Private Health Care - Bank Negara Malaysia As The Insurance Regulator By VM Chandran

Insurance Regulator

Insurance Regulator's target is a  "paradox"  -  Growth of medical insurance business  is fodder for the escalation of private medical costs.

Malaysia is becoming an affluent society and one key aspect of it is the proliferation of private medical care. It speaks well for the country, and even highly, if it is done in an organised fashion. The key aspect is accessibility and quality at an affordable  cost with careful control on medical inflationary rise.

(OSTB : In the racial nature of all things in Malaysia the 'affluent society' is only reflective of and also sustainable largely among the non bumis. Hence this issue has little  urgency for the  politicians. It is does not involve their voters.)

Today it is known that 8 out of 10 private patients are covered by Medical Insurance, effectively making Insurance companies the biggest paymasters of private medicine. This gives the Insurance companies the inherent strength to place themselves in a powerful leading role to dictate the direction of affordability in private medical care.

The net result, is that it can become a check and balance to the various charges being levied by private hospitals. An environment could have been created for transparency whereby all rates and charges including services,  pharmaceutical items (distinguishing between original and generic) supplies are agreed upon and published. An open book concept which permits patients the freedom of choice with precise knowledge of what they are getting into.

On the other hand,, this transparent open book concept can create a cost effective approach to the private hospitals, knowing that their details have to be published. This encourages competition among private hospitals, providing an all round superior quality service at very competitive prices.

In all these there is a paradox. And Bank Negara Malaysia is in the center of this paradox.  Bank Negara as the Insurance Regulator has set a target of 75% penetration for insurance in the Malaysian market by 2020. 

In 2015  it was around 40% to 50%. Insurance claims have seen a significant growth too. In 2017 the claims ratio was 71.1% as compared to 50.4 % in 2015. 

This has severely affected (or rather 'benefited) the medical insurance industry, which sees a 15% annual increase in annual premium rates.

Based on the above statistics, one wonders if the obsession with achieving Bank Negara's  75% market penetration may have influenced the Insurance companies' "relaxed attitude"  to facilitate claims. 

As an added  argument, I embark on this view based on the significant increase in  annual premium rates.  Like the private hospitals, it is about business growth for the Insurance companies. 

Business growth is the driving force - any larger interests of their clientele takes a dip. Similar to "patient care" which is used by private hospitals as a marketing tool, medical insurance companies can brag that their "cover" can absorb most of the hospital charges and easily facilitate settlement of claims. Surely, that in itself is sufficient  attraction to draw new clientele.

Insurance companies' role as a " check and balance" is then compromised. Now it would be seen to be a " win, win, win" situation for the private hospitals, insurance companies and the Insurance Regulator, with all of them achieving their goals, except for the public and the Government.

The public has to pay more while the Government has to face the consequences of high private medical costs, which stresses the public health system. 

This is because people will certainly migrate to public health when they  find that their insurance cover for private medical care is unsustainable for their illness (too expensive).  Therefore public health services and the public health budget will take a toll. 

To compound matters, the cost of living digits will "dance" their way up - providing ample "fodder" for other social issues, in particular with the aging population.

In the 'supply' chain of private medical care involving private hospitals, medical insurance companies and Bank Negara as the Insurance Regulator, there seems to be a total lack of measures to ensure the accountability of private medical costs to patients. The simple concepts based on a market  economy for private medical care has deteriorated into something with an ugly distasteful taste. 

(OSTB : Mr Chandran, there is no real free market in Malaysia. This is the single largest problem that is making us poor and instead  enriching the cartels, the monopolies, the oligopolies, the government granted 'concessionaires', the vested interests and those with cable.)

It is not the failure of the market economy, but rather the inefficiency and failure of every facet in the chain linking private medical care which has not played its effective role in creating an environment of "checks and balances" - inflicting a high price of which  both the public and the Government are now the victims.

V M Chandran

My comments :   The role of regulation should be to increase healthy competition in the economy. Regulation SHOULD NOT stifle competition or raise the barriers to entry in any economic sector.  Sadly the race based politics of the country does not seem to understand basic economic principles. Hence the continuous bungling.