Healthcare systems in Asia are under increasing financial and operational strain as populations age, demand for services rises, and chronic diseases become more common, according to AIA Group chief healthcare officer Dr. Kelvin Loh. In an AIA paper titled “PAYOR-PROVIDER ALIGNMENT: Making Healthcare Sustainable in Asia,” Loh said healthcare systems across the region are “straining under the weight of aging populations, greater demand for care, and rising chronic disease rates.” He added that this resource squeeze is “exacerbating medical inflation and throttling access to care at a time when government budgets are stretched, and economic growth is looking uncertain.”
Loh argued that fee-for-service structures in many markets mean payors and providers often respond to different sets of incentives. He said this misalignment can contribute to unnecessary utilization, limited investment in preventive services, and higher out-of-pocket costs for patients. Drawing on patterns seen in other fee-for-service markets, AIA’s analysis suggests that roughly one-quarter of healthcare spending in Asia could be associated with wasteful activity. Examples include unnecessary surgeries and hospital admissions, inappropriate antibiotic use, and missed opportunities for prevention and early intervention. Loh cited “a simple example” of avoidable hospital stays when ambulatory or community care would be clinically suitable.
The paper highlights recent market data indicating that medical cost trends in Asia remain elevated and are outpacing general inflation in several economies. A 2024 report from Mercer Marsh Benefits found that the medical trend rate in Asia – the projected annual increase in medical claims costs – remains “persistently high,” with double-digit forecasts in many markets. For 2025, the report projected trend rates of 15% in Malaysia and Vietnam, 19% in Indonesia, and 21% in the Philippines, all above those countries’ broader inflation measures.
At the same time, World Health Organization data show that households are taking on a growing share of health spending. According to the AIA paper, out-of-pocket expenditures rose 10% in India and Indonesia and 13% in Australia and Singapore between 2022 and 2023, the most recent period available. Loh linked these developments to factors such as limited insurance coverage, constrained public-sector spending, and persistent inequalities in access to care. He cautioned that small, incremental adjustments to benefits design, pricing, or reimbursement are unlikely to be sufficient. Loh argued that “piecemeal changes will only lead to more dramatic and painful changes in the future” if underlying incentives remain unchanged.
Loh described a range of models, already in use in other regions, that aim to bring payors and providers into closer alignment on cost, quality, and long-term outcomes. In the US and Europe, some insurers have acquired or established general practice and specialty clinics, long-term care facilities, and ambulatory centres. Others have formed joint ventures or other commercial arrangements with provider organisations. In parallel, payment mechanisms such as bundled payments are being used to standardize care pathways, limit unwarranted variation, and simplify the patient journey.
Within Asia, AIA is using its own data to adjust how it manages relationships with providers. The group analyses quality indicators and health outcomes, adjusted for patient risk profiles, to identify providers that deliver consistent, evidence-based care. Based on this assessment, AIA is creating preferred provider panels that it can offer to policyholders as part of its health coverage. According to the paper, this approach is intended to give customers access to “more affordable and effective coverage,” while panel providers benefit from “increased volume and consistency on fees.” Loh said an environment that “allows and encourages all parties to assess the viability of these approaches stands the best chance of allowing society to make an empirical determination as to the most suitable and sustainable models.”
Outside full vertical integration, Loh pointed to two system-level requirements for payor-provider alignment: standardised health data and greater fee transparency. First, he called for more consistent recording and sharing of clinical data – including diagnoses, procedures, and laboratory results – at a detailed, line-item level. Standardized datasets across providers and insurers, he said, would allow stakeholders to analyse how care is delivered, compare performance, and identify areas to improve efficiency, quality, and outcomes.
Second, Loh emphasised transparency around charges for treatments and procedures. AIA’s internal reviews have found wide variation in fees for drugs and procedures between facilities with similar profiles, as well as instances where insurers are billed more than patients paying out of pocket for the same item. “Transparency would allow prices to have the signalling effect necessary for market efficiency,” Loh said. With clearer information, he argued, patients could make more informed choices, while insurers could identify cost-effective care pathways and design incentives to support preventive care. He added that transparency is particularly important for smaller insurers that may not have sufficient claims volume to generate robust insights from their own data alone.
Loh said that any significant realignment of incentives across the healthcare value chain will require coordination among governments, payors, providers and patients. “Reform must come about through a multi-stakeholder process that includes governments, payors, providers, and patients. If these groups work together on the basis that access to affordable healthcare is a public good, then patients will benefit through more affordable, more efficient, more patient-centric care, and society at large benefits through reduced aggregate spending and greater health equity,” he said. The paper sets out how AIA views payor-provider alignment as a long-term response to medical inflation and system sustainability, rather than a short-term utilisation control. From a system perspective, Loh said such alignment can improve resource efficiency, promote prevention and chronic disease management, strengthen price signals, and distribute financial responsibility more evenly across stakeholders.
For patients, Loh said, potential outcomes include more affordable and accessible services, better results through evidence-based care, and treatment in the most appropriate setting. For providers, closer alignment can support more predictable revenue, investment in technology and capacity, and longer-term partnerships with payors that emphasise sustainability and preventive health. Loh said these changes are necessary to “bring society meaningfully closer to tackling affordability today, shoring up accessibility and quality for future generations, and reducing the costs to society, like wastage and other externalities of the fee-for-service model.”
