THE global healthcare rose significantly in the shadow of the 2020 pandemic, reaching an all-time high of US$9 trillion in 2020 or about 10.8 per cent of the global gross domestic product (GDP), according to the World Health Organisation (WHO).
This number continues to rise since 2020, and according to Kenanga Investment Bank Bhd’s research team (Kenanga Research), it is expected to reach a total of US$10 trillion by 2026, increasing from US$8.4 trillion in 2022, representing a compound annual growth rate of 3.5 per cent over a five-year period.
This more than reflects the growing demand for healthcare services as the general public grow increasingly aware and wary of rising health issues while governments worldwide increase their budget on the healthcare sector to better prepare their countries’ healthcare system.
Specifically, WHO had reported that almost half of the global healthcare expenditures (US$4 trillion) will be spent on three leading causes of death, namely; cardiovascular diseases, cancer, and respiratory diseases.
However, while governments effectively rose to the occasion during the first year of the Covid-19 pandemic, WHO cautioned that the ongoing challenge is sustaining government spending on health to meet population needs.
A key lesson of the pandemic is that health threats can have wide spillovers and jeopardise economic stability, the organisation pointed out.
“The experiences of several decades, and now of the pandemic, have demonstrated that government spending on health is crucial to promoting universal health coverage.
“Government investment in public health functions is also essential for strengthening health security.
“New challenges will likely emerge as the world enters an era of rising uncertainty, complexity and volatility,” it said in its ‘Global spending on health – Rising to the pandemic’s challenges’ report.
Against the backdrop of the Covid-19 pandemic, ageing populations in most countries will also reshape service delivery needs.
“The macroeconomic consequences of the pandemic suggest not only slowing growth but also widening income inequality and growing poverty within countries. Moreover, new health threats will influence disease burdens and health system capacities.
“This will place a greater emphasis on building stronger and more resilient health systems,” it added.
Yet as the demand for health resources rises, a combination of factors is narrowing the budgetary space available to governments.
“The sharply deteriorating global macroeconomic context, with weakening income growth and rising inflation, means that governments face lower revenue and higher costs. This is compounding the structural challenge many countries face due to ageing populations, which reduce capacity to collect government revenues from labour markets.
“The large stock of additional public debt accumulated will also have ongoing budgetary implications – particularly in low and lower-middle income countries, where debt servicing is already on par with health spending,” it said.
For Malaysia, our current healthcare system is highly imbalanced in terms of the distribution of services, infrastructure, equipment, manpower and geographic locations across the public and private sectors.
“Public health facilities cater mostly to the much bigger lower-to-middle income population due to the wider network and low or almost free charges while the higher income patients seek private healthcare providers for faster services.
“This has resulted in a severely overstretched public healthcare sector and its workforce,” Kenanga Research pointed out in its ‘Healthcare – The healer needs healing’ report.
To ensure equitable and sustainable healthcare in Malaysia, the long-awaited national Healthcare White Paper (HWP) was released, detailing various reforms.
One key aspect is the introduction of a more sustainable health financing model to address the ever-rising needs of the people and escalating healthcare cost.
Analysis: Are reforms needed in the healthcare sector?
LAST year, the Ministry of Health pushed for the Health White Paper (HWP) which aims to reform Malaysia’s health systems towards supporting the health and well-being for Malaysians over the next 15 years.
On June 15, 2023, the Malaysia Parliament passed the Health White Paper (HWP), paving way to the start of a critical, structural reformation plan that responds to Malaysia’s health challenges and ensures greater equitability, sustainability, and resilience of the health system.
“While Malaysia has achieved relatively good health outcomes since Independence, the health system today is straining to cope with a significantly different set of challenges that has emerged in recent decades.
“The HWP sets out a holistic proposal for systemic and structural reforms of the Malaysian health system in order to respond to the nation’s health challenges and to ensure greater equitability, sustainability and resilience of the health system,” Malaysia’s Ministry of Health said.
Healthcare issues constantly rank as one of the top concerns for households, especially when disaster strikes a wage earner or when elderly loved ones inevitably succumb to one of the many non-communicable diseases that plague the nation, Health Minister Dr Zaliha Mustafa had said in an opinion piece recently.
She pointed out that one of the key priorities of a compassionate government is ensuring accessible and equitable healthcare for all its citizens, especially the vulnerable and the disenfranchised.
