Solving the bottomless demand for healthcare


  • Vital Signs
  • Wednesday, 02 Oct 2019

Cost controls are a means to an end, and that end is affordable healthcare access for all Malaysians.

There are many more tools to achieve equitable access, not just cost controls alone. This week though, we’ll examine ways to reduce unnecessary healthcare demand, which are an important factor in controlling costs.

Demand for healthcare rises as the population becomes bigger, older and sicker.

Demand also increases as the population becomes more educated and richer (PDF), regardless of the population size, age and disease prevalence.

Frankly, demand for healthcare is bottomless, and will only endlessly rise.

Bigger and older populations are probably neutral outcomes, but better-educated and richer populations are inherently beneficial outcomes.

Health systems and citizens should accept these facts of life and rapidly move on to discuss solutions to populations that are growing sicker.

By sicker, I mean more diseases, more complex diseases and more long-term diseases. These are three separate things.

These situations arise because we’re living longer in a body that may not be built for 100 years of life, among other reasons.

Our individual organs can fail (e.g. diabetes is caused by a failing pancreas) and multiple unrelated organs can fail simultaneously (e,g, having diabetes and colon cancer at the same time), yet modern medicine can keep you alive despite having both diabetes and colon cancer (after 10-20 years of healthy life, you may still develop a third disease that is fatal).

When demand is unnecessary

For the patient with both diabetes and colon cancer, healthcare is definitely necessary. For other patients, healthcare could be arguably unnecessary.

In 2012, the American National Academy of Sciences estimated that US$765 billion or RM3.21 trillion (PDF) is wasted in the healthcare sector annually.

We don’t have a similar study for Malaysia, but applying the same ratio of 27% wastage to Malaysia means that we waste RM16 billion a year on unnecessary healthcare.

Here are three causes of unnecessary demand.

Firstly, it comes from doctors or the system. Examples are over-investigations (a brain MRI for a two-day headache), over-treatments (seven days of antibiotics for a simple flu) or over-hospitalisations (for a medicine paid by insurance if injected in a hospital, but paid by the patient if injected at home).

When doctors aren’t paying for these interventions (because it’s paid by the Government, insurers or patients) or when private doctors are paid a fee for each service they provide, you might expect healthcare costs to rise.

This is called the principal-agent problem. That’s why we have third party insurance administrators and clinical audits to ensure there is no over-treatment.

Secondly, demand comes from citizens and patients. For example, it’s often easier for a doctor to just provide a brain MRI or antibiotics to a fussy or anxious patient, or if the patient requests/demands/insists for treatment.

The rise of litigation is a small contributory factor to increased demand for healthcare too.

In reality, we can spend endless sums of money on healthcare.

Part of that is our fear of mortality. Another part is our reliance on modern science to fix everything with a magic pill, absolving us of any responsibility of self-care.

We also worship modernity (“I deserve the latest and most expensive painkiller”) and use healthcare as a status symbol (“I see the best private dermatologist for my skin condition”).

And here is a controversial part: those who are privately insured will request more interventions even if they don’t need it (“I’ve already paid my insurance premiums, so I’m entitled to the full claims. I won’t pay for nothing!”). This is called moral hazard.

Finally, demand can be unnecessary in cases of supplier-induced demand. In normal economics, costs drop when supply increases and demand is stable. In supplier-induced demand, costs rise.

For example, private hospitals that add another 200 hospital beds (or more MRI machines) will have to recoup the cost of the investment. How do they do this? Perhaps one method is by encouraging more hospital admissions (and MRI scans), even if it’s unnecessary.

Reducing unnecessary demand

The first few solutions to reduce unnecessary demand are already in place, and I won’t re-propose them again.

Three small ongoing examples are educating the population about appropriate self-care and unnecessary healthcare, performing antibiotic surveys inside hospitals, and making third party insurance administrators more efficient and effective.

Here are four additional solutions that use Budget 2020 to reduce unnecessary healthcare demand in Malaysia. The aim is to reduce the sickliness of our population, thus reducing demand.

Firstly, allocate more money specifically to ring-fenced preventive activities in the Health Ministry (MOH).

In 2014 (PDF), MOH allocated 69% of its budget to curative services and only 7% to preventive services.

While it’s true that curative services are much more expensive than preventive, and there is no global recommendation of the right ratio, a ring-fenced and multi-year allocation to preventive care will be a good investment to reduce future demand.

It’s important to note that the government is almost solely responsible for preventive health, because private entities will be understandably almost absent from these activities.

Secondly, Budget 2020 can allocate money as seed funding (PDF) for non-governmental organizations (NGOs) and civil society organizations (CSOs).

These NGOs and CSOs must engage only in preventive behaviour (e.g. exercise and mental health) or provide culture/language-specific decision aids for patients (e.g. videos and pamphlets) to educate when to seek treatment and when treatment could be unnecessary and harmful. Their target audience must be the B40 and M40 economic groups.

Thirdly, Budget 2020 can provide tax deductions to private companies to promote healthy behaviours.

A list of “healthy behaviours” can be created by existing agencies, e.g. the National Institute of Occupational Safety and Health (NIOSH) or the Health Ministry's Disease Control Division.

Examples could be progressive tax relief for companies with healthy food options in the canteen (more vegetables and less fried foods) or for companies with flexible working hours (to reduce traffic jams and mental stress). GSK’s Partnership for Prevention (PDF) is one example of a company that benefited from such programmes.

Finally, Budget 2020 can encourage non-hospital care by providing an allocation to stimulate the growth of privately-owned and -operated Patient-Centered Medical Homes (PDF).

In simple terms, these medical homes ease the transition from high-attention private hospitals back to low-attention homes.

That transition can be medically, logistically and emotionally scary, which is why some patients choose to stay in private hospitals “just to be safe”.

These are just Budget 2020 solutions to reduce unnecessary demand. Obviously, there are many other reasons for unnecessary demand, but Budget 2020 can’t solve them.

For those other reasons, we need other policy instruments, for example, system reform to re-organize the health system, finance and pay for it, and change the incentives structure, among others.

Next week, we’ll look at how to directly control costs, focusing on private hospital bills, insurance premiums, and medicines and technology prices. Stay tuned!

Dr Khor Swee Kheng has postgraduate degrees in internal medicine and public health, and has worked in five health sectors across three continents. He is currently specialising in health systems and policy in a public university and a local think tank. The views expressed here are entirely the writer’s own.


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