. Had you heard that figure before? Mr Bartlett: Yes. That was the figure I gave at estimates. But, again, it is not a million fewer. We have a certain number now. The rate is growing by 4.5. If it grows by 3.5, there is an estimate that there will be a million fewer than there might have been, all other things being true. It is not a reduction of a million from the current number. Senator REYNOLDS: I understand. Senator DI NATALE: It is a million less than there otherwise would have been. Senator REYNOLDS: You are saying there will still be more GP visits but the rate of increase will slow. Will they be for serious illnesses or are we talking at the lower end of the scale? That is useful information. Mr Bartlett: We have no indication. One of the difficulties in all of this is that people make a range of choices when they decide whether or not to see a GP. Senator REYNOLDS: But there is no indication that this reduction that you are estimating will be from serious illnesses. Mr Bartlett: No. Senator BILYK: Does that mean there is no indication that they will not be either? Mr Bartlett: Logically, you would expect that, if somebody is feeling particularly ill, they are more likely to go see a GP than somebody who is not. Senator BILYK: Not if they cannot afford it. Senator DI NATALE: Symptoms do not correlate with severity. Mr Bartlett: They may or may not. COMMUNITY AFFAIRS REFERENCES COMMITTEE

133 Page 60 Senate Tuesday, 29 July 2014 Senator BILYK: I had brain tumours and I walked around with them for 10 years, so I absolutely agree with Senator Di Natale. Mr Bartlett: The question I would ask in response to that and it is not really my job to ask questions here is: would a GP visit 10 years earlier have made a difference? Senator BILYK: No, the GPs did not think about doing an MRI. I would have been overserviced! Senator McLUCAS: Has any modelling or thinking; I will not say modelling because you chipped me last time any thinking been done about what cohorts of patients will delay or not go to the GP? We have talked a lot about this today. What people make up those million visits? Mr Bartlett: We have a range of figures at the moment about people from particular regions and socioeconomic areas and their use of GP services. We do not have good data about people's use on the basis of income. We extrapolate one from the other. There is no link made between Medicare data and tax data routinely to look at use of services or things like that. Where that is reported, it tends to be reported on the basis of survey data. Senator DI NATALE: So low-income areas. You are basically doing it on geography rather than individuals. Mr Bartlett: Correct. Senator DI NATALE: Okay. Mr Bartlett: At the moment, you find a significant range of variation in use of services. You see higher use of GP services in chronic disease management items and things like that in lower socioeconomic areas than you see in high, and you see higher use of specialists in more affluent areas than you do in lower socioeconomic areas. Part of that is an artefact of the MBS data. It covers off private services. It does not cover off public hospital services. So there is a mix there that we do not get visibility of. In terms of trying to work out what is going to happen as we have gone through previously, there are a range of things in terms of this measure and how it will work where it is almost impossible for me to say something meaningful about the reaction of a practice in an area with a patient group. It is problematic to say that it will affect this group in this way versus that group in that way. Senator McLUCAS: But is it reasonable to expect that those people who are on lower incomes will nonattend at a higher rate? Mr Bartlett: There are a range of things built into the measure which are designed to try to ensure that does not happen, such as the limit of 10 services for those people who have concession cards. There are things like that built in there which are designed to ensure that people who might be constrained by cost are still able to attend. Senator DI NATALE: Which adds up to 40 visits if there are four people in the family correct? Mr Bartlett: Yes, 40 visits, or a combination of 40 visits, DI services or pathology episodes. So it is some mix. CHAIR: Senator Reynolds, do you have another question on data? Senator REYNOLDS: I do. Mr Bartlett, we have heard today and read in some of the submissions about the OECD comparative figures, and they have been quoted extensively. I am actually struggling to see any relevance to our local circumstances given that it appears that what they are trying to compare with is a bit like comparing apples and oranges. They are different health systems with different service delivery and different assessment mechanisms. So I am just wondering if you can comment about how relevant you see them as being. Mr Bartlett: There was a reasonably lengthy discussion about this last time which said that you can use outof-pockets as a percentage of health expenditure, which suggests Australia would Senator REYNOLDS: I just have to say that this is my first hearing. I am new to this, so I do not have all of that background. Mr Bartlett: If you look at out-of-pockets as a percentage of health expenditure, Australia is relatively close to a whole range of other countries. If you look at out-of-pockets on a US dollar adjusted basis, Australia has high out-of-pockets. The difficulty with that is that that is in many ways a function of the relative wealth of a country the exchange rate and various other things so it does not necessarily tell you anything. Senator Di Natale last time asked me about the percentage of household expenditure, and we have some information there we can cover. But the other thing is that, if you try to adjust for the differing GDP and look at what Australia's out-ofpocket costs are relative to others, we sit at about the middle of the field once you do that. COMMUNITY AFFAIRS REFERENCES COMMITTEE

134 Tuesday, 29 July 2014 Senate Page 61 Senator REYNOLDS: Do we include other things in those categories? I think there was some suggestion that we might include a range of alternative therapies and medications that are not included in the costs for other OECD country figures, which would obviously raise us up the scale a bit. Mr Bartlett: As I think AIHW indicated, we are collecting data that is largely consistent with the parameters set by the OECD, but the difficulty with it all is that, as I think they covered, it would appear that they collect it better than most. Certainly that is the reputation they have. But certainly one of the things that are clear from the data is that both a very significant proportion of the total and a significant contributor to the growth is nonprescription medicines, which include complementary medicines. There is also a significant contribution from what are called 'other services', which include complementary therapies. As I went through last time, if you look at it, there is evidence that says there are markets in Australia such as about $4 billion a year that is spent on complementary medicines and therapies, about from memory $750 million a year that is spent on vitamins and minerals, over half a billion that is spent on weight loss related products, and about $1 billion that is spent on cosmetic surgery. Senator REYNOLDS: Just to clarify, they are included in the figures that we have here? Mr Bartlett: Not all of them, but there are elements of it in there, and one of the difficulties about being particularly specific about what is in and what is out is that there are elements of it that go in but not all of it goes in. But, again, they are there. They also indicate that there is a very robust market in Australia for, effectively, discretionary expenditure on a range of clinical areas. CHAIR: And we had a bit of a large discussion last time about that, too. Senator DI NATALE: I just want to go back to the issue of data collection, because it was a recurrent theme through many of the submissions, and I think the former secretary of your department actually called it a 'tragedy' in terms of the amount of data that was not collected; he used that word specifically today. Mr Bartlett: Sorry when you said 'former secretary' I had a particular person in mind; I had to stop and think for a minute to work out who you were referring to! Senator DI NATALE: It was not a recent former secretary. You talked about linking MBS data with tax data, for example. Is there a barrier to doing that? Mr Bartlett: Yes. Senator DI NATALE: What is the barrier? Is it the same barrier we heard about earlier? Mr Bartlett: No. There are specific prohibitions on Medicare data, MBS data, being linked with PBS data. That is within the health portfolio. There are rules set by the Privacy Commissioner about the terms under which it can be done, how long it can be kept, and how it has to be destroyed. Tax data is surrounded by a whole raft of its own secrecy provisions. It is collected under very strict conditions, and one of those very strict conditions is very tight restraints on how it can be used to inform other things. So there is no routine way we could seek to link those datasets. Senator DI NATALE: Are those legislative hurdles surmountable? At a practical level, is it something that could be dealt with, for this specific instance, if it needed to be? Mr Bartlett: Almost anything can be overcome legislatively, but it tends to be difficult. Again, there have been media reports in the last few days of privacy concerns about the personally controlled electronic health record and things like that. It just emphasises the difficulties in this area. Senator DI NATALE: So let us not look specifically at tax data. But what about other information? You are basically using geography as a proxy for socioeconomic status that is what you are saying. And what I am saying is: are there better proxies, and can we look at health care card status, for example? Mr Bartlett: Yes, and we can look at concessional status and talk about that. Senator DI NATALE: So we can break it down according to concessional status, which is certainly much more informative if it is a direct link between MBS data and concessional status, rather than looking at geography. Why don't we do it? Why isn't that publicly available? I would have thought that that was pretty basic information. Mr Bartlett: I would have to have a look to see what is and is not available from DHS. There is quite a lot that is available on the DHS website, and there is, again, a capacity for DHS to prepare reports and information for people Senator DI NATALE: It is not very detailed. COMMUNITY AFFAIRS REFERENCES COMMITTEE

