1 CARE ConceptPaper 110809

CONCEPT PAPER

MINISTRY OF HEALTH

1Care for 1Malaysia:

RESTRUCTURING

THE MALAYSIAN HEALTH SYSTEM

MINISTRY OF HEALTH MALAYSIA

11 AUGUST 2009

1

EXECUTIVE SUMMARY

CONCEPT PAPER FROM THE MINISTRY OF HEALTH

1Care for 1Malaysia:

RESTRUCTURING

THE MALAYSIAN HEALTH SYSTEM

This paper is presented to introduce the concept of a national health system named

1Care, in line with the government‟s 1Malaysia model towards greater unity. Input and

guidance of Economic Council members would help improve ideas in this concept paper.

With the approval of the cabinet, MOH, with assistance from various partner agencies

and stakeholders, will then undertake further systematic planning towards the

development of a full blueprint for the 1Care national health system within a 2-year time

frame. Phased implementation will be introduced with full evaluation and monitoring to

ensure that objectives of the 1Care proposal are achieved.

2. Malaysia‟s health care system is acknowledged internationally as a successful,

modern government-regulated health system that provides effective health services.

Despite the accolades received, Malaysia, like many other countries, is apprehensive

that the present system of health care delivery and financing may not be sustainable in

the long term.

3. The country faces several issues and challenges in order to put the population at

the forefront of health services and to increase the system performance and advance

quality of care. These challenges include ensuring that services provided meet clients‟

need; enhancing performance to improve equity of service; providing higher quality care;

and overcoming limited and mismatched health care resources such as human resource,

financial and physical infrastructure.

2

4. Malaysia‟s health care financing pattern mimics more that of lower and lower-

middle income countries while in reality we are an upper middle-income country striving

for high wage earning status. It is now timely to restructure the system in order to align

performance to the needs and expectation of the nation.

5. 1Care is the restructured national health system that is responsive and provides

choice of quality health care, ensuring universal coverage for the health care needs of

the population through the spirit of solidarity and equity.

6. The proposed restructured Malaysian Health System will retain the existing

strengths of the current system. MOH will be streamlined to focus mainly on governance

and stewardship, and specific community health services. The daily task of patient care

will be devolved under an autonomous Malaysian Healthcare Delivery System with

integration of public and private health care providers and services congruent with the

1Care concept. These changes will lead to more competition between the providers,

higher quality and greater efficiency. The restructured system will be more responsive to

population health needs and expectations through increased autonomy. Some functions

will be placed under independent organisations owned by and accountable to the MOH.

7. The linchpin of the restructured health financing system is the contribution by

individuals and companies into a social health insurance (SHI) fund publicly managed on

a not-for-profit basis. SHI premiums are estimated at 9.5% of household income, with

contributions from the government, employer and employee. Two options in the

proportion of contributions are submitted for consideration. The National Health

Financing Authority (NHFA) will safeguard the integrity of the system, its effectiveness to

control the rate of health care cost increases and ensure the equitable financing and

delivery of health services.

8. Overall spending for health will increase from 4.7% of GDP in 2007 to an

estimated 6.2% of GDP. Nevertheless, government subsidy on health care will reduce

from an estimated 17.9% of TEH in 2007 to 15.6% in the proposed system through

improved targeting of vulnerable population.

Prepared by:

Ministry of Health

6 August 2009

3

Contents

EXECUTIVE SUMMARY ............................................................................................................................ 1

CONCEPT PAPER FROM THE MINISTRY OF HEALTH ..................................................................... 4

OBJECTIVE .................................................................................................................................................. 4

BACKGROUND ............................................................................................................................................ 4

Current Health System ............................................................................................................................ 4

Achievements ........................................................................................................................................... 6

Government‟s Commitment .................................................................................................................... 7

Challenges in the Current Malaysian Health System ......................................................................... 8

FEATURES OF THE PROPOSED RESTRUCTURED MODEL ........................................................ 17

FINANCING ARRANGEMENTS, COST & FINANCIAL IMPLICATIONS.......................................... 22

CAUTIONS AND CONCERNS ................................................................................................................ 28

BENEFITS ................................................................................................................................................... 29

Benefits to the Nation ............................................................................................................................ 29

Benefits to the People ........................................................................................................................... 30

Benefits to Health Care Providers ....................................................................................................... 31

CONCLUSION ............................................................................................................................................ 31

REFERENCES ........................................................................................................................................... 32

ANNEXES ................................................................................................................................................... 34

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CONCEPT PAPER FROM THE MINISTRY OF HEALTH

1Care for 1Malaysia:

RESTRUCTURING

THE MALAYSIAN HEALTH SYSTEM

OBJECTIVE

1. The objective of this concept paper is to propose a restructured national health

system that will meet and sustain the future needs of the country. It introduces the

concept of 1Care in line with YAB Prime Minister‟s vision of 1Malaysia. 1Care is the

restructured national health system that is responsive and provides choice of quality

health care, ensuring universal coverage for the health care needs of the population

based on the spirit of solidarity and equity.

2. The purpose of tabling this concept paper is to seek input and comments from the

Economic Council members. It is also to get approval to develop a detailed blueprint for

the restructured national health system.

BACKGROUND

Current Health System

3. Malaysia has a dichotomous health care system where comprehensive health

care is offered by a government-led public sector co-existing with a thriving private sector

(Annex 1). The latter caters mainly for the personal care of individuals while the former

provides for both personal care and public health services to ensure overall population

health. There are many different financers and providers of health care serving various

population sub-groups. Nevertheless, the Ministry of Health (MOH) remains the main

provider and financer of health care in the country.

5

4. There are glaring imbalances and mismatches between the public and private

sector in terms of resources and workloads. In 2008, although only 11% of primary care

clinics are publicly owned, they handled 38% of total patient visits. While there are more

hospitals in the private system, the reality is 78% of hospital beds remain within the

public system, attending to 74% of admissions. Through concerted effort, 55% of doctors

are now within the public system. Despite the greater workload for providers in the public

system, more resources are spent through private financing (Figure 1).

