This article first appeared in The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025

The global financial crisis of 2008 popularised the term “too big to fail”, which is also an appropriate label for the Malaysian health system. Two other terms that can describe the Malaysian health system are “too big to manage” and “too big to understand”.

Here are some numbers to demonstrate how our health system can be “too big to understand”. Every year, we spend more than RM80 billion on healthcare. The entire health system employs at least 450,000 healthcare professionals, with 300,000 in the Ministry of Health (MoH) alone. In 2023, there were four million hospital inpatient admissions and at least 104 million clinic outpatient visits.

Taken together, Malaysia has 373 hospitals, 14,000 clinics, 6,000 dental clinics and 3,000 community pharmacies, regulated by more than 25 laws. There are 33 medical schools, 55 third-party administrators and at least 16 health insurance companies. The ministries of health, higher education, defence and digital are involved in healthcare, alongside the Public Service Department, treasury, Bank Negara Malaysia, Employees’ Provident Fund and many other agencies, statutory boards, ministries and local governments.

The challenges are obvious: the brain drain; increasing healthcare costs; an ageing population; a mental health crisis; a non-communicable diseases crisis; and the list goes on. It is equally obvious that the country’s healthcare must reform to ensure affordable and high-quality care for Malaysians.

If it’s true that reforms are needed but the health system is too big to even understand, how do we even begin to reform our health system? Here are three guiding principles:

Politicians will promise magic solutions to the complex problem of healthcare reforms. At best, each solution solves a small part of the overall problem, and not the overall problem itself. Therefore, Malaysia needs a basket of solutions more than “a single standalone magic solution”.

This basket of solutions can be grouped into three categories: (i) the health workforce; (ii) financing; and (iii) service delivery. All solutions should be implemented simultaneously and in parallel.

For the workforce, immediately implementable solutions can include a RM500,000 bond for graduating medical students from Universiti Malaya or Universiti Kebangsaan Malaysia who move to Singapore to work as House Officers (every year, about 100 medical students from UM and UKM move to Singapore after graduating, which means that Malaysian taxpayers are effectively subsidising doctors to work in Singapore). We can also reallocate the doctors working in non-clinical administrative roles to clinical work, to reduce the workload of frontline clinical doctors, which increases their morale and decreases burnout.

For financing, the uncomfortable political discussions on “how to raise more funding for healthcare” must start now. Obviously, shared responsibility for health, strategic purchasing, diagnosis-related groups, case-mix and controlled increases of insurance premiums are necessary. But we need more top-line funding for healthcare. Broadly speaking, there are two ways to raise the additional billions of ringgit that we need: either increase general taxation or income taxes, or introduce a payroll tax to fund personal health savings accounts or insurance premiums.

My vote is to introduce a payroll tax. Here are some rough calculations to explain my choice:

The question for the political leadership is: “Which is a better use of political capital: to increase individual income taxes by 1% to collect RM 0.44 billion from 2.7 million employees, or introduce a new 1% payroll tax to collect RM5.57 billion from 16 million employees?” The calculations show that the payroll tax is a more realistic political position, a more effective use of political capital, and fairer because all 16 million employees are contributing (compared with only 2.7 million employees paying individual income taxes).

For service delivery, the usual solutions must be implemented: more primary care (instead of hospital care); more preventive care (instead of curative care); and more digital health (to increase access and reduce cost). One under-discussed solution is the “gatekeeper system”, where trained general practitioners act as the first contact with patients and the GP decides if the patient requires specialist doctors and hospital care. Countries like Denmark, the Netherlands and the UK have a GP gatekeeper system that has reduced healthcare costs over time.

In October to December 2024, several solutions were proposed by various government agencies, including Rakan KKM (a “premium economy” service ostensibly to retain specialists in MoH, among other goals), spreading the increase in insurance premiums between 2024 and 2026, introducing value-based healthcare and implementing diagnosis-related group (DRG) payment models in private hospitals.

Each of these solutions have been promoted with many assertions and very limited amounts of evidence, analysis or international best practices. Unintended consequences are present, which must be acknowledged and then mitigated.

For Rakan KKM, data and lessons from the Full-Paying Patients scheme since 2007 have not been published. While the Rakan KKM website states that “excess revenues will explicitly cross-subsidise public patients”, government-linked investment companies (GLICs) may appear to be investing into (not funding) Rakan KKM. If GLICs expect a return on investment, this is not aligned with the “excess revenues for cross-subsidy” statement. Therefore, a clear statement from the health ministry will reassure Malaysians.

I am very supportive of DRGs, and believe it will bring significant benefits. But DRGs must be implemented with a harmonious collaboration between healthcare payers (like the government and insurers) and healthcare providers (like hospitals and doctors, whether public or private). Typically, DRG implementation requires significant education, common standards, a trusted third party to mediate, and three to 10 years of gradual implementation one disease or department at a time. And DRGs have one major drawback: if hospitals and doctors receive a fixed fee for a specific procedure or conditions, then (private) hospitals and doctors will choose the easiest procedures or conditions to manage, leaving the life-threatening and serious conditions for other (public) hospitals and doctors to manage. This is called “cherry-picking”.

No solution is perfect, and all solutions must have mitigation for unintended consequences. Therefore, all stakeholders should have a sincere and pragmatic view of their proposed solutions, and propose mitigation for all solutions.

Mario Cuomo is a former governor of New York, who once said: “You campaign in poetry, but govern in prose.” To paraphrase Cuomo, “public policies are poetry, but public administration is prose”.

In other words, no amount of beautiful rhetoric of public policies means anything if the public policies are not implemented well. And the only way to implement beautiful public policies is to have strong public administration.

In the case of health reforms, the Health White Paper was passed by parliament in June 2023, and makes the case for an “independent committee, council or commission” to monitor health reforms. I propose a Health Reforms Commission, and have elaborated details in “What does Merdeka mean for Malaysia’s Health?” (The Edge, Aug 31, 2020, Issue 1334), and “Now is the time for health reforms” (The Edge, May 29, 2023, Issue 1474).

The Health Reforms Commission is intended to be part of the public administration of Malaysia, working closely with the health ministry and other government agencies and reporting to parliament. An “external reforms unit” sitting outside the country’s public administration is not likely to succeed, as the technocrats and bureaucrats will understandably feel like an external reforms unit will be temporary and an encroachment on their turf.

If designed correctly, the Health Reforms Commission will work hand-in-hand with technocrats and bureaucrats, and provide new political capital and “punca kuasa” to the healthcare technocrats and bureaucrats to work with other agencies and to also catalyse reforms in the private sector.

Health systems fail slowly, then suddenly. There is an urgency to reform our health system, but to do so in a calm, deliberate and thoughtful manner. We should not desire magic solutions or perfect solutions without unintended consequences, and we should focus on strong public administration more than beautiful rhetoric in public policies. There is still time to reform, but time is short.

Happy New Year to all Malaysians, and always wishing good health and well-being for all.

Dr Khor Swee Kheng is CEO of Angsana Health and he specialises in health systems

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