How Malaysia Can Implement National Health Insurance, With Contributions Across The Board

The Galen Centre moots payroll deductions, like EPF contributions, for a national health insurance scheme that should also receive contributions from the B40.

KUALA LUMPUR, July 7 – Health financing experts are amplifying their calls for a national health insurance scheme, as the government looks for ways to reform financing for Malaysia’s long underfunded health care system.

Galen Centre for Health and Social Policy chief executive Azrul Mohd Khalib said payroll deductions – akin to contributions made by private sector employers and workers to the Employees Provident Fund (EPF), the Employment Insurance System (EIS), and the Social Security Organisation (Socso) – can be used to pay for a national health insurance scheme.

“It can actually look like the way we are contributing to the EPF, through payroll. So, today, a lot of people are contributing not just to the income tax, but also EPF, the EIS, and Socso – so you’re contributing already through the payroll mechanism, which makes it a lot easier so that your take home pay is basically yours,” Azrul said during a BFM Health and Living 2022 “The Next Normal” conference panel session in Kuala Lumpur last June 18.

“But the question really that will be in people’s minds is how much do I have to pay, and that is going to be the issue here because if you come from the middle class, you might feel it is going to be unfair, you’re taking on yet another amount and you have to pay for other people, and you bring less pay home,” Azrul said, adding that contributions to the health insurance scheme can amount to about RM2,500 annually for most working individuals.

“To be honest, based on what we have today in our health system, we need to relook at how we contribute and invest in our health, and come to the realisation that we actually need to pay more, we need to invest more in something like a national health insurance where everybody contributes – not just the middle class – but also the bottom 40 per cent (B40) income group, for example, they also need to be able to contribute.

“Today, we talk about tax-funded health care, and the way we talk about tax funding is as if everybody is paying tax. Guess what? When you look at the amount of money that we collect from people, actually, only around 2.5 million people out of 30 million people who work, out of a population of 32 million, pay tax.

“So, these are the same people we are expecting to pay again and again. In reality, we must all pull our weight, we must all contribute towards this health care crisis because we are in a crisis, and the reality is there’s no such thing as a free lunch, and certainly, this RM1, RM5 model needs to be reformed,” Azrul said.

Azrul was referring to the RM1 and RM5 consultation fees for outpatient and specialist visits respectively at Ministry of Health (MOH) clinics and hospitals.

MOH appears to be looking at introducing a national health insurance scheme as well, ahead of the November tabling of a White Paper in Parliament on health care reform. 

At a forum in Singapore last month, Health Minister Khairy Jamaluddin suggested introducing social health insurance, where contributions into the fund would be on a sliding scale based on income and waived or fully subsidised for low-income earners.

Medical Inflation, Ageing Population Seen “Risky” For Insurance Industry

Mark O’Dell, the CEO of Life Insurance Association of Malaysia (LIAM), said a national health scheme has “a lot of merit” as health care costs rise and the population ages.

O’Dell said medical claims inflation has been exacerbated by a “buffet syndrome” where policyholders seek to maximise the value of premiums paid, in addition to unregulated private hospital charges and an ageing society, which translates back into higher premiums.

“The bill is expected to be paid for by my insurance company, right? So, two things in my mind is firstly, I’m not that concerned about the cost because it’s not going to be out of my pocket, right [sic] and two, you feel [sic] entitled to consume as much out there as I want as I can – it’s the buffet syndrome, right? You claim as much as you can. So this has led to overconsumption.

“Now, on top of that, you have issues with providers, and you should know that in the private sector, doctors’ fees and other expenses associated with the doctor cost are all regulated – they have scheduled benefits – but 60 to 70 per cent of your hospital bill are hospital charges which are not regulated.

“And hospitals are businesses with shareholders, they are expected to make a profit, certainly more profit, this year than last year, next year than this year, and since the money is coming through the patient, then there are many providers who actually look to optimise on this money for servicing delivered in order to get higher claims from the insurance company,” O’Dell said.

“And I’d just like to add one more point there, and that is on ageing society. And we may not really feel it as much today as feel it 10 years from now or 20 years from now, but Malaysians are getting older and living longer, and the challenge to that is the realisation that the risks increase exponentially as you get older.

“For the average medical insurance, about one in 10 policyholders will claim in a year – that’s across the board, old and young. But for those aged 70 to 75, it becomes one in two, so it becomes a very expensive proposition. I personally am very concerned about sustainable financing in the private sector for health care for seniors,” O’Dell added.

“I think the idea of a national health scheme to underpin the core financing has a lot of merit, and I really hope that the government will take it seriously this time around.”

CodeBlue previously reported a study that showed Malaysia’s medical costs climbing at an average rate of eight to nine per cent annually between 2013 and 2018, similar to the annual global inflation trend of eight per cent.

The study, commissioned by the insurance and takaful industry, found that non-surgical treatment costs rose 9.3 per cent annually on average, while surgical treatment costs increased by 7.8 per cent per annum throughout the study period.

The five key drivers named as contributing to the yearly increase in private medical costs and claims in Malaysia were advances in medical treatment, imported equipment and medicine, high prevalence of non-communicable diseases (NCDs), ageing population, and increasing benefits and policy design.

Consider Health Care Payment Models In Other Countries

O’Dell said Malaysia can look at health care payment models in countries like Taiwan and Singapore.

Taiwan’s national health insurance (NHI), implemented in 1995, provides universal, mandatory coverage. The single-payer system is funded primarily through payroll-based premiums, although the government provides generous premium subsidies for low-income households, civil servants, and others. 

