KUALA LUMPUR, June 26 — MPs on both sides of the divide have excoriated insurance and takaful operators (ITOs) and private hospitals for surging health insurance premiums and hospital bills.
Ten legislators participated in a comprehensive debate on the Public Accounts Committee’s (PAC) 1,999-page report on health insurance premiums, private hospital charges, and the impact on public health care that was tabled in the Dewan Rakyat yesterday.
Instead of touting the government’s Reset initiative – which merely seeks to create a new private base medical and health insurance/takaful (MHIT) product – most of the MPs demanded legislative and regulatory reform to fundamentally change the entire private health care ecosystem.
Some lawmakers trained their guns on insurers for hiking premiums drastically for senior citizens especially at a time when they needed protection the most, despite having been loyal customers for more than a decade.
Others accused private hospitals of “creative” charging via cross-subsidies and charging bigger hospital bills for insurance patients with guarantee letters (GL) than cash-paying patients.
“From the PAC’s report, we clearly get the message – why have the people’s health turned into an industry from which to generate profit?” Afnan Hamimi Taib Azamudden (PN-Alor Setar) told the House during the debate.
“Why take advantage of people in need? People who don’t have money go to government hospitals, whereas those who do buy insurance, but the cost of insurance goes up. Are we now allowing those who do business in medicine to do business as they like, raise prices as they like, taking advantage of sick people who need treatment?
“This is not right. I believe that both the government and Opposition share the same sentiments.”
The PAS MP slammed Bank Negara Malaysia (BNM) for failing to control the costs of health insurance and “high” private hospital charges.
“Pasir Gudang [MP] mentioned just now that private hospitals make billions of ringgit in profit. Those profits should be channeled to government hospitals to address their weaknesses. Why aren’t the relevant government agencies looking into this?” said Afnan Hamimi.
Chong Zhemin (PH-Kampar) supported the PAC’s recommendation for the establishment of a new independent regulatory structure for consumer protection in private health care and medical insurance.
“We cannot allow an ecosystem that involves private hospitals, insurance companies, drug suppliers, medical device suppliers, and patients to operate without sufficient price regulation,” he told Parliament.
“In any free market with information asymmetry, consumers are the weakest party. In the health sector, patients are not ordinary consumers. Patients don’t buy treatments like vegetables in a market. Patients are scared, sick, and desperate. In this situation, they don’t have true power to compare prices, negotiate, or reject charges.”
Chong backed the PAC’s recommendation for private hospitals to transition from a fee-for-service to diagnosis-related groups (DRG) reimbursement mechanism, but stressed that the latter must be based on accurate data. The Ministry of Health (MOH) must also be empowered to control private hospital charges beyond doctors’ fees.
The DAP lawmaker also cited the lack of an effective complaints channel for insurance or hospital billing disputes, noting that in such cases, patients are sometimes referred to their hospital, which then refers to their insurer that subsequently refers to the patient’s policy.
“In the end, patients are caught in the middle,” said Chong. “When people are sick, they can’t be expected to be a lawyer, accountant, or insurance expert to defend their rights.”
Abdul Latiff Abdul Rahman (PN-Kuala Krai) described the matter as going beyond medical insurance premium hikes, but a much worse issue about a “private health care ecosystem that operates without price transparency, standard billing, or sufficient regulation”.
As a result, the people face a three-pronged burden: hospitals that practise “creative charging”, an insurance industry that shifts risk, and a government left behind in policymaking.
“Bank Negara Malaysia regulates the insurance industry, but lacks the legal instruments to control the root cause of premium hikes and an increase in the cost of treatment in private hospitals,” he told the Dewan Rakyat.
The PAS MP cited the PAC’s report about a “manipulation” of drug prices to cross-subsidise other operational costs in a hospital, besides price discrimination between GL and cash or pay-and-claim patients. “So buying protection actually leads to a punishment in prices.”
As for the insurance industry, Abdul Latiff noted that ITOs offer lower premiums to new young customers in a closed pool as older and sicker policyholders, who have been faithfully paying premiums for years, exit the pool when their premiums spike.
“Actually, it should be that the longer you hold a policy, the cheaper you’re charged,” he said. “But senior citizens are forced to cancel their policies at a time when they most need it.”
Investment-linked policies (ILP), on the other hand, transfer risk to consumers, most of whom don’t understand fund performances and complex contracts. “Transparency isn’t a choice, but an obligation.”
Abdul Latiff pointed out that the main cause of medical inflation isn’t doctors’ fees, which are regulated and haven’t been revised since 2013, but from the costs of medicines, equipment, lab diagnostics, utilities, and other operational costs in a hospital.
