- Equity in health care financing: The case of Malaysia
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Equity in health care financing: The case of Malaysia
Equitable financing is a key objective of health care systems. Its importance is evidenced in policy documents, policy statements, the work of health economists and policy analysts. The conventional categorisations of finance sources for health care are taxation, social health insurance, private health insurance and out-of-pocket payments. There are nonetheless increasing variations in the finance sources used to fund health care. An understanding of the equity implications would help policy makers in achieving equitable financing.
The primary purpose of this paper was to comprehensively assess the equity of health care financing in Malaysia, which represents a new country context for the quantitative techniques used. The paper evaluated each of the five financing sources direct taxes, indirect taxes, contributions to Employee Provident Fund and Social Security Organization, private insurance and out-of-pocket payments independently, and subsequently by combined the financing sources to evaluate the whole financing system.
In order to assess inequality, progressivity of each finance sources and the whole financing system was measured by Kakwani's progressivity index.
Results showed that Malaysia's predominantly tax-financed system was slightly progressive with a Kakwani's progressivity index of 0. The net progressive effect was produced by four progressive finance sources in the decreasing order of direct taxes, private insurance premiums, out-of-pocket payments, contributions to EPF and SOCSO and a regressive finance source indirect taxes.
Malaysia's two tier health system, of a heavily subsidised public sector and a user charged private sector, has produced a progressive health financing system.
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The case of Malaysia exemplifies that policy makers can gain an in depth understanding of the equity impact, in order to help shape health financing strategies for the nation.
The financing of health care is a subject of major concern throughout the world. Health care financing is the activity of raising or collecting revenue to pay for the operation of a health care system [ 1 ]. Differences in social health insurance are: implementation either at the national or community level, eligibility either on a mandatory or voluntary basis, and contribution either by the individual or the employer.
Variations in out-of-pocket payments are its formality or informality and function either as co-payment, co-insurance or full cost.
Hence the emergence of finance sources such as community health insurance and informal payment.
Policy makers are considering or implementing various financing strategies in order to strengthen health care financing. Such implementation is likely to have a substantial impact on the equity of health care financing.
Equity involves a value judgment of fairness on the accepted magnitude of variations from the expected degree of equality in the population. Equity in health care financing is assessed by the degree of inequality in paying for health care between households of unequal Ability To Pay ATP [ 2 ].
It is usually represented by the extent to which health care is financed according to ATP.
Its importance is evident in policy documents, policy statements, the work of health economists and policy analysts. The commitment to equitable financing is expressed in the policy statements by linking finance to: ATP in Denmark and the UK; equity in Ireland, Portugal and Spain; solidarity in Italy and the Netherlands; and tax financing in Switzerland [ 2 ].
Furthermore, the accordance of health payments to ATP is regarded as an important objective in the finance of health care in Belgium, France, Germany, Ireland, the Netherlands, Spain and the UK [ 3 , 4 ]. Policy makers in various countries are seen to commit towards financing health care according to ATP. The Ministry of Health MOH in Malaysia subscribes to this commitment by proposing that the nation's contribution to the new national health financing scheme be related to ATP [ 5 ].
This paper presents an equity assessment of the health financing system, and draws together all finance sources in Malaysia to evaluate the whole financing system.
The second section presents the Malaysian health care system. The third section summarizes the methodology regarding the data, variables and analysis on all Malaysian finance sources and the system. The fourth section presents the empirical results on progressivity for the finance sources and financing system. The fifth section discusses the progressivity, methodological concerns, comparisons with other studies and the policy implications.
The sixth section draws the conclusions. The fundamental principle of the Malaysian health care system is that accessibility to health care not to be related to ATP, particularly in the event of sickness [ 6 ].
The government is concerned with the performance of the health care system, whose primary purpose is to improve health of the nation [ 7 ].
This stems from the understanding that health represents the human capital, which is the central thrust to sustainable economic growth and development of the country. The Malaysian health care system has been improving over time, such that a higher standard of health status has been achieved with the relatively limited resources available to the health sector.
For example, throughout the period of to , life expectancy at birth increased significantly males from Such improvement in health status has been achieved within the range of 2. The total health expenditure was 3. Malaysia was ranked at 49 from WHO member countries in the World Health Report [ 9 ], which assessed the overall health system performance against three objectives of good health, responsiveness and fair financial contribution.
Malaysia performed unsatisfactory in fair financial contribution, with ranking at — from WHO member countries, whilst moderately in the other two objectives the level of good health was ranked at 89 whilst distribution at 49 from , the level of responsiveness was ranked at 31 whilst distribution at A dual health care system, with both the public and private health services, co-exists in Malaysia. The government provides health care services to the nation through public hospitals and health clinics throughout the country.
