KUALA LUMPUR, August 18 — Medical professionals are the driving factor in determining the size of hospital medical bills for patients, said the Association of Private Hospitals of Malaysia (APHM).
APHM board member Dr Anwar Anis highlighted that doctors are key influencers behind the variation in medical costs between out-of-pocket (OOP) paying patients and those covered by insurance, with many aiding OOP patients to trim down medical costs.
“There is a differentiation between inpatient and outpatient pricing. But what drives the difference in the bill size to the patient is actually the medical professional.
“We need to close that gap of understanding between the medical provider, the doctor, and the insurer,” Dr Anwar said at a forum on rising health care costs that was organised by the Federation of Malaysian Business Associations (FMBA) and Eximius Medical Administration Solutions (e-MAS) at Hospital Canselor Tuanku Muhriz UKM last July 26.
While hospitals impose a single charge, the approach varies based on payment method. Dr Anwar noted, “The hospital has one charge, but the doctor’s perception is if the patient is paying out of pocket, ‘I must help him save money.’ But if the insurer is paying for it, ‘I will do whatever is necessary without trying to manage the cost for the patient.’ That’s where the difference comes from.
“Unfortunately, that is the mindset. And that’s not just the doctor’s mindset, it’s also the patient’s mindset. And it’s partly because it is cashless. The patient also feels, ‘I have been paying my insurer for the last 20 years, please doctor, do whatever you need to do’.
“But a cash-paying patient will say, ‘Is there options, other alternatives? Is there a cheaper MRI outside? I will take the trouble, I will drive out half an hour, I will pay for the MRI myself, and come back to this hospital’.
“And that is what drives that difference. It is not a structure of the business, unfortunately, it is, out of a desire to differentiate who’s paying for it,” said Dr Anwar.
This mindset shared by doctors and patients towards insurance is detrimental to the patient and is termed the “buffet syndrome” by Mark O’Dell, chief executive officer of the Life Insurance Association of Malaysia (LIAM) and a member of the forum.
O’Dell defines the buffet syndrome as consumers’ sense of entitlement when making claims on their purchased insurance policies. Patients often believe they can extract as much as possible from the “big financial institution that is off somewhere allegedly making hundreds of millions of dollars”. However, they overlook the fact that insurance companies’ cumulative payouts will eventually impact their premiums.
O’Dell said that all insurance contributions go into a fund, and when contributions fail to sustain the fund, premium payments must rise, which ultimately disadvantages the patients.
O’Dell further clarified that to remain competitive, Malaysian insurance companies offer schemes covering 100 per cent of hospital expenses. This, combined with patients’ excessive consumption and unchecked private hospital pricing, can drive inflation upwards.
“Our studies showed that 60 to 70 per cent of the inpatient bill was from the hospital. The doctors’ charges are all regulated. The inflation rate attributed to the doctors’ cost and anesthesiologists’ cost, et cetera, et cetera were very nominal, and you can only see a little bit of bumps when the government raised the fee structure.
“But when it comes to other things like other hospital services, diagnostic et cetera, they’re not regulated. Some of them are at the mercy of uncontrollable costs, but otherwise, the private hospital is free to charge what the market will bear. And if the payor (the insurance company) is paying 100 per cent of the bill, it creates a situation where it can lead to higher inflation.”
Health Insurance Has 80 To 90 Per Cent Claim Ratio
Bank Negara Malaysia’s (BNM) financial development and innovation department director Lau Chin Ching discredited the notion that insurance companies reap substantial profits from medical insurance.
Lau said that insurance companies do not amass considerable profits from medical insurance due to its high claim ratio, typically ranging from about 80 to 90 per cent. This is in part due to medical inflation.
“Contrary to popular belief insurers are making lots and lots of money, they (insurers) do invest and make their money, but I think medical policy itself actually has a very high claims ratio, about 80 to 90 percent because of all this medical inflation.
“It’s basically like if you paid one ringgit of premium, and if the claims ratio is 90 per cent, it means 90 per cent of it is used to pay claims.
“There’s actually very little profit being made. And then you should still minus expenses by the company and so on. So, contrary to belief, the margins are not very high,” said Lau.
In short, the mix of excessive consumption and the misconception about highly profitable insurance firms discourages patients from prioritising a healthy lifestyle and preventive health care. Instead, many still lean towards the current reactive health care approach.
