KUALA LUMPUR, August 16 – A health policy expert has proposed a strategic purchasing mechanism to purchase health services for the Malaysian population in reforming health care financing.
Prof Dr Syed Mohamed Aljunid – a Malaysian professor of health economics, policy and management and chair of the Department of Health Policy and Management at the Faculty of Public Health at Kuwait University – pointed out that Indonesia’s out-of-pocket (OOP) expenditure on health halved from 60 per cent to 30 per cent after Indonesia implemented social health insurance in 2014 with a health financing system.
Indonesia’s health financing system also doubled the country’s overall health spending from 1.5 per cent or 2 per cent of its gross domestic product (GDP) to nearly 3.5 per cent or 4 per cent, nearly equal to Malaysia’s current total health spending. Malaysia’s public health budget is primarily financed by general taxation revenue, with MOH acting as both provider and payer of health care.
Dr Syed explained that in the health financing system in Indonesia, the government purchases services from both public and private hospitals through strategic purchasing, where certain tariffs are set by Indonesia’s Health Ministry.
Governments can collect funds either via a social health insurance scheme or other health financing systems through a certain entity that then negotiates prices to purchase health services for the population.
“I envisage the same thing in Malaysia. If we want to reduce out-of-pocket expenditure, which is one of the main issues that leads to inequity and inaccessibility of services by the B40 (bottom 40 per cent) as well as M40 (middle 40 per cent) group, it’s to have a strategic purchasing mechanism to put in place and the funding is organised by an entity.
“The source can be social health insurance or a tax-based system, but this is the way to move forward,” Dr Syed told a session on sustainable health care financing at the Health Policy Summit 2022 yesterday here, organised by MOH Malaysia.
He pointed out that when he was engaged by Indonesia’s MOH back in 2007, the health financing proposals that he had worked on for the neighbouring country were targeted for the estimated 80 million poor people in the 240-million population at the time.
Thailand, he said, similarly reduced its OOP expenditure on health to 15 or 16 per cent with its health financing system. Malaysia’s OOP expenses rose from 32 per cent of total expenditure on health in 2006 to 35 per cent in 2020, according to MOH’s National Health Accounts Steering Committee.
About 43 per cent of OOP spending in 2020 went to outpatient services, compared to 25 per cent for inpatient services. Private household OOP expenditure comprised 76 per cent of Malaysia’s private sources of health financing that year.
“Without a health financing system, I don’t think Indonesia would be able to raise enough funds to fund services and raise health expenditure from the mere 1.5 per cent to the 3.5 per cent or 4 per cent that they’re currently enjoying,” said Dr Syed.
“This is one of the best ways to see how we can raise funds. Funds raised by the entity in government is managed responsibly by the government and they purchase the services strategically on behalf of the population.
“And this is where value-based purchasing comes in. Both public and private services are covered in Indonesia which is, to me, a very big jump in terms of the way health facilities are accessible to the population compared to maybe 10 years ago.”
When asked by moderator Dr Muhammed Anis Abd Wahab, deputy director of the national health financing section at MOH’s planning division, on whether the government controls health care providers through a strategic purchasing mechanism, Dr Syed said health care providers are free to provide services if they agree with the prices offered by the government in its health financing package.
The strategic purchasing mechanism can set charges, or tariffs, to pay for treatment of particular conditions.
“When we develop a tariff, we need good information because we don’t want a hospital to go into the red. But of course we don’t want hospitals to overcharge people.
“So this is where you have a good information system. The hospitals, if they want to be provider for that health financing scheme, they must increase efficiency so as to be able to provide services on par or below the cost reimbursed by the government. In this way, we can get the efficiency that we want,” Dr Syed said.
He stressed that even with a health financing system, countries should move away from a fee-for-service model to avoid cost escalations and inefficiencies.
Instead, Dr Syed suggested that a health financing system pays primary care physicians with a capitation method, while hospitals can be paid via case mix or a modified version of case-based payment.
Capitation is a fixed amount of money per patient per unit of time paid in advance to the doctor for the delivery of health care services, whereas case-based payment involves payments made according to the cases treated rather than per service.
The capitation method for family care, Dr Syed said, could be used to incentivise primary care providers and hospitals to provide preventive services to reduce unnecessary admissions.
“All these we can achieve if we use tools related to strategic purchasing,” he said. “Whether we have social health insurance or other forms of health financing, strategic purchasing should be considered strongly by the government.”
In his keynote address yesterday, Health Minister Khairy Jamaluddin said strategic procurement of services from private health care providers is a part of integration between the public and private health sectors, but acknowledged concerns about medical inflation.
The minister also expressed commitment to raising Malaysia’s annual budget for public health care to 5 per cent of GDP within the next few years, in line with the World Health Organization’s recommendations for upper middle income countries, and that the funding increases should be ring-fenced in each subsequent budget. Malaysia’s total public health spending was only 2.58 per cent of the GDP in 2020.
Dr Syed pointed out that health financing was the main gap in issues discussed in the Health Policy Summit organised ahead of a Health White Paper on health care reform that Khairy plans to table in Parliament by year end, citing referrals between the public and private health sectors, integration between the two, and high levels of OOP expenditure on health.
“All of this will not be able to be solved and we’ll talk about this for the next 10, 20 years if we don’t have health financing reform,” he said. “This is the best solution that can solve many of the problems we’re facing.”