Khairy Moots Social Health Insurance, Low-Income Fully Subsidised

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KUALA LUMPUR, June 13 – Khairy Jamaluddin proposes introducing social health insurance and co-payments to boost Malaysia’s “chronically underfunded” public health care system, with full subsidies or waivers for low-income groups.

The health minister said the Cabinet is also “seriously” discussing raising the government’s allocation on health care spending, noting that Malaysia’s spending on health care in the public sector only amounts to 2.6 per cent of the country’s gross domestic product (GDP), below the 4 per cent average among middle-income countries and the 5 to 6 per cent rate recommended by the World Health Organization (WHO).

However, Khairy stressed that he needed to be “realistic”, saying that increasing allocations for the Ministry of Health (MOH) from the federal government budget had its “limits and constraints”, especially in the medium term as the economy recovers from the Covid-19 pandemic, as he cited Malaysia’s “extremely tight” fiscal position and possible global stagflation.

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“The health care fund must be sufficiently large to fully harness the power of risk pooling, effectively spreading the risk amongst individuals who are healthy with those who have pre-existing conditions, a group who today would either not be eligible for private insurance coverage or who would not be able to get affordable coverage given their high risk,” Khairy said in his keynote address last June 2 at the Public Health Thought Leadership Dialogue organised by the National University of Singapore’s (NUS) Saw Swee Hock School of Public Health.

“So if we want a future-proofed Malaysia’s health care system that provides equitable access to better quality health services long-term, including better preventative and promotive care, we need to have a dedicated health care fund that is both tax-funded and that is supported by contributions from the people who can afford to do so, be it in the form of co-payments or social insurance or a combination of these progressive contribution methods.

“And this is easier said than done. This is a huge and tough political call.”

Co-payments mean that patients pay a certain percentage of the costs of treatment, compared to the current system where the government subsidises approximately 98 per cent of health care costs in MOH facilities. Patients currently pay a nominal registration fee of RM1 to RM5 at government clinics and hospitals.

Khairy said contributions into the proposed health care fund should be on a sliding scale based on one’s income and that contributions should be waived or fully-subsidised for “low-income” earners.

The health minister did not specify whether the bottom 40 per cent (B40) of income earners in the country should be exempted from making contributions into the proposed health care fund. The B40 group has likely expanded after economic shutdowns in the past two years of the pandemic that saw job losses and pay cuts.

Exempting a large proportion of the Malaysian population from social health insurance payments means that the middle class – who already pay income tax – would shoulder the burden of paying health care costs for everyone else.

Khairy also did not specify a suggested rate of contribution by employees and employers for the proposed social health insurance fund.

The previous 1Care social health insurance scheme proposed by the Najib administration from 2010 to 2012 was shelved due to public opposition over reports that employees would be required to contribute 10 per cent of their monthly gross salary to the scheme that is compulsory for enrolment by all citizens, besides mandatory contributions from employers and the government.

1Care was proposed to be regulated by a new national health financing authority that would act as a strategic purchaser to negotiate prices and payments with service providers for the social health insurance scheme that would avail health services across the public and private sectors for the insured.

Under 1Care, patients could not choose their own doctor to seek free medical treatment. The 1Care system would assign one for them. If other medical practitioners were consulted by patients, the costs would be borne by patients, not 1Care. General practitioner (GP) visits were limited to six per year. Exceeding this would see patients paying for the visits.

In his speech to Singaporeans, Khairy pointed out that out-of-pocket spending comprised 34.5 per cent of Malaysia’s total health expenditure in 2020, which he described as “very high” compared to other upper middle income countries. About 43 per cent of out-of-pocket spending went to outpatient services.

“These levels of out-of-pocket payments are a major concern especially when we have a high prevalence of chronic diseases, as it would likely lead to delays in treatment and greater illness due to cost avoidance,” he said.

Khairy acknowledged that in the medium term, federal taxation – which is the predominant source of financing for Malaysia’s public health care sector – would likely continue to be the main source of health care funding for Malaysia due to its “inbuilt equity”.

“But the question before Malaysia and before me, running this now is, will relying on federal taxation be sustainable long-term? What would future-proofing health care financing look like for us? The answer to the first question is of course no. It’s no longer sustainable and the system will break.”

He noted “severely limited” opportunities to integrate the public and private health care sectors through strategic purchasing, amid limited publicly managed funds. In 2020, Malaysia’s total health care spending of about RM67 billion comprised approximately 55 per cent from the public sector. MOH was the main source of financing for Malaysia’s total health expenditure at about 46 per cent, followed by private household out-of-pocket spending at 34.5 per cent.

Total expenditure on health in Malaysia by public and private sources of financing from 2006 to 2020. Graphic from the Ministry of Health’s Malaysia National Health Accounts Steering Committee’s presentation on November 3, 2021.

Khairy said his proposed Malaysian Health White Paper on health care reform, which he intends to table in Parliament this November, would contain proposals on a sustainable health care financing model for Malaysia.

“The structural reforms I mentioned earlier such as, amongst others, establishing and strengthening a strategic purchasing function or development of payment models, all these reforms will need processes and reporting lines that ensure each function has accountability to taxpayers and contributors.

“There may be some increase in administrative costs but I believe that this will be manageable if we emulate global best practices and ultimately be worthwhile if access and health outcomes are improved.”

Khairy stressed the need to “future-proof” health care reforms, some of which have been discussed for decades, across various administrations, regardless which political party is in government.

Besides seeking bipartisan support, or a “national greenlight”, for the White Paper in Parliament that would propose reforms spanning a period of 15 years, the White Paper would also suggest establishing a Healthcare Reform Commission to “independently” monitor, advise, and report on the status of the implementation of proposals to the government, Parliament, and Malaysians.

“Having a transparent and well-appointed Healthcare Reform Commission would, we hope, inject a level of institutional check-and-balance and stability into the health care political economy, supporting structural reforms no matter what the future holds.”



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