135 Page 62 Senate Tuesday, 29 July 2014 Mr Bartlett: It is kept at a level where there is no possibility of an individual being identified, for all of the reasons which you would understand. Senator DI NATALE: I do understand, but you can use concessional status in a way that does not identify individuals. Mr Bartlett: Sure. Senator DI NATALE: We are talking about huge numbers of people. Mr Bartlett: I am sorry; I do not know what is on the DHS website, so I do not know whether that is available at that level. Senator DI NATALE: My understanding is that if I want to look at MBS data now, and I want to break it down by concessional status, and I want to look at the number of bulk-billed services that are done according to various concessional status, and I want to perhaps break it down so that we are looking not just at isolated episodes but episodes over time, I just cannot get that information. Mr Bartlett: Again, I guess the question I would ask about it is as follows. There are things that we can tell you about the percentage, for example, of services that are concessional. There are things we can tell you about bulk-billing rates and various other things for concessionals. If you start to chain things together and try and work out what happens, again, the difficulty I have with some of this is that you are getting down to the point of: 'Are we talking about an individual?' It gets harder to do these things. So you can get co-claimed items, and we do look at that. But the issue that is there and the constraint on a lot of this is the one that says, 'What is the level you take the barrier down to where there is no risk of identifying somebody?' Senator DI NATALE: We are, potentially, about to enter into this enormous experiment about the impact of the co-payment on different groups of people, and we have had these questions swirling around now for months about what sort of impact that is going to have on different groups of people. We have had a number of people who have provided evidence to us who have said, 'We just can't get the level of information we need. We are not going to be able to assess and evaluate in the way that we need to, and it is, in large part, because of a reluctance to provide the information that is necessary.' And I want to know what it is. At the moment, your main concern appears to be identifying individuals, but we are talking about a population of over 20 million and these groups contain hundreds of thousands of people. We are not talking about data at that granular level. Mr Bartlett: My main concern is to ensure that the legislation as it stands and the conditions set by the privacy commissioner as they stand are not breached. Senator DI NATALE: Are you suggesting there are privacy restrictions around providing the level of data that I have asked for? Mr Bartlett: I think that, again, one of the inhibitions about providing data in the past has been a concern about that, but Senator DI NATALE: I know that is a general criticism. I am being very specific here. Let me put a specific proposition to you. We want to correlate MBS data very directly with concessional status and we also want to do it over time so that we can assess, for a person of a particular concession or status, what proportion of their visits are bulk-billed and what proportion are not bulk-billed very straightforward questions. Are there any specific reasons you can give me that we cannot do that right now? Mr Bartlett: No. Senator DI NATALE: No privacy concerns? Mr Bartlett: Not that I am aware of because, again, you are quite right: at that level I cannot see how you could use that Senator DI NATALE: So why can't I get that information? Mr Bartlett: I do not know whether you can or cannot; I am not familiar enough with what is available through the DHS website. I know that that data can be provided on request from DHS to members of the public. I also know, if they request it, DHS will essentially charge them because there is a cost to them in extracting that data. But it is available. Senator DI NATALE: Why isn't it just publicly available? Say I am a researcher and I want to get on the website. At the moment I have some information that is pretty useless. It tells me the total number of MBS items that are bulk-billed great, that does not tell me enough. Mr Bartlett: I think there is a piece of work being done at the moment looking at making more of the data available at a lower level. That work is in progress. COMMUNITY AFFAIRS REFERENCES COMMITTEE

136 Tuesday, 29 July 2014 Senate Page 63 Senator DI NATALE: That is happening at the moment? That is encouraging. I do not know why you could not have told me that at the very start. Mr Bartlett: I was trying to actually answer the questions that you were asking. The issue I have with it is that, look, there are certain levels to which the provision of data will become possible, but there are again constraints within the legislation that mean that, if somebody is expecting to get unit record MBS data, it is not going to be available anytime soon. It is problematic. Senator DI NATALE: Can I ask on notice, then, what work is being done at the moment and what level of data we will be able to get access to? As I said, I am referring specifically to concessional card status and doing a series over time so we can monitor what proportion of visits are bulk-billed and not bulk-billed over time. Senator McLUCAS: What datasets were requested by DOH of DHS in order to inform the design of the policy? Mr Bartlett: None. We have the entire MBS dataset going back to 1983; DHS do not. DHS keep five years of data; we have the lot. It is provided over a daily feed to us, so we would not ask them to essentially provide us with information that they are routinely providing us with now. Senator McLUCAS: So you could answer the question of the Australian Healthcare and Hospitals Association? Mr Bartlett: We could. Senator McLUCAS: If they asked it of you. Mr Bartlett: If they asked it of us. But we would also be suggesting to them that, if they want an answer, the best thing is to actually approach DHS and try to get it through the usual way in which they deal with data requests, which is not FOI. Senator MOORE: What if I asked? Mr Bartlett: If you asked? We would provide you with the information. Senator MOORE: If I ask for that information you will provide it to me? Mr Bartlett: Yes, just as we have done for Senator Wong when she has asked questions on notice about particular electorates and bulk-billing rates versus percentage of people who are bulk-billed. Senator MOORE: I would like it. Senator McLUCAS: That is not the question that AHHA was asking, though. My understanding is that they were asking how individuals sometimes, always or never are bulk-billed. Mr Bartlett: And, essentially, there are a range of ways in which you can answer that question, but one way of answering that question is to say that the bulk-billing rate is X, the number of people who receive a bulk-billed service in a year is Y and there is some comparison between the two that gives you a sense as to whether bulkbilling is targeted at a particular subgroup or spread across the population. Senator MOORE: And you can give us X and Y? Mr Bartlett: We can give you X and Y, yes. Senator McLUCAS: I think the question they were trying to answer is: do individual patients attending various different doctors' surgeries get treated in the same way? I think that is what they are trying to answer, and the only way to do that is to track the individuals' billed events. Mr Bartlett: Again, that becomes increasingly problematic, because what you are asking us to then do is to provide data about individual patients and individual doctors. Senator McLUCAS: You would de-identify it. Mr Bartlett: Yes, but even if you get down to individual practices and the potential to identify practices, there are some problems there. It does not mean it cannot be done, but you are also adding a significant level of complexity to the question that is being asked, and I suspect it becomes quite problematic to answer. Senator McLUCAS: I might send them your way, Mr Bartlett. Mr Bartlett: Thank you. I will look forward to them. Senator McLUCAS: You can do it after you finish your submission. Senator DI NATALE: I would like to put a question on notice. You may have the information on hand. I am interested in the average fees that are charged by a doctor per item number. COMMUNITY AFFAIRS REFERENCES COMMITTEE

