- 5 weeks ago
- #considerthis
The Public Accounts Committee recently released a sweeping report on rising medical insurance premiums and private hospital charges. The PAC identified weaknesses across the healthcare ecosystem and proposed significant reforms. So what did the PAC get right and what may it have missed, whether their recommendations are enough to address the root causes of medical inflation, and what patients should realistically expect next. On this episode on #ConsiderThis Melisa Idris speaks with Azrul Mohd Khalib, CEO of the Galen Centre for Health and Social Policy.
Category
🗞
NewsTranscript
00:10Hello and good evening. I'm Melissa Idris. Welcome to Consider This. This is the show
00:14where we want you to consider and then reconsider what you know of the news of the day. The Public
00:19Accounts Committee recently released a sweeping report on rising medical insurance premiums as
00:26well as private hospital charges. Now the PAC identified weaknesses across the healthcare
00:32ecosystem and they also proposed some significant reforms. So today on the show what we'll do is
00:38we'll look into what the PAC got right and what they may have missed, what the PAC recommendations
00:45are and whether they go far enough into addressing some of the root causes of medical inflation
00:50and finally what patients should realistically expect next. And helping me unpack the 1,999
01:00page PAC reports, I have with me Azrul Muhammad Khalib who is the CEO of the Gallen Centre for Health
01:06and
01:07Social Policy. Azrul, good to have you in the studio with me. We've got our work cut out for us
01:12to unpack
01:12this report. I want to start with the PAC's diagnosis. So I think for many months now, even
01:18years, Malaysians have been told that the issue of rising medical health insurance premiums has been
01:28because it's an insurance problem. This is an insurance industry problem. But the PAC report says
01:33actually, no, it's an ecosystem-wide problem. So talk to me a little bit about that. If the way we
01:40finance, regulate and deliver private healthcare is the problem, where do we begin with this report?
01:47Did the PAC get the diagnosis correct in the first place?
01:50Thanks for having me, Melissa. And you know, this is a very relevant report for what we are
01:58increasingly seeing as a cornucopia of cost of living crisis issues and for which for a certain strata of
02:07population, especially those in the middle class and also those in more well-off, insurance,
02:14health insurance especially, has become an issue that is dominating conversations around the dinner
02:19table, lunch and amongst co-workers and so forth, right? So the genesis of the PAC report can be found
02:29actually in 2024 when there was a flurry of repricing exercises that were being done by the ITOs,
02:38the insurance takaful organizations, to accommodate the halt in repricing, which occurred due to the COVID-19 crisis,
02:48in which they suspended repricing, obviously, due to the pandemic, and then later on had to readjust because of
02:55inflating costs and so forth. So we saw the repricing occurring where there was the announcement that deductibles
03:04and co-payments were going to be the thing that we would expect for all future health insurance products to
03:11come.
03:12And then Utusan Malaysia put out a report in November 2024, which kicked it all off and caused concern for
03:22which
03:23it led to the formation of the PAC to look at this issue of two things, private health insurance premium
03:33increases and
03:34private hospital charges. So those are two very interesting components of the private healthcare space that we're
03:41talking about right now. But it all came from that 2024 experience.
03:46So this has been one and a half years in the making?
03:48It has been a year and a half. And you can see that in the report being almost 2,000
03:53pages.
03:54It was a hefty read. So now I have to ask you, if the PAC says, well, actually, the problem
04:03is systemic,
04:04that it's not no one person's fault. So it's not the insurers, it's not the private hospitals,
04:10it's not Bank Negara or the regulators, it's everyone. If it's nobody's, say, singular fault and
04:18everyone is responsible, then is nobody accountable? How do we hold someone responsible to fix it?
04:26This is one of the key findings from the PAC inquiry process, because it is a plague on both your
04:36houses situations, to be honest. Everyone is to be blamed here. Because at the end of the day,
04:42the private healthcare space is a free market. It is capitalist in nature, it's intended to make
04:48money, to do business, to get profit and to pay dividends to shareholders. I mean, that's the
04:55business. And the problem here lies in us expecting it to perform otherwise. And we very often are trying
05:05to find the situation where we have a two-tier system, a public healthcare system that we have,
05:10for which 70% of the population utilizes, and another 30% of the population utilizing the private
05:17healthcare space. So when you look at how much money are we talking about, how much is it that is
05:24looked at in terms of actual expenditure, you find that what we're really talking about here is
05:30out-of-pocket payments, where people are paying to purchase services in private healthcare, for which
05:37they are either paying out their own pockets, or utilizing things like insurance to pay for.