Programmes like the recently launched ‘Skim Perubatan MADANI’ (SPM) will likely provide relief to many disenfranchised Malaysians, but Dr Zaliha pointed out that the MOH is acutely aware that we need a workable and realistic plan that addresses systemic weaknesses and leverages existing strengths across the healthcare landscape.
“Short-term measures will not improve our healthcare system’s overall prognosis – this requires addressing structural issues. This is where the Health White Paper (HWP) comes into play.
“The HWP – a concept paper that looks into systemic and structural reforms to our healthcare system over the next 15 years – was tabled in Parliament (in June). Alhamdulillah, it was positively received and approved by both the Dewan Rakyat and the Dewan Negara,” she said.
The HWP is divided into four pillars; namely: transforming healthcare service delivery, advancing health promotion and disease prevention, ensuring sustainable and equitable health financing, and strengthening the health system’s foundations and governance.
Meanwhile, at a talk hosted by Kenanga Research on the opportunities in Malaysia’s national healthcare insurance scheme reforms, the Malaysian Medical Association (MMA) holds the view that the main challenges in Malaysia’s healthcare stem from its dichotomous nature where there is little integration between the public and private health sectors, resulting in an overburdened public health sector while the private sector continues to have excess capacity.
It also pointed out that the ageing population (which increases the need for long-term care, demand for consumables and pharmaceuticals and health workforce), and the rising burden of non-communicable diseases or NCDs due to lack of preventive healthcare which significantly increase the cost of treatment in the later stages, continue to be a major challenge for the sector.
According to the Department of Statistics Malaysia, by 2030, 15 per cent of the population is expected to be above 60 years old, making Malaysia an ‘aged’ society’.
While Malaysians are living longer, the population is not necessarily living in better health as based on current trends, an estimated 9.5 years of life expectancy will be spent in poor health due to the incidence of NCDs or chronic diseases.
“The rising cases of NCDs which then progressed to chronic stages have increased the cost of care per patient significantly due to the cost of treatment and prescription drugs as well as the cost of management of long-term complications such as cardiovascular and chronic kidney diseases,” Kenanga Research noted.
“Beyond the direct cost of care, NCDs also cause losses in economic productivity estimated at nearly one per cent of gross domestic product (GDP),” it added.
According to the HWP, Malaysia is now at the centre of an NCD crisis with 70 per cent of the population currently accessing public healthcare.
As such, strengthening it must be a priority.
There is also the fact that Malaysia’s healthcare system has contributed to an imbalanced distribution of services, infrastructure, equipment, manpower and other resources that overburden public healthcare facilities as evident during the peaks of the Covid-19 pandemic.
“Generally, public healthcare facilities are distributed across the country, including in rural and remote areas, whereas private healthcare facilities tend to be concentrated in urban areas.
“Hence, there are much greater pressures on public sector healthcare resources to cover the needs of the whole population. Case in point, public sector clinics comprise only 28 per cent of total primary healthcare facilities but handle almost 64 per cent of outpatient visits,” it said.
“In our view, Malaysia has to urgently put into place a government-initiated framework that would pool funds and spread risks across the population, similar to that of the EPF and SOCSO, to ensure those in need of medical treatment have access when they need it,” it opined.
Alternative fund generator
Aside from a government-initiated pool funds for the healthcare sector, a revamped healthcare insurance system could also lead to better overall healthcare services for Malaysians.
Kenanga Research suggested that a revamped healthcare insurance system could lead to lower out-of-pocket spending, reduced waiting times and access to more modern medicines and technology.
“Moreover, it would also allow for new treatments, drugs, and therapies not available at government hospitals to be made available for patients,” it said.
According to the preliminary data on the Malaysia National Health Accounts: Health Expenditure Report by MoH, health expenditure in the country in 2021 totalled RM78.2 billion, where public and private sector spending were almost equal.
The total out-of-pocket spending amounted to RM24.6 billion in year 2021, or 32 per cent of the total health expenditure while out of the private sector health expenditure, out-of-pocket expenditure was a whopping 75 per cent last year, private insurance (17 per cent), corporations (five per cent), and others (four per cent).
It was suggested that Malaysia should take on a hybrid healthcare insurance similar to the Australian system of a single-payer, multiple-provider arrangement, where public and private hospitals would provide equal facilities and functions to a patient (vs. current: multi-payer multi-provider system).
“Basically, it would mean that everyone has to contribute. Theoretically, all working citizens are obligated to set aside a portion of their income into a fund which they can draw upon to pay their own medical bills when the need arises,” Kenanga Research said.
