BANK NEGARA Malaysia (BNM) has called for greater efforts to expand the availability of affordable healthcare options, suggesting that incentivising the growth of not-for-profit hospitals and increasing the supply of mid-tier hospital beds can help alleviate the rising costs of medical insurance and healthcare services.
In its 2024 Annual Report released today, the central bank pointed to a variety of strategic initiatives aimed at addressing the surge in medical inflation, highlighting the importance of transparency and competition within the healthcare sector.
BNM suggested that private hospitals should be required to publicly display the prices of pharmaceuticals and provide clear price ranges for common services, enabling policyholders to compare costs and promoting healthy competition across the medical industry.
Ministry of Health’s (MOH) ‘Rakan KKM’ could provide a solution to the mounting financial pressure on individuals seeking to maintain access to health coverage
The report outlines the potential benefits of scaling up the Ministry of Health’s (MOH) ‘Rakan KKM’ initiative, which offers affordable ‘premium economy’ services at selected public hospitals for elective outpatient, daycare, and inpatient treatments.
This initiative could serve as a benchmark for prices, providing cost-effective alternatives for medical and health insurance/takaful (MHIT) policyholders who are struggling with rising premiums.
BNM stressed that this initiative, in collaboration with key stakeholders—including the Ministry of Finance, the Ministry of Health, insurers and takaful operators (ITOs), private hospitals, clinics, and consumer groups—would provide a much-needed solution to the mounting financial pressure on individuals seeking to maintain access to health coverage.
Price Transparency Crucial for Tackling Medical Inflation
In a further push for greater transparency in medical costs, BNM proposed that private hospitals publicly display the retail prices of medications and offer price ranges for frequently used healthcare services.
This would allow policyholders and insurers to more easily compare costs across different healthcare providers, fostering a more competitive and efficient market.
To help manage these price fluctuations, the central bank also recommended that the MOH conduct a regulatory and legislative review of the current oversight of private hospitals, particularly in how inflationary adjustments to prices are calculated.
One key mechanism suggested by BNM for managing healthcare costs is the implementation of a Diagnosis-Related Group (DRG) payment system.
This would replace the current fee-for-service model, where hospitals are reimbursed for each individual service provided. Under the DRG system, patients would be grouped according to their diagnosis and medical needs, with each group assigned a predetermined payment amount.
This approach would incentivise hospitals to be more efficient while providing greater price predictability for both patients and insurers.
Improving Electronic Medical Records to Reduce Costs
Another critical area for reform highlighted in BNM's report is the enhancement of electronic medical record (EMR) interoperability across hospitals.
By improving the accessibility and portability of medical data, EMR systems would help address the current fragmentation of health records across various healthcare facilities.
This would not only improve the quality and continuity of patient care but also reduce unnecessary diagnostic tests and procedures, which, in turn, would drive down healthcare costs in the long term.
BNM pointed out that, as of 2023, a total of 7.7 million individuals were covered under MHIT, and Malaysia’s overall healthcare expenditure reached RM84.2 billion that year.
The amount funded by MHIT has grown significantly over the past two decades, from RM0.96 billion in 2003 to RM6.75 billion in 2023, underscoring the increasing reliance on medical insurance to cover escalating healthcare costs.
However, BNM also cautioned that the temporary measures introduced in December 2023 to ease the immediate impact of premium adjustments could not continue indefinitely if medical inflation persists.
“It is therefore imperative that key stakeholders work together to implement more comprehensive health reforms to tackle the root causes of medical inflation,” the report stated. – March 24, 2025
