Towards a Citizens' Proposal for Healthcare Reforms -
Issue Papers
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Towards a Citizens' Proposal for Healthcare Reforms
Chan Chee Khoon - People's Health Assembly - Issue Paper
A Work-in-Progress Seminar on
Health & Healthcare in Changing Environments: The
Malaysian Experience
(April 22 & 23, 2000, Kuala Lumpur)
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Introduction: Current Situation, Problems
On August 7, 1999, in response to mounting public anxiety over
the privatisation of healthcare, the Minister of Health announced that the Barisan
Nasional government's policy of corporatising the public hospitals had been suspended.
This may have succeeded in removing a contentious issue from the 1999 election agenda, but
the underlying problems of Malaysian healthcare are hardly resolved and the simmering
crisis continues.
The Malaysian healthcare system has won international recognition from the World Health
Organisation and other health agencies for its remarkable achievements since Merdeka.
Government health services in particular, financed by taxes and other public revenues,
have achieved impressive coverage for primary healthcare. People in the rural areas have
recourse to an extensive network of government health centres and klinik desa with
referral backup, while the urban residents have access to government as well as private
hospitals and clinics. Overall, more than 90% of our population live within 5km or one
hour's travelling distance of a primary healthcare facility. This has been a major factor
contributing to our favorable health indices which are almost on a par with those of
richer industrialised nations.
This is all the more remarkable given our modest government health expenditures (about 2%
of Gross Domestic Product). Judged by this measure, and despite the high subsidies of
public sector healthcare, it is clear that the government has been quite restrained in its
spending on this essential social service, a fact which is masked by the repeated
assertions of onerous financial burden and unsustainable subsidies. Rather than over-spending, there is in fact
under-spending, which leads to the real
problem in public sector healthcare: the massive and sustained haemorrhage of senior,
experienced staff from the government service to the private sector, due in part to large
differentials in remuneration. The resulting, chronic understaffing adds to the workload
of those who remain, and further compounded by low morale arising from diverse causes, it
re-inforces the perennial exodus of staff from the public sector.
The challenges to Malaysian healthcare, and the BN's policy responses occur against a
backdrop of globalisation of trade, investment, and manufacturing. We are constantly
reminded that businesses and economies need to be cost-conscious, not just at the level of
enterprises, but systemically as well. In particular, cost-effective and dependable
supportive services, utilities and infrastructure are crucial elements which can enhance a
country's competitive position.
Privatisation under the right circumstances can contribute to these goals but this
requires a degree of transparency and accountability in market operations and public
management which is not currently in evidence. Indeed the BN government's record to date
in privatising social services and utilities is one of poor accountability and
transparency, absence of competitive tendering, inadequate oversight and regulation, and
this is undermining our competitive edge through cost-inflation of these industry inputs.
At the same time, the World Trade Organisation's push for liberalised trade in the service
industries (General Agreement on Trade in Services, GATS) poses a serious challenge to our
accessible public healthcare system. The pressure to dismantle public sector healthcare,
in favor of demand-driven systems and away from need-based priorities, will have
far-reaching consequences for our primary healthcare system which is currently held in
high esteem internationally.
The BN's Approach
The Barisan Nasional's approach to the current challenges facing
Malaysian healthcare is to corporatise and privatize the public sector. The
BN repeatedly asserts that the financial and administrative burden on government is
excessive. In truth, as we have noted, public sector expenditures in healthcare are very
modest, and staff salaries are unrealistically low to the point it is difficult to retain
even the vocationally-inclined who provide that crucial core of motivated and dedicated
professionalism. The problem is not over-spending, but rather underspending. The BN policy
furthermore is to rely on the market for efficient allocation of resources, and for
cost-conscious and client-responsive service. However, the track record of privatised
components of government healthcare (e.g. skyrocketing costs of pharmaceuticals and
hospital support services) contrasts sharply with this rhetoric.