APHM Supports Co-Payment Structure
Dr Anwar expressed APHM’s support for a government-backed co-payment system, citing its potential to motivate patients toward better health practices and reduce disparities between out-of-pocket and insured patients’ fee structures.
“I think as, APHM, we actually support to say that if the government one day says no more 100 per cent payout with co-payment, we are happy. We are happy because it will curb some of these differences that are there between a self-pay patient and an insured patient. And it also puts back some responsibility in the hands of the patient.
“Now the patient will think twice before deciding to have a lifestyle where, although he knows he’s got risk [and has already] been assessed for cardiovascular risk, doesn’t bother because, ‘Okay, I’ve got insurance, and when I have a cardiac bypass for RM80,000, my insurance is paying for it, but if I have to pay 20 per cent of that, RM16,000, I will actually take some preventive steps.’
“That’s something either Bank Negara or the government must decide, look, insured or not, that’s the co-payment. I think that will fundamentally change patients’ behaviour.”
Lau, representing Bank Negara, noted that the bank has floated a consultation paper to gauge insurers’ receptiveness to co-payments in existing insurance plans. The aim is to offer consumers a choice and follow findings from other nations that show such schemes could save 20 per cent to 80 per cent on premiums annually or in the future.
“We want every company to provide a choice to their consumers. And we find that, based on our research, a lot of the, I would say, relatively younger population, as well as the savvier ones, who want to take charge of their own health and their financial management, they understand that actually over consuming these medical services is not a good thing for them in the longer run.
“They will have to bear the cost of it later on, especially when they need the insurance the most. Some studies in other countries have shown that if you do have a co-payment medical policy, you may actually save premiums of up to 20 to even 70, 80 per cent per annum, or in the longer run.
“Of course, that still requires not just that we will introduce that and everything [and it] will solve the problem. It will still require a lot of the parts of the whole ecosystem to work together, and that’s why Bank Negara also strongly supports the national Health White Paper that’s been passed in the Parliament as well recently.”
Lau underscored that co-payments could also promote rewarding healthy behaviours among the insured. Currently rare due to tight health insurance margins, such incentives could become more feasible, enabling insurance companies to have more capital to reward their insured for maintaining good health.
“You have seen it in some other sectors. For example, a motor policy, Takaful especially, sometimes you will actually receive a letter at the end of the year that says, ‘For your good driving behaviour and there is actually surplus in the pool, you are able to get back some cash reward’.
“In short, I would say the concept is not [im]possible. And I hope that with all the big measures that we’re introducing, regulations as well as what MOH (Ministry of Health) is trying to do on the ecosystem, then there’ll be more space for insurance to provide such feedback.
“So for now, what I can see is that a lot of it rewards good behaviour for preventative care, for a good health lifestyle.”
Bank Negara Recommends Itemised Billing To MOH
Lau also indicated that Bank Negara had suggested to the MOH that hospitals should disclose itemised bills. This step would enhance patient awareness of surgical costs and promote transparency and accountability in the private health care sector.
“We did recommend to a certain extent to MOH [we said,] ‘Can you get the hospitals to publish the itemised billing?’ But sometimes, itemised billing is also very difficult for consumers to understand. I think it’s important to understand that there needs to be a lot of transparency.
“Apart from medical itemised billing, we’re also thinking like some countries, they actually publish, for example, let’s say a knee surgery in a hospital of this class. How much it would cost if you do this and this. And then they’ll publish for different types of hospitals and so on.
“For the consumer, they probably understand it better, not so much of an itemised billing, but, ‘Oh, if I go to this kind of hospital and I do this kind of surgery, this is how much I should expect.’ And at the same time, the insurance can also have a benchmark.
“And in a way, it could help provide education, as well as some level of transparency and some level of discipline to the industry.”
O’Dell supplemented this by suggesting hospitals adopt a diagnosis-related grouping (DRG) pricing method, akin to package pricing. DRGs are utilised to categorise patients with similar diagnoses, aiding in managing hospital expenses and determining reimbursement rates.
O’Dell said it would be a large step forward for the private sector to adopt DRGs for cost control, as it could significantly curb medical inflation and promote a more structured pricing approach.