Partnerships to provide more accessible services
BEYOND the government’s intervention in the healthcare sector, greater partnerships between the public and private healthcare sectors could also greatly elevate the current imbalance in Malaysia’s healthcare system.
“There are numerous opportunities for such partnerships in the areas of procurement, provision of primary healthcare services, and preventive medicines, teaching and training healthcare workforce and digitalisation.
“Specifically, partnerships between the public sector and the private sector that are formed to integrate both healthcare systems,” Kenanga Research opined.
For illustration purposes, this approach allows for the sharing of medical equipment and facilities as is the case in countries such as Australia, where private wings are located beside public hospitals with different charges for both private and public healthcare services while utilising the same equipment and manpower.
“Considering that some 20 to 30 per cent of private hospital beds are currently not being utilised, bringing in public sector patients enables these available beds to be better utilised,” it suggested.
Sharing its view, the Association of Private Hospitals Malaysia (APHM) in a report by RHB Investment Bank Bhd’s research house (RHB IB) pointed out that with private healthcare continuing to thrive, Malaysia’s public healthcare sector remains under pressure with a shortage of nurses, lack of resources, overworked and underpaid medical practitioners, as well as long waiting times for patients.
Therefore, the concept of PPP has been suggested by various groups – including the MOH – as a key driving factor to improve Malaysia’s healthcare system and enhance the country’s reputation as a hub for world-class healthcare services.
“In fact, the PPP model was put to test during the pandemic, where private hospitals worked together with public hospitals to offer vaccinations as well as treatments and isolation services for Covid-19 patients,” the association highlighted.
To put things into perspective, the PPP model is capable of helping the government, particularly in the decanting process (such as public hospital outsourcing a portion of patients to be treated at private hospitals at an agreed lower fee).
During the pandemic, the government outsourced thousands of non-Covid-19 patients to private hospitals, at a cost of at least RM128.8 million, according to the MOH’s 2021 Annual Report.
Under the Covid-19 PPP, the MoH – through its not-for-profit company, Protect Health Corporation SB – spent a total of RM393.4 million for Covid-19 vaccine doses administered at more than 2,200 vaccination centres (PPVs) in 2021.
The PPVs administered more than 25.2 million doses of vaccines, including over 5m doses by general practitioners and 2.9 million via private hospitals.
“We think it is crucial to accelerate the PPP initiative to brace for any potential impact from a new wave of diseases.
“The lesson learnt in 2020-2021 from the Covid-19 pandemic underscores the need to further strengthen Malaysia’s healthcare system.
“The primary hindrance to the lack of integration is the dichotomy system, as the public sector is primarily tax-funded, whereas the private sector is covered by out-of-pocket payments, corporate coverage, or for-profit private insurance.
“In view of this, the public sector is often reluctant to outsource patients to the private sector, given the relatively higher fees charged by the latter,” RHB IB said.
APHM had also noted that the dichotomy system has meant that information is not easily shared, leading to delays in diagnosis and treatment, unnecessary repeated investigations, and added costs.
“Resources across the public sector and private sector need to be more effectively and efficiently utilised.
“Less dichotomy and more partnerships or integration will reduce the pressures on public sector facilities, while increasing access for patients – and ultimately facilitating a seamless flow of care between providers, whether in the public, private, or non-profit sector,” it said.
All in, RHB IB said, “While we recognise the various challenges faced by private healthcare service providers, we are rather upbeat on the outlook for the healthcare sector, thanks to the inelastic nature of demand for healthcare services, pick-up in international patient visits, and the aging society trend, which could potentially open up new avenues of growth (ie wellness and geriatric services).”
It pointed out that government policy reforms should aid in fast-tracking the advancement of the healthcare industry and future-proof the industry from any pandemics in the future.
“With the introduction of the HWP, there are many details and action plans that will need to be worked out in the years ahead.
“The recommendation under the HWP, which suggests that MOH should focus primarily on its role of governance and relinquish its role as a purchaser and healthcare service provider could contribute to a more transparent function.
“With a clear separation between the two roles, the HWP aims to introduce appropriate competition and innovation in the healthcare space and ensure more consistent monitoring and evaluation of all health facilities, including public health facilities.
“In our view, not only would this strengthen the morale and political position for the next 15 years of proposed reforms, it would also symbolise MOH’s will for a future-proofed healthcare system,” it opined.