One pressing reality that continues to affect all of us is medical inflation.
The cost of healthcare, not just medication, but services and infrastructure, has been steadily rising for as long as we can remember.
It's a persistent issue with no easy solution.
Participants at a health insurance roundtable co-organised by Verisk and Asia Insurance Review unpacked some of the pressing questions surrounding medical inflation such as key drivers and what can be done.
“From my perspective, one of the key drivers of medical inflation is the rapid evolution of treatments and the growing expectations from consumers. When someone receives bad news about their health, they naturally want access to the latest and best treatment options available- not last year’s solution. These newer treatments often come at a higher cost and demand for them is increasing,” said Actuaries onTap founder and CEO Alex King.
Even when projecting future claims, we must consider that new treatments, the ones not yet available, will emerge and people will want them. Social media, online research and platforms like 'Dr Google' make information widely accessible. Patients are more informed and more likely to seek second opinions or push for treatments they’ve read about elsewhere,” Mr King said.
Verisk head of life Jeff Cook tapped on Mr King’s insights saying that medical inflation is a long-standing issue and it is not going to easily disappear.
“While medical inflation is often seen as a negative because it drives up the cost of products, you could argue there's an unseen benefit. It also increases the need and demand for insurance products, potentially opening more opportunities for insurers to reach new markets,” Mr Cook said.
That said, we’re facing some major challenges. Distribution is one, especially in terms of relevance and affordability for the under-30 age group. There's also a fundamental misalignment between healthcare providers, insurers and reinsurers. We, as insurers, cannot own the entire healthcare sector. Profit-driven organisations will always be part of the ecosystem,” Mr Cook added.
Speaking on medical innovation, AXA Life and Health Reinsurance Solutions CEO Laurent Pochat-Cottilloux said there are positive aspects to medical innovation.
“We should welcome the fact that more diseases are becoming treatable and that outcomes are improving. However, one of the core reasons healthcare is becoming so expensive is the fee-for-service model,” Mr Pochat-Cottilloux said.
“There wouldn't be a market for million-dollar injections or high-cost technologies like Da Vinci robots or proton beam therapy machines if we weren’t paying for them the way we do. The industry fuels itself. Prices are going down, not up. Today’s computer is thousands of times more powerful than one from 15 years ago, and yet it’s cheaper,” he said.
“To truly address the root cause, we might need to rethink the entire model. In my view, one potential solution could be bringing clinical decision-making closer to or even within the insurance company so choices around care also consider cost-effectiveness and value,” he said.
Prudential Assurance Company Singapore chief health officer Sidharth Kachroo said medical inflation is largely driven by two key factors, one being overutilisation.
He said one solution was bringing clinical decision-making into the insurer’s domain.
“That’s a big shift, and while it may not be realistic today, it could be a step toward aligning incentives in the future,” Dr Kachroo said.
This roundtable on health insurance in Asia was hosted by Verisk and co-organised by Asia Insurance Review.