From Azrul Khalib
The RESET strategy, a coordinated reform framework to overhaul the private healthcare system and curb soaring medical inflation, announced in June by Bank Negara Malaysia, needs a serious rethink and might itself need a revamp.
Short for “Revamp, Enhance, Strengthen, Expand and Transform”, RESET comprises five strategic thrusts and 11 key initiatives — from the introduction of basic standard health insurance or takaful (MHIT) coverage to a public-private hybrid care model.
Reform is certainly needed as medical inflation, estimated to be 15.6% to 18%, continues to erode affordability and access, especially to private healthcare services.
It is increasingly becoming a situation where many of us will be pressing our faces on the windows of our world-class private hospitals, being proud of their existence but unable to access them as the costs involved are increasingly beyond the affordability of many.
Yet, it is also a fact that our private health facilities are considered best value for money with medical tourists and their families coming from all over the world.
The objective of RESET is to slow unsustainable cost growth, make coverage more affordable for Malaysians, and improve efficiency and accountability in the healthcare system.
The direction and intent are good and right. Yet, 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
Malaysia cannot legally implement or impose a diagnosis-related group (DRG) regime for the private healthcare system unless the Private Healthcare Facilities and Services Act 1998 is amended to mandate data submission, define payment rules, and permit moving away from itemised billing towards bundled packages.
It is still unclear if an amendment is being planned or, more importantly, if consultations are being conducted.
Without legal clarity, private hospitals and insurers will continue to rely on the current fee-for-service basis.
Risk of failure
DRG can curb “do-more-bill-more” behaviour, but only when calibrated with quality, realistic Malaysia-specific cost and clinical data, with proper risk adjustments.
Inadequate data will raise the possibility of ineffectiveness, fraud and failure.
Even in jurisdictions such as Taiwan which has had DRG in place for more than a decade, there still are cases of upcoding (a type of medical fraud), early discharges and selective admission of patients. Strong controls are necessary.
In the US, studies have shown that DRGs could even have the reverse effect — causing inflation through payments dependent on case-based coding, resulting in millions of dollars in extra payments.
It must be understood from the onset that the DRG model does not freeze or prevent the growth of medical costs or expenditure.
Transparency is essential
One of RESET’s strategic pillars hinges on price transparency for medicines, procedures and hospital services.
US studies suggest that though transparency can reduce prices for laboratory, diagnostic or imaging processes, which a patient can shop around to compare, it has a limited effect on total health spending.
In Malaysia, hospital services, medical consumables and investigations that make up 60-70% of the private hospital bill are currently unregulated.
Prior to hospitalisation or outpatient treatment, patients will not likely know which medication or drugs they will need during the course of their treatment, rendering the requirement for price lists of drugs to be displayed limited in their usefulness.
It is also highly unlikely for those undergoing inpatient care to fill their prescriptions outside of the hospital where they are being treated.
Malaysia’s approach is to insist on the drug price list to be printed and hope that transparency reduces prices.
Observations at private clinics and hospitals will likely reveal that barely any patient glances at the printed list or tablet, much less compare prices and demand for cheaper drugs.
They trust their healthcare provider to know what drugs work best and the appropriate course of treatment.
Low participation likely
The proposal to provide “standardised premiums” with “essential” coverage, supposedly targeting the middle class, is similar to what was previously attempted under Perlindungan Tenang, which provided insurance and takaful products covering events like death, accidents or fire for lower-income recipients.
However, MHIT insurance products are more costly and broadening the risk pool will be critical. Tenang depends heavily on government subsidised vouchers, while the MHIT product will not likely have that benefit.
Due to its voluntary nature, most people in the M40 target group will likely opt out and be reluctant to utilise already drained EPF savings for the purpose of insurance through the i-Lindung facility.
The median EPF savings is RM11,000 now, making it a bad idea to tap into retirement savings to finance premiums. This base MHIT product will likely need subsidies or mandates to broaden the risk pool.
GPs as gatekeepers will be publicly opposed
Reset proposes GPs (general practitioners) as the first point of contact, curbing self-referral to specialists which might be unnecessary and inflate costs.
But for this to work, there must be proper recognition and addressing of the problems currently plaguing private primary care providers with consultation fees stuck for more than three decades and ongoing requirements for itemised billing, which is contradictory to bundled payments such as DRGs.
Failure to do so could result in GP practices thinning out or shortening consults to survive, signing off patients to hospital outpatient departments after five-minute consultations.
Patients will also oppose the gatekeeper role as they will insist on the right to go straight to a specialist for treatment, especially if they have already invested heavily in health insurance. Gatekeeping by GPs could end up being tokenistic or reduced to a concept described on paper.
Absence of national health insurance
In many countries which properly utilise 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 currently 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 national health insurance framework covering both public and private healthcare would act as serious competition to private insurance and takaful providers.
Healthcare does not cost RM1, even in public healthcare, and it must be properly financed to ensure that we get the right treatment and care needed and not depend on what the government or insurer can afford.
Introducing national health insurance provides a way forward to address current treatment and care gaps.
Conclusion
A joint ministerial committee (involving the health ministry, finance ministry and Bank Negara) 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.
As we have seen from the policy shifts last year intended to emphasise co-payment and deductibles, as well as the interim controls introduced to cap rising premiums until 2026, the public, insurance and takaful operators, private hospitals and private clinics may or may not cooperate or play along 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 now starting to impose limits to coverage, which might interfere with 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 rein in 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.
Malaysia is about to become a high-income economy, and it is time that we properly increase our investment in the healthcare system to ensure that it is future-proofed for the decades ahead.
Azrul Khalib is the CEO of the Galen Centre for Health and Social Policy, and an FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.
