Imagine 10 jumbo jets crashing every week for a year or the whole population of Petaling Jaya dying every year. The loss of life would be equivalent to the 210,000 – 440,000 deaths due to medical errors in the United States annually, based on a report from the Institute of Medicine (2013).
Healthcare in America is failing, although ironically it has the largest private healthcare system in the world and spends more than any country on private and public healthcare, amounting to US$ 2.8 trillion. Its annual healthcare spending is larger than the whole economy of the United Kingdom at US$ 2-6 trillion or France at US$ 2.7 trillion. If there are no changes in the way we do things, Malaysia could become another America. So, how are we faring?
Ageing Population and Measuring Healthcare Performance
By the year 2030, Malaysia’s population will be as old as ageing Japan. Asia and Malaysia, specifically, have one of the fastest ageing populations in the world. According to the Singapore-based Asia Pacific Risk Center (APRC), the swelling ranks of the elderly will cost the region $20 trillion in healthcare by 2030. Malaysia will take only 23 years to double from 7% in 2020 to 14% in 2043. This ageing process took Europe 100 years.
Japan spends 8% of its Gross Domestic Product (GDP) on healthcare and 80% of the expenditure is government-funded, while Malaysia spends 4.4% and 52.4% respectively. The total expenditure on healthcare, both public and private, stands at RM50.3 billion, where operational costs take 93% of the pie and development only 7%.
The GDP percentage spent on healthcare ranks Malaysia at number 156 in the world. Majority Malaysians go to public healthcare facilities. 75% of Malaysians seek in-patient treatment and 90% of Malaysians seek out-patient treatment at public facilities. Despite that, the government spends only 52.4% for total healthcare expenses. This indicates two things; the far higher cost of private facilities and the affordability for the public majority to go for private healthcare.
Trying to summarise healthcare in one article is a mammoth task. The healthcare system is very complex, with many indicators and different expectations. This includes patients, doctors, other healthcare providers, the supply chain, and also government and other healthcare regulators.
How do we measure the healthcare of a nation? A performance measurement is required. A monitoring plan that can ensure continuous improvement in quality, effectiveness, accountability and, most importantly, affordability. The measure must also cover holistic aspects of healthcare from patient satisfaction, efficiencies of healthcare professionals, utilisation, clinical quality, equipment, technology and financial performance.
How do we measure performance? Using affordability is a measure, the cost of birthing in hospital with a 2.6 days stay in the United Kingdom and Australia amounts to one month’s median wage versus three months’ median wage in Malaysia. The cost of birthing is intentionally chosen, as pregnancy and childbirth are the main cause for hospitalisation at 19.9% for both public and private hospitals. (Ministry of Health, 2016)
Some selected healthcare statistics below indicate where Malaysia stands.
Selected Healthcare Measurement Statistics
Profit, Subsidy or a Government’s Responsibility
There is an ongoing debate whether healthcare is a personal responsibility or a government’s responsibility. In fact, it is a joint responsibility. The individual is responsible for choosing a healthy lifestyle, and the government is responsible for ensuring a healthy environment, including housing and a safe water supply, providing equitable, affordable, good quality healthcare, including an effective immunisation programme, and addressing the social determinants of health, such as poverty and unemployment.
The rising cost of healthcare has shown that the government has a major responsibility and duty to provide the facilities and personnel for a high standard of healthcare and to meet the cost of healthcare through an equitable health insurance scheme. The recurring question is whether healthcare expenditure by the government is a form of subsidy or does it represent one of its unavoidable responsibilities?
I find it irresponsible that, in PEMANDU’s Subsidy Rationalisation Labs, healthcare is identified as an item to be rationalised under the subsidy programme. Such a policy attitude does not recognise healthcare as an investment. This will have an unhealthy impact on healthcare.
By agreeing that healthcare is a government responsibility, we need to begin addressing issues related to the privatisation of healthcare, the high cost of pharmaceutical drugs and medical services, the development of healthcare personnel, healthcare facilities, and third party administrators. Malaysia also needs to explore and learn from other successful models adopted by other countries.
Privatisation of Healthcare, Profiteering Private Hospitals and Government Linked Companies
In 1983, the Malaysian government under then Prime Minister Dr Mahathir Mohamad introduced privatisation policies which allowed the private sector to play a greater role by taking away some of the government’s responsibilities in both healthcare and education. Since then, healthcare costs have risen considerably. Private hospitals that were run by non-profit organisations and religious organisations are now increasingly run as profit- motivated private hospitals. The flawed reasoning was simple. As the rich could afford private hospitals, this would reduce demands on government hospitals and make available better services for the poor.
