Australia has a population of 23.5 million spread over a large land mass of some 7.7 million square kilometres. However, most of the population is concentrated along the eastern seaboard with Sydney, Melbourne and Brisbane as the major population centers. Australia has a well-developed modern economy with an average Gross Domestic Product (GDP) per capita in 2011 of $42,540 (Purchasing Power Parity (PPP), 2011 international $) and a life expectancy at birth in 2012 of 82 years .
Overview of the Health Care System
The Australian health care system is complex with a mixture of public and private sector health service providers with a range of funding and regulatory mechanisms involving three levels of government; the Australian, State/Territory, and Local. The Australian Government has the primary role of developing broad national policies (particularly in national issues like public health, research and national information management), regulation, and funding. The State and Territory Governments are primarily responsible for the delivery and management of public hospitals and health services as well as a wide range of community and public health services (such as school health, dental health, maternal and child health and environmental health programs). They also maintain a direct relationship with most health care providers. The local government is responsible for the provision of water (including fluoridation), management of waste, and food hygiene.
There is extensive involvement of the private sector in health services. Services provided include hospitals, general practitioners, specialists, consultant physicians, and other allied health professionals. Various agencies are involved in the private sector provision of health services including profit and non-profit organizations, voluntary agencies, large corporate operators, faith-based organizations, and private health insurance funds.
Overall coordination of the public health care delivery system is the responsibility of the Australian Government and State/Territory health ministers. They are supported by the Australian Health Ministers' Advisory Council (AHMAC), a committee of the heads of the Australian Government, State, and Territory health authorities. AHMAC advises Australian health ministers on policy, resources and financial issues.
Financing health care in Australia
Australia has a publicly funded universal health care scheme and is operated by the Department of Health (DoH) within the Australian Government. The aim is to provide universal access to health care to all Australian citizens and permanent residents, regardless of their personal circumstances, at an affordable cost or at no cost, while allowing choice for individuals through substantial private sector involvement in delivery and financing.
Financing for health care is provided by the Australian Government, or State, Territory, and Local governments, as well as private health insurance and out-of-pocket payments by individuals. In the overall funding arrangements, the Australian Government provides funding for most out of hospital medical services and for health research. The Australian, State, and Territory governments jointly fund public hospitals and community care for aged and disabled persons.
Residential elderly care is financed by the Australian Government by means of subsidies paid to service providers, based on the level and type of care needed by the individual. Community care services for the elderly and the disabled are jointly funded according to a formula. For residential and community care, residents and clients pay different fees depending on the type of service, level of care, and the client's capacity to pay.
There are some innovative and unique health services within the Australian health care system to meet special needs. These are:
Financing Australian Health Care
Australian funding for health care is raised principally through general taxation (such as income tax, and taxes on sales of goods and services) and is supplemented by the 2.0% Medicare levy on taxable income above certain income thresholds. The Medicare levy was 1.5% prior to July 2014, with the extra 0.5% dedicated exclusively to fund the NDIS. There are also significant co-payments on many services (relative to many developed countries), especially for specialists and drugs. Taxpayers with high incomes who do not have private health insurance pay an additional 1% to 1.5% of taxable income as part of the levy. Medicare levy revenue raised AUD$9 billion or around 50% of the cost of Medicare services in 2011-12 .
Private Health Insurance Rebate is an Australian Government tax rebate scheme to encourage participation in private health insurance membership. Currently, the Australian Government provides up to 38.7% subsidy to individuals who acquire private health insurance, depending on age and income. As of December 2013, 47% of the population was covered by basic private health insurance .
Expenditure on Health Care in Australia
Total expenditure on health care in 2011-12 was around AUD$140.2 billion dollars (9.5% of GDP in 2011-12) . Of the total health expenditure, the Australian government contributed 42.4% with State, Territory, and Local governments contributing 27.3%, and non-government funding (e.g. health insurance, individuals) contributing 30.3% . Of the non-government funding, individuals contributed 57.2% .
The Australian medical technology industry had a total annual turnover of AUD$10 billion in 2012 (which included expenditure on aids, appliances, major medical equipment, and medical and surgical supplies, including surgically-implanted prostheses and homograft items) . The medical technology industry produces more than 41,292 medical devices listed on the Australian Register of Therapeutic Goods (ARTG) and employs over 19,000 people. In 2011, medical devices (excluding medical services to implant the device) accounted for 3.3% of the total health spending in Australia .