137 Page 64 Senate Tuesday, 29 July 2014 Mr Bartlett: Senator, are you asking for the average MBS fees per item for all doctors or are you asking for a breakdown per doctor, which is what I just heard you say? Senator DI NATALE: I am asking per doctor. I understand please correct me if I am wrong it is the summary statistics by MBS item. Mr Bartlett: Just to give an example, a is lens replacement. You would like to know what the average fee charged for that item is? Senator DI NATALE: Correct. Mr Bartlett: You do not want it for all 5,800 items? Senator DI NATALE: No. I will perhaps let you know which item numbers. Mr Bartlett: No, I don't have that on me! Senator DI NATALE: Do you provide that by doctor as well to, for example, professional groups like the AMA, as opposed to group data? Mr Bartlett: We would be very selective because of the sheer size of the dataset. We would look at providing it by decile so the top 10 per cent charging, down. Senator DI NATALE: So basically a bit of a curve. Mr Bartlett: The trouble with an average is that an average can hide Senator DI NATALE: Correct it hides the highs and lows. That is what I am interested in the variation in fees for item numbers. I do not know how easy it is for you to be able to provide that information. Mr Bartlett: Again, it depends on how much of it you want. If you want it for all 5,800 items Senator DI NATALE: I am probably not interested in ingrown toenails. I will let you know. But you are suggesting by decile? Mr Bartlett: Yes. Senator DI NATALE: Thank you. Senator McLUCAS: At the last hearing we talked about any work the department had done to think about the impact on various types of doctors' practices, and you said that you had not done that work. I asked the AMA whether it is possible to do that today and Professor Owler said it was quite possible. I said, 'Is it possible?' and he said 'Yes.' Have you done any work around the impact of the changes the co-payment plus the change to the bulk-billing arrangements on the viability of various types of doctor practices? Mr Bartlett: No. Senator McLUCAS: Why not? Mr Bartlett: Because, as I said last time, a significant number of variables feed into that that go beyond what we could derive meaning from. Senator McLUCAS: If you do not know how the practice would work, how can our minister say that the doctor can make their own choices about whether or not they bulk-bill? How can the minister say that? Mr Bartlett: Because they can. Under this arrangement they can make choices. It is not mandatory. Senator McLUCAS: Well, they can make choices and go bust. Mr Bartlett: Again, as I think I said last time, in a range of these areas there are significant levels of competition, and practices make choices each day about how they will and will not bill patients. We assume that they will continue to make those choices. Senator McLUCAS: You are the Department of Health for Australia. Have you done any thinking about how the policy will affect the practice of GPs in our country? If you haven't done any modelling on the viability of a practice, have you thought about whether or not the doctor may have to change the way they treat their patients because of the way the GP co-payment and bulk-billing arrangements will affect the viability of their practice? Mr Bartlett: I think that again one of the things that I would say about the existing I am sorry; I was looking for some numbers way in which the system works is that we have a 83 per cent bulk-billing rate for GPs. There are some areas that have very high bulk-billing rates; there are some areas that have lower bulk-billing rates. Bulk-billing does not correlate neatly to concessional, non-concessional, if you use that as a definition of need. There are a number of concessional patients who pay significant co-payments. There are is very large number of non-concessional patients who pay no co-payments. There is not a significant amount of evidence there now that COMMUNITY AFFAIRS REFERENCES COMMITTEE

138 Tuesday, 29 July 2014 Senate Page 65 indicates that it is only driven by people's capacity to pay. It is driven by doctors making a series of choices about what they will charge or won't charge. The assumption we are making is that they will continue to make choices about what they will and won't charge. They will, obviously, pay attention to the way in which the measure works but I would assume that, in paying attention, they will also take into account a range of other factors just as they do now. Senator McLUCAS: Did the department do any analysis then what you have described is all true of the different way those practices operate where you might have a doctor in a low-income area who partially bulk-bills and partially does not? Why is that practice working differently to another one in a high-income area that has the same sort of billing practice? Mr Bartlett: In many cases because they have made different decisions about what will and won't work for them economically. If, for example, I looked at Primary Health Care, which is a big corporate provider, they bulkbill most services. They generate a very significant margin of profit on bulk-billing services. If I look at other practices, they will have other business models. We do not go into practices and have information about the margin that different practices are making. We assume that as small or large businesses they are essentially making those decisions themselves, and the system is set up to enable them to do so. Under this change, it will continue to enable them to do so. They will continue to make decisions about how they choose to operate as a practice. Senator McLUCAS: You are not at all concerned that it will change the way patients are treated in Australia? Mr Bartlett: I think that it will have an effect on the margins. I do not believe that it is a massive change to the way in which patients are treated and I think that the way in which it is constructed is that it has a range of safety nets for concessional patients, in particular, which are designed to ensure that they continue to access services. Senator McLUCAS: When you say it will have an effect on the margins, what do you mean by that? Mr Bartlett: You would assume that in terms of the way in which this works, some of the doctors that are currently charging people co-payments may choose to charge some more people co-payments as in larger copayments. They may vary the amount of the co-payment they charge. There is a range of choices that they have. We assume that some of them will make choices of that sort. Others will make other choices. Senator McLUCAS: Have you thought that one of the choices that a doctor may be forced to make is that for those people who they deem cannot be charged therefore they have to be bulk-billed will have to be crosssubsidised by their wealthier patients? Mr Bartlett: I would suggest that happens in a whole range of practices now. Senator McLUCAS: But it will happen more. Mr Bartlett: Will it? I don't know. Senator McLUCAS: You don't know. Mr Bartlett: I don't know. Senator McLUCAS: It is a shame someone didn't think about this. Mr Bartlett: Again, I think there is a whole range of things you are describing that happens in the existing system. Senator McLUCAS: You have lots of material. You have made a judgement that there will be one per cent less growth in GP attendances. You have not gone down the road of making any assessment of what will change in a regular GP practice in any place in Australia because of the way that the changed payment system in Medicare will change the way the practice is financially operated. Mr Bartlett: Senator, as I think I said at estimates, if we go through and have a look at the data that is available, 89 per cent of doctors charge at least a patient. When you include corporate practices that have doctors remaining at 11 per cent who currently do not charge patients, there is another two or three per cent who are working for corporate organisations that charge patients now. These people all make assessments now about who they will charge, who they will not charge and how they will do it, and we assume that they will continue to make those choices. What is a typical practice? Senator McLUCAS: I do not know. I asked you that question, Mr Bartlett. Mr Bartlett: I think it depends very much in terms of where you are talking about and what you are talking about. The variation is enormous, as you would expect. COMMUNITY AFFAIRS REFERENCES COMMITTEE

