The Great Medical Inflation Puzzle: Who Is Really Responsible? — Dr Rajeentheran Suntheralingam

When two men quarrel, the third rejoices. This ancient proverb has never been more apt than in Malaysia’s current health care crisis. Private hospitals blame insurance companies for demanding crippling discounts. Insurers blame hospitals for creative itemisation and opaque billing. And while these two giants wage their war of words, the patient quietly bears the cost. Yet there is a fourth party in this equation, one that rarely features in parliamentary hearings or industry white papers: the Malaysian public. For if hospitals are spending fortunes on hotel-style lobbies, robotic surgical systems, and luxury inpatient suites, they are doing so because patients reward such investments with their patronage. Every man is the architect of his own fortune, but in this case, the fortune being built is one that all of us, collectively, are paying for. Medical inflation in Malaysia has been rising significantly year-over-year. For 2026, projections place it at more than 16 per cent. General inflation hovers around 2.2 per cent. The gap is a chasm. Various parties have been making public statements over this issue. They reveal a system trapped in a cycle of mutual blame, competitive excess, and forgotten priorities. The Hospital’s Lament: ‘We Are At Their Mercy’ The private hospitals painted a picture of powerlessness. Malaysia’s insurance industry, apparently is controlled by foreign giants, the various medical insurance companies. They say they are at their mercy essentially. The evidence is stark. Insurers are apparently demanding discounts of 25 to 40 per cent. The private hospitals conclude that giving 40 per cent discount means they are subsidizing their client. It doesn’t make sense in a private sector. Even a charity hospital cannot run with 40 per cent discounts. Private hospitals apparently operate on profit margins of just 9 to 11 per cent. Yet insurers threaten de-panelment, i.e. removing cashless facilities, if discounts are not granted. To survive, hospitals have turned to creative itemisation: marking up consumables, unbundling charges, and cross-subsidising high costs through opaque billing. But this, in turn, fuels the very inflation insurers claim to fight. The Insurer’s Retort: ‘We Are Fighting Overcharging’ The insurance industry on the other hand sees a different picture. The PAC report confirmed that non-professional charges (medicines, medical supplies, equipment, and diagnostic tests) are the primary drivers of medical inflation, not doctors’ fees which have been regulated since 2006. These charges are entirely unregulated. They highlight price discrimination, where guarantee-letter patients are charged more than cash payers. They decry unbundling: separately billing for items like pillowcases and alcohol swabs that should be included in room fees. But here is the deeper problem. Hospitals, squeezed by insurers’ discount demands, have responded by raising other charges to cross-subsidise operational costs. The result is a cost-shifting cycle: insurers demand discounts, hospitals raise non-professional charges, insurers raise premiums, and patients bear the burden. The Uncomfortable Truth: The Public’s Role In The Health Care Arms Race Private hospitals increasingly compete not on clinical outcomes, but on hotel-style lobbies, luxury inpatient suites, concierge services, premium architectural finishes, and sophisticated technologies. These investments may improve patient experience, but they also raise a critical question: who ultimately pays for them? The answer is patients. These costs rarely appear as separate charges. Instead, they are absorbed into facility charges, room rates, and bundled procedures. Patients unknowingly contribute to investments that have little direct impact on clinical outcomes or safety. Many Malaysians assume private hospitals offer superior services due to shorter waiting times and luxury amenities. They are drawn to contemporary amenities, lower wait times, and cutting-edge medical technology. When choosing between a utilitarian hospital and one with a marble lobby, patients overwhelmingly choose the latter, even if it means paying more. The private hospitals have acknowledged this reality: private hospitals must invest in advanced treatments, robotics, and cutting-edge technologies to stay relevant. Without these investments, hospitals risk falling behind in providing the best possible care for patients. But “best possible care” has become conflated with “most luxurious experience.” Patients now demand faster and better care, and hospitals compete to provide it. The Forgotten Party: Doctors’ Stagnant Fees Remarkably, one party is conspicuously absent from the blame game: doctors. Their professional fees have been frozen since 2006, with a measly increase in a 2013 amendment of the fees. Doctors’ consultations remain capped, however these limits have not kept pace with inflation, rising operational costs, or the increasing complexity of medical care. Private medical specialists have been given the raw end of the stick for years. Their consultation fees and procedure charges have remained capped while every other professional enjoys the freedom to adjust fees in line with market realities. No other profession is forced to purchase medical indemnity insurance, amounting to six figures a year for higher-risk specialties while simultaneously being told that their fees cannot rise. The Path Forward: Time For A Pause A problem well stated is a problem half solved. We have stated the problem. Now we must act. We must question the arms race in medical technology. Do we need multiple robots in the Klang Valley when two or three centres of excellence would suffice? Should hospitals compete on clinical outcomes rather than the latest gadget? We must separate health care from hospitality. Patients should not be paying for hotel-style lobbies and concierge services. These costs should be transparent and optional, not hidden in bundled charges. We must ask whether medical tourism serves Malaysian patients or exploits them. If luxury infrastructure is primarily for foreigners, why should Malaysian patients bear the cost? A portion of medical tourism revenue should be directed back into the public system. We must end the cost-shifting cycle. Insurers and hospitals must negotiate in good faith, with transparency and regulation, rather than passing costs to patients. We must finally review doctors’ fees. After 20 years of stagnation (except for a measly increase in 2013), it is time for an independent commission to recommend fair, sustainable fees that reflect the value of medical expertise. Finally and most importantly, we must educate the public. Patients must understand that luxury does not equal quality. A marble lobby does not improve surgical outcomes. A hotel-style suite does not reduce infection rates. When patients choose hospitals based on hospitality rather than clinical excellence, they are not merely exercising consumer choice, they are driving up costs for everyone. Conclusion: Utilitarian Vs Luxury Malaysian private health care cannot simultaneously serve the interests of shareholders, medical tourists, and ordinary Malaysians. A choice must be made. Should we focus on a utilitarian, medical-focused hospital dedicated to providing comprehensive, specialised care, such as diagnoses, treatments, and ongoing support for the sick and injured, at a reasonable cost? Or should we pursue a luxurious, seven-star hotel-hospital, defined by marble floors, premium furnishings, and extravagant amenities that ultimately drive up medical costs and inflation? The private health care industry should pause and reflect. The current model, competing on luxury, blaming insurers, and passing costs to patients, is unsustainable. It is time to focus on affordable, value-based health care for Malaysians, not just luxury amenities for medical tourists. But the public must also pause and reflect. Every time we choose a hospital because of its marble lobby rather than its clinical outcomes, we are voting with our feet and our wallets for a system that prioritises hospitality over health care. We are parting with our money, and we are getting luxury in return. But luxury is not health. And health is what we truly need. Finally, the patient is paying. And the patient, ultimately, is the one who suffers.