Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Private Health Insurance (National Joint Replacement Register Levy) Bill 2009 will impose a levy on joint replacement prostheses sponsors in order to fund the National Joint Replacement Registry.

The registry collects information about joint replacement surgeries, such as hip, knee, ankle, shoulder, wrist and spinal disc replacement procedures, and reports on the safety and quality of these procedures and devices used in the operations.

The work of the registry is critical to improving health outcomes for many Australians. Around 70,000 people had joint replacement surgery in the last 12 months.

The registry estimates that the information it has provided has improved surgical practice, reducing the number of unnecessary revision surgeries by 1,200 Australians per year.

In addition to improved patient outcomes, the registry estimates that it has saved the health sector and consumers around $44.6 million, based on reductions in the level of hip and knee revision procedures while the registry has been operating.

The average costs for revision procedures are much higher than for standard joint replacements, and the registry helps in minimising revisions by collecting data indicating which devices are linked to higher revision rates. This assists orthopaedic surgeons in selecting better performing prostheses.

Expenditure on hip and knee prostheses represents around 30 per cent of total expenditure by health insurers on prostheses. Insurers paid over $1 billion in benefits for prostheses in 2007-08, out of a total of $7.4 billion spent on hospital benefits in that year. This means that prostheses expenditure represents around 15 per cent of privately insured hospital benefit outlays.

The registry assists in ensuring this funding, and public hospital expenditure, is directed to better performing products with lower revision rates.

Taxpayers have met the operating costs of the registry for over 10 years, which are now around $1.6 million a year.

It is appropriate that manufacturers and importers of medical devices used in joint replacement surgery now fund the costs of the registry. The new cost recovery arrangements will be similar to the funding arrangements for the United Kingdom’s National Joint Registry, which is funded through a levy on joint replacement products.

The Australian registry provides invaluable post-market surveillance of joint replacement prostheses, and this monitoring of the safety and quality of devices provides considerable benefit to the industry by improving consumer confidence in the safety and efficacy of joint replacement devices. Any devices showing high failure rates can be identified quickly and promptly removed from the market.

The data produced by the registry also assists the industry by informing the development of new prostheses, allowing manufacturers to draw on reliable performance information for existing products and designs.

The introduction of cost recovery arrangements will also produce $5 million in budget savings over four years.

Legislated cost recovery arrangements will ensure continuing and stable funding for the critical work of the registry, and ensure that it can continue to provide data to improve patient outcomes.

The proposed arrangement will preserve the independence of the registry. As levies will be imposed under legislation, and collected by the government on behalf of the registry, there will be no possibility of funding being withdrawn from the registry by medical devices sponsors who are not happy with its findings.

Joint Replacement Prostheses Sponsors

The bill imposes a levy on sponsors of joint replacement prostheses. A joint replacement prosthesis is a prosthesis that is listed on the Commonwealth Prostheses List and which is used in joint replacement surgery. The person who made the application to have the joint replacement prosthesis listed on the Prostheses List will be the sponsor for the purposes of the new levy.

The levy

The bill requires the levy to be paid on days to be specified in the Private Health Insurance (National Joint Replacement Register Levy) Rules and on additional days, if any, determined by the minister.

The bill restricts the numbers of times a levy can be imposed to a maximum of six levies in any financial year.

Sponsors will be levied on each day specified in the rules, to be known as national joint replacement register levy days. A maximum of four levy days per financial year are permitted by this method.

Also, the minister can determine supplementary levy days. A maximum of two supplementary levy days per financial year are permitted.

Sponsors will be levied according to the number of joint replacement prostheses they sponsor, and the levies will only be used to fund the operating costs of the registry. The bill provides that there may be different rates of levy for one or more kinds of joint replacement prostheses, that the levy rate may be set at zero, and that there will be a maximum levy rate of $5,000 per listing. This range of levies is appropriate, as there is a very wide range of products included in the registry, from screws and bolts that have prices of less than $50 each, to specialised knee replacement systems, which can have prices of more than $67,000.

