Governments want the middle class to pay their way
Policymakers in Southeast Asia are developing a new way to contain public health costs: Make more of their citizens pay their own way. Most countries in the region developed national health-care networks decades ago, and they are not about to shut down their publicly funded hospitals. Regional policymakers, though, are watching with concern the rising cost of health care in the U.S. and other developed countries. Officials in Kuala Lumpur, Singapore, Bangkok, and elsewhere worry they'll face a similar squeeze unless they get costs down now.
So governments are starting to require citizens whose income exceeds certain limits to pay for their own health insurance. They also want private-sector hospitals to take some of the heat off the public networks. "There's a concerted effort to make sure the rich consume their health care in private hospitals," says Vincent Chin, managing director for the Boston Consulting Group in Kuala Lumpur and adviser to the Malaysian government on health-care policy. At the turn of the century, only 20 percent of Malaysian patients used private-sector hospitals, he says. The government wants that number to hit 40 percent by 2020, according to Chin.
Singapore is aggressively promoting the switch away from government hospitals by adjusting the amount Singaporeans pay for procedures based on their income. Thanks in part to this change, half of Singapore patients now use private-sector hospitals, up from 20 percent in 2007. "We do not dangle the myth of free health care. Instead we argue for individual responsibility and some co-payment," Health Minister Khaw Boon Wan said at a health-care summit in Singapore in July. "Nobody is denied good care. But if you demand nonessential services, please pay."
This approach has caught the attention of hospital operators. Kuala Lumpur-based Columbia Asia, which is backed by U.S. investors, has 17 centers in India, Malaysia, Indonesia, and Vietnam and is opening another 17, all of them catering to local patients. "The demand is tremendous—and it's not five years down the road, it's today," says Daniel R. Baty, Columbia Asia's largest shareholder. "Clearly, governments in these countries have made the decision they are not going to be involved in health care." Columbia's no-frills service is less luxurious than some other private hospitals yet more efficient than the public networks.
Other hospital companies anticipate a flood of new business. India's Apollo Hospitals has opened six new facilities with a total 750 beds in the past year. Bangkok Chain Hospital, one of the largest operators in Thailand, is adding two new hospitals. In August, Malaysia's state-controlled investment company, Khazanah, took control of Singapore-based Parkway Holdings, which has more than 3,400 beds around the region. Indian operator Fortis Healthcare, which lost out to Khazanah, still wants to make acquisitions, CEO Bhavdeep Singh said on Sept. 2.
Privately held Gleneagles Intan Medical Center in downtown Kuala Lumpur is a good example of what middle-class patients can get. Shopkeeper Low Cher Yet recently transferred his 78-year-old mother to Gleneagles Intan after waiting months for results of kidney and liver tests by government-paid doctors. "Yes, it is expensive in a private hospital like this," he says. "But at least it is good."
The Chinese government, which has controlled almost all health care in the country for decades, may soon follow the lead of Singapore and Malaysia. The Health Ministry and other government departments have agreed in principle to open the market to foreign-owned hospitals, according to a Sept. 7 report in China Business News, a newspaper published by state-run Shanghai Media Group. "You have this push by governments to essentially create demand for private hospitals," says BCG's Chin. Hospital operators "have almost an assured growth model."
The bottom line: Health-care policymakers in Asia are encouraging more affluent Asians to use private hospitals and their own funds.