A SHARP escalation in medical insurance claims in Malaysia is being fuelled primarily by hospital supplies and services, which now account for nearly three-quarters of inpatient costs, according to a World Bank report that warns of growing inefficiencies and long-term sustainability risks in the private healthcare system.
The analysis highlights a widening imbalance between surging claims and slower premium growth, alongside evidence that a substantial share of hospital admissions could be avoided, raising concerns about overutilisation and systemic cost drivers.
“These charges accounted for 70% of total costs in inpatient Medical and Health Insurance/Takaful (MHIT) claims,” the report reveals.
Hospital supplies and services (HSS) encompass consumables, laboratory testing and the use of medical and diagnostic equipment such as scanners and X-rays.
“Evidence suggests that its share is increasing. Across all hospitals in the centralised MHIT database, HSS represented 70% of total charges in 2022, increasing to 72% in 2023 and to 74% in 2024.”
The findings, contained in the World Bank report titled “Cost Drivers in the Malaysia Health Insurance and Takaful Sector: A First Look at the Centralised Claims Database”, point to structural weaknesses in cost management and care delivery.
“Alarmingly, our analysis shows that a large share of inpatient episodes are potentially avoidable.
“The share of admissions due to ambulatory care sensitive conditions, which include diseases such as diarrhoea and gastroenteritis that can be managed at lower levels of care, but also ischemic heart disease and renal failure that can be prevented with longer-term strengthening of preventive and primary care, was 23% in 2024,” The Star reported it saying.
Such trends suggest the presence of moral hazard within the system, as insurance products heavily weighted towards inpatient care may inadvertently encourage unnecessary hospital admissions.
Beyond utilisation, rising costs per claim represent the second-largest contributor to overall cost growth at 25%, while claims inflation has surged to 21.6%, significantly outpacing premium inflation of 13.2%.
This divergence underscores mounting pressure on insurers and raises concerns over the long-term viability of private medical coverage.
The report noted that part of the recent surge may be attributed to post-pandemic effects, as patients return for previously deferred treatments, though these pressures are expected to moderate.
To address affordability and curb excessive use, the World Bank proposes the introduction of a standardised base MHIT plan with defined annual limits starting at RM100,000 and automatically increasing to RM150,000.
“The annual limits of the base MHIT plan, which is set at RM100,000 and automatically adjusts upwards to RM150,000, would be adequate to cover 99% of treatment episodes,” the report recommended.
The report also draws attention to inefficiencies in hospital billing structures, noting that largely unregulated charges for supplies and services, which make up between 70% and 74% of total costs, may be prone to overuse.
It suggests a phased shift towards diagnosis-related group payment models to improve efficiency, alongside reforms to provider networks, including tiered hospital systems and differentiated co-payment arrangements to enhance transparency and align care with best practices.
Officials stress that addressing the surge in healthcare costs will require coordinated action across insurers, healthcare providers and regulators to ensure financial sustainability while maintaining access to care. - April 29, 2026
