About 25 years ago, an elderly teacher told me that sometimes, to make a garden beautiful again, it is necessary to chop everything down, let young shoots sprout in a controlled manner, and the flowers will bloom according to how we shape and prune the trees.
This advice is very appropriate for the health insurance business in Malaysia.
Malaysia’s health assurance industry stands at a crossroads. For decades, the industry has been plagued by planned increases in health care costs to satisfy shareholders’ interests and a fragmented assurance pool due to intense competition.
Today, the health assurance industry is beset by losses. The health financing ecosystem is so complicated. Private hospitals are holding insurance companies at ransom, not only through their pricing, but also through their control over public perception and sentiment.
The health regulator has zero control over private health care pricing, and the financial regulator maintains a tight grip on the assurers. This pressures assurers and consumers alike.
Without strategic intervention, the sector risks widening affordability gaps, weakening sustainability, and the total collapse of the health care ecosystem.
If business pressures mount, assurance is forced to stop selling health products, and the entire health-related ecosystem will collapse.
There will be massive job cuts in the health assurance and TPAs industry. Some TPAs may have to close, while others will be forced into a merger and acquisition.
Private hospitals’ revenue will drop drastically, hospital stock prices will nose-dive, and shareholders will not see their dividends. Laboratory services and other paramedical services economies will be affected.
These are not hypothetical scenarios but imminent realities. The sun is setting fast. We need to take the bull by the horns, but not with a textbook theoretical approach, educational, or public relations measures.
The country needs a 360-degree reset that involves government, financiers, and providers. Addressing one without the other will not work.
Health Insurance Product Withdrawal
The impact of health insurance withdrawal on the nation’s economy is grave. Commercially, the private health care sector will be the worst hit.
Listed private hospitals’ share prices will plummet. They will face severe cash flow strain.
The public health care system will face a sudden, massive strain, due to a surge of patients migrating from private settings to government facilities.
Companies will be forced to absorb employees’ medical costs, potentially affecting workplace welfare. A political fallout cannot be ruled out. The total downside impact will be unmanageable.
During this period of chaos, hospitals may be forced to into cost-cutting measures and move into a new business domain by developing and selling their own medical financing products. They will be forced to take risks.
However, a positive outcome is that private hospitals will be forced to negotiate with insurers as equal partners.
Prevention Is Better Than Cure
Managing chaos is far more difficult and disruptive than creating it. It has many uncontrollable elements.
Therefore, it is in the best interests of all stakeholders to work together for a common goal on a win-win basis.
The solution lies in good foresight and a clear management plan. The country needs a clear, urgent, government-led health care financing blueprint for stakeholders, ensuring a shared vision for transformation that moves from reactive to value-based, integrated care.
This roadmap must be initiated by the highest office of the government, with a clear delivery timeline.
At the moment, this information is not available to the public. It must be a controlled total reset.
Private Hospital Charges Must Be Regulated
Specific laws must be initiated. A medical provision business must be differentiated from other forms of business. It is not a purely commercial business, but it has a strong social element.
While waiting for DRG implementation, interim measures must be put in place. Negotiated pricing benchmarks for acute and acute-on-chronic treatment must be established, and the costs of various medical procedures and drugs must be regulated.
Measures like price displays are useful, but unlikely to affect service costs. Unlike in American and European societies, we don’t expect public pressure to move the cost of private hospital services. Government intervention is necessary through regulation and corporate manoeuvring.
Health Assurance Providers Must Discontinue Services And Be Replaced By A National Consortium
The free market in the health assurance industry is the main reason for the current predicament. Underwriting flexibility, unrealistic limits, and a cashless payment system were created to entice consumers, and the private hospitals moved in and took advantage of the situation.
The assurance industry has given private hospital operators a “licence to slaughter” on a silver platter. Therefore, blaming private hospital operators per se is wrong. The Malaysian assurance companies must accept this and take appropriate corrective actions.
Competition must be controlled to a certain limit. It is proposed that a National Health Financing Administration (NHFA), initially jointly owned by government investment arms and assurance industry players, be formed quickly to roll out a National Contribution Fund and an assurance benefit scheme.
Public hospitals must be corporatised and placed under a single holding company, and must serve as service providers alongside private hospitals. The NHFA entity must be a full-fledged government corporate entity. Assurance companies can sell supplementary products to complement the NHFA schemes.
Be Realistic
In the current situation, making everyone in the health care financing ecosystem happy is an impossible task. We have to accept that, in the public’s best interests, we cannot make all stakeholders happy.
To a certain extent, it is a lose-lose reset where private hospitals and insurance companies have to give in to ensure more sustainable long-term economic benefits.
The days of unregulated profiteering are over. Fairness and transparency are today’s buzzwords. Don’t kill the goose that lays the golden egg.
Conclusion
Malaysia’s health insurance industry has reached a critical breaking point due to escalating private health care costs, fragmented risk pools, regulatory imbalances, and unsustainable competition.
The highest level tsunami warning has been issued. The tremors have been around for a while. It’s time to act.
Continued inaction could trigger widespread economic and social fallout, including insurer product withdrawals, job losses, hospital revenue collapse, and severe strain on public health care.
We call for a decisive, government-led total reset of the health care financing ecosystem, and we emphasise that managing an eventual collapse would be far more damaging than proactively restructuring the system.
We advocate regulating private hospital charges, treating health care provision as a socially sensitive sector rather than a purely commercial one, and replacing the free-market health assurance model with a national consortium through a NHFA model.
While acknowledging that such reforms will involve painful trade-offs and dissatisfaction among stakeholders, we would like to stress that controlled intervention, transparency, and shared sacrifice are essential to restore affordability, sustainability, and long-term stability to Malaysia’s health care system.
Dr Mohamed Rafick Khan 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 and 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.
