As Malaysia progresses towards becoming a high-income status nation by the year 2020, the cost of living in the country will inevitably increase exponentially and the cost of medical procedures will also rise in tandem. Medical inflation in Malaysia has been estimated to increase to about 10 to 15 percent annually and based on statistics from the past 15 years, the medical inflation rate has increased by a whopping 107 percent.
Over the course of 15 years, the cost of medical procedures have almost doubled. For example, an open heart surgery used to cost only RM 30,000 in 2000, but in 2015, its cost has more than doubled to RM 62,000. Similarly, the cost of a single total knee replacement surgery was only RM 14,000 in 2000, but has increased to RM 25,000 in 2015. A craniotomy, meanwhile, used to cost RM 32,000 in 2000 but has increased to RM 50,000 now. Angiograms and one-stent angioplastics used to cost RM 4,000 and RM 15,000 respectively back in 2000. Now, the price of these procedures has risen significantly to RM 10,000 and RM 25,000.
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The unstoppable increase in health spending has raised the question of whether the private healthcare system is sustainable in the long term as patients who pay out of pocket will soon private health care out of their reach. When compared with other countries in AsiaPac region, Malaysia’s healthcare expenditure is expected to reach up to U$ 681 per capita by 2018. This indicates that Malaysia is expected to have higher healthcare spending, which in turn reflects the increase in healthcare cost in the near future.
In the coming years, the healthcare industry, will be one of the top growth sectors. This is because is it driven by rising affluence of communities as well as growing number of middle income citizens who have better private health insurance coverage. The rising cost of of healthcare can also be attributed to the rising demand from patients who require better healthcare services. There is a huge growth expected over the years particularly for the lower middle-income bracket.
Even though a person can be healthy, ailments can happen unexpectedly due to old age. Yet, none of us are likely to include major hospitalization bills or expensive medical treatments in our blissful retirement vision. But an unexpected turn of events such as terminal illness or accidents can easily wipe away all your life savings.
There is no question that healthcare expense is a big concern for retirees. In fact, many studies suggest it is the biggest concern that retirees have. Instead of planning ahead, many find ways to limit their spending during retirement years as a way to mitigate the worst of health circumstances.
Why do costs of medical procedures continue to rise?
- Private healthcare operators boast some of the most state-of-the-art equipment available in the market. A good example is the use of X-ray machines decades ago, which have now evolved to more high-tech equipment like MRI. In order to purchase and maintain these new equipment, medical costs will naturally rise. To operate these advanced equipment, hospitals need to hire better qualified staff who require higher wages, which can go up by double the standard amount, naturally increasing cost at all points.
- Demand for more resources and basic needs such as healthcare as country’s population continues to grow. By 2018, it is projected AsiaPac region will consist of more than 2.3 bil people above the age 65. Aging population will require long term medical services and medication, naturally escalating the cost of healthcare.
- Life expectancy of Malaysians has seen a steady increase since 1960s. An average age for a man in the 60’s was only 52 years while for women, 55. In the 80’s, it has increased to 65 and 68. Two decades later, the age for men averaged 72 while for women, 76.
- Lifestyle diseases due to sedentary lifestyle & hectic work schedule have become a common, such as coronary heart disease, stroke, influenza and pneumonia, HIV/AIDS, tuberculosis, lung cancer, diabetes mellitus, lung disease, kidney disease and colon cancer.
Obstacles faced by healthcare industry
Main one is shortage of qualified and specialized medical professionals. It’s not about the numbers since private colleges offering medical courses are mushrooming nowadays. It’s about really competent medical professionals, not just paper qualification. That aside, the doctor to patient ratio stands at 1.:791, and in 5 years from now, based on estimated population of 34 mil, the average ratio should be 1:400.
Second is the ever increasing costs of specialty drugs. Presently, there is no cap for price of pharmaceuticals, which could be one reason for the hike. Additionally, the rising cost of specialty drugs could also be attributed to the increasing rate of raw materials, equipment, labour and also the weakening of Ringgit. Although the Health Minister said that the implementation of GST on April 2015 will not affect the health care industry, the various by products used in healthcare services are not exempt and this has increased costs quite significantly.
The rising costs of healthcare is inevitable in anywhere around the world. Private healthcare serves as a means for people who wants to avoid the long waiting times and reduce the burden of overcrowding public hospitals.