Figure 1: Public-Private Sector Resources and Workload (2008)

13.54

12081

2199310

41249

143

38.4

802

16.68

10006

754378

11689

209

62.65

6371

0% 20% 40% 60% 80% 100%

Health Expenditure (RM billion) (2007)

Doctors (excl. Houseman)

Admissions

Hospital Beds

No. of Hospitals

Outpatient visits (m)

Health clinics (with doctors)

Public Private10

5. A national referral system has been established within the MOH to provide a

systematic assessment and treatment of patients, along the continuum of appropriate

care. Patients access primary health care providers as the first point of contact and are

referred up to higher levels as needed. Cases are returned to the primary care providers

for follow-up, once close secondary or tertiary attention is no longer necessary. Despite

some bypassing in the public sector, there is a pre-determined referral system to

secondary or tertiary care, with primary care providers acting as gatekeepers (Annex 2).

However, bypassing is rampant in the private sector where patients self-refer freely into

Source: Health Informatics Centre (HIC)

6

any level of care (Annex 3). The practice of doctor-hopping among certain patients is a

matter of concern, as it does not promote prudent and desired health care practices.

Achievements

6. Malaysia‟s health care system is acknowledged internationally as a successful,

modern government-regulated health system that provides effective health services

(Bloom G & Standing H, 2008). Malaysia has achieved notable successes in health

status and the health sector including:

reduction in morbidity and mortality and increasing lifespan of citizens;

an equitable public health sector;

universal access to a comprehensive government health sector;

an effective safety net for catastrophic expenditure for chronic illnesses;

minimal or no co-payment for services within the public system;

health service focused on health promotion and disease prevention; and

private sector responsive to market forces.

7. Since Independence, Malaysia has achieved great improvement in health as

reflected by certain key health indicators. Life expectancy at birth for both genders has

increased over the years, rising from 56 years for males and 58 for females in 1957 to 72

years for males and 76 years for females in 2006. (WHO, 2007). Infant mortality rate,

which is a good indicator of overall health system performance, reduced drastically to

levels comparable to developed countries. Nevertheless, Malaysia‟s health indicators

have plateaued over recent years, compared to other countries, some of whom invest

more into their health systems (Figure 2).

7

Figure 2 : Selected Vital Statistics, Malaysia 1957-2006

Government’s Commitment

8. The Government of Malaysia (GOM) has been committed, both conceptually and

operationally, to progressively improve the health and quality of life of Malaysians. The

Ministry of Health (MOH) strives to provide accessible, equitable and high quality health

care to the population. Various public documents state the Government‟s role and

responsibility on health, notably the following:

Article 74(1) of the Federal Constitution stipulates that the Federal Government

has the authority to legislate health matters. (GOM, 2002)

Vision 2020 states (among others) the aim to ensure the Nation provides

adequate access to health facilities (Mahathir M, 1991).

Chapter F (Medical 1974) of the General Order for the Civil Services incorporates

the proviso for free medical benefits for civil servants and dependants at public

facilities only (GOM, 2006);

The EPF Act 1991 initiated the Employees Provident Fund (EPF) as a compulsory

savings scheme for non-pensionable employees and includes provision allowing

withdrawal of a portion for medical treatment (GOM, 1991).

8

Malaysia is a signatory to the Universal Declaration of Human Rights (1948)

(General Assembly, United Nations) wherein Article 25 states that “Everyone has

the right to a standard of living adequate for the health and well-being of himself

and of his family, including … medical care and necessary social services, and

the right to security in the event of unemployment, sickness, disability, … in

circumstances beyond his control. Motherhood and childhood are entitled to

special care and assistance”.

Since the Fifth Malaysia Plan, Malaysia‟s 5-year Development Plans have

included statements on cost sharing through health care financing mechanisms to

provide wider choice and better quality of health services. Although efforts to

study the sustainability and eventual introduction of a suitable financing scheme to

replace the present one began in the 1980s, to date they have not lead to

substantive action. Various reasons may have contributed to the inertia such as

timing, political will, readiness of the government, people‟s acceptance and

enabling infrastructure to accommodate the change.

Challenges in the Current Malaysian Health System

9. Despite the accolades received, Malaysia, like many other countries, is

apprehensive that the present system of financing may not be sustainable in the long

term, given the rapid rise in health care spending and the high out-of-pocket proportion

of this spending. Furthermore, the country faces several issues and challenges in order

to put the population at the forefront of health services and to increase the system

performance and advance quality of care. The main challenges are:

to ensure services provided meet clients‟ need;

to enhance greater performance;

to enhance equity of overall service delivery;

to ensure higher quality of care; and

to overcome limited and mismatched health care resources such as human

resource, financial and physical infrastructure.

9

Challenges in Serving the People Better

10. In striving to provide better services to the community, the public health care

system faces the constraints of higher consumer expectations, epidemiological and

socio-demographic shifts towards an aging population and the changing attitude towards

lifestyle, as well as a fairly rigid central administrative structure. The most common

complaint received by the MOH is the long waiting time for services and medical

procedures at all levels of the system. Greater expectations and demands are the

natural evolution of better education, higher income, and more access to information.

Changing trends in socio-demography and disease patterns present a major challenge in

the containment of health care cost (Figure 3 and 4).

Figure 3: Changing Demographic Trends

Source: Department of Statistics

10

Figure 4: Changing Disease Trends in Peninsular Malaysia (1970 and 2008)

11. The elderly are living longer as evidenced by an increase in life expectancy. An

increase in the aged population is associated with an increase in the prevalence of ill

health mainly chronic problems which require long term and continuous care. Elderly

patients are more likely to be admitted with serious and life threatening conditions

entailing high cost. The cost of health care will increase as the elderly population

increases in the future.

Challenges in Achieving Greater Performance

12. While the population has benefited greatly from the publicly funded health system,

there are growing issues of inefficiency in the targeting of limited health funds.

Government spending on public health services benefit even those who can afford to pay

for care leading to leakages of public subsidy. Data from the National Health Morbidity

Survey II (NHMS II, 1996) showed that among the richest quintile of the population, more

than half (54%) still admit into public hospitals. It is necessary to encourage the rich to

utilise public facilities because they provide the much needed voice to counter-check the

system and maintain the critical patient mix. Nevertheless, leakages of public subsidy

can be circumvented if the affluent are required to pay amounts commensurate with

services rendered.