Privatisation did not stop there. In 1993, the pharmaceutical services under the Ministry of Health were privatised. For example, Renong company was awarded an exclusive long-term contract for providing medicines and medical supplies, which subsequently doubled government expenditure for such purchases. Instead of discontinuing privatisation, the Ministry of Health extended the privatisation of other support services such as laundry and linen, clinical waste management, cleaning services, facility engineering and maintenance in 1996, three years later. Within a year, the cost of these services tripled from RM140 million to RM450 million.
As a result of privatisation, highly qualified and experienced doctors flocked to the private sector. Within twenty years, two-thirds of the total number of specialists and consultants resigned from government hospitals to enter the private sector. This brain drain inevitably increased the waiting times of patients in government hospitals and led to a deterioration in the quality of patient care, which sometimes resulted in delays in diagnosis and treatment and inevitably in deaths.
As reflected earlier, the cost of healthcare in private hospitals is very high. For example, maternity charges for Class 1 patients in a public hospital amount to RM800. This is a fraction of the cost in the private sector which averages around RM3,500-RM6,000. The cost of medicines has also recently risen sharply since the implementation of the General Services Tax (GST), particularly in private hospitals where the cost of GST is not absorbed.
We need to determine the real cost of healthcare. Why are there Approved Permits for medicines? Profiteering must not be allowed, especially by the large health conglomerates and Government Linked Companies (GLC) such as Sime Darby, Pantai, Khazanah, KPJ Healthcare Berhad and others which account for more than 40% of private hospital beds.
The unhappy consequences of privatisation in the healthcare sector call for an urgent review of the government’s policy of privatisation. There is an unavoidable conflict of interest when the government, in effect, is wearing three hats – as a public healthcare provider, as a regulator, and as an investor in a profiteering healthcare sector.
Insurance Supply over Demand and the Third Party Administrators’ Expenses
The mandate in privatising healthcare claims that it will shift the burden of healthcare to the private sector. At the same time, a financial model needs to be established to bear the cost, and the insurance industry has done well to achieve this. It is estimated that the total cost that would insure every Malaysian would be around RM30 billion per year with a minimum premium that will cover the cost of hospitalisation.
Over the years, the number of insurance policy holders has increased and more private hospitals have been built. With the creation of such supply versus demand, the cost of healthcare should have been reduced. However, this has not been the case. Recent years have seen a sharp rise in the cost of healthcare services and medicines. New artificial demands have been created. For instance, patients in private hospitals are often over-investigated and over-treated.
There is also a need to review the high fees charged by specialists. On average, in a standard hospitalisation bill, hospital fees, including the cost of medical equipment, disposables and nursing, come to 60% of the total bill, while specialist fees amount to 40%. These fees are governed by the 13th Fee Schedule which should be reviewed.
Like any other industry, the cost of healthcare has been increasing unnecessarily because of the activities of the so-called ‘middle-man,’ also known as Third Party Administrators (TPA) or Managed Care Organisations (MCO). They provide interface administration between medical providers, corporations and insurance companies and assist in processing claims and administering corporate and retail policies and financial procedures. They charge fees or commissions which are standardised by the Insurance Regulatory Development Authority (IRDA). Most Malaysians are unaware of the extra premium charged by insurance companies for TPA services.
Regulations can be enforced by amending and including such provisions in existing Acts, such as the Private Healthcare Facilities and Services Act 1998 (PHFSA). There are at least 30 TPAs/MCOs currently operating in Malaysia.
Malaysia’s Healthcare Human Resources and Facilities
According to the Ministry of Health (2016), Malaysia has 46,491 doctors working in both public and private hospitals – a ratio of 1:656. The ratio for dentists is 1:4,775, pharmacists 1:2,900, opticians 1:9,578, and optometrists 1:19,053. The Eleventh Malaysia Plan (2016-2020) calls for a doctor ratio of 1:400, which translates to a target of 75,000 doctors by 2020. The question is whether there are enough training hospitals and future graduate doctors to achieve such goals. This translates to 28,509 newly qualified doctors within the next four years.
The Ministry of Health, however, is saying that the infrastructure needed for completing internship or housemanship training is inadequate and that new medical schools are being frozen, as a remedy. In other words, there is a shortage of hospitals and training posts.
At the moment, there are 143 public hospitals with 41,389 beds and 183 private hospitals with 12,963 beds. As 75% of the population use public hospitals, one public hospital would need to serve 157,342 Malaysians, while one private hospital would need to serve 40,983 Malaysians.
