- Samsul Said/Bloomberg
PETALING JAYA: Bank Negara is set to implement structural reforms to curb medical inflation, which continues to outstrip global and regional averages.
Healthcare spending in Malaysia is expected to rise as the population ages and chronic diseases become more prevalent.
In 2023, Malaysians spent RM84.2bil on healthcare, with medical and health insurance/takaful (MHIT) contributions rising sixfold from RM960mil in 2003 to RM6.75bil in 2023.
Malaysia’s medical inflation rate is projected to reach 15% by 2025, surpassing the global and Asia-Pacific averages of 10% and 11%, respectively.
“Among the factors that contributed to the high medical inflation in Malaysia are the rise of non-communicable diseases, ageing population, increase in manpower cost in the healthcare sector and advancements in medical technology.
“This development has resulted in higher claims payout by insurers and takaful operators (ITOs).
“To preserve the long-term sustainability of MHIT protection, ITOs will periodically review and adjust the pricing of their MHIT products to ensure that the premiums collected are sufficient to cover the cost of claims made by policyholders,” the central bank said in its annual report.
Between 2021 and 2023, MHIT claims surged by 73%, whereas premiums increased by just 21%.
Claims per 100 policyholders jumped from 11 in 2018 to 25 in 2023.
Insurers have raised premiums, with some policyholders facing hikes of over 40% in 2024.
To ease the burden of rising premiums, Bank Negara has introduced interim measures for 2024 to 2026.
These measures include spreading out premium increases over at least three years and temporarily pausing premium hikes for those aged 60 and above on basic plans.
Furthermore, it allows policyholders to reinstate lapsed policies without extra underwriting and requiring insurers to offer alternative plans at the same or lower premiums.
However, the central bank warns these measures are strictly temporary.
“The interim measures cannot be sustained if high medical inflation persists.
“It is therefore imperative that key stakeholders must holistically and effectively implement broader health reforms to address medical inflation,” stated the central bank.
To further address the issue, Bank Negara will be collaborating with key stakeholders such as the Finance Ministry, the Health Ministry, ITOs, private hospitals and clinics, and consumer groups.
This will be guided by five strategic thrusts namely greater price transparency, improved provider payment mechanisms via diagnosis-related groups payment mechanism, MHIT transformation, cost-effective options by supplying affordable and mid-tier hospital beds and digital health through enhancing interoperability of electronic medical records across hospitals.
“The implementation of the five strategic thrusts is expected to reduce the pace of medical inflation and result in cost savings, while ensuring access to quality healthcare in line with global best practices.
“This will help to contribute to more sustainable premium adjustments over the longer term and secure continued access to MHIT protection,” it added.
