The writer says medicine and equipment prices also vary depending on the individual country’s import taxes, currency exchange rates, regulatory controls and local mark-ups. — IZZRAFIQ ALIAS/The Star
RECENTLY there has been news coverage citing a report by MBSB Research that medical inflation in Malaysia could rise by as much as 16% in 2026. The report attributes this increase to factors such as the brain drain of doctors and nurses, and rising drug prices.
While such headlines can sound alarming, it is important to understand what the Medical Trend Rate (MTR) means for patients, how it is calculated and why it matters.
Simply put, the MTR is a benchmark measuring the yearly increase in the cost of healthcare. It is used by insurance companies, employers, governments and hospitals to project future healthcare expenses. Unlike the Consumer Price Index (CPI), which tracks general inflation, the medical trend rate is not a fixed number. Instead, it reflects year-to-year changes in how often people seek medical care and how much treatment costs, adjusted for cost-saving efforts within the healthcare system.
The simplified formula is: Medical Trend Rate = (Utilisation Trend + Cost per Service Trend) – Cost Management Savings. Utilisation Trend refers to how often people use healthcare services; Cost per Service Trend reflects the rising cost of treatments due to higher drug prices, advanced medical technology, and wage increases for healthcare professionals; and Cost Management Savings refers to reductions achieved through efficiency improvements, the use of generic drugs, and preventive health programmes.
When the MTR rises, healthcare costs and insurance premiums usually follow, which means patients could face higher out-of-pocket expenses in the future. Insurers, for example, might use it to adjust insurance premiums. Employees may also feel its impact depending on how employers use the MTR to plan budgets for employee health benefits. Meanwhile, hospitals and government agencies might rely on the MTR to monitor the sustainability and affordability of healthcare services.
Patients may notice that different sources report varying MTR figures. Some estimated the 2025 MTR at around 10%, while others put it as high as 16%. Such discrepancies can be confusing, leaving patients wondering why the numbers differ and which to rely on.
It is important to note that different organisations measure and interpret data to calculate MTR in different ways. Insurers may rely on actual claims data from their policyholders. Hospitals on the other hand are likely to use internal billing and cost information. Consulting firms might conduct industry surveys across insurers, hospitals and employers.
In addition, because these datasets vary in sample size, demographics and assumptions, the results naturally differ. There is no single global formula for calculating MTR. Each entity weighs factors such as utilisation rates, treatment costs, exchange rates, and cost containment differently. In short, all these numbers can be accurate. They simply reflect different parts of the same ecosystem.
The next pertinent question that patients have is why MTRs are different across countries.
Even though hospitals around the world use similar drugs and equipment, healthcare costs rise at different rates from country to country. Various factors contribute to this. Healthcare is a labour-intensive industry and salaries, in many cases, make up the largest share of hospital costs. Countries facing shortages of doctors or nurses, such as the United Kingdom, often need to raise wages to retain staff, which affects their MTR.
Medicine and equipment prices also vary depending on the individual country’s import taxes, currency exchange rates, regulatory controls, and local mark-ups. Some countries, like Japan and Canada, keep inflation in check through bulk procurement and price controls, while others, like Singapore, operate more market-driven systems, resulting in higher MTRs. In this regard, consumer demand also plays a role. As people become more health-conscious and aware of the latest innovations in drugs and diagnostic technologies, the demand for these cutting-edge technologies increase, adding further pressure to costs.
An additional driver of higher MTR is the phenomenon known as the “buffet syndrome,” where in predominantly private healthcare systems with extensive insurance coverage, patients are inclined to utilise more services than necessary, leading to higher overall costs.
Often, there is a perception that “more testing” or “doing more” is always better, especially when patients do not directly feel the financial impact because it is covered by insurance. However, more tests or procedures do not necessarily lead to better outcomes. Instead, it is best to work closely with doctors and discuss which procedures are truly necessary.
Amid all the buzz around the MTR and the cherry-picking of factors that contribute to it, what is helpful is to remind ourselves that these calculations are subjective and as such, I would encourage patients not to panic over the various MTR numbers itself. What matters most is the trend and how healthcare costs are rising over time, the same way the cost of food rises every year due to inflation.
Instead of being crippled by a number, patients can use the MTR to anticipate changes in treatment costs, insurance premiums and co-payments, so they can plan their finances.
Patients can also take proactive steps by using preventive care to avoid expensive treatments later. The Association of Private Hospitals Malaysia (APHM) has consistently emphasised the importance of strengthening primary healthcare utilisation. Early detection through regular check-ups, health screenings, and continuous care management can significantly reduce the need for high-cost interventions and hospital admissions in the long term.
Furthermore, patients can enhance their financial preparedness by engaging with financial counsellors at private hospitals. This collaboration enables them to clearly understand cost estimates, insurance coverage boundaries, and available financial support mechanisms prior to commencing treatment.
At the policy level, the Joint Ministerial Committee for Private Healthcare Costs (JMCPHC), led by the Finance Minister II and the Minister of Health, of which APHM is a part of at the consultative level, is focused on addressing and managing the many factors that contribute to medical inflation that go beyond just brain drain and rise in drug prices.
The goal is to ensure that Malaysia continues to have a sustainable and reliable healthcare system that can serve every Malaysian. Efforts at the JMCPHC include measures to strengthen investment in the public health system, cooperation with private healthcare providers to help shoulder national health demands through initiatives like the Hospital Services Outsourcing Programme (HSOP) and enhancing collaboration between the private sector and government in policy planning.
Ultimately, the goal is not to have healthcare that costs nothing, because that is simply not sustainable. Quality healthcare comes at a price and maintaining a system that is both high-quality and sustainable for all Malaysians requires shared responsibility and careful management by all stakeholders.
I believe that understanding this and the trend behind medical costs allows patients to be proactive rather than reactive. With this insight, patients can make smarter healthcare decisions, safeguard their finance, and play an active role in shaping a sustainable, quality healthcare system for Malaysia.
Datuk Dr Kuljit Singh is president of the Association of Private Hospitals Malaysia (APHM) and Independent Director of the Malaysia Healthcare Travel Council (MHTC) Board. The views expressed here are solely the writer’s own.