05:42So what has happened here is that Malaysia has faced double-digit medical inflation for several years now,
05:50and it's gotten worse, especially after the COVID crisis. And private hospital charges are going up,
05:57and therefore insurance premiums also, because private health insurance and takaful premiums
06:04don't exist in a vacuum. They are responding to something, right? So if there's more utilization of
06:10the insurance, if there's more cost that's being charged by the private hospitals and clinics also,
06:15not forgetting, therefore the premiums would also have to respond because there's more utilization of
06:22that. And unfortunately, unlike countries like America, for example, where the pool of insurance
06:30premium holders is very wide, very deep, in Malaysia is very thin, and it's a small proportion of the
06:42population, which means a large group of the population have some kind of insurance, but they
06:48don't have enough insurance. They have like maybe minimal, small amounts. So they're underinsured. So
06:54we're told that it's maybe around 30% of the population that has some form of insurance, but when you
07:00look
07:01at what kind of insurance they have, many of them, you know, they're trying to help out their nephew or
07:06cousin, they buy these insurance, and then they pay for it, and then they pay for years. And then one
07:12day they
07:12fall sick. And then they go to the hospital thinking, I've got no problems, I've got insurance, I'm going to
07:18be
07:18able to be covered. They go to the hospital, turns out what they have is life insurance, or critical
07:25illness insurance, but not health insurance, which will enable you to finance the treatment that you're
07:31getting in a private healthcare space. Right, let's put insurance under the microscope. It's one of the many things
07:36that the PAC focused on, but I think this is quite interesting because the PAC took issue with the
07:42three characteristics of how health insurance is designed in private health insurance is designed
07:47in Malaysia. Risk selection, closed pool, and investment linked policies. Talk to me about risk
07:51selection practices, because you talked about the pool that we have, right? Private insurance fails to
07:57function as a long-term social safety net, safety net because vulnerable groups are excluded
08:03through premiums, pricing mechanisms. So there's many ways to look at who is able to be part of this
08:11pool. Right. And one of the things that you have to bear in mind, again, this is a business, meaning
08:17you want to be able to have in the pool people who are not going to always dip into the
08:25resources that
08:26they may have. So people will tell you, oh, you got 500,000 annual limit, or 1 million annual limit,
08:32or even more these days, depending on how much premium people pay. I don't know how much you
08:36have, Melissa. It's not that much. It's not that much. Yeah, so basically what happens is, is you don't
08:43want people who are going to be continuously using that pool of money. So I say people, meaning people
08:50who are sick or people who need healthcare. Yeah, so people who are needing treatment, but who are
08:54needing to tap on to that 500,000 or 1 million annual limit that they're going to use. So who
09:01is part of
09:01this pool is dependent on how they look at risk. So in many countries and in Malaysia, it's
09:08individually risked, meaning you are looked at as an individual in terms of your risk
09:13of how much do you, are you valued in terms of someone who needs to pay more compared to
09:21another person. So if a person who's healthy, who has no conditions, no pre-existing conditions,
09:27no non-combatical diseases, maybe someone who's a typical profile of a 21, 22 year old,
09:33this person, nothing. So this person will be paying premiums that are low. So it'd be like
09:41maybe 21 or 22 ringgit even, very minimal and so forth. This person will be paying into.
09:48Compare this against somebody who's maybe around 35 years of age. Maybe it's got hypertension,
09:54cardiovascular disease, got a little bit of a weight problem. At that point of time in their life,
10:01maybe they've got a little bit of, you know, that sedentary lifestyle going on because they've been
10:07at work. So when they look at the profile of this person, this person would have to pay more premium
10:12compared to the 21 year old because they're looking at the different risk differently for different
10:17people at different stages of their life. But they're all part of this pool, right? So what you
10:22want to have is this pyramid where you have more of the healthy people who are then going to fund
10:29the costs of those who are going to be drawing on it later on in life or who are sick
10:34or growing old
10:35and so forth. So we have a situation now where the premiums are increasing faster than what people
10:42can afford. This is due to many reasons, not just medical inflation, but also higher utilization,
10:49more Malaysians falling sick after COVID-19. More and more people are needing to be hospitalized,
10:56being treated for different diseases that have tension, cardiovascular disease,
11:00chronic kidney disease, different types of cancers and so forth. So more people are tapping into
11:06insurance and therefore the health insurance and takaful industry now is looking like this is a bad
11:12business because we want people to just pay but not having to utilize. But when more people pay,
11:18the payouts are becoming bigger and bigger each year. Therefore, it becomes unsustainable if you keep
11:24it at the level of premiums that you paid several years ago. So the insurance industry has had to
11:30reprice itself periodically to keep up with the changes in the cost of providing that health care.
