UNIVERSAL HEALTH COVERAGE STUDY SERIES No. 42
Public Disclosure Authorized Malaysia: A new public clinic built every four days
Public Disclosure Authorized
Public Disclosure Authorized
Please cite this paper as: Yap, W., Razif, I., and Nagpal, S. 2019. “Malaysia: A new public clinic built every four days”. Universal Health Care Coverage Series No. 42, World Bank Group, Washington, DC. Public Disclosure Authorized
Wei Aun Yap, Izzanie Razif, and Somil Nagpal -
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UNIVERSAL HEALTH COVERAGE STUDY SERIES No. 42
Malaysia: A new public clinic built every four days
Wei Aun Yap, Izzanie Razif, and Somil Nagpal
The World Bank, Washington, DC, 2019
3 Table of Contents
Table of Contents ...... 4 Abbreviations and Acronyms ...... 6 Preface to the second round of the Universal Health Coverage Study Series ...... 7 Acknowledgements ...... 8 About the Authors ...... 9 Executive Summary ...... 10 1. Introduction ...... 11 2. Political, Economic, and Population Context ...... 12 3. Service Delivery ...... 14 4. Health Financing ...... 17 Resource Mobilization ...... 20 Pooling ...... 23 Purchasing ...... 24 5. Institutional Architecture ...... 27 6. Management of the PHS Benefits Package ...... 28 How are New Technologies and Programs Included and Excluded at the Central level? ...... 28 7. Information Environment ...... 31 Performance Management and Public Accountability ...... 31 8. Focus Area 1: Implicit Targeting in Malaysia’s PHS: Propoor but at what cost? ...... 33 Implicit Targeting of the Poor...... 33 Implicit Targeting, Rationing, and Implications for Health System Goals ...... 35 9. Focus Area 2: The Private Sector: Complementary or Contradictory ...... 38 10. Reform Agenda ...... 41 Annexes...... 43 Annex 1 Full-Paying Patient initiative ...... 43 Annex 2 Foreign Worker’s Health Insurance Protection Scheme ...... 44 Annex 3 Contracting Out ...... 45 Annex 4 Informing Decisions on the Benefits Package: The Role of MaHTAS ...... 46 Annex 5 The Political Economy of Rural Health ...... 48 Annex 6 Benefits Incidence Analysis and Financial Protection ...... 49 References ...... 50 Notes ...... 53
4 Figures Figure 1 Epidemiological Transition ...... 13 Figure 2 MOH Primary Healthcare Facilities, 1957–2014 ...... 14 Figure 3 Total Health Expenditure (THE) Trends, 1997–2016 (Real Per Capita as Percent of GDP) .... 18 Figure 4 Share of Public and Private Health Expenditure, and Government Size, 1997-2016 ...... 18 Figure 5 Health financing sources, providers, and functions ...... 19 Figure 6 Federal Government Health Expenditure Trends, 1970–2017 ...... 21 Figure 7 Public-Private Inpatient Utilization Share Trends, 1996–2015 ...... 37 Figure 8 Public-Private Preferences for Inpatient and Outpatient Utilization by Economic Quintile, 2015 ...... 37
Tables
Table 1 Key Public and Private Supply and Utilization Indicators ...... 16 Table 2 Typical Provider Payment Mechanisms Used in the Private Sector ...... 26 Table 3 Benefits Incidence Analysis for Public Health Spending, 2011 ...... 49 Table 4 Catastrophic Health Out-of-Pocket Expenditure ...... 49
Boxes
Box 1 Fiscal Space for Health in Malaysia ...... 22 Box 2 Organization and Regulation of the Private Health Sector ...... 24
5 Abbreviations and Acronyms
CD communicable disease CPG clinical practice guideline DALY disability-adjusted life year DHO district health office DM diabetes mellitus EPU Economic Planning Unit FPA First-Party Administrator FPP Full-Paying Patient GDP gross domestic product GNI gross national income GST Goods and Services Tax HSC Health Sub-Centers HTA Health Technology Assessment K1M 1Malaysia Clinic MaHTAS Malaysia Health Technology Assessment Section MCH maternal and child health MCO Managed Care Organization MCQ Midwife Clinics cum Quarters MHC Main Health Center MOH Ministry of Health NCD noncommunicable disease NHMS National Health and Morbidity Survey NHS National Health Service PHS Public Healthcare System RM Malaysian ringgit SHD State Health Department SMRP System Maklumat Rawatan Pesakit SODO Specific Object Discrete Object SPIKA Foreign Worker’s Health Insurance Protection Scheme TAC Technical Advisory Committee THE total health expenditure TPA Third-Party Administrator TPCA Third-Party Claims Administrator UHC universal health coverage UNICO Universal Health Coverage Study Series WDI World Development Indicators
6 Preface to the second round of the Universal Health Coverage Study Series
All over the world countries are implementing pro-poor reforms to advance universal health coverage. The widespread trend to expand coverage resulted in the inclusion of the “achieving universal health coverage by 2030” target in the Sustainable Development Agenda. Progress is monitored through indicators measuring gains in financial risk protection and in access to quality essential health-care services.
The Universal Health Coverage (UHC) Studies Series was launched in 2013 with the objective of sharing knowledge regarding pro-poor reforms advancing UHC in developing countries. The series is aimed at policy-makers and UHC reform implementers in low- and middle-income countries. The Series recognizes that there are many policy paths to achieve UHC and therefore does not endorse a specific path or model.
The Series consists of country case studies and technical papers. The case studies employ a standardized approach aimed at understanding the tools –policies, instruments and institutions used to expand health coverage across three dimensions: population, health services and affordability. The approach relies on a protocol involving around 300 questions structured to provide a detailed understanding of how countries are implementing UHC reforms in the following areas:
• Progressive Universalism: expanding population coverage while ensuring that the poor and vulnerable are not left behind; • Strategic Purchasing: expanding the statutory benefits package and developing incentives for its effective delivery by health-care providers; • Raising revenues to finance health care in fiscally sustainable ways; • Improving the availability and quality of health-care providers; and, • Strengthening accountability to ensure the fulfillment of promises made between citizens, governments and health institutions.
By 2017, the Series had published 24 country case studies and conducted a systematic literature review on the impact of UHC reforms. In its second round, the Series will publish an additional 15 case studies, A book analyzing and comparing the initial 24 country case studies is also available: Going Universal: How 24 Developing Countries are Implementing UHC Reforms from the Bottom Up. Links to the Series and the book are included below.
Links http://www.worldbank.org/en/topic/health/publication/universal-health-coverage-study-series http://www.worldbank.org/en/topic/universalhealthcoverage/publication/going-universal-how24- countries-are-implementing-universal-health-coverage-reforms-from-bottom-up
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Acknowledgements
The authors would like to thank YBhg. Datuk Dr. Noor Hisham bin Abdullah, Director General of Health at the Malaysia Ministry of Health for his guidance, continued support and permission to publish this article.
The authors would also like to thank the officials from the Ministry of Health, including the Medical Development Division and Planning Division, who have provided comments, information, and background context important to this case study. We would especially like to thank the Malaysia Health Technology Assessment Section (MaHTAS) and their officials: Dr. Junainah bt Sabirin (Deputy Director), Dr. Izzuna Mudla bt Mohamed Ghazali (Senior Principal Assistant Director), Dr. Roza bt Sarimin (Senior Principal Assistant Director), Ms. Noormah bt Mohd Darus (Senior Principal Assistant Director [Pharmacist]), Ms. Ku Nurhasni bt Ku Abd. Rahim (Senior Principal Assistant Director [Pharmacist]), Mr. Syful Azlie b Md Fauzi (Science Officer), and Mr. Lee Sit Wai (Pharmacist), who provided information and context on health technology assessments; and Ms. Jaime Chan Yoke May (Pharmacist) of Sarawak General Hospital, who provided information on pharmaceutical services.
In addition, we would like to acknowledge and thank Owen Smith, Aparnaa Somanathan, and Mei Ling Tan for kindly reviewing this case study, and Aneesa Arur, Sevil Salakhutdinova, and Luka Voncina for valuable comments received. Views expressed in this article are not necessarily the views of the Government of Malaysia or the World Bank.
8 About the Authors
Yap Wei Aun is Executive Director of Quanticlear Solutions. His professional interests include health policy and analytics. He has consulted on health policy and social protection for the World Bank in Lao PDR, Indonesia, and Malaysia, and was part of the Malaysia Health Systems Research collaboration between Harvard University and the Ministry of Health. Prior to his work on health policy, Wei Aun worked as a medical doctor in a variety of places – England, district hospitals in Sarawak, and Kuala Lumpur. His last clinical position was at the Intensive Care Unit of Hospital Kuala Lumpur. He completed his basic medical education at the University of Newcastle Upon Tyne, before obtaining the MRCP (UK) and a Master in Public Health (Harvard).
Izzanie Mohamed Razif has been a Research Officer at the National Health Financing Unit, Planning Division, in the Ministry of Health (MOH) in Malaysia since 2011. In addition to her work on health financing, she has also been involved in health system research and in translating her research findings into policy decisions. Her recent research work on equity in health financing has included analyzing the distribution of the burden of financing health services across income groups in Malaysia. Prior to that, she was involved in the Malaysia health care demand analysis, which studied the inequities in health care demand in Malaysia. She has been part of the National Health and Morbidity Survey team in 2011 and 2015. Izzanie earned a degree in Biochemical Science from National University of Malaysia in 2010 and she is currently studying for a master degree in health service management majoring health financing in University Putra Malaysia.
Somil Nagpal is the cluster lead for the World Bank’s health and nutrition programs in Indonesia and Timor Leste, having served recently in a similar capacity for Cambodia and Lao PDR. Prior to joining the Bank in 2009, Somil has served as a health insurance regulator in India, and also in the Indian ministries of Finance and Health. He represents World Bank as a core team member in global UHC initiatives such as the Joint Learning Network (JLN) for Universal Health Coverage and UHC2030. Somil qualified as a medical doctor with dual post-graduate degrees in hospital administration and financial management and is a Fellow of the Insurance Institute of India. Somil has been associated with the Universal Health Coverage (UNICO) Study Series since its inception and was also a co-author of the UNICO synthesis book, Going Universal.
9 Executive Summary
The Malaysian health system has been described by the World Health Organization as a “low-cost health care system … that provides universal and comprehensive services” (Safurah Jaafar et al. 2013, pg 98), with universal health coverage (UHC) attained, according to some commentators, by the 1980s (Savedoff and Smith 2011a). A key pillar of this system is the tax-funded and Ministry-of-Health-delivered top- down Public Healthcare System (PHS), which provides health coverage primarily through supply-side investments in facilities, rather than demand-side financing schemes.
The scale of these supply-side investments has been very substantial historically: Malaysia built one new public clinic every 3.8 days for 23 years since independence in 1957, explicitly prioritizing maternal and child health (MCH) and rural areas, at a period when gross national income (GNI) per capita was only several hundred U.S. dollars. These geographically-targeted supply-side investments have surely contributed to Malaysia’s success in attaining a high level and equitable distribution of MCH and communicable disease (CD) outcomes, whereby Malaysia performed better than expected given its economic status. However, the performance of this system in preventing and managing chronic noncommunicable diseases (NCDs) such as cardiovascular disease and cancer is inadequate, as exemplified by the rising prevalence of diabetes mellitus (a recent increase to 17.5 percent of adults over 18 years of age in 2015, approximately half of whom are undiagnosed). In addition, the propoor coverage of cost-effective but costlier services delivered from public tertiary facilities in urban areas is unclear, especially given that the PHS benefits package is not explicitly defined.
As supply-side investments were prioritized in rural areas and for MCH services, a gap was left that has been filled by a dynamic but loosely regulated and fragmented private sector. The private sector is large— it consumes nearly half of health expenditures and accounts for 69 percent of clinics. This mixed public- private health financing and delivery ecosystem is hence an important characteristic of Malaysia’s health system. This has allowed those who have the means, to pay privately for health services and experiential service elements like air-conditioning and private rooms, if they do not wish to access equivalent services in PHS due to the lack of these service elements, the lack of provider choice, or long waiting times. This establishes an outlet for excess demand and helps to decongest public facilities. Doctors working in the public sector can also supplement their wages through dual practice. However, with medical price inflation of 17.3 percent in 2016 (Mercer Marsh 2016) and the brain drain of experienced clinicians from the public to the private sector, the sustainability of the health system and the negative spillover effects or ‘externalities’ of the private sector on PHS is a challenge.
