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Utter Economics

Budget Cuts Wounding Public Health

Slashes made to public health and medical care expenditure contradict the government’s “enhanced healthcare” provision promise and put public health at risk.

“Health is everything. As such, concerted efforts will be implemented to enhance the health levels of the rakyat and quality of the healthcare in the country,” said Prime Minister Datuk Seri Najib Razak during the tabling of Budget 2017.

However, the ability of the government to deliver on this promise may be jeopardised by the serious budgetary reductions in public health and medical care operational expenditure (Opex). This year, medical care services, which cover hospital supplies, blood transfusion medication and pharmaceutical supplies, suffered an RM589mil allocations cut, dropping by 12.9% from RM4.576bil in 2016 to RM3.987bil in 2017. Public health allocations fared even worse, falling from RM1.483bil in 2016 to RM1.245bil in 2017, amounting to a 16% reduction.

As Table 1 shows, budget cuts have been made to almost all items listed under public health and medical care. Apart from cardiothoracic treatment, expenditure cuts have been made in significant areas such as pharmacies and supplies for public health, where opex fell by 11.9%, family health development (17.9%), and forensic science, which saw the biggest decrease (56.7%).

The anecdotal evidence that emerged recently, including cases of laboratory tests being suspended and the shortage of medicines,[1] already points to funding challenges faced by the Ministry of Health (MoH). It will not be surprising if further budget cuts in these key areas lead to more such cases in 2017.

One division that has experienced worrying cuts in resources is disease control, where allocations were reduced by 22.6%. The division now will receive RM53.1mil less than last year. Such cuts will jeopardise the government’s ability to combat dengue, which is already at record levels in urban areas, as well as the lurking threat of Zika.

The MoH is already buckling under the weight of rising medicine costs and anticipated increases in patient load. Cutbacks on services and supplies only cripple its ability to handle these challenges, much less rise to meet new ones.

Workforce and Outsourcing

These concerns aside, there have been some positive measures made to the MoH budget. In certain areas, allocation has actually increased; one example is the introduction of an additional grade 56 between grade 54 and JUSA C, which will give timely and well-deserved promotions to medical and dental specialists and encourage them to remain in public service.

According to budget estimates, this will result in an additional RM1.1bil spent on emoluments (Items 2 and 3 under Dasar Baru), accounting for 83.2% of the total increase for emoluments in 2017. The estimates further show that MoH intends to retain a large majority of the current workforce (generally reflected in Bil. Jawatan) while maintaining a 20.3% budget cut on management costs, which suggests a desire for “lean management” practice.

While increasing allocations for emoluments is a step in the right direction, other increases in operating expenditure are somewhat harder to justify. For example, in the budget estimates, a whopping RM2.015bil was specially allocated for a programme covering the “privatisation of hospital support services.” In his parliamentary reply, health minister Datuk Seri Dr S. Subramaniam clarified that this special allocation would be given to five outsourced companies tasked with providing hospital support services such as facility maintenance engineering, biomedical services, biochemical waste management, and laundry and cleaning services. All in all, 148 public hospitals will be served.[2]

However, awarding such a large sum towards the privatisation of hospital support services seems excessive, especially given the large funding slashes simultaneously made to public health and medical care sectors, where resource allocations can make a difference to a wider swathe of society.

Moreover, certain background details surrounding the relationship between the companies and MoH raise more questions than answers. Three out of five of these companies had been awarded 15-year concession contracts for similar services from the period of 1997 to 2011, and then, in 2015, they again received a 10-year contract renewal. Could the cost of these concessions have been lowered if there is greater competition and transparency?

Although the overall Health Budget for 2017 has increased (from RM23.03bil to RM24.8bil, representing a 7.7% increase), a further breakdown of allocations shows significant cutbacks made to public health and medical care – both areas that directly impact public access to healthcare service and treatment.

