Published by BusinessToday, image by BusinessToday.
As Malaysia transitions into an ageing nation, rising medical costs remains a significant burden, particularly for Malaysian senior citizens from low- and middle-income groups.
According to the United Nations(UN), a country is considered as an ageing nation if 7% of its population is over 65, with a super-aged nation surpassing 20% threshold.
Projections show that by 2050, 80% of individuals over 60 are expected to live in low- and middle-income countries worldwide. In the Asia-Pacific region, one in four persons is expected to be 60 years or older by the same year, highlighting the scale of the challenge ahead (“Addressing the Challenges of Population Ageing in Asia and the Pacific”, UN ESCAP, 2017).
The latest figure by the Department of Statistics Malaysia (DOSM) revealed that the population of people aged 65 and above has increased to 10.9% in Q3 2024, up from 10.7% in Q3 2023.
DOSM further projects that Malaysia is expected to become an aged nation by 2040, with over 17% of its population aged 60 and above, marking its trajectory towards becoming a super-aged country.
At the heart of this crisis lies a pressing challenge: the insurance dilemma.
Healthcare insurance premiums, intended as “safety nets” to ensure access to medical services and reduce financial burdens in emergencies, are increasingly becoming inaccessible. Rising premiums—spurred by escalating private hospital costs—pose a significant challenge, with recent hikes reported at 40-70%. While this impacts all policyholders, the ageing population bears the brunt, facing a double burden of rising premiums and fixed incomes.
For many, these stark increases leave no choice but to terminate their policies, placing additional burden on public healthcare facilities.
For instance, the premium for an insurance policy that previously cost RM281 has now doubled to RM627 (annual: RM 7,524) for a 61-year-old retiree, placing a significant financial strain on those reliant on fixed incomes (i.e. pensions, EPF), amidst escalating living costs.
Rising insurance premiums far outpace actual inflation rates, compounding the financial strain on policyholders. For context, Bank Negara Malaysia (BNM) reported a medical inflation rate of 12.6% in Malaysia in 2023—more than double the global average of 5.6%.
The notion of “paying less now to save later” is a misconception, as at the end of the day insurance entities often transfer the burden of medical inflation onto policyholders by increasing premiums.
Tax relief may soon lose its significance for the working class, as rising insurance premiums risk becoming increasingly unaffordable.
How will the current generation fare as they age when many are already struggling to afford insurance premiums?
Therefore, as Malaysia transitions into an aged nation, it is imperative for stakeholders to implement proactive, robust, and effective measures to address this looming crisis.
The sedentary lifestyles of Malaysians, coupled with genetic predispositions and the natural ageing process, significantly increase the risk of developing non-communicable disease (NCDs) related to cancer, cardiovascular, metabolic, and respiratory conditions. Furthermore, many individuals face multiple NCDs simultaneously, compounding the challenge.
According to the 2023 National Diabetes Registry Report, the mean age at diagnosis for Type 2 Diabetes Mellitus (T2DM) patients is 65, highlighting the prevalence of the disease among older individuals. Alarmingly, the 2023 NHMS survey indicates that 80% of young adults (18-29 years) remain unaware of their diabetic condition.
This lack of awareness, coupled with young adults opting out of insurance coverage and relying solely on public healthcare, risks further straining the already burdened public healthcare system.
In the long term, an overburdened public healthcare system may lead to increased out-of-pocket expenses for essential services, including insulin, potentially mirroring the challenges faced by countries like the U.S., where insulin access is not universally free.
Insurance policies “misused” by healthcare professionals
As disclosed, part of the increase in premiums is due to the rise in private hospital fees—proving, as the saying goes, “there is no smoke without fire”. Private hospitals often contribute to these costs by overcharging for procedures, inflating doctor fees, and performing unnecessary medical tests, particularly when patients have medical cards.
Such unethical practices by ostensibly “highly skilled and educated professionals” not only drive up the overall cost of insurance premiums but also leave policyholders unable to fully utilise their insurance benefits due to restrictive policies, unfair claim rejections, etc.
The ripple effect of medical tourism
Malaysia’s accessibility to cutting-edge medical technologies and equipment, coupled with affordable treatment plans for international patients, has established the country as a leading healthcare hub in the region. In 2022, the Malaysia Healthcare Travel Council (MHTC) reported that 850,000 international patients sought treatment in Malaysia, generating RM1.3 billion in revenue. In addition, the medical tourism market in Malaysia is expected to grow at a compound annual growth rate (CAGR) of 14.6%, reaching a valuation of US$ 7.54 billion by 2034, according to Fact. MR, a Dubai-based market research company.
While medical tourism significantly boosts Malaysia’s economy, it raises concerns for locals who rely on the same private hospitals and treatment plans. Catering to medical tourists often requires substantial investments in infrastructure, technology, and personnel to meet global standards—costs that are frequently passed on to all patients, driving up local medical expenses. Additionally, private hospitals adjust their pricing models to align with international patient rates, which are often beyond the affordability of residents, potentially distorting the market and increasing healthcare premiums.
Therefore, these combined factors underscore the urgent need for stakeholders to explore and implement effective measures.
- Bank Negara Malaysia (BNM) plays a critical role in regulating premium pricing. However, the current BNM’s policy of not capping premium hikes grants insurance entities considerable authority to raise premium costs at their discretion. Adopting guidelines for transparent pricing and requiring insurers to justify increases based on medical inflation rates and actual healthcare cost data would provide critical safeguards for policyholders, especially those from lower- and middle-income groups.
- Besides, it is recommended that the Ministry of Health (MoH) enhance the healthcare regulations under the Private Healthcare Facilities and Services Act 1998, with a particular focus on dispute resolution mechanisms and transparent pricing. Key measures include establishing feedback and reporting systems for patients to report overcharging and creating independent mediation bodies to address such issues.
Although MoH has wisely mandated private clinics and hospitals to list item prices, extending this requirement to other services would be beneficial. Implementing standardised billing practices, enforcing price limits on essential services, procedures, and medications, as well as requiring hospitals to display fixed prices, can promote fairness and equitable access to private healthcare. These measures would also minimise opportunities for misuse within the healthcare system.
- Finally, citizens must be empowered through improved health education, equipping them to make informed decisions about their healthcare. As emphasised by EMIR Research previously, adequate patient education and engagement not only reduce the prevalence of NCDs but also enables individuals to take proactive control of their health (refer “Health Literacy And Preventative Care: Reducing the Burden On Healthcare Systems”, EMIR Research, 2024)
Impact on public healthcare
The 2023 National Health and Morbidity Survey (NHMS) reveals that public healthcare facilities are already under significant strain, with outpatient services operating at an average utilisation rate of 48.9%. Notably, 57% of these patients are from the B40 category.
Furthermore, hospital admissions paint an even starker picture, with public hospitals recording a 74.7% admission rate. These figures underscore the mounting pressure on public healthcare, which could intensify if rising insurance premiums continue unchecked, leaving more citizens without private coverage.
In conclusion, what should be an essential need—health insurance—is increasingly becoming a “luxury”, an unaffordable reality for many. Stakeholders must away from a reactive “we’ll cross that bridge when we come to it” mindset and tackle the monopolisation of private hospitals and insurance entities within the healthcare industry.
Jachintha Joyce is a Research Assistant at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.