11

13. The issue of limited appraisal and reward for performance in the public system still

needs to be addressed. Poor working conditions, lower remuneration and rewards

coupled with heavy workload contributes to the continuous brain drain of experts and

experienced staff from the public to the private sector and overseas. A less recognised

problem is the high payment charged in the private sector even when care delivered

does not meet acceptable standards. When the MOH tries to tackle such matters

through legislation and enforcement, it is accused of conflicts of interest as MOH itself is

both the regulator and provider of services.

Challenges in Improving Equity

14. In health care, both horizontal and vertical equity are relevant. Those with equal

need should receive equal care, while payment should be according to capacity to pay.

Moreover, such payment should not be required at the time of use but through a regular

prepayment mechanism. Regardless of the wide network of public and private sector

facilities in Malaysia, its distribution is unbalanced. Private facilities are concentrated

mainly in urban areas. Specialist services are available predominantly in larger towns.

Hence, rural communities do not receive comparable services. This has contributed to

the discrepancy of health outcomes between urban and rural population as shown in

Table 1.

Table 1: Discrepancy in health outcomes by geographical location

Source: National Health and Morbidity Survey (NHMS) III, 2006

15. Preferences for seeking care at various facilities are clearly income dependent

(Figure 5). When people earn more, they preferentially switch to seeking private health

12

care. As Malaysia strives towards becoming a high-wage earning country, the relevance

of the public health system, as it exists now, is a major concern. Service charges at

public health facilities (both primary and hospital care) are nominal and may even be

waived on appeal. However, frequent media solicitations for financial assistance for

health care indicate a weakness in the system. There is a need to increase the

responsiveness of the health care system and health providers to meet the needs and

expectation of the population.

Figure 5: Health care Utilisation by Income

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Less than

RM400

RM400 -

RM699

RM700 -

RM999

RM1000 -

RM1999

RM2000 -

RM2999

RM3000 -

RM3999

RM4000 -

RM4999

RM5000 &

above

Pre

va

len

ce

government private

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Less than

RM400

RM400 -

RM699

RM700 -

RM999

RM1000 -

RM1999

RM2000 -

RM2999

RM3000 -

RM3999

RM4000 -

RM4999

RM5000 &

above

Government Private

Hospital careAmbulatory care

Source : NHMS III, 2006

16. Since 2004, private spending on health overtook public spending (Figure 6). The

proportion of private sector expenditure has increased from 24% (Health Services

Financing Study, 1985) to 55.2% (HIC, 2009). This pattern does not augur well for the

health system because it has been shown that when majority of health care is privately

funded, there is less control on health care inflation. Consequently, cost of health care in

such situations will rise even faster (World Bank Institute,2007).

Income Range

13

Figure 6: Public-Private Expenditure on Health, 1997-2007. Real RM Value (2007)

Figure 6: Public Private Expenditure on Health, 1997-2007

Real RM Value (2007)

28

5,6165,806

6,351

7,320

8,7279,083

12,067

11,558

10,271

11,542

13,546

5,658

5,538

5,970

6,5716,824

7,208

10,079

11,740

13,034

14,360

16,6821.51.6 1.7 1.8

2.1 2.1

2.5

2.2

1.9 1.9

2.1

1.51.5 1.6 1.6 1.6 1.7

2.1

2.32.4 2.4

2.6

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Perc

en

tag

e (

%)

RM

mil

lio

n

Year

PUBLIC (RM million) real RM2007 base PRIVATE Public as % GDP Private as % GDP

Source : MNHA (2007) & HIC (2009)

17. Of greater concern is the pattern of spending for health in Malaysia (Figure 7).

Malaysia is noted to have very high out-of-pocket spending. At the time of illness and

vulnerability, people have to ensure that they have enough funds to seek care not only in

the private system, but also in the public system where purchases of certain prescribed

drugs, prostheses and equipment are not subsidised by government funds. This does

not provide adequate risk protection from possible impoverishment as a result of seeking

care during episodes of catastrophic illness such as cancers, renal failure and major

cardiovascular conditions.

14

Figure 7: Ratio of Out-of-Pocket (OOP), Public & Private Expenditures

18. There is some risk pooling mechanism available in the private sector in the form

of voluntary private health insurance (PHI). These commercial for-profit organisations

offer risk-rated insurance packages which are mainly affordable to healthy young

financially independent people. Those who are in most need of financial security when

seeking care such as the elderly who are not economically active and those with long-

term chronic illnesses and pre-existing medical conditions, are unlikely to be accepted as

insurers will deem them as very high risk. The PHI industry has grown tremendously in

Malaysia in recent years. Unfortunately, to the health economist, this spells yet more bad

news as PHI is another proven factor contributing to high health expenditure (World

Bank Institute, 2007).

19. Malaysia‟s financing patterns mimics more that of a lower or lower-middle income

country while in reality we are an upper middle-income country striving for high wage

earning status. In these latter countries, social security infrastructure plays a significant

role to garner private capacity into publicly managed fund-pooling mechanisms. In

Malaysia, statutory bodies such as the Employee Provident Fund (EPF) and Social

Source : World Bank, 2005 COUNTRIES

PER

CEN

TAG

ES

15

Security Organisation (SOCSO) have only a minimal role in providing this social

protection in health financing.

Challenges in Quality of Care

20. The dichotomy of public and private provision has had a major impact on the

quality of care between the two sectors. Variations arise from the significant difference

in infrastructure, such as facilities and equipment, as well as the clinical practice and

competency of providers and ancillary staff. Such variations have significant impact, not

just on perceived quality but more critically patient safety.