139 Page 66 Senate Tuesday, 29 July 2014 Senator REYNOLDS: Just further to Senator McLucas's questions, you are saying that it has always been a practice's business model judgement in terms of what additional co-payments they do, whether they bulk-bill or do not, how much they do, who they do and who they do not. Under that model there are a lot of people who mostly bulk-bill who can still make a profit in their practice. Would it be fair to say that GP visits will still increase so it is not as though they will be having fewer visits so there will still be more patient revenue? Isn't the $2 out of the $7 they can charge also to offset their decisions not to charge some people the co-payment? So the $2 is an offset and that would be another consideration for them. Mr Bartlett: Again that clearly gives them a level of flexibility in terms of what they decide to do. Senator REYNOLDS: Thank you. Senator BILYK: I am wondering if there was any modelling done. We have heard in a number of submissions and the AMA or it might have been Dr Duckett today that they think there will be some cost shifting because people will start going to emergency departments more. I am wondering if there was any process done that worked out how much that might cost in regard to people choosing not to go to their GP but to go to an emergency department. Mr Bartlett: No estimate or modelling was done about the effects in terms of people moving to emergency departments as part of the policy. States and territories were given the option of essentially charging a small copayment for particular types of services in emergency departments. Senator BILYK: I am a Tasmanian senator and in the health system in Tasmania it can be quite difficult to get your records or information out of the hospital when you need to go for your next MRI. They are quite understaffed and it is going to be cut more I understand. I am wondering how people think you can do so much more with less. Mr Bartlett: Sorry, Senator, I do not understand the thrust of your question. Senator BILYK: It is going to increase the workload for people in a variety of areas in public hospitals if you have more going through even if they are charging. A question that came up today was: where would that charge actually take place? Would they be charged before they have the service or later? I am wondering what sorts of processes have been done to sort out this administrative nightmare, which is how I see this is going to end up. Can you tell us what work is being done with regard to that? Mr Bartlett: The government has said that the states and territories can make decisions about what they want to do in that area. Senator BILYK: So basically they are just passing the buck to the states and territories. Would you agree with that? Mr Bartlett: If there is the sense that there is a significant risk of increases to emergency departments then a logical way of dealing with that is to remove the incentive for people to use them as an alternative. Senator BILYK: I am afraid I just do not get that logic. It does not work for me at all. It is bizarre. Senator REYNOLDS: On that last point in terms of passing the buck, as I think you described it, isn't it right that delivery of those hospital services is the responsibility of the state government? Senator DI NATALE: They are now! Senator BILYK: Yes, that is right, and they are going to be overloaded even more, Senator Reynolds. That was my question. It is buck-passing. It is pretty simple just fob it off on the states and territories. Senator REYNOLDS: But is it a fair question of the Commonwealth department if they are state government responsibilities? Senator McLUCAS: These are GP type services that are meant to be delivered by Medicare. Senator BILYK: This is a federal cost that is right. Senator McLUCAS: Senator Bilyk is saying it is expected there will be an increase in emergency department use. Senator REYNOLDS: The question related to MRIs and other Senator McLUCAS: No, GP type services. Senator BILYK: Not now, in general. I just cited that as an example. Senator McLUCAS: The question really should be: did the Commonwealth contemplate that there would be an incentive to move to emergency departments for GP type services? That is why the government said, 'The COMMUNITY AFFAIRS REFERENCES COMMITTEE

140 Tuesday, 29 July 2014 Senate Page 67 states and territories can charge for them.' Those are the policy parameters, as I understand it. That is correct, isn't it? Mr Bartlett: That is correct. Senator McLUCAS: You would have heard evidence today from one of our witnesses who said it was totally impractical for emergency departments to charge a co-payment for some of the reasons that Senator Bilyk said. Was that a consideration before the policy was announced? Mr Bartlett: I do not see how it could be totally impractical. Senator McLUCAS: We had evidence today from the Australian Healthcare and Hospitals Association to say it was impractical. You might want to read the Hansard to see how they explained it. Mr Bartlett: I would be interested to know why that is impractical. I can understand people might prefer not to, but I cannot understand how it is impractical. Senator McLUCAS: Have a read of the Hansard. If you could respond to that in the submission, that would be useful, because it is not the first time it has been put to us that it is an impractical proposal. I am trying to get an understanding of what thinking is behind the increase in the GP payment. We have all agreed today that there will be a potential for deferral or nonattendance at a GP if there is a co-payment required. What impact is that going to have on the cost of the health system, particularly the hospital part of the health system, over time? Dr Duckett gave us a graph in his submission, on page 12, which used some of the data we have had in front of us today from the National Health Performance Authority that says that the adjusted cost per separation from an area with a very low doctor-to-patient ratio is over $1,500 more. Do you want to comment on that analysis? Mr Bartlett: I would comment that, if you look at figure 15, it looks more like a scattergram than something where you can see a definite trend that supports the point that is being made. I cannot look at that graph and essentially get that meaning. You can certainly pick out examples where that is true Senator McLUCAS: You can. Mr Bartlett: but equally you can point Senator McLUCAS: But the trend line is there. Mr Bartlett: Again, I am not sure what a trend line in that sort of scattergram means. Senator McLUCAS: There are only 61 Medicare Locals. We do not have enough points Mr Bartlett: Again, what you are seeing is massive variability. I cannot look at that and say that there is a clear link that leaps out at you from that graph. Senator McLUCAS: The trend is about a $500 difference in cost per hospital. It says something to me, but I would like your analysis of it. Prof. Cullen: I would be happy to have a look at this. The one thing that this data does not tell me is what statisticians would call the R 2 namely, what the probability is that the trend line actually represents the data. Looking at that data, I think the R 2 on this is very, very low. I am perfectly happy to have a conversation with Dr Duckett and ask him that, but if the R 2 on that is what I think it would be then it is very difficult to draw a conclusion from the fact that there is a line going downwards there. It is a nice line to draw, but the fact that he has not told us what the R 2 is means it is a line which you can draw no conclusion from. Senator McLUCAS: If you could address that in the submission as well, that would be helpful. Mr Bartlett: To the extent we can. Obviously we rely on what we get from Dr Duckett. CHAIR: We have got 10 minutes left. I am aware that I have got senators who all want to ask questions. I am seeking your guidance. Do you want me to allocate time or do you want to do you want to do a theme? Senator REYNOLDS: Time. CHAIR: Okay. I will do five minutes each. Senator REYNOLDS: I am not quite sure about that allocation of time some have had a lot more time but I will see what I can do. Coming into this, as my first hearing on this subject, I have been very interested to hear, in relation to the statistics, that the out-of-pocket costs are still somewhere over 17 per cent of the total health costs, and so a lot of the submissions talk about the real issue being the rising cost of health overall. Many of them have mentioned different ways of reducing some of those cost drivers. The AMA said that what they see as the biggest cause for increased health costs is the volume of treatment for single episodes. There have been a number of discussions around that in terms of the role of allied health, GPs and alternative therapies and some of the associated costs. Do you agree with the AMA that that is the biggest cost to driver? COMMUNITY AFFAIRS REFERENCES COMMITTEE

