Kenanga Research says a revamped healthcare insurance system could lead to better overall healthcare services for Malaysians.
PETALING JAYA: The introduction of a national healthcare insurance scheme is likely to be back on the table, assuming a market-friendly outcome of the upcoming state elections, says Kenanga Research.
The research house expects private healthcare providers IHH Healthcare Bhd
and KPJ Healthcare Bhd to be clear winners of the potential introduction of such a scheme.
In its latest report, Kenanga Research said: “The time is running out for an overhaul of the healthcare system with public hospitals overflowing with patients and long waiting lines at emergency wards as well as ensuring universal coverage for healthcare needs for all Malaysians.”
Presently, Malaysia has a dual healthcare funding system, namely, private and public.
Kenanga Research noted, “In our view, a revamped healthcare insurance system could lead to better overall healthcare services for Malaysians, lower out-of-pocket spending, reduced waiting times and access to more modern medicine and technology.
“Moreover, it would also allow for new treatments, drugs and therapies to be made available for patients not available at government hospitals,” it pointed out.
The research house also suggested the system could entail a single-payer, multiple-provider arrangement, where public and private hospitals would provide equal facilities and functions to a patient versus the current multi-payer, multi-provider system.
“Basically, it would mean everyone has to contribute. Theoretically, all working citizens are obligated to set aside a portion of their income into a fund, which they can draw upon to pay their own medical bills when the need arises,” added Kenanga Research.
As an example, it said that in a single-payer system, private healthcare insurance could play the role as a co-insurer for services not included in the national healthcare insurance fund, but it will be the insurance fund that decides on the co-payments and not the service provider.
“The set-up could mean lower overall healthcare costs for the country, as a single-payer system would have greater leverage in dictating prices to providers than multiple buyers in the current system comprising various government agencies, individual patients and insurance companies,” the research house noted.
As for the cost of treatment, except for co-payments, it is paid by the fund. However, the cost of services to be delivered would be negotiated by the insurance fund with the providers.
Hence, Kenanga Research said the key advantages of a single dominant-payer system are lowered costs due to competition among healthcare providers and the ability to demand for better services from both the public and private sector.
It also cited that both Singapore and Australia were currently operating on single payer funding models.
Hypothetically, upon the introduction of a national healthcare insurance scheme, Kenanga Research said its financial year 2024 (FY24) earnings forecasts for IHH Healthcare and KPJ Healthcare could be raised by as much as 12% and 25% and their target prices by as much as 7% and 25% to RM7.50 and RM1.90, respectively, based on the same valuation basis (without new expansion).
While an overhaul of the local healthcare system of this scale may take a long time to accomplish, the research house said, “Given the forward-looking nature of the market, we believe the share price re-rating could happen as soon as the government demonstrates a firm commitment towards achieving it.”
Apart from being potential beneficiaries of an overhaul of the local healthcare system, we continue to like IHH Healthcare and KPJ Healthcare for their pricing power, an ageing population and rising affluence.
Kenanga Research, which has an “overweight” call on the healthcare sector, said it likes IHH Healthcare and KPJ Healthcare for their market positions.
IHH Healthcare has a presence in Malaysia, Singapore, Turkey and China. KPJ Healthcare, meanwhile, has the largest network of 28 private hospitals in Malaysia versus the 16 of IHH Healthcare, it added.
