The multinational companies – which supply the nation’s hospitals with medical devices such as hip joints,screws,pacemakers and trauma plates – have been accused by private health insurers of shifting the profits they are making in Australia to other countries including Singapore and Switzerland.
Private health insurers are at loggerheads with multinational giants about the cost of medical devices.Glenn Hunt
But the body representing the multinational companies said its members always complied with Australia’s taxation laws and accused the private health insurance industry of trying to “hijack” the federal government’s review into multinational tax avoidance.
The overseas companies are locked in an increasingly bitter dispute with private health insurers over the cost of medical devices,which can be three times more here than in other countries.
According to an analysis by Private Healthcare Australia,around 300 medical device suppliers are estimated to only pay a total tax bill of around $310 million.
This is despite being given more than double that amount - around $625 million annually - via the Private Health Insurance rebate. The Commonwealth gives an average contribution of about 25 per cent towards the purchase of medical devices,which according to the analysis ends up in the revenues of medical device companies.
The calculations are contained in a submission to Treasury from Private Healthcare Australia chief executive Rachel David,who urged the government to crack down on the “tax minimisation strategies”.
“Given the pressures on the Australian health system and tax system to be able to support the welfare safety net in Australia,we can’t have a situation where massive global companies are not paying their fair share of tax,” David told thisThe Sun-Herald andThe Sunday Age.
“For Australians,it’s a double whammy - they are affected by the fact they pay some of the highest prices in the world for medical technology,yet companies are clearly not paying their fair share.”
Asked whether the government’s review into multinational tax avoidance would look into medical device suppliers,Treasurer Jim Chalmers said Labor’s reforms would “address tax loopholes exploited by multinationals and improve tax transparency”.
“It’s important that we get this right,which is why Treasury is consulting widely about proposed changes to our multinational tax system,” he said.
Former Health Minister Greg Hunt in March came to a deal with the Medical Technology Association of Australia,which represents the medical device suppliers,to ensure that private patients will always pay between seven and 20 per cent more than the public price for medical devices.
This partially reversed a prior commitment to begin lowering the gap between the cost of medical devices in public and private hospitals. It also came on top of the already inflated public prices that Australians pay for medical devices,with some implants selling at up to three times the price here than in Britain or New Zealand.
According to correspondence seen by this masthead,the nation’s private health insurers have made a guarantee to the government that every single dollar saved from reversing Hunt’s deal would go back into Australians’ pockets through lower premiums.
Reversing the Hunt deal would save private health customers $400 million over four years and the budget $100 million,according to Private Healthcare Australia,which would be equivalent to 0.5 per cent of average health insurance premiums.
Medical Technology Association of Australia chief executive Ian Burgess said insurers were “making blatantly false representations to the media about the impact of Prostheses List benefits on premiums,which doctors,hospitals and consumer advocates can tell you is not the main contributing factor”.
He also accused private health insurers of “continuing to spend more on themselves through management fees to the sum of $2.6 billion”.
“MTAA and its members believe in all companies paying their fair share of tax and being fully compliant with taxation law in Australia,” he said.
“Actions by the corporate insurance industry to hijack the Government’s review into multinational tax is yet another example of insurers prioritising profits before people.”
The federal government sets the prices for more than 11,000 types of medical devices for privately insured Australians through the Prostheses List.
Peter Breadon,director of the health and aged care program Director at the Grattan Institute,said the deal between Hunt and the MTAA,which represents the medical device suppliers,was “hard to justify”.
He said there was no reason why the prices for medical devices at public and private hospitals should be so different.
“I think that the devices industry has too much input into device pricing and the way it’s done,and this could be another example of that,” he said.
“I don’t think there’s a good reason to do it this way[fixed pricing through the Prostheses List]. And it explains why we pay such high prices here.”
In a statement,Health Minister Mark Butler said he was “engaging with all stakeholders to get a clear understanding of what the former minister agreed to regarding the Prostheses List”.
“The government’s priority is that people can access affordable medicines,treatments and medical devices and that the Australian taxpayer gets value for money,both in the public system and through our support for private health insurance,” he said.
Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley..