Boo Su-Lyn | CodeBlue

2024 is the Year of the Payer in Malaysian health care, with three major policy decisions that benefited payers for health care: health insurance copay mandate, IJN’s mandated shift to generics, and the staggered rollout of doctors’ on-call allowance hike.

KUALA LUMPUR, Dec 2 — This year has seen momentous shifts in Malaysian health care policy that affect millions of ordinary citizens, a longstanding institution, and thousands of health care workers.

Across the public and private sectors, CodeBlue identified three major policy decisions: Bank Negara Malaysia’s (BNM) mandate for copayment features in medical and health insurance; the Ministry of Health (MOH) switching the National Heart Institute (IJN) to generic drugs, and limits set by the Public Service Department (JPA) or Ministry of Finance (MOF) on doctors’ on-call allowance raise.

All of these three public policies benefit the payer for health care services – the insurance industry, the MOH, and JPA or MOF – at the expense of middle class Malaysians or policyholders, IJN, and medical officers respectively.

It’s also noteworthy that these significant policy decisions were primarily made by faceless technocrats within the central bank, MOH, and JPA or MOF, instead of Finance Minister Anwar Ibrahim or Health Minister Dzulkefly Ahmad portraying these as political achievements by the Madani government.

Health Insurance Copay Mandate 

Winner: Insurance industry
Losers: Millions of middle class Malaysians or policyholders

Public fury has erupted over the jump in health insurance premiums. While Utusan Malaysia reported that medical insurance premiums are expected to rise by 40 per cent to 70 per cent next year, there have been anecdotal complaints of far higher hikes, such as a 262 per cent premium increase that forced a cancer patient to drop his medical insurance policy last August.

BNM has mandated licensed insurers/ takaful operators (ITOs) to include a minimum 5 per cent copayment feature and/or RM500 deductible in the design of any new individual medical reimbursement insurance/ takaful products. Since last September 1, a licensed ITO offering medical and health insurance and takaful (MHIT) products must offer at least one product with minimum 5 per cent copay (no cap is set).

In contrast to its July 6 statement, when BNM touted copayments as a solution to help contain medical inflation that hit 12.6 per cent in Malaysia last year, the central bank’s November 28 statement omitted mention of copayments, simply saying that it has required ITOs to “review their current repricing strategies” for medical and health insurance.

The Galen Centre for Health and Social Policy slammed BNM’s recent statement as being “disingenuous, cosmetic, and late”, citing numerous reports that people are already terminating their policies following double or even triple-digit percentage hikes of their health insurance premiums. “The horse has already left the stable,” said Galen Centre chief executive Azrul Mohd Khalib.

Although both the Life Insurance Association of Malaysia (LIAM) and the Association of Private Hospitals Malaysia (APHM) claim that the costs to insurers and private hospitals are unsustainable, large businesses in both industries recorded higher revenue or profit this year.

KPJ Healthcare Berhad hit an historic RM1 billion quarterly revenue for the third quarter this year, its highest ever at RM1.03 billion. IHH Healthcare Berhad’s core net profit for Q3 2024 increased 43 per cent year-on-year to RM528 million on higher patient volumes and taking on more complex cases. Major government-linked companies have shares in top private hospital operators.

Insurer AIA Berhad recorded the Group’s profit after tax of about RM1.1 billion for the six months ended June 30, about 33 per cent higher than the same period last year. Allianz Malaysia Berhad’s revenue for the third quarter this year grew 10.3 per cent year-on-year to RM1.44 billion on higher insurance revenue from its general and life insurance segments.

There are conflicting reports on how many Malaysians are protected by personal health insurance. According to LIAM, about 45 per cent of Malaysians are insured. But according to the National Health and Morbidity Survey (NHMS) 2019, only 22 per cent of the population have personal health insurance; 43 per cent of those who do not have personal health insurance say they can’t afford it.

The issue of increasingly unaffordable health insurance and private hospital charges falls under “no man’s land” in public policy. Kluang MP Wong Shu Qi complained about BNM and the MOH passing the buck in their meetings with legislators.

Talk by Dzulkefly and his deputy, Lukanisman Awang Sauni, about value-based health care or diagnostic-related group (DRG) payment models for private hospitals remains mere rhetoric. The Private Healthcare Facilities and Services Act 1998 (Act 586) only caps doctor fees, hence the government does not have the authority or punca kuasa to regulate all other private hospital charges.

If the Madani government were serious about regulating private hospital industry charges (beyond requiring long itemised hospital bills), then it would announce new legislation to mandate, not merely recommend, new payment models to replace fee-for-service in private hospitals. It’s likely that an entirely new Act is needed, as Act 586 was enacted mainly to regulate the standards, not charges, of private health care facilities.

CodeBlue argues that a new independent statutory commission should have the powers not just to regulate charges by private hospitals and other health care facilities, but also to take jurisdiction of medical and health insurance — separately from other insurance products regulated by BNM. While this new Private Health Care Commission, along with its associated legislation, can be parked nominally under the MOH, the commission should have full powers and independence like Bank Negara.

IJN’s Mandated Shift To Generic Drugs

Winner: MOH (as the payer for government patients at IJN)
Losers: IJN, pharmaceutical companies supplying IJN with original medicines

For more than three decades, IJN had thrived as the country’s top cardiac centre by operating outside the public health service while earning revenue from the government — MOH specifically as the payer for IJN’s government patients, primarily pensioners and civil servants.