Government Funding of New Health Care Services
The Australian Government's funding includes four major national subsidy schemes, Medical Benefits Scheme (MBS), the Pharmaceutical Benefits Scheme (PBS), the National Disability Insurance Scheme (NDIS) and the Private Health Insurance Rebate. The Medicare Benefits Schedule is a listing of services and tests that are subsidized by the Australian Government through the MBS and available to inpatients in private health services and out-of-hospital services in the public and private sector. Additional, but smaller, schemes include the Repatriation Schedule of Pharmaceutical Benefits (RPBS) and the National Immunisation Program (NIP) Schedule. MBS and the PBS cover all Australians and subsidize their payments for private medical services and for a high proportion of prescription medicines, but not medical devices. Private health funds cover the costs of medical devices in the provision of private health care and public hospital budgets pay for medical devices in the provision of public health care. In total, the MBS and PBS accounted for 59.8% of total Australian Government health care expenditure for 2011-12 . Expenditure through the MBS in 2011-12 accounted for AUD$17.6 billion .
The Medical Services Advisory Committee (MSAC) was established in 1998. The MSAC provides advice to the Minister of Health on medical procedures for listing on the Medicare Benefits Schedule, including services and procedures related to diagnostic tests and medical devices. The principal role of MSAC is to evaluate new medical technologies and procedures, based on evidence of their comparative safety, clinical effectiveness, and cost-effectiveness. In 2009, the ‘Review of the Health Technology Assessment in Australia’ recommended that MSAC strengthen and streamline its operations and improve the flexibility of its regulatory processes (see http://www.health.gov.au/internet/hta/publishing.nsf/Content/review-1).
The Health Technology Assessment Access Point (HTAAP) commenced operations in 2010. The HTAAP assists potential applicants for Health Technology Assessment (HTA) for reimbursement where the applicant is uncertain about the appropriate funding program (MBS or PBS) or when funding may be required for both programs. This is relevant, for instance, for medical devices or services that are co-dependent on the prescription of pharmaceuticals (and vice versa), and where such technologies need to be assessed by more than one expert advisory committee, for example, Pharmaceutical Benefits Advisory Committee (PBAC) and the MSAC. An example of a technology that requires more than one assessment is a genetic test that helps determine the population for use of a new drug (personalized/precision medicine).
The Review also established the Prostheses List Advisory Committee (PLAC) to replace the Prostheses & Devices Committee. The primary role of the PLAC is to manage the Australian Prostheses List (PL) which comprises over 10,000 implantable devices eligible for reimbursement by private health funds. Whereas MSAC reviews and determines the listed price of services provided in the delivery of tests or devices, the PLAC does not determine the reimbursement benefit for the medical technology itself. Implantable medical devices are reviewed by the PLAC and a benefit is assigned for the device itself. (Note: MSAC determines the fee for the clinician to implant the device).
Regulation of Medical Devices
DECISION MAKERS AND DECISION MAKING PROCESS DIAGRAM
*Health Technology Assessment Group contracted by the Department of Health
CA = Contracted Assessment
SBA = Submission-Based Assessment
Decision making process diagram — PLAC
Decision makers and influencers
Department of Health (DoH) operates the publicly funded universal health care scheme, and hosts the PBS, MBS, and all health care administration.
Minister of Health (MoH) makes the final decision to approve the proposed MBS listing taking into account the advice from MSAC and all previous documentation.
Medical Services Advisory Committee (MSAC) evaluates the documentation provided by the Evaluation Sub-Committee (ESC) involving the clinical effectiveness, safety, and cost-effectiveness of the proposed technologies. MSAC provides advice to the Minister of Health.
Evaluation Sub-Committee (ESC) appraises the Contracted Assessment reports undertaken by the Health Technology Assessment (HTA) Groups or the Health Technology Assessment Groups critiques of the Submission-Based Assessments. These reports collate evidence on clinical effectiveness, safety, cost-effectiveness, and financial implications to government budgets. Members of ESC include clinicians, clinical epidemiologists, health economists, consumer representatives, and biostatisticians. Their role is to review and interpret clinical and economic analyses of medical services submitted to the MSAC and advise the MSAC on technical aspects of economic evaluations.
Health Economics Sub Committee (HESC) is convened as and when needed to undertake detailed reviews, evaluations or to provide additional advice, including on special topics. Their reviews are used to provide guidance to the ESC and MSAC.
