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‘Social health insurance’ proposal needs more scrutiny

Patients waiting even during the lunch hour at a general hospital

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As we are unable to pay fair monetary wages to workers, the least we can do is to provide healthcare to them at subsidised rates, writes Jeyakumar Devaraj.

Introducing some form of revenue collection from the rakyat to help defray healthcare costs has been on the government’s agenda since the 1980s.

It has toyed with the idea of a special health tax, separate health financing authority, a payment system that covers both the public and private sector, and other related issues. But so far, despite many studies, no definite plans have been finalised.

The present episode of sponsoring health insurance for the B40 appears to have started from the Peduli Sihat scheme that was implemented by the Selangor government in 2017. That is a scheme which provides families with a household income of RM3,000 and below a debit card which will pay for treatment at any private health care facility in Selangor up to a maximum of RM500 per year per family, limited to RM50 per treatment episode. The idea was incorporated in the Pakatan Harapan manifesto which listed this Peduli Sihat scheme as one of the 10 targets for the first 100 days.

But the idea seems to have morphed into something bigger and more harmful. In August 2018, the new Health Minister, Dzulkefly Ahmad, announced that the government would introduce “social health insurance” for families from the bottom 40%, and that these families would not be asked to pay towards the scheme. This insurance will pay for a total of RM10,000 worth of treatment in private hospitals for that family for one year. According to Dzulkefly, this new plan will be rolled out in January 2019.

Impact on federal healthcare budget

We now have about 7.5 million households in Malaysia; 40% of that would be three million families. If all of them were to use their entitlement for insurance cover, that would come to a whopping RM30bn (3 million x RM 10,000) per year. This is bigger than the federal health budget for 2018 of RM27bn.

Of course not every family will use their entitlement in a year, but we should not underestimate the innovative approaches that private hospitals might take to milk this cash cow! Patients can be easily persuaded or frightened into getting themselves admitted for scopes, MRIs and angiographies as there is a huge asymmetry in knowledge between patients and their doctors. Health expenditure will go up, but it may not really add appreciably to better health for the population.

Dr Lee Boon Chye, the Deputy Health Minister, said a few days later that families that who to do so could buy additional cover if they wished.

Types of insurance schemes

But things are not all that simple. There are many kinds of health insurance. Let’s look at two aspects:

  1. How are insurance payments to be determined? Will insurance premiums be community rated? This means that every family pays an amount irrespective of the medical history of the family members. This is the system adopted in South Korea, where people have to pay 5% of their income to the insurance fund.
  2. Will there be a single not-for-profit insurer as there is in South Korea, or will it a number of private companies competing with one another for the market as is the case in Malaysia now? In Malaysia the premiums are risk-rated. In other words if you have diabetes, or if you have a history of certain illnesses, then your premiums will be higher.

Physicians’ compensation

The second issue that we have to consider is how this insurance scheme will compensate the healthcare provider.

There are two ways this is done:

  • through a capitation scheme
  • by a fee for each service provided

Capitation scheme

The GP system in the UK is by capitation: each GP is allocated a number of patients to look after, and the GP is paid monthly by the number of patients he is looking after whether or not they come to see the GP that month.

One benefit of the capitation system is that it makes sense for the GP to carry out health education so his or her patients’ chronic conditions are well under control and they do not develop complications that require them to go and see the GP.

Fee for service

The fee-for-service system pays the healthcare provider based on the number of visits, procedures and types of intervention that he or she provides. If not properly audited, patients may end up being over-investigated and subjected to procedures and operations that they might not really need.

Example 1: For a child who has a pain in the right lower quadrant of the abdomen, mesenteric lymph node inflammation has to be considered as the differential diagnosis to appendicitis. But as charges for managing the former conservatively are much lower than operating on the latter, a fee-for-service will influence doctors to go for the latter diagnosis.

