A private health insurance body has called for a royal commission into what it describes as “grossly excessive” pricing of medical devices in Australia, claiming it is driving up premiums.

Matthew Koce, chief executive of hirmaa, which represents 22 not-for-profit health funds, told a Senate inquiry yesterday the costs of devices such as pacemakers and defibrillators was a government-sanctioned racket.

“Every day big multinational national companies are permitted to obfuscate and delay and to continue charging grossly excessive prices in Australia,” Koce told a Senate hearing into private health insurance.

"What we are presently hearing in the courts points to an appalling culture at some of the large medical device companies - and given what we know about the grossly excessive costs being charged for medical devices in the private health system and given the curious lack of progress to date by government - we believe it is time for a royal commission to shine a light on the medical device industry and bring this to a head once and for all."

According to hirmaa, existing regulation forces private health insurers to pay much more for prostheses than they cost in public hospital systems, in some cases by more than 200 per cent, directly contributing to increased premiums.

The health industry body claims costs of prostheses in public compared to private settings in 2013-14 differed by $718,256,536, causing an average direct cost impact to premiums of about $130.

The gap is projected to grow to $1,012,260,123 in 2018-19, with an impact on hospital policy premiums of $181.

The inquiry, chaired by Greens Senator Rachel Siewert, is looking into the possible reform of regulations related to the Government’s price-setting Prostheses List.

Private health insurers are legally required to pay the minimum benefit listed for a device if the patient has appropriate health insurance. If the minimum benefit doesn’t cover the cost of the device to the hospital, the patient may need to pay the gap.

The Prostheses List has set prices for Australian private hospitals that are about 50 per cent higher than those in the United States, New Zealand and France, industry sources claim.

Health insurance premiums have risen an average of 6 per cent a year since 2010, outstripping inflation.

About half a million Australians cancelled or downgraded their private health insurance cover in 2015.

Submissions to the inquiry close on July 28.

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