11:37Right, but that doesn't solve the root causes of why the costs have increased so much and why
11:43there's so much utilization. I want to think about how we can increase the pool. So Bank Negara designed
11:49the MHIT base plan, which was designed to make insurance premiums far more affordable, cover a wider
12:00segment of society and maybe increase the pool of this risk sharing. Do you see that as a way to
12:07maybe address some of the limited cello pool here? So MHIT corresponds to medical health and insurance
12:14and takaful. So that's basically everything that we have right now. And what they are proposing here
12:21is a base model of what you could say, buruk pun, it's going to be this, you know, the bare
12:27minimum,
12:29this is what you're going to be having. And this should be something that should be affordable by all,
12:34as many people as possible. And most importantly, provide the coverage that you need. And to ensure
12:42that, you know, we're talking about the 70%, 30% of people utilising private and public health care,
12:48right? We want more people who are currently in public health care to make use of private health care.
12:55We need more people to shift from our congested burden health care system in the public side
13:02to the private side. So it can only be done if we can afford the treatment, the care services,
13:09and this base MHIT product, which has now been branded as Medi-Assas, launched just like a week or so
13:19ago, is supposed to be able to do that. Now, one point that needs to be highlighted is that this
13:28is not
13:28a government product. It's just designed by Bank Negara. The government is not putting any money into
13:34this. It is not, the underwriter is not going to be the government. The private sector is the one
13:40that is supposed to implement this product. So they have to offer it.
13:44They have to offer it as a product to customers. And they will be processing the claims. They will
13:51making the payouts. They will be looking at their individual pools as well. So that's very important
13:57because it still will be governed by the same mechanisms that you have been depending on right
14:04now for other MHIT products.
14:07There could be a mismatch between what it is that we want to achieve with the kind of practical
14:11implementation of it. I want to put the conversation to private hospitals and maybe the root causes of
14:19medical inflation. So one of the things that I actually found quite interesting or startling from
14:24this report was that Bank Negara and Ministry of Health, actually they don't have the legal authority
14:32to control treatment costs in private hospitals. I did not know that before the PAC report.
14:40Talk to me about this major regulatory gap.
14:44Which page was that, Melissa?
14:45I cannot remember. It was right at the very beginning and under the recommendations.
14:50Exactly. And this is one of the most important findings in this process of the PAC, which we
14:58really have to thank them for. And I give credit to former PAC member, Bayan Lepas Simzi Sin,
15:07who kicked off this whole process, made it happen and get the right people. And of course,
15:12Wes Emiati is the chair of the PAC because this finding is the one that got everybody startled
15:20to realise that the bulk of what we're talking about here involve MPs pointing to another ministry
15:28and then ministry saying, no, it's actually the other person's responsibility. But the ministry
15:32then saying, no, but we don't have a mandate. And that's one of the things that was found,
15:37that the cost of insurance premiums are not regulated by anyone, though they have to inform
15:48Bank Negara. But the quantum itself is not regulated. So that's very important. The private hospital
15:55charges itself are not regulated by anyone. That's a free market space there. If you look
16:04at a typical private hospital bill, you will find that 20% of that involves the consultancy
16:11fee of the doctor. That's regulated. The doctor's charges are regulated. Are regulated. 10% involves
16:18pharmaceuticals, which may or may not be regulated depending on where you're looking at in terms
16:24of market. Is there a lot that's being charged there? Can they charge more? There's a sort of
16:32limit to what you can charge for Panadol, for example, you know, or statins or cardiovascular
16:37drugs and so forth. But the 70%, the rest of the bill is not regulated. Things like the cost
16:44of a syringe, calling for nurses, being charged for room, your chadda, your blankets, your pillow
16:52cases, saline, all those commodities form 70% of the hospital bill for which it is totally
17:00not regulated. So this is where we see there being a regulatory gap here. The problem, Melissa,
17:10is that we're not looking at regulation as in to ensure that this is, are these crooked practices?
