KUALA LUMPUR (Dec 11): The diagnosis-related group (DRG) pricing system to regulate private hospital bills is more likely to be rolled out by the second quarter of 2025, Health Minister Datuk Seri Dr Dzulkefly Ahmad said on Wednesday, as the Private Healthcare Facilities & Services Act 1998 must first be amended.

“I actually want this to be completed as soon as possible. However, it requires extensive engagement because it involves multiple parties," Dzulkefly told reporters at Parliament.

Prime Minister Datuk Seri Anwar Ibrahim had on Tuesday stressed the urgency of accelerating the rollout of the DRG system, and that the government was looking at doing so early next year — which typically refers to the first quarter — citing rising medical costs that have caused medical insurance premiums to surge by 40% to 70%, sparking widespread public concern. 

Anwar made the statement when speaking in Parliament on the government’s plans to review the private healthcare law that governs and regulates private healthcare services in Malaysia.

The DRG is a healthcare pricing system that sets a fixed amount based on the complexity of the case, as opposed to the traditional fee-for-service model that involves itemising each charge. Many advanced countries, including the US, South Korea, Japan, and European nations, have adopted the DRG system.

Dzulkefly said Malaysia needs the DRG system "because we aim to establish a system of repayment, reimbursement, and charges. Currently, we only have consultation fees."

The Health Ministry, he said, is focusing on transparency in drug pricing and other costs.

"With the DRG system, there will be greater transparency, so patients will know what they are being charged. For example, in our outsourcing arrangements, we use a bundle payment system. It’s not about paying for each individual service. For specialties like cardiothoracic surgery, cardiology, and nephrology, we use bundled payments. In this model, the DRG will also function similarly, so patients will know their charges upfront,” he said.

The minister added: “We aim to ensure this system is effective, as it will contribute to a value-based healthcare approach that is fair to insurers, private healthcare providers, and patients alike.”

The Association of Private Hospitals Malaysia (APHM), which represents over 150 hospitals across the country, has called for a transparent and collaborative discussions with all stakeholders to urgently address the issue of healthcare costs.

“We must understand and find a solution that will benefit the patient. DRG and amending the Act may be options, but will they address the issue? We need to study this together. That is our suggestion for the sake of our people, considering the broader perspective and long-term gains, as we move into advanced technologies like digitalisation, artificial intelligence, and innovative treatment methods,” said APHM president Datuk Dr Kuljit Singh, when contacted by The Edge.

“All stakeholders must discuss cost containment in the right direction. The bottom line is that we are not against cost containment, but we must do it the right way,” he added.

In 2023, Malaysia saw medical cost inflation rise by 12.6%, more than double the global average of 5.6%.

APHM has previously argued that the healthcare sector does not generate excessive profits, noting that profit-after-tax margins of 9%-11% are relatively modest compared to other sectors.

Meanwhile, the Life Insurance Association of Malaysia, the Malaysian Takaful Association, and the Persatuan Insurans Am Malaysia have stated that the premium repricing is an "unavoidable measure", driven by rising medical treatment costs, advanced healthcare technologies, and the increased use of healthcare services.

Bank Negara Malaysia, which regulates the insurance industry, on the other hand, told insurers and takaful operators to be "more reasonable" with their repricing amid public concerns, suggesting that this could be achieved by gradually increasing premiums over time, as well as offering "viable" and "meaningful" options. The central bank has yet to disclose the options.

Since September, insurers and takaful operators have been required to offer consumers the option to purchase medical insurance products with a co-payment feature, which basically gives policyholders the option to share in the medical costs as a way to reduce their premiums. In short, those who do not take up the co-payment feature will have to pay higher premiums for their medical insurance.

For more Parliament stories, click here.

Read also:
Discussions on DRG implementation underway — Dzulkefly
Insurers say still in talks with BNM over recent hikes in medical insurance premiums
Malaysia aims to implement system to standardise private healthcare costs early next year — Anwar
Medical inflation: Govt to revoke commitments to ‘one or two’ drugmakers, shift to generic drugs, says PM
MOH exploring use of Diagnostic Related Groups to address surging private healthcare costs
Private hospital operators plan to expand price assurance initiative, says association