Malaysia is grappling with the challenge of regulating the costs of private hospital services, as public discontent escalates over rising medical expenses. Despite health insurance being regulated by Bank Negara Malaysia, private hospital charges remain largely unchecked, except for doctors’ fees under the Private Healthcare Facilities and Services Act (PHFSA) 1998. The Ministry of Health (MOH) admits that while no policy decision has been made on this pressing issue, controlling healthcare inflation is part of ongoing health financing reforms aimed at promoting value-based healthcare in the country.
The issue gained national attention after Mark O’Dell, CEO of the Life Insurance Association of Malaysia (LIAM), publicly shared his RM18,837.55 bill for a minor hernia surgery, prompting calls for regulation. O’Dell proposed the adoption of Diagnostic Related Groups (DRG), a system where hospitals receive fixed payments based on the complexity of cases rather than itemizing each charge. This suggestion has sparked a broader debate on whether such models could bring about consistency and transparency in private healthcare billing, ultimately curbing exorbitant costs.
Economic Feasibility of Reform
The Association of Private Hospitals Malaysia (APHM) emphasizes that a successful transition to DRG or value-based payment models hinges on the establishment of a national healthcare financing system. Recent trends indicate that the rising costs of medical equipment and drugs, combined with a medical inflation rate of 12.6% last year, make the current private healthcare model increasingly unsustainable. Nevertheless, APHM asserts that Malaysian private hospital procedures remain the cheapest in the region, adding a layer of complexity to the cost regulation debate. The question remains: can implementing a national financing system along with new payment models like the DRG ensure both affordability and quality in private healthcare?
Against the backdrop of these economic challenges, Bank Negara Malaysia and LIAM argue that full-coverage health insurance products are no longer sustainable due to high claim inflation rates. This scenario has led to the imposition of a minimum 5% copayment mandate on all new health and medical insurance products as a means to curb unsustainable claims. While this measure aims to reduce financial strain on insurers, it also emphasizes the urgent need for systemic reforms to address the core issues plaguing the private healthcare sector.
Need for Systemic Reforms
Malaysia is struggling to manage the escalating costs of private hospital services amid growing public discontent over rising medical expenses. Although health insurance is regulated by Bank Negara Malaysia, private hospital charges remain mostly unregulated, with only doctors’ fees overseen under the Private Healthcare Facilities and Services Act (PHFSA) 1998. The Ministry of Health (MOH) acknowledges that no policy decisions have been made on the issue, but it is part of ongoing health financing reforms aimed at promoting value-based healthcare.
The issue came to the forefront after Mark O’Dell, CEO of the Life Insurance Association of Malaysia (LIAM), revealed his substantial RM18,837.55 bill for a minor hernia surgery, leading to public outcry for regulation. O’Dell suggested adopting Diagnostic Related Groups (DRG), a system where hospitals receive fixed payments based on the complexity of cases rather than itemizing each charge. This proposal has ignited a broader discussion on whether such models could bring consistency and transparency to private healthcare billing, potentially helping to reduce exorbitant costs.