There are now only 44 training hospitals. This lack of training hospitals is a real problem and has led to the enforcement of an additional year of training for interns before they can be registered professionally. The other problem is that the heavy workload of doctors is having an impact on the quality of training of interns.
There could be a way out. More training hospitals should be built and training regulations can be revisited to allow interns to seek training overseas in training posts certified by the Ministry of Higher Education. Another possible solution could be the upgrading of rural clinics into mini hospitals with qualified doctors. All these measures could help to increase the placement of trainees and doctors, but they are far from ideal.
I have always advocated a minimum wage and a bigger pie for the general workforce. Despite the size of profit generated in healthcare, the salaries of doctors in the public sector have always remained proportionately small. The Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) over Revenue percentage for Malaysia’s private healthcare sector is approximately 35%, while its Wages/Revenue stands at 20%. By comparison, the benchmark in Australia, a developed country, stands at approximately 12% EBITDA/Revenue and at 45% Wages/Revenue.
Affordable Care Act and Non-Profit Hospitals
The government of South Korea has found that promoting preventive medicine is cost-effective. This has been achieved by bearing all medical costs for its citizens, as long as they undergo annual medical examinations without fail.
There are also other options that can be explored, such as social hospitals where non-profits run hospitals in government-provided buildings. New legislation can also be drafted and can be literally labelled as the “Affordable Care Act,” which will obligate the government to provide affordable healthcare. A measure to correlate insurance premium costs to income can also be introduced to ensure that every Malaysian citizen will find such health insurance affordable.
Indonesia has a Muslim reformist organisation, Muhammadiyah, which is active mainly in matters of religion and education. Some of its 5,754 schools are open to non-Muslims and its latest venture is in running non-profit medical clinics and hospitals. Today, it owns several hundred clinics and hospitals in Indonesia.
Since 19.9% of hospital admissions in Malaysia are related to pregnancy, it would be feasible to start off with the establishment of a chain of maternity and paediatric hospitals, easily accessible and affordably priced, with no frills. A chain of such hospitals in shoplots is envisaged, operated by non-profit organisations or cooperatives.
Kamataka, a state in the southwestern region of India, has led the way in introducing the Yeshasvini Health Scheme for the rural masses, providing access to quality healthcare at only 5 Rupees (RM0.30) per month. The scheme provides for free outpatient consultation and 1,700 different types of operations entirely free of cost to the patient! Within seven months of its launch, more than 5,000 farmers had various types of operations and 23,500 farmers had outpatient medical consultations.
Healthcare is a Collective Obligation
According to the ‘State of Households II Report’ by Khazanah Research Institute (KRI), a nutritionally adequate diet is beyond the reach of many Malaysians, particularly in urban areas, taking other living expenses into account. Such economic straits are bound to affect the state of healthcare, which must not be the sole responsibility of the government but the collective responsibility of every Malaysian.
The collective payment of income taxes, real property gains taxes, goods and services taxes, road taxes and others must be for the benefit of the people. Taxes collected by the government must be used for two primary social obligations – health and education. The allocation of funds for health and education will eventually bring many benefits for both the government and the people by ensuring a healthy, educated and productive population who will contribute to the nation’s economy and wellbeing.
Looking ahead, the remuneration of doctors should not be based on a fee-for-service, as it is known to encourage over-investigation and over-treatment. Income disparity between the public and private health sectors must be narrowed. The doubling of investment in the public health sector, in terms of facilities and personnel, must be accomplished in the next decade. Privatisation of healthcare must be reviewed and reduced. Universal national health insurance must be introduced and the whole philosophy of healthcare rewritten, so that healthcare becomes a non-profit social enterprise that is ingrained as a common social responsibility.
I have always been a strong proponent that the government has a responsibility and a duty to provide adequate healthcare and education, as both are basic fundamental rights necessary for an advanced society. A healthy and educated society is the backbone of any successful and enlightened country. Both are important investments to be made by any government. A completely holistic revisit of the healthcare system and a measurement of healthcare performance are pivotal and essential for our future. It is something that needs our urgent attention and commitment. Let us get our act together or we will be doomed to fail.
Anas Alam Faizli is a construction and an upstream oil and gas professional with a doctorate in Business Administration, where his thesis focused on capital investment evaluation practices and decision-making in the oil and gas. This article was first published at the writer’s blog aafaizli.blogspot.com. The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official policy or position of Malaysian Business.