Hence, although Malaysia deserves credit for the impressive and equitable gains at a low cost in MCH and CD after independence, this unique geographic, experiential, and benefits-package-targeted, supply- side-driven PHS model of attaining these health system outcomes is being tested by changing epidemiological and fiscal realities. This can potentially limit the universality and equity of Malaysia’s much-acclaimed universal health coverage, especially its breadth-of-service coverage for NCDs and cost- effective but costlier services. In addition to private sector externalities and the rising expectations of a nation on the cusp of attaining high-income status, these challenges signal the direction of opportunities for overdue health reforms and cross-participation across both the public and private sector, in order to steer Malaysia away from becoming a victim of its earlier impressive successes.
10 1. Introduction
This case study on Malaysia is part of phase 2 of the multicountry Universal Health Coverage study series (UNICO), which explores propoor universal health coverage (UHC) programs, which expanded one or more of the three dimensions of the UHC cube—breadth of population coverage, depth of service coverage, and height of financial coverage—in a manner that is propoor. Malaysia is one of only a handful of global examples of low-income or middle-income healthcare systems which had been able to deliver equitable and effective health outcomes at low cost and with strong financial protection, through public sector supply-side investments. The experiences and lessons learnt from Malaysia’s Public Healthcare System (PHS) are hence relevant for low- and low-middle-income countries considering such a pathway to UHC.
Specifically, we explore whether and how PHS achieved propoor coverage, even though all citizens, rich and poor, are entitled to free or nearly free services at public facilities. In addition, this case study explores whether there were any relevant tradeoffs and unintended consequences, both currently and for long-term sustainability. This is especially a concern because PHS does not exist in isolation but operates within the context of a mixed public and private health financing and delivery ecosystem. PHS affects and is affected by the overall health system including the private sector.
For the purposes of this UNICO case study, we define Malaysia’s PHS as the system that provides personal health services (excluding dental and traditional and traditional or complementary medicine) financed by general taxation and delivered through the Ministry of Health (MOH) for a nominal fee or free-of-charge, excluding services provided at prices with the intention of substantive cost recovery, such as services provided to noncitizens and services provided under the Full-Paying Patient (FPP) initiative. This PHS definition and moniker is specific for the purposes of this case study. PHS is a type of national health service (NHS) (Böhm et al. 2012; Gottret and Schieber 2006), but is different from the English NHS in important aspects. While both the PHS and the English NHS are centrally-planned and financed through general taxation, the English NHS differs in that it purchases from private or not-for-profit providers and requires users to register with a general practitioner, and underwent internal market reforms in 1991 (Smith 2018).
Sections 2 to 4 of this case study describes the political, economic, and population context in which PHS exists, and covers two important aspects of PHS – service delivery and health financing – which are instrumental to its success. PHS coexists with a large parallel private sector, which is described together in these sections. Additional topics on PHS – its institutional architecture, management of its benefits package, and information environment – are covered in sections 5 to 7. Two major focus areas are then discussed: The first focus area (section 8) discusses how PHS achieved propoor coverage through implicit targeting, while the second focus area explores the interrelationship between PHS and the private sector. Section 10 concludes with a proposed reform agenda for Malaysia.
11 2. Political, Economic, and Population Context
Malaysia is a federation of 13 states and three federal territories formed in 1963, following independence from the British, which was gained for Malaya (Peninsular Malaysia) in 1957, and for Sabah and Sarawak (two states on Borneo island) in 1963. The political system is a federal constitutional elective monarchy, with a bicameral Parliament (comprising the House of Representatives and the Senate), elected on a first- past-the-post basis. States in Malaysia have a unicameral State Legislative Assembly, formed of elected representatives.
Malaysia has an open-market economy, which has been growing rapidly since independence. In 1965, Malaysia’s GNI per capita (Atlas method, current U.S. dollars) was US$300, rising to US$1,940 in 1985, US$5,250 in 2005, and US$10,460 in 2018 (Malaysia Economic Monitor, World Bank 2019). It is currently classified as an upper-middle-income country and aims to achieve high-income status very soon (expected to be between 2021 and 2024). Malaysia’s road network is extensive and car ownership is high (93 percent) (The Star 2016). Official poverty rates are low at 0.6 percent in 2014, down from 49.3 percent in 1970 (Economic Planning Unit 2016).
The population of Malaysia is multiethnic and multireligious, with 30.3 million people as of 2015 (World Bank 2016). Among citizens, 68.6 percent are Bumiputera (comprising Malays and indigenous groups in Peninsular Malaysia, Sabah, and Sarawak), 23.4 percent are Chinese, and 7.0 percent are Indian. Noncitizens, an important part of the labor force, comprise 10.3 percent of the population. Although a secular state, Islam is the official religion of the federation, with 61.3 percent of the population as adherents. Urbanization is proceeding rapidly. In 1960, only 27 percent of the population was urban, but this increased rapidly to 50 percent in 1990 and 75 percent in 2015. Adult literacy rates are high at 95 percent in 2015, both among females, at 93 percent, and males, at 96 percent (World Bank 2016). Malaysia’s population is also rapidly undergoing both a demographic and epidemiological transition.
Based on UN Population Projections and definitionsi, Malaysia will be an “aging” society by around 2020 and is expected to progress from an “aging” to an “aged” society within 20 years, a demographic transition that took 69 years in the United Kingdom and 115 years in France (World Bank 2015). Aging and the rapid pace of aging has important implications for both the financing of healthcare and healthcare needs. The proportion of the population that is working age—that is, those aged 15 to 64—is at its projected peak of 70 percent during this current decade, and is anticipated to decrease after that to 64 percent by 2050 and 56 percent by 2100 (United Nations 2015).
Malaysia’s epidemiological transition from infectious diseases to chronic noncommunicable diseases (NCDs), including injuries, is well underway. In 1990, 60 percent of disability-adjusted life years (DALYs) were lost due to NCDs. By 2013, this increased to 72 percent of DALYs lost (Figure 1) (IHME 2014). Similarly, the prevalence of diabetes mellitus (DM) has almost tripled from 6.3 percent in 1986ii to 11.6 percent in 2006 and 17.5 percent in 2015 (Institute for Public Health 2015; Safurah Jaafar et al. 2013).
12 Figure 1 Epidemiological Transition DisabilityAdjusted Life Years (DALYs) Lost in Malaysia, 1990 and 2013
11% 12% Injuries 17% 29% Communicable, maternal, neonatal, and nutritional 72% 60% diseases Noncommunicable diseases
1990 2013
Source: Global Burden of Disease Study 2013 (2014).
Since independence in 1957, Malaya (and subsequently Malaysia) has made great strides in developing its health system and achieving impressive health outcomes. Infant mortality rates declined from 67 deaths per 1,000 in 1960 to 6 deaths per 1,000 in 2015 and life expectancy at birth increased from 59 years in 1960 to 75 years in 2015 (World Bank 2016). This is an impressive result although Malaysia’s relative standing as a positive outlier for infant mortality and life expectancy compared to countries at a similar economic state has diminished over time, with the rise of NCDs as the likely causal factor. The groundwork for these impressive improvements in health outcomes was laid even prior to independence, with the explicit prioritization of rural health as most of the population was rural, resulting in supply-side investments in health, clean water, and sanitation infrastructure in rural areas.
For that reason, some commentators suggest that Malaysia achieved universal health coverage (UHC) as early as the 1980s (Savedoff and Smith 2011b), although this may pertain just to maternal and child health (MCH), and communicable diseases (CDs). UHC nevertheless continued to be reiterated in the Malaysia Plans, a five-yearly series of national developmental plans, at least since the 10th Malaysia Plan 2011- 2015, which incorporates the specific language of UHC—“ensuring universal access to health care” as a key results area (Economic Planning Unit 2010)—although equivalent prioritization of health long preceded this articulation.
In tandem, Malaysia’s policy makers have also emphasized the economic role of the health industry and the role of private sector providers in healthcare. Under the government’s Economic Transformation Program, private sector investment in healthcare is highlighted (Jabatan Perdana Menteri 2014), and under the 11th Malaysia Plan 2016–2020, the role of the private sector in increasing access to health is enshrined (Economic Planning Unit 2015). These policies, combined with the rural focus of the public system, have resulted in somewhat intentional gaps in the public system that have been filled by a vibrant private sector (described in Focus Area 2, below) which has developed in tandem with the public sector, resulting in a mixed public and private health financing and delivery system in Malaysia.
13 3. Service Delivery
As PHS is essentially a large supply-side intervention, its performance depends on the scale, distribution, comprehensiveness, and effectiveness of its facilities. In this regard, Malaysia’s story is compelling. When the then Malaya gained independence in 1957 there were only seven public clinics throughout the country. The stock of health facilities grew dramatically: by more than a thousand in the subsequent decade until 1970 and again by more than a thousand by 1980 (Figure 2). This is equivalent to one new public clinic built every 3.8 days for the first 23 years of independence, from 1957 to 1980. Notably, GNI per capita during this period was just a few hundred US dollars and only breached the US$1,000 mark in 1978. Furthermore, the national population in 1980 was less than 14 million.
Figure 2 MOH Primary Healthcare Facilities, 1957–2014 3,500 3,000 307
2,500 947 708 1061 2,000 1Malaysia clinics 725 1,500 Health clinics Clinics 224 Community clinics 1,000 1880 1924 1810 1509 500 943 0 7 1957 1970 1980 1990 2000 2014
Source: Safurah Jaafar et al. (2012) for 1957–2000; Ministry of Health (2015a) for 2014. Note: Includes community clinics (Klinik Desa), health clinics (Klinik Kesihatan), and 1Malaysia clinics (Klinik 1Malaysia). Excludes stand-alone dental clinics and mobile clinics.
This network of public clinics, including health clinics, community clinics, urban 1Malaysia clinics,iii and mobile clinics forms the backbone of PHS. They are distributed throughout the country and penetrate deep into rural and remote areas, including the interior areas of Sabah and Sarawak. These clinics are generally organized around a district health office (DHO), which manages several health clinics, which in turn are the lead facilities for the network of rural community clinics and urban 1Malaysia clinics. There are geographic operational zones for MCH and CD health services but, importantly, individuals are not currently assigned to a designated primary health provider.iv Public hospitals are distributed relatively evenly, with a district hospital in almost every district in the country, although tertiary hospitals (for example, state hospitals and specialist medical institutions) are generally located in large cities.
These increases in the supply of health facilities have also been accompanied by a large increase (over and above population growth) in the number of doctors, including generalists and specialists, both public and private. In 1960, there was one doctor per 7,000 people, but by 1990, this ratio had improved to one doctor per 2,550 people, and by 2010, to one doctor per 834 people. There are, however, distributional issues, by sector, geography, and level and type of specialization. Both public and private doctors are concentrated more in urban areas, although this is less acute in the public sector due to effective deployment of health workers to rural areas in the public sector and possibly, the intrinsic motivations of health workers in serving disadvantaged populations. Nevertheless, retention of doctors, especially senior specialists, within the public sector is a major concern. Between 2006 and 2011, 422 medical specialists resigned from public service (Nor Filzatun Borhan et al. 2014). There are ongoing initiatives to support
14 the number of specialists in the public sector. These include expanding sub-specialty training places (funded by MOH directly), career promotion exercises, and the FPP initiative (Annex 1), which formalizes dual practice within public sector facilities.
Increasing the supply of facilities and doctors alone would not adequately account for the success of PHS. The training and the professionalization of the midwifery workforce have been cited as instrumental factors for Malaysia’s success in improving maternal health (Pathmanathan and Liljestrand 2003). Governance norms are relatively strong in Malaysia–physician absences in the public sector are uncommon. Supply-side efforts to innovate and adapt to the changing context, such as the lean healthcare initiative and off-site cataract services, continue to shape service delivery in PHS.
