Private healthcare, insurance premiums: a disaster waiting to happen

 

From Dr P Raju

The uproar over insurance premium hikes in the news compels me to voice my opinion that this was a disaster waiting to happen.

The private healthcare industry continues to capitalise on an unchecked and lucrative business model that ultimately burdens ordinary Malaysians.

According to publicly available data and personal analysis, approximately 70% of private hospital patients in Malaysia use insurance for their treatments while 30% pay out of pocket.

On the other hand, several private hospital groups have reported growing profits year-on-year, with profit margins ranging between 15% and 20%, indicating a lucrative industry.

The proliferation of private hospitals in the Klang Valley

Let’s start with the sheer number of private hospitals in the Klang Valley. Estimates suggest that there are over 50 private hospitals operating within this region, many with bed capacities of over 200.

This might place the Klang Valley among the regions with the highest density of private hospitals globally. However, where are the health ministry hospitals?

Petaling Jaya, one of the most densely populated suburbs of the Klang Valley, lacks even a single ministry-operated hospital despite the apparent need. This disparity is concerning.

If a population density warrants such a high number of medical facilities, signalling an unhealthy population, why hasn’t the government stepped in to provide equitable access to healthcare?

This unchecked growth of private hospitals illustrates how profitable the business model is. The private sector has steadily grown to dominate the serviceable market, often without competition from public hospitals.

This monopoly drives a dependency on private healthcare, which comes at an exorbitant cost for the average Malaysian.

The reimbursement game: insurers vs private hospitals

As consumers, we pay insurance premiums to hedge against the risk of illness, assuming this guarantees better and faster care at private facilities. While many centres boast top-notch facilities bordering on opulence, the reality is far from ideal.

Long waiting times persist and treatment costs continue to rise despite advancements in technology and training. Private healthcare providers have long gamed the reimbursement model, seeking to maximise claims from insurers without raising red flags.

Twenty years ago, a common procedure such as a caesarean section at a private hospital typically cost RM3,000 to RM5,000. Today, a hospital stay for the same procedure can cost between RM12,000 and RM20,000 – a staggering increase despite improvements in technology and efficiency.

One might wonder: how is it that with more trained personnel, better equipment, and decades of operational experience, private hospitals haven’t achieved cost efficiency for routine procedures?

The answer lies in a systemic focus on maximising revenue rather than optimising care.

It is worth noting that doctors’ professional fees have been regulated since 1998 under the Fee Schedule in the Private Healthcare Facilities and Services Act. These regulations aim to prevent overcharging by healthcare professionals. However, they exclude hospital-related charges, which often constitute the bulk of a patient’s bill.

To compound this issue, insurance providers have tightened their payout structures to curb excessive claims. This cat-and-mouse game between payors and private hospitals has led to an inflation rate of 10% to 15% annually for private medical costs, far outpacing Malaysia’s general inflation rate.

Ultimately, it’s the consumer who bears the brunt, with soaring premiums and out-of-pocket costs.

Hospital billing practices: a legalised free-for-all

A deeper dive into hospital finance departments reveals the resource intensive process of billing and collections. When a patient is referred to a private hospital with medical card insurance, the process typically begins with a referral from a general practitioner or specialist, followed by the issuance of a guarantee letter from the insurer.

This letter establishes claim limits and authorises treatment. Beyond the regulated doctor’s fees, every plaster, bed hour, and “gift pack” is itemised on the bill.

Here’s where the imbalance becomes apparent: despite legal compliance, there’s little oversight or regulation over hospital billing practices. The result is inflated costs for patients and prolonged battles between hospitals and insurers over payouts.

In this complex ecosystem, the private healthcare industry has created a bubble that is ripe for collapse – a reality now reflected in next year’s announced insurance premium hikes.

A difficult choice

So, should Malaysians continue to feed this profit-first healthcare model?

Yes, because hedging health risks is a practical necessity. No, because private hospitals – fuelled by insurance and third-party administrator systems – prioritise profits over equitable care.

As I have told my insurance agent: “If my hospital bill exceeds RM35,000 to RM50,000, I’d rather be treated at a government facility.”

Public hospitals see far more cases and they also house multidisciplinary teams capable of managing complex conditions. These teams, which handle a high volume of complex cases daily, possess far more expertise than the typical consultant at a private hospital, who often manages cases independently with limited support.

The way forward

Malaysia needs systemic reform in healthcare to address this imbalance. Possible solutions include:

1.  Greater investment in government facilities — Increasing the availability and quality of government hospitals in underserved urban areas like Petaling Jaya.
2. Regulation of hospital billing practices — Introducing transparency and capping charges for common procedures and services.
3. Public-private partnerships — Encouraging collaboration between the public and private sectors to reduce costs and improve efficiency.
4. Learn from Singapore — Singapore’s model of healthcare combines subsidised public healthcare with mandatory savings in MediSave accounts. Their strict cost controls and outcome-based evaluations ensure equitable access while maintaining high-quality care.
5. Incentivise preventive care — Reducing healthcare costs by encouraging wellness programmes and regular health screenings to mitigate expensive treatments later.

Until such measures are implemented, the private healthcare industry will remain a hungry monster, feeding on the hard-earned money of ordinary Malaysians while promising the best care at the highest price.

It’s time to hold all stakeholders accountable and push for a healthcare system that prioritises people over profits. - FMT

Dr P Raju is a doctor, former member of the Poisons Board, and an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.