World Bank Flags Rising Hospital Supply Costs in Claims
According to a report by the World Bank, hospital supplies and services (HSS) constituted 70 percent of the expenses associated with inpatient medical insurance claims.
Charges associated with Health Support Services (HSS) constituted 70 percent of the overall expenses in inpatient Medical and Health Insurance/Takaful (MHIT) claims, with data indicating a rising trend in its proportion.
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The report indicated that across all hospitals within the centralized MHIT database, HSS accounted for 70 percent of the total charges in 2022. This figure increased to 72 percent in 2023 and further escalated to 74 percent in 2024.
HSS encompasses consumable items, laboratory testing, and the utilization of medical and diagnostic devices, including scanners and X-ray machines. The report indicates that the trend justifies a more thorough investigation into the appropriateness of care and the utilization of healthcare resources.
Our analysis reveals a concerning trend: a significant portion of hospital admissions could potentially be prevented. Specifically, conditions that are sensitive to outpatient care, known as ambulatory care sensitive conditions (ACSCs), accounted for 23 percent of hospital admissions in 2024.
It further stated that hospital admissions for ailments like diarrhea and gastroenteritis might indicate a moral hazard, considering that MHIT products predominantly focus on covering inpatient care.
The increase in claim costs ranked as the second most significant factor contributing to the escalation in expenses, responsible for 25 percent of the growth. The report additionally discovered that the inflation rate for claims had increased significantly to 21.6 percent, markedly outstripping the 13.2 percent premium inflation rate, thereby eliciting concerns regarding the long-term viability of private health insurance.
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The statement suggested that the increase might be associated with the demand for postponed medical treatments following the pandemic; however, it is anticipated that this trend will stabilize as the foundational effects of Covid-19 diminish.
One of the suggested initiatives includes the implementation of a foundational MHIT plan aimed at enhancing affordability and curbing undue usage, with yearly coverage caps initially set at RM100,000, which will automatically increase to RM150,000. According to the report, this would adequately cover 99 percent of treatment occurrences.
The report additionally underscored inefficiencies in hospital billing, pointing out that unregulated hospital service and supply (HSS) charges constitute between 70 percent and 74 percent of the overall costs and are susceptible to overutilization. A gradual transition to diagnosis-related group (DRG) payment systems was recommended to promote more efficient healthcare delivery.
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The proposal also recommended changes to provider networks, including the structuring of hospitals into tiers and the implementation of varied co-payment schemes, to enhance cost transparency and ensure that care delivery adheres to best practices. Officials stated that addressing the escalating costs of medical care demands a collaborative effort among insurers, healthcare providers, and regulatory bodies.
The report indicated that the existing design of the MHIT product could be a factor in increased utilization, highlighting the importance of establishing annual limits. The statement suggests that introducing a phased deployment of the DRG system might diminish the motivation for providers to inflate HSS. Simultaneously, revising the hospital billing structure could enhance clarity and transparency.