Shortly after it was elected, the unity government introduced Menu Rahmah offering cheap meals at RM5 per plate to address concerns about high food prices. We do not hear much about that scheme anymore.
Now, because people are concerned about escalating medical insurance fees the government has launched the Medical and Health Insurance/Takaful (MHIT) scheme which is a lower-cost insurance product to be offered commercially by medical services companies. It is essentially Menu Rahmah for private healthcare providers.
Recently differing views have been exchanged between economists and health policy experts who are very cautious about the proposal and private sector medical providers, who will make money from the scheme and think it is a great idea.
So, who is right? The experts or the purveyors of private medical services?
Buying an MHIT product will be voluntary, so the demand will come from two sources, existing policyholders who drop expensive medical insurance schemes and switch to the new lower-cost product and new policyholders who join the market in the hope of getting access to private healthcare.
This will reduce the demand for existing policies which might cause people to be under-insured on the cheaper plan. It could also encourage new policymakers to take the low-cost option in the belief they are well-covered only to find that they have to pay out-of-pocket when cover ends or they face costs not covered by the scheme.
The new MHIT products will also be offered by insurance companies on a voluntary basis. Some may offer the MHIT as a low-cost option. The annual limit is too low for major treatments, and the exemptions will be high for the low-cost options.
The basic MHIT product provides RM100,000 minimum coverage. This puts more money into the system which increases demand for private healthcare, so prices are likely to rise not fall. As prices rise, RM100,000 buys less treatment so either people top-up out-of-pocket or they go back to public hospitals partway through treatment.
The MHIT might also disrupt the market, forcing down prices for health insurance coverage without a guarantee of increasing the number of policyholders. Lower coverage prices have lower annual limits and more exemptions which is a bad outcome for everyone.
MHIT is voluntary so you still have a small risk pool and because the premium is low it might not cover the risk.
To make the scheme viable insurance companies will cut eligibility criteria, exclude patients and treatments and have high deductibles to be covered out-of-pocket by patients who only find out at the last minute.
So it will really be private commercial healthcare companies that benefit not patients or insurers. In fact both patients and insurers may be worse off.
Above all medical inflation will not be solved with a private insurance scheme like this. Medical inflation can only be cut if the government is the sole purchaser of the services on behalf of the patients. Then the government can control the prices and regulate over-prescription.
We will have to wait and see what happens next, but it is likely that either existing policyholders will switch to MHIT and in the process damage the market or no one will buy it and it will not solve the problem.
As a general rule healthcare should be funded by the government not by the insurance industry.
One way to do this would be 1% e-payments tax (EPT) on all electronic transactions which would raise RM28.8 billion, almost enough to cover the RM30 billion out-of-pocket expenses already spent on healthcare, and provide universal free coverage without paying extra for insurance fees that only benefit the private medical industry.
The views expressed are those of the writer and do not necessarily reflect those of FMT.
