The reported 40% to 70% increase in medical insurance premiums has caused an uproar amongst Malaysian consumers. Many had taken private insurance to bypass the public healthcare system with its long waiting periods and frequently overburdened systems. They had expected that their insurance premiums would allow them fair access to the private healthcare system.<\/p>\n\n\n\n
This sharp increase in insurance premiums has for many already struggling with stagnant incomes and higher living costs led to consumers giving up on their policies. It has been reported that between January 2024 and June 2025 more than 340,000 consumers had chosen to forgo their health insurance due to substantial premium increases by insurance companies.<\/p>\n\n\n\n
The cause of this substantial increase has caused parties pointing fingers at one another. The private hospitals blame the insurance companies. While the insurers accuse hospitals of overtreatment and inflated pricing leading to sharply higher medical clams.<\/p>\n\n\n\n
However, the real victim is the consumer. Medical insurance is a complex service and frequently the consumer relies on the agent to suggest what is best for him. Frequently the benefits are highlighted and the risks minimized. The real possibility of significant increases in future premiums is frequently ignored. This results in the steep increase in premiums impacting on the ability of the consumer to afford the premiums. The consumer has no control over the premium increase or the hospital charges.<\/p>\n\n\n\n
The claim of the so-called \u201cbuffet syndrome\u201d without evidence is cited as one of the reasons for medical inflation. While insurers make pre-tax profit margin of 17 \u2013 18% and private hospitals make a pre-tax profit margin of 13 -14%, the consumer is blamed for so-called abusing the system.<\/p>\n\n\n\n
On a more objective analysis according to the Health White Paper of the Ministry of Health the health challenges contributing to rising medical costs include increase in non-communicable diseases, emergence of both new and old infectious diseases, an aging population and mental health issues, technological advancements in healthcare services, climate change and its impact on the ecosystem and increasing healthcare workforce wages.<\/p>\n\n\n\n
While these are indeed valid factors affecting medical inflation it should be stated clearly that these factors impact not only Malaysia but countries all over the world. Thus in 2025 there is no justification for Malaysian medical inflation to be 15% while Asia Pacific average is 11.1% and the global average being 10%. The Competition Commission, the Ministry of Domestic Trade and Cost of Living and the Ministry of Health should investigate why medical inflation in Malaysia is higher that both the rate in Asia Pacific and Global inflation rates. Even in 2023, medical inflation in Malaysia was 12.6% more than double the global average of 5.6%.<\/p>\n\n\n\n
According to a report by the central bank hospital supplies and service charges contribute 70% and 59% respectively of total medical charges for non-surgical and surgical treatments. As it is only the doctor\u2019s fees that are regulated there are no regulations or controls for the other charges by private hospitals, clinics and other healthcare services.<\/p>\n\n\n\n
The report also cited differing non-transparent medical charges between patients with and without medical insurance coverage. In a survey comprising 33,815 respondents\u2019 patients found insured private hospital patients using guarantee letters were charged RM 4,978 for dengue treatments, four times more than the RM 1,288 billed to pay and claim patients. Similarly in a sample of 53,188 patients treated for pneumonia saw that those with medical insurance coverage being charged RM 6,859 or three times the RM2,654 paid by those who fit the bill themselves.<\/p>\n\n\n\n
FOMCA fully supports the statement by the Prime Minister of Malaysia to amend the Private Healthcare Facilities and Services Act 1998 (Act 586) to regulate private hospital charges and implement the diagnostic-related group (DRG) mechanism that recommends a fixed amount or range based on the complexity of a medical procedure including reasonable charges for scans and other hospital supplies and services.<\/p>\n\n\n\n
Regulated pricing should well bring down the cost of private healthcare services and in turn help reduce the need for higher insurance premiums.<\/p>\n\n\n\n
While Bank Negara has undertaken several measures including spreading out of premium adjustments, temporary pause in premium adjustments and the reinstatement of policies, probably the most consequential approach is the development of an alternative medical and health insurance\/takaful (MHIT) products.<\/p>\n\n\n\n