Private providers, although not part of PHS, are an important part of the ecosystem. Private clinics, of which there were almost 7,000 in 2014, outnumber public clinics but are generally smaller and concentrated mainly in urban areas, especially in the west coast of Peninsular Malaysia (see Table 1). These clinics are mainly small, single-provider clinics concentrated in cities and towns, which in some cases form a network of clinics. In the past, private pharmacies have been reported to dispense medications without prescriptions (The Star 2006), and there are many traditional and complementary medicine providers, although they are not the focus of this case study and not discussed hereafter. Private hospitals comprise a wide and heterogeneous range of private hospitals, from small facilities with only a handful of beds, to large hospital chains (including international chains) which control several private hospitals throughout the country, catering to both locals and health tourists. Although there are more private than public hospitals, there are fewer private hospital beds, as these hospitals tend to be smaller in size. Unsurprisingly, private hospitals like private clinics, are concentrated in urban areas. Private medical practitioners, especially senior practitioners, typically operate as independent contractors, rather than as employees of a private hospital.
The public-sector accounts for the majority of both inpatient and outpatient utilization, even though health expenditures for both sectors are similar. Private primary healthcare is generally used for acute conditions such as fever, cough, abdominal pain, and diarrhea, whereas public primary healthcare is used for maternal and child health (MCH) and chronic conditions such as hypertension, DM, and lipid disorders (Sivasampu et al. 2016), bearing in mind that the cost of medications is included in the nominal user fee paid for at public facilities. Nevertheless, the size of the private sector warrants further exploration (in Focus Area 2), as this may even be antithetical to the notion of UHC, if this implies a lack of effective access to clinically warranted services.
15 Table 1 Key Public and Private Supply and Utilization Indicators Year Indicator Public Private 2014 Clinics Health clinics – 1,061 Licensed private medical MOH Health Facts 2015 Community clinics – 1,810 clinics – 6,978 1Malaysia clinics – 307 (31% of total) (69% of total) 2014 Hospitals MOH – 142 Private hospitalsa – 184 MOH Health Facts 2015 Non-MOH – 8 (45% of total) (55% of total) 2014 Doctors MOH doctors – 33,275 Private doctors – 12,290 MOH Health Facts 2015 (73% of total) (27% of total) 2015 NHMS 2015 Outpatient 1.94 visits per person per year 1.29 visits per person per (Institute for Public Health Utilization year 2016) (60% of total) (40% of total) 2014 NHMS 2015; MOH Inpatient MOH inpatient admissions and day Inpatient admissions: Health Facts 2015; Utilization care attendances: 1,083,201 MOH 2015a; Institute for 3,653,124 Public Health 2016 (77% of total) (23% of total) Note : NHMS = National Health and Morbidity Survey. Facilities as per the definition used by the respective MOH data sources. a Excludes maternity homes, nursing homes, hospices, ambulatory care centers, blood banks, hemodialysis centers, community mental health centers, and combined facilities.
16 4. Health Financing
An important feature of PHS is the health financing context in which it exists–a mixed, interrelated, and approximately equal-sized (measured in terms of expenditures) public and private health financing ecosystem. In this section, we describe the overall health financing context of both sectors, and discuss specific health financing topics–resource mobilization, pooling, and purchasing–for PHS, and where relevant, the interrelated private sector.
Public financing is mobilized primarily through general federal taxation and delivered in a centralized manner primarily through MOH in the form of operational and developmental budgets. Although not the focus of this case study, other ministries such as the Ministry of Higher Education; the Ministry of Defense; the Ministry of Human Resources, and the Ministry of Women, Family, and Community Development also receive financing from general taxation for providing some health services through university hospitals, military hospitals, estate clinics in Sabah and Sarawak, and family planning clinics, respectively.v
There are some payroll contributions applicable to the formal sector and to expatriate workers, which can go towards health: (a) the Employees Provident Fund, a scheme for all formal sector workers except civil servants on the pension scheme, is not a health contribution per se, but a mandatory old-age savings scheme, allowing up to 30 percent of funds (Account 2) to be withdrawn before age 55 to cover medical expenses for critical illnesses; (b) the Social Security Organization, a mandatory scheme for formal sector workers up to an income cap of RM 4,000 for contributions, which receives mandatory contributions and covers injuries, invalidity, occupational diseases, and dialysis; and (c) the Foreign Worker’s Health Insurance Protection Scheme, which is a mandatory insurance scheme for most foreign workers which covers inpatient services at MOH hospitals (Annex 2).
State governments, although bestowed with limited revenue-raising powers (for example, natural resources and business licensing) and a state legislature, have a limited role in healthcare financing and provision. State governments and local authorities perform some public health functions such as the regulation of food premises, dengue vector control, and in some areas, MCH and general outpatient services. However, in recent years, the Selangor state government has been more involved in health and has funded, through state revenues, an initiative called Skim Peduli Sihatvi to cover private general outpatient services for the poor.
The private sector is financed primarily through out-of-pocket expenses and through private health insurance. Many private sector employers provide private health benefits (although they are not mandated to do so) through reimbursements of medical expenses, Third-Party Administrators (TPAs), and Private Health Insurers (also see Box 2).
Quantitatively, total health expenditures (THE) for both sectors has been increasing over time, both in real per capita terms (from RM 685 to RM 1,636 per capita in 2010 prices between 1997 and 2016), but also as a proportion of GDP (from 3.1 to 4.2 percent from 1997 to 2016) (Figure 3). Public expenditures comprise 52 percent of THE, a slight decreasing trend from 60 percent in 2009, but over the last two decades, this share of public compared to private health expenditures has ebbed and flowed, varying from 51 to 61 percent, even as the size of the government, measured as general government revenue as a percent of GDP, declined from 28 to 19 percent from 1997 to 2015 (Figure 4).
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Relative to GDP, public expenditures on health in 2016 were equivalent to 2.17 percent of GDP and private expenditures on health were 2.04 percent of GDP. Additional aggregate national health accounts indicators are presented in Figure 5.
Figure 3 Total Health Expenditure (THE) Trends, 1997–2016 (Real Per Capita as Percent of GDP) 1800 5.0 1,636 1600 4.1 4.1 4.5 4.0 1400 4.2 3.5 1200 3.1 3.4 1,224 3.0 1000 987 2.5 800 905 2.0
600 ofGDP Percent 685 1.5 400 1.0 200 0.5 Real THEper Capita (RM,2010 Prices) 0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Real THE Per Capita (RM, 2010 Prices) THE (% GDP)
Source: MNHA 2017.
Figure 4 Share of Public and Private Health Expenditure, and Government Size, 1997-2016 100 90 80 70 60 58 58 61 58 60 59 50 57 57 57 56 56 55 56 51 52 53 54 53 54 52 Percent 40 30 20 28 21 19 10 15 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Public Expenditure as % of THE Private Expenditure as % of THE General Government Revenue (% GDP)
Sources: MNHA 2017; Ministry of Finance 2016; World Bank 2016.
18 Figure 5 Health financing sources, providers, and functions Health financing sources, as percent of THE, 2016 Total Public, 52 Total Private, 48 Other public, 2 MOHE, 3 Other federal agencies, 4 Out-of-pocket, 38
Private insurance, 7 MOH, 43 Corporations, 2 Other private, 1
Health providers, Health functions, as percent of THE, 2016 as percent of THE, 2016 Retail and Medicines medical , supplies, goods, 7 and Ambulato Administr appliances ry care, 25 ation and , 9 insurance, Administr 6 ation and insurance, Research Curative 6 and care, 70 Research teaching and instituti… Hospitals, training, 6 53 Public Public health, 3 health, 5 Capital Others, 1 development, 3 Others, 1 Source: MNHA 2017.
19 Resource Mobilization
PHS is financed from a substantial portion (but not the whole) of MOH funding, which in turn is a substantial part of overall public financing for health, specifically, from federal government general revenue. This has notable strengths as a progressive financing source, especially in natural resource-rich countries and where inequality and labor informality are significant (Yap, Smith, and Cotlear 2018).
Sources of federal government general revenue in 2016 (Ministry of Finance 2016), which are the primary financing sources for PHS, are direct taxes (56 percent of total revenue), which includes income taxes from companies, individuals, petroleum, and stamp duty; indirect taxes (26 percent of total revenue), including export and import duties, excise duties, and goods and services tax (GST) which was introduced in 2015; nontax revenues (20 percent of total revenue), which includes licenses and permits, fines, and dividends from investments (including from the national oil company, Petronas); and nonrevenue receipts and revenue from federal territories (1 percent of total revenue). These sources in aggregate were “slightly progressive with a Kakwani’s progressivity index of 0.186” (Yu, Whynes, and Sach 2008) based on the Household Expenditure Survey (HES) of 1998/99, and remain propoor in subsequent analyses based on the Household Expenditure Survey 2004/2005 (Institute for Health Systems Research 2013).
As a share of general government expenditures, there has been a U-shaped curve in the prioritization of health over time. In the 1970s, approximately 7 to 9 percent of federal government operating expenditure was spent on health, but this decreased in the 1980s to the early 1990s to approximately 5 percent. However, since that period, there has been a steady increase in the prioritization of health in the operational budget of the federal government, and the budget for 2017 includes the highest percentage allocation to health, at 11 percent, at least since 1970 (Figure 6). Given population growth and inflation, real per capita government spending on health grew slowly from 1970 to 1990, doubling over those 20 years from RM 83 to RM 160 (2010 prices). In the subsequent 25 years—from 1990 to 2015—spending more than quadrupled on a real per capita basis to RM 667 (2010 prices).
20 Figure 6 Federal Government Health Expenditure Trends, 1970–2017 12 700
11.0 11 665
600 10
562 9 8.8 8.4 8.4 8.4 500
8 7.7 7.3 7.2 453 7 400
6 354 5.2 5.2 5 300
4 259 Real PerCapita (RM,2010 prices) 200 3
as percent of General Government Operating Expenditures Operating Government General of as percent 167 141 2 133 100 107 1 83
0 -
Sources: Ministry of Finance Economic Reports and World Bank (2016); revised estimate for 2016, budgeted for 2017.
21 Box 1 Fiscal Space for Health in Malaysia As one of the Asian tigers, Malaysia’s rapid economic growth since independence created favorable fiscal conditions for the health sector during a period of sustained economic expansion. GNI per capita increased from US$300 in 1965 to US$10,460 in 2018. This allowed the government to spend more on health per capita in real terms, without increasing taxation rates or at the expense of other sectors.
There are, however, some recent important developments affecting overall government revenues. As a net oil exporter, the drop in crude oil prices since mid-2014 has affected government revenue significantly. This period has also been associated with depreciation in the national currency, the Malaysian ringgit, in line with other emerging market currencies, and with its implications on the cost of imported health technologies. The government follows a self-imposed debt ceiling policy, restricting debt to 55 percent of GDP. At the close of 2018, this debt amounted to 51.2 percent of GDP, very close to this self-imposed limit. Apart from Malaysia’s fiscal position, there have also been, advances in medical technologies, changing demography and epidemiology, and rising expectations which continue to increase demands on the health system. In response, the government has made efforts to expand fiscal space for health through increasing government revenue, increasing the efficiency of spending, and reprioritizing health and reducing spending in other sectors as described below:
Increasing Government Revenue: Malaysia has traditionally depended on corporate income taxes and oil related revenues for the larger part of public sector revenues. In fulfilment of its 2018 election manifesto, the government replaced the Goods and Services (GST) with a Sales and Services Tax (SST), with implications on revenue (Malaysia Economic Monitor, June 2019). Previously the GST, which was introduced in 2015 as a value added tax, had helped to diversify sources of fiscal revenue. Malaysia also imposes relatively heavy ‘sin’ taxes on tobacco and alcohol, and there will soon be a new tax on Sugar Sweetened Beverages, in late 2019. In November 2015, tobacco excise taxes were raised by 40 percent (New Straits Times 2015). Neither of the ‘sin’ taxes, GST, or SST were earmarked for health, but considering the decrease in revenue from crude oil, have helped to protect overall government revenues, and by extension, public expenditures on health.
Increasing Efficiency: The MOH has recently been reducing the subsidies on user fees chargeable to noncitizens who are not considered to be the target group, as there is a private system that can be accessed by them, although it is noted that noncitizens working in Malaysia formally would also be contributing to the public system through income taxes and the SST. These increases were intended to attain full cost recovery by 2016 and hence plug an inefficiency within MOH that provides subsidized benefits to an unintended group.
