Department’s U-turn on medical device funding a crushing blow to hospitals and patients

The Department of Health and Aged Care has confirmed the private health sector has just 11 months until a funding cliff that will have dire consequences for thousands of patients in hospitals around Australia.

Hospitals could be forced to cut back services and patient costs for surgery could soar after the Department backtracked on ensuring funding would continue to flow from private health insurers for almost 500 essential medical devices.

“Now items, such as staples and skin glues that are used to close wounds during surgery, will be removed from the Prostheses List on 1 July 2024, with no mandated funding arrangements after that date,” said Catholic Health Australia Health Director, Caitlin O’Dea.

“This unexpected U-turn has come as a complete shock to the hospital sector. We are heading for disaster.”

In December 2022 Health Minister Mark Butler announced that health insurers would continue to be required to reimburse hospitals for the items via a new funding mechanism. The Department of Health and Aged Care has since reneged on that policy.

“Millions of dollars and years of good faith consultation have been flushed away in a fiasco concluding with the Department washing their hands of responsibility for ensuring good public policy outcomes for consumers.

“From mid next year, funding for these essential medical devices will disappear and hospitals will face the huge funding cliff that we, and indeed the Department’s own review, have been warning about for the past two years.

“The effects of this funding cliff would be disastrous, and the ball is now firmly in the Health Minister’s court. It is imperative that Health Minister Butler steps in and reaffirms his December 2022 commitment that an alternative funding mechanism will be in place to ensure private patients do not face inflated costs when they have surgery.

“The Department’s decision to remove these items from their existing funding mechanism lets health insurers off the hook and makes this a $200 million problem for patients and hospitals. What is the point of health insurance if not to fund members’ healthcare?

“Our member hospitals are all not-for-profit and this will cost them $80 million. They do not have a bucket of money they can tap into to cover this U-turn, so something will have to give. Either procedures which require a high volume of these unfunded items will be withdrawn, services will shut, or consumers will be left out of pocket. These are impossible options to deal with.

“The Department naively suggests that hospitals and health insurers can simply sort it out among themselves. Considering the Department could not make headway on this in two years despite its significant weight and the resources available to it, it is unrealistic to expect industry to do it alone in less than half that time.

“Regional hospitals and surgeries performed on women such as caesareans, breast cancer operations and bariatric surgeries will be particularly impacted.

“Given the enormous risk posed to rural and regional patients, and particularly women, the Health Minister must intervene. Access to these essential medical devices can be maintained by mandating itemised funding via the Benefit Requirement Rules. We know this is possible because this is the alternate funding mechanism announced by the Minister in December 2022.

“We are not asking for the moon. We are not asking for a single extra cent. We are simply asking that these essential medical devices continue to be funded. Cool heads and sense must prevail to avoid impacts on accessibility of services and cost of care for patients.

“The Minister now has a brief window to correct the Department’s mistake and direct them to ensure these essential medical devices continue to be funded past 1 July 2024.”

Catholic Health Australia is Australia’s largest non-government grouping of health and aged care services accounting for approximately 10 per cent of total hospital-based healthcare in Australia. Our members provide around 25 percent of private hospital care, 5 percent of public hospital care, 12 percent of aged care facilities, and 20 percent of home care and support for the elderly.