Operating as a private hospital owned by the Minister of Finance Incorporated (MOF Inc.), IJN could afford to hire talented cardiologists and heart surgeons by offering much more attractive salaries than government service. IJN could also provide public patients with original medicines, all on the government dime.

But last October, this came to a screeching halt when the MOH decided that it could no longer tolerate skyrocketing bills from IJN, especially after Anwar announced that pensioners could continue their treatment at the cardiovascular and thoracic care hospital.

MOH’s payments to Institut Jantung Negara Sdn Bhd (IJNSB) jumped a whopping 68 per cent over the past decade from RM361.8 million in 2013 to RM606.5 million in 2023.

Shockingly, a 2023 analysis sighted by CodeBlue revealed sky high drug prices charged by IJN to the MOH for common medications. The prices charged for IJN’s top 10 prescribed drugs (all innovators) ran between 42 per cent and an incredulous 4,323 per cent higher than the MOH’s procurement. These include cholesterol-lowering statins that are widely available in community pharmacies.

The MOH is expected to save at least RM100 million (likely a lot more) from the substitution of brand-name drugs with generic equivalents for patients referred and sponsored by the ministry. These government patients comprise about 68 per cent of IJN’s patient load. Another 17 per cent are public patients paid for by state governments or statutory bodies. Only 15 per cent of IJN’s patient load are private.

Cost savings for the MOH (and taxpayers) are directly equivalent to revenue loss for IJN. Based on Companies Commission of Malaysia (SSM) records, IJNSB’s annual revenue increased every year over the past decade, rising 81 per cent from about RM519 million in 2014 to RM938 million in 2023. The company recorded profit before tax of about RM112 million in its 2023 financial year, a jump of 173 per cent from RM41 million in 2014.

IJNSB’s revenue from the MOH was about 65 sen for every ringgit earned last year, averaging at 68 sen per ringgit over the past 10 years.

If drugs are indeed IJN’s main source of revenue, the MOF Inc.-owned hospital may well see a severe hit to its bottom line come 2025 — likely consuming its entire 2023 profit. Pharmaceutical companies supplying IJN with innovative drugs are also expected to suffer losses of millions of ringgit.

The MOH has reassured the public that generic medications are safe and effective, due to the requirement for bioequivalence testing to ensure that generics have the same therapeutic effects as their branded counterparts. IJN saw more than 48,000 government patients last year.

‘Pilot Project’ On Doctors’ Small On-Call Allowance Raise

Winner: JPA/ MOF
Losers: Thousands of medical officers

For years, and across at least two health ministers (Dr Zaliha Mustafa and Dzulkefly), doctors working in the public health service have called for an increase to their pitiful RM9.16 hourly on-call allowance rate. The Malaysian Medical Association (MMA) suggested raising it to RM25 per hour, an increase of 178 per cent.

During the tabling of Budget 2025, Anwar announced an increase of the on-call allowance rate for medical and dental officers by RM55 to RM65 per shift. This amounts to a new allowance quantum of just RM11.50 to RM11.90 per hour, less than half the RM25 hourly rate requested by MMA.

Worse, the raise in government doctors’ and dentists’ on-call allowance turned out to be a mere “pilot project”, as described by Dzulkefly in a written November 4 parliament reply, subject to “targeted” implementation in certain departments and select hospitals or clinics, as per the central agency’s recommendation.

The health minister told the Dewan Rakyat last Tuesday that the use of the term “pilot project” (projek rintis) in his own written reply was incorrect, describing the on-call allowance increase instead as being done in a “staggered” manner.

Dzulkefly did not state when, who, how many people, or which departments or centres would be the first to get the small allowance raise of under RM3 per hour.

The new rate of less than RM12 per hour will likely stay for at least the next five years or longer, given that it took the government more than a decade to revise the on-call allowance in 2024 after a raise in 2012.

Doctors responded to the “pilot project” on their on-call allowance hike with anger, with many sharing sentiments on social media about feeling “scammed”. On X, Hartal Doktor Kontrak (HDK) simply posted a sarcastic response of laughter.

Dzulkefly’s press secretary Nik Azmi Fathil, in a reply to HDK, tied the on-call allowance rate increase to a streamlining of working hours in a new work scheme under Sistem Saraan Perkhidmatan Awam (SSPA).

However, six nursing groups slammed the addition of three (uncompensated) working hours to 45 hours a week under the new SSPA shift system that went live across the entire civil service yesterday on December 1. Specialist doctors – including the College of Emergency Physicians under the Academy of Medicine, Malaysia – also protested the new 45-hour work week for health care shift workers, citing serious risks to patient safety and health care professionals’ own health.

Although the health minister met with groups representing nurses, assistant medical officers, and health care assistants among others (doctors weren’t listed) last Thursday, he didn’t announce a delay in the implementation of the 45-hour work week for health care staff.

As health care workers are regulated by JPA together with other civil servants, due to the absence of a Health Service Commission, the MOH lacks the authority to change the new official 45-hour work week.

The only power the MOH has is to ensure that nurses, doctors, and other health care workers on shift duty actually get to take their one-hour breaks, like regular office employees in the government. This likely requires the closure of at least non-critical zones in the emergency department, wards, the intensive care unit, or operating theatres during break hours if there are insufficient staff — obviously impossible.