The Malaysian healthcare space has got some very good things going for it - an extremely affordable/near-free public healthcare, which is increasingly being known for quality as well (though struggling with insufficient resources and funding), a thriving private healthcare landscape with increasingly more entrants, making Malaysia an attractive destination for medical tourism.
Yet, all is not so rosy under the hood.
Focus: Private Medical Insurance
In recent weeks, we have seen an uproar in social media over our regulator BNM's latest requirement of a co-payment feature in new medical insurance plans going forward (minimum of RM500 or 5% of medical expenses, up to a cap to be set by insurers/takaful operators). Actuarial Partners published a very well written explanation of why this co-payment requirement is actually an important step in the right direction: https://www.linkedin.com/pulse/role-co-payments-actuarialpartners-z7dwc/?trackingId=VNJYZCX1SbK%2FBL744PR8SQ%3D%3D
The co-payment is actually the tip of the iceberg, both from the perspective of the issue itself and its solution.
The iceberg that is threatening our healthcare ecosystem, can be illustrated by the two pictures below:
Malaysia's medical inflation rate (near 15%) is clearly outpacing global and regional trends. This directly translates into higher medical insurance premiums. It has now become a norm for medical insurance premiums to rise by at least 30-40% every two years.
The following picture unveils more:
This is rather shocking even to experienced insurance professionals. Nearly 75% of private healthcare expenditure is out-of-pocket, and only a measly 17% is funded by private insurance!
This can only mean two things: 1) Current private health insurance products are either too expensive or not made available to a vast majority of the market who need it. 2) Regulating medical insurance product designs alone cannot make a significant change to the rising medical inflation rate. Other ecosystem level changes are required.
Nonetheless, let's dig deeper into the issues with the current private medical insurance designs.
Cashless Medical Plans - A boon or a bane?
A "cashless" medical plan means that the customer/patient does not (in theory) need to fork out any amount of money for their hospitalisation. The bill is directly paid by the insurance company (or usually a Third-Party Administrator/TPA) to the hospital.
These really started taking off approximately in the late 2000's. Prior to cashless medical plans, customers had to pay their medical bills to the hospital first, and then claim from the insurance company afterwards. At first, cashless medical plans included cost-sharing elements, for example co-insurance/co-payments where the customer pays a % of the medical bill up to a pre-set limit (usually RM1,000-2,000), or a deductible (usually RM500-RM2000) and the insurance company pays the rest. Sub-limits (ie maximum payable amounts) by the type of hospital charges were also common. In the early 2010's, competition started heating up when the fully cashless medical plans without any cost-sharing and sub-limits were introduced in the market. Soon, this trend was adapted by nearly all insurers in the market. Extremely high annual limits and unlimited lifetime limits became the norm. Quoting from the LIAM/PIAM/MTA study done by Actuarial Partners in 2020: "This is akin to offering a limitless “credit card” to spend on medical treatment as there is almost no immediate monetary ramification to insureds at the point of discharge. While this offers peace of mind to those insureds who want to hedge against high medical bills for serious illness, it could lead to unnecessary costs and over-consumption. This has been referred to as a “buffet syndrome” which ultimately increases the average claims per insured and subsequently leads to higher and more expensive medical insurance premiums."
Once the genie was out of the bottle, there was no way to put it back in.
In my experience, I have observed that claims experience from the pre-2010 plans were at least 20-30% better, if not more, compared to the fully cashless plans that came subsequently. Medical inflation trends on the pre-2010 plans were also much more controlled compared to the post-2010 fully cashless plans.
In my view, even BNM's latest co-payment requirement can only partially remedy the situation from this point of view. Honestly, based on the public outcry from the small co-payment requirement BNM imposed, I don't think they would go further in putting explicit limitations on product designs or try and pull back cashless plans. Beyond the co-payments, we need to look into the health ecosystem holistically as well. The Ministry of Health (MOH) has outlined its ambitious plans with regards to this in its Health Reform paper. To be continued, next - Health Ecosystems References: 1) Actuarial Partners article on co-payments: https://www.linkedin.com/pulse/role-co-payments-actuarialpartners-z7dwc/?trackingId=VNJYZCX1SbK%2FBL744PR8SQ%3D%3D 2) Willis Tower Watsons global survey on medical insurance trends: https://www.wtwco.com/en-my/insights/2023/11/2024-global-medical-trends-survey 3) MNHA National Health Expenditure presentation: https://www.moh.gov.my/moh/resources/Penerbitan/Penerbitan%20Utama/MNHA/LAPORAN_MNHA_2011-2021.pdf 4) BNM MHIT guideline: https://www.bnm.gov.my/-/mhit-req-en 5) MOH Health White Paper: https://www.moh.gov.my/moh/resources/Penerbitan/Penerbitan%20Utama/Kertas%20Putih%20Kesihatan/Kertas_Putih_Kesihatan_(ENG)_compressed.pdf 6) LIAM, PIAM, MTA Medical Inflation Study by Actuarial Partners: https://www.liam.org.my/images/liam/AN_ABSTRACT_FROM_MHI_MCCTF_STUDY.pdf
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