Insurance chiefs tell what’s driving up private hospital treatment costs

 Public Accounts Committee tables report on rising health insurance premiums, private hospital charges, and their impact on public healthcare.

Health insurers told a PAC hearing the overutilisation of medical equipment and procedures contributed to higher healthcare costs and insurance premiums. (Envato Elements pic)

PETALING JAYA:

The pricing practices of private hospitals and the alleged overuse of medical equipment were scrutinised by insurance industry leaders during a Public Accounts Committee hearing on rising health insurance premiums last year.

According to a PAC report tabled in Parliament today, Allianz Malaysia Bhd chairman Zakri Khir claimed during a PAC proceeding on June 19 last year that hospitals actively drove the utilisation of expensive medical equipment to recover capital costs.

Taking a US$1 million (RM4.12 million) lithotripter machine used to break up kidney stones as an example, Zakri said hospitals would push for higher utilisation as they would be seeking a return on investment of at least six times.

“The only way to recoup that cost is to charge higher prices. So, it’s not fair pricing,” he said in a report released on the PAC website.

“They buy a new machine and say, ‘Oh, we have to utilise it’. They send emails to all doctors saying, ‘Please utilise this machine as much as possible’. This is what is happening.

“I’m not throwing them (private hospitals) under the bus. They are behaving like any other private entity – they want to make money.

“But a certain balance has to be reached. We need to get to a point of fair pricing. What is fair?”

Zakri, a former Social Security Organisation chairman, was among 21 witnesses who provided PAC testimony during 19 proceedings held between Feb 24 and Aug 14, 2025.

The transcripts of the proceedings were published in a PAC report on rising health insurance premiums, private hospital charges, and their impact on public healthcare tabled in Parliament today.

The PAC said its inquiry was prompted by widespread public concern over rising healthcare costs and Malaysians’ ability to maintain insurance coverage.

The PAC hearings highlighted growing concern that, without stronger oversight, rising medical costs would continue to push up insurance premiums and place pressure on both households and the broader healthcare system.

Echoing concerns over pricing dynamics, AIA Berhad CEO Heng Zee Wang said hospital discounts had proven largely ineffective, as any negotiated reductions were often offset by increases in other charges.

He argued that the core issue was not discounts, but medical wastage and overutilisation, including unnecessary MRI scans and endoscopic procedures.

Heng also questioned the wide variation in prices for identical procedures across hospitals, calling for clearer benchmarks.

“Why does one hospital charge RM5,000 for an MRI, another RM3,000, and another RM1,500?

“It’s not about the margins hospitals make. It’s about ensuring fair charges for patients and policyholders,” he said.

He warned that excessive or inappropriate use of medical procedures ultimately drove up insurance premiums across the entire risk pool.

“If one person is overcharged, the nine others in the insurance pool will have to pay for it,” he said.

Prudential Assurance Malaysia Berhad’s chief health officer, Manisha Keyal, said the insurance industry was not simply calling for lower or higher prices, but for a structured framework to regulate hospital cost increases.

She noted that while insurance premiums were regulated, there is currently no equivalent system governing how private hospital charges were adjusted over time.

“The key point is that we all need regulated pricing.. The regulator for insurance companies (Bank Negara Malaysia) regulates premium increases. They look at the costs incurred by the company, the premiums collected, and then allow products to be priced accordingly.

“A similar governance framework is needed for private hospitalisation costs – how these costs can increase, what the parameters for increases are, and how we can rationalise them,” she said. - FMT