More money needed for proper healthcare


Healthcare allocation has no doubt increased in Budget 2015, but is it sufficient to cover the needs of our increasing population, on top of our goal to remain a medical tourism hub?

Malaysia has a two-tier system of healthcare services: a state-led and publicfunded sector exists alongside a thriving private sector. The National Health and Morbidity Survey 2011 report estimates 4.3 outpatient visits to physicians per capita and 111 inpatient discharges per 1,000 capita per annum in Malaysia. The report also indicates that 50% of outpatient medical visits and 74% of inpatient admissions were made in the public sector, and public expenditure as a percentage of total health expenditure was 52.27% as of 2011.

Thus, even though privatisation of healthcare took place in the 1980s and has made gains since, statistics show that the public healthcare sector still plays the leading role in providing healthcare services to public.

Health is included in the federal list in the Ninth Schedule of the Constitution of Malaysia, providing the federal government with the power to manage, plan and implement policies over health matters. Budget 2015, announced in October, has allocated RM23.3bil, or 8.5% of the total budget, to health – a marked increase from RM16.8bil (7.2%) allocated in the previous year.

Still missing the mark

But is this increase good enough? The World Health Organization (WHO) recommends a minimum government health expenditure of five per cent of GDP. Malaysia spent just 3.9% of GDP on health in 2013 even though the federal government had initially proposed to spend 7.7% of the total budget on healthcare that year. Advanced countries such as Germany, the UK, France, Netherlands, Japan and the US spend more than 10% of their GDP on healthcare.

The reality is that as much as 41.72% of total expenditure on Malaysian healthcare was from out-of-pocket expenditure by the public in 2011. Because healthcare, like education, is a fundamental task for the government, it is argued that it must shoulder a greater share of the public healthcare burden.

Healthcare costs on the rise

The increased allocation for healthcare may be explained by higher year-to-year operating costs (e.g. from Budget 2012 [RM15bil] to Budget 2014 [RM20.5bil], there was an increase of 37% in three years). One of the reasons for this rising cost is Malaysia’s ageing demography. Malaysians aged 65 and above made up 5.1% of the total population in 2011 and 5.5% in 2013, and will hit 6.8% by 2020. Malaysia gained 145,300 more senior citizens in the past three years, and the exponential growth in the elderly will require significant investments in the public healthcare system.

The federal government must also draft reasonable healthcare policies to cope with the increasing total population, which is expected to reach 32.4 million by 2020. The efficiency of public healthcare service delivery needs to be improved, and it would be unwise of the government to rely on individuals and the private sector to provide for this.

More inflation from GST

Budget 2015 also announced that almost 2,900 medicine brands treating 30 types of illnesses – including heart failure, diabetes, hypertension and cancer, as well as low fertility – will be exempted from the goods and services tax (GST). This is certainly a good move to keep the healthcare costs low.

However, medicine cost is only part of the total healthcare cost. Other healthcare services (e.g. fees for overnight stays) and medical equipment will still be subjected to six per cent GST. With many goods and services subject to GST, private hospitals will incur higher operating costs, likely leading to an increase in healthcare fees after the implementation of GST.

To ensure that private healthcare is more affordable and accessible to a larger segment of the community, the government will have to allow more competition in the healthcare sector, which should reduce costs across the board. The Ministry of Health (MoH) should also monitor healthcare service charges – especially in the private sector – after implementation of GST.

Tax relief is not enough

Tax relief for medical expenses available to taxpayers, their spouses and children has been increased from RM5,000 to RM6,000 per year for the treatment of serious illnesses such as cancer, kidney failure, heart disease, AIDS, Parkinson’s disease and leukaemia. But the cost of treatment for many of these illnesses far exceeds RM6,000 per year. Cancer treatments, depending on which type and what stage, can cost up to RM300,000. An increase of RM1,000 in tax relief simply cannot be expected to make any significant impact.

Furthermore, the median household income in 2014 is RM4,258 per month, and households earning less than RM4,000 per month will not have income tax liability. Thus, this tax relief is unlikely to benefit most Malaysians, especially the poorer ones who need it the most.

Medicine cost is only part of the total healthcare cost. Other healthcare services and medical equipment will still be subjected to six per cent GST.

More health clinics, please

In Budget 2015, the federal government proposed building 30 new 1Malaysia clinics, but just 20 new fully equipped health and dental clinics. Based on the rate tabled in Budget 2013, 30 new 1Malaysia clinics would cost at least RM8.5mil. Given the budget proposed to build more clinics, one wonders why the government opts for more 1Malaysia clinics instead of normal health clinics.

The Star reported in May 20141 that 1Malaysia clinics are very unpopular, some averaging fewer than 15 patients a day. 1Malaysia clinics were reported to be only manned by assistant medical officers, and the government has since dispatched 30 qualified doctors to these new clinics. The necessity of 1Malaysia clinics, and whether they can be a good alternative to normal clinics, remains in question.

At a waiting room of a local hospital. Spurring the medical tourism industry is important, but measures are best introduced in ways that ensure that local patients continue to enjoy accessible and affordable healthcare.

Balancing medical tourism with local needs

To make Malaysia a medical tourism hub, Budget 2015 extended tax incentives to encourage private sector modernisation and investments. The new incentives for private hospitals or medical centres to admit more than five per cent of international medical tourists are given in the form of 100% Investment Tax Allowance of qualifying capital expenditure for a period of five years. But this incentive runs the risk of encouraging the private sector to prioritise medical tourists over local patients.

Spurring the medical tourism industry is important, but measures are best introduced in ways that ensure that local patients continue to enjoy accessible and affordable healthcare. Malaysia should advisably avoid having a twotier healthcare system with significant differences in quality and accessibility.


Given the limited resources allocated to the MoH to improve the public healthcare sector, the government needs strategic plans to maintain operating costs within a reasonable and effective range while keeping up standards that are comparable to the private healthcare sector. Wastage needs to be slashed, and the government should concentrate on where healthcare matters most, from facility upgrades to training and retaining the services of qualified medical officers. Quality, accessible and affordable healthcare is the right of every Malaysian, and should not depend on differences in socioeconomic status.

1 “Public shy away from 1Malaysia clinics”, The Star, May 11, 2014 ( News/Community/2014/05/26/Public-shyaway- from-K1M-1Malaysia-clinics-in-urbanareas- not-serving-their-purpose/).

Lim Chee Han received his PhD in Infection Biology from Hannover Medical School, Germany. He is a senior analyst in the economics section of Penang Institute.

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