The base MHIT plan is designed to be the lowest denominator product; a standalone medical protection plan that balances medical coverage and affordability. The plan caps the annual policy limit at RM100,000 with standardized benefits that cover costs associated with common admissions in private hospitals. The premium of the base MHIT plan is lower because of the lower claim limit and benefits.<\/p>\n\n\n\n
One of the key concerns of the new policy is the mandatory co-payment, requiring the policy holder to bear a portion of the total medical bill before insurance claims kick in. This feature is suggested to minimize the phenomenon of \u201cbuffet syndrome\u201d that is supposed to be driving up healthcare costs for everyone. The \u201cbuffet syndrome\u201d refers to the overconsumption by the consumers of medical treatments and medications in an attempt to maximize policy coverage.<\/p>\n\n\n\n
This syndrome is being used to justify co-payments. However, a report by Khazanah Research Institute entitled \u201cRaising Medical Premiums: Can it be Cured?\u201d would emphasize that there is no robust data proving that this syndrome to be occurring at large scale in Malaysia. It states that the assumption that many people want to be hospitalized or be subjected to excessive treatments for no reason just to benefit from there coverage seems to be at odds with reality.<\/p>\n\n\n\n
The greater concern is that co-payment products that come with lower insurance premiums may shift a significant financial burden to the consumer who are already stressed by medical inflation.<\/p>\n\n\n\n
Secondly, due to the overpricing of medical treatments and the differing charges for insured and self-paying patients, the time has come to move from the current model of fee for service to a value based model where charges are based on patient outcomes. The current Minister has proposed the implementation of the diagnosis-related groups (DRG) payment system that involves paying a set amount for a patient\u2019s treatment for a particular procedure or treatment. The Ministry would regulate that pricing. This could certainly help in curbing unnecessary healthcare utilization and expenditure.<\/p>\n\n\n\n
The DRG is a hospital payment and classification system that groups patients with similar diagnoses, treatments and expected resource use into the same category and then pays the hospital a fixed amount per case not per service. The new policy is a switch from a fee for service to a fee for health outcomes. The DRG system would ensure that no hospital would over-charge<\/p>\n\n\n\n
One of the key positive points of the MHIT plan, according to the Minister of Health, is that pre-existing medical conditions will be covered under the MHIT plan. This is a critical strong point as most insurance companies reject insurance policy for those who need it most.<\/p>\n\n\n\n
Next, there is great need for enhances education and awareness programmes to improve public understanding of how insurance works and more importantly the essential factors in choosing a good health insurance plan. It is also crucial for consumers to understand that the best insurance policy is not one with the most benefits but one they can sustainably afford for life, bearing in mind that premiums will continue to increase with their age and medical cost inflation.<\/p>\n\n\n\n
Despite the emphasis on private insurance it is important to note that medical insurance is not the main source of health expenditure in Malaysia. In 2022, medical insurance only made up 8.3% of total expenditure in Malaysia. The Ministry of Health accounted for 42.9%. What is particularly worrying is that out of pocket expenditure by patients accounted for 37.2%, one of the highest globally.<\/p>\n\n\n\n
Hopefully these measures taken by government on private insurance can help decrease out of pocket payments and increase uptake of private insurance. Bank Negara\u2019s innovative approach to address medical inflation in Malaysia should be supported by all consumers.<\/p>\n\n\n\n
FOMCA strongly believes that due to the serious economic situation faced by Malaysians with stagnant incomes and increasing costs of living for almost everything even day to day food supplies and childcare, the government needs to substantially increase allocation for public healthcare to upgrade and enhance existing facilities, modernizing care delivery models through mechanisms such as strategic purchasing and digitalization, as well as ensuring the wellbeing of the healthcare force to ensure the Malaysian healthcare system continues to be accessible and affordable to all Malaysians.<\/p>\n","protected":false},"excerpt":{"rendered":"
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