PETALING JAYA: Hospital supplies and services (HSS) made up 70% of inpatient medical insurance claim costs, according to a World Bank report.
“HSS charges accounted for 70% of total costs in inpatient Medical and Health Insurance/Takaful (MHIT) claims, and evidence suggests that its share is increasing. Across all hospitals in the centralised MHIT database, HSS represented 70% of total charges in 2022, rising to 72% in 2023 and 74% in 2024,” the report said.
HSS includes consumables, laboratory tests, and the use of medical and diagnostic equipment, scanners and X-rays.
The report said the trend warrants closer examination of whether care is appropriate and how healthcare inputs are being used.
“Alarmingly, our analysis shows that a large share of inpatient episodes are potentially avoidable. The share of admissions due to ambulatory care sensitive conditions (ACSCs)... was 23% in 2024,” it said.
It added that admissions for conditions such as diarrhoea and gastroenteritis may reflect moral hazard, given that MHIT products are heavily skewed towards inpatient coverage.
Higher costs per claim were the second-biggest driver of cost growth, accounting for 25%.
The report also found claims inflation had surged to 21.6%, far outpacing premium inflation of 13.2%, raising concerns about the long-term sustainability of private health coverage.
It said the spike may be linked to post-pandemic demand for delayed treatments, though the trend is expected to moderate as Covid-19 base effects subside.
Among the proposed measures is a base MHIT plan to improve affordability and reduce unnecessary utilisation, with annual coverage limits starting at RM100,000 and automatically rising to RM150,000. The report said this would be enough to cover 99% of treatment episodes.
The report also highlighted inefficiencies in hospital billing, noting that unregulated HSS charges account for 70% to 74% of total costs and may be prone to overuse. A phased shift towards diagnosis-related group (DRG) payments was proposed to encourage more efficient care.
It also suggested reforms to provider networks, such as hospital tiering and differentiated co-payments, to improve cost transparency and align care with best practices.
Officials said tackling rising medical costs will require coordinated action by insurers, healthcare providers and regulators, while Malaysia’s public healthcare system remains the cornerstone of universal health coverage.
The report said the current MHIT product design may be contributing to higher utilisation, underscoring the need for annual limits.
It added that the phased implementation of DRG could reduce incentives for providers to increase HSS, while restructuring hospital bills could improve transparency.