The government will determine the amount of levies through rules made under the legislation following consultation with the registry and the medical devices industry.

Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

The opposition will not oppose the Private Health Insurance (National Joint Replacement Register Levy) Bill 2009. The purpose of this bill is to establish a levy to fund the ongoing operation of the National Joint Replacement Registry. The National Joint Replacement Registry was a great initiative of the Australian Orthopaedic Association with the support, at the time, of the Howard government. Indeed, on 6 July 1998, the then health minister, Dr Michael Wooldridge, announced funding for the Australian Orthopaedic Association to establish that particular register. Its purpose is to define, improve and maintain the quality of care of patients receiving joint replacement surgery. The information collected provides an accurate measure of the success or otherwise of a procedure. That information is then used to inform surgeons, other healthcare professionals, governments, sponsors of joint replacement products and patients.

The National Joint Replacement Registry also provides post-market surveillance of joint replacement prostheses. The real benefit of this is that it has helped to reduce the incidence of revision surgery. That is certainly one of its objectives. It provides information about the types of joints available and surgical techniques and collects a whole series of other information. The great thing is that all hospitals which undertake joint surgery—around 300 across Australia—do participate in the registry, which of course enables very comprehensive information about joint replacement surgery to be collected. I think that the registry has already been successful and a very effective measure over the past 10 years.

I do think that there is scope to take the use of the information that is collated one step further. One of the key cost drivers of health care—in particular, in the private system, but across the whole health system—is the increasing cost of prostheses. There is a great variety of prosthetic items, including in the orthopaedic area. There is great variety in quality and in cost. A lot of information can be obtained through this register about which are the most effective orthopaedic items, as well as other information. If we have got a particular product that is cheaper and more effective, why would we not channel all of our limited healthcare resources that way?

There is a lot of scope for us to become more cost effective and to continue to follow the lead of what has happened through the Pharmaceutical Benefits Scheme process, where we have a very rigorous process of assessing both the clinical effectiveness and the cost-effectiveness of a particular product before it is listed on the PBS. There have been attempts by the previous government, which I am sure are continuing under the current government, to go down a similar path with prosthetic items. Certainly, with this particular initiative and, with the data available through the National Joint Replacement Registry, I think that there is much more that we can do in terms of comparative analysis and assessing the cost-effectiveness of particular products that are funded either through the public system or through private health insurance funds and patients.

While we will not be opposing this bill, we are concerned that this is yet another one of the many hidden revenue grabs, one of the many cost recovery measures, that have been introduced by the government under the radar, really, in this budget. When there is a cost recovery measure, there ought to be genuine engagement with all affected stakeholders. There ought to be consultation, and that has not happened on this occasion. There is no denying that there is a significant benefit that has been derived from the Joint Replacement Registry, and it is important that the good work continues to be funded appropriately. Up until this point, it has been funded by the government. The Rudd government has now made a decision that it has to be cost recovered.

The industry would acknowledge that as sponsors they do derive a benefit from the registry, but they are by no means the sole beneficiaries and the government, in our view, should adequately justify the reason for cost recovery measures such as this. We do not believe that this has happened in an adequate fashion. The information collated by the registry is of benefit to many stakeholders, including surgeons, government and private health insurance. The levies proposed in this legislation are in addition to the application and ongoing listing fees already incurred by sponsors of joint replacement prostheses. As I have mentioned, there has been a complete lack of consultation on this measure and a lack of evidence presented by this government on what other funding mechanisms were considered. Have they essentially just gone, as they have on other occasions, for the easy revenue grab, ignoring any of the flow-on consequences?

Whilst this bill acknowledges the differing benefits applicable to prostheses, there is a reasonable expectation that consideration must also be given to the frequency of utilisation of prostheses in procedures in determining appropriate levels. We understand that the government has decided to continue to fund this very, very important initiative through a cost recovery measure. It is not something that we are very excited about, but we have come to the view that we will on this occasion not oppose the bill. With those few comments, I place the opposition’s position on record.