Reprioritizing Health: Although there may not have been an explicit intent to prioritize health, significant budget cuts have been made in other sectors—most significantly fuel subsidies, which amounted to 2.5 percent of GDP in 2013 (Ministry of Finance 2013) and were withdrawn in December 2014, though these were partially reinstated in May 2018. In contrast, whether intentional or a result of cuts in other sectors from which health was spared, the health budget allocation of 11 percent in 2017 was at the highest proportion since at least 1970 (since when data have been available). This increased prioritization was preceded by various media reports of budget cuts and the lack of availability of medicines (Malaysiakini 2016; “RM380m Cut from Health Ministry Budget Restored” 2016). Health’s share of the federal budget in 2018 and 2019 has been less than the 2017 peak.
22 A further potential source of resources for health is user fees. MOH collects user fees from patients at point of service. These fees are generally nominal (for example, RM 1, or approximately US$0.25, for primary healthcare outpatient consultation, including medications) for citizens. Noncitizens face a different fee schedule with higher prices aimed at full cost recovery. These fees make up a small but increasing (due to initiatives such as the FPP initiative (Annex 1) and cost recovery initiatives for foreigners) proportion of revenue (1.5 percent of operational expenditure in 2012vii). However, these are reported and returned to the consolidated fund of the treasury under the Ministry of Finance, not kept by either the facility or MOH, and could be reallocated for nonhealth purposes, except for the portion paid to the attending physician under the FPP initiative. Hence, these fees would not accurately be described as resource mobilization specific to health or to fund PHS.
Pooling
As health is primarily under the purview of the federal government rather than state governments, PHS financing is pooled across the whole federation before distribution to providers across the states. In theory, this allows the government to cross-subsidize different regions of the country, with wealthier regions subsidizing poorer and less healthy regions. This “geographic pooling” may have been key in the past, as the government invested in the supply of health and sanitation infrastructure preferentially in the rural areas. In addition to pooling across regions, a general-tax-financed health system also, in principle, pools resources and cross-subsidizes across individuals, between wealthy and poor, healthy and unhealthy, and across different age groups. However, in practice, due to the line-item budgeting system used, which keeps finances in multiple different pools representing different functions at different budget centers, the de facto pooling of the PHS may be less than idealviii.
The broader pooling within PHS contrasts with more limited pooling within the private sector. A substantial proportion (82 percent of private financing or 38 percent of THE) of private health financing is unpooled in the form of out-of-pocket expenditures. This is a major opportunity for reforming Malaysia’s health financing because out-of-pocket payments are inflationary and inefficient, even if these expenditures are concentrated among higher-income quintiles and hence do not result in large-scale impoverishing health expenditures. The remaining 18 percent of private financing (8 percent of THE) is pooled in the form of private insurance, private TPAs, or private employer-provided health coverage. Although coverage of private voluntary health insurance is decent - 24 percent of the populationix (Institute for Public Health 2016) - private health insurance premiums for individual (nongroup) private health insurance is experience-rated not community-rated and medical underwriting is allowed. This allows insurers to place individuals into separate pools dependent on ex-ante risk, each with separate pricing. Pooling is better where employers provide medical benefits by self-insuring their employees, with or without the administrative services of a Third-Party Administrator (TPA), or purchase group health insurance on behalf of their employees (Box 2).
23 Box 2 Organization and Regulation of the Private Health Sector
Notes: This schematic is intended only to be a concise representation of the private health sector in Malaysia. Exhaustive details are omitted. * Strictly speaking, TPAs and FPAs only administer claims, and do not exercise direct control over the provider on matters such as utilization or clinical standards, unlike a Managed Care Organization (MCO). ** Takaful is an Islamic or Syariah-compliant alternative to conventional insurance.
Households or individuals can either purchase private health services directly from private clinics or hospitals on a fee-for-service basis (a), or can purchase private health insurance (b), generally for hospital services. Employers can also reimburse employees for their use of covered private clinic or hospital use (c), or make use of the market power of TPAs (d). Both (c) and (d) imply that the employer is self-insuring their employees’ health coverage, although it is also possible for an employer to purchase insurance premiums on behalf of their employees (e). Private health insurers or their Islamic equivalent, Takafuls, are regulated by the Bank Negara Malaysia, whereas TPAs and MCOs and providers are regulated by MOH. Maximum physician charges for providing health services are regulated under Schedule 13 of the Private Healthcare Facilities and Services Act (2006).
Purchasing
PHS is dependent on the provider payment system used by MOH: a line-item budgeting system for the operational and developmental budgets received from the federal government. The operational budget is based on historical expenditures, with incremental changes as warranted by changing operational needs (for example, changes in wages and staffing) and the fiscal situation. The developmental budget is linked to a series of five-year Malaysia Plans, with the Economic Planning Unit (EPU) as the key policy-making entity, which decides on proposals from line ministries. This development budget includes major once- off developmental expenses such as the construction of a new hospital.
24 Given the centralized context, line-item budgets are set, based on historical expenditures and aggregated budgetary requests, first for programs and divisions, and then, within these programmatic categories, (referred to as OS program codes), budgets are channeled to different geographic regions and ultimately to budgetary units (referred to as responsibility center codes, or PTJs). Although there are exceptions, the typical lowest-level service provision budgetary units are DHOs (which cover the network of primary care clinics within the district) and district hospitals. Public clinics are generally not independent budgetary units but are managed (including for staffing and budgets) directly by the DHO. The line-item budgets further specify an economic classification (Specific Object Discrete Object, or SODO codes) for the type of expenditure such as salaries and various categories of operational costs.
There is an ongoing Ministry of Finance initiative with technical assistance from the International Monetary Fund and for which MOH is a “champion” ministry, to move toward outcome-based budgeting. Outcome-based budgeting aims to “improve the efficiency, the performance, and the prioritization of expenditures by aligning national and ministerial outcomes with programs and budgetary resources and by integrating planning, budgeting, and evaluation” (Curristine et al. 2015, page 7), by identifying mutually exclusive commonly exhaustive outcomes that can be linked to the budgetary process. Five ministry-level outcomes and 53 program-level outcomes (and related key performance indicators) have been identified, but given the cross-sectoral nature of health, and the mixture of both public and private elements within the health system, and the overall interrelationships, complexity, and time lag of linking specific activities to health outcomes, there would be challenges in executing this initiative in this sector on an annual budget cycle basis.
Public providers (such as public clinics and hospitals) have limited autonomy, for example, over human resources (hiring and firing) and the budget. Many expenditure items such as salaries and contracts for hospital support services (also see Annex 3) are locked, and there is limited flexibility for the hospital director or district health officer to innovate, and no flexibility to provide monetary performance incentives. There is no internal (or externally contestable) market or purchaser-provider separation. PHS hence continues to depend primarily on the professionalism and work ethics of its work force, coupled with management tools such as annual work performance assessments and quality assurance programs, rather than on financial incentives. This contrasts with the English NHS where internal market reforms now include quality or performance-related payments to facilities.
With regard to private sector purchasing outside the PHS context, the provider payment mechanism used typically is fee-for-service (Table 2). This is generally considered to be inflationary by health economists, with negligible risk sharing and incentives to influence provider behavior to improve quality and encourage appropriate content while discouraging supply-induced demand or moral hazard. For example, if a surgical patient develops an infection due to the surgery, the additional costs of managing this infection would be billed to the patient or payer. The organizational and regulatory context in which private purchasing occurs is described in Box 2.
25 Table 2 Typical Provider Payment Mechanisms Used in the Private Sector
Provider When Purchased When Purchased by an Employer Using When Purchased by Private Health Out-Of-Pocket by a Third-Party Administrator (TPA) Insurers (and/or their First-Party the Patient Directly Administrators) (this is the predominant financing source) Private Fee-for-service TPAs generally passively process claims Primary healthcare is rarely covered by clinics (against pre-determined rules) and pay private insurance. providers on a fee-for-service basis. These rules can include, among others, limitations on the type of drugs usable for various diagnoses, and limitations on referrals to specialists.
Some TPAs, however, receive adjusted per capita payments from employers and pay providers on a fee-for-service basis, although TPAs are not formally expected to bear financial risk. Private Fee-for-service TPAs are not generally used for Fee-for-service, generally, although larger hospitals hospitals, with a few exceptions. insurers can negotiate discounts and apply some soft influence on private hospitals In those instances, TPAs generally within their panel. process reimbursements to hospitals on a fee-for-service basis.
26 5. Institutional Architecture
Malaysia’s PHS is financed through, organized within, and delivered by MOH, although the term PHS is specific to this case study and is a conceptual (and artificial) construct from the perspective of MOH. There is hence no single specific PHS organizational unit within MOH.
The MOH is a highly centralized federal ministry led by the Minister of Health, with the Secretary General of Health and Director General of Health the highest-ranking civil servants in the ministry. The functions of MOH are broad and not confined to the PHS. These functions include stewardship functions (such as the regulation of providers), public health (communicable disease control and health education at the population level), research and professional education, and, as a health service, the provision of personal health services, from the primary to tertiary level, to citizens and noncitizens. In most cases, services are provided at only a nominal fee or free of charge, but important exceptions to this would be services involving (high-cost) health technologies, which are unavailable or rationed through limited availability; services to noncitizens, for which a different fee schedule applies, which is priced with the intent of full cost recovery; and full-paying patients who opt to pay higher user fees in return for provider choice and private rooms (Annex 1).
The service delivery arms of the MOH responsible for the provision of personal health services for PHS are organized at the central level first into “programs” x: Public health (which covers primary healthcare), medical (which covers hospital and medical specialties), and pharmaceutical. There are other “programs” within the MOH but these do not play a substantial role in providing personal health services. Each of these programs is led by a Deputy Director General or Principal Director. Under these programs are various divisions such as the Family Health Development Division and the Medical Development Division, which are responsible for primary healthcare and hospital and specialty care, respectively.
This central programmatic and divisional structure is mirrored at State Health Departments (SHDs) and then at District Health Offices (DHOs), although DHOs are not responsible for hospital services. Though located away from the federal center, SHDs and DHOs are federal entities and do not report to the state or local governments, nor do they receive any direct funding from state or local governments. Deputy State Health Directors who are responsible for the “programs” at the state-level report to the State Health Director, but authority over budgets for “programs” at the state-level rests with central-level MOH superiors. The State Health Director cannot reallocate budgets between “programs” within a state.
With some exceptions, MOH health workers are civil servants, and health facilities are federal government assets. Some functions of MOH are contracted out (Annex 3) according to standard public procurement rules, and these contractors employ non-civil servants.
27 6. Management of the PHS Benefits Package
As an NHS-type system, there is no formal, explicitly-defined benefits package for PHS. There is no legally-enforceable right to specific services. Hence, unlike a formalized health insurance system that typically includes uniform (across products, beneficiaries, or both) legally-enforceable benefits, the de- facto or “effective” benefits package provided by PHS would represent a complex culmination and interplay among historical decisions to include or exclude certain health technologies and programs, central-level decisions to include and the degree to which to fund new technologies and programs (and for which patients, where, for what indication, and by what type of provider), the local-level supply, individual practitioner decisions, and the demands or self-advocacy of patients. If all the services provided by PHS were available uniformly to all Malaysians, without explicit or implicit rationing, this “potential” benefits package would be comprehensive, but the more critical measure of the depth of service coverage for an NHS-type system is not the “potential” benefits package, but the equity and reliability of the “effective” benefits package available to most of the population regardless of geographic location and without significant waiting lists. This directly relates to the depth and propoor nature of service coverage, one of the three dimensions of UHC.