So what can we do as consumer? The smartest option is to plan for private insurance that allows individuals to seek treatment in both public and private healthcare facilities at later stages of life. Medical costs is one of the most overlooked matters in retirement planning. In the long run, the best way to manage costs is to practise financial planning and ensure there is adequate savings to cover medical emergencies.
How to minimize financial impact due to rise in the costs of medical procedures
Don’t wait till you’re sick
Health problems do not discriminate between age and gender. Those who have been known to lead the healthiest of lifestyle could also fall prey to unexpected, life-threatening diseases.
For those who are planning for retirement, healthcare is a huge expenditure to plan for on top of normal living expenses. Unlike travel, hobbies or entertainment expenses in retirement, medical expenses are non-discretionary. If you are sick or injured you need treatment. Having adequate reserves and a good medical coverage can be the difference between a comfortable retirement and one filled with financial challenges.
It is critical that you take a hard look at what your medical expenses might be and factor these costs into your retirement spending estimation as well.
The key product solution for healthcare protection is medical insurance. While people are generally encouraged to start protecting their health at an early age, it is never too late to start tending to your well-being.
But don’t wait till you are sick as medical insurance is only available to those who are in good health because insurance company is required to underwrite one’s risk. Also, the older you get, the more insurance is likely to cost.
The biggest chucks of healthcare costs
As retirement planning needs to be personalised, so is planning for your healthcare cost in retirement as different people will have different health risk factors. As such, it pays to look into your family health history to determine your health risks in order to prepare more adequately towards it.
According to the World Health Organization (WHO), the top killer diseases in Malaysia are coronary heart disease and stroke. There are treatments for these diseases and other critical illnesses but they don’t come cheap. To make matters worse, medical costs are getting higher by the year as our health deteriorates with age. In Malaysia, the medical inflation rate, which is the increase of medical costs, is between 10% and 15% every year.
For instance, medical treatment for cataract costs RM3,500 to RM5,000 now and in 20 years, it could rise to between RM24,000 to RM34,000.
Long term assisted care
Another thing most-overlooked is medical long-term assisted care in a nursing home at their last stage of life. This is so that their family members don’t get burdened with the hassles of taking care of them.
• Home care – for those who are more independent but need a bit of home care.
• Day care – for those who are lonely at home, day care provides interaction with other senior citizens.
• Integrated residential care centers or IRCCs – for those who had a bad fall or are bedridden and will need more care and rehabilitation care.
• Dementia care – for those Dementia patients who need a home where they can walk around, socialize and perform daily tasks in a safe and secure environment.
Long-term care facilities can range from RM1,000 a month with basic care services in semi-private room to RM5,000 a month, in a private room with skilled nurses and in-house doctors providing professional and specialised healthcare for rehabilitation or palliative care. In the United States, four out of every ten people who reach the age of 65 will enter a nursing home at some point in their lives.
About 10% of the people who enter a nursing home will stay there five years or more. In Malaysia, we need to account at least a year stay in a nursing home and it is wise to factor in a 10% a year medical inflation if you are planning ahead for the future.
Planning a smooth sunset ride
It is important that we face our sunset years realistically. While critical illness like stroke or cancer can be fatal, one’s quality of life can certainly be enhanced with adequate medical attention. One of the surest way to address your concerns in the face of medical catastrophe is by getting an insurance policy that will see you through your medical needs.
Here are a few things to note when shopping for medical insurance policy.
• Get a medical insurance when you are in good health.
• Average lifespan of Malaysians is 75, so ensure plan provides protection way beyond that.
• Look for plans that do not impose a fixed lifetime limit to ensure continuous and uninterrupted access to medical care you may require in your old age. Consider an unlimited medical cover that starts over every year, regardless of the amount of claims you have made previously.
• Look for a higher annual limit to help cope better with escalating medical costs.
• Lastly, never ignore the fine print that is almost always at the edge of your documents. Make sure your insurance provider does not impose a co-insurance policy on you, meaning you will have to pay a certain percentage of the hospital bill on your own.
For long-term nursing care, because it is highly unlikely covered by your medical insurance, you would have to actively set aside an amount to be invested to grow this fund.
There is no denying that healthcare costs are a major concern and even bigger expense for most retirees. But a financially successful retirement plan that includes a combination of proper health insurance coverage to provide the necessary medical attention when one gets sick and additional provision for long-term care will definitely set you on a correct path to a solid retirement plan.
Adapted from an article in 4E Journal 4Q 2015 published by FPAM, written by CEO of Ara Damansara Medical Center, Sue Lee, CFP.