Malaysia’s healthcare RESET: what comes next?

Malaysia's healthcare system is facing rising medical bills and insurance premiums, prompting the government to implement RESET, a comprehensive reform effort targeting medical inflation. Led by the health and finance ministries, Bank Negara Malaysia, and industry players, RESET focuses on value-based healthcare, cost-effective service delivery, and improving access to quality care.

The strategy comprises five key components: MediAsas, price transparency, digital health system enhancement, cost-effective options, and changes to healthcare provider payments.

Khazanah Research Institute's associate Ilyana Mukhriz noted that it is too early to determine the effectiveness of RESET, particularly MediAsas. She emphasized the need for more information on MediAsas' uptake and impact on costs, suggesting that a pilot study is a good starting point to assess its potential. Ilyana also called for the publication of data on MediAsas' take-up rates, affordability, and financial sustainability.

The digital health system is another critical aspect of RESET. The health ministry is pushing for interoperable electronic medical records through the Malaysia Digital Health Certification Network to improve information-sharing, reduce duplicate testing, and increase billing transparency. Mukhriz praised the renewed push for digitalization as a positive step but highlighted potential challenges, such as development and maintenance costs, outdated infrastructure, and reluctance among healthcare workers.

Changes to healthcare provider payment mechanisms are also part of RESET, with a focus on Diagnosis Related Groups (DRGs). Under this system, payments would be based on categories of patient cases rather than separate charges for each service. Ilyana acknowledged that this approach could help combat overbilling and overconsumption but warned that providers might be incentivized to reduce hospital stays, tests, or procedures to minimize costs.

She emphasized the need for robust monitoring and a risk-adjustment framework to consider patient complexity.

Price transparency in private healthcare services has been introduced, but Mukhriz stated that it is too early to assess its impact on healthcare costs. She described the initiative as a positive step and called for the publication of data on its effectiveness. Over time, indicators of success could include narrower price gaps between providers, lower insurance claims costs, improved patient decision-making, and slower medical insurance premium growth.

While RESET encompasses various measures intended to combat medical inflation, Ilyana stressed that it should be seen as part of a broader, all-of-government approach. She highlighted the importance of tax-funded healthcare, prevention, and addressing the needs of an aging population. Ultimately, RESET is one of many initiatives that the Malaysian government should focus on to ensure the health of the nation.