As an example, the “potential” benefits package includes services such as the management of DM, angioplasties, and chemotherapy but the “effective” benefits package would more likely includes services related to CDs (for example, dengue fever), maternal health (for example, prenatal care), child health (for example, immunizations). However, the “effective” depth of service coverage for NCDs such as DM and hypertension is variable – a large proportion of people with these conditions (as determined through a blood test or blood pressure readings) were unaware of their diagnosis, and even among those who were aware, only a small proportion had their conditions controlled. In 1986, less than one-third of those with DM (or 2 percent of the adult population) were aware of their diagnosis, but in 2015, not only had the prevalence of DM increased by almost three times, the proportion of those who were unaware increased to more than half of those with DM (or 9 percent of the adult population). Among those who are aware of their DM diagnosis, only 38 percent of had glucose levels within the treatment target range (Atun et al. 2016). A recent global study of universal coverage ranked Malaysia as 84th of 195 countries, based on a Healthcare Access and Quality (HAQ) index (Fullman et al. 2018). This modest performance, in which Malaysia obtained a HAQ index of 68 out of 100, was primarily due to challenges in access to quality healthcare for NCDs - various cancers, chronic kidney disease (a complication of DM), ischemic heart disease, and stroke.
How are New Technologies and Programs Included and Excluded at the Central level?
Expanding the existing benefits package (medical devices, procedures, and drugs) is a centralized process, which essentially follows two important parallel (with some degree of overlap) tracks for this decision- making process:
Formal Health Technology Assessments for Medical Devices and Procedures. The introduction of new health technologies (especially for medical devices and procedures) and programs are increasingly informed (but not determined) by HTAs conducted by the Malaysia Health Technology Assessment Section (MaHTAS), as described in greater detail in Annex 4. This mechanism, which includes economics analysis, will result in a recommendation on the use, including conditionalities, or nonuse, of the technology.
28
If a negative recommendation is provided, this generally means that that health technology will be excluded from use in MOH and, by implication, PHS. However, even though cost-effectiveness has been considered in the assessment, a positive recommendation does not automatically result in the inclusion of that health technology in the benefits package. Rather, it allows internal advocates to make a request for funding using the usual budgetary request mechanisms. If this is something “new,” that is, an addition to the historical line-item budget, the request is referred to as a “dasar baru”, or new policy, and such requests are discussed regularly at policy decision committee meetings. In some cases of national interest, “dasar baru” may even be escalated to the cabinet (the highest body of the executive branch of the government). Funding may be partial, in which case implicit or explicit rationing mechanisms would be required, as the demand for such technologies exceeds the supply. It may be possible for a new health technology to be included without going through an HTA, but presumably that would be for exceptional cases that have strong justification.
Benefits can also be removed by means of this HTA mechanism, since assessments can be conducted on older technologies to review the current suitability and cost-effectiveness of such technologies, thus allowing for substitution by newer health technologies.
Drugs. The MOH has an existing formulary, commonly referred to as the “blue book,” which specifies which drugs can be purchased for and used at MOH facilities. These drugs are generally available to patients without copayment once they are formally listed. The formulary defines the clinical indications whereby each drug may be used and the category of health personnel who may prescribe the drug. For example, “A” category drugs, can only be prescribed by consultants and specialists, while “B” category drugs can also be prescribed by medical officers, and “C” category drugs can also be prescribed by paramedical staff (including a specific category for midwives).
Decisions to include or exclude drugs in the formulary are the remit of the Malaysia Formulary Review Panel within the Pharmaceutical Services Division of MOH. These decisions are based on drug evaluations conducted by the division itself (not MaHTAS) three times a year, based on technical dossiers from the pharmaceutical industry. These decisions can also be informed, on an advisory basis, by the HTAs conducted by MaHTAS, especially on questions of cost-effectiveness, although the final decision rests with the Pharmaceutical Services Division. If the drug in question has not been assessed, this division, like other government agencies, can ask MaHTAS for an HTA.
Inclusion of a drug within the MOH formulary does not necessarily mean the drug would be automatically fully-funded or available in adequate quantities in all MOH facilities, and hence rationing would still apply.
Local Supply and Individual Health Practitioners. The effective local availability of new or costly health technologies approved and purchased for use within MOH depends on purchasing decisions that follow the budgetary processes. There are both explicit and implicit mechanisms for rationing the use of health technologies.
The explicit mechanism involves the formal limitation of some health technologies for use only in specific health facilities (typically tertiary referral facilities in bigger cities) or by specialists (including family medicine specialists), on the grounds that expertise (specialists or subspecialists) or adequate health
29 infrastructure is required to support the use of these technologies. This may be true for some complex health technologies, but this is also extended to some drugs belonging to common drug classes such as statins (for the treatment of high cholesterol) and angiotensin II receptor antagonists (for the treatment of high blood pressure, particularly among diabetics, due to the added protection against long-term kidney damage), which do not require added expertise to use but were more expensive on a unit price basis (even if they may well be cost-effective due to the reduction in long-term complications). This suggests that limiting the annual expenses from those health technologies is a contributory reason for limiting availability of some health technologies to specialists. It can be argued that all Malaysians, regardless of residence, do have access to all these health technologies even if provided at only some facilities, because they can be referred to such facilities that do provide them. However, referral requires health worker time and effort, and the patient may also incur travel and opportunity costs, and these factors may act as additional barriers.
Individual health practitioners also play a small role in determining the “effective” benefits package of users, as they exercise their own clinical judgement. These providers are informed by Clinical Practice Guidelines (CPGs), which can specify the rational use of drugs and health technologies for specific clinical indications, including thresholds for screening and diagnostic tests, which rationalize benefits and use even if stock is available locally. They further exert their influence by playing a gatekeeping role, which is important because certain parts of the benefits package are available only in select facilities. Implicit rationing, for example, through waiting lists and gatekeeping, is discussed further in Focus Area 1, below.
In summary, the NHS-style management of the benefits package produces a “potential” benefits package that is comprehensive but inadequately funded to cover all who may need such benefits, even though informed by HTAs that include cost-effectiveness analyses. The cost-effectiveness threshold used as a general guide for HTAs – approximately 1x GDP for one incremental life spent in full health – might not be reflected in the calculus used to the budgetary allocation for Malaysia’s PHS. As a result, while HTAs do inform decisions on the management of the benefits package, other explicit and implicit mechanisms are required to manage costs by managing utilization or rationing care, resulting in an “effective” benefits package that may be neither reliably available in every facility nor equitable, given the concentration of new and often expensive health technologies in tertiary facilities.
30 7. Information Environment
Malaysia’s PHS has no formal enrolment process as it is funded mainly on the supply-side and therefore automatically includes every Malaysian citizen, identified based on their citizenship identity cards. This is a crucial distinction in the information environment of an integrated NHS-type system like PHS from social health insurance systems is that granular patient-level administrative records, while highly desirable and needed for accountability and disease management, are not needed to administer the financing and organization of the PHS. This is an inherent characteristic of an integrated NHS-type system funded on the supply side, which has implications on the performance of the system.
The information systems used have focused on the collection of aggregated facility-based indicators (of those using services), rather than granular person-level data for the eligible population (regardless of whether services are used or not). This collection of aggregated data, however, is extensive, with 109 data tables each with multiple indicators, published annually by the Health Informatics Center within the Planning Division.xi These indicators cover policy areas such as health status (including both mortality and morbidity), healthcare resources (including human resources), healthcare utilization, health financing, and regulations.
This data collection exercise allows MOH officials to plan resource allocations such as human resources and financing at the facility level according to norms, because the utilization rates of individual facilities are known. However, apart from recent efforts to capture granular-level inpatient information using the Patient Care Information System (System Maklumat Rawatan Pesakit or SMRP), most indicators are aggregated at the facility level or higher. In addition, because this is an NHS-type system with no enrollees, information is available only from users of services. Analysis of administrative data is generally limited to tabulations of indicators, with some disaggregation along socioeconomic or geographic dimensions.
There are ongoing and ambitious initiatives to further modernize the health information system, including links beyond MOH to the private sector (New Straits Times 2017), through initiatives such as the Malaysia Health Data Warehouse, a repository and analytic platform for multiple sources of health data; and the Malaysia Health Information Exchange, an initiative to enable lifetime and portable electronic patient records. Compliance with national and international health informatics standards—such as the Malaysian Health Data Dictionary and the International Statistical Classification of Diseases and Related Health Problems-10 (ICD-10)—have been institutionalized as part of these new initiatives.
In addition to administrative data, MOH also conducts a regular (approximately every five years) household survey—the National Health and Morbidity Survey—to obtain population-level indicators on health status, utilization, and expenditures.
Performance Management and Public Accountability
Indicators are organized in alignment with the MOH bureaucratic structure—with each “program” (for example, public health, pharmaceutical, medical, dental, and so forth) presenting separate indicators related to their “program”. For some indicators, specific targets may be set—for example, immunization targets. Although attainment of targets is not directly linked to any incentive payments to the facility or staff, individual budgetary units (such as hospitals or district health offices) can request additional budget allocations midyear or as needed, using the need for additional resources to attain targets as the rationale.
31 This may also have the unintended consequence of mobilizing resources toward inefficient or poorly performing units.
The MOH publishes reports on their website,xii which allows the public to be informed of its activities, but there is no legislation in Malaysia equivalent to the Freedom of Information legislation in advanced countries although Parliament has the authority to pose questions to MOH. Basic information on MOH facilities and services is also available online. End users may post complaints onlinexiii on the MOH website, a service only available in the national language and in English.
32 8. Focus Area 1: Implicit Targeting in Malaysia’s PHS: Propoor but at what cost?
Malaysia’s PHS is widely regarded to be responsible for meeting these propoor, effective, and relatively low-cost health system goals, even though it does not use explicit targeting. As an integrated and universal NHS-type system, and unlike social health insurance schemes, there is no formal identification or enrolment process for inclusion in PHS. All citizens, rich or poor, are automatically eligible for highly subsidized and often free-at-point-of-use services at MOH facilities. In order to make use of this benefits, the identity of citizens is verified by means of a national identity card (MyKAD) which is issued to citizens over age 12 and includes biometrics stored on an electronic chip. Children (after registration of their birth) are issued an identity card called MyKID which does not include biometrics.
All citizens, regardless of income status, are eligible to use health services provided by PHS and subject to the same subsidized user fee schedule which specifies different fees based on three classes (1st, 2nd, and 3rd class). About 85 percent of MOH beds are in 3rd class wards for which minimal user fees apply up to a maximum of RM 500. For poor citizens (excluding civil servants, who would receive equivalent benefits through the civil service commission) who are unable to afford these user fees, or need access to high- cost health technologies (such as medicines, assistive devices, rehabilitation equipment, stents, or prostheses) or services not available at MOH facilities, there is a means-tested (by a social worker) Medical Assistance Fund (Tabung Bantuan Perubatan) that provides financial coverage (Ministry of Health 2008). In 2013, this fund paid out RM 30 million (Ministry of Finance 2013), but this is a tiny fraction (< 0.2 percent) of public health expenditures. This explicitly targeted fund is hence unlikely to have contributed significantly to the propoor performance of PHS at an aggregate level, although it provides a mechanism to reduce financial access barriers for the poor.
Implicit Targeting of the Poor
We postulate that the equity of PHS results from implicit targeting, specifically geographic targeting, experiential targeting, and an “effective” benefits package that prioritizes services differentially (though not exclusively) used by the lower-income groups.
Geographic Targeting
The geographic targeting of health services was an intentional national choice. Even prior to Malaya’s independence in 1957, national leaders expressly prioritized rural health. In a 1955 speech, Tunku Abdul Rahman Putra al-Haj, who would become Malaysia’s first prime minister, said: “We shall place special emphasis on health and welfare problems of the rural communities. Consideration will be given to the increase of rural health centers and traveling dispensaries so that an energetic country wide attack will be made against disease.” (National Archives of Malaysia 1979). Later in March 1957, just prior to independence, he presented a policy paper at the Federal Legislative Council and stated that “The choice of course—as Honorable Members can see for themselves from the White Paper—is one of priorities. We could have a larger Army if we were to decide to employ fewer teachers and doctors, build less schools, fewer hospitals, fewer rural health centers and less pay for the soldiers. We have decided against that sort of solution” (National Archives of Malaysia 1981).
The result of this explicit prioritization of rural health was the explosion in the supply of health and sanitation infrastructure, with one new public clinic built every 3.8 days for the first 23 years after
33 independence. By the early 1970s, MOH had developed a formal plan for health service provision in rural areas—the Rural Health Service—with three-tiered rural health units, each covering a rural population of 50,000, scattered throughout West Malaysia (Annex 5).
