Insurance and rising costs in private hospitals

The surging costs of private medical care in Malaysia, coupled with escalating insurance premiums, have ignited public dissatisfaction, prompting critical discussions about the sustainability of healthcare financing.

With premiums expected to rise by 40 to 70 percent in 2024, policyholders are questioning the justification for these increases and calling for greater transparency and regulation.

This review delves into the interplay between insurance companies and private hospitals in Malaysia, drawing comparisons with Singapore and Brunei, and explores the potential for a more balanced and humanitarian approach to private healthcare.

Economic strain of rising premiums

The rising cost of medical insurance in Malaysia is a significant financial burden for middle-class families and retirees. Cases like Hamidi’s, whose premiums increased from RM157.69 to RM237.34 in two years, exemplify the financial strain many policyholders face.

Elderly individuals, such as Tony Pereira, experience even sharper increases, with premiums skyrocketing from RM540 to RM2,030 per month upon reaching age 65. This trend has pushed many policyholders to either abandon their insurance policies, rely on employer-provided plans, or turn to public hospitals, thereby exacerbating overcrowding in government facilities.

The fundamental issue lies in the justification for these annual premium hikes. While insurance providers attribute the increases to rising medical costs and inflation, policyholders demand evidence and clarity. The lack of transparency from both insurers and private hospitals has fueled scepticism.

As highlighted by the Life Insurance Association of Malaysia (Liam), private hospitals are accused of overcharging and issuing opaque bills, while hospitals argue that their operations are constrained by high fixed costs and a single revenue stream.

Private hospitals: A question of humanitarianism

The profit-driven nature of private medical care in Malaysia has raised concerns about the lack of humanitarian considerations in healthcare. While private hospitals play a critical role in alleviating pressure on public health services, their heavy reliance on profit generation often translates into exorbitant charges for patients. This raises the question: can private hospitals strike a balance between profitability and compassion?

Singapore offers a model worth examining. The city-state operates a mixed healthcare system where government oversight ensures cost transparency and affordability in private hospitals.

Policies like the MediShield Life programme, which provides basic coverage for large hospital bills, demonstrate how public-private collaboration can enhance healthcare accessibility without compromising financial sustainability. By contrast, Malaysia’s unregulated private hospital charges and limited government intervention in medical insurance have left patients bearing the brunt of rising costs.

Brunei presents another contrasting example. With a state-funded healthcare system, the majority of citizens enjoy free or highly subsidised medical care, reducing the dependence on private insurance. While such a model may not be directly applicable to Malaysia due to differing economic structures, Brunei underscores the potential for integrating public funding with private healthcare to ensure affordability.

Striking a balance: Profitability vs fairness

To address the escalating costs, Malaysia must adopt a multipronged approach that balances the financial interests of private hospitals and insurance companies with the needs of policyholders. Key strategies include:

1. Enhanced regulation and transparency

The government, through Bank Negara Malaysia and other regulatory bodies, must enforce stricter guidelines on pricing for both insurers and hospitals. Requiring private hospitals to provide itemised, comprehensible bills can deter overcharging and build public trust. Similarly, insurance companies should disclose the basis for premium hikes, including claim ratios and operational costs.

2. Public-private partnerships

Malaysia can learn from Singapore’s success in fostering public-private partnerships. Introducing government-backed insurance schemes that cover a portion of private medical costs could help reduce out-of-pocket expenses for patients while ensuring hospitals maintain profitability.

3. Promotion of preventive healthcare

Encouraging preventive care and early treatment can reduce the overall cost of healthcare. Insurance companies and hospitals can collaborate to incentivise regular health screenings and wellness programmes, ultimately lowering the frequency and severity of claims.

4. Tiered insurance premiums

Adopting a tiered pricing model, similar to Singapore’s MediShield Life, can make insurance more accessible to a broader population. Younger and healthier individuals could pay lower premiums, while older policyholders contribute slightly more, but without the sharp increases currently seen in Malaysia.

Conclusion

The healthcare financing dilemma in Malaysia underscores the urgent need for systemic reform. While private hospitals and insurance companies are integral to delivering quality care, their operations must not overshadow the humanitarian aspect of healthcare.

Drawing lessons from Singapore’s regulatory oversight and Brunei’s state-funded system, Malaysia can pursue a balanced approach that ensures affordability, transparency, and sustainability. By fostering collaboration among stakeholders and prioritising patient welfare, Malaysia can transform its healthcare landscape into one that is equitable, efficient, and compassionate. - Mkini

---

The views expressed here are those of the author/contributor, Reed Flute and do not necessarily represent the views of MMKtT.