Protocol Advisory Sub Committee (PASC) evaluates the contracted HTA Groups Protocol developed in conjunction with information provided by the applicant, selected health experts and consultation with stakeholders and the general public. The purpose of the PASC is to describe the decision options associated with the proposed technology, approve of the overall protocol for assessment, ensure current clinical practice and future practice is accurately reflected, and all relevant parties have had adequate input into the decision options.
Health Technology Assessment (HTA) Groups are usually independent university-based groups with multi-disciplinary skill sets covering clinical expertise, health economics, statistics, economic modeling, and epidemiology. The HTA Groups are contracted by the DoH to undertake the required work and may involve the development of the Protocols, critiques of Submission-Based Assessments, Contracted Assessments, and reviews of MBS items (among others). They are expected to produce structured reports using Department templates to provide comprehensive and concise information on the issues arising for clinical effectiveness, safety, economic and financial implications.
Prostheses List Advisory Committee (PLAC). Appointed by the Minister of Health, the PLAC is responsible for setting the reimbursed price of implantable medical devices and human tissue for the private health care system. Private health funds are required by law to pay mandatory benefits for implantable prostheses that are provided as part of an inpatient episode of hospital care where a Medicare benefit is payable for the associated service or procedure (surgery). There are more than 10,000 devices listed on the PL. The PL does not include external prostheses such as leg extensions, wigs etc. Like MSAC, the PLAC provides advice to the Minister.
Therapeutic Goods Administration (TGA). The TGA assesses therapeutic goods for safety and efficacy. The agency is responsible for regulating therapeutic goods including medicines, medical devices, and medical equipment such as scanners, blood, and blood products. Any product for which therapeutic claims are made, including herbal extracts and other supplements used in complimentary medicines, must be listed, registered, or included in the Australian Register of Therapeutic Goods (ARTG) before it can be supplied in Australia. The TGA is similar to the Food and Drug Administration in the United States. Therapeutic goods are normally registered before being allowed to submit an application for government subsidy through listing on the MBS or PBS but parallel applications are permitted.
Individuals or bodies from the medical profession, medical industry, or other groups apply through the Australian Government Department of Health (DoH) who manages the application process. It is possible that a medical device could go through the regulatory and reimbursement process at the same time although normally the device is regulated first. There are six broad stages to the MSAC application process for reimbursement of medical services. The reimbursement process for devices is described below.
REIMBURSEMENT AND PRICING APPROVAL PROCESS
Stage 1: Expression of Interest and Initial Meeting. The applicant meets with the DoH to discuss the application and ensure the correct processes are understood by the applicant. The DoH seeks clinical expertise for PASC and confirms availability with possible HTA Groups for producing a comprehensive decision analytic protocol (Protocol).
Stage 2: Eligibility: The DoH considers eligibility to ensure the proposed service constitutes a clinically relevant service under the criteria of the Health Insurance Act 1973, the need for Therapeutic Goods Administration (TGA) approval of products, and the confirmation from the MSAC Executive of the assessment pathway.
Stage 3: PASC Protocol Development: Applicants are required to submit an application. Using the information supplied in the application, a draft Protocol is prepared by a contracted HTA Group. The draft Protocol is a blue print for how the proposed service/device is to be evaluated. The Protocol includes background information on the service/device, the proposed clinical management algorithm, and specifies the clinical and economic evidence required to inform MSAC’s appraisal. It is also developed with input from relevant clinical experts who are selected by the DoH. These experts are part of the Health Expert Standing Panel. PASC will consider the draft Protocol at the first meeting (approximately 3 months after the applicant’s lodgement deadline) and will consider feedback from public consultation and any additional applicant comments. PASC will ratify the final Protocol at a second meeting (approximately 4 months after the first meeting) and accept where appropriate. The process cannot be easily expedited as these meetings are set in advance. The final approved protocol is released a month later; thus the total time for protocol development is approximately 8 months).
Stage 4: Assessment of Evidence: Applicants have two choices:
Stage 5: MSAC Appraisal & Minister of Health Decision: Before submitting evidence for MSAC approval, all therapeutic goods used in the relevant medical service should have been either listed on the Australian Register of Therapeutic Goods, or, an application for listing lodged with the TGA. MSAC considers a wide range of supporting documents and feedback provided by interest groups when producing its final advice to the Minister. The Minister makes a final decision based on MSAC advice. MSAC prepares a detailed rationale for its conclusions in the form of a ‘public summary document’.
