(This article can also be read at the Penang Institute in KL Column in the Malaysian Insight, 21nd May 2017)
Both my parents are over 70 years of age. My father is a retired architect who had his own private practice. My mother is a housewife. As far as I know, there are no private medical insurance providers who offer medical insurance plans for people their age.
My father had to undergo a heart bypass last year at a private hospital and he paid the expenses out of his own pocket. My mother had to go for a spinal procedure recently for which she had three options: a costly private hospital option, a heavily subsidised option at Universiti Hospital but with a longer waiting time period, and an in-between option with the University Malaya Medical Centre (UMMC). In the end, she chose the in-between option.
The husband of a retired civil servant came to my service centre last month to seek financial assistance to purchase his cancer drugs. Even though he is eligible for the government pensioner’s medical plan as a spouse of a retired civil servant, he was told that he had to pay for the drugs he needed to take as part of his cancer treatment which costs thousands of ringgit per treatment.
The problems faced by my elderly parents and the spouse of the retired civil servant illustrate one of the major health care challenges in this country. Many people are caught between the public healthcare sector which is either rationing its services through time i.e. longer wait times or the supplies i.e. limiting the amount of subsidised medicines, and the private sector which is already expensive and likely to become even more so over time.
Of course, if my parents had access to a health insurance scheme, that would have significantly decreased their medical expenses even if they chose the private hospital option. Similarly, if the spouse of the retired civil servant had a health insurance scheme, that would cover at least part of his very expensive cancer medicines.
The question then is this: will the Voluntary Health Insurance Scheme announced by the Minister of Health to be rolled out next year, be able to “solve” the health care challenges illustrated above? The answer, for now, is that we simply do not know for the simple reason that very little of the details of this insurance scheme have been made public.
Of course, we can read between the lines and try to guess the motives for the rolling out of such an insurance scheme. The putative reason is to decrease the cost of private health care, which almost everyone acknowledges is very costly for the average Malaysian.
But if this new health insurance scheme is totally voluntary, partly to avoid any possible backlash from the previous experience of trying to introduce the mandatory 1Care health insurance programme, the Ministry faces another cost related challenge.
Any voluntary health insurance scheme must somehow avoid the problem of attracting mostly-unhealthy people from enrolling in such a scheme. For example, if only the elderly who currently cannot buy any private sector health insurance and others with pre-existing congenital health problems such as asthma or cancer buy into such a scheme, the premiums would have to be very high or the government subsidy for such a scheme would have to be very high.
Most health insurance schemes, especially those in developed countries, work on a risk pooling basis. With a large pool of people from all backgrounds, ages and health conditions enrolled in a health insurance scheme, those who are healthy and who do not use much health services are effectively subsidising the insurance cost for the elderly and those with congenital diseases who are high users of health services. If the proposed health insurance scheme is voluntary, the risk pooling benefits may disappear if the majority of those who enrol in it are old and / or already sick.
One way which the government can overcome this problem is to attract the young and the healthy to buy into this health insurance scheme. For example, medical insurance cards are increasingly popular among the younger generation these days, especially those who do not have employers who provide healthcare benefits, those who are freelancers or part-timers and those who switch jobs very often. If the government can provide a lower-cost option to existing private health insurance schemes, these lower risk individuals may be tempted to switch to this new option.
The government can also provide other incentives such as tweaking the tax system to make this new health insurance scheme tax deductible and at the same time, force employers to count the health benefits enjoyed by their employees as income (and hence taxable) so that some employees may want to switch to this new and cheaper insurance scheme.
The sustainability of such a voluntary insurance scheme, apart from risk pooling, also depends on the entity which is in charge of running this scheme. If it is a private company that prioritises profit maximisation, then we face the danger of ever increasing insurance premiums, higher deductibles and other forms of health care rationing.
But if it is a government run scheme, with the ability to put pressure and negotiate hard with private hospitals to control costs and charges to patients, the long terms prospects will be much better, for the insured as well as for the government. So far, the Minister has said that it will be run by an NGO but has not disclosed the identity of this NGO yet.
In the long run, it is very likely that the government wants to expand this health insurance scheme to more and more people, including those who are currently using government hospitals. If such a move can control healthcare costs, increase accessibility and protect Malaysians from catastrophic health events, then we should welcome it. But because of the paucity of details and the lack of transparency and trust in the motives of the government, it makes is much harder to have an honest and rational debate on a complicated but very important part of public policy that impacts millions of people in the country.
Dr Ong Kian Ming is the Member of Parliament for Serdang, Selangor and is also the General Manager of Penang Institute in Kuala Lumpur. He holds a PhD in Political Science from Duke University, an MPhil in Economics from the University of Cambridge and a BSc in Economics from the London School of Economics.