In other areas, greater resources have been awarded for retaining professionals in public service and privatising hospital support services. The justification of spending more in these areas must be weighed against cutting down in other – arguably more critical – areas of healthcare.

Development Takes a Back Seat

Reduced development allocations are also expected to negatively impact MoH’s public healthcare delivery services. The 2017 Budget set a new low for development expenditure with a budget reduction of 16.4%, from RM1.6bil in the previous year to RM1.34bil in 2017.

Broadly speaking, MoH’s budget has increased on a year-on-year basis (except for 2016), peaking at RM24.8bil for 2017 (Figure 1). However, the allocations set aside for development expenditure have gone the opposite way.

In 2010 development expenditure totalled RM3.58bil or 24.3% of total expenditure. This amount has steadily declined over the years, reaching an all-time low of RM1.34bil, or a mere 5.4% share of the overall health budget for 2017 (Figure 2).

Excluding the public health sub-sector, which received surplus allocations for providing urban health services, almost all development line items for 2017 have been slashed (Figure 3), the most significant cutbacks being in staff training (RM60mil or 54.5%) and staff facilities upgrade (RM19.3mil or 54.4%).

In his budget speech, Najib announced that the federal government would allocate resources to upgrade hospital facilities, build and upgrade new hospitals and clinics, and acquire 100 ambulances. However, the 2017 budget allocation for building new hospitals has in fact been reduced, by RM97.1mil or 35.4%. Such a significant cut will surely hamper the government’s ability to build more public healthcare infrastructure to meet growing public demands.

Public use of government hospitals and health facilities in Malaysia has been increasing from 2010 to 2015. In 2015 about 75 million people utilised MoH primary and curative care services, with a 16.5% and 41.7% increase over 2010 in outpatient attendance in hospitals and public health clinics respectively.

While medical workforce numbers have increased, there is a worrying gap in terms of infrastructural public health facilities, such as the number of MoH hospitals, beds and combined number of health and community clinic facilities. For example, from 2010 to 2015, the number of hospital beds in government hospitals increased by 9.5%, compared to admission rates, which rose by 18.6% in the same period.

More Resources Needed!

In a Facebook posting released just before the tabling of Budget 2017, [3]the director general of health Datuk Dr Noor Hisham Abdullah aired his concerns over the struggle faced by the public healthcare sector in coping with the increasing patient load.

Noor Hisham went on to state that the MoH had taken necessary steps to reevaluate, optimise and reallocate its limited resources to “wherever it is needed the most.” According to him, these measures were aimed at increasing efficiency and effectiveness by cutting wastage and job duplications “so as to provide excellent healthcare services at reasonable costs with high satisfaction to the rakyat.”

While these are praiseworthy objectives, the MoH’s hands are tied by chronic underinvestment in public health infrastructure. The recent RM262.1mil or 16.4% cut made to the development expenditure budget will only make it harder to bridge the gap between supply and demand.

The result will be overcrowding in public hospitals and community clinics, and overall decreased standards in healthcare service delivery – especially to lower income groups. The federal government must therefore reexamine the development needs of MoH. Where necessary, it must endeavour to increase budget allocations to ensure the long-term sustainable development of the public health sector.

  • [1]“Vi-Jean Khoo, “Lack of funds leads to suspension of clinical laboratory tests in Malaysian hospitals,” MIMS, October 9, 2016, http://today.mims.com/ topic/lack-of-funds-leads-to-suspension-of-clinicallaboratory-tests-in-malaysian-hospitals.
  • [2]““Parlimen | 25102016 | Ong Kian Ming [Serdang],” October 24, 2016, https://www.youtube.com/watch?v=RkRqHn7qaUA.
  • [3]““Health Ministry to optimise available money,” FMT News, October 7, 2016, http://www.freemalaysiatoday.com/category/nation/2016/10/07/health-ministry-to-optimise-available-money/.

  • This article first appeared in Malaysiakini on November 4, 2016.

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