But even when markets operate with a lesser degree of interference, this remains a
contentious issue. The aggregate performance of the market-driven system in the USA for
instance is deplorable -- 43 million uninsured, unimpressive vital statistics despite
spending 14% of GDP on healthcare (twice the western European/Japanese average), pervasive
complaints against for-profit managed care which has been accused of putting profits ahead
of patient welfare and good medical practice. The "internal market" reforms of
the UK National Health Service, and the Private Finance Initiative, have not been
resounding successes either. Indeed, bodies such as the World Health Organisation are now
advising national governments against undue and indiscriminate reliance on the market for
the financing and delivery of healthcare services (see below).
Beyond that, even when there is efficient, optimal allocation of resources (by market
criteria), it may not achieve socially desirable, distributional objectives in healthcare
access. The government is aware that a demand-driven, fee-for-service system (what we
currently have in the private sector) may re-direct care away from need-based priorities.
Furthermore, a fee-for-service system encourages inappropriate and wasteful use of
healthcare resources especially when third party payers such as insurance or other forms
of pre-paid healthcare are involved.
The BN's solution to this however -- for-profit managed care - may be remedy worse than
the ailment. The BN Health Minister asserts that managed care has in fact been the norm in
the public sector (for instance, the practice of medical referral in the government
medical services) but he conveniently ignores the crucial distinction, that the Ministry
of Health is one huge non-profit
managed care organisation (MCO). Market discipline, in the form of profit-driven managed
care, has been a highly unsatisfactory tool in the US and other countries for reining in
the excesses of fee-for-service healthcare. The WHO itself has cautioned that the
fundamental purpose of healthcare reform is to improve
the health of populations through rational development and use of healthcare
resources, and not to contain cost through "managed
care" or other unwarranted compromises on quality of care.
For-profit managed care of course is the latest incarnation of medical insurance, a
projection of the insurers' influence (as bulk purchaser of healthcare services) into fee
setting and in extreme cases, even into clinical judgement and prerogative, and treatment
protocol. Increasingly, it appears that the BN government has adopted a de facto
policy in national healthcare financing which relies principally on a patchwork of
profit-driven health insurance and managed care schemes, supplemented with medical
charities and trust funds for poor patients.
Finally, perhaps as an offshoot of the Multimedia Super Corridor, telemedicine has been
promoted as a panacea for diverse problems plaguing the public sector, in particular the
chronic shortage of senior, experienced medical staff. In theory, this could be alleviated
by a more efficient use of scarce, skilled personnel whose expertise could be extended
through internet access and telemedical technologies.
Undoubtedly, there are aspects of telemedicine which will be welcomed by educated,
affluent and internet-wise healthcare consumers. It is however far from clear whether the
economics (and logistics), and requisite level of general/computer literacy will allow for
the ambitious roles that have been assigned to telemedicine. There is much more which has
not been done, before this can become a major vehicle for a nationally accessible health
information and consultation system, one which can benefit the vast majority of the
country's residents.
An Alternative Perspective on Healthcare Reforms
* Re-affirming a multiple role for government in healthcare. The
government should continue to play a provider role, in addition to an
enhanced regulatory role in a
mixed public/private healthcare system which needs to be functionally integrated. It is
unwise to continue dismantling the public healthcare sector out of an obsessive faith that
market-based solutions will invariably deliver higher efficiency and lower unit costs,
clearly not the case in many instances. Indeed, Dr Gro Harlem Brundtland, Director-General
of the World Health Organisation has stated that "not
only do market-oriented approaches lead to intolerable inequity with respect to a
fundamental human right, but growing bodies of theory and evidence indicate markets in
health care to be inefficient as well" (WHO Annual Report, 1999).
* Nonetheless there can be situations when judicious use of market incentives
can capture the more positive effects of competitive influences: enhanced efficiency,
better outcomes, greater consumer satisfaction, and lower unit costs to consumers. Where
public services are privatised, this requires the strictest adherence to transparency and
accountability in public management and oversight, if the hypothetical merits of
privatization are to benefit the rakyat, rather than favored corporate entities and
individuals. Unbridled competition can also lead to substandard services and care when the
consumer is vulnerable and in a weak bargaining position. One policy objective is
therefore to encourage a competitive
private sector under a regulated environment, which can capture the efficiencies,
innovativeness and drive of private enterprise, but at the same time minimises the less
desirable consequences of a profit-maximising orientation.