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

I would like to support the comments of Senator Cormann. Any changes that could be made to develop the joint replacement register so that it becomes even more useful than it has been must certainly be applauded but, once again, the method and the process leave a lot of questions. Firstly, as a member of the Senate Community Affairs Legislation Committee which oversees the Department of Health and Ageing, I think we almost need a recording now that says the department did not consult. Every inquiry we have we hear about consultation which has not actually listened to the people consulted. Perhaps we need new definitions of what consultation is. Time and time again we are told that whilst the key stakeholders were told what the department thought the department would do, they were not asked for input. If they were asked for input, it was not accepted and the practicality of suggestions put was often completely ignored. We had evidence of this during the inquiry we held around this bill. Lifehealthcare Distribution noted:

Certainly this kind of proposal should follow appropriate consultation to achieve a result fairly across the spectrum of stakeholders, and there has been no consultation so far from the Department of Health and Ageing with the industry on this matter.

Further, the Medical Technology Association of Australia, which represents all the manufacturers and suppliers of prostheses, who are referred to as sponsors, commented:

… there has been no exchange of views on how best to implement this legislation through the rules. Although the Department intends that the levy on listings could be as low as zero, they conceded that they do not have accurate utilisation data on which they will presumably base exemptions. This is a process which should be understood as being practical and achievable before the legislation is passed.

So once again we have the situation of the cart being put before the horse. Let us hope that the system the government has developed is workable and that it does not lead to skewing within the market.

We were given evidence during our hearing that if there are costs involved, there is the possibility that prostheses manufacturers and suppliers might choose not to list products that they hold in reserve for replacements when they are needed and lesser used products. The UK system, which the Department of Health and Ageing tells us was closely examined before this system was put in place, in fact works on a utilisation basis, not on a levy on prostheses manufacturers and suppliers simply for holding prostheses. So we have that concern about this. I am also concerned that there has been little examination, it would appear, from the Department of Health and Ageing about the fact that the Australian Orthopaedic Association are the only group involved in running and having control over the register. I think it is quite excellent that this register has given us the chance already to examine faulty products and remove them from the market. It has brought about the need for a lot fewer replacements, and many fewer revisions of replacements need to be done. It is giving us a much, much better picture of the costs and benefits of good surgery and good products. But, as has been pointed out by the Medical Technology Association, it is not just faulty products that can lead to faulty operations and faulty performance of prostheses. It can also be that particular surgeons or particular ways of undertaking surgery, even particular postoperative procedures, can affect the way a replacement operation works and the level of success it has.

So these are also issues that need to be looked at. Medtronic Australasia, commented:

When any single group that is involved runs the entire process there is the potential for a conflict of interest. We do not suggest that the Orthopaedic Association has a particular conflict of interest. However, if data being collected that involves multiple stakeholders and only one stakeholder group owns the data and directs the design of the registry, there is always the potential for a conflict of interest.

So this is an area that I think needs to be watched closely. It is not just the prostheses themselves that can lead to failures in operations. There are many other reasons as to how this can occur. The register, used properly, will give us a wonderful opportunity to look at this but we need to be concerned that the governance of this register is undertaken in such a way that all aspects of legislation are looked at. I would certainly hope that there will be a review by government within 12 months to two years of the way the register is working with this levy.

Judith Adams (WA, Liberal Party) Share this | Link to this | Hansard source

I certainly agree with my colleagues’ comments and I rise to add further to those. Industry comments during our Senate Community Affairs Legislation Committee’s inquiries relating to this bill were ones of concern relating to consultation with industry and about possible conflicts of interest. There was also concern about the mechanism being used to set the levy rate. As you have already heard from my colleague Senator Boyce, many of the submissions and the witnesses at the inquiries commented on the lack of consultation between themselves and the Department of Health and Ageing. During the Senate inquiry, I asked the department how and when industry had been consulted and they admitted that there had been no consultation prior to the budget announcement. Therefore, until a month ago, the industry was not aware of this levying process. The lack of consultation results in no feedback from industry regarding the implementation of this legislation. One witness even commented that the first time they had become aware of the levy was when reading the inquiry advertisements.

