Contrary to the conventional wisdom that healthcare in Malaysia is underfunded, the total expenditure on health is very close to the international benchmark of 5% of GDP.
In 2023 it was 4.6% of GDP and this year public spending is 10% higher than last year. The problem is not the total but the mix, with public spending of RM45 billion, or 2.4% of GDP topped up by private healthcare spending of RM40 billion or 2.2% of GDP.
More than 75% of private healthcare spending, around RM30 billion, is out-of-pocket — paid directly by vulnerable patients without private insurance, which accounts for only around 17% of spending.
This is the core of the problem. Rather than draw on payments extorted from patients when they or their loved ones are sick and at their most vulnerable, the government must replace dependency on exploitative pay-as-you-go schemes with a holistic, sustainable and structured funding scheme that benefits all Malaysians.
The health minister recently mooted private health insurance funded by withdrawals from pension savings with EPF and suggested that only 1% of funds would be affected.
Since EPF has RM1.25 trillion in funds with around 15%, or RM187.5 billion in Account 2, 1% of that is RM1.9 billion of potential transfers of retirement savings to private insurance companies. The current controversies on excessive increase in insurance premium, medical inflation and the demands for regulation raise many red flags on this point alone.
Not only is this insufficient to cover the out-of-pocket costs, it also gives the impression that this scheme only benefits insurance companies rather than solve comprehensive healthcare funding universally. Private healthcare providers and investment analysts are already capitalising on the revenue and profit opportunities in the financial markets.
Within 15 years Malaysia will move from an ageing to an aged society with around 17% of the population above 60 years old. They will not be working or working less and so they will have low income but higher living costs especially for healthcare.
Here is a basic contradiction, by withdrawing from EPF for private health insurance early in life there will be insufficient funds for long-term healthcare costs in retirement. For EPF this will deplete the total fund and affect all members.
For individuals, where 97% of people have inadequate EPF savings and half have less than RM10,000 paying RM200 to RM300 per month or RM2,500 per year for medical insurance becomes impossible.
Very few will benefit, and it will reinforce the impression that EPF is a savings account and not a retirement fund. It will reduce savings in their accounts at exactly the time when people need to be rebuilding their savings. This will make the retirement crisis worse.
One possible alternative scheme would be to allow both private and public medical services providers in the market but have them paid for directly by the government rather than out-of-pocket by individuals. Private insurance and full fees for elective and cosmetic treatments would still be available in such a scheme.
As the monopsony, or single purchaser of medical services, private healthcare providers sell their services to the government which then has more control over price, cost, quality and regulation.
The expected chorus of “we can’t afford it”, is predictable but misguided. The RM30 billion out-of-pocket spending is less than RM1,000 for every Malaysian per year or RM2.75 per day, half the price of a cup of teh tarik.
To pay for this a simple e-payments tax (EPT) of 1% could raise RM28.8 billion which would be a very important start to such a scheme and of course a Malaysian Superfund can provide sustainable support in the long-term.
The views expressed are those of the writer and do not necessarily reflect those of FMT.