Greater public transparency on the various costs of medical procedures is needed to promote medical and health insurance (MHI) as well as takaful sustainability, as well as to manage claims inflation in the long term, says Bank Negara Malaysia (BNM).
In its Annual Report 2019, BNM said this can be achieved through the publication of reference benchmark costs for common medical procedures, enabling patients – particularly those who are self-paying – to make well-informed decisions on their desired level of healthcare service and its associated costs.
However, in the case of insured patients who do not have to pay out of their own pockets, the costs are less likely to factor into their healthcare decisions, it said.
“In order to encourage a collective responsibility to ensure affordable access to MHI protection for all, the adoption of co-payments or deductibles in MHI plans which can give policyholders more control over the costs of their healthcare decisions is also important,” the central bank said.
These changes, which have also been observed in other countries such as Singapore and Australia, can have an important effect in capping the persistent increase in healthcare costs through better market discipline.
BNM also noted the need to facilitate the standardisation and collection of data that can be used by the medical and insurance as well as takaful industries to increase efficiency, reduce waste, prevent fraud and improve product design.
This calls for the application of a consistent diagnostic classification standard and standardised formats for billings to increase cost transparency, among others, it said.
“The digitalisation of medical records and integration of health information systems also have the potential to generate significant operational efficiencies and contribute towards moderating medical claims inflation,” BNM said.
Malaysia’s cost of medical care has been reported to be above the global average and is among the highest in Southeast Asia amidst growing demand for MHI.
In the report, the central bank said MHI is a significant and growing product segment, accounting for 15.5 percent of total gross premiums in the life insurance and family takaful sector in 2019.
Between 2016 and 2019, MHI claims grew by 11.6 percent a year, which had increased pressure on the underwriting performance of MHI providers as rising claims continued to outstrip the increase in premiums.
Over the same four-year period, MHI premiums grew by an average of 9.5 percent a year.
During the period, 96 MHI products were repriced, affecting 4.5 million policies.
This is a cause for concern as more expensive premiums make coverage increasingly unaffordable to many, said BNM.
Factors driving MHI claims inflation include a longer-living population as well as better and more advanced medical care.
Besides that, anecdotal accounts of healthcare providers who engage in price differentiation and charging higher if a patient is insured, are also driving unwarranted increases in medical costs.