The services range from outpatient curative care to preventive and promotion of health. The main public health provider is MOH that provides primary care, secondary care and tertiary care through various types of health facilities such as general hospitals, district hospitals and health clinics. There were MOH hospitals with a total of 30, beds , 6 special medical institutions with 4, beds , health clinics, 1, rural clinics, 89 maternal and child health clinics, and mobile clinics in An open-door policy in regard to general outpatient services and hospital admissions has been practiced by the public health sector.
Access to specialist services is nonetheless controlled through a national system of referral. Specialist services are available at designated hospitals such as national referral hospital in the capital, the state hospital and selected district hospitals. Referral of patients for specialist services is to the nearest facility if patients cannot be managed at general outpatient facilities.
The National Quality Assurance Programme was implemented to maintain, improve and evaluate the quality, efficiency and effectiveness in the delivery of public health services [ 7 ]. The Clients Charter commits providers to providing a specified standard of services explicitly and can be used in order to monitor the quality of services and enhance customer satisfaction.
Public health services are heavily subsidized by the government. Secondary and tertiary care services provided at hospital facilities are also highly subsidized by the government. A total of RM 7. Private health providers complement the medical services provided by the government.
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Private health providers mainly focused on curative services and include general practitioner clinics, medical centres to private hospitals [ 7 ]. Private hospitals exist in a variety of sizes with the number of beds ranging from 17 to 2, There were private hospitals with a total of 10, beds , and an estimate of about 5, private general practitioner clinics providing a range of primary health services in [ 11 ].
The emergence of a private health sector is driven by demand. Affluent members of the population expect high quality health services and create the demand for a private sector. The quality of care at private facilities was perceived to be of high quality [ 7 ]. Newly built private hospitals are equipped with large, ultramodern and lavish medical technology.
The prompt services at the private general practitioners' clinics also offer convenient medical services in particular to the nearby population [ 7 ]. The private facilities are monitored and regulated by the Malaysian government to ensure quality service and cost control.
The regulatory environment was strengthened by the implementation of Private Health Care Facilities and Services Act enforced on the private sector. It expresses specific requirements for facility standards and the assurance of quality services in accordance with the National Quality Assurance Programme [ 5 ].
The private sector charges user fees on patients for utilizing health services in order to operate and maintain their facilities.
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The private sector offers lucrative remuneration packages to medical practitioners upon joining their organization. The expense of utilizing health services at private facilities represented by their user fees is higher than at public facilities. Access to private health services is inevitably limited to the richer segments of the population that can afford to pay high user fees as out-of pocket payments or co-payments with coverage of private insurance [ 7 ].
Some private hospitals are established as charitable institutions, in parallel with the principles of a caring society. This principle is one of the nine challenges in the Vision [ 7 ], which articulated the government's vision of a developed and united nation. Price discrimination is practiced in some of the charitable institutions, by charging a premium on those who can afford for cross-subsidization to the poor. The price discrimination practice is nonetheless becoming increasingly difficult to sustain due to the need to compete with commercial hospitals [ 12 ].
Malaysia is a predominant tax financed system that the government contributes significantly towards financing health services. The national macro level expenditure showed that the government subsidise A tiny 0. The majority of private finance sources were accounted for by out-of-pocket payments The balance The Ministry of Finance MOF collects general taxes as direct and indirect taxes to finance the public services including health care.
The employed population also contributes to EPF. The employed population earning less than RM 3, further contributes to SOCSO that provides medical benefits for work-related injuries of members [ 14 ]. Private insurance is voluntarily purchased by individuals, who pay different premiums depending on the type of health insurance and level of coverage.
Out-of-pocket expenses represent payments incurred at the point of utilization at health facilities. The five sources of funding direct taxes, indirect taxes, EPF contributions and SOCSO contributions, private insurance premiums and out-of-pocket payments are channelled directly or indirectly through financial intermediaries to either public or private health facilities that coexist in parallel.
The utilisation of public health services is almost free, only nominal charges are levied upon certain services whereby the patients have to pay from out-of-pocket. Conversely, utilising private health services require out-of-pocket payments, or co-payments with private health insurance coverage.
The affluent or those that can afford to pay user fees have a choice of switching to the private sector whilst the poor rely on the public sector. Private health services were perceived as of higher quality with reduced waiting time [ 7 ]. The assessment on equity in financing health care draws on established techniques from the public finance literature.
The starting point of assessment is the notion that health care financed according to ATP is considered equitable.
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To judge whether the health payment undermines or contributes to the equitable financing goal, one has to assess how closely in practice health payment is linked to ATP.
Progressivity measures the deviation from proportionality in the relationship between health payment and ATP [ 15 ]. It reveals the extent of inequality in paying for health care services between households of unequal ATP.
A health payment is progressive regressive if it accounts for an increasing decreasing proportion of ATP as ATP rises. A progressive regressive system means that the individuals or households with greater ATP are paying more less proportionally in financing health care. Health care financing systems are proportional if individuals or households with different ATP are spending the same proportion of ATP in financing health care.