IN late 2018, a Harvard team led by Professor William Hsiao wrapped up their consultancy with the Health Ministry (MOH) advising on, among other things, deployment of Voluntary Health Insurance (VHI) as a tactical expedient en route to a full Social Health Insurance (SHI).

In 2019, the Harvard consultancy team convened a summer conference in Cambridge, Massachusetts on “Health & Healthcare in Southeast Asia”, at which the then health minister Dr S. Subramaniam was the specially invited guest.

Subramaniam, in his conference dinner speech, acknowledged that the tactical expediency of VHI was a necessity learnt from the aborted rollout of SHI’s predecessor 1Care after its matter-of-fact unveiling to the public in 2010.

Evidence favours tax-financed healthcare systems

In May 2020, “The Case Against Labor-Tax-Financed Social Health Insurance for Low- and Low-Middle-Income Countries” appeared in the prestigious health policy journal Health Affairs. 

The article was authored by the crème de la crème of the health economics profession, among whom were two senior members of the Harvard consultancy team, Hsiao (former chief actuary of the US government) and International Health Economics Association past-president Winnie Yip.

The article (and a YouTube video based on it) were brought to the attention of participants of the UNU-IIGH roundtables on the Health White Paper (July 2022) by Dr Taketo Tanaka from the Kuala Lumpur office of the World Health Organization (WHO).

The abstract spells out the authors’ consensus that:

“an increasing interest in initiating and expanding social health insurance through labor taxes (typically, payroll taxes with matching employer contributions) in low- and low-middle-income countries goes against available empirical evidence. This article builds on existing recommendations by leading health financing experts and summarizes recent research that makes the case against labor-tax financing of health care in low- and low-middle-income countries. We found very little evidence to justify the pursuit of labor-tax financing for health care in these countries and persistent evidence that such policies could lead to increased inequality and fragmentation of the health system. We recommend that countries considering such policies heed the evidence on labor-tax financing and seek alternative approaches to health financing: primarily using general taxes or, depending on the context, general taxes combined with adequately regulated insurance premiums”.

Tanaka, in his remarks at the roundtables, had extended the discussion from low- and low-middle-income countries to country experiences such as South Korea’s (an affluent country).

More importantly, the late Adam Wagstaff, in his World Bank Policy Research Working Paper 4821 (“Social Health Insurance vs. Tax-Financed Health Systems: Evidence from the OECD”) had reported in 2009 that among 29 OECD countries (1960-2006), moving from tax-financed healthcare to social health insurance:

• increased per capita health spending by 3-4% without corresponding improvement in health outcomes
• resulted in worse amenable mortality rates for diseases that require strong population-based public health programmes, such as breast cancer
• formal sector employment declined by 8-10% (casualisation)
• total employment declined by as much as 6%.

In light of this extensive and authoritative body of evidence spanning low income to low-middle-income countries (Yazbeck et al, 2020) to upper-middle-income to high income countries (Wagstaff-OECD, 2009), which consistently showed that tax-financed health systems outperform labour-tax financed SHI, we are puzzled by persistent arguments that Malaysia should opt for labour-tax financed SHI over tax-financed healthcare systems.

To our minds, the onus is on advocates of labour-tax financed SHI to explain to the Malaysian public why our country is a special case exempt from this unambiguous evidence base, which favours tax-financed healthcare systems.

We should be clear that in Malaysia, we are struggling to overcome a legacy of chronic underfunding of public sector healthcare dictated by foreign investment considerations, and market creation for profit-driven healthcare.

Towards a National Health Fund

Citizens’ Health Initiative understands that SHI is an attempt to deal simultaneously with two distinct problems:

• how to raise more money for national health expenditures (putatively anchored by a proportional payroll tax), that is a de facto supplementary, regressive income tax, with matching employer contributions
• integrating an (over-burdened) public healthcare sector with an (under-utilised) private sector (through a [unified?] provider payments system, which can rationalise utilisation of services across both sectors)

We firmly believe that there are better solutions for dealing with these two problems:

• there should be a dedicated ring-fenced National Health Fund (funded by a supplementary progressive health tax, corporate taxes, property and capital gains taxes, Tobin-type taxes, sin taxes, other public revenues, (zakat?), subject to robust governance provisions (stakeholder representation, accountability, transparency)
• this fund would be used to:

– re-invigorate public provision of healthcare: expanded delivery capacity – recruit and/or contract for more staff, strengthen comprehensive primary care with continuity-of-care and referral linkages to deal with increasing burden of non-communicable diseases, better management of staff (and facilities), terms of employment and benefits, transparent criteria and processes for upskilling, promotions, and career prospects (perhaps a separate Health Services Commission to tackle grouses driving the perennial outmigration of senior experienced staff); rationalise and reorganise use of resources, build and equip more health facilities where needed, to ease congestion and bottlenecks, improve quality of care (in short, a reinforced public sector to provide timely, appropriate, no frills, quality care, on the basis of need, to all eligible care-seekers)

– where shortfalls in delivery capacity exist, spillover patients from public hospitals can be channelled to private hospital panels in accordance with a (diagnosis-related group-based?) fees schedule and (casemix-based?) institutional grants (MOH could be a bulk purchaser of supplementary/top-up services from the private sector, at negotiated, discounted prices required of licensed private providers) (much like housing developers being required to fulfil a certain quota of low-cost housing)

There is much room for improvement in public sector healthcare, but there is no need to throw the baby out with the bathwater by dismantling our tax-funded publicly provided healthcare system. 

This healthcare system is an underrated achievement in our developmental history, one which we should be truly proud of. It had largely achieved WHO’s primary healthcare goals by the time these were enunciated in the Alma-Ata Declaration of 1978, a key prong of the strategy of “Health for All by 2000”.

Malaysia’s public sector healthcare system deserves our vigorous defence. It is a credit to our civility and ethos as a nation – healthcare on the basis of need, not on the basis of ability to pay. – November 16, 2023.

* Chan Chee Khoon reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.