In loving memory of my dear friend, Mr. V.M. Chandran.
Medical Health Insurance is a risk mitigation mechanism where for a comparatively small amount of monies per year, one can hedge against risks which may be of significant value such as medical expenses. This depends on what type and extent of coverage one has, which is predetermined to compute the premium based on personal information which includes age, occupation, medical history including family, any pre-existing illness, and other key matters.
Today a good 80 to 85 % of patients in private hospitals use medical insurance as their primary source for funding their medical expenses. This has become a key integral part of Private health care.
An interesting aspect of Medical costs is that its inflation in Malaysia is running as high as 12 to 15%, which itself is a "world record" whilst premiums for medical insurance seem to be " hitting the roof" with a remarkable increase of 30% for 2020. Maybe the traditional economics "Supply and Demand" seem not to hold its assumptions in Private health care.
Insurance companies seem to have a forceful argument that technological innovations in Medical science have increased the cost of medical care. This is their principal justification as they "pool" the total claims and spread it over a larger population by creating such an astronomical increase in premiums. A point that is continuously debated because Insurance companies seem to move at a "snail's pace" to approve technological treatment including "robotics". Indeed some regard them as a hindrance to scientific progress in medical care. Probably, Insurance companies in their actuarial calculations have never inbuilt aspects of new technology development unless it is the latest medical health insurance policy.
On the other side, Private hospitals indicate technology has helped in efficient operating levels and much earlier recovery of patients. Yet the benefits that it is supposed to accrue is not reflected in the patient "billings". Indeed, medical health care has skyrocketed with technology. A simple appendicitis operation by traditional surgery would cost around RM8,000. A new technological approach seems to put the bill around RM20,000. Obviously, the classic argument of capital cost, operating cost including maintenance and training cost would seem to be their cost build-up argument.
The key question that arises from advancement in technology is to whom the benefits in the form of operational efficiency and speedy recovery are advantageous???? Surely not to the patients in " dollars & cents". If any, the private hospitals turn around time for patients and more effective use of assets paves the way for higher utilisation of those assets and better occupancy level, ultimately for better profits. All this is a significant cost to the patient.
While I have blatantly stated the point that new technology is benefiting private hospitals, it must also be recognised that I am aware that a few hospitals are ethical about such things and allow the choice to the patients ie whether to adopt traditional or technology-aided procedures. This I must mention to differentiate them.
This brings me back to the aspect of Medical insurance. If patients have regular claims on their medical bills, the issue of "civilised" increases in premiums seems to have a sound foundation. However, where the insurance premium increases are burdened on people who have the "cover" but had not utilised it, should they be subjected to the same "pari passu" treatment as patients who make claims against their insurance? Here the Insurance companies are playing "Robin Hood" ie pooling all the premiums, with or without claims to pay for claims of patients who incurred the medical expenses. Is that proper?
M Shanmugam of Star media had raised in one of his articles on Health care the issue of "No Claims Bonus" - NCB. The term NCB is best known for Motor Insurance, where predetermined discounts are provided for motor insurance premiums when there are no claims when renewal arises. It seems to be a benefit that is accrued to the vehicle owner for ensuring that his vehicles were not subject to any claims. Sort of a "Reward" system.
Introducing NCB for Medical insurance can be the best roadmap action to be taken by Insurance companies in Malaysia. Much too long we seem to be "short-changed" as all medical insurance holders are lumped together. What makes matters diabolically interesting is that in various other regimes some form of "Reward " system is in place for Medical insurance holders who maintain their health and or who do not make claims for medical expenses.
Some of the prevailing scenarios are:
1. NCB is provided on 50% of the ceiling sum over a period of 5 years. The NCB is not used to discount premiums but rather is added to the ceiling sum each year till the 5th year.
This effectively means at the end of the 5th year, the ceiling sum has increased by 50%, whereas in the intervening period the premium is charged on the original base case.
This scheme has its advantage as it can help the medical insurance holder to capitalise on new technology for medical care with a larger ceiling sum. Insurance companies are reluctant to implement.
2. In some places where the Medical Insurance holder has not made any claims on his Insurance, the cumulative premium paid during the term is reimbursed after some administrative charges.
3. There are places where the NCB amount on Medical health insurance is given "portable" rights ie transferable to other existing insurance policies of the individual, which could enhance its value.
The regimes that provide such facilities particularly on NCB for Medical health insurance seem to cater across the board recognising each group and attributing to the careful management of their Medical health insurance. The "lazy" approach of "lumping" everyone as one is an easy way out but the justice of equity is not there.
In a nutshell, it would seem Insurance companies are maximising their returns with regard to the idiosyncrasies that exist in their field. A "clean sweep" system is adopted as the Insurance holders are burdened with ever-increasing premiums. This would become more acute as Medical science moves forward innovating new techniques and procedures. The health insurance remains stagnant in a time of its own and their only solution is to increase the premiums.
Insurance companies must be more creative in their health insurance and one key area is to engage with Private hospitals in the introduction of new technology. Indeed if any they are the Private hospitals' biggest paymaster, so they have the negotiating powers to determine the "monies worth" of the charges. This is a duty of care and responsibility that Insurance companies owe to the health insurance policyholders.
Unfortunately, they seem to omit this part of their duties that seems to help in catalysing the escalation of medical health costs in the country. The failure to take such responsibility seems to have a devastating effect on the cost of private Health care in Malaysia and the problem is growing.
V M Chandran
January 2020.
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