Are GPs really ‘willing buyers’ in healthcare?

The much touted GP town hall with Health Minister Dzulkefly Ahmad came and went recently. One of the largest ever congregations of primary care doctors in Malaysia was assembled at the meet – more than 800 doctors, as reported by the media. This was an important first.

Equally important was the fact that the minister, despite what many people say, was one of the first health ministers to genuinely consider and look into the plight of GPs, and he did end the meeting with the promise that he would do his best to get the harmonisation exercise through the government.

Many issues were raised at the meeting, most of them related to issues pertaining to the consultation fees. Although I remain hopeful that the harmonisation exercise will be carried out and that GPs working out of shop lots will be allowed to charge the same consultation fees as their private hospital counterparts, we do live in “30-day Malaysia” where every issue is “hot” for just 30 days before fading into the background. To paraphrase a former and now current prime minister, “orang Malaysia ‘mudah lupa’!”

One of the issues that popped up prominently during the town hall session was the fact that managed care organisations (MCOs) and third party administrators (TPAs) only reimburse GPs at a rate of RM10 to RM15 for each consultation. This is low and in many cases unfair, especially when compounded with other charges imposed by MCOs/TPAs on GPs.

Unfortunately, I hear that one of the responses from the powers that be was that GPs are “free to choose or discard” whether or not to join the panel of a MCO/TPA. If GPs do not want to be paid such low fees by a MCO/TPA, then they should not be on the panel of said MCO/TPA. In short, it was summarised as a “willing buyer, willing seller” situation – GPs should just not join the MCO/TPAs if they don’t want to.

This is a highly misguided, simplistic view of the situation especially since this is an issue that needs quite a bit of unravelling. I choose to elaborate on this in length since this is an issue which involves almost all of us who work in the salaried sector but yet have very little idea on the magnitude of MCO/TPAs in our daily lives.

First, let me provide a quick refresher. What are MCOs or TPAs? MCOs are private entities that have an arrangement with private healthcare providers to provide healthcare for their client companies, while TPAs are entities that create specific employee health benefit plans and process their claims, again on behalf of their client companies. In certain countries such as the US, there are very clear differences between MCOs and TPAs, but in Malaysia the lines between the two are sometimes so blurred that there seems to be little difference between them.

Decades ago in Malaysia, say in the 1980s, if you were an employer with a factory of a few hundred workers, you would usually have an agreement with a GP who has a clinic near your factory. If your workers fell ill, they would go to the GP and be treated, with their bills in total sent to you at the end of the month. Each worker had a maximum allocation for their healthcare expenditure from the employer’s side and your human resources (HR) person would often have chats with the GPs if costs were overrunning the allotted budget or if there was a high amount of medical absenteeism (via medical certificates or MCs). This system is still in place for many small employers in Malaysia today, especially in small towns.

However, there were a few shortcomings in this system. First was the fact that employees could only get covered at one clinic (or a few clinics located nearby if the GP was part of a chain). Second, this form of employee health coverage was limited to the primary care level and if employees wanted to get admitted to hospital, they rarely had any form of employer-health coverage.

This is where MCOs/TPAs began coming into the picture. On one hand, they negotiate with employers by offering coverage packages. For example, TPAs will cover your employee for all health costs for RM500 a year. On the other hand, MCOs/TPAs negotiate and GPs/private hospitals provide outpatient/primary care and/or secondary/inpatient cover all for that price.

The advantages for employers (and their employees) on the surface appear numerous. For one, there is now the advantage of choice. Instead of all employees having to go to a single GP for good or ill, now they are able to visit any GP of their choice as long as the GP is registered under the particular MCO/TPA. For employers, MCOs/TPAs also have an added advantage in terms of removing from their management the need to oversee and process health claims for their employees from the GP, basically an outsourcing of the HR process.

The economic theory underlying the entire premise of MCOs/TPAs is that of free market competition where every year, different companies choose the MCOs/TPAs that can offer them the best quality care at the most cost-effective prices. The MCOs/TPAs are able to negotiate with different providers, be it GPs or private hospitals, to provide cost-effective care (if not, they just don’t choose you to be on the panel of the MCO/TPA). The noble idea behind this entire premise is that through the MCOs/TPAs, healthcare costs will be kept low.

In reality, however, the scenario is very different. As business entities, MCOs/TPAs are also profit driven. On the demand side of the equation, they squeeze employers with ever-rising employee health benefit packages, citing the rising costs of healthcare services. On the supply side of the equation, MCOs/TPAs are aggressive in price lowering measures including controlling the amount of fees paid to the providers in terms of consultation, administrative fees for every transaction and other strategies. The monetary profits from both ends of the supply/demand chain are then translated into profits – for the MCO/TPA. If this sounds suspiciously like the concept of a middleman, well, that’s exactly what MCOs/TPAs are.

Adding to the problem is the fact that there are not that many MCOs/TPAs to begin with. Thus instead of being a competitive market where an employer is able to pick and choose their MCO/TPA every year based on competitive offer, what you get is an almost monopolistic situation where the MCO/TPAs are in a situation of almost total control. Employers are forced to remain with an MCO/TPA because sometimes there are no other choices of scale. Similarly, providers such as private hospitals and GPs have no choice but to take on MCO/TPAs as clients simply because they are the only entity that all the different employers have signed on to. It’s very easy to tell GPs, “If you are not happy with an MCO/TPA then don’t sign on with them. It’s a willing buyer, willing seller market.”

Take this scenario, for example. In industrial areas all around Malaysia, you get factories and companies clustered with thousands of employees whose health benefit packages are from their employers. All the employers in the area are signed on with one MCO/TPA who pays GPs only RM10 for each consultation. The GP has no choice. He/she is unwilling to “buy” into the MCO/TPA relationship and become their provider but has to do so. If not, not one employee among the thousands of people working there can seek treatment with this GP since they are not “covered”. Therein lies the problem. GPs are not “willing buyers” when it comes to the MCO/TPA relationship but they have no choice.

Ironically, as a “public good”, almost every economist will tell you that healthcare should be regulated and not left to the devices of the free market. Interestingly, while private hospitals and GPs as providers are regulated, MCOs/TPA are not. They are free to engage in any kind of profit-making strategy with little care about how it impacts patient care – the only outcome that should be of any interest in the provision of healthcare (also interesting is the fact that MCOs/TPA are run almost exclusively by people who are not healthcare professionals).

Individual private hospitals, with economies of scale and financial capacities bolstered by the fact that they belong to big conglomerates, are able to better weather the challenges offered by such monopolistic behaviour, but with such loaded dice against them, what can GPs do?

There have been multiple calls and agreements from the health ministry to streamline and regulate MCOs and TPAs under the provisions of the Private Healthcare Facilities and Services Act 1998. Regulating MCOs/TPAs is not a choice of the government which can be carried out in a leisurely fashion. It is a necessity today. Only then can the healthcare market be somewhat restored to some semblance of fairness for individual GPs to actually consent to becoming a “willing buyer”.

Dr M Murallitharan is a public health physician and medical director of the National Cancer Society Malaysia.

The views expressed are those of the author and do not necessarily reflect those of FMT.