Editorial| Social Protection

National Health Insurance

Will implementing a national health insurance scheme help us provide a more secure social safety net for all Malaysians?

By Editorial Team | 7 November 2019


  • Commenting on the state of public healthcare in Malaysia, the Director General of Health Malaysia said in a social media post earlier this year: “We are currently underfunded, understaffed, underpaid, overworked, overstretched and with facilities overcrowded with patients. We all need to try harder to improve the public healthcare system to increase the funding, to increase the number of healthcare workers, to improve the salary scale and availability of job posts in our health facilities; all of which are beyond the control of MOH. I believe when there is a will there is always a way.
  • The overburdened public healthcare system means that some Malaysians opt for private healthcare, with waiting times in public healthcare being a major issue. However, in terms of private healthcare insurance coverage, only 41% of Malaysians are currently covered. Furthermore, incidences of financial bankruptcy as a result of medical costs are not infrequent – in 2015, Agensi Kaunseling dan Pengurusan Kredit (AKPK) reported that approximately 14% of their cases were related to medical bankruptcy. This does not sit well with the Universal Health Coverage (UHC) targets (see below for more on UHC).
  • At the moment, public healthcare is funded via our tax revenue. Despite year on year increases in the annual budget allocation for healthcare, tax revenue is insufficient to address the shortcomings and existing gaps, as the D-G of Health’s quote above signifies. Further, financing via tax revenue means that there is a need to balance health spending vs. other government spending – which in itself is already highly stretched.
  • Even under its current healthcare burden the funding system is unsustainable, and this does not yet include the future strains of an ageing society. Healthcare social safety nets like MySalam and Peka B40, which are steps in the right direction, are still limited in terms of universal reach, and further expansion may be difficult with the current funding model. There is a pressing need to rethink how we finance healthcare, partly to supplement current government budget allocation but also to find a way to sustainably finance healthcare for the future.


Towards Universal Health Coverage

  • As a member of the United Nations, Malaysia has agreed to try and achieve Universal Health Coverage(UHC) by 2030, as part of the Sustainable Development Goals (SDG) agenda. UHC does not mean guaranteed free health care for all possible health issues, (indeed, this would be financially unsustainable). However, it does aim to encourage countries to re-evaluate how they finance healthcare so that UHC is possible.

Universal Health Coverage (UHC) is based on the 1948 World Health Organisation (WHO) Constitution declaring Health as a fundamental human right. The definition of UHC embodies three (3) main objectives:

1) Equity in access to health services – everyone who needs services should get them, not only those who can pay for them;

2) The quality of health services should be good enough to improve the health of those receiving services; and

3) People should be protected against financial-risk, ensuring that the cost of using services does not put people at risk of financial harm.

In 2017, the Global Monitoring Report on Tracking Universal Health Coverage stated that Malaysia has achieved 70% in the UHC service coverage index. You can find more information about UHC via the World Health Organisation (WHO) website.

  • Taken together, there are three things at play here: significantly high government subsidisation of public healthcare, the need to ensure that all Malaysians have a social safety net when it comes to healthcare, and our commitment towards the UHC goal. All three dimensions suggest a rethink of how we finance healthcare. To that end, we invite you to consider moving towards a National Health Insurance healthcare financing model as a way forward.


National Health Insurance

  • Healthcare financing models can be classified into four broad categories: tax-based financing (Beveridge Model), Social Health Insurance (Bismarck Model), market-driven healthcare (the out-of-pocket model), and the hybdrid of tax-based financing (Beveridge) and social health insurance (Bismarck) referred to as the National Health Insurance (NHI) Model.
Source: adapted from Verma et al (2015), with author’s own additions
  • Broadly, the main features of a Tax Based Financing model (Beveridge Model)  is that healthcare is financed by the government through tax revenues, characterised by healthcare coverage for all. The government owns and controls the public healthcare providers (private healthcare providers also operate but are not state-funded).
  • In comparison, under the Social Health Insurance model (Bismarck Model), the coverage is either funded through employer, individual or private insurance funds. Healthcare delivery can be provided by the government or private entities. (Note: There seem to be some discrepancies in specific classifications, but the four categories above are widely accepted.)
  • While a foolproof system does not exist, one progressive way to decrease over-reliance of our public healthcare system on government tax revenue alone would be to supplement our tax based financing with a form of national insurance for healthcare, introducing a model commonly classified as a National Health Insurance system.
  • In principle, an national health insurance (NHI) system typically requires citizens to pay into a government run health insurance program. The premium is typically means-tested or determined based on individual income, with subsidies for low-earners. This NHI system can run in parallel with the tax revenue funding system, allowing us to maximise our funding sources for healthcare.
  • Unlike private insurance, NHI schemes do not have a financial motive. Hence no claims would be denied, and no one will be denied coverage due to a pre-existing condition. Premiums will potentially also be lower if all 32 million Malaysians are insured under an NHI system.
  • Examples of countries that have implemented a form of NHI include Taiwan and Japan.

