PETALING JAYA: Hospital supplies and services (HSS) took up 70% of the cost of inpatient claims for medical insurance, says a World Bank report.
“These charges accounted for 70% of total costs in inpatient Medical and Health Insurance/Takaful (MHIT) claims.”
HSS refers to consumable items, laboratory testing and the use of medical and diagnostic equipment, scanners and X-rays in hospitals.
“Evidence suggests that its share is increasing. Across all hospitals in the centralised MHIT database, HSS represented 70% of total charges in 2022, increasing to 72% in 2023 and to 74% in 2024.”
This was part of the findings revealed in a World Bank report on “Cost Drivers in the Malaysia Health Insurance and Takaful Sector: A First Look at the Centralised Claims Database”.
The report said these patterns warrant a more detailed examination of the appropriateness of care, as well as the mix of inputs used in the production of healthcare.
“Alarmingly, our analysis shows that a large share of inpatient episodes are potentially avoidable.
“The share of admissions due to ambulatory care sensitive conditions, which include diseases such as diarrhoea and gastroenteritis that can be managed at lower levels of care, but also ischemic heart disease and renal failure that can be prevented with longer-term strengthening of preventive and primary care, was 23% in 2024,” it said.
These patterns, especially admissions due to conditions such as diarrhoea and gastroenteritis, are consistent with the presence of moral hazard, especially given that MHIT products are skewed towards inpatient care coverage, it added.
Higher costs per claim was the second highest driver of cost growth, accounting for 25%.
The report also found that claims inflation has surged to 21.6%, significantly outpacing premium inflation at 13.2%.
This imbalance reflects mounting pressure on insurers and underscores concerns about the long-term sustainability of private health coverage.
The report noted that the recent spike may be linked to post-pandemic effects, as patients return for previously delayed treatments.
These elevated trends are expected to moderate as the base effects of Covid-19 subside.
Among the proposed measures is the introduction of a base MHIT plan designed to improve affordability and reduce unnecessary utilisation.
The plan includes annual coverage limits starting at RM100,000, automatically increasing to RM150,000, which is expected to cover 99% of treatment episodes.
According to the report, the design of current MHIT products may contribute to higher utilisation, therefore there is a need to set annual limits.
“The annual limits of the base MHIT plan, which is set at RM100,000 and automatically adjusts upwards to RM150,000, would be adequate to cover 99% of treatment episodes,” it recommended.
The report also highlights inefficiencies in hospital billing structures, noting that unregulated hospital supplies and services account for 70%–74% of total costs and may be vulnerable to overuse.
A phased shift toward diagnosis-related group (DRG) payments is suggested to encourage more efficient care delivery.
Additionally, reforms to provider networks – such as tiering hospitals and introducing differentiated co-payment levels – are expected to promote cost transparency and align care with best practices.
Officials stressed that addressing rising medical costs will require coordinated action across all stakeholders, including insurers, healthcare providers and regulators.