141 Page 68 Senate Tuesday, 29 July 2014 Mr Bartlett: It is one of the biggest cost drivers. If I go through and I look at that data about, for example, GP consultations and costs over the last 10 years, there has been a growth in consultation numbers, but there has been a growth in the cost per GP attendance as well. If I look at pathology, you get more pathology requests per GP visit, with more tests and more expensive tests, and you see similar things with DI. So it is a compounding effect. There are a range of things fitting into it. Senator REYNOLDS: That is interesting, because also the testimony this morning was that GPs are not appreciated enough in the process. What you are saying is that GP visits will still increase. They were saying the issue is: appreciate them more, which I clarified meant having more primary health care and, presumably, some of this high volume of treatment done by GPs. But then we had the nurses and midwives organisation here, and the occupational therapists, saying that, as part of that increased volume of treatment, they could actually provide greater service, at a lower cost presumably, than having the doctors doing some of that volume. In terms of the MBS, currently or in future, have you got any comments about the impact of that ratio of GPs to other allied health professionals? Mr Bartlett: In there were million GP services carried out across the country, and the benefits paid were $5.939 billion. If you go back, the chronic disease management items with a link onto allied health were introduced back in Part of the rationale was that, by allowing the chronically diseased so the people who are going to use services the most to be treated by allied health, you would reduce their use of GP services and it would, in effect, shift people across to a lower-cost form of care. In there were 97.4 million services. In there were million services. In there were million services. In there were 107 million services. In there were million services. In there were million services, and so on up to the current million. We are now paying nearly $6 billion for GP costs, up from $2.8 billion in We are also now paying for $250 million worth of allied health services each year that were not being paid for when that trend started. The one thing that is really clear in terms of the various changes that have been made is that it does not stop the growth in GP services, and the notion that if you introduce something it will shift services out of GPs into another notionally lower-cost area just is not borne out by any evidence that we have in the local environment. Senator REYNOLDS: Thank you. There has also been discussion of, and I raised a question earlier about, alternative therapies and where they fit into the mix in terms of the total percentage of out-of-pocket costs. Can you expand on that; and what sorts of alternative therapies actually come into those out-of-pocket costs? Mr Bartlett: Alternative therapies cover a fair spectrum. Senator REYNOLDS: In terms of which ones are included in figures for out-of-pocket costs. Mr Bartlett: The difficulty with that is that I know there are a range of things that are sold in pharmacies, supermarkets or whatever that, as AIHW have said, are captured in some of their data, and that will cover things like to cite some that are quite commonly advertised red krill oil, St John's wort, whatever. They are a significant proportion of those non-prescription medications that are captured in the out-of-pocket data, and that is the fastest growing area of the out-of-pocket costs, in that 17 per cent. Senator DI NATALE: What is the fastest growing area? Mr Bartlett: The non-prescription medications. Senator DI NATALE: Hang on Mr Bartlett: Which is more than just those, but they are Senator DI NATALE: Are you talking about the 32 per cent, which is the 'other medicines' category? Well, that is not just complementary medicines. Mr Bartlett: No, Senator, it is not. Senator DI NATALE: It is prescribed medicines that do not reach the [inaudible]. Mr Bartlett: Yes. Senator DI NATALE: It is paracetamol, non-steroidals et cetera. And the take-home message from AIHW is that we do not know what proportion of complementary medicines Chair, I will take this as my time, by the way CHAIR: I was just going to say! Senator DI NATALE: But I think this is an important point. You have made a reference to this on a couple of occasions, that that 30 per cent has become almost synonymous with complementary medicines, and we just do not know. It might be that five per cent of that 30 per cent is actually complementary medicine. COMMUNITY AFFAIRS REFERENCES COMMITTEE

142 Tuesday, 29 July 2014 Senate Page 69 Ms McNeill: It is 62.7 per cent, Senator $5.4 billion. Senator DI NATALE: Hang on. Again, let's be clear about this Ms McNeill: It is 62.7 per cent. Senator DI NATALE: Of what? Ms McNeill: Of the amount that you are talking about. So, if I took the report and we talk about the 30 per cent, the expenditure on 'all other medication' items was estimated at $8.7 billion. Senator DI NATALE: Yes. Ms McNeill: Over-the-counter medicines were 62.7 per cent of that, or five Senator DI NATALE: Yes, but that includes paracetamol and non-steroidals. Ms McNeill: or $5.4 billion. Under co-payment prescriptions, which are the ones that you referred to Senator DI NATALE: Yes, I know. That is fine Ms McNeill: that cover the full price, was 19.6 per cent or $1.7 billion. Private prescriptions Senator DI NATALE: But, again, you just made the same error Ms McNeill: were 11.1 per cent or $966 million; and the remaining 6.6 per cent Senator DI NATALE: With respect, we are about to finish, and you are not being helpful. The question was about complementary medicines. The figure you have just given me of 62 per cent includes paracetamol, nonsteroidal anti-inflammatories and a range of other treatments that do not capture Ms McNeill: It includes vitamins, toothbrushes, condoms Senator DI NATALE: complementary medicines. CHAIR: Hang on. Don't talk over each other. Ms McNeill: cotton buds and facial cleansers, too. Senator DI NATALE: Condoms as well! Thank you! I do not consider condoms to be complementary medicine. Ms McNeill: I appreciate that Senator DI NATALE: Mr Bartlett, the point is: do you know what proportion of that 32 per cent figure is actually complementary medicines? Mr Bartlett: No, I do not; but the one thing I would say is that, as I have also said a few times, we have a market survey that essentially says that Australians are spending $4 billion a year on complementary medicines and natural therapies. So I do not know and the alignment between the two is not clear but there is clearly a lot of money being spent by Australians Senator DI NATALE: Yes, we will agree with that. Mr Bartlett: and that is the point we are trying to make. But your point is a valid one. We cannot say that, of that, there is this much on red krill oil and that much on something else. We do not know that. Senator MOORE: Would anyone know that, Mr Bartlett? Mr Bartlett: AIHW is about as close as we can get, and they did not Senator MOORE: And they were uncertain as well. Mr Bartlett: Yes, I was going to say. Senator MOORE: So, in terms of the evidence, it is very difficult for anyone to know that kind of information. Mr Bartlett: Yes. And there is a real interaction on the margins of these out-of-pockets which is unclear in terms of some of the other areas I have talked about as well. They are not all in, but some of them clearly are. CHAIR: Senator Reynolds has a follow-up question. We did deal with this quite extensively in Melbourne. Ms McNeill, are you able to provide to us the list you read out so that people can look at that to work out what is paracetamol and the things that would be considered medicines rather than complimentary medicines? Ms McNeill: That is taken straight from the AIHW's data and I think, as Senator Moore has referred to, they have CHAIR: Okay, so that is that same list? Ms McNeill: Yes. COMMUNITY AFFAIRS REFERENCES COMMITTEE

143 Page 70 Senate Tuesday, 29 July 2014 CHAIR: Thank you. Senator REYNOLDS: I was going to segue into the cost of medication. Obviously there has been a lot of discussion and debate over perceptions that people in Australia are paying too much for their medications and that it is part of the big driver in the cost of health. I am wondering: do you have any figures to show what Australians are paying in comparison to other countries in relation to their costs their out-of-pocket expenses versus the actual costs of medication? Do you have any figures or commentary on that? Ms McNeill: One minute, Senator; I do have something on that. Senator REYNOLDS: While you are having a look for that, to save time: on the PBS we have also had a talk today about price disclosure and actually making that a shorter period of time. Do you have any comments on price disclosure generally such as the time frame and how many drugs are subject to price disclosure? Ms McNeill: Certainly. We currently have 326 drugs that are subject to price disclosure calculations, of which, over the period of time since price disclosure began in 2007, 161, or roughly 50 per cent of them, have taken price reductions. In the most recent round, under simplified price disclosure, which is the new process where the calculation is undertaken after six months' worth of data instead of 12 months, we have 95 of 316 drugs taking a price reduction. This is an average of 30 per cent of the drugs that were in the calculation period. Since price disclosure began, we have 59 drugs that have taken three or more reductions, 21 that have taken four reductions, seven that have taken five reductions and 16 that have taken only two reductions. This is all in addition to the statutory 16 per cent and the two per cent and five per cent reductions in It is very difficult to compare different formularies in different countries because we have different pricing agreements and different supply chains, but one of the things that we have heard in some of the submissions and testimonies is that Australia is not necessarily getting good value for money for some of its generic medicines. To reassure the committee, there are drugs such as rosuvastatin that are significantly cheaper in Australia than in the United Kingdom. We had similar outcomes for a lot of the cancer treatments. Docetaxel, paclitaxel, topotecan and oxaliplatin are all commonly used drugs in the treatment of cancer that are all significantly cheaper here than in other countries. We have common drugs that are used in the treatment of rheumatoid arthritis, which represents 13 per cent of all chronic disease in Australia. Etanercept, one of the most commonly used drugs, is also cheaper here than in other countries and that is still on F1. We have had conversations in the past about the Canadian experience and whether we have been compared to those countries. Eighteen months ago there were statements made that the drugs in Canada were decreasing in price faster than in Australia, and the top six drugs tended to be looked at there. All of those drugs including common things for antidepressants, cholesterol management and lipid disorders are now all 55 per cent to 85 per cent cheaper as a result of price disclosure and comparable, if not cheaper, to their Canadian counterparts. Senator REYNOLDS: Thank you. I go back to my original question about what people actually pay, their out-of-pocket costs, and what the PBS subsidises. So for the full cost of medication and the subsidies that people benefit from from the taxpayer how do we compare internationally with what people actually pay? Ms McNeill: It is very difficult to compare because of the number of drugs that are available in different countries. For example, in New Zealand there are 70-plus drugs that are not available there but the co-payment is cheaper than in Australia. So you can pay less for a drug, but the options of drugs that you have to choose from is significantly reduced. Likewise that can be the case in other countries. In some respects the OECD will show that sometimes our co-payments are higher and there are other times when it will show that our co-payments and our safety net provisions in the longer term make things cheaper. But you do have to look at the whole system, which is the number of drugs that are available and subsidised. One of the things that is regularly referred to is patient choice in Australia so in Australia, you and your clinician determine which is the brand and the best drug that is available for you to choose and that is not always the case in other countries. Senator McLUCAS: During the hearings there have been lots of questions Mr Bartlett: Senator Di Natale, you asked a question about the breakdown. We actually have some ABS data about household weekly expenditure on those things. This is figures: prescription medicines, $5.83 per week; first aid supplies and therapeutic appliances, $2.12 per week; nonprescribed pain relievers, 84c per week; sunscreen, 16c per week; other nonprescribed items, which is obviously all of the things we are talking about, $8.91 per week. Senator DI NATALE: Again, other nonprescribed items Mr Bartlett: It could be broad, but we have taken out things like painkillers and so we are left with Senator DI NATALE: Okay, so we know painkillers are not a major component. COMMUNITY AFFAIRS REFERENCES COMMITTEE

