Rising healthcare costs: what’s driving them?

It can be viewed through the lens of supply and demand in terms of healthcare professionals as well as the cost of medical consumables and medical tests among others.

As we come into the new year, uncertainty continues to cloud the Malaysian healthcare landscape.

The mid-term to long-term viability of the entire medical insurance landscape in Malaysia is at stake, and with it, the entire Malaysian healthcare system.

Surely this is just fear-mongering, one might say. But let’s delve a little deeper. Complain what you may about private medical insurance but understand clearly that it is the “fuel” that powers the private healthcare system in Malaysia.

Even while some complain about the private healthcare system as well – it is good to be reminded that it is an important source of revenue, a major driver of medical innovation, an important avenue for healthcare professionals to work and continue to provide health services for all Malaysians.

The collapse or even “shrinking” of the medical insurance sector bodes ill for the private healthcare system; and without a vibrant, robust private healthcare system providing needed healthcare services, the public healthcare system may well be completely overwhelmed and totally collapse.

Which is why trying to salvage, and improve the private medical insurance landscape in Malaysia is of interest to everyone, not only the industry, or even just its clients.

What is afflicting the industry, and with it all of us who are subscribers to private health insurance?

As the industry itself has clearly laid out, the three overriding problems medical insurers face are:

i) rising risk within the risk pool,

ii) rising healthcare costs, and

iii) rising medical claims being made on insurers.

Having explored in detail the issues of risk pooling within the Malaysian context and what can be done to further improve on this in earlier instalments, I move on to explore the perennial complaint of every single stakeholder in the healthcare system, and the ever-rising healthcare costs.

Everyone has complained that costs are going up for healthcare. From the consumer perspective, bills are so much higher than they were even as recently as five years ago. Healthcare providers are complaining that the costs of drugs and medical consumables are getting higher, giving them no choice but to raise prices overall.

As a result, total medical bills are higher, and all payers — whether they are individuals who are paying out-of-pocket, employers paying out the costs of their employees’ healthcare, and even insurance reimbursing the costs of their clients healthcare expenditures — are voicing similar complaints on this.

Specifically within the medical insurance context, insurers are voicing out that these costs are far above what they had planned for when estimating insurance payouts, thus requiring them to raise premiums in order to cope.

But the issue of rising healthcare costs is not unique to the private sector alone in Malaysia, it is also afflicting the public sector.

Before we explore why healthcare costs have skyrocketed, it is perhaps also wise to expound a little on what these costs are about and what is driving the rise in their prices.

One clear way to look at healthcare costs can be through the lens of supply and demand.

From the supply side, healthcare costs come from the costs of paying healthcare professionals such as doctors and nurses; as well as the cost of medical consumables, medical tests, surgeries, equipment, drugs and other medical devices.

More often than not all these are bundled together, and it is very difficult to extricate the different pieces apart if you are seeking to reduce healthcare costs.

For example, you can ask for nasi lemak without fried chicken, and it will cost much less; but in healthcare there is usually no option to choose a “no-frills” surgery, or a conversation in which patients can say, “Doc(tor), I don’t want five days of antibiotics, can you just give me three days instead?”

The interesting part of these healthcare costs is that in the case of human resources, especially doctors, they have to abide by a Fee Schedule which has already been set legally. Thus, there is a cap on healthcare costs due to their charges.

However, there have been complaints by patients on the “gaming” of some of these cost-control mechanisms.

Chief among this is an allegation which continues to float around social media that doctors put down charges for multiple consultations when these consultations are alleged to last for a very short time, or when the patients were not aware of it being a consultation such as when they were asleep.

Another common allegation floating its way around social media is how doctors are allegedly charging for additional procedures or services above and beyond what they are performing onto the patient.

In this manner, it is alleged, although individual consultation episodes or procedure charges are capped legally, doctors are getting around them through these “gaming” strategies.

As with most of these allegations, there are few, if any, formal complaints that have been made, but they remain a serious issue in terms of public (and even the market’s) perception.

Worse, these perceptions are shaping some of the cost-control mechanisms being evolved by insurers to contain these “costs” — be they real or not.

It is ironic in a sense that rising healthcare costs in the private sector are being attributed, rightly or not, to the healthcare professionals’ costs when their brethren in the public sector are being under-remunerated.

However, it does raise a valid point. If human costs in the public sector are not a direct contributor to rising healthcare costs (which by the way are also rising in the public sector), what is it that is contributing to this rise? These are some of the other factors to be explored in the next instalment.- FMT

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