* Market-defined efficiency however is no guarantee of an acceptable, equitable access to
healthcare. It is therefore essential also to re-invigorate the public healthcare sector
with infusions of personnel, resources, and most importantly, morale and motivation to
ensure that affordable healthcare of quality continues to be provided on the basis of
need. A reliable, motivated and competent public sector also plays the important role of a
benchmark for quality, and acts as a competitive price check (bulwark) against excessive
price increases in the private sector. This in fact was one of the principal missions of
the Institut Jantung Negara: to be a source of
high-quality cardiac care provided at medium cost.
* Within our preferred, pluralistic system of healthcare providers, a historically
important component is the non-profit private sector. The Lam Wah Ee Hospital, Adventist
Hospital, Selangor Tung Shin Hospital, Chinese Maternity Hospital, Assunta Hospital, Mount
Miriam Hospital, and Islamic missionary clinics are collectively a testimony to the
energy, motivation and drive of voluntary organisations and the potential of community and
philanthropic support. There is clearly a fund of community sentiment which when properly
mobilised and wisely marshalled, offers at least as important an alternative to commercial
medicine in easing the burden on the public sector. It would be tragic indeed if this
older tradition withered through neglect, lack of encouragement and support, and diversion
of human and material resources solely to the commercial private sector. The authorities
clearly can exercise some discretion to influence the balance one way or the other. Fiscal
incentives, land grants, and preferential leases of public facilities are among the policy
options available to the government to encourage the non-profit private sector.
At its best, the non-profit private sector can be an exemplary blend of dedicated,
people-oriented service in the finest traditions of caring and motivated voluntarism.
* There is an emerging consensus in WHO and in international health circles that
efficient, rational, and socially just healthcare can be better delivered when financed by
publicly-operated healthcare funds. The institutional setup must ensure that funds are
allocated in accordance with accountable and transparent criteria of need, and there is
flexibility to accommodate meaningful, responsible and motivated community involvement.
The involvement of profit-oriented commercial insurance in healthcare financing is not
favored, in view of negative experiences with discriminatory premiums and its tendency to
undermine the implicit compact and cross-subsidy which is the essence of national health
insurance. Much preferred is a National
Health Insurance Fund for Malaysia. This would be a payroll-based scheme
(employer/employee contributions) with supplementary contributions from progressive
taxation to extend its benefits to ALL citizens and (legal) residents. It would be
operated as a non-profit statutory
institution with effective and credible representation of the lay public. On the
assumption of a continuing mix of public-private providers, a single-payer
publicly-operated healthcare fund would be able to reduce overhead and administrative
costs, and it would furthermore have the purchasing power to negotiate effectively with
(private sector) healthcare providers to ensure reasonable returns and cost control. No
less important is its role in ensuring that mandated standards in clinical care and
institutional upkeep are not compromised. In short, a national healthcare fund would be in
a better position to ensure cost-efficient care which is at the same time consistent with
norms of medical necessity.
* We should at the same time be wary about the rapid spread of investor-led, for-profit
managed care, beholden more to shareholder interests than to patient welfare or good
medical practice. Market discipline, in the form of profit-driven managed care, has been a
highly unsatisfactory tool for reining in the excesses of fee-for-service healthcare and
we should not repeat the avoidable experiences of the USA.