21. At the same time, the unregulated growth of medical technology as well as its

ready assimilation into the private sector contributes not only to quality concerns but has

also been proven to contribute to the rising cost of health care (Annex 4). The MOH

Health Technology Assessment (HTA) section reports that of the 115 health

technologies assessed from 2004 to mid 2009, only 33% were recommended for routine

or selected use, 50% were not recommended while the balance should only be used in

the research environment. Although the introduction of the Private Health care Facilities

and Services Act (1998) has addressed some of these concerns, there is a need for a

more concerted effort regarding the control and distribution of technology as an effective

way to regulate the availability, use and equitable distribution of cost-effective technology

to achieve higher quality of care.

22. A challenge to the harmonisation of quality standards and practices across the

health system is the lack of information and data sharing. This is further compounded by

low uptake of information communication technology (ICT) to assist clinical practice and

evaluation as well management practises.

Challenges in Limited Health Care Resources

23. In considering resources for any sector, the main components are generally

human resource, physical infrastructure and financial resource. Despite efforts to

increase the health care provider numbers in Malaysia, the country still lacks a significant

volume. The current doctor-population ratio of 1:1,255 is higher than the WHO

16

recommendation of 1:1000 (Oji, Utsumi & Uwaje, 2005). Moreover, skilled personnel are

not necessarily distributed according to health needs of the nation (Annex 5). Private

facilities in particular, responding to higher purchasing power, are concentrated in urban

areas.

24. Given the volume of patients that utilise public hospitals, it is not surprising that

overcrowding is an issue that frustrates the government‟s efforts to provide more

creature comfort to patients and visitors. MOH primary health care providers treat more

patients with chronic illnesses compared to private general practitioners (GPs) who treat

more „healthy ill‟ (ACG Project Team, 2007). For public sector specialists, about 70% of

their patient workload consists of complex cases, compared to 25% for private sector

specialists (Abu Bakar S. et. al. 1993). In such a stressful environment, it is perhaps not

surprising that there are substantial unhappiness from both clients and staff in the public

sector.

25. Although Malaysia is an upper middle income country, its level of health

expenditure mimics more that of a lower middle income country (Figure 8). The system

is clearly under tremendous pressure. It is time to revamp the situation in order to align

performance to the needs and expectation of the nation. It is time for “business unusual”.

(Mohd. Ismail M., 2009)

Figure 8: Total Expenditure on Health as percentage of GDP for Countries according to Income Level (2005)

17

FEATURES OF THE PROPOSED RESTRUCTURED MODEL

Main Objectives of Restructuring

26. Given the many challenges now facing the Malaysian health system, the

objectives of the proposed restructuring are manifold. The newly restructured system will

have to be BETTER than what Malaysians already enjoy today, with enhancement of

universal coverage in line with the 1Malaysia philosophy. The concept of 1Care ensures

horizontal integration between the public and private sectors and vertical integration

between the various levels of care within the health care delivery system. Through this

integration, the development of a national health system will promote greater technical

and allocative efficiency.

27. Health services will become more affordable through a publicly-managed

prepayment scheme, designed to ensure sustainability and appropriateness of the

system to the needs of a progressive nation. The restructuring will undertake measures

to improve equity in terms of access to better quality of care and financial risk protection.

This includes effective safety nets for catastrophic spending due to illness in a

responsive and caring health care system.

28. It is envisaged that increased personalised and community care will lead to

greater client satisfaction and health outcomes. A more conducive work environment will

eventually lead to the reduction of the brain drain of highly skilled health care personnel

from the country and from the public to the private sector.

Features of the proposed restructured model

29. The proposed restructured Malaysian Health System will retain the existing

strengths of the current system. The role of the MOH will be more streamlined in 3

broad functions:

Governance and stewardship

Selected public health services

Personal health care services devolved to the Malaysian Healthcare Delivery

System (MHDS)

30. Its main focus within the new public health functions would be the governance and

stewardship of the national health system. The role of community health services and

18

the function of communicable disease control are critically important as witnessed by the

current pandemic of H1N1 Influenza 2009 ravaging our country and indeed the world.

This public good will remain protected and guaranteed as it remains within the MOH, but

with a more specialised role. The MOH of the future will be managed as a tight ship of

highly skilled senior experts, functioning cohesively in a matrix organisation.

31. The daily routine of patient care will be devolved under an autonomous Malaysian

Healthcare Delivery System (MHDS). The formation of MHDS will change the health

care system in two major aspects:

the separation of purchaser-provider functions from MOH, allowing the role of

MOH in governing and financing the health system to be more effective and with

fewer issues pertaining to conflict of interest; and

the integration of public and private health care providers and services congruent

with the 1Care concept.

32. In the restructured system, Primary Health Care (PHC) will be the thrust of health

care delivery in Malaysia. This change will result in better collaboration between public

and private providers who now perform on equal footing, utilising similar care pathways

and performance tools; thus leading to higher quality and efficiency. The MHDS will be

more responsive to individual health needs and expectations through increased

autonomy. To this end, some functions will be placed under independent organisations

owned by and accountable to the MOH. These autonomous bodies, which are run by

their own management board, will have the flexibility to engage and remunerate staff

based on capability and performance. Staff and facility performance will also be the main

criteria for service payments.

Functional Relationship of the proposed restructured model

33. The schematic in Annex 6 highlights the functions of the restructured health

system. This paper is designed to introduce the broad skeletal concepts of 1Care and

the restructured health system. The substance of the structure and detailed

organisational arrangements will be developed in a blueprint for the restructured system

when general approval to proceed is secured.

New Public Health Functions

19

34. The New Public Health Functions denoted in the chart includes policy and

regulations, public health services and any other services deemed necessary.

The Policy & Regulation function includes those related to the following:

Policy and Development - responsible to formulate and review all national level

policies related to the health system planning including (but not confined to)

standard setting, quality assurance, guidelines for good practice and adoption of

cost-effective measures, infrastructure development, training needs, research,

ethics, ICT support. These functions will apply to the various scope of health such

as hospital care, disease control, family health, oral health, health promotion,

pharmacy services, nutrition, engineering, and other areas of concern.