I would like to quote from Device Technologies Australia, who questioned the logic of the timing of the bill, given that the review of health technology assessment, HTA, is currently underway. In light of the lack of consultation with industry, Device Technologies stated:

It is disappointing to note that despite the consultative progress being made through the current HTA Review and previous Productivity Commission reports, industry has not been consulted and appears not to be considered as an integral stake holder in the passage of the Bill, despite the proposed tax being directed specifically and exclusively towards sponsors of orthopaedic prostheses. Industry would have a conflict of interest in self funding a registry of orthopaedic devices supplied by it to the Australian healthcare system.

Another area of concern at the recent inquiry was the lack of industry representation on the registry management board, as the two seats for industry body representatives had been removed. When I asked the department for the reasons behind their removal, the response was that it was purely advisory. I am assuming, then, that if advice is given but not acknowledged or even used by the board, industry representation is not required. I will just read from our report. Medtronic Australasia raised similar concerns:

At present, with regard to the NJRR, industry does not hold any positions on the NJRR Management Committee. A position is held on the subordinate Advisory Committee. Should industry seek data from the NJRR, then it is only available on a payment basis. We are unclear as to what representation and access to data industry may have if the proposed legislation is enacted.

That is certainly another area of concern. Regarding the conflict of interest, currently the data on the registry is managed by the Australian Orthopaedic Association, and although none of the witnesses felt that there was any particular conflict of interest I would like to state that one organisation having complete control of the registry should be noted as something of concern. If the Orthopaedic Association has control of data input as well as releasing information to other organisations, this must be seen as a conflict of interest and should be reassessed, and therefore more consultation must be done with industry to assess the best process regarding access to registry data.

The committee also heard from a number of witnesses, as well as receiving submissions, that stressed the concerns relating to the levy rate setting mechanism. The department’s proposal relates to the prosthesis list, when instead the department should have consulted with industry and perhaps looked at the option of utilisation. For example, some prostheses can cost as much as $67,000. However, these may only be used once or twice a year, compared to other items which are constantly used. Most submissions highlighted this, noting that an item such as the $67,000 prosthesis would more than likely be used in paediatric orthopaedic operations and are therefore very rarely used compared to a knee or hip replacement prosthesis.

It is clear that in countries where there is a levy rate for joint replacements—for example, the United Kingdom—it has worked well and is considered successful. However, the United Kingdom’s levy is different in that it looks at utilisation, while the department’s levy does not relate to utilisation and therefore would not have the same success rate. I support the bill to introduce a national joint registry levy. However, it is clear that more industry consultation needs to be done and it is important that there be a review that would this time involve industry feedback. Therefore, I hope that the government will consider the coalition’s recommendation that the levy system and the funding of the registry be reviewed in 12 months time.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

in reply—I thank senators for their contributions to this debate. I note the concerns regarding consultation, and the Department of Health and Ageing, I can assure you, will be consulting with stakeholders on implementation. The Private Health Insurance (National Joint Replacement Register Levy) Bill 2009 will impose a levy on sponsors of joint replacement prostheses in order to fund the National Joint Replacement Registry. The registry provides invaluable post-market surveillance of joint replacement prostheses and also assists the industry by informing the development of new prostheses. As the industry derives considerable benefit from the registry, it is appropriate that its costs are now recovered from industry. The introduction of cost recovery arrangements will also produce $5 million in budget savings over four years.

Legislated cost recovery arrangements will ensure continuing and stable funding for the critical work of the registry and ensure that it can continue to provide data to improve patient outcomes. The government will determine the amount of levies through rules made under the legislation following consultation with the registry and the medical devices industry.

Question agreed to.

Bill read a second time.