Measures to address rising healthcare costs are critical to ensure sustainable access to affordable public and private healthcare following a sustained period of above inflation price rises, said Malaysian Re in its annual report on the country’s insurance sector.
Malaysia’s public and private health systems are under pressure from rising healthcare costs, which at an estimated 15% in 2024 are well above the global average of 10.1%, combined with a rising burden from non-communicable diseases (NCDs) and an ageing population, the reinsurer said in its Malaysian Insurance Highlights 2025.
As a result of rising medical claims, the country’s insurance and takaful operators have faced public scrutiny over premium hikes, leading to Bank Negara Malaysia announcing interim measures to cap a rise in insurance premiums. They have also seen their profits halve.
Malaysia Re said pressures in the public sector were exacerbated by issues of fraud, waste, and abuse (FWA) in private healthcare, which Malaysia tactfully referred to as being ‘additionally challenged by non-aligned interests’, which it said can lead to over-billing.
“To remain relevant and competitive, insurers and takaful operators must innovate and develop Medical and Health products that ease the escalating healthcare cost burden while also adapting to evolving consumer needs and regulatory requirements.
Increased engagement with policymakers to improve regulation and financial protection for Malaysia’s population is essential,” Malaysian Re said in its report.
Malaysia’s government is aware of the problem and it published The Health White Paper for Malaysia in 2022, aiming to strengthen and future-proof Malaysia’s health system by shifting the focus from inpatient treatment to primary healthcare provision, but Malaysia Re said that issues remain.
NCDs were highlighted as a major reason for rising healthcare inflation in Malaysia, with rising rates of conditions such as diabetes, cardiovascular diseases, cancer and chronic respiratory diseases.
Malaysian Ministry of Health data quoted by the reinsurer showed that investment in disease prevention has been limited, with only 6.8% of total healthcare expenditure in Malaysia devoted to prevention versus 68% for curative care.
“Lifestyle risk factors are important for NCDs. For example, in Malaysia, 20,000 deaths per year are attributed to smoking. This highlights the need for stronger preventive health initiatives,” the report said.
Vulnerable groups
Malaysia is facing the additional problem of rapid ageing. And while the country is not greying as rapidly as neighbours Thailand and Vietnam, Malaysia Re said the country’s ageing population presents a long-term challenge.
According to the Department of Statistics Malaysia, by 2030, Malaysia is projected to be an aged nation, with 14% of the population aged 65 and above.
“Older people require more healthcare services and have more complex healthcare needs, which significantly increases healthcare costs. Currently, care for the elderly is largely dependent on family and community support, which is not sustainable,” the report said.
Malaysia said that an additional challenge was the high level of out-of-pocket expenditure in the private healthcare sector, which it said raised concerns about the financial protection of vulnerable groups.
According to the reinsurer, public hospitals in Malaysia bear a disproportionate patient burden compared to the private sector.
“In 2021, for example, despite there being fewer public (158) than private (209) hospitals, public facilities accounted for 76% of all inpatient admissions. A similar split of 74.7% to 25.3% was observed in 2023.
Furthermore, less than 50% of healthcare workers and professionals are employed in the public sector.
As a result, many healthcare workers in the public system are overworked and burnt-out. They are also less well paid than in the private system.
This ultimately affects the availability and potentially the quality of care, and has led to an exodus of healthcare professionals to the private sector or overseas, where working conditions and financial incentives are better, compounding the issue,” Malaysia Re said.
The reinsurer said that to address these issues Malaysia had been working with the private sector over issues such as healthcare financing reforms, including proposals for social health insurance and partnerships with private providers.
It’s not all bad news for Malaysia, despite the heavy reliance on the public sector, state healthcare spending is still around 4% – way below the 10.4% global average recorded by the World Bank in 2021.
The low percentage of state revenues spent on healthcare is despite the government ramping up expenditure in recent years – the 2024 health budget allocation of MYR41.2bn was a material increase on the MYR25bn figure of seven years earlier.
Likewise the 2025 budget allocation is a 10% increase on 12 months earlier.
“However, despite funding increases, Malaysia’s public healthcare expenditure remains below the global average for countries with similar income levels and below the government’s 5%-of-GDP target.
According to the WHO, Malaysia’s public healthcare expenditure as a percentage of GDP ranks seventh among ASEAN countries, a concerning position for an upper-middle-income nation, and is significantly lower than the 6–7% average observed in comparable economies,” Malaysia Re said.