Regulatory body – specialised function mainly to formulate and review all

legislations related to health care providers, health care practice and premises,

marketing and use of medical equipment, pharmaceuticals and other medical and

health products. Public Health, Medical Practice, Oral Health, Drug and

Pharmacy, Medical Devices, Health Facilities, Food Safety, Traditional and

Complementary Medicine, and Research. Emphasis will be placed on the clear

delineation of function and responsibility for legislation and regulation so that

oversight and enforcement will be effective and impartial to avoid conflicts of

interest. Where appropriate, different aspects of enforcement may remain within

the MOH or devolved to independent bodies.

Monitoring and Evaluation – to ensure restructuring of the health system will meet

specific objectives. Performance of autonomous bodies will be monitored and

evaluated. Quality and standards established by the Government will be

implemented so that the people receive appropriate and satisfactory health

services. Aspects such as health care provider assessment which encompass

accreditation, credentialing and others will be given attention. Health quality

control implementation will be carried out jointly with professional health bodies. In

areas where there are legislation involving establishing of facilities and services,

such as health care facilities and laboratories, assessment and monitoring in

terms of „zoning‟ or issuance of „certificate of needs‟ will be required. There may

be quota assessment before an approval is given.

35. The Public Health Services function will focus on issues related to the

implementation of community based Public Health Services mainly focused on

Communicable Disease Control, community level disaster management and others.

Communicable Disease Control related services like Public Health Laboratory services

20

will be retained within the MOH. These services will be provided throughout the country

within the existing public health network.

Malaysian Healthcare Delivery System (MHDS)

36. The MHDS will be the implementing arm in the delivery of personal care. It

comprises of several Regional/State Authorities to address regional health needs. They

are responsible for the strategic supervision of the following functions:

developing plans for improving health services in their local area,

making sure local health services are of a high quality and are performing well,

increasing the capacity of local health services so they can provide more services,

and

making sure national priorities for example, programmes for improving cancer

services are integrated into local health service plans.

37. The MHDS does not raise its own funds. Funding of MHDS activities related

directly to personal care will be obtained from the National Health Financing Agency

(NHFA) based on pre-determined criteria set by the NHFA in collaboration with the MOH.

Primary Health Care Trust (PHCT)

38. Primary Health Care Trust (PHCT) is an autonomous agency accountable to the

MHDS. It administers personal care as the key agency to purchase primary health care

services and other levels of services for the region. They are responsible for providing

personal care and preventive services. They oversee and purchase health care services

from independent contractors (Primary Care Providers/Contractors), dentists and

pharmacies. They also commission services from secondary or tertiary care providers

such as hospital services, emergency services, etc.

Primary Health Care Providers (PHCP)

39. Primary health care services will become the foundation of the health services

with strong focus on promotive-preventive care and early intervention. PHCP comprises

medical practitioners and dentists, assisted by nurses and appropriate paramedical

personnel, in public and private clinics operating individually or as registered groups to

provide services under the financing scheme. The primary health care providers who are

21

independent contractors will function as family doctors and dentists, who are

gatekeepers to secondary and tertiary care. Every individual in the population is

registered with a PHCP. Financing of medical services is by capitation with case-mix

adjustments (based on the community‟s health profile). There are also additional

incentives for achieving performance targets and as inducement for working in less

desirable areas. The benefit package of services will be developed and other payment

mechanisms apply for dental treatment and pharmaceutical prescriptions where patients

will make some co-payments when receiving service. These co-payments are instituted

to encourage prudent use of these services. Certain identified groups, such as the poor,

will be exempted from these co-payments.

Hospital Services

40. In the restructured system, patients will be referred by their PHCP to higher levels

of care, except in emergencies. There will be a regional network of autonomous public

hospitals, based on distribution of expertise and sub-expertise available in every

zone/state/district. The PHCT purchases hospital services from either the public network

or private hospitals. The services provided by public hospitals, will be funded through a

global budget based on case adjustments using Diagnostic Related Groups (DRG).

Financing of the private hospitals services is through case-based payment.

National Health Financing Authority (NHFA)

41. NHFA will be an autonomous statutory body, accountable to MOH. It will not be

privatised to safeguard the integrity of the system, its effectiveness to ultimately control

the rate health care cost increases and ensure the equitable financing and delivery of

health services to the Nation. It shall manage both the social health insurance and

general taxation fund for personal health care as a single fund manager. Funds will be

disbursed to the regional/state health authority based on specific and transparent

formulas to cover the personal health care needs of that population. The NHFA will be

accountable for the management of the overall health financing system in close

collaboration with the MOH and MHDS. The main responsibilities of the NHFA include:

Design Benefits Package together with MOH, MHDS and PHCT

Negotiating with government for funding required to provide the agreed benefits

package

Monitor the fiscal performance of agencies within MHDS

22

Independent and Professional Bodies

42. Within the restructured health system, several existing independent and

professional bodies with specific technical functions will be strengthened while new ones

may be established. These autonomous agencies are set up to ensure that the system

will be more responsive to client needs. In some situations, they serve as regulatory

functions for licensing and enforcement.

FINANCING ARRANGEMENTS, COST & FINANCIAL

IMPLICATIONS

43. In the proposed system, current financing arrangements will also be restructured

to ensure better financial risk management, equity in financing of health care, greater

efficiency of government subsidy for health care and accountability of work performance.

The proposed financing scheme moves the current Malaysian financing picture, as

described earlier (Figure 8), more into an upper middle to higher income country pattern.

44. Health care will continue to be financed through a combination of mechanisms but

with greater public financing, thus reversing the trend of private individual financing seen

previously (Figure 6). Major components for health financing will now be publicly

administered social health insurance (SHI) and general taxation, with much smaller

components of private spending. Private spending may consist of out-of-pocket spending

(OOP) to pay the minimal co-payments at point of seeking care e.g. for dispensing of

drugs and dental treatment within the SHI benefits package, and for services not covered

by SHI. Private spending will also include voluntary top-up private health insurance (PHI)

and corporate spending for employees for coverage of high end care and other non-SHI

covered items.

45. SHI contribution in the proposed system is mandatory with contributions for the

premiums raised from employer, employee and the government of Malaysia (GOM). The

whole population of Malaysia has to subscribe to SHI with no avenue to opt-out from the

system. This will ensure a high level of risk pooling and equity in financing for health

23

whereby the healthy will cross-subsidise the ill, the rich cross-subsidise the poor, and the

economically productive cross-subsidise the dependant. SHI premiums are calculated as

a percentage of income and shared by employer, employee and government funding.

