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Sunday, 30 May 2021

The financial benefits of Medicare in Australia - a personal example

Medicare is Australia’s universal health insurance scheme. It guarantees all Australians (and some overseas visitors) access to a wide range of health and hospital services at low or no cost. Australians make more than 150 million visits to a GP every year. Medicare — the public health insurance system — helps pay for those visits, hospital treatments, and prescription medicines (that are on the PBS list).

For example, I've had severe atopic dermatitis (eczema) since I was a young child. Atopic dermatitis is long lasting (chronic) and tends to flare periodically. It may be accompanied by asthma or hay fever (I had asthma as a child but grew out of it, but I still have severe allergies such as dust mites, mould, rye grass etc). No cure has been found for atopic dermatitis. In my case it also resulted in two bouts of Cellulitis that could have killed me.

The traditional treatments include topical corticosteroids (creams and ointments) and oral prednisone or prednisolone for the most severe 'flare-ups', although often the disease relapses once medication is discontinued. So for the past fifty or so years I've benefitted from paying the basic PBS (Pharmaceutical Benefits Scheme) amount (currently around $40 per prescription) rather than the full cost of prescribed medications.

As DS1 had even more severe eczema than myself (he was hospitalized several times as an infant and young child for both eczema flare-ups and severe asthma), and DS2 has eczema and asthma similar to what I had as a child, we have still ended up paying several thousand dollars each year for visits to our GP and specialists (partly refunded via Medicare) and for prescription medications. But a large part of the costs was covered by Medicare, as was the cost of public hospital treatments. We also currently have private medical insurance (paid for by my employer) which comes in handy for 'elective' hospital treatments (such as cataract operations etc.), dental care, and has also reimbursed us for ambulance costs (which aren't covered by Medicare) and the few occasions we have used private hospital accommodation (such as for my cataract operations).

Recently a new biological treatment for severe eczema called Dupixent came onto the market. Rather than being a topical treatment (applied to the external skin) it is an injected human monoclonal antibody that inhibits signaling of the interleukin IL-4 and IL-14 which are linked to the subcutaneous inflammation that causes severe eczema symptoms. This medication is delivered via a single injection every fortnight, but before it was added to the PBS schedule each injection cost around $750! My immunologist specialist had told me that a few of his other patients had been on Duprixent - either paying the full cost 'out of pocket' (around A$22,000 pa), or were covered by an overseas medical insurance policy that included this treatment. However, even though I earn a decent wage, paying $22,000 pa made this treatment effectively unaffordable.

Dupixent had been evaluated as effective by the Australian Therapeutic Goods Administration (TGA) several years ago, but had twice been rejected for inclusion on the PBS registry due to the cost (and the limited budget allocation for PBS). Fortunately it turned out to be 'third time lucky' and this medication was finally added to the PBS list on 1 March 2021, at an estimated cost of A$270 million pa. It is estimated that this medicine will be of benefit to more than 3,600 Australians. Turns out that I'm one of them, with my specialist getting approval and writing me a prescription for Duprixent on Friday. I'll collect the first batch of medicine from my local pharmacy next week and I have another appointment with my specialist in a fortnight to get the initial two injections and to be instructed on how to self-inject the single injection required every fortnight.

Hopefully with this new treatment my eczema will significantly improve - clinical trials showed that around 50% of patients had their eczema improve by 75% after 16 weeks of treatment, and around 75% of patients after one year. Switching from taking immunosuppressant medication will also remove the need to have regular blood tests, and will remove the increased risk of skin cancer that the immunosuppressant treatments have.

From a financial point of view, I'll be joining the ranks of Australian tax-payers that actually pay no net tax (receive more value in benefits received than they pay in tax) as the income tax on my salary is around A$28,000 pa and the value of the PBS subsidy for Duprixent will be worth around A$22,000 pa. When added to the benefit of DS2 receiving free pubic school education at a selective High School I'll be getting more back in taxpayer-funded benefits than I am paying out in income tax. Long live socialized health and education!

Once I reach pension age (66) I may also be able to get a Commonwealth Seniors Health Card that would reduce the cost of PBS prescriptions from $41.30 to only $6.60. While I won't ever qualify for the Age Pension (due to the Asset Test Threshold for a partial pension being just over A$1 million of assessable assets for a home-owning couple), there is only an deemed income cap of A$89,920 for a couple to be able to obtain the Seniors Health Card. There is no assets test for the Health Card. Although we will hopefully receive more than A$90K pa in actual income during our retirement, the deemed income will be significantly lower as the deeming rate is 2.25%. This means we would have to have more than $4 million of financial assets (excluding the family home) before we would be ineligible for the Seniors Health Card. In any case, whether I pay $41.30 or $6.60 per prescription will make little difference. 

From the Federal budget point of view, the fact that the Regeneron patent on Dupixent will expire on 27 October 2029 means that the cost of having this medication on the PBS list should greatly reduce once it goes 'off-patent' as other manufacturers will then be able to produce 'generic' versions of the medication at a much lower cost to the Federal government. There are apparently also other similar biologic treatments in the pipe-line, so the cost of Dupixent may also fall due to competition before the patent expires.

Side note: apparently in the US 82% of medical insurance plans cover Dupixent at a co-pay of $60-$125. So the out-of-pocket cost of Dupixent would end up similar to our cost on Medicare (but the average cost of health insurance in the US is around $6,000 pa, whereas the Medicare Levy in Australia is only 1-1.5% for medium and high income earners who do not have private hospital cover). Around 8% of people in the US have no health insurance.

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