The looming malaysian healthcare debate part 3

MALAYSIAN HEALTH CARE DEBATE (PART 3)

Dr. Francis H.H. Ngu, M.B., B.S. (Mal.), M.H.P. (U.N.S.W.)

Sarawak.

EXAMINING DIMENSIONS OF MEDICAL CO-CONTRIBUTION:
BETTER SOCIAL SAFETY NET NOW ?

Background

It is well known that government provided health care in Malaysia is virtually free for outpatient primary care and minimal for inpatient hospital care. Pharmaceuticals are also generally free. Those in abject poverty are exempted from even the minimal payments. Overall, Malaysians pay for less than 5% of the health care costs to government.

Public advocate groups have persistently opposed changes to the arrangement, and to the Privatisation Policy, especially the privatization of government hospitals.
However, to move health care to the next and sustainable phase of development, a health care financing mechanism is likely to be rolled out soon. Employers and employees are likely to have to contribute, together with Government, to a health care fund which will finance health care.

No public hearing has been conducted to gauge community views. Few details are known, except that the very low income, the very poor and the elderly may be exempted from payment. Strong social resistance to medical co-contribution may be anticipated.


Comparative foreign models

Co-contribution is a feature of the National Health Service of several developed countries including UK and Australia. The government of social-democratic parties of these countries, have some 60 years ago introduced a wide range of social welfare benefits, including highly subsidized public sector health care.

Patients pay a minimal amount for consultation, and medication prescribed. The poor, unemployed and lower income are means-tested by the national social security or welfare system, and are exempted from any payment.

In UK the NHS makes annual capitation grants set against performance targets to providers (GPs) for providing care. In Australia, the Federal government re-imburses the providers (doctors, pharmacies) on a case by case basis, according to schedules agreed upon. The general practitioner’s are “gate-keepers”, patients receive specialist and hospital care only upon referral by GPs.


A few differences between Malaysia and developed countries should be born in mind:

1. Wage earners of developed countries have incomes 5-15 times of Malaysian wage earners. Thus basic minimum wage in Australia starts at around RM 40 per hour, with heavy loading for weekends and public holidays.
2. Generous income support are given to the unemployed or low income families, of up to RM 5000 per month for a family of 5 or 6. The income at which poverty level is set is thus very high.
3. The thresh-hold for paying personal income tax is also very high, at around RM 50 K annual income, or much more.
4. The government of these developed countries allocate proportionately far more than Malaysia to health care; in Australia total national health care expenditure is over 10% of GDP, in UK somewhat less, in Malaysia least and under 5% of GDP.


There are many more salient points for consideration, but suffice it here to state the above.

Level of health care provision

Malaysia is praised internationally for a very extensive primary care network; the national health outcomes from public health programmes including maternal and child health are most outstanding.

Yet from the relative under spending as suggested by the above comparisons with foreign developed countries, there must exist many gaps and deficiencies. This is indeed the case. This writer, admittedly writing from a political perspective, has set out the broad outlines of the unmet health care needs of the State of Sarawak alone (1). The same holds for Sabah, and possibly pockets in Peninsular Malaysia.

INCOME THRESHOLD FOR CO-PAYMENT, QUANTUM of PAYMENT

The debate about co-payment will surely revolve around the income or wealth level at which co-contribution becomes applicable, and for the higher income employees, at what percentage of the base salary.

Threshold income

The threshold income at which wage earners have to co-contribute surely has to relate to the income level below which poverty is defined.

The Selangor State government sets it at RM 1500 pm per family of 5, this before the withdrawal of fuel subsidies in 2008. A consumer association puts the figure at around RM 2000 pm.
A federal minister suggested that the threshold income for personal income tax
should be RM3000 pm. (RM 3.15 = US$ 1 approx.)

This latter would suggest that taxing a wage earner with an income of RM 3000 pm would impose some hardship on the latter. Enforcing co-contribution, by the same logic would be unfair at that income level.

The official Malaysian poverty threshold as set at around RM 800 p.m. for a family of 5, is grossly off the point. Taking into account home loan payments, transportation costs, and a series of other commitments, co-contribution should be considered at a relatively high threshold income, say RM 5000 pm or much higher.

It is estimated that only about 30 % of Malaysian wage earners take home RM 3000 p.m. or more.

If the threshold for co-payment is set at RM3000 p.m., only a third of the workforce will pay, at RM 5000 p.m. as threshold, perhaps just 10 % of employees will make co-payments.

This limits the amount of funds for health care from employee contributions.

