MySalam, not quite a private health insurance scheme

One of the new welfare schemes that have come out as part of the government’s programmes for the B40 group is MySalam. The brainchild of the finance ministry and co-owned by the health ministry, it is, in essence, a welfare scheme designed to alleviate the cost of catastrophic health expenditure due to severe medical diagnoses – a one-off payment of RM8,000 when diagnosed with one of 36 critical illnesses – and to provide some form of financial protection for daily wage earners, as the scheme allows recipients to receive RM50 a day for up to 14 days a year.

The MySalam initiative has received a mix of bouquets and brickbats from a range of groups, the most recent being a group of organisations and individuals who sent a memorandum to Prime Minister Dr Mahathir Mohamad urging him to implement a moratorium on the programme.

Following a roundtable session I attended in Parliament last week, I think there are quite a few things pertaining to the scheme about which people are unclear.

The overriding question for many people is whether MySalam is a health insurance scheme. The government says it is not, and I agree.

At the risk of oversimplifying matters, let me explain a little. With any insurance, the people enrolling try to reduce their risk of paying a lot of money when they run into some kind of disaster by buying an insurance policy. This policy is usually a lot cheaper than the actual cost of the disaster.

For example, a car accident may cost you RM10,000. In order to avoid paying this sum, you buy an insurance policy for RM100. You may get into an accident, in which case you are covered, or you may not, in which case you lose RM100. This is called risk mitigation.

So how do insurance companies make money, you might ask. Let’s say 1,000 people buy the above-mentioned insurance at RM100, but only five people actually make a claim in a year. The money which remains is the profit earned by the insurance company.

As a profit-making concern, the insurance company has already had its experts – actuaries – calculate the probability of how many people will get into accidents per year. With that, along with other relevant information, they calculate what the price of the premium should be.

Here’s where another dimension comes into play. Insurance companies always use an additional concept called individual risk rating. Remember the RM100 premium mentioned earlier? If you compare a young driver who has had multiple accidents and an experienced driver who has been driving for 20 years without encountering a single scrape, do you think their premiums should be the same?

The insurance company will impose a higher premium of, say, RM150 on the young driver since he is more likely to get into a car crash – i.e. he has a higher risk. This is what individual risk rating means.

Health insurance works the same way. When you buy private health insurance, you are insuring yourself from the medical expenses associated with an illness. As per your insurance plan, you are covered for a certain number of health conditions.

Unfortunately, private health insurance also comes with a complex assessment of individual risk rating. Different factors such as your age, your family history, and whether you already have a certain disease, all increase your risk rating and thus the cost of your insurance premium.

Health insurance also usually covers only the cost of treatment and is almost always paid directly to the provider. For example, you have private health insurance and you are admitted for a chest infection for a week. Your final hospital bill is RM5,000. In most cases, if the admission is covered by insurance, the insurance company doesn’t pay you the money. Instead, it pays the hospital directly.

Now let’s look at the MySalam scheme and how it fits in the health insurance framework.

The MySalam scheme automatically enrols all Malaysians identified under the Cost of Living Aid (BSH). It covers not only the individual registered under the BSH scheme but also their spouse (the scheme covers around 3.7 million individuals between 18 and 55 years old).

The government, via its partnership with Great Eastern Insurance, has paid the annual premium for individuals and their spouses for five years, which works out to be about RM125 per person per year. In return, when they are diagnosed with one of the 36 illnesses listed, or are admitted to the hospital for a period of time for any disease, they are eligible to make monetary claims from the system online.

Already, there are several obvious differences between MySalam and a private health insurance scheme. First, the scheme’s participants are automatically enrolled in the system, unlike a private health insurance scheme where interested parties have to pay their own premiums.

Secondly, irrespective of your disease risk, the premiums remain the same for everyone. There is no form of risk rating.

Research shows that those in lower socio-economic groups are more predisposed to illnesses than those in higher socio-economic brackets. When you take that into account, this definitely does not seem to be a private health insurance scheme since it has enrolled people who are more at risk – something that no conventional health insurance scheme would do.

Thirdly, unlike private health insurance schemes where providers, i.e. hospitals, are directly reimbursed, MySalam reimburses clients directly, as mentioned on the website. This is apparently so that the recipient is free to utilise the money to resolve any part of the financial difficulty arising from the illness, which may or may not be directly related to treatment.

Based on these points, it is quite clear that the MySalam scheme doesn’t fit the definition of a private health insurance scheme. So what is it?

Going by its description, it seems to be a social welfare protection scheme focused on health issues, which makes it unique as one of the largest such schemes ever proposed in Malaysia.

As one of the organisations working on the ground, we at the National Cancer Society Malaysia are well aware of the financial struggles our patients and their families face when confronted with a severe illness such as cancer. It makes it impossible for them to start and finish treatment while managing their households due to the additional burden of treatment – and this is at highly subsidised government hospitals. So kudos to the government for conceptualising and undertaking such a project, which will directly impact the lives of Malaysians.

There are quite a few hiccoughs which may arise with the implementation of MySalam, and these areas need to be further improved to ensure that the scheme does what it is meant to do.

But it’s important to end on the note that MySalam as it is being deployed now is a good initiative. It is a work in progress that can be improved through input. And that’s what we want to do: to ensure that in the end, all schemes and programmes rolled out are effective and benefit us, the people.

Dr Murallitharan M is a public health physician and medical director of the National Cancer Society Malaysia. - FMT