Member of the Public Accounts Committee (PAC) of Parliament, Halimah, pointed out that there are excessively high mark-ups in multiple stages of the pharmaceutical supply chain, with some private hospitals in certain cases selling generic drugs at prices even higher than originator drugs.
She said that some private hospitals even list charges separately for items such as medical waste disposal, pillowcase fees, and alcohol swab fees, which should originally be included in ward or basic service charges.
She mentioned that private hospitals lack a unified and standardized charging structure, resulting in the actual costs of medical services and basic items not being transparently reflected. The issue of high drug prices is often used to cover up other operational costs that are not directly charged, such as nursing fees and utilities.
Halimah, who is also the Member of Parliament for Kapar, stated this today (25th) in the Dewan Rakyat on behalf of PAC Chair Datuk Mas Ermieyati, when expounding on the report "Rise in Medical Insurance Premiums, Private Hospital Charges, and Their Impact on the Public Healthcare System".
She continued that, due to the public not cultivating healthy lifestyle habits and the growing number of people unable to afford private medical insurance premiums, more patients are turning to government hospitals for treatment. This leads to an increase in the number of patients in government hospitals, more crowded medical facilities, longer waiting times, and greater financial and operational pressure on the national healthcare system.
“Therefore, the issue of rising medical insurance premiums is no longer merely an insurance industry problem, but a national issue involving private medical charges, drug prices, public health behavior, and the sustainability of the public healthcare system.”
PAC Summarizes 20 Conclusions & Puts Forward 17 Recommendations
Halimah, member of the PAC, said that after hearings and investigative procedures, the PAC summarized 20 conclusions and put forward 17 recommendations.
The 20 conclusions are as follows:
(1) Although Bank Negara Malaysia holds punitive enforcement powers, they intervene ex post facto and do not have legal tools to directly control external factors that lead to premium increases, such as the rising cost of private hospital medical fees.
(2) The current insurance system in our country is easily subject to “risk selection” practices. Insurance companies use risk stratification and segmentation strategies, often excluding those who need protection the most through pricing mechanisms.
(3) Some insurance companies shut down old risk pools in order to offer more competitive premiums to new customers. This may harm long-term loyal policyholders, as the shrinking old risk pool is left with higher-risk or sicker individuals, leading to a rapid rise in claims rates and, subsequently, a significant increase in premiums.
(4) Investment-linked insurance essentially transfers part of the investment risk and the risk of rising medical costs to consumers. Many consumers are not aware that insurance costs increase with age, thereby affecting the sustainability of long-term coverage.
(5) The cyclical repricing model used in the insurance industry, although meant to adjust premium levels, often leads consumers to experience financial shocks, with single premium hikes reaching as much as 40% to 70%.
(6) The high premium increases force some policyholders over 60 to terminate their coverage because they can no longer afford the premiums, thus exposing them to the risk of being uninsured when they need coverage the most.
(7) The free market mechanism cannot maintain long-term premium stability because medical inflation continues to outpace general inflation. The increase in premiums is closely tied to the growth in medical costs, so the problem must be addressed from the perspective of the entire medical system, not just from the insurance industry.
(8) Private hospitals lack a unified and standardized charging structure, making it impossible to reflect the real cost of medical services and basic items.
(9) Some private hospitals engage in “unbundling,” separately charging for items such as medical waste disposal, pillowcase fees, and alcohol swab fees, which should originally be included in ward or basic service fees.
(10) Private hospitals have price discrimination practices, charging patients with insurance guarantee letters higher fees than those who pay cash or those who pay first and make reimbursement claims later.
(11) The main driver of medical cost inflation is not professional physicians’ fees, as doctors’ fees have been regulated since 2013. Instead, the real cost push comes from non-professional fee items such as rising medicine and medical supply costs, continuous increases in drug prices, rising diagnostic and lab fees, usage of more expensive medical technology and treatments, higher operational costs for private hospitals (manpower, energy, technology), and rising medical litigation costs and defensive medicine expenditure.
(12) The Reset Plan is a comprehensive reform program comprising 11 measures, including price transparency, insurance system reform, strengthening digital systems, and the implementation of the Medical & Health Insurance Scheme (MHIT), but its success depends on interdepartmental policy coordination and institutional collaboration.
(13) The Diagnosis-Related Groups (DRG) system is a medical billing mechanism that charges based on the patient’s disease category or condition rather than itemizing the costs of tests, drugs, and treatments.
(14) The DRG system is considered helpful in shifting medical services from a “procedure-profit” orientation to a “clinical efficiency” orientation. However, there are several prerequisites that must be met before DRG implementation, including a comprehensive data repository and an integrated Electronic Medical Records (EMR) system.
(15) There are price mark-ups at multiple stages of the medicine supply chain, and in some cases, generic drug prices sold in hospitals are even higher than originator drugs.
(16) Malaysia currently has over 1,500 types of drugs with only one registered manufacturer each, resulting in manufacturers being able to maintain high prices due to a lack of competition.
(17) The public has doubts about the independence of the Financial Services Ombudsman institution, mainly because its operational funding comes from the insurance industry itself.
(18) The Private Healthcare Facilities and Services Act 1998 has not been updated in line with the times, enabling private hospitals to legally impose various “creative charges.”
(19) Most Malaysians lack awareness and interest in health screening, leading to late disease detection, more insurance claims, delayed treatments, and such delayed treatments usually cost much more than the cost of early screening and prompt treatment.
(20) This phenomenon has already triggered a chain reaction in the public healthcare system.