This article first appeared in Forum, The Edge Malaysia Weekly on March 24, 2025 - March 30, 2025

As our nation advances economically and ages rapidly, health is increasingly one of the foremost concerns for Malaysians. I am deeply concerned about the rising costs of private healthcare, as access to affordable, quality healthcare is essential for all.

I often remind people that I serve as minister of health, not just for the Ministry of Health-run hospitals and clinics, but for both the public and private sectors. Challenges such as private sector medical inflation are not merely problems to solve in isolation, but a generational opportunity to transform private healthcare towards a value-based paradigm.

This has been my approach since I raised the challenge of private sector medical inflation at my first opportunity with the Parliamentary Special Select Committee on Health (PSSC-Health) on April 2, 2024, even when public discourse was primarily focused on the long-standing underfunding and overcrowding of the public sector.

My health transformation team promptly followed up by developing high-level, comprehensive solutions to transform our health system, including addressing the fundamental causes of medical inflation, as a whole-of-nation approach in collaboration with key partners such as Bank Negara Malaysia.

These were presented to PSSC-Health on Aug 27, 2024, and included several key initiatives that pertain to the private sector, such as implementing diagnosis-related groups (DRGs), enhancing strategic purchasing, transforming private health insurance and takaful systems and strengthening primary healthcare, which is particularly crucial to shift the burden away from hospitals and curative care towards prevention and proactive chronic disease management.

Our whole-of-nation approach has now evolved into a comprehensive plan, one that does not merely address inflation but leverages this challenge as a catalyst and an opportunity to reorient private healthcare towards a future-proof value-based paradigm that serves all Malaysians sustainably. Allow me to share a few of the initiatives on the horizon and the benefits they will bring.

Our current generation of private health insurance and takaful products have significant challenges, from unsustainable premium increases to coverage gaps. As a whole-of-nation response, various government ministries and agencies are collaborating with industry to co-create a modernised voluntary private health insurance/takaful base product to be offered by existing private insurers and takaful operators. Ultimately, this can serve as the default option for Malaysians seeking private healthcare, which is open to all but targeted at private sector employees (including government-linked companies and small and medium enterprises) and their families, with these key elements:

Life course coverage to protect you throughout your life course by incentivising early enrolment while young and healthy, with the commitment of a continuity strategy across employers, employment states and after retirement, and an actuarially sound pathway to include those with pre-existing conditions.

Value-based healthcare will be the guiding paradigm and expressed through an evidence-based benefits package and formulary that prioritises cost-effective health technologies to ensure affordability and sustainability, and modernised payment systems that involve a phased transition away from inflationary fee-for-service (FFS) payments towards efficiency- and quality-enhancing DRGs. Care will be taken to ensure a considered, balanced and evidence-based approach towards generics, innovator, high-cost oncology drugs and robotic surgery.

A broad-based provider network will be leveraged, inclusive of mid-priced private hospitals, non-profit hospitals, and our soon-to-be-launched Rakan KKM “premium economy” services.

Additional financing is being explored with the Ministry of Finance and the Employees Provident Fund to optimise tax incentives for both employers and employees, and to unlock the use of the EPF’s i-Lindung platform, potentially unlocking game-changing additional amounts of private financing, without burdening taxpayers and employers, or reducing employee take-home pay.

Supplementary tiers can be offered by insurers and takaful operators to provide the choice of additional benefits building on this base product.

As this base private health insurance/takaful product has not yet been given a name, suggestions are very welcome. Please use my Twitter handle @DrDzul.

Many will already be aware of Rakan KKM, which I described in an article in Issue 1546, Oct 21, 2024. Rakan KKM is a win-win-win initiative to (i) increase the income and retention of public healthcare teams so they can serve all, while (ii) using excess revenues to cross-subsidise public patients and invest in our infrastructure and equipment. Rakan KKM also (iii) provides the option of more affordable “premium economy” services, which is especially relevant given medical price inflation. Even for those not directly using Rakan KKM, this initiative serves as a price benchmark, helping inform consumers, insurers/takaful operators and private hospitals of appropriate pricing levels for comparable services. Rakan KKM is already in a pre-operationalisation phase and is scheduled to welcome its first patient later this year.

Many have asked whether medical inflation in the private sector has further strained public hospitals as patients lose insurance coverage or struggle to afford private care. Following the pandemic, in line with global trends, rising non-communicable diseases and ageing, we have witnessed a significant surge in demand for inpatient services across both the Ministry of Health-run and private hospitals. While this increase has fuelled congestion in public hospitals and inflation in private hospitals, the data reveals an interesting pattern: the relative shift in hospital usage is actually trending towards private hospitals, evidenced by a dramatic 42% year-on-year increase in private hospital inpatient admissions from 2022 to 2023.

Our vision for Malaysia’s healthcare future considers both public and private sectors as complementary pillars within one system. The private sector initiatives outlined above work in tandem with our ongoing public healthcare strengthening efforts, including comprehensive digitisation and workforce optimisation. Innovative models like Rakan KKM, which are not dependent on the government budget, also free up financial resources in our public hospitals for remaining patients, thus ensuring more equitable resource distribution throughout the system. This integrated approach allows us to maximise the impact of every healthcare ringgit, delivering better outcomes for all Malaysians regardless of where they receive care.

Datuk Seri Dr Dzulkefly Ahmad is the minister of health

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