LETTERS: The RESET strategy — a coordinated reform framework to overhaul the private healthcare system and curb soaring medical inflation — was announced by Bank Negara in June.
It needs a serious reassessment.
Short for Revamp, Enhance, Strengthen, Expand and Transform, RESET comprises five thrusts and 11 initiatives.
RESET includes a basic, standardised medical and health insurance/takaful (MHIT) product and an emphasis on price transparency for medicines and procedures.
It also proposes building a common digital-health infrastructure to enable national electronic medical records, and a public-private hybrid care model.
Most importantly, it envisages moving hospital payments away from the often-costly fee-for-service (FFS) model towards diagnosis-related group (DRG)-based bundled payments.
Reform is needed as medical inflation, which has gone unchecked for years and is estimated to be at least 15.6 per cent and as high as 18 per cent, continues to erode affordability and access, especially to private healthcare services.
In comparison, Malaysia’s headline inflation averaged 1.4 per cent for the first seven months of 2025.
The country’s double digit medical inflation rate is among the highest in the Asia-Pacific region.
Reset faces at least six shortfalls that could blunt its impact on medical inflation, or even cause it to fail in execution.
THE legal pathway remains unclear:
As it stands, Malaysia cannot legally implement or impose a DRG regime for the private healthcare system.
Act 586 (Private Healthcare Facilities and Services Act 1998) will need amendments to mandate DRG data submission, define payment rules across private health providers, and even permit moving away from itemised billing towards bundled packages.
It is unclear whether an amendment is being prepared and, if so, whether thorough consultations and regulatory-impact assessments (RIAs) will be carried out.
ROLLING out DRG without robust local cost data invites failure
DRG can curb “do-more-bill-more” behaviour — but only when calibrated with high-quality, Malaysia-specific cost and clinical data and with proper risk adjustments.
Without such data, the system risks ineffectiveness, gaming, or outright failure.
TRANSPARENCY is necessary but lacks ability to address inflation
United States evidence suggests price transparency can reduce prices for “shoppable” services (for example, lab tests and imaging).
However, transparency has limited effects on total health spending because many services are not shoppable and tools are under-used.
In Malaysia, 60 to 70 per cent of a private hospital bill (services, consumables, investigations) is unregulated.
Patients are often unlikely to know, before admission or outpatient treatment, which medicines they will require.
That limits the usefulness of requiring display price lists for drugs in advance.
It is also highly unlikely for those undergoing inpatient care to fill their prescriptions outside of the hospital where they are being treated.
BASE MHIT product will likely have low participation
RESET’s base MHIT aims to provide “standardised premiums” with “essential” coverage, supposedly targeting the middle class.
This is similar to what was attempted under Perlindungan Tenang, which provided insurance and takaful products covering events like death, accidents, or fire for lower income recipients.
However, MHIT products are more costly and broadening the risk pool will be critical.
Tenang depends heavily on government subsidised vouchers, while this base MHIT product will not likely have that benefit.
GENERAL practitioners (GPs) as gatekeepers may face opposition.
Reset proposes GPs as the first point of contact, curbing self-referral to specialists which might be unnecessary and inflate costs. This is a good and sensible idea.
But for gatekeeping to work, the problems plaguing private primary care must be addressed.
For example, consultation fees have not kept pace with costs in many practices (this claim needs a supporting source if kept precise), and statutory itemised-billing requirements would conflict with bundled DRG payments.
ABSENCE of national health insurance
In many countries that properly use DRGs, the existence of a national health insurance framework as a single payer is a powerful factor, especially in imposing DRGs and managing costs.
Malaysia does not have this advantage.
Instead, it has multiple payers from government to insurers, takaful and individuals.
Having DRGs without national health insurance will cripple their ability and effectiveness.
A joint ministerial (Health Ministry, Finance Ministry and Bank Negara) committee to oversee the implementation of Reset is a positive step.
However, execution hinges on consistent cross-ministry alignment, disciplined timelines, and strong technical capacity in a multitude of areas, especially health economics, even at the hospital level.
Last year’s policy shifts — for example the emphasis on co-payments and deductibles — together with interim controls on premium adjustments illustrate the political sensitivity of reform.
Even with these measures, insurers, takaful operators, private hospitals and clinics may not fully align with Bank Negara’s modelling or projections.
It is important to recognise that. There is a limit to what Bank Negara can do in healthcare.
Unfortunately, payers such as insurers and third-party administrators are starting to impose limits to coverage that might interfere or affect the standard or level of care as determined by the healthcare provider such as restricting reimbursements to generic or biosimilar medicines.
Reset is the most serious attempt in years to tackle the structural drivers of Malaysia’s medical inflation. We need it to succeed.
However, it should not be a race to the bottom where we compromise on standards, care and quality, in the process of trying to make healthcare cheaper.
AZRUL MOHD KHALIB
Chief executive officer , Galen Centre for Health and Social Policy
The views expressed in this article are the author’s own and do not necessarily reflect those of the New Straits Times
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