“Blaming doctors may be popular, but it’s inaccurate and doesn’t solve the problem.”
He said the PAC’s “uncomfortable” answer to increasingly expensive health insurance and shrinking protection was a “free-market mechanism without standardised prices or a regulator with comprehensive powers that has failed to maintain stable and fair premiums”.
Abdul Latiff called for the establishment of an independent regulatory body that can standardise hospital billing, evaluate justifications of charges, and coordinate insurance premiums.
He also asked BNM how many ITOs practise a closed pool, why this practice is allowed to punish loyal customers with higher premiums, and if the central bank would prohibit closed pools and mandate wider risk pools instead, besides moderate premium adjustments.
V. Sivakumar (PH-Batu Gajah) observed that Malaysians are increasingly asking if they can pay for treatment in private health care facilities, whether their medical card suffices, and if they can afford to continue paying for health insurance.
“This is the paradox that’s happening right now,” Sivakumar told Parliament.
“In this issue, we’re not pointing fingers at one party alone. Health insurance premium hikes, private hospital charges, and pressure on the public health care system are an issue of an ecosystem involving private hospitals, insurance and takaful companies, the MOH, Ministry of Finance (MOF), and Bank Negara Malaysia (BNM).
“But we must understand that premiums aren’t the root cause; they’re caused by rising costs of treatment, medicines, devices, technology, and procedures. When treatment costs increase, insurance claims also rise. When claims rise, premiums also go up. People finally face difficulties in maintaining health protection.”
Sivakumar cited the Galen Centre for Health and Social Policy’s previous statement that 70 per cent of a hospital bill comprises unregulated charges.
The DAP MP noted that Malaysia faces 15 per cent medical inflation, much higher than China and Singapore at 8 per cent, Australia at 5.1 per cent, and Japan at 0.9 per cent.
“If insurance companies find that their health insurance products are no longer financially sustainable and cause continued losses, it’s not impossible that they will reduce their offerings, withdraw products from the market, or reduce protection,” said Sivakumar.
“If this happens, people will lose access to health protection from the private sector and more patients will totally rely on public hospitals, therefore increasing the government’s financial burden and pressure on public health care facilities.”
P. Prabakaran (PH-Batu) highlighted complaints he received from a few policyholders about a significant hike in their premiums after using insurance to cover hospital treatment.
“Does the usage of benefits by policyholders affect premiums? If yes, how big is the impact and was this issue clearly explained when policies were sold to them?” asked the PKR lawmaker.
“From a person’s perspective, ‘If I have been paying for years, why is it that when I utilise the protection, I must pay more later.”
Shamsulkahar Mohd Deli (BN-Jempol) said health insurance premium hikes of between 40 and 70 per cent has affected senior citizens especially, forcing them to cancel their unaffordable policies.
“I saw this with my own eyes when a retiree faced problems in obtaining medicines because their GL was insufficient. These problems are arising in private health care facilities,” he told the House.
The Umno MP further questioned whether the government was planning to amend the Private Healthcare Facilities and Services Act 1998 (Act 586) to control a “culture of creative charging” by private hospitals.
He cited the PAC’s findings about the unbundling of charges for basic items like clinical waste disposal, pillow covers, and alcohol swabs that should have been included in the room charge, besides higher charges for GL patients than cash or pay-and-claim patients.
Hassan Abdul Karim (PH-Pasir Gudang) urged the government to raise taxes on private hospitals that make a huge profit from medical tourism, noting that Penang recorded 570,000 foreign patients last year, with revenue exceeding RM1.1 billion.
“While government hospitals face a lack of funding and staff shortages, the private sector continues to enjoy big profits.”
PAC member Zahir Hassan (PH-Wangsa Maju), who wrapped up the debate, said the committee heard testimony from not just BNM, MOF, and MOH representatives over the course of its inquiry from February to August last year, but also insurance industry representatives, insurance agents, and private hospital representatives.
The PAC even held public hearings in Penang and Kuala Lumpur that were attended by 800 members of the general public.
“Honourable Members, we cannot continue to kick the can down the road in the issue of health care financing. Long-term structural reform through the Reset programme and DRG is one of the only ways out to cut the chain of medical inflation in the private sector,” Zahir told the House.
“Failure or delay of this agenda will trigger a nightmarish domino effect. People who are forced to cancel their insurance will switch to government hospitals, therefore paralysing the capacity of the public health care system that functions as a social safety net.
“Health care is a human right. Its management by any commercial entity cannot be solely driven by greed or profit, but must instead be centred on value-based health care for the wellbeing of Malaysians.”