Even in 2010, much later in the country’s development, 50 1Malaysia Clinics (K1Ms) were established to expand coverage for low-income households in urban areas. These were later “enhanced to provide greater accessibility to affordable healthcare services for low-income households” (Economic Planning Unit 2015). In addition to improving physical access to health facilities among low-income urban households, these facilities had expanded opening hours into the evening and weekends to improve effective access for users who work during the day.
Hence, at least for primary healthcare facilities, supply-side investments have been concentrated in areas populated by poor and low-income households, both in urban and rural areas, thus improving the access to healthcare differentially for these households. Indeed, the utilization rate of outpatient services at public facilities is propoor, with a concentration indexxiv of -0.179 in 2011 (see Annex 6 | Table 3).
However, an important caveat to this is the distribution of public hospitals, especially specialist medical institutions, which are concentrated mainly in big cities. Although, the utilization rate of inpatient services at public facilities is also propoor, with a concentration index of -0.150, the types (and hence costs) of services provided at district hospitals closer to rural areas, state hospitals, and specialist medical institutions are likely to be very different. Although all citizens, regardless of residence and income status, in theory have access to all public facilities, rural patients would depend on referrals to higher-level facilities (for which transportation costs are not generally covered), their own initiative to identify access points into the system, or both, to obtain specialist care (also see Annex 1).
Experiential Targeting
Even in a situation in which rich and poor households have similar physical and financial access to public services, that is, they would face the same user fees and would travel the same distance to use services, there are other differential access barriers and “signals” that might result in differential actual use of health services and hence de facto implicit targeting of health services to different income groups. These “experiential” elements of access, both real and perceived, include waiting times, opening hours (including during weekends and holidays), acceptability for the patient to choose a doctor, or other service elements, dormitory-style wards versus private rooms, perceived socioeconomic status of fellow patients, default language and “culture” of the staff, friendliness, cleanliness, comfort levels (for example, air- conditioning in waiting areas), and conveniences of the facility.
These experiential elements of access either would impose differential “costs” (for example, opportunity costs) to patients of different socioeconomic status, or would act as powerful signals to patients as to whom the intended users of the system are, and hence would allow experiential targeting of PHS services to lower-income groups, although these groups may incur significant opportunity costs and may restrict their use of these health services, albeit not to the same degree as high-income groups. These opportunity costs are not imposed arbitrability just for the purposes of targeting or to discriminate for the sake of discrimination but represent service elements that would be costly for the government to improve. In other words, the lack of these service elements is how unavoidable rationing is expressed.
34 These same experiential elements of access are leveraged by private sector providers to attract patients who can pay, and to provide these missing experiential features—for example, through extended evening opening hours, provider choice, shorter waiting times, and private rooms (Institute for Public Health 2016). However, current evidence suggests that the technical quality of public clinics is better, or at least no worse, than private clinics. This is based on a study of public and private clinics in Malaysia that found that public clinics performed better than private clinics based on a series of clinical indicators of technical quality for conditions commonly seen at clinics such as acute conditions and prescribing behavior (Atun et al. 2016). There is hence no evidence that favorable experiential elements are a proxy for the technical quality of services.
Benefits-Package-Based Targeting
Different income groups have different disease profiles and hence different health needs. A benefits package hence has the potential to be used as a targeting tool. Although the PHS benefits package is in theory comprehensive, the “effective” benefits package prioritizes CDs and MCH, for example with an extensive network of community clinics (klinik desa) in rural areas which provide MCH services but generally do not provide general outpatient services or manage NCDs. These are “fully” funded with little or no implicit rationing—that is, there are insignificant waiting times and adequate supply geographically distributed to cover the entire target population. However, there are components of the benefits package that are either explicitly not covered or are inadequately funded or resourced (for example, percutaneous coronary intervention and some cancer diagnostics and treatment). For example, there are only 10 MOH hospitals nationally, located mainly in or near state capitals), that have a cardiac catheterization laboratory (needed to provide emergency percutaneous coronary intervention, the optimal emergency treatment for heart attacks, to be performed within 90 minutes of onset of the heart attack).
The choice to fully fund a benefits package disproportionately used by lower-income groups is hence another targeting instrument. However, there may be important implications if excluded benefits adversely impact health outcomes relevant to lower-income groups.
Implicit Targeting, Rationing, and Implications for Health System Goals
Although these three instruments of implicit targeting may have contributed to the success of Malaysia’s PHS in propoor coverage, there are major costs and implications.
Geographic targeting, where financing follows facilities and not patients is prone to inclusion and exclusion errors, where some high-income groups may have easy physical access to facilities and where some low-income groups may have difficult physical access to facilities, not due to intentional discrimination but due to the realities of the distribution of facilities. This is especially relevant for hospital and specialty care, which are most feasibly located in large cities, and hence depending on geographic targeting for these services will likely to be prorich. Furthermore, because three-quarters of the population lives in urban areas, high- and low-income households may no longer be segregated by geography (“Poor among Plenty | New Straits Times | Malaysia General Business Sports and Lifestyle News” 2018). In advanced economies, targeting is typically done at the household-level based on a national, cross-sectoral backbone targeting system.
35 Experiential targeting, likewise, might impose opportunity costs on lower-income groups (for example, by spending the whole working day at a health clinic waiting to access healthcare services due to queues), which have economic implications, but also might result in reduced use of healthcare services such as screening for NCDs. Although some of this reduction in the use of health services might be for unnecessary care which does not impact health outcomes, given the high proportion of undiagnosed and undertreated NCDs in Malaysia, imposing experiential access barriers to target services to lower-income groups might also have the unintended consequence of limiting appropriate demand for preventive and promotive care especially for chronic conditions, where demand is already weak. For example, uptake of a free health screening scheme run by the Social Security Organization has been low—only 19 percent of those eligible have redeemed their free health screening vouchers (“Only 18.6% of Socso Health Screening Vouchers Redeemed” 2014).
Targeting by benefits package, by fully-funding health services intended to benefit lower-income groups while partially funding health services intended for higher-income groups, can also result in significant inequalities in domains of health not prioritized or monitored by policymakers, because there is significant overlap in health needs across all income groups. Hence, although fully-funding MCH services such that access, without significant waiting lists or travel, is universal, has resulted in impressive and equitable MCH outcomes, underfunding hospital specialty services such that these have long waiting times for appointment slots, stock-outs of supplies,xv and are geographically restricted to the specialist hospital(s) that supports the relevant specialty, might result both in prorich mistargeting and the rationing of needed care. Indeed, a recent study of trends in amenable mortality indicates that there are large socioeconomic disparities in non-MCH health outcomes (Atun et al. 2016). While queuing at the facility (regardless of whether an appointment system is used or for walk-in cases) may be an experiential access barrier and incur opportunity costs, waiting weeks or months for the next appointment date for specialist services, imaging, and other high-cost services is an implicit form of rationing, with impacts on health outcomes that may disproportionately affect the poor.
Indeed, many of these aspects of implicit targeting cannot be separated from implicit rationing. PHS has made impressive and equitable improvements in MCH and CD-related health outcomes that can be attributed to supply-side investments in health facilities in rural and poor areas and a technocratically determined benefits package that prioritizes MCH- and CD-related health services focused on technical quality rather than experiential service elements. However, the limitations of such a supply-side-focused system are increasingly being revealed by changes in the context of the country, particularly demographics, epidemiology, rising expectations, and urbanization, and adds impetus for health transformation to shift funding from the supply side to the demand side, which also enables provider- purchaser separation.
Furthermore, gaps in service provision are important “signals” to higher-income households—the “middle class”—who have carved out a separate tier in the health system by contributing toward a parallel private system and opting out of PHS in many instances. This has important implications and externalities for Malaysia’s health system and PHS, as discussed in Focus Area 2.
36 Figure 7 Public-Private Inpatient Utilization Share Trends, 1996–2015 100
80
60 Private
Percent 40 Public 20
0 1996 2006 2011 2015
Source: Institute for Public Health 2016
Figure 8 Public-Private Preferences for Inpatient and Outpatient Utilization by Economic Quintile, 2015 Panel A Inpatient Utilization, 2015 100 7 10 16 29 23 80 58 60 Private 94 40 90 84 71 77 Public 20 42 Utilization(percent) 0 Q1 (Poorest) Q2 Q3 Q4 Q5 (Richest) All
Panel B Outpatient Utilization, 2015 100 30 28 80 39 40 50 59 60 Private 40 70 73 Public 61 60 20 50 41 Utilization(percent) 0 Q1 (Poorest) Q2 Q3 Q4 Q5 (Richest) All
Source: Institute for Public Health 2016
37 9. Focus Area 2: The Private Sector: Complementary or Contradictory
As discussed earlier, PHS achieved its effectiveness and equity through prioritizing specific MCH- and CD-related health services and implicitly targeting them to lower-income groups. By doing so, PHS left gaps in health service provision that include geographic gaps, with relatively lower per capita densities of primary healthcare facilities and resources in urban areas; higher-cost health technologies, which are becoming increasingly important to modify health outcomes due to rising NCDs; and experiential service elements, whose absence constitutes a soft access barrier especially for the middle classes.
The Narrative: Filling gaps …
The traditional narrative is that such gaps are filled by a vibrant and dynamic private sector, including both providers and insurers who are not dependent on the government budget and are a source for 48 percent of total health expenditure (MNHA 2017). Approximately 69 percent of clinics and 55 percent of hospitals are privately owned. This is consistent with the government’s explicit policies to leave space for and promote the private sector. Interestingly, the government itself owns several large private hospitals and hospital chains through its sovereign wealth fund, and this may result in policy ambiguity as to the role of the state in both healthcare provision and in the health industry, more generally (Britnell 2015; Chan 2014).
The private sector has been lightly regulated (Chee and Barraclough 2007). Private healthcare facilities are regulated by MOH under the Private Healthcare Facilities and Services Act 2006, and private health insurers are regulated by the central bank, Bank Negara Malaysia, under the Financial Services Act 2013 and the Islamic Financial Services Act 2013. These regulations include minimum standards for facilities and maximum medical professional fees chargeable as regulated according to Schedule 13 (Government of Malaysia 2013). Health insurers are regulated mainly on fiduciary grounds to ensure solvency and financial sustainability (Box 2). Otherwise, despite the presence of significant market failures in healthcare markets, private providers, insurers, and patients are left to market forces.
… and providing positive options for patients and providers …
There are positive spillover effects from this dynamic sector. The private sector creates an outlet for excess demand, especially for wealthier income groups, and by extension enables PHS to be propoor. Public facilities would be a lot more congested if the private option were not so extensive. Furthermore, initiatives like FPP allow public doctors to supplement their public-sector wages by seeing patients privately out-of- hours in specially-designed wards within public hospitals. Public doctors may also legally moonlight in private facilities out-of-hours, with the permission of their managers.
… but with critical weaknesses and negative spillover effects …
However, there are important caveats and weaknesses related to the private sector. The private sector is financed mainly using unpooled out-of-pocket expenses. The purchasing of health services is reliant on fee-for-service, an inflationary and inefficient provider payment mechanism, used even when private expenditures are pooled by, for example, private health insurance. Purchasers are multiple and fragmented, and hence would struggle to negotiate better payment mechanisms. Unsurprisingly, healthcare cost inflation is very high - estimated at 17.3 percent in 2016, which is the second-highest rate of inflation in
38 the region (Mercer Marsh 2016). These are important considerations, because despite the additional costs, the technical quality of the private sector, at least for primary healthcare, is weaker than the public sector.xvi
Private health insurance coverage is modest and often shallow, at 8 percent of total health expenditures, covering 24 percent of the population who have private health insurance. Even where there is private health insurance coverage, there are further inefficiencies in terms of low loss ratios of between 50-60 percent (Atun et al. 2016). Most private health insurance plans include caps, and hence patients can still be exposed to catastrophic expenses. Critically ill and high-cost patients who breach the limits on their private health insurance often fallback into PHS which is then faced with these high-cost episodes of care. Any lack of coordination of services between public and private providers can result in the duplication of services (for example, diagnostic tests and investigations) and compromises the gatekeeping within PHS.