144 Tuesday, 29 July 2014 Senate Page 71 Mr Bartlett: Yes. That is the best we have got for that at this point. Senator DI NATALE: Thank you. Senator McLUCAS: In the compilation of your submission that you will provide to the committee, would you have a look over Hansard to identify places where there have been questions that have been posed that we have not got to in our conversation this afternoon? One of those will be just take this on notice to put it in the submission around questions on how will the 10 visits be counted? So how will people know when they have actually had 10 visits and is it in a financial year or a calendar year? We need to understand all of that machinery stuff better. How will the safety net work? And this is for both amended safety nets. What I am looking for there is: what is the forward prediction of the numbers of people who will hit those safety nets into the future compared to the current? How many people are hitting current safety nets under the current methodology? If that could be tracked, projected on current and then projected on the new safety nets and the numbers of people who will hit those safety nets. Mr Bartlett: We can and will do that for you. The only issue with it that I would raise is that the current safety net has a threshold increase Senator McLUCAS: That is built in. Mr Bartlett: No. It has been going up by CPI but it has a significant increase that will go forward from 1 January next year, which means that the trend line of who is going to get there and whatever is completely changed. That shift from the current level to $2,000 is going to change that. Senator McLUCAS: That is under the new proposal, is it? Mr Bartlett: No Senator McLUCAS: That is under the original, the existing Mr Bartlett: that is under a budget measure that goes back a couple of budgets. And then there is a single safety net that has lower thresholds that will kick in 12 months later. We can give you what you are asking for, but in terms of trend lines about who qualifies for it, it is obviously affected by that increase to $2,000 before you get to the new one. But we will give you that information. Senator McLUCAS: That is good. The other question that I have been asking, trying to get some understanding of, is the level of non-bulk-billed GP attendances in remote and very remote areas. I have always focused on the number of bulk-billed events in remote and very remote areas, and when you look at the number of non-bulk-billed attendances the numbers are very high. But the particular numbers I am looking for are for the very remote areas one would expect that is where most AMSs are. Is there a way to disaggregate the number of Mr Bartlett: The AMS contribution? Senator McLUCAS: Yes, that is right. I think I have answered my own question. Mr Bartlett: I think we can do that for you. I have figures on the bulk-billing rates for the various categories. For major cities of Australia, the bulk-billing rate for GP services is 83.4 per cent in ; for inner regional Australia Senator McLUCAS: Mr Bartlett, rather than telling me now, could you put it in the submission? Sorry, but there is one other issue that I want to canvas. Ms McNeill, I think you are the probably the person who can answer this question for me. It is expected, with the increase in co-payments for pharmaceuticals, that there will be a reduction in scripts filled. That is the evidence that we have received over the hearing. What predictions is the department expecting for the reduction in prescriptions filled in terms of the modelling you have done about the cost impacts of the increased co-payment on pharmaceuticals? Ms McNeill: As we discussed at Senate estimates, we have expected a movement in script volumes from subsidy based on medicines going under the co-payment amount from 40 to 55 per cent, and that is about five million scripts a year. But as to whether or not scripts will not be filled, that is something that we have not taken an estimation of, because that is not something you can reasonably make an estimation of. As we discussed at estimates, it can mean that patients are moving to fixed-dose combinations. It can mean that instead of getting a medicine as Senator Di Natale referred to, an analgesic, Panadol on the PBS you can go and buy it over the counter for a quarter of the price, and you may choose to do these things. We have to be very careful. I have seen multiple testimony discussions about what happened in 2005, where in some disease classes there was a reduction in script volumes. There were also significant increases in script volumes in other disease classes elsewhere. In fact, that period was the time we had the health scare related to celecoxib and rofecoxib, which saw a change in script volumes, by itself, of 4½ million, which was more than the total reduction on the PBS script volumes that COMMUNITY AFFAIRS REFERENCES COMMITTEE

145 Page 72 Senate Tuesday, 29 July 2014 people are trying to link to the co-payment changes in When you take those kinds of things into account analgesics, changes in health, clinical guidance we cannot extrapolate that into how we think people may choose to fill their scripts whether you may choose to buy a proton-pump inhibitor over the counter versus actually getting the prescription filled. But, as I said, we have also had a significant number of movements in recent years from single items to fixed-dose combinations, which are not only single but double or triple therapies. We have that particularly in the hep C and HIV space now as well. That all confounds what we are being asked to model. Senator McLUCAS: Then perhaps I could ask that the submission respond to the Grattan Institute report, on page 11, where they say: co-payments reduce the use of medicines and tests that a patient has been prescribed and that they presumably should be taking. International reviews of the literature, US studies and several Australian studies have found this. They go on to describe what happened in What you are saying is all fine, but there must have been some assessment of what the future pharmaceutical use will be, and has there been an inclusion in that future-use assessment of some decreasing use as a result of the increased co-payment? Ms McNeill: The answer to that is no. Senator McLUCAS: So, if we come back in three years and say, 'Well, it did happen' Ms McNeill: Our point is that we cannot look at what happened in 2005, because of the confounding factors that are in there, and that you cannot look at what happened in the past, which was a 22 per cent increase in copayments versus what is now in place, which is a potential 13 per cent increase, because you cannot look also at the fact that there were changes in different disease and clinical treatments. I cannot look at that and say that that automatically translates into behaviour how patients may choose to fill their prescriptions for medicines and whether there are price signals or not. I think there was some research done by the Australian 45 and Up study which looked at statins in that space. Statins are one of the drugs that actually increased during the 2005 copayment increase, but it is also one that they looked at and could find no correlation between level of income and the capacity or interest in actually filling a script for a statin. Senator McLUCAS: Statins is one of the drug types that Dr Duckett looks at, so perhaps you could have a look at what he has said and respond to that. Ms McNeill: I will respond to that, certainly. CHAIR: Thank you. That is all we have time for. There is the question of when your submission is coming in. I am not asking that to be difficult! But we have a time line that we need to meet for our report. And there is also the question of how soon you can get us the answers to the questions you have taken on notice. Mr Bartlett: We can endeavour to go through today and answer a lot of questions in that submission, but we have a reasonably final version that we can get you fairly quickly. If we are going to significantly enhance it, obviously that will take a bit of time. CHAIR: I think it would be good to get that in as soon as we can and then ask you to make a supplementary submission with the other information, because at least we can then start looking at your initial submission. Mr Bartlett: We will endeavour to get the supplementary information to you as soon as we can. Can I get a sense of what your deadline for that is? CHAIR: We have asked everybody else if we can have it on Thursday. I understand that you will be working on the first one. Could we have that tomorrow? Is that possible? Mr Bartlett: We will see what we can do. CHAIR: And Monday morning for the supplementary? Mr Bartlett: Again, we will see what we can do. We will do our best. CHAIR: Thank you. That is the end of the hearing for today. I thank the secretariat, Hansard and all our witnesses, and I thank the department. Committee adjourned at 16:01 COMMUNITY AFFAIRS REFERENCES COMMITTEE

