Medical insurance is a hot-button topic currently. Everyone – be it the policymakers, insurers, private hospitals, clinics, doctors or patients – will tell you that the system is broken. Some of the key reasons contributing to the broken system:

1. Malaysia’s demographics – 20 years ago, medical insurance penetration was relatively low. We had a free flow of healthy 20- or 30-year-olds enrolling and buying medical insurance. They outnumbered the oldies, who at the time many still relied on government services. Now, the government services are strained, those who bought medical insurance 20 years ago are older and sicker, and there are fewer healthy younger people buying in. People are now also getting afflicted with many diseases from a younger age, even at birth. As a result, the overall medical insurance pool is both older and sicker than it was at any time before. Naturally, the chance of claiming (%) and the severity of claims (RM) is both higher, resulting in higher strain on the medical pool.
2. Advancement in medical technology – With this, conditions (such as cancer) can be diagnosed earlier. While people live longer, they require more ongoing care/treatment. All this doesn’t come cheap.
3. Medical inflation – As more people flock to private healthcare, the demand increase allows private hospitals to charge more. Many advanced equipment/medications need to be imported; this is subject to increases in cost as demand for these equipment/medications rises. Weakening of MYR over the past decade may have exacerbated the problem somewhat.
4. Private hospitals and doctors taking advantage of insured patients to perform unnecessary treatments, prescribe expensive trial medications and conduct frivolous diagnostic screenings
5. Insured patients not having any skin in the game – with RM1mil annual limit, who cares about what the hospitals charge. Whatever treatment or diagnostics the doctor suggests, just accept it, cause why not? Patients pay nothing out-of-pocket, other than their premiums.
6. Insured patients colluding with agents and doctors to hide their medical history which is otherwise excluded as it is considered pre-existing.
7. Insured patients colluding with agents and doctors to claim diagnostic or preventive treatments, that are usually excluded from coverage.

Items 4-7 have always been there, they’re just more pronounced now as the entire system is at a breaking point. The main underlying reason is mainly item 1 and 2. Item 1 in particular, as 20 years ago we were in the “goldilocks” period.

How can we reform the system:
1. Skin in the game for insured patients so that patients will exercise discretion and only get treatment that is necessary as they will pay a portion of the cost out of pocket. For this, we need to have:
a. Deductible
b. Co-insurance (as a %)
c. Out of pocket limit
2. Pre-existing conditions need to be covered, no longer excluded/loaded.
3. Medical insurance coverage should be simplified by reducing the exclusions, e.g. related to pregnancy/maternity, congenital conditions, preventive/diagnostic treatments, lab tests, vaccinations

With Reform #1, patients are incentivized to seek treatment they can actually afford. At present, patients just go to the most expensive hospital with no regard. By paying a portion of the treatment cost out of pocket, they will also be incentivized to remain healthy and only go to seek private treatment when absolutely necessary.

With Reform #2 and #3, this will increase premiums for everyone no doubt, but as it is many people already try to game the system. This will result in a fairer and more equitable healthcare system for everyone. Moreover, there will be lesser administrative burden for doctors, and lesser TPA over-reach dictating the level of care. Those who have medical insurance coverage at work as part of their employee benefits may not require a separate cover at all if they are happy with their coverage limit.

Example of product design:
Deductible (per year) = RM2,000
Co-insurance = 20%
Maximum out-of-pocket (per year) = RM10,000

Example of insurance coverage for a hospitalisation:
Treatment cost: RM20,000
Deductible: RM2,000
Co-insurance: min(RM8000,20%*RM18000) = min(RM8000,RM3600) = RM3,600
Out of pocket: min(RM10000,RM3600+RM2000) = min(RM10000,RM5600) = RM5600
Covered = RM20,000 - RM5,6000 = RM14,400

This post has been edited by contestchris: Oct 23 2025, 12:12 PM