KUALA LUMPUR (Nov 11): Fitch Solutions Country Risk & Industry Research said the spread of the Delta variant had stretched the healthcare system in Malaysia.

In a report on Wednesday (Nov 10), Fitch Solutions said Malaysian hospitals were overstretched, while Covid-19 bed utilisation was consistently beyond 100% during its peak in August 2021, leading to the construction of field hospitals.

“As the virus now progresses from the pandemic to endemic stage, Malaysia aims to invest in regional disease centres, vaccine development and develop better understanding of communicable diseases.

“And, as the Covid-19 pandemic has shown, infectious diseases threaten a blow to health systems already facing significant pressure on their capacity to care for patients,” it said.

Fitch Solutions said Malaysia's public healthcare system is mainly financed through federal government taxation and general revenue.

It said that although government spending on healthcare as a percentage of the country's gross domestic product had been gradually increasing over the years, the World Health Organization still considers this to be below global as well as regional standards.

Fitch Solutions said the pandemic had underscored the need to increase funding for the healthcare system both in terms of facilities and working conditions for staff.

Citing Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, Fitch Solutions said Malaysia will undertake a medium- to long-term reform of its healthcare sector while gradually aiming to increase healthcare spending every year.

It said among other policy directions being considered is increasing public healthcare charges for higher-income earners, and incentivising people to buy health insurance.

Social protection schemes will also provide health benefits for informal workers.

Moreover, looking beyond the pandemic, Fitch Solutions believes that the Malaysian government will remain firmly committed to improving health quality and access across the country.

It said in recent years, the healthcare sector has seen a rise in government expenditure, with an increase in medical facilities and higher-quality treatments.

The implementation of the B40 (bottom 40% income group) healthcare scheme is one of the key initiatives that will expand healthcare access to the nation's lowest earners, it said.

“In 2020, healthcare expenditure in Malaysia grew 6.9% year-on-year, with an estimated value of RM63.1 billion.

“In 2021, we expect growth to accelerate to 9.6%, reaching RM69.2 billion.

“We forecast health expenditure to experience a five-year compound annual growth rate of 7.6% in local currency terms and 8.9% in US dollar terms, reaching RM91.1 billion by 2025,” it said.

Fitch Solutions said while reforms are under way to secure the long-term sustainability of the public healthcare system, challenges remain.

“We remain sceptical about the progress of the reforms and any alteration of the funding structure of the healthcare system will require a revision of our healthcare expenditure forecast.

“We will not incorporate this into our forecast until the reforms are officially approved and we note that it is likely that the funding structure will change.

“Public healthcare expenditure will increase considerably in the short term,” it said.

Fitch Solutions said its longer-term forecast reflects that the growth in spending will decelerate as cost-containment measures will inevitably be introduced to maintain sustainable levels of funding.