146 Attachment 6 Level 12, 54 Miller St, North Sydney NSW 2060 Australia PO Box 2016 North Sydney NSW 2059 Australia P (+612) F (+612) E reception@mtaa.org.au Proposed criteria for reimbursement of Non-Implantable and Custom-Made Devices (NICD) This paper outlines a proposal for a principle based approach to determine reimbursement for exceptional medical technologies that currently do not fit the Prostheses List (PL) criteria. Background The PL criteria were designed to address specific public policy issues relevant at the time. Its focus was on access to surgically implanted prostheses and it provided consumers, health professionals, hospitals and health funds with certainty about what was covered for patients with private health insurance. However advances in medical technology have meant that newer devices not left in the body, or custom-made products for the patient do not qualify for reimbursement. The Federal Minister for Health may determine access to non-prostheses in an ad-hoc manner and these items are listed on Part C of the PL (cardiac loop recorders and insulin pumps). This paper proposes criteria for the reimbursement of non-implantable and custom-made devices. The criteria for non-implantable and custom-made devices (NICD) The focus of the NICD Criteria is to identify technologies with clinical benefits where there is limited or no funding pathway and where PHI coverage is not assured. Without an established funding pathway, access to new NICD technology can be erratic and patients may be missing better health outcomes that would otherwise be available. MTAA recommends six criteria for determining which specific NICD technologies should be reimbursed. These proposed NICD Criteria (attached) have the advantage of being based on the current Prostheses List approach, including requirements for comparative clinical effectiveness and cost-effectiveness. 29 May 2015 Attachment: The proposed NICD Criteria MEDICAL TECHNOLOGY FOR A HEALTHIER AUSTRALIA Medical Technology Association of Australia Limited ABN

147 Attachment 6 Level 12, 54 Miller St, North Sydney NSW 2060 Australia PO Box 2016 North Sydney NSW 2059 Australia P (+612) F (+612) E reception@mtaa.org.au Proposed criteria for reimbursement of Non-Implantable and Custom-Made Devices (NICD): Mandatory criteria: 1. The product must be approved by the Therapeutic Goods Administration for use within Australia 1 ; and 2. The product must be used on a single patient only as part of an episode of hospital treatment or hospital-substitute treatment; and 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); and Additional criteria: 4. The product should: be used surgically in the patient and be purposely designed in order to: o combat a pathological process; or o modulate a physiological process; or and be essential to and be specifically designed as an integral single-use device necessary to support the use of the product as described above, which is intended for use with the patient in whom that product is used, or essential to support the implantation of a product listed on Part A of the Prostheses List ; 5. The product has been compared with alternate products on the Prostheses List, as well as other alternate approved products and treatments for which a Medicare Benefit is payable, and complies with one of the following: it is at least equivalent in clinical effectiveness and cost effectiveness; or it is likely to avoid the use of a more invasive or expensive product or treatment; or it is used when other products and treatments fail. and 6. The cost of the product is relative to its clinical effectiveness. 1 Note: this would include ARTG inclusions and custom made devices (and potentially cover 3D printed devices) which whilst approved for supply by the TGA, are not included in the ARTG. MEDICAL TECHNOLOGY FOR A HEALTHIER AUSTRALIA Medical Technology Association of Australia Limited ABN

148 Value of Innovative Technologies Attachment 7 Custom-made Medical Devices: 3D Printing Technology What are Custom-made Medical Devices? Custom-made devices are one-off medical devices prescribed for the exclusive use of a particular patient, such as prostheses, orthoses, hearing-aid inserts, and dental appliances. Devices intended by their manufacturers to be assembled, installed, adjusted or fine tuned before being put into use are not considered custom-made devices. Furthermore, mass produced devices which need to be adapted to meet the specific requirements of the medical practitioner or any other professional user are also not considered to be custom-made devices. Applications and Benefits Reimbursement and Access Challenges Personalised medicine model likely to offer better anatomical fit for better patient outcomes than off the shelf devices manufactured to standard specifications More accessible - due to increased application of 3D printing technology to the manufacture of medical devices (including some implants) Reimbursement of custom-made devices is not possible due to the current Prostheses List (PL) criteria which state that the product must be included on the Australian Register of Therapeutic Goods (ARTG). E Therapeutic Goods Administration (TGA) Regulatory Requirements U C Custom-made medical devices are exempt from entry in the ARTG, however they are still regulated in that the manufacturer must apply a conformity assessment procedure to their manufacture, and adverse events must be reported to the TGA, who may take appropriate regulatory action such as recalling the product due to safety and performance reasons. MTAA Reccommendations Custom-made medical devices are medical devices made specifically in accordance with a request by a health professional specifying its design characteristics or construction and intended to be used only in relation to a particular individual, or by a health professional to meet special needs arising in the course of his or her practice TGA Guidance Custom-made medical devices should be included on the PL and be reimbursed by private health insurers. EP R O D Definitions..describes two types of custom devices: one specific to the special needs of the physician s practice, and the other specific to the patient s unique physiological/ pathology needs FDA Guidance Custom-made medical devices should be able to be included in the ARTG, if the sponsor wishes to voluntarily do so, in a manner which is not prohibitive by time and cost. R Custom-made device means any device specifically made in accordance with a duly qualified medical practitioner s written prescription which gives, under his responsibility, specific design characteristics and is intended for the sole use of a particular patient European Council Directive Legislative changes to enable Prostheses List Advisory Committee (PLAC) to accept applications for custom-made devices for entry in the PL, even though they do not have an ARTG number i.e. custom-made medical devices can be lawfully supplied without the need for an ARTG entry, such as devices supplied under certain conditions as part of the Special Access Scheme or Authorised Prescriber Scheme. T Regulatory Requirements in Australia and Other Jurisdictions Europe European Council Directive United States FDA Guidance Custom-made medical devices are exempted from the CE marking of conformity when they are placed on the market. Custom-made medical devices are exempt from Premarket Approval (PMA) requirements and conformance to mandatory performance standards. To qualify for exemption, the device needs to address the following: devices created or modified in order to comply with the order of an individual physician or dentist the potential for multiple units of a device type (not to exceed 5 units per year) qualifying for the custom device exemption annual reporting requirements by the manufacturer to FDA about devices manufactured and distributed. O Australia TGA Guidelines D O N Custom-made medical devices are not required to undergo premarket assessment by the TGA and are exempted from inclusion in the ARTG. However, a system or procedure pack that contains one or more custom-made medical devices is not considered a custom-made medical device. Conformity Assessment Procedures for devices used for a Special Purpose applies. According to the TGA requirements the manufacturer/sponsor must: prepare a written statement in relation to the device prepare and maintain documentation in relation to the device notify the TGA about any adverse events or problems with the device or its use establish and maintain a postmarket monitoring system. Manufacturer or his authorised representative must draw up the statement containing the information: prepare a written statement in relation to the device the name and address of the manufacturer data allowing identification of the device in question a statement that the device is intended for exclusive use by a particular patient, together with the name of the patient the name of the medical practitioner or other authorised person who made out the prescription and, where applicable, the name of the clinic concerned the specific characteristics of the product as indicated by the prescription. Member States may require that the manufacturer shall submit to the competent authority a list of such devices which have been put into service in their territory. Level 12, 54 Miller Street, North Sydney NSW 2060 Phone: (+61 2) adoolan@mtaa.org.au Website: The definition takes into account multiple considerations such as anatomical location, disease state, material, technology, and indications. Custom Devices are not exempt from any other requirements, including, but not limited to: Quality System Regulation including Design Controls Medical Device Reporting Labelling Corrections and Removals Registration and Listing. Device should include the following information: a statement that the device is a custom device the name of the ordering physician identifying information for the patient (if applicable) whom the device is intended to treat, indications for use sterilisation status relevant composition information (materials, components, etc.) storage conditions.

