The rising cost of medical insurance premiums is a pressing issue, with soaring healthcare inflation leaving many Malaysians questioning whether they can maintain their coverage.
Bank Negara Malaysia (BNM) has introduced interim measures to soften the financial burden, but long-term solutions are urgently needed to address the root causes of medical cost inflation.
Interim Measures: A Lifeline for Policyholders
On December 20, 2024, BNM unveiled measures allowing insurers and takaful operators (ITOs) to spread premium increases caused by medical cost inflation over three years, up to 2026. This approach is expected to cap yearly premium adjustments at less than 10% for 80% of policyholders.
For those aged 60 and above with basic coverage, premium increases due to medical inflation will be paused for one year. Lapsed policies from 2024 will also be reinstated without additional underwriting requirements, easing the pressure on affected policyholders.
While these measures bring temporary relief, they cannot fully shield Malaysians from future premium hikes if medical cost inflation remains unchecked.
The Root of the Problem: Unregulated Costs
Malaysia's medical cost inflation reached 15% in 2024, far exceeding global and regional averages. Azrul Mohd Khalib, chief executive officer of the Galen Centre for Health and Social Policy, attributes this to unregulated private hospital charges. Over 60% of hospital bills, excluding consultant fees and medicines, fall outside regulatory control.
Insurance expert Dr. Mohamed Rafick Khan Abdul Rahman observed that rising healthcare costs are driven by controlled profiteering rather than inflation. He noted that private hospitals inflate prices for unregulated drugs and actively promote the use of their diagnostic services to maximize profits.
“Hospitals impose varying charges depending on whether patients pay in cash, use credit cards, or rely on medical cards. The differences are significant, as private hospitals view insurers (ITOs) as lucrative revenue sources. There is no justification for this differential pricing,” he wrote in a Code Blue op-ed on December 3, 2024.
Supporting this perspective, Lavaniyah Ganapathy, founder of the Children’s Cancer Association Malaysia (CCAM), criticized the practice of private hospitals inquiring about a patient’s insurance status before admitting them. “Patients with insurance are often charged for items they don’t use. For example, hospitals may charge for an entire packet of syringes when only one is utilized. These inflated charges lead to higher payouts by ITOs, surpassing the premiums collected,” she explained.
Lavaniyah also highlighted the complexity of medical bills, stating that the use of medical jargon often confuses patients. “Hospitals are providing bills to ordinary people, so why not make them understandable in layman’s terms? Furthermore, billing should be standardized for all patients, irrespective of their insurance status,” she emphasized.
In summary, private hospitals are accused of profiteering through inflated drug prices and unnecessary diagnostic tests, often exploiting insured patients. Some hospitals charge for unused items or apply different rates based on payment methods, further exacerbating the issue of rising healthcare costs.
Beyond Interim Solutions
The interim measures introduced by BNM have provided temporary financial relief for policyholders while giving ITOs the opportunity to gradually adjust premiums to address rising medical costs.
However, managing medical cost inflation and future adjustments to MHIT premiums requires more than just the efforts of ITOs and BNM.
Comprehensive healthcare reforms are urgently needed to ensure long-term solutions.
Structural Reforms Needed
Prime Minister Dato' Seri Anwar Ibrahim and the Ministry of Health have unveiled plans to address escalating healthcare costs. Key initiatives include:
• Adopting Generic Medications: This measure aims to reduce drug prices and lessen reliance on expensive branded medicines.
• Controlling Medicine Prices: The directive targets excessive pricing, with some larger companies charging Malaysia RM5,000 for a drug while offering the same product to Thailand for only RM1,500 due to weak regulations and monopolistic practices. It emphasized the importance of private sector adoption of wholesale procurement to address these disparities.
• Introducing Diagnosis-Related Group (DRG) Pricing: This model categorizes similar medical cases to predict costs and standardize private hospital charges. To implement the DRG system, a joint RM60 million fund involving the government, insurance providers (ITOs), and private hospitals has been proposed.
Health Minister Dato' Seri Dzulkefly Ahmad confirmed that DRG pricing would require amendments to the Private Healthcare Facilities and Services Act 1998. The revised framework is expected by mid-2025 as it requires extensive engagement because it involves multiple parties .
A Collaborative Effort
Dr. Mohamed Rafick Khan advocate for broader reforms, including:
• Government opens corporatized hospitals to offer competitive pricing.
• Regulating drug and diagnostic service charges.
• Establishing a parliamentary-level task force to address systemic inefficiencies.
Moving Forward: A Whole-of-Nation Approach
BNM's interim measures provide temporary relief, but sustainable solutions require comprehensive healthcare reforms.
Dr. Mohamed Rafick Khan emphasized the importance of a whole-of-nation approach to address rising insurance premiums. The issue of increasing insurance premiums is not just the responsibility of MOH or BNM; it is a government-wide problem. "A parliamentary-level task force, involving multiple agencies such as BNM, MOH, KPDN, and the Inland Revenue Board, is necessary to overcome this issue effectively," he stated.
Meanwhile, tackling unregulated costs and fostering transparency in medical billing will be critical. As Malaysians await the rollout of structural reforms like DRG pricing, collaboration among stakeholders, including the government, private hospitals, and insurers, will be essential to curb medical cost inflation and ensure affordable healthcare for all.
By: Kpost
Information Source: Malaymail
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