Taiwan
Taiwan adopted the National Health Insurance system in 1995. The revenue for Taiwan’s NHI program is derived from several sources: employees, employers and government.

The NHI program insures citizens from six (6) main categories and 15 subcategories based on their job and income. The percentage of premium paid by citizens for each category varies from 0% for low income citizens to 100% for the self-employed citizens.

Most hospitals in Taiwan now remain privately owned but a non-profit organisation. Physicians, on the other hand, are either salaried or self-employed (Consultants).

Japan

In Japan, citizens and residents are mandated to enrol themselves into any one of the Statutory Health Insurance System (SHIS) plans based on their age, employment status, place of residence as a resident non-citizens. However, undocumented migrants and visitors are not covered.

The Government regulates universal healthcare through SHIS which has more than 3,400 non-competing public, quasi-public and employer-based insurers. All SHIS plans provide the same benefit packages, pre-determined by the government following the advice of Central Social Insurance Medical Council (Government body). The national government sets the provider fees, and subsidises local governments, insurers and providers.


Why National Health Insurance for Malaysia?

  • In implementing NHI in Malaysia, it is important to note that it is not meant to replace the annual tax revenue system, but to supplement it. The aim is to increase all available funds for healthcare, for three reasons.
    • One, this will allow the tax revenue to reach further and alleviate the tax burden and solve resourcing issues currently plaguing our healthcare financing.
    • Two, multiple sources of funds can potentially ensure a resilient, predictable and sustainable health financing system.
    • Three, the creation of a government-backed insurer could move funds from the currently high “post-paid” out-of-pocket percentage to a “pre-paid” insurance percentage, potentially improving purchasing power and achieving economies of scale.
  • We believe that implementation of such a model in Malaysia may pave the way for reducing the burden on tax revenue and supplement the funding of resources, remuneration and infrastructure sorely needed by the public healthcare sector. The NHI will also help ensure that no Malaysian is at financial risk due to healthcare related issues.
  • An NHI type scheme in Malaysia could take a number of different forms. While a definitive model needs to be carefully developed to fit with the Malaysian context, here are some suggestions that can be considered (and need not be mutually exclusive):
    • A means-tested mandatory contribution of x% of salary, which would guarantee a minimum level of health care for all. There is an option to run such a scheme in parallel with private insurance schemes.
    • A single-payer national insurance scheme where the government manages the insurance and claims process. Contributions are made via payroll, and subsidised for students, pensioners and those earning below a particular wage.
    • Making healthcare insurance mandatory for all citizens, where citizens who are employed obtain insurance through their employers, and a nationalised insurance scheme for everyone else not in employment.
  • NHI models also assist in achieving the goal of being able to provide for UHC. A good case for Malaysia’s reference in terms of locality and economic status is Thailand.
  • The UHC project in Thailand was phased in over a number of years, underlining the fact that implementation of any such program cannot be done overnight and needs to be implemented in stages – which is why it is imperative that we start very soon to ensure that we are able to manage potential healthcare financing crises of the future.
  • To end our editorial, we share a summarised version of the Thai experience as food for thought.

How Thailand achieved UHC

Thailand achieved their UHC by increasing healthcare coverage to different groups over the course of 27 years and achieved it by the year 2002. In Thailand, there are three different public health insurance schemes covering the whole population, the Civil Servant Benefit Scheme (CSMBS) for public sector employees and their dependents, the Social Health Insurance (SHI) scheme for private employees and Universal Coverage Scheme (UCS) for the rest of the population. This is governed by the National Health Security Act 2002.

The Social Health Insurance (SHI) scheme was run on a capitation contract model since 1991. The UCS scheme upon establishment followed suit with capitation payments for outpatient services and an overall budget with diagnosis related payments for inpatient care. Capitation is a payment arrangement set out for healthcare service providers; a set amount for each enrolled person assigned to them is paid according to the each specific period of time.

The CSMBS and UCS uses tax revenue for financing, while tripartite payroll contributions is used to fund the SHI. According to Prangkongsai in his paper, there exists substantial evidence to show that the poverty ridden citizens in Thailand benefit from the public health services. This is aided by the geographical proximity of these services to the rural population.

According to Suphanchaimat, the mechanisms  in which healthcare services purchases are made and providers are paid are important factors in determining long-term cost containment. Also, the systems efficiency and financial risk protection for beneficiaries play an integral part in UCS mechanism.

The 2016 World Bank data shows that Thailand only spends 3.71% of GDP on Health but was able to achieve UHC. Comparing this to the United States of America (USA), they have the highest spending in healthcare amounting to 17.07% of GDP but then however, they are nowhere close to achieving UHC.

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