149 Attachment 8 Value of Technology Inequitable patient access to clinically and cost effective medical technology: Catheter ablation for atrial fibrillation BACKGROUND CATHETER ABLATION FOR THE TREATMENT OF AF Atrial fibrillation (AF) causes irregular heart rhythm and is the most common cardiac condition. It is estimated to affect 460,000 Australians. Prevalence increases with age. Furthermore, AF prevalence is predicted to double among people aged 75 years and over by The therapeutic aim in treating AF is to restore and maintain the normal sinus rhythm, thus relieving symptoms, improving quality of life and reducing the risk of potentially severe complications such as stroke or death. There are three forms of AF: Paroxysmal: Recurrent but terminates within 7 days Persistent: Consistent for greater than 7 days Permanent: Long-standing which either fails to terminate or terminates but relapses within 24 hours. Symptoms of AF may be managed with ongoing pharmacological treatment, or permanently treated with catheter ablation. Catheter ablation has been shown to be superior to anti-arrhythmic drugs (AADs). Catheter ablation allows patients to achieve freedom from AF. This outcome is supported by a meta-analysis of 32 randomised controlled trials involving 3,560 patients. The superior efficacy of catheter ablation compared to AADs is further demonstrated by the large number of study participants who crossed-over from AAD treatment to radiofrequency ablation (36-88%), mostly due to lack of efficacy. Catheter ablation is a proven treatment for managing AF. Patient without AF E ECG Traces Patient with AF The Cardiac Society of Australia and New Zealand supports catheter ablation in selected patients as a Class 1 indication for paroxysmal atrial fibrillation and a Class 2A indication for more persistent forms U Cardiac Society of Australia and New Zealand (CSANZ) Position Statement 2013 C Clinical guidelines recommend the use of catheter ablation for selected patients If drug treatment has failed to control symptoms of atrial fibrillation or is unsuitable: offer left atrial catheter ablation to people with paroxysmal atrial fibrillation consider left atrial catheter or surgical ablation for people with persistent atrial fibrillation European Society of Cardiology (ESC) Guideline 2012 Catheter ablation of symptomatic paroxysmal AF is recommended in patients who have symptomatic recurrences of AF on antiarrhythmic drug therapy and who prefer further rhythm control therapy, when performed by an electrophysiologist who has received appropriate training and is performing the procedure in an experienced centre. EP R O Health Burden People with AF have a significantly poorer quality of life than the general population. The presence of AF results in lower general health, physical activity, emotional health and vitality. UK National Institute for Health and Care Excellence (NICE) Clinical Guideline 2014 D BURDEN OF AF AF symptoms include palpitations, dizziness, fatigue, chest pain and breathlessness. These symptoms can be disabling and affect a person s work, diet and lifestyle. AF can also affect a person s mental health. R People with AF have a higher risk of: Stroke: About times higher Heart failure: Up to 3 times higher Death: times higher D O N O T Economic Burden AF generates a significant economic burden. In 2010 it cost the Australian healthcare system at least $1.25 billion per annum through medical costs, disability care and lost productivity output. Approximately 35% of these costs resulted from stroke and heart failure. The total cost for AF pharmaceuticals was $74.7 million in This comprised $57.5 million of government costs via the Pharmaceutical Benefits Scheme (PBS) and $17.2 million in out-of-pocket patient expenses. The economic burden is expected to increase with an estimated 7.9% annual rise in the incidence of AF-related hospitalisation and healthcare. AF TREATMENT AND COST-EFFECTIVENESS Treatment of AF using catheter ablation is associated with substantial cost-savings gained through: Reduction in hospitalisations (in-patient hospitalisation and emergency), general practitioner visits, medication use and costs, specialist consultations, and other AF-associated costs such as carer duties. Increased quality of life and productivity (quicker recovery and ability to return to work). In addition, catheter ablation may be cost-effective by reducing the risk of AF-associated comorbidities such as stroke and heart failure. Data from large multicentre registry studies (up to 37,908 patients) showed the risk of stroke after catheter ablation for AF was reduced to that of the general population. Avoidance of an AF-related stroke is likely to save an average hospitalisation cost of at least $30,000 in the first year. Acknowledgement Agnes Ginges Centre for Molecular Cardiology, Centenary Institute Level 12, 54 Miller Street, North Sydney NSW 2060 Phone: (+61 2) adoolan@mtaa.org.au Website: Catheter ablation of AF should be considered as first-line therapy in selected patients with symptomatic paroxysmal AF as an alternative to antiarrhythmic drug therapy, considering patient choice, benefit, and risk. Patient perspectives: Finding out that you have AF can be a sobering experience, but it needn t necessarily be a life sentence. AF can be fixed in many of us. AF was beginning to seriously affect my life to the point where I felt compelled to retire several years early. Sometime after that I finally heard about and underwent a completely successful ablation procedure, after which my quality of life was completely restored. Had I known about ablation before I retired, I would have been able to continue working for some years. AF was beginning to seriously affect my life until I finally heard about and underwent ablation, after which my AF completely disappeared. ISSUE: INCONSISTENT PATIENT ACCESS TO CATHETER ABLATION Catheter ablation procedures receive funding from the Australian Government through the Medicare Benefits Schedule (MBS). Private health insurance covers patients hospital stay, theatre time and professional fees. Importantly, there is inconsistent funding for the ablation catheters required to perform these procedures. The CSANZ has highlighted. If private patients are denied access to these procedures, then they may be forced to seek treatment in the public health system. This will invariably add to the existing burden on public hospital waiting lists. RECOMMENDATION: INCLUSION ON THE PROSTHESES LIST The Prostheses List must be updated to include new technology and nonimplantable devices such as ablation catheters. This will help to ensure private health funds fulfill obligations to members and people with AF have access to best practice clinical care. The inclusion of ablation catheters on the Prostheses List will also help to reduce the number of private patients seeking treatment in the public system thus reducing added burden on public hospital waiting lists.