This model of nationally pooled financing will further enhance social unity and caring as

per the 1Malaysia concept. To ensure greater equity and lower average premiums, SHI

premiums are estimated through community risk-rating to cover all family members, and

not individual risk-rating as in PHI. The latter will result in unacceptably high premiums

for those with the greatest health care needs and yet have the lowest capacity to finance

this need, and these are mainly the young and elderly. The estimates for financing in the

restructured system are shown in Table 2 below.

Table 2: Estimates for financing for the restructured system

Estimated Annual Cost to Finance Malaysian Health System (RM)

Expenditure for personal health care (PHC, specialist & inpatient care)

27.87b

As % of GDP

3.9%

Estimated Total Expenditure on Health with 5% administrative charge (Includes personal health care, public health, training, research, private insurance etc.)

44.23b

As % of GDP

6.2%

Per capita expenditure for personal health care

984.44

Per capita expenditure for all health services

1,562.60

SHI Premium for personal health care

972.44

SHI Premium for average household (HH)

4,181.50

SHI Premium as % of average household income

9.5%

46. All estimates are made based on the assumption of population averages for

annual utilisation and cost. Primary health care visits are estimated for 6 annual visits per

person. Specialist clinic visits are estimated on 0.78 utilisation rate and inpatient care on

0.09 utilisation rate (NHMS II). The Malaysian population is estimated as 28,306,700

(Department of Statistics, 2009). Average household size is 4.3 persons per household

24

(Department of Statistics, 2006). Unit cost estimates are RM40, RM317.39 and

RM5088.16 for a primary care visit, a specialist visit and an inpatient episode

respectively. A low 5% administration is estimated for the running of the system at

steady state capitalising on economies of scale and prudent government management.

47. Funding contributions by employer and employee is a key feature of SHI as a

move towards greater social solidarity. There is no accepted gold standard on how to

apportion government, employer and employee contributions to SHI premiums (Annex

7). We propose 2 options in funding contribution of either 2/3 employer and 1/3

employee participation as the preferred Option 1, or 50:50 contribution as Option 2.

Option 1 is recommended given that majority of income tax collection for Malaysia is

raised through corporate tax rather than personal income tax and companies are already

spending substantial amounts privately to provide health care benefits to their

employees. The 2 options are presented schematically in Figure 9. Nevertheless, these

figures remain preliminary estimates and further analysis and estimates will be

recalculated when the decision is taken to proceed further with the planning for

restructuring.

Figure 9: Funding options for Employer-Employee contribution to SHI Premiums.

48. With the proposed financial restructuring and the expansion of the social security

fund for health, beyond the current minimal health care spending through organisations

such as Employee Provident Fund (EPF) and Social Security Organisation (SOCSO),

public financing will increase from about 44% of total expenditures on health (TEH) to

25

76% of TEH, if the whole Malaysian population participates in the SHI programme. This

is demonstrated in Figure 10.

Figure 10: Main Sources of Health Financing

49. International experience has shown that countries with majority public funding for

health care is better able to control the rate of health care cost increases through greater

financial management, economies-of-scale and the bargaining power of a monopsony

not-for-profit organisation. Comparative analysis of the financing arrangements for both

the current and the restructured health system is made in Annex 8.

50. The GOM remains committed to funding of health services in the restructured

system but with better targeting of beneficiary groups. This will reduce the use of

precious government funds by those of higher income who can afford to fund their own

health needs. Thus government subsidies for health care will be targeted to vulnerable

groups. Through general taxation, the GOM will subsidise funding of primary health care

services for the whole Malaysian population. At the same time, government will also

subsidise SHI contributions for identified vulnerable population groups such as the poor,

26

disabled, and the elderly. As the largest employer in the country, the government will be

expected to contribute to the insurance premiums of government pensioners, civil

servants and five dependants. The GOM will also fund for various other components

particularly items which are public goods and merit goods such as community health

measures e.g. communicable disease control, health education, environmental health

issues and in-service training for public health care providers. Funding for other items

such as public infrastructure development and research will be through MOH budget.

Estimates for these commitments are shown in Table 3.

Table 3: Estimates for Government Spending on Health in the Restructured

System

51. Therefore, in line with proposal to inject sufficient funds into the health system,

government spending for health will increase from 2.11% of GDP in 2007 to an

estimated 2.85% of GDP (or from RM13.6billion to RM23.4billion in 2007 RM value).

However, government subsidy on health care will reduce from an estimated 17.9% of

TEH in 2007 to 15.6% in the proposed system through better targeting of vulnerable

population. In absolute quantum, the reduction in subsidies of about 2.3% of TEH is

almost RM1billion.

52. The linchpin of the restructured health financing system is the contribution of

private spending by individuals and companies into a national fund that is publicly

27

managed on a not-for-profit basis. This arrangement under the National Health Financing

Authority (NHFA) will not be privatised to safeguard the integrity of the system and its

effectiveness to ultimately control the rate of health care cost increases and ensure the

equitable financing and delivery of health services to the Nation.

53. Funds to pay for SHI premiums may come directly from employer and employee

contributions as monthly salary deductions, and also through direct contribution by non-

formal sector workforce (possibly at a reduced rate to be estimated later). Other possible

sources of fund raising may include EPF dividends, EPF contributions and SOCSO

funds. In line with other government plans to look at contributory pension schemes

(pencen bercarum) for civil servants, it is conceivable that civil servants will also

contribute towards their own SHI premiums as per private employers. If the programme

is adopted, another possible source of funds may come from the Kumpulan Wang

Amanah Pencen (KWAP).

54. PHI has been developing steadily in Malaysia providing some risk pooling for

health care amongst the higher income population. Current private spending for health

of 56% of TEH in 2006 (41% OOP, 8% PHI and 7% corporate and other spending

sources) will ultimately be reduced to 23% of TEH in the reformed system at steady

state. Private spending will not disappear completely as this component allows for the

continued development of PHI in specific niche areas as a voluntary top-up to the

mandatory SHI programme. Individuals and corporations may also choose to fund other

aspects of health services particularly the extra hotel-level comforts through some OOP

payments or company expenses.