The Quantum of Co-contribution

In foreign countries like Australia, they started from as low as 1% of base salary, rising to 2-3 % after many years of policy adoption.

Co-payment of 1% of salary of a RM 3000 wage earner is RM 30 pm., RM360 pa. or 1% of a RM 5000 wage earner RM 50 pm, or RM 600.

Taking this percentage amount or even more from an employee would be intolerable. It also raises the point as to whether the maximum contribution will be capped, and then the amount at which the cap will be set.

(The figures quoted above are purely for the discussion, and do not imply that writer supports co-contribution at RM 3000 or RM 5000 monthly as threshold income.)

Limitation of wage earner’s contribution

Thus the amount for the National Health Care Finance Fund that can be raised from wage earners or low-income self-employed is thus much limited. This is due to the inability of the Malaysian public due to poverty and to a low-income wage structures to make a substantial co-contribution.

Even a low minimum wage regime, long canvassed by labour unions, is not in place.

Employer and corporate contributions

If employer contribution is rated according to employee pay, the employer contribution is similarly circumscribed; the quantum of corporate contribution (voluntary or mandated) is also expected to be limited and not rising much annually, due to a nett national investment outflow and lackluster GDP growth.

Would government and industry however agree to a small Health Care Levy on excess profits (or as market bonanza from time to time), especially in the resource sector ? The social and economic debate on the hefty resource and mining tax is currently still raging in Australia; though the initial proposed levy is regarded by many as outrageously high, the general principle of it seems to have considerable support.



Are we prepared to look at all avenues of social financing mechanisms adopted overseas, or do we selectively pick one, namely medical co-contribution, and maintain a blind spot for other potential mechanisms ?


Other social security organisations

Contribution from EPF to the national health fund is controversial as EPF as the old age pension fund for wage earners as originally designed, is already undermined by house purchase and other withdrawals; SOCSO has however a treatment and rehabilitation component in design which are synergistic with health care.

Both EPF and SOCSO contributions are also rated according to employees’ wages, generally low as earlier stated. While EPF is savings and growth in concept, SOCSO and any medical co-contribution are non-refundable population risk insurance in conception.

MECHANISMS ; FUND MANAGEMENT

It remains unclear as to the structural arrangements to control and manage what will eventually be a large fund, or if there are other sources of funding, other than from Government consolidated revenue and possibly employee and employer co-contribution.

Will the Fund collect directly, to the burden of employers, or delegate collection to an existing agency like SOCSO ? Are there safeguards for abuse of public funds, not unfamiliar to Malaysians ?

HAS THE THRESHOLD FOR A BETTER SOCIAL SAFETY NET NOT BEING
CROSSED ?

Means testing

Wage income threshold is technically an easier method of determining the liability for employee contribution, however incomes of self-employed may be harder to ascertain with accuracy.

Moreover for a given wage threshold, the family needs and commitments may differ considerably. Thus a family in Sarawak with a relatively high total income of RM 12,000 say, may have a couple of children studying without loan or scholarship, in KL; minus the expenditure on their childrens’ education what is their expendable income ? And not forgetting essential car and house mortgages to pay.

Thus in developed social democratic countries, large bureaucracies have to be set up for determining the income and fundamental expenditures of families, to determine their eligibility to a wide range of social welfare benefits, including free health care.

If the Government of the day thinks it is time to introduce GST, abolish subsidies and push medical co-payment, then has the time not arrived to also introduce a more comprehensive social welfare system ?

Such a welfare system would have to be based on Means Testing for social welfare benefits, including free health care without being subject to co-contribution; this in a “High Cost Few Subsidies” economy, where the majority of the people will be not just in the “Middle Income Trap,” but effectively be in the “Low Income Trap”

This writer wish to refer readers further to his initial assertion in 2008, and to propose here that in 2010 and thereafter, setting up a proper Social Welfare System has become all the more urgent, including for all the other reasons previously stated in 2008. (2)

Health care issues inexorably lead to the over-arching issues of the economy, the basic principles underlining public policies and the wider political scenario. However, it may best to leave to the better rationale of individuals, rather than to canvass a particular line of political and social thinking here.

Ref.:

1. Ngu, UNMET HEALTH CARE NEEDS, SARAWAK, 2010, PARTS 1& 2. (Pt.3 Due) Tindak Malaysia blog.
2. Ngu, Social Welfare Article in the wake of the fuel price shock of 2008, reproduced at Tindak Malaysia blog. Also on N Francis Sarawakiana blog, April 2009, “Reproduction: Social Welfare Article.”