If you’ve been hit with higher medical insurance premiums lately, you’re not alone. Many Malaysians are feeling the pinch, and it’s hard not to wonder why this is happening. Is it just insurance companies hiking prices? Not quite.
According to recent figures, Malaysia's gross medical inflation for 2024 is at 15%, significantly higher than the global average of 10%. The high medical inflation causes medical claims to be unusually high in Malaysia. As insurance is based on a risk pooling concept – when the pool of insurance premiums collected is not enough to pay off all the medical insurance claims, that is when the insurance companies have to increase premiums to make the pool bigger. Let’s break it down so it’s easy to see what’s happening and why this matters to everyone.
Why is Malaysia’s Medical Inflation So High?
(1) Private Hospital Costs Are Uncontrolled
In Malaysia, private hospitals can charge what they want because there are no rules to regulate prices – especially for Hospital Services and Supplies (HSS). These charges include everything from lab tests to medicine to the equipment used like drips or ventilators, which often makes up to 70% of a patient’s bill.
(2) Insured Patients Are Charged More
Did you know insured patients often pay more than uninsured ones? Hospitals sometimes see insurance as a chance to charge higher fees or unnecessary checks, which adds to the costs for policyholders.
(3) Unclear Bills
Ever looked at a hospital bill and had no idea what half of the items are? Bills are often filled with confusing medical terms, making it hard to know exactly what you’re paying for. Unfortunately, this lack of transparency gives room for higher charges.
(4) More Visits After COVID-19
Since the COVID-19 pandemic, private hospitals have seen an uptick in patient admissions. Some of these visits are for genuine medical issues, but many are simply for observation or basic diagnostic tests. While this might seem harmless, it adds to the number of claims insurance companies need to cover.
What Does This Mean for Insurance?
Insurance companies are paying more in claims than they collect from premiums. In fact, for every RM100 collected, they’re paying out RM111 in claims. This means they’re not making enough to cover the costs.
To keep up, insurers have had to increase premiums simply to manage the rising costs of medical care.
What Needs to Change?
The real issue is the cost of medical care itself. Without addressing the root causes of rising healthcare costs, premiums will continue to climb. Here’s what can help bring these costs down:
- Clearer Bills: Confusing terms make it easy for unnecessary charges to slip in. Medical bills should use simple language so patients know exactly what they’re paying for.
- Equal Pricing: Insured and uninsured patients should be charged the same rates for the same treatments. This would prevent unfair price hikes for those with insurance.
- Better Transparency: Hospitals and drug manufacturers need to be upfront about their pricing. Patients should have access to cost comparisons to make informed decisions.
- Lower Drug Prices: Medicine is a major part of medical bills, and reducing drug prices could significantly lower overall healthcare costs.
- Digital Records: Digital records that can be shared between hospitals would prevent repeated tests, saving both time and money.
A Nation-Wide Effort
The interim measures announced by BNM have taken some financial pressure off the shoulders of policyholders while allowing ITOs to gradually reprice their premiums to manage medical cost pressures. However, comprehensive healthcare reforms are still urgently needed to manage medical cost inflation and future MHIT premium adjustments — and they cannot be done by just ITOs and BNM.
Prime Minister Dato’ Seri Anwar Ibrahim responded to a question at Dewan Rakyat on 10 December 2024 saying that the Ministry of Health is exploring the use of generic medications to manage and reduce medicine costs. He added that the government is also looking at the possibility of implementing a new payment model called Diagnosis-Related Group (DRG), which will have to be expedited.
It was announced that a joint fund of RM60mil will be set up by the government, ITOs, and private hospitals to support the healthcare reforms and the implementation of the DRG.
The DRG model groups similar medical cases together to make it easier to predict costs and ensure fair payment for treatments. It aims to make the costs of medical procedures more transparent and will help to curb excessive medical cost inflation once the private hospital charges are aligned to the system.
"I have instructed the Ministry of Health to come up with an immediate measure, and this has been discussed at length. If possible, it should be implemented early next year (2025) so that costs do not rise exponentially," he said.
This instruction is also related to medicine prices as there have been some bigger companies charging Malaysia RM5,000 due to lax controls and monopoly, while charging Thailand RM1,500 for the same medicine. He added that this is the reason the private sector should also procure wholesale.
Minister of Health Datuk Seri Dr Dzulkefly Ahmad said on 11 December that the DRG pricing system to regulate private hospital bills is more likely to be rolled out by the second quarter of 2025. He said that the Private Healthcare Facilities and Services Act 1998 must first be amended to strengthen the regulatory framework of the private healthcare sector. The review of the Act will specifically focus on Schedule 13, which pertains to professional fees in relation to payments and reimbursements of private healthcare providers.
“I actually want this to be completed as soon as possible. However, it requires extensive engagement because it involves multiple parties," Dzulkefly said.
Meanwhile, Dr Rafick Khan called on the government to corporatise public hospitals and break the profiteering cycle between insurers and hospitals by offering more reasonable prices. The government, he said, must also regulate drug and diagnostic services charges and make incentivising practices between doctors and hospitals illegal.
He also stressed on the need for a whole-of-nation approach to tackle insurance premium hikes.
“The issue of rising insurance premiums is not an MOH or BNM problem. It’s a government problem. A parliamentary-level task force involving multiple agencies (BNM, MOH, KPDN, and the Inland Revenue Board) is needed to address the issue,” he wrote.