17:17Is this a monopoly and so forth? No. The issue here is consumer protection. So in many industries
17:25around the world, you have consumer protection to ensure that consumers are able to be given fair,
17:32transparent and reasonable market rates in terms of what they can afford and so forth. Malaysia,
17:39when it comes to the private healthcare space, as I mentioned, the actual increases of insurance premium,
17:46not regulated. The charges, the 70% I said about private hospitals, also not regulated. So we are
17:55seeing a space that needs a regulatory presence to ensure that consumers are protected, but also a space
18:04where you can go to for problems. Right now, they have an ombudsman where you can go to Bank Ngarra
18:12to
18:12complain about insurance not paying out for stuff, your GL being revoked, them not bothering to process your
18:20claims. But that requires you to go through a laborious process. And it's very reactive. It's reactive. It takes time.
18:27And you may not have time. People have died before they can get their claims processed while waiting
18:33for that to happen. And we want to avoid the situation where families and loved ones are not able to
18:39be seen
18:40as being taken care of. I really like this lens of consumer protection in healthcare. One of the
18:48recommendations of the PAC was to create a new independent regulator overseeing both private
18:53healthcare and health insurance. Let's unpack that. What would another regulator solve? And can we
19:03avoid from over-regulating? What's the balance to avoid from over-regulating this industry?
19:08Melissa, healthcare is one of the most regulated spaces in the industry. In any industry in this
19:16country, healthcare is, one would say, regulated to death to some extent. The irony of it. The irony of it.
19:24But there are some places that are still not regulated. So it's not cowboy town. And one thing we have
19:30to
19:30recognize is that Bank Ngarra already regulates the insurance takaful space to ensure that there's no
19:39mispractice this wrong representation, illicit type of behavior and so forth. But the quantum of charges and so
19:48forth, they don't do. And it's very important for us to realize that we are not proposing something for
19:54the sake of setting up yet another body, another committee and so forth. But it's really to ensure that there's
20:02a
20:03mechanism that's able to provide that consumer protection for the purposes of ensuring that people don't end up
20:08bankrupt. For example, in Singapore, they have a co-payment cap for annual, instead of disabilities. So in Malaysia, we
20:22don't have a cap.
20:22Meaning, if you're paying a co-payment of $10,000 or $15,000 each time that you are having to
20:29be treated, then you could find yourself quickly running out of money.
20:33In Singapore, there's a cap of around $5,000 per year for co-payment. So the idea is to protect
20:44the consumer. I mean, it may be bad for the service provider, but it's good for the consumer.
20:48But the problem here, that's the kind of protection that we need. We need someone to look at the repricing,
20:55for example.
20:56Repricing should be permitted because it's a business, but there needs to be reasonable expectation of what that repricing should
21:04look like.
21:04And maybe, you know, in smaller quantums or more regularly.
21:08Frequency, but also the percentage. We see 40%, 70%. Even the worst case we heard was around 200%.
21:17Of an increase in premiums? Of an increase in premiums, because the persons involved were above the age of 60.
21:23So we find that when we look at the issues that are affecting insurance, for example, the older you are,
21:30it seems like you are being priced out.
21:32And that's when you need health insurance the most.
21:35The time when it's worse in your life and the time when you're most vulnerable, that you've invested in for
21:40years for health insurance, that you need it,
21:44is the time you suddenly realise that it's been taken away from you simply because the repricing exercise has priced
21:51you out of affordability
21:53at a point where you are retired, may not have source of income, and therefore you're not being able to
21:59afford that.
21:59But the problem here is the private hospitals as well and clinics on the other side, you see,
22:04because insurance premiums don't exist in the vacuum, you need a regulator to look at the cost or the charges
22:13for private hospitals.
22:14Now, the insurance and the private hospital, TACAFO and third-party administrators will hate me for saying it,
22:22that we need yet another regulatory presence in this space.
22:25But the fact is, is that it's bad business if you price yourself out of the affordability of people who
22:33are needing to pay for that service, right?
22:36And you're just doing business for yourself.
22:38Private hospitals need to be regulated in the sense that we need reforms there to look at whether these charges
22:45are reasonable.
22:46According to law, you have to see every single item.
22:50Oh, itemised billing.
22:51Itemised billing for everything, which is why we sometimes find these ridiculous charges that are being put in.
22:58Cotton swabs.
22:58You know, cotton swabs.
22:59Syringes.
23:00You use three swabs, but you charge for a pack of 50 or 100, for example, because it's contaminated once
23:07you open up the pack.
23:07Right. So, the good news is some reforms have been put in.
23:11Now that we're talking about diagnosis-related groups, where it's a bundling of these costs.