55. For catastrophic spending on conditions not covered in the SHI benefits package,

other existing sources of funding will be utilised. Such sources include the MOH Health

Welfare Fund and the government grants given to specific non-governmental agencies to

provide specific services such as the National Kidney Foundation, AIDS Foundation,

National Heart Foundation and the National Cancer Council (MAKNA).

28

CAUTIONS AND CONCERNS

56. This paper is presented to introduce the concept of a national health system

termed 1Care in line with the government‟s 1Malaysia policies towards greater unity. In

presenting this paper to the Economic Council (EC) it is expected that EC members will

provide valuable input and guidance to improve the skeletal plans towards restructuring

the Malaysian health system.

57. With the consensus of the Economic Council and approval of the cabinet, the

MOH, with assistance from various partner agencies and stakeholders, will then

undertake further systematic planning towards the development of a full blueprint for the

1Care national health system within a 2-year time frame. Upon development, phased

implementation of the programme will be introduced with full evaluation and monitoring

to ensure that the objectives of the 1Care proposal are achieved.

58. Given the scale of the restructuring, it is imperative that change is managed

effectively at all levels of stakeholders. With further development of the blueprint many

more deliberations with interested parties and stakeholders including the community will

be undertaken to ensure that a solid and widely accepted proposal emerges, taking into

consideration various aspects of concern. A realistic time frame for phased

implementation is required to ensure that the requisite manpower, infrastructure and ICT

needs and challenges are addressed. Appropriate training for health care personnel

such as training in management of public providers and managers in preparation for

greater autonomy has to be conducted. Effective change management will entail initial

injection of investments particularly for the restructured public system in order to

compete with the private sector on similar footing.

59. In preparation for expanding the 1Care concept expounded in this paper, a

comprehensive review of existing statues and documents will be undertaken to identify

and streamline existing legislations and regulations on the government‟s role and

responsibility.

60. It is understood that restructuring towards greater efficiency in health delivery may

require rationalisation of services in some regions and its development in others to also

address equity issues. Payment mechanisms, incentives and market signals will lead to

29

change in the distribution of health facilities and the desired changes to ensure higher

quality health care practices.

61. Planning and execution of the 1Care plan will occur over the longer term. Whilst

the current economic socio-political and global situation may be of concern to effect such

changes in the short term, nevertheless it is expected that the EC will recognise that now

is the ideal time (and indeed it is warranted) to prepare the necessary groundwork.

BENEFITS

Benefits to the Nation

62. The development of a national health system will strengthen national unity

through a 2-prong process in which:-

social solidarity is fostered through SHI contribution specifically addressing

marginalised segments of the population in accordance with the 1Malaysia effort.

There are cross subsidies by the rich to the poor, the healthy to the sick, and the

economically productive to dependants and enhancement of corporate social

responsibility through employer contribution; and

the 1Care concept emphasises the ethical delivery of health care, employing

welfare and extra-welfare economic principles to tackle the obvious market

failures of the health system for better efficiency and at the same time, addressing

equity issues that troubles the system.

63. This programme will stimulate the health care market through increased health

care spending aligned with Malaysia‟s upper middle income status. With enhanced

public-private integration there will be increasing productivity and system

responsiveness.

64. The policy will capitalise on the liberalisation and globalisation of the health

care market and ensure that Malaysia’s health care system remains competitive

with the ability to attract highly skilled medical personnel and support health care travel.

At the same time, public funds and subsidies will not benefit foreigners at the expense of

the Malaysian people.

30

65. The restructured system reduces unnecessary dependence on government

fund by decreasing the leakage of government spending to those who can afford. This

segment of society will contribute through SHI allowing better targeting of limited

government subsidy. As mentioned previously, in 2007, government subsidy for

personal health care services was 17.9% of total expenditure on health (TEH). With the

proposed restructuring, this will be reduced to 15.6% through better targeting of

vulnerable groups, despite enhancement of services.

66. The proposed system will improve financial safety nets for lower and middle

income groups through better risk management. There is reduction of direct out-of-

pocket spending (OOP) at point of seeking care by prepayment and coverage of the

poor, disabled and elderly through general taxation. Through SHI, the paying population

gains from the large pool of contributors. There will be lower insurance premium and

wider benefits. There is assurance that no one is denied coverage due to any existing

illnesses or has to pay substantial individually risk-rated premiums due to ill health.

67. Public management of majority of the health expenditure will ultimately contain

the rapid growth in health care cost and inflation. 1Care promotes greater efficiency

through various means such as higher quality of care, more cost-effective measures,

reducing duplication and increasing competition by attending to the inherent failures of

health care market.

Benefits to the People

68. This proposal was developed with the ethos of serving Malaysians better.

Through 1Care, people will get more access to both public and private providers in a

move to bring about personalised care nearer to home.

69. At the point of physical and economic hardship during illness, individuals are not

faced with the concern of paying large sums or setting up deposits with the guarantee of

minimal co-payments at the point of seeking care. With prepayment into the SHI

scheme, there is assurance of access for vulnerable group, and addresses the demand

and expectations of the middle-income segment of the Malaysian population. The

restructured system has at its heart the pledge to improve quality of care delivered and

client satisfaction.

31

70. In the end the pursuit is for greater health outcomes for the community, thus

ensuring the means to higher work productivity and the ability to pursue individual life

choices.

Benefits to Health Care Providers

71. The restructuring will bridge the gap between remuneration and workload among

health workers in the public and private sectors. Eventually, the problem of public sector

workers migrating to the private sector (brain drain) can be overcome. The restructuring

optimises the existing health practitioners in the public and private sectors. The lack of

health staff interested in serving less desirable areas can be addressed through the

provision of specific incentives. Training and credentialing mechanisms will be

developed to ensure all health practitioners have the appropriate competency, in line

with the care standards to be determined.