Specific Proposals
* In line with WHO-recommended norms for national healthcare
expenditures (4%-8% of Gross Domestic Product), public sector healthcare expenditures in
Malaysia should be increased from its present level of 1.5%-1.7% of GDP to at least 4% of
GDP. (In 1983, the private sector accounted for 24% of total national health
expenditures, but the current proportion probably exceeds 40% in view of its rapid
expansion in the last decade). Increased
public expenditures by itself however is no guarantee of improved access to healthcare or
its better quality. It must be coupled with adherence to transparent procedures and
consistent criteria to ensure rational deployment and use of public resources. Without
being overly bureaucratic, we can have more decentralised, discretionary authority which
must however be subject to transparent, accountable oversight and review. There are
indications that the 1996 privatisation of hospital support services (laundry, hospital equipment and facilities maintenance,
cleansing services, and clinical waste disposal) has resulted in dramatic increases
in operational costs (as much as 3-4 fold) without commensurate expansion of services or
gains in quality. No less important is consultative, accountable and competent
staff management without which severe demoralisation and erosion of work motivation
would add further to the perennial exodus of senior, experienced staff from the public
sector.
* A National Health Insurance Fund
should be established from compulsory contributions from employers, the self-employed, and
employees, based on payroll (or income, in the case of the self-employed), with
supplementary contributions from general taxation to extend its benefits to all citizens
and (legal) residents. It would be operated as a non-profit statutory institution with
effective and credible citizen participation. This National Health Insurance Fund would be
the principal funding source for public sector healthcare which will continue to be
subsidised to ensure that it remains affordable to all in need. Public sector healthcare
should not be dismantled but instead should be re-organised and re-invigorated to boost
staff morale and work motivation. It should be given greater operational including
financial autonomy in the form of decentralised regional health authorities (or divested
as non-profit publicly-owned health trusts in the manner of the UK's NHS Trusts) and
subject to explicit guidelines and regular review. This further requires that rational and
consistent criteria be developed and adhered to in resource allocation for the public
sector (population base, epidemiological profile and patient loads, case-mix etc).
Patients who opt for private sector healthcare would be re-imbursed by the NHIF up to a
level not exceeding the equivalent, benchmark expenditures in public healthcare
facilities, based on best-practice consensus clinical protocols, case-mix, DRG or similar
estimates of cost of treatment.
* Rational, cost-efficient utilisation of healthcare resources includes the appropriate use of scarce, skilled medical
expertise. Because of the system of medical referral practised by the Ministry of
Health, the Ministry of Health has been described as one large managed care organisation, most importantly a non-profit MCO. Not surprisingly, a 1993 joint study by
the Academy of Medicine and the Ministry of Health showed that 70% of outpatient
encounters at government specialist clinics were for conditions requiring specialist
attention. In the private sector however, where access to specialist care is unscreened,
demand-based self-referral, the corresponding proportion was 25%. This is grossly
inappropriate use of a scarce, highly-skilled human resource. One way to redress this is
to impose a condition on NHIF re-imbursement for private specialist care, requiring that
it must be on a referral basis. For-profit managed care however, beholden more to
shareholder interests, can be detrimental to patient welfare and good medical practice.
Medically necessary care may be denied and profit-driven managed care has been a very
unsatisfactory tool in the USA for discouraging the wasteful use of medical resources.
For-profit managed care should be phased out. More importantly, a systematic program for
upgrading the quality of primary care and family medicine is required, with entry
standards and an accredited system of continuing medical
education (CME) for periodic re-certification. The public and private sectors
should be functionally co-ordinated and integrated, and the Ministry of Health should be
empowered to ensure an acceptable, rational distribution of primary care as well as
hospital facilities throughout the country.
* A permanent National Health Council
should be established in which the lay public through their civic representatives are
effectively, adequately, and credibly represented. Among its functions would be advising
on national health priorities, health care standards, aggregate health expenditures,
criteria for resource allocation, incentives for a non-profit private sector, fees
schedules in the public and private sectors, and a review of existing corporatised and
privatised health services with a view towards rational, accountable and sustainable use
of public resources.
Citizens' Health Initiative
April 10, 2000
Biodata summary
Chan Chee Khoon, Sc.D.
School of Social Sciences
Universiti Sains Malaysia
11800 Penang, Malaysia
e-mail: ckchan@usm.my