23:18So, instead of itemising each and every one, you are basically looking at a bundle in cost.
23:24Right. So, we won't have time to get into all the 17 recommendations, but I do want to ask you
23:28about what we can expect as patients, as consumers of private healthcare.
23:35What is it that Malaysians can realistically expect?
23:38Because I understand there had already been a reset initiative way before the PAC report.
23:43But are you worried that this PAC report will just fall on deaf ears and not go anywhere?
23:48Well, a couple of points, really.
23:51Malaysians, when they were responding to this PAC report, was very cynical about the process, really.
23:58They were saying, what lah, you know, the MPs are only discovering things that Malaysians have been living for years.
24:06And been telling them for years.
24:07And have been telling, experiencing and so forth.
24:09And they were mocked for putting out this report.
24:13But I think this is a very important process because we have it documented in a parliamentary process which highlights
24:20it to the highest levels of policymaking, the seriousness and urgency of this issue.
24:26It needs to be addressed by, you know, people in power, people in government.
24:30And therefore, this process was necessary.
24:32One, the second is that when we look at this issue as a consumer, what can we do?
24:39And we're looking at remedies that are being proposed right now.
24:41For example, you mentioned the reset framework.
24:43Is that going to work?
24:45The honest truth is we don't know.
24:48They have announced that they're going to pilot the Medi-Assas product by the end of this month.
24:54And it will go on for a few months until October.
24:57But the issue is how do you pilot insurance product?
25:02It's not about how many people sign into the product.
25:05And by the way, I'm going to sign in.
25:07I'm curious too.
25:08Into Medi-Assas Flexi, the more expensive one.
25:12Because we want to find out what the success look like for these products.
25:17So success, in our opinion, is going to be when you're able to claim against the insurance coverage.
25:24Typical insurance product says you have to wait two months, three months, six months, two years before you can claim,
25:32right?
25:32That's the typical insurance product.
25:36For this base MHIT, this Medi-Assas, are you going to be able to claim immediately?
25:42Is it immediately?
25:43Once we sign in, is it going to be successful?
25:46Because at the end of the day, this is still being managed by the ITOs themselves.
25:50It's still business.
25:51It's still business.
25:52And are you going to be pre-screened before you go for this product?
25:57Oh, for existing illnesses.
25:58Yeah, for existing non-comical diseases.
26:01If you have hypertension, if you have diabetes, surely you want to know before you sign on to that product.
26:09And if you do, does that mean your premiums will no longer be as advertised?
26:13Because a person with diabetes and hypertension together is a much higher risk profile compared to somebody who doesn't.
26:21And therefore, they should be paying more premium.
26:23But it's also to ensure that when you have time to claim against your insurance coverage, you can be successful.
26:31And I want to say this, Melissa, I want people to get insurance.
26:35I want people to be covered and protected from financial catastrophe.
26:39But we want to make sure that the insurance coverage works.
26:42The protection that is promised delivers.
26:46People are paying decades into insurance products that they've never utilised.
26:51And then the first time that they're going to utilise, they find out they cannot or they're not successful or
26:58won't be covered.
26:58So imagine how that feels.
27:00If that was to happen with the base MHIT or the MediAssas, then it's a failure of that product.
27:07So success should be that we're able to claim for the protection we need.
27:12We're able to get covered with the diseases that's covered.
27:16But most importantly, we're able to deliver on what is promised under that.
27:23And I'm looking forward also to the issue of protecting older people.
27:26Yes, above 60.
27:28Above 60 years old, we find that the insurance policy premiums are higher.
27:32They cost more.
27:34These are people who insurance and takaful organisations don't want to touch because they're considered high risk.
27:41Right now, any product that is coming out that is being proposed should prioritise those above the age of 60
27:49because we are an ageing nation and we need to ensure that they get protected.
27:53Well, I hope you tell us the results of your findings.
27:56I hope so too.
27:58Thank you, Aslo, for helping us unpack this report.
28:01I appreciate your time.
28:02That's all the time we have for you on this episode of Consider This.
28:05I'm Melissa Idris signing off for the evening.
28:07Thank you so much for watching.
28:08Good night.
28:09Good night.
28:09Good night.
28:10Good night.
28:12Good night.
28:14Good night.
28:21Good night.
28:22Good night.
28:23Good night.
28:24Good night.
28:25Good night.
28:25Good night.
28:25Good night.
28:25Good night.
28:25Good night.
28:25Good night.
Comments