Home Coalitions Health Care Watch out for the Aussie consultant’s proposal

Watch out for the Aussie consultant’s proposal

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Karl Karol, the Australian consultant tasked with coming up with a recommendation on how to finance our health care system, is proposing a model that is neo-liberal to the core, observes a worried Jeyakumar Devaraj. And civil society has not been consulted. 

The study commissioned by the Economic Planning Unit (of the Prime Minister’s Department) and the Health Ministry with financial sponsorship from the United Nations Development Programme (UNDP) appears to be progressing on schedule. An interim report was released in August 2006 and another updated 250- page Interim Report was released in February 2007.

There have also been meetings of a “Steering Committee”, which has representatives from the doctors associations, the insurance association, the association of private hospitals and other bodies. Sadly, the government has not seen it necessary to invite any of the consumer bodies in the country to sit on this committee. Neither have health advocacy groups such the Citizens Health Initiative or the Coalition Against Health Care Privatisation (GMPPK) been invited – although the latter has been most pro-active in presenting ideas regarding health care reform. The final report is expected in May 2007.

What is the thrust of the consultant’s recommendations? Will the recommendations lead to an amelioration of the problems besetting our health care system? Or do we have cause to be worried?

The consultant's main recommendations

The consultant, Karl Karol from Australia, has thoroughly reviewed the various studies and surveys that have been done prior to this and, to his credit, has summarised the major findings of these previous studies clearly. However he has gone on to endorse the government’s concept of the future health care model for Malaysia with only a few minor refinements. The main features of the model being proposed are neo-liberal to the core in that
•    the funding for health care is to be from the people and not from general taxation;

•    government hospitals are to be corporatised so that they will function like companies, so that they may be rendered more efficient through market discipline;

•    there will be integration of the primary health care sector, the government hospitals and the private hospitals under this scheme;

•    the “internal market”, financial incentives and the profit motive shall be the main driver of the system;

The main features of the Health Financing Model proposed by the Consultant are outlined below.

1.    A National Health Financing Fund will be set up, owned by and controlled by the government through the “National Health Financing Authority”, which will be established with Parliamentary approval.

2.    This fund will receive income from an “ear-marked” VAT (Value Added Tax or Goods and Services Tax or GST). It may also receive some input from general taxation especially in the initial period.

3.    The National Health Fund will pay for all treatment of the illnesses listed under the Essential Health Care Benefits Package (EHBP) with the proviso that patients must first go to a General Practitioner (GP) to whom  they are  designated. If specialist referral or hospital admission is required, it must be done by the patient’s GP. The fund will not pay up if the patient by-passes the GP and goes straight to the specialist or hospital.

4.    All GPs in the country will be brought under the scheme, and they will all be allocated a certain number of patients. The GPs will be paid a capitation sum based on the number of patients registered under them. They will get the same income per patient whether the patient comes to their clinic ten times in a year or not at all. They have to treat the patients registered under them for free.

    To prevent over investigation and treatment by the specialists, the model envisages that the GPs will become “fund managers” for the initial part of specialist care for the patients registered under them. In other words each GP will be given a fund for referring patients to specialists. If they stay within their budget, the GP will get a hefty bonus. If the GP exceeds this referral budget, he may face a financial penalty! The purpose of this mechanism is to make GPs efficient gate-keepers and to prevent abuse of the system by both patients and the specialists.

5.    Government hospitals will no longer get an annual budget. They will be paid by the amount of clinical service they provide. All illnesses listed in the EHBP will be classified as Diagnosis-Related Groups (DRGs). Each DRG will be rewarded a certain payment that will be specified in the EHBP. For example, treatment for appendicitis may be RM1,000, and this will be irrespective of whether there are any complications or the length of the hospital stay. A private hospital that handles an appendix case will also get the same payment from the national health fund. The idea is that this competition with private hospitals will help make government hospitals “leaner” and more “efficient”.

6.    Private insurance will be allowed for illnesses that are not covered by the EHBP and to cover specialist costs that are not incurred through the GP referral system.


A market driven system as proposed by Karl Karol, illustrated here, will serve to restrict and limit access and the kind of healthcare services made available to the public. Access to health care is a human right. Health care should not be subjected to the dictates of market forces. We now present in the following pages, the Coalition's response to Karl Karol's proposal.

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The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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