CONCLUSION

72. Malaysia‟s health system has been recognised internationally as an excellent

system. However, current and future challenges will affect the sustainability and

relevance of the system. Therefore, the restructuring of the country‟s health system is

critical. The proposed health system will have several clear advantages. Citizens, health

practitioners and the government will obtain multiple add-on benefits. The 1Care concept

is in tandem with the 1Malaysia philosophy to foster greater cohesiveness of the

Malaysian population through the national health system.

73. The Economic Council is requested to consider and approve the proposed

concept of 1Care through Restructuring of the national health system to enable the

Ministry of Health to further its blueprint development.

Prepared by:

Ministry of Health

7 August 2009

32

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34

ANNEXES

ANNEX 1

Current Malaysian Health System

35

ANNEX 2

Access to Health Providers in Malaysia

Oth

ers

Other agencies & Private sector

PR

IMA

RY

HEA

LTH

CA

RE

SECO

ND

AR

Y/TE

RTI

AR

Y CA

RE

MOH

Estate

Ora

ng

Asl

iFa

cilit

ies U

nive

rsit

y H

osp

ital

s

Priv

ate

Hos

pit

als

GPs

Med

ical

Cor

ps

Rural/Community Clinics

1 : 4,000 population

Health Clinics/Centres

1 : 20,000 population

Hospitals without

Specialists

Hospitals without

Specialists

Hospitals with

Subspecialty

Hospitals with

Specialists

ANNEX 3

Access to Health Providers in MalaysiaO

ther

s

Other agencies & Private sector

PRIM

AR

Y H

EALT

H

CAR

ESE

CON

DA

RY/

TER

TIA

RY

CAR

E

MOH

Estate

Ora

ngA

sli

Faci

litie

s

GPs

Rural/Community Clinics

1 : 4,000 population

Health Clinics/Centres

1 : 20,000 population

Hospitals without

Specialists

Hospitals without

Specialists

Hospitals with

Subspecialty

Hospitals with

Specialists

By passing

Priv

ate

Hos

pita

ls

Uni

vers

ity

Hos

pita

ls

Med

ical

Cor

ps

36

ANNEX 4

MEDICAL DEVICE AND EQUIPMENT IMPORTS IN MALAYSIA (2001-2007)

Source ??? Not Frost and Sullivan

37

ANNEX 5

Number of Clinics and Hospitals by State, June 2009

State Clinic

Hospital

MOH* Private MOH Private

Johore 352 805 11 28

Kedah 281 336 9 11

Kelantan 251 185 9 3

Malacca 86 278 3 4

Negeri Sembilan 143 261 6 7

Pahang 306 222 10 8

Penang 88 483 6 20

Perak 288 619 14 13

Perlis 39 32 1 0

Selangor 189 1510 10 41

Terengganu 172 154 6 1

Sabah 270 301 22 3

Sarawak 203 303 20 9

WP Kuala Lumpur & Putrajaya

14 960 2 30

WP Labuan 11 9 1 0

Total 2729 6458 130 178

* MOH : Health Clinics and Community Clinics only

38

Annex 6

35

Functional Relationship in the Restructured Health System

39

ANNEX 7

Country Year %

GDP

SHI funds

(multiple/

single)

%

population

covered

Contribution

(% income)

Employer Employee

HIGH INCOME COUNTRIES

Australia 2005 9.7 Single

(Medicare) All

Residents 1.5-2.5% Nil 1.5-2.5%

Japan 2002 8 Multiple 99% 8 4 4

Korea 2007 5.6 Single payer

(NHIC) 97 4-5% 2 2

Taiwan 2004 6.17

Single Payer (Bureau for

NHI) 99 4.55 (10% by

govt.) 2.7 (60%) 1.4 (30%)

France 2008 11.1

(2008) Multiple (17) 100 19.6 12.8 6.8

Germany 2008 10.7 Multiple

(319) - 2003 99.8 16 8 8

United Kingdom 2008 9.4

National Insurance

(Social Security) 100 (NI)11 (NI)12.8

Netherlands 2008 9.2 Multiple 98.5 7.2 4.8 2.4

Hong Kong 2006 5.5

(2002) Nil Nil Nil Nil Nil

MIDDLE INCOME COUNTRIES

Malaysia 2007 4.7

SOCSO (Employment

Injury & invalidity) 16.8 2.25 1.75 0.5

Indonesia 2002 2.8 Multiple 10 2.5 (ASKES) 2 0.5

Chile 2004 6.1 Single 86 7 Nil 7

Philippines 2005 3.3 Single 73 2.5 1.25 1.25

Costa Rica 2003 7.1 Single public 88 15 9.25 5.5

Thailand 4 Multiple Mixed 4.5

(Govt. 1.5) 1.5 1.5

Mexico 2002 6.2 Multiple 51% 9.5 6.95 2.95

Nigeria 2005 3.9 Single na 15 10 5

Tanzania 2002 8.7

Multiple (Main - NHI

fund) na 6 3 3

Mongolia 2002 4.3 Single 77.3 4% (max) 2 2

40

Annex 8

Comparative data of selected countries on Total Expenditure on Health (TEH)

GDP per capita

US $

TEH per

capita TEH as %

of GDP

Govt. HE

(% of

TEH)

Public

HE (%

of TEH)US $

Mid Malaysia (MNHA) 7,221* 245 4.3 44.2 44.6

Mid Malaysia (New)** 7,221* 445 6.16 46.1 76.9

High Japan 38,443 2,936 7.6 14.6 81.3

High Rep of Korea 19,115 973 5.9 11.4 53.0

Mid Thailand 3,869 98 3.5 56.0 63.9

Mid Colombia 5,440 201 7.3 33.6 84.8

Low Vietnam 1,051 37 6.0 17.0 25.7

Low Indonesia 2,254 26 2.1 37.0 46.6

Low Kenya 895 24 4.5 41.9 46.6

High Singapore 37,600 944 3.5 26.5 31.9

High Taiwan 17,040 1561 6.17 9.0 66.5

Mid Mexico 10,211 474 6.4 17.3 45.5

Source: WHO (2006)

•2008 Figure** Based on proposed system