A further spillover is specialist incomes. Specialist income differentials between PHS and the private sector, which can be substantial, have implications for the retention of specialists in PHS and add upward pressure on salary expectations. Indeed, these pressures to retain specialists in PHS have led to the FPP policy (Annex 1).
… leading to unintended consequences and future risks
Hence, although PHS is a success story in terms of propoor coverage and effectiveness in attaining MCH- and CD-relevant health outcomes, and it is commendable for a government to deprioritize financing care for higher-income groups, this may have had three unintended consequences.
Firstly, it is a powerful signal to higher-income groups that PHS, although a universal system with no explicit intention to exclude higher-income households, but by virtue of geographic, experiential, and benefits-package-based targeting, is perceived to cater primarily for the needs of lower-income households. This has important political economy considerations because once higher-income elites opt out of PHS and establish their own arrangements for financing and receiving healthcare services, there comes a tipping point after which they are no longer personally invested, either politically or financially, in PHS. This may have long-term consequences on the fiscal prioritization of PHS, because once higher- income households have an entrenched alternative health financing and delivery system, there is little rationale for them to lobby to strengthen PHS for all. Alternatively, they may lobby for a change in the propoor character of PHS—for example, to shift the prioritization of PHS towards tertiary hospital specialty services in urban areas to cover healthcare which involves multiple specialties and would be difficult to obtain in the private sector, where clinical services are less team-based.
Educated elites can also be an important constituency to keep within all levels PHS because, although some advocacy can be self-serving, they are also more informed and better able to successfully push for higher overall standards within the system and for greater accountability. They can thus play a complementary, informal governance role within PHS if they are deeply invested in it.
Secondly, just as higher-income elites have begun opting out of PHS, the government also left the private sector to operate in a lightly regulated environment, with minimal government intervention. As expected, given the substantial market failures in health, this has resulted in inefficiencies (such as the misallocation
39 of resources to needs) and healthcare cost inflation, which have affected both the private sector and PHS itself (due to spillover effects).
Thirdly, this has resulted in a health system that is fragmented and “tiered,” with little coordination and information sharing between the public and private sectors, and within the private sector, even though patients can move fluidly between providers in both sectors.
These lessons, in hindsight, highlight the importance of maintaining an appropriate balance between the role of markets and the role of the government across the whole health system (in the case of Malaysia, both the private sector and PHS), where government intervention is required to mitigate market failures, while the role of markets is emphasized in areas prone to government failure. The PHS, with its lack of provider-purchaser separation, leaves little space for opportunities to use market-like instruments to improve its performance. Likewise, in the private sector, there is little mitigation of information asymmetries, and few remaining opportunities to leverage market power and advanced provider payment mechanisms to effect health system goals, and inadequate attempts to pool and organize the financing of private health expenditures in an efficient, equitable manner.
40 10. Reform Agenda
In summary, PHS has performed strongly in attaining a high and equitable level of MCH and CD health outcomes at relatively low cost and with strong financial protection. This was achieved through very substantive (one new clinic every 4 days for more than 20 years) investments in and strong governance of the supply-side (particularly the prioritization of clinics in rural areas which provide MCH services), funded through the general taxation system of a fast-growing economy which pools resources nationally. Services are delivered through the centralized federal government apparatus, including reliance on rigid line-item budgeting on an annual cycle and civil service norms for managing human resources for health. Patients, regardless of income status, receive care for free or pay only nominal user fees to receive care from PHS. Alternatively, patients with means can access an extensive parallel private health sector, concentrated in urban areas, which allows them to choose their doctor, cut down on waiting time, stay in private rooms at hospital, and access care at more convenient times and in more comfortable settings.
These interactions within this mixed public-private health financing and delivery ecosystem have been instrumental for the success of PHS in the geographic and experiential targeting of a MCH and CD package of care in a propoor manner. The private sector can absorb access demand and decongest PHS facilities, and through dual practice, supplement the salaries of public doctors. But there are important implications and spillover effects on PHS: There is weak continuity of care across and within the sectors, with the sickest (and costliest) patients often falling back into PHS facilities for care (Atun et al. 2016). The private sector also exerts upward pressure on the salaries of public specialists. Furthermore, the private sector is itself financed predominantly through unpooled out-of-pocket expenditures and paid using inefficient and inflationary provider payment mechanisms (mainly fee-for-service).
The critical question facing Malaysia is whether this outmoded healthcare model, which has been successful in the past, is adept for the current and future context of healthcare in Malaysia. Malaysia is faced with a rising tide of NCDs. These are chronic conditions which develop insidiously over time, reflecting individual lifestyle choices and the environment. These require multisectoral, proactive (as people with these conditions may have no symptoms and be unaware), and preventive investments in the early control and tight management of these chronic conditions. Greater continuity and coordination of care is required, which will be challenging in a fragmented system. Treatment for these conditions may be lifelong and treatment for the complications of these conditions are costly. This will strain an already underfunded system further and constrain the ability of PHS to expand and maintain propoor coverage of NCDs to mimic earlier successes with MCH and CDs.
The pace of advances in medical technologies, aging, NCDs, and rising expectations also contribute to a trajectory of healthcare cost inflation which is unsustainable in the long term (Economist Intelligence Unit 2014), even though the current health system is low-cost relative to economically-similar countries. This is accentuated by the reliance on rigid line-item budgets, lack of advanced provider payment mechanisms, and lack of provider autonomy to make fundamental changes to improve effectiveness and efficiency, despite Malaysia’s attempts to reprioritize health and increase efficiency of spending described earlier.
It is unclear if the government is willing or able to sustain increases in public financing for health using this existing health financing model, above and beyond GDP growth, especially given the fiscal pressures faced. If this is unsustainable, this should be acknowledged, so that the fundamental and decisive health financing reforms required to set Malaysia on a sustainable pathway for health financing can proceed.
41
The most obvious opportunity is to create a vehicle to pool out-of-pocket expenditures, in an equitable manner which reflects the inclusive development ethos of the country. As Malaysia has a mixed public- private health system and intends the participation of a dynamic private sector, these financing reforms should then be leveraged to integrate both the public and private delivery systems and be coupled with advanced provider payment mechanisms to improve the quality and content of services provided while limiting supply-induced demand. These payment reforms will necessitate some degree of purchaser- provider separation. There are also opportunities to improve the functioning of private health insurance and provider markets, through regulation or fostering market conditions to expand coverage, encourage greater pooling of risk, create better value products, and modernize provider payment mechanisms. These financing and purchasing reforms will allow cross-participation between the public and private sectors, whereby public and private financing can be used to purchase health services from both public and private providers. Recently, the federal government introduced a health screening scheme for the bottom 40 percent (B40) of the population called PEKA B40. This is a promising example of purchasing health services from private providers using public financing. Public providers are not included so there is no full cross-participation of both public and private providers.
In order to participate fully on the same playing field as private providers, public providers will at the very least need greater autonomy over revenue, and the authority to make key management decisions, including hiring and firing staff, priority setting, and subcontracting. If not, it would be challenging for these providers to perceive the same signals inherent in the provider payment mechanism and to effectively compete with agile private providers. At the same time, for both the public and private sectors, integration between primary healthcare and hospital-based care would be important to ensure efficiency gains in treating patients at the most appropriate level, while maximizing the long-term benefits of preventive and promotive care. Such integration would need to be enabled by a modernized health information system, which is able to track health at a person-level.
Indeed, this proposed reform agenda is not novel and similar reform principles may have been stated in the past. But, the urgency of these overdue reforms however, is increasingly pressing. The exact path to, and instruments for, achieving these reforms depend on the political context of the country, but without strong political leadership, Malaysia’s initial successes in cultivating an effective and equitable health system may be tarnished by its subsequent failures to adapt and transform.
42 Annexes
Annex 1 Full-Paying Patient initiative
In 2007, MOH piloted the Full-Paying Patient (FPP) initiative at Hospital Selayang and Hospital Putrajaya, primarily as a strategy to stem brain-drain among senior specialists from the public sector to the private sector. Then-Minister of Health Dr. Chua Soi Lek was quoted stating “we are losing … specialist doctors every year, who resign to join the private hospitals … We hope this approach will enable the hospitals to allocate some additional incentives for the specialist doctors” (The Star 2007). This initiative allows use of a portion of the public hospital as a private ward, and allows MOH doctors (civil servants), out-of-hours and without compromising their public work, to see full-paying patients “privately.”
Full-paying patients have the privilege of choosing their specialist doctor, would be seen more promptly, and have access to executive wards, first-class wards, or the equivalent. They would be subject to different fees, with specific rules dividing out which component of the fees are to be paid to the doctor and which are paid to the facility. Note that revenue collected by the facility is not retained by the facility but is returned to the government treasury’s consolidated fund.
There are also maximum limits to the degree to which the FPP initiative can be implemented. For specialist, the total payments they receive from seeing full-paying patients cannot exceed three times their current monthly salary and fixed allowances. For facilities, full-paying patients cannot comprise more than 30 percent of total clinic attendances (Ministry of Health 2015b), to mitigate but not obviate valid concerns about perceived conflicts of interest and inequity. If queues and other service elements worsen for non-full paying patients, this would erode the equity of PHS and increase discrimination against the poor.
MOH has since adopted this pilot as policy and included an additional eight hospitals in 2015 as part of phase 1. In October 2016, eight more hospitals were added as part of phase 2. Although initially envisioned as a specialist retention scheme, the revenue-generating capacity and eventual need for facilities to retain and autonomously manage a greater portion of their revenues from FPP would be a useful though perhaps unintended segue toward organizational reform within MOH. However, if not carefully managed, it could distort specialist incentives and the motivation levels of nonphysician health workers within the public hospitals themselves. Furthermore, it may also provide public specialist with a low-risk stepping stone towards private practice by allowing them to test the waters and determine the demand they are able to generate for private work for themselves. The MOH is concerned about this issue and is monitoring and reviewing the implementation of this policy.
43 Annex 2 Foreign Worker’s Health Insurance Protection Scheme
In 2011, the Foreign Worker’s Health Insurance Protection Scheme (SPIKPA) was introduced, which mandates employers to purchase health insurance for their employees (as a condition for receiving a work permit). This covered 1.7 million foreign workers (Jabatan Perdana Menteri 2015) with total revenue of RM 170 million in 2015. The premium for this insurance is RM 120 per year per worker and the benefits cover inpatient care at MOH hospitals up to a maximum of RM 20,000 (revised up to RM 10,000 in 2016). Employers can choose to purchase this from any of the 24 private health insurers that offer this standardized inpatient insurance package. Claims are by Third-Party Claims Administrators (TPCAs) of which there are two.
Prior to the introduction of this scheme, foreign workers already had access to public facilities, as after all, some workers and/or their employers contribute income and other taxes (such as GST). This scheme was hence not introduced to expand health coverage to foreign workers but to improve revenue collection. Although charged based on a higher user fee schedule than citizens, these user fees, although covered by SPIKPA, were still subsidized. It was only in 2016 that user fees for noncitizens were priced with the intent of full cost recovery. Furthermore, since hospitals are obliged to provide emergency treatment regardless of means to pay, it may be possible for foreign patients to refuse to pay user fees after being discharged from hospital in such cases. It was primarily to address these leakages of resources that the SPIKPA scheme was introduced. The intent is to ensure that MOH hospitals are able to recoup user fees from formal foreign workers covered by this scheme.
44 Annex 3 Contracting Out
Healthcare services (for example, inpatient, outpatient, and diagnostic services) are generally provided in- house by MOH providers, but there are a few exceptions intended to ensure access to clinically-necessary services. For example, radiotherapy services, where clinically warranted and may be unavailable (e.g., for maintenance reasons) at MOH facilities, but available at private hospitals, can be contracted out based on negotiated rates.
Hospital support services and pharmaceuticals, in contrast, are contracted out by MOH. Hospital support services include clinical waste management, cleaning services, linen and laundry, facility and engineering maintenance, and biomedical engineering maintenance. For all MOH hospitals, these services were contracted out at the central level to three concession companies in 1997 for 15 years. At the local hospital level, additional services, such as security, are also typically contracted out according to government procurement rules.
