Emergency intervention ... Exploding premiums and declining services have resulted in the first decline in private health members in 15 years.

Exclusive IPSOS research obtained by News Corp Australia shows if no action is taken to control premium rises, one in five fund members will downgrade or drop their cover within six years.

Health funds say Health Minister Sussan Ley could save the day and cut premiums by between $150 and $300 a year if she changes to the way the government sets the price for prostheses like hip and knee replacements.

However, health fund spokeswoman Private Healthcare Australia chief Rachel David says the minister needs to change the pricing system within the next eight weeks to impact on next years’ premium rise.

“Premium applications for next year have to be in by November 1, so really by the end of the year we need to see some movement,” Ms David said.

DECLINING VALUE

Official government figures show health fund membership began to decline from June last year from a peak of 47.4 per cent of the population to just 47 per cent in June 2016.

The number of people covered by insurance fell by 2958 for the first time in 15 years in June 2016.

Data from health insurance broker iSelect supports this and shows there has been a drop off in the number of new people aged under 40 joining health funds in the past 12 months.

These people are likely to make fewer claims and help keep the price of insurance down.

Market researcher IPSOS interviews 5000 people annually about their attitudes to health and provides the results in confidential briefings to industry players who pay for the results.

News Corp has obtained its 2015 report which contains dire warnings about the future of private health insurance.

Open-wallet surgery ... rising fees, increased extras and fewer services is seeing private health lose its appeal.Source:Getty Images

“We know with the (27 per cent health insurance tax) rebate now means tested and indexed to CPI, we will hit an ‘affordability cliff’ in 6 years time, with one-fifth of consumers significantly downgrading or dropping hospital cover,“ IPSOS says.

IPSOS says products that exclude treatments such as obstetrics or hip replacements to cut cost have grown from 1 per cent to 30 per cent over 20 years, and 80 per cent of policies now have an excess or exclusions, up from 20 per cent two decades ago.

“This is putting the viability of the private health sector, which underpins accessibility of non-emergency surgery in Australia, under threat.”

The market researcher also warns that as state governments build newer public hospitals people are no longer differentiating between private and public hospitals based on quality.

COSTING AN ARM AND A LEG

In the May budget Health Minister Sussan Ley squibbed at making reforms to the pricing of medical devices like hip and knee replacements that would have cut health fund premiums by between $150 and $300 per policy.

Health funds say they have calculated savings of between $800 million and $1.2 billion a year if the government changes the way it sets the prices for medical devices.

Currently the government scheme sets prices for medical devices that are up to five times higher than those paid in comparable countries.

Public hospitals can buy the same medical devices used in private hospitals at half the price, a health fund industry study says.

Pray - and pay - for a recovery ... Private health insurers say Australian Health Minister Sussan Ley’s delays in reforming the prices of medical equipment is driving up costs.Source:AAP

The industry wants prices linked to those paid by public hospitals and referenced against the prices paid for the same devices overseas.

Ms Ley said the immediate priority was getting the new Prostheses List Advisory Committee (PLAC) up and running with the right expertise.

“The new PLAC will be tasked with ensuring their number one focus is improving affordability and access to medical devices for consumers.

“I see all players in the supply chain — from manufacturers and hospitals through to insurers and consumers — playing an essential role in striking the right balance to deliver this in a sustainable way.”

EQUIPMENT ‘NOT DRIVING COSTS’

Susi Tegen, Chief Executive of the Medical Technology Association of Australia, denies the medical device industry is responsible for the growth of health fund premiums.

“We represent only 14 cents in every dollar paid in reimbursements under hospital cover,” she said.

“An immediate across the board cut to medical devices, rather than an overall reform of PHI, is not the solution, and will have unintended consequences for patients.

“We fear a blunt cut demanded by PHI will result in reduced services and clinical choice for patients.

Blame game ... Medical equipment manufacturers say private health industry attempts to blame them for rising costs are misleading.Source:Supplied

“Comparing one country against another on price alone is misleading and fails to reflect the differences in those healthcare systems. It simply isn’t comparing apples with apples,” she said.

The head of private hospital group Ramsay Health Care, Chris Rex, this week said state governments could be forced to pay more for medical devices if the federal government looks after “its friends” — the health insurers — with new reforms.

However, Ms David said if international reference pricing was used even public hospitals could save money. A drug eluting stent used in heart coronary costs $3450 in a private hospital, $1209 in a public hospital but just $535 in the UK.