Stage 6: Implementation: If a decision is made to publicly approve the proposed service/device, DoH is instructed to implement the changes. For example, if a new MBS item has been approved, the item is added to the Medicare Benefits Schedule that describes the service and the fee on which the Medicare benefit is based. Of note is that the MBS item is generic; that is, it is not linked to a specific product. This is different from the regulation of pharmaceuticals.
REIMBURSEMENT AND PRICING APPROVAL PROCESS – MBS SERVICES
The MSAC meets three times a year in March, July, and December. An estimated timeline of the process for a SBA on the MSAC meeting date is given below.
CA = Contracted Assessment, DoH = Department of Health, ESC = Evaluation Sub-Committee, PASC = Protocol Development Sub-Committee, MBS = Medicare Benefits Scheme, SBA = Submission Based Assessment
Following MSAC's consideration, the Department of Health is required to consider the financial impact to government, consult with the Department of Finance and Deregulation, seek Cabinet agreement and then draft and implement legislative change before an item can be amended or added to the Medicare Benefit Schedule.
REIMBURSEMENT AND PRICING APPROVAL PROCESS – IMPLANTABLE DEVICES
The PLAC meets monthly to review applications, while the Prosthesis List (PL) is published in February and August every year. If an error is made in an application, or during the determination process, listing could be delayed until the next PL publication cycle.
There are two main categories of implantable medical devices. No-gap devices are listed with a single benefit and health insurers are required to pay if the patient has appropriate insurance coverage. Gap-permitted devices have minimum and maximum benefits listed. For gap-permitted implantable devices, private health insurers are required to pay at least the minimum benefit, and a co-payment is charged to the patient.
It is critical for commercial and market access success that implantable devices are included on the PL. If a device is similar to a predicate device, an application of non-inferiority is usually lodged to PLAC. The evidence requirements for these applications are straightforward. Novel devices with new procedures or high risk implantable devices attract a more rigorous evaluation process and are often associated with claims of superiority over the comparator. NB: novel devices need to have a MBS listing before they can be listed on the PL; however, the application process to MSAC and the PLAC may be concurrent. The evidence requirements are higher and the application is often reviewed by the Health Economic Sub Committee (HESC), which usually requires some time to evaluate the application and delays the application process through at least one cycle. It is not unusual for PLAC applications of new and novel devices to take more than 12 months to achieve listing. This is in addition to the time taken to obtain an MBS listing.
The guidelines for applications to the Prosthesis List can be found here: http://www.health.gov.au/internet/main/publishing.nsf/content/health-privatehealth-prostheseslist.htm
At the time of writing, the Department of Health is reviewing the application requirements for Protocols and Submission-Based Assessments. Submission-Based Assessments generally follow the template for major submissions to the PBAC. Further information will be available from the Department’s website in due course. The current arrangements can be viewed at this web site: http://www.msac.gov.au/internet/msac/publishing.nsf/Content/msac-application-process-lp-1
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MSAC. An Overview of the New Arrangements for Listing on the Medicare Benefits Schedule http://www.msac.gov.au/internet/msac/publishing.nsf/Content/C7CBE2F3791A9733CA2575AD0082FD88/$File/Overview-new-arrangements-MSAC.pdf
1. Australian Government. Budget papers http://www.budget.gov.au/2012-13/content/bp1/download/bp1_bst5.pdf. 2012-2013.
2. Private Health Insurance Administration Council. Privately insured people with hospital treatment cover. Annual analysis by Sex, Age and State. http://www.apra.gov.au/PHI/PHIAC-Archive/Documents/Survey-Report-Dec-2013.pdf PHIAC; 2012.
4. Medical Technology Association of Australia Ltd. Medical Technology in Australia: Key facts and figures 2013, Occasional Paper Series: http://www.mtaa.org.au/docs/key-documents/mtaa-factbook-2013-final.pdf?sfvrsn=0 Sydney: MTAA; 2013.
5. Australian Government Department of Health and Ageing TGA. Australian regulatory guidelines for medical devices (ARGMD) https://www.tga.gov.au/sites/default/files/devices-argmd-01.pdf. Canberra: Australian Government, 2011.
6. Australian Senate Community Affairs Reference Committee. The regulatory standards for the approval of medical devices in Australia. http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Completed_inquiries/2010-13/implants2012/report/index. Canberra: Australian Government, Nov 2011
Authors & Contributors
Louisa Gordon, PhD Senior Research Fellow, Centre for Applied Health Economics, Griffith Health Institute, Griffith University, Australia
endorsEment of this roadmap
This roadmap was independently reviewed and endorsed by a special subcommittee of ISPOR-AC Inc. that comprised of: