[The Edge Malaysia] Opinion: Beyond financing healthcare: Building a sustainable healthcare model for Malaysia - by Dr Raymond Choy
Malaysia is unlikely to find one financing mechanism that solves every healthcare challenge. Public financing will remain fundamental, while insurance and takaful will continue providing financial protection.
(Sept 21): Dr Sean Thum’s recent article, Building a social market for Malaysian healthcare, raises an important question at a critical time for Malaysia: how do we preserve access, quality and choice while ensuring that healthcare remains affordable and financially sustainable?
The concept of a social market provides an important framework for this discussion. However, as Malaysia considers reforms to healthcare financing and provider payment, perhaps we need to broaden the question beyond simply who pays for healthcare to also examine what we are paying for, how we pay for it, and what outcomes those payments produce.
The urgency is reflected in Malaysia’s latest medical claims data. The Malaysia medical claims inflation report 2025, published by the Life Insurance Association of Malaysia, Malaysian Takaful Association and the General Insurance Association of Malaysia, reported medical claims inflation of 12.28% in 2025, with more than one million claims recorded. Claims frequency increased by 11.22%, while the average cost per claim increased by only 0.95% to RM12,446.
Compared with 2019, claims frequency is approximately 38% higher and average claim severity approximately 39% higher. Medical claims inflation recorded a 13.62% compound annual growth rate between 2023 and 2025, while medical claims typically account for 75% to 80% of medical insurance premiums.
One figure deserves particular attention. Claims increased by 11.22% in 2025, while the average cost per claim increased by only 0.95%. This suggests that Malaysia does not only have a healthcare cost problem. We increasingly have a healthcare utilisation and sustainability problem.
Costs nevertheless remain elevated. Private hospital cost of care increased by 5.86% in 2025 and private daycare by 2.3%. If healthcare utilisation continues to rise while the underlying cost of delivering care remains high, simply transferring those increasing costs between insurers, employers and patients will not make the system sustainable.
Sustainability cannot simply mean shifting the bill
From paying for activity to purchasing value
Instead of asking only how much a consultation, medicine or procedure costs, we should increasingly ask whether the patient received appropriate care, whether it was delivered in the appropriate setting, whether clinically equivalent and more cost-effective alternatives existed, whether unnecessary escalation was avoided and, ultimately, whether the patient achieved a good outcome.
The objective should not simply be to reduce healthcare utilisation. Patients who genuinely need healthcare should receive it, and delaying appropriate treatment may ultimately create worse outcomes and higher costs.
The goal should be better healthcare utilisation, not simply less healthcare utilisation. This means helping patients receive the right care, in the right setting, at the right time and at the right cost.
For one patient, telehealth may be appropriate. Another may be managed through community pharmacy services. Some require physical assessment by a GP, while others genuinely require specialist or hospital care. The question therefore needs to evolve from “Can this patient make a claim?” towards “What is the most appropriate way to manage this patient’s healthcare need?”
We need to move upstream
Hospital payment reforms, including diagnosis-related groups (DRGs), can play an important role in improving efficiency and predictability. However, value-based healthcare cannot begin only when a patient enters hospital. By then, many opportunities to influence the trajectory and cost of care may already have passed.
Healthcare transformation must therefore move upstream into prevention, healthcare navigation, pharmacy, telehealth and particularly primary care.
If hospitals progressively adopt episode-based and value-based purchasing, Malaysia should also explore alternative models in primary care. These could include population-based payments, subscriptions, bundled services and episodes of care alongside traditional fee-for-service arrangements.
For common conditions, an episode of care could encompass consultation, appropriate medication, reasonable follow-up and clear escalation protocols. The economic unit then begins shifting from each individual transaction towards appropriately managing the patient’s healthcare need.
Importantly, value-based healthcare should never simply mean paying doctors less. A sustainable healthcare system must also be sustainable for healthcare providers. High-quality and efficient providers should benefit from stronger partnerships, predictable patient flows and incentives aligned with outcomes.
From processing claims to managing healthcare
Addressing medication costs, price transparency, inappropriate utilisation, waste, fraud and abuse must also form part of this transformation. Across millions of healthcare interactions, relatively small improvements in treatment choices, medication purchasing, clinically appropriate generic utilisation and provider pricing can compound into meaningful system-wide savings.
Technology and data can increasingly identify unusual utilisation and significant price variation earlier. More importantly, they can help patients navigate towards appropriate care before unnecessary expenditure occurs.
Historically, much of healthcare administration has focused on eligibility, provider panels, claims processing and payment. These remain necessary functions, but the next generation of healthcare infrastructure should increasingly help determine where patients should receive care, what an appropriate episode should cost, how medicines can be optimised, whether utilisation is appropriate and what outcomes are achieved.
We therefore need to evolve from predominantly processing healthcare claims towards orchestrating healthcare journeys. If we wait until a claim arrives before trying to manage healthcare costs, we may already be intervening too late.
Building a sustainable healthcare economy
Malaysia is unlikely to find one financing mechanism that solves every healthcare challenge. Public financing will remain fundamental, while insurance and takaful will continue providing financial protection. Fee-for-service will remain appropriate for many services, while DRGs, bundled payments, capitation, subscriptions and outcome-linked incentives can each play different roles.
The opportunity is to build a blended healthcare financing architecture, where different mechanisms work together around the patient rather than operate as disconnected silos.
At Heydoc Health, these questions increasingly shape how we think about healthcare. We are exploring subscription and episode-based primary care, healthcare navigation, medication optimisation, provider cost intelligence and analytics around healthcare utilisation. We certainly do not claim to have all the answers, but one lesson is becoming increasingly clear: simply digitising the existing healthcare financing model will not be enough.
A digital claim is still a claim, and a digital fee-for-service transaction remains fee-for-service. Technology becomes truly transformative when it enables us to redesign how healthcare is accessed, purchased, coordinated, measured and rewarded.
The latest claims data should therefore be viewed as more than another warning about medical inflation. More than one million claims, double-digit claims inflation and rapidly increasing utilisation are signals that healthcare sustainability requires collective action from government, insurers and takaful operators, employers, healthcare providers, technology companies and patients themselves.
Thum’s social market provides an important framework for this conversation. The next step should be to extend that thinking across the entire healthcare journey, particularly upstream into prevention, navigation, medicines and primary care.
For too long, healthcare financing discussions have primarily asked: Where will we find more money to pay for healthcare?
Perhaps the more transformative question is: How can every ringgit we already spend create more health?
That shifts the conversation from financing healthcare towards purchasing health, from paying primarily for activity towards rewarding value, and from managing healthcare costs after they occur towards improving healthcare before those costs arise.
Malaysia does not simply need a healthcare system that we can continue to pay for. We need one that can continue to care for Malaysians for generations to come.
In my humble opinion, that is the real meaning of healthcare sustainability.
Source: The Edge Malaysia