In the previous article, we called upon the government to implement the National Healthcare Financing Scheme (NHFS) to comply with Universal Health Care (UHC).
The NHFS needs a supporting legal framework, a statutory National Health Fund (NHF), and monetisation of KKM hospitals and clinics’ assets. The funds would be used to improve hospital services.
Monetisation is done through a corporate exercise, and the hospital’s operational efficiency will be measured using financial parameters.
Technically, UHC is non-existent in the private health care system in Malaysia, and among the public hospitals, low-cost accessibility is good but the logistical challenge that prevents timely diagnosis and treatment made it not in compliance with the definition of UHC.
Under the UHC concept, with NHFS implementation, the population would have equal access to private and public clinics and hospitals within their geographical location.
This will increase private clinics and hospitals’ earnings.
Assurance Programme As Components of NHFS
The NHFS programme has several components. It involves the setting up of an organisation (National Health Fund) with its regulatory framework that manages it as a statutory fund.
The fund collects and pools the assurance contribution (premium) received from payors. The second component of NHFS is corporatising selected government hospitals and monetising its services and assets through bonds and sukuk.
The raised capital shall be used to enhance the hospital’s various services. The third component is managing members’ (contributors) benefits and the fourth would be realligning MOH roles as NHFS regulators and reducing its role in managing corporatised hospitals.
MOH should be a standard-setting entity, develop DRG (Diagnosis-Related Group), and review its charges periodically. The previous article explains more about DRG is available on the CodeBlue website.
There is a need to expedite the implementation of NHFS to ensure Malaysia’s health care system meets UHC standards. The government’s financial position is quite alarming, and tax revenue alone is inadequate to finance health care services.
The government needs to shift the funding of health care services from tax revenue to a non-tax direct contribution.
Taking into account the assurance industry expertise, the government should consider allowing the Assurance (insurance and takaful) industry to initiate and operationalise the National Health Assurance (NHA) programme and let EPF set up and manage the National Health Fund.
The NHA programme has to be an industry-wide initiative. EPF will be the fund manager and the funder for the NHA programme.
The Assurance Industry Should Take The Lead
The assurance industry has vast experience in doing incident-based pricing, excellent skills, and knowledge in financial management and investments.
The industry is highly regulated with strong internal governance mechanisms, which will protect the participants and payor interest. The industry employees have excellent skills and experience in product development, structuring, and membership management.
They also have sound knowledge of risk management and the development of reassurance programmes. There would be a very short learning curve if the assurance industry were allowed to initiate this programme.
The industry has the necessary capital to invest in resources to start the programme. Malaysia is not the only country that relies on the insurance industry to initiate a National Health Assurance programme.
It has been done by many countries around the world. Examples can be seen in the GCC areas and within the member countries of the European Union. Why would the industry invest in such a scheme?
Benefits For Assurance Industry
While the assurance industry is doing the government a huge favor, the programme will benefit the assurance. They would get population claims data and use it to develop new products and offer top-up coverage above the baseline products.
Their original investment should be repaid within the first 24 months. The claims and operations costs would be fully covered by the National Health Fund (NHF).
The assurance industry that runs this programme would receive an administrative fee (typically a small percentage of the gross premium received by the NHF).
Typically, a National Health Assurance product offers a modest benefit amount. It is proposed that members in Malaysia receive a medical benefit of up to RM300,000. Those who want a larger benefit can purchase additional top-up coverage from NHF panel assurance providers.
In this approach, the NHF bears the claims risk for the first RM300,000, while the assurance companies bear the balance. The assurance company and the NHF may structure a co-insurance programme. This will enhance the assurance of businesses’ claims experience.
With such an approach, the assurance sector will improve its image among the public, assist the government in launching the NHFS, earn up to 2 per cent of management fees, and have the opportunity to sell its product at a lower risk rate.
In general, the assurance entity will have two revenue streams.
Migration To Government
Based on the assurance-driven NHA practices in other jurisdictions, company ownership will be gradually transferred to the government on a mutually agreed-upon timeline.
Before the transfer is completed, a care provider network, including hospitals and GP clinics, will be established.
The IT infrastructure will be set up and gradually enhanced to integrate the use of artificial intelligence to improve claims processing.
Expectation From The Government
In addition to setting the provision of supporting legal framework, the government (via MOH) must ensure that the DRG is implemented and enforced for all health care providers.
It is impossible to have a DRG-based pricing for 100 per cent of the illnesses within the next 12 months. As DRG is dynamic, perhaps DRG should be launched with 70 per cent of the pricing has been completed.
For now, the government should allow insurers to negotiate with corporate public hospitals based on business volume during the initial phase of implementation.
In the second phase, when the DRG structure is nearly complete, care providers should also include those from both corporate public and private hospitals.
With help from the insurers, the government should develop a population enrolment strategy for the programme.
Starting with a modest number of retirees and government personnel, the number of participating members should be gradually increased over time according to a prescribed strategy.
The government’s premium contributions to the National Health Fund, determined by the designated assurance entity, are linked to the number of enrollees. The government needs to provide an initial seed fund to operationalise the NHF.
Conclusion
There is an urgent need to ensure the nation’s health care system complies with UHC principles, to resolve the pricing conflict between insurance companies and private hospitals, and to address government financial constraints in strengthening public hospital services.
The assurers have the essential knowledge in operating health assurance schemes and should be entrusted to operate a pilot programme on behalf of the government.
The programme and its assets will be gradually handed over to the government within a mutually agreed time frame.
Dr Mohamed Rafick Khan, a reassurer and assurance industry consultant, is a trained physician with 12 years of experience in military medical services and over 22 years of experience in the assurance industry. He retired as the CEO of a multinational reinsurance company in 2019. Currently, he remains active as an independent international assurance industry consultant.
- This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.