Example 2: Not all patients who complain of a chest pain need an angiogram, especially if the pain is not related to exertion and there are no other risk factors. But reassuring a patient is not as lucrative as performing an angiogram – and quite a few doctors will succumb to that temptation.

Some of this is already occurring in the private sector in Malaysia. And there are many other examples.

Impact on quality of care in government hospitals

The slide above demonstrates how the development of private hospitals has undermined the public healthcare system.

We already have a two-tier health care system in Malaysia where those who can pay for treatment in private hospitals get to meet specialists promptly and get treatment much faster than those relying on the government hospitals. This is one of the reasons why several health activists are alarmed by the health minister’s enthusiasm in pushing for this new insurance scheme without taking more time to evaluate all its potential impact.

We are worried that the following events will be set into motion:

We now need to take every step to preserve and strengthen the public healthcare system in our country. We feel that, in addition to playing an important role in treating the sick, this would build a sense of social solidarity among the different classes of people in this country, reduce anxiety over the prospect of catastrophic illnesses and old age and create the conditions for people to be more generous to one another. In short, it would make Malaysia a happier, more harmonious society.

Our call

  • Submit the health insurance idea to much more scrutiny and discussion before taking any definite decision. We would be doing a disservice to the poorer half of the population if we were to rush to implement this new insurance.
  • Increase the federal health budget in stages over the next five years to 4.0% of GDP from the current 2.2%. Use the extra funds to:

– build a second general Hospital in all our state capitals that have over-crowded wards.
– provide plates, screws, operating staplers, cataract lenses, drug eluting stents with minimum co-payments.

  • We claim to be aspiring to be a high-income country. Britain, with its per capita GDP of US$44,100 (PPP) spends 9.9% of GDP on healthcare while we on US$29,000 per capita spend only 4% of GDP overall (public and private).

(GDP figures for 2017 from CIA World Factbook)

Source: Penang Monthly May 2018
  • Declare a moratorium on the building of new private hospitals as these will continue to suck away specialists from the government sector. This moratorium could be lifted once a better balance in deployment of our specialist doctors is achieved.
  • Introduce a new service commission for healthcare personnel in government service with features that will help retain senior and experienced people.

– perhaps adopt the pay scheme in IJN
– give three-month sabbaticals to specialists every five years of service so that they can go overseas and pick up new skills and procedures.
– give enhanced pensions to those specialists who put in 20 years or more of service in the government sector.

Would this make our B40 lazy?

This might be what some Malaysians might think. But we believe differently.

Apart from the ‘externalities’ that I mentioned above, one other reason is that Malaysia is trapped in a low-wage economy in which ordinary workers are paid much less than their compatriots in advanced countries despite having similar productivity.

Contrasts the wages of our school cleaner with that of an Australian:

  • Cleaner in Malaysia – RM1,000/month
  • Cleaner in Australia – RM10,000/month
  • Cost of living in Australia is three times more

There is a 10-fold difference. Even if the cost of living in Australia is three times more than ours, the real income for a cleaner in Australia is still three times higher than that of our cleaner.

Similarly in our factories:

  • Worker in electronics factory in Malaysia – RM1,200/month
  • Worker in factory in California, US – RM10,700/month

Workers in electronic factories in Bayan Lepas receive about an eighth of the pay of a worker in a US factory in California even if they are producing the same component product. Such a differential has little to do with “productivity” (as the World Bank and IMF would like us believe) but is due largely to the “market power” of large firms outsourcing production of components to developing countries. (But this is not the place to go into a detailed discussion of that.)

As we are unable to pay fair monetary wages to our workers given our subservient position in the international economic system, the least we can do is to provide them essential services – healthcare, education, public transport – at subsidised rates. A sort of ‘social wage’.

I hope I have been able to communicate the reasons why we sometimes takes a contrary position to the mainstream: it stems from a different understanding of the current situation.

The above was a talk given at the Galen Centre for Health and Social Policy in Kuala Lumpur on 20 October 2018

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