The public health sector is underfunded, overstretched in terms of resources and manpower, and has been in this chronic state for a long time serving the majority of the Malaysian population.
Despite annual budget increases, allocations to the Health Ministry (MOH) have never exceeded 10.5% of the federal budget in the past two decades, exacerbating the strain on public health services.
The government’s revenue collection, a mere 16.4% of GDP last year, pales against the escalating federal debt.
Advocates of health financing reform argue that a shift to social health insurance (SHI) is imperative, given their scepticism on the federal government’s ability to adequately prioritise and fund public health.
The idea gained traction with the recent renewed interest of discussions on a national health insurance system, and the Health White Paper tabled in parliament in June also strongly hinted at an insurance-based system, using terms such as strategic purchaser, benefit packages, progressive contributory scheme and the establishment of a health fund.
While SHI could potentially boost the health fund beyond MOH allocations, there are concerns about its cost-effectiveness and societal impact on public health and employment.
If a country is like the United States, where people have to pay for their own healthcare through private health insurance and out-of-pocket spending, then SHI would be a big improvement for them.
But Malaysia’s current tax-based system ensures heavily subsidised healthcare based on entitlement, as simple as showing an ID card, with no other bureaucratic hurdles.
In an insurance-based system, the patient would be asked whether he or she is enrolled in the system, whether the premium has been paid, whether the service required is included in the package of benefits subscribed to, or whether any “top-up” is required to enjoy “more premium” health services in the private sector.
The SHI model would differ from the private health insurance model, in that the SHI would be more inclusive, as it would assess community risk and not exclude people based on their pre-existing medical history.
However, unlike SHI, the current public health system does not require the government to spend money on additional staff to do the administrative work and campaigning to enrol people, collect premium payments and verify or underwrite medical claims from different service providers.
According to a widely cited 2009 World Bank study, there is a 3-4% increase in per capita health spending when a country shifts from tax-based to SHI financing, but without a corresponding improvement in health outcomes. The additional administrative costs alone are the main cause of the increase.
To put this in context, if we were to achieve the 5% of GDP public funding target for health as outlined in the Health White Paper, this means the health fund would have RM78 billion to operate in 2021, of which RM58.5 billion would be for the provision of health services.
Imagine that 3% of the efficiency loss due to additional hiring of administrative staff would be a sum of RM1.8 billion that could otherwise be better spent on other health operations or development purposes.
Health fund board members and decision makers would face intense lobbying and negotiation from the private sector.
Looking at the recent history of the Covid health fund’s dealings with the private sector, one can only be more pessimistic about getting a fair deal and reducing costs for the public.
Recently, the government couldn’t even fend off vested lobbies from the tobacco and vape industries on the tobacco control bill) and private hospitals and clinics (on the mandatory drug price display policy).
Let’s say the government pays for all members of the B40 household and automatically enrols them all, and all other non-B40 employees and workers have to fill the funding gap after taking into account the government’s allocation, which would mean an average premium of RM224 per month or RM2688 per year, would the M40 household in particular be happy with such an additional tax-like levy on the public health service they currently enjoy?
For SHI to be more efficient, enrolment and premium collection from employees and employers is common practice.
The World Bank study also found that a shift to SHI would reduce the formal sector’s share of employment by 8-10%, meaning that some employers would resort to casualising certain positions to part-time or short-term contracts in order to avoid contributing to their employees’ compulsory health insurance. Once again, M40 workers would be the most likely victims.
What would happen to the dynamics of healthcare consumption if there were a large shift in demand for healthcare to the private sector, as permitted by the SHI system, and what would happen to the funding of public hospitals in smaller towns and rural areas?
Can the SHI really be realistically trusted to keep health care costs down if more and more of the population shifts to using the services of the profit-driven private health care sector? Think again.
180th article for Agora@TMI column, published on The Malaysian Insight, 13 Nov 2023
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