Pharmaceutical services, specifically the “right and authority to purchase, store, supply and distribute” drugs and nondrugs approved by MOH to government health facilities, and the “development of Pharmacy Information System and Clinical Pharmacy Systems” has also been contracted out by MOH for a 10-year period ending in 2019. This concession agreement accounted for RM 1.2 billion (5 to 6 percent of MOH operating expenditure) of the concession company’s revenue in 2015 (Pharmaniaga 2015).
45 Annex 4 Informing Decisions on the Benefits Package: The Role of MaHTAS
The Malaysia Health Technology Assessment Section (MaHTAS)a was established in 1995 as a unit within the Medical Development Division (the division with responsibilities over hospital care), but has subsequently been upgraded to become a section consisting of five units: Health Technology Policy, Evidence-Based Medicine and Health Economics, Clinical Practice Guidelines (CPGs), Horizon Scanning and Communication, and Monitoring of Implementation of Health Technology Assessments (HTAs) and CPGs. Broadly speaking, the functions of MaHTAS are to provide scientific and technical inputs to inform clinical management (including development of CPGs), research, and policy decisions. This further includes capacity building and monitoring the implementation of CPGs and HTAs. Although MaHTAS is under the Medical Development Division, it supports the HTA needs of other programs within MOH, such as the Pharmaceutical Program (for drugs) and the Public Health Program (for vaccines, screening programs, and other public health programs such as smoking cessation). Traditional and Complementary Medicine interventions can also be considered for HTA review.
Key products include Health Technology Assessment Reports, which are the flagship reports of MaHTAS and the most comprehensive; Technology Review Reports, or “mini-HTAs,” which are less comprehensive and hence can be prepared more quickly; Information Briefs, which are rapid (two-week) reviews; Clinical Practice Guidelines; Technology Scanning Reports, which are rapid assessments of emerging health technologies; and other products.
A summary of the process of producing an HTA report is as follows.
1. A request is made for an HTA to be conducted on a particular health technology or program, either new or existing (for example, if there are concerns about cost-effectiveness or efficacy in the light of current technologies). Requests can be submitted online by MOH clinicians or units or other government agencies, but not directly by the pharmaceutical industry. Occasionally private health insurers and large employers also seek advice from MaHTAS on the appropriateness of covering specific health technologies for their beneficiaries or employees, which MaHTAS is responsive to, although this does not constitute a formal HTA request.
2. Because there are limited resources to conduct HTAs, a prioritization process is undertaken by the HTA Technical Advisory Committee (HTA TAC) using objective criteria such as prevalence of diseases, availability of competing technologies, cost (direct and indirect), and effects on existing infrastructure and human resources. The findings and recommendations of HTA TAC would then be presented to the HTA & CPG Council for approval to proceed with the assessment. (Note: The HTC TAC is chaired by the Director of the Medical Development Division with co-opted Heads of Clinical Services representatives from various MOH divisions, research institutes, and hospitals. The HTA & CPG Council is chaired by the Director General of Health, Malaysia, with representatives from MOH (Deputy Director Generals of Health, Directors of Divisions, representatives from among the State Health Directors, and representatives from the Heads of Clinical Services), academia (medical faculties from public universities), the private sector (through the Association of Private Hospitals Malaysia), the Academy of Medicine, and the Malaysian Medical Association.)
3. The health technology or program then undergoes the technical review by a multidisciplinary team according to MaHTAS guidelines and an external review, after which it will be presented to the HTA
46 TAC. Amendments can be suggested and approval will again be needed by HTA TAC before the HTA report is submitted to the HTA & CPG Council for final approval. (Note: Cost-effectiveness analyses informally use a willingness-to-pay incremental cost-effectiveness ratio within but toward the lower spectrum of the World Health Organization’s suggested cost-effectiveness threshold of between one and three times GDP per capita, although other factors are also considered in HTA decisions.)
4. The HTA report is sent to the requester and disseminated widely (including via the mobile app, myMaHTAS, available for Android an iOS mobile devices) through national and international networks.
5. Monitoring and evaluation of the impact and influence of the HTA involves a requester feedback form, and a twice-yearly evaluation form based on the International Network of Agencies for Health Technology Assessmentb framework.
This process can take 8 to 18 months and can result in three possible decisions: a recommendation for routine or selected use (34 percent of HTA report decisions); a recommendation for further research to be conducted, where additional evidence is needed to conclusively inform use of the health technology or program (27 percent); or a negative recommendation (39 percent). A recommendation for routine or selected use can further specify the criteria for use (which patients and for which clinical indication) and the geographic availability of the health technology due to the related availability of expertise on use this. For example, endobronchial ultrasound for the screening of lung cancer is approved for use in only five respiratory centers in Kuala Lumpur (Institut Perubatan Respiratori), Selangor (Hospital Serdang), Penang, Terengganu, and Sabah.
From 1997 to 2016, MaHTAS produced 65 HTA reports covering programs (33 percent of HTA reports), procedures (25 percent), medical devices (23 percent), and drugs (16 percent), in addition to 326 mini- HTAs, 104 CPGs, 100 information briefs, and various other products.
Although the HTAs conducted by MaHTAS have no legal mandate, they are important inputs for MOH budget holders, private sector insurers and employers, and the medical assistance fund (described in Focus Area 1), particularly in excluding ineffective or non-cost-effective technologies and programs. The HTAs can also inform the regulation of private health providers, by setting normative standards on acceptable safe and effective health technologies that can be licensed for use.
Notes: a. MaHTAS is a member of various international networks including the Network of Agencies for Health Technology Assessment, Guidelines International Network (GIN), HTAsiaLink, Health Technology Assessment International (HTAi), and the International Society for Pharmacoeconomics and Outcomes Research (ISPOR).
Sources: Discussion with MaHTAS on November 28, 2016; MaHTAS 2015, 2016.
47 Annex 5 The Political Economy of Rural Health
Selected Quotes (emphasis added)
Speech by the Chief Minister (Tunku Abdul Rahman) over Radio Malaysia on August 9, 1955
“In the sphere of medical, health and social welfare, the Alliance has mapped out a very extensive program which we shall endeavor to implement, but in view of financial limitations, we shall have to decide on priorities. We shall place special emphasis on health and welfare problems of the rural communities. Consideration will be given to the increase of rural health centers and traveling dispensaries so that an energetic country wide attack will be made against disease.” (National Archives of Malaysia 1979)
Speech by the Chief Minister (Tunku Abdul Rahman) at the Federal Legislative Council, Kuala Lumpur on March 6, 1957
“The choice of course—as Honorable Members can see for themselves from the White Paper—is one of priorities. We could have a larger Army if we were to decide to employ fewer teachers and doctors, build less schools, fewer hospitals, fewer rural health centers and less pay for the soldiers. We have decided against that sort of solution.” (National Archives of Malaysia 1981)
Ministry of Health Annual Report 1971–1972
“The Rural Health Service is the Ministry of Health’s program for bringing medical and health care to the rural areas by providing a network of rural health units scattered throughout West Malaysia. The primary objective of the program is “to raise the health standards of the rural people,” and since about 70 percent of Malaysia’s people live in the rural areas, this goal has been given very high priority by the Ministry.
“The current Rural Health Scheme, introduced as part of the General Plan of Development in 1956, is based on an integrated, “three-tiered” delivery of medical and health services.
“The Rural Health Service is ‘three-tiered’ in that each Rural Health Unit is composed of three types of facilities: The Main Health Center, the Health Sub-Center, and the Midwife Clinic cum Quarters. It has been determined that each Rural Health Unit will be composed of one Main Health Center (MHC), four Health Sub-Centers (HSC), and twenty Midwife Clinics cum Quarters (MCQ) and that each Rural Health Unit will serve a rural population of approximately 50,000 people.” (Ministry of Health 1972)
48 Annex 6 Benefits Incidence Analysis and Financial Protection
PHS, which is funded through general taxation, is generally considered to be propoor, with concentration indexes for outpatient and inpatient utilization of -0.179 and -0.150, respectively, in 2011. The data sources informing these analyses do not, however, have adequate information on the type, content, and intensity of the quantities of utilization recorded during the survey. If these can be assumed to be comparable across quintiles—that is, if wealthy and poor patients access the same type, content, and intensity of services, bearing in mind the geographic distribution of tertiary hospitals, then PHS is clearly propoor (Table 3).
Table 3 Benefits Incidence Analysis for Public Health Spending, 2011 Public Spending Q1 Q2 Q3 Q4 Q5 Concentration Benefits (Poorest) (Richest) Indexes Incidence Analysis 2011 public 22.8 30.0 23.7 15.1 8.5 -0.179 outpatient use 2011 public 22.8 27.5 16.3 25.1 8.3 -0.150 inpatient use (inpatient days) Sources: Institute for Health Systems Research 2013; Institute for Public Health 2016.
Out-of-pocket expenditures as a percent of total health expenditures, at 38 percent, are relatively high in Malaysia, although the incidence of catastrophic expenditures is relatively low and tends to be concentrated among wealthier households (Table 4). This can be attributed to the performance of PHS in providing financial protection, despite “modest” government spending on PHS, due to the concentration of out-of-pocket expenditures among wealthier quintiles (Rannan-Eliya et al. 2016). Only a small fraction of the population, 0.15 percent, was impoverished by health expenditures (using a US$2-per-day poverty line) in 2011 (Institute for Health Systems Research 2013). Nevertheless, the high percentage of out-of- pocket expenditures in the private sector represents unpooled and inefficient financing, which is associated with the health system concerns described in Focus Area 2, and which remain an opportunity for reform.
Table 4 Catastrophic Health Out-of-Pocket Expenditure Household Out-of- Q1 Q2 Q3 Q4 Q5 All Pocket (Poorest) (Richest) Percent of households 0.2% 0.02% 0.29% 0.64% 0.55% 0.34% spending more than 25 percent of total expenditure on health out-of-pocket expenses Source: Institute for Health Systems Research 2013.
49 References
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52 Notes
i An “aging” society is one in which 7 percent of the population is aged 65 or more, and an “aged” society is one in which 14 percent of the population is aged 65 or more. ii For 1986: Among adults aged 35 and above. For subsequent years: Among adults aged 18 and above. Given that age is a strong risk factor for DM, the 1986 numbers would likely been even lower had the wider age range of adults aged 18 and above been included. Hence, the increasing prevalence of DM is likely to have been more stark than portrayed in the chart. iii 1Malaysia clinics are basic primary care facilities with expanded opening hours (evenings and weekends) sited in low-income urban areas, which were initially staffed by medical assistants (similar to physician’s assistants), in order to provide basic health services for just RM 1. iv The Family Doctor Concept is a new MOH initiative, which aims to provide greater provider continuity by assigning patients to a named primary health care team, based on the operational zones of health clinics. This team is multidisciplinary includes occupational therapists, physiotherapists, dieticians or nutritionists, nurses, physicians assistants, and doctors. v Because there are only a modest number of non-MOH public facilities, public facilities for the purposes of this case study refer generally to MOH facilities. vi https://www.pedulisihat.com/ and (“Ucapan Pelancaran Skim Peduli Sihat – MES | Merakyatkan Ekonomi Selangor” n.d.) vii Total revenue collection for MOH in 2012 was RM 401 million, of which user fees comprised RM 254 million (with RM 88 million contributed by noncitizens). Source: Ministry of Health 2012. viii For more information on pooling and input budgets, also see Cashin, World Health Organization, and Results for Development Institute 2017. ix Six percentage points of this 24 percent is combined coverage—private health insurance and employer-sponsored health coverage. x The MOH has additional “programs” and departments which are not directly related to the provision of personal health services, such as the Research and Technical Support program. There is also an Oral Health Program but this is not elaborated on further in this study as PHS is defined in more narrow terms for the purposes of this case study, in alignment with the Universal Health Coverage Study Series. xi Health Indicators 2014. http://www.moh.gov.my/images/gallery/publications/HEALTH%20FACTS%202014.pdf xii http://www.moh.gov.my/english.php/pages/view/56. xiii http://moh.spab.gov.my/eApps/system/index.do. xiv For more information, please see http://siteresources.worldbank.org/INTPAH/Resources/Publications/459843- 1195594469249/HealthEquityCh8.pdf. xv News media in late 2016 highlighted stock-outs of diagnostic supplies at an MOH hospital Malaysiakini 2016. xvi Source: MOH, unpublished.
53