Health care services are provided mostly by contracted private providers. Covered services include preventive, primary, specialist, hospital, and mental health services. Long-term care, a more recent addition, is provided separately. 

Out-of-pocket costs include copayments for outpatient care and prescription drugs and coinsurance for hospital stays. Private health insurance consists mostly of disease-specific cash indemnity policies.

Before the NHI, Taiwan had more than 10 public insurance schemes, each covering a particular group, such as government employees, farmers, and low-income households. 

These programmes covered 59 per cent of the population. The 41 per cent who were uninsured had very restricted access to medical care, resulting in wide socio-economic disparities among the population.

Taiwan’s government proposed moving to a universal NHI programme in 1986. The planning process involved studying health insurance systems abroad, including Medicare in the United States, borrowing parts from systems of other countries and adapting them to suit Taiwan’s national conditions. 

The NHI bill was eventually passed in 1994, and implemented the following year.

Singapore has a multi-payer health care financing framework, known as the 3Ms, where a single treatment episode might be covered by multiple schemes and payers, often overlapping.

MediShield Life, a universal basic health care insurance, is mandatory for citizens and permanent residents and provides lifelong protection against large hospital bills and select costly outpatient treatments.

MediSave, a national medical savings scheme, helps cover out-of-pocket payments. Personal and employer salary contributions (8 per cent to 10.5 per cent, depending on age) to MediSave accounts are mandatory for all working citizens and permanent residents. These tax-exempt, interest-bearing accounts can be used to pay for family members’ health care expenses.

MediFund is an endowment fund used by the government as a safety net for needy Singaporeans who cannot cover their out-of-pocket expenses, even with MediSave.

Other available national insurance programmes include long-term care insurance schemes ElderShield introduced in 2002, and CareShield Life, introduced in 2020. The latter automatically covers people born in 1980. For those born earlier, participation is optional.

The ElderShield scheme is no longer open for new applications.

Azrul pointed out that in Malaysia, the government typically makes decisions whether to introduce new treatments based on whether the public can afford it, not whether they need it.

“Now, think about it from the patient’s point of view. Say if you need a certain medication and the doctor says, ‘Oh, you can’t afford it’ but there’s a suboptimal treatment which you can probably afford. It’s not based on what you need but based on what you can afford – is that really the way you want your treatment plan to progress? No. 

“You want to know what is the best treatment and we will find out how – I shall find a way to get the treatment that is needed. But there should be a compromise in between,” Azrul said.

“We need to relook at the way we are investing in our health care and do something and that’s where we need to look at countries like Japan, for example, an ageing population.

“Maybe we should contribute to a fund, from the age of 40, that will support us when we are older, so that by the age of 60, we can have at least 20 years of contribution. There’s no way we can depend on pension schemes and savings for 20 years,” Azrul said.

Does Malaysia Need Its Own Obamacare?

Both Azrul and O’Dell disagreed with suggestions that Malaysia should consider a model like the United States’ Affordable Care Act, known colloquially as Obamacare. 

The US health care system is a mix of public and private, for-profit and non-profit insurers and health care providers. The federal government provides funding for the national Medicare programme for adults aged 65 and older and some people with disabilities.

The federal government also runs programmes such as Medicaid and the Children’s Health Insurance Programme, for low-income households and targeted groups like veterans.

Meanwhile, private insurance – the dominant form of health coverage in the US – is provided primarily by employers. The uninsured rate is estimated at 8.5 per cent of the population.

Obamacare is a comprehensive health care reform law that addresses health insurance coverage, health care costs, and preventive care, which was signed into law in March 2010.

The act expanded Medicaid eligibility, created health insurance exchanges, mandated that Americans purchase or otherwise obtain health insurance, and prohibited insurance companies from denying coverage or charging more due to pre-existing conditions. 

“Here in Malaysia, we don’t need Obamacare because anyone in the country, including a non-Malaysian, can walk into a public health facility to get treatment, get hospitalised, or to get surgery. The only issue is whether this is possible for the next 50 years? How do we make it sustainable?

“What we need is more of what Taiwan, the Netherlands, and the UK have, where there are single or multiple systems where we pool our resources and make health care much more affordable,” Azrul said.

O’Dell said Malaysia’s health system just needs more integration and coordination among health care providers.

“When you look at the public sector, they lack facilities, they lack funding, and they lack specialists, right? The private sector has more of those resources. So, I think there really needs to be greater coordination and integration between the public and private health care.

“And I’d just make a point about spending. Malaysia spends about 5 per cent of gross domestic product (GDP) on health care. When you look at developed countries like the UK, it’s more like 12 per cent. In the US, it’s 16 per cent of their GDP they spend on health care. 

“It’s not to say that spending more is the answer but it really brings to light the fact on how underinvested we are in Malaysia,” O’Dell said.

Public health expert Dr Jemilah Mahmood previously called for “out of the box” thinking to address funding issues involving health care financing and reforms.

Dr Jemilah mooted the idea of utilising a “small percentage” of zakat (an annual alms tax on Muslims to aid poor people in the Muslim community) or wakaf (a voluntary charitable endowment for Shariah-compliant purposes) to provide health care access for the poor.

Khazanah Research Institute senior advisor and economist Prof Jomo Kwame Sundaram, meanwhile, expressed reservations and concerns about equity in developing a national health insurance scheme.

He said past ideas of introducing a RM50 standard insurance “would be tantamount” to a poll tax that promotes “inequity” that will burden those who cannot afford it.

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