In the nearly 60 years since Malaysia’s independence, the country has made enormous strides in health care, creating an internationally lauded public health system that delivers quality care to a large proportion of the public at extremely affordable rates. This is complemented by a growing private sector, which provides quality care – often in specialist areas – to those Malaysians and foreigners who can afford it.
In February 2015 Prime Minister Najib Razak could boast that public medical fees were the lowest in the world, with the government currently subsidising health care costs at a rate of about 98%. But as Malaysians live longer and lifestyles change, the prevalence of diseases such as diabetes and cancer has increased, putting pressure on health care funding.
The government is embarking on a major structural reform of health care and the way in which it is funded, provided and supported. In future, while the government will continue to play a central role, the private sector will be expanded and complementary industries such as health care tourism, medical education and pharmaceuticals developed.
Changing Concerns
Malaysia’s life expectancy is 74 years, according to the World Health Organisation (WHO), which describes the country’s primary health care system as “extensive and comprehensive” and accessible to nearly all of the population.
The Malaysians of today are very different people from those of 1957, or even 20 years ago – living longer, eating more, if not always better, and less vulnerable to infectious diseases. But they are also older, carry more weight, and are more at risk of the kind of non-communicable diseases that require long-term treatment, putting a strain on health budgets.
The 2015 National Health and Morbidity Survey showed 17.7% of the country’s 30m people were obese and 30% overweight. In 1996, the prevalence of obesity was just 4.4%. The incidence of diabetes has also risen, from 11.6% in 1996 to 17.5% in 2015. According to the WHO, Malaysia’s “healthy life” expectancy is 64, compared with averages of 68 for the region and 66 for the country’s economic income group. Non-communicable diseases are thought to account for about 73% of all deaths in Malaysia. In Malaysia’s public hospitals in 2014, heart disease was the leading cause of death, followed by respiratory diseases, infectious diseases and cancer. Heart disease and cancer, meanwhile, were the leading causes of death in private hospitals.
Effects Of Urbanisation
Some 74% of Malaysians now live in cities. Increased urbanisation has also created challenges in the form of new infectious diseases, such as dengue, which, while rarely fatal, infects huge numbers of people and usually requires hospitalisation. Dengue is spread by the Aedes mosquito and affects not only Malaysia but also other parts of Southeast Asia, including Singapore, Thailand and the Philippines. Efforts are under way to develop a vaccine, but the number of infections each year continues to reach the tens of thousands. The incidence rate spiked from 31.6 per 100,000 population in 2000, to 361 cases per 100,000 in 2014, although the fatality rate fell to 0.2%. Maternity aside, infectious diseases were the leading cause of hospitalisation in 2014, according to the Ministry of Health.
There is also a risk of infectious disease – notably tuberculosis – among the large population of foreign workers, according to the WHO. While health screening is carried out for registered workers and a mandatory health insurance scheme – the Hospitalisation and Surgical Scheme for Foreign Workers – was introduced under the government’s Economic Transformation Plan (ETP), it is estimated that there are some 2m undocumented workers. While they were once eligible for free public health care, since 2016 all foreigners have been required to pay full medical fees.
The total budget allocation for health has hovered between RM20bn ($4.95m) and RM23bn ($5.69m), or 8-10% of total government spending, over the past few years. The 2015 budget, at RM23.3bn ($5.77bn), included the construction of two public hospitals, as well as 20 health clinics and four dental surgeries.
Private Involvement
To reduce the financial burden and ensure services are directed to the areas they are most needed, Malaysia is opening the health sector to further private involvement. Health care is a key sector of the country’s reforms under the ETP, which recognises the potential economic multiplier effects of the medical industry.
“They are beginning to see that the government cannot afford to heavily subsidise and give almost free treatment to the citizens of this country,” Dr Jacob Thomas, chairman of Ramsay Sime Darby and president of the Association of Private Hospitals of Malaysia (APHM), told OBG. “They want the private sector to play a bigger role. We are beginning to talk seriously about public-private partnerships (PPPs) and the government is looking at ways that public patients can be treated in private hospitals.”
The earliest PPPs in Malaysia were introduced in drug supply, before they were expanded into specialist clinics such as cardiac centres. The designation of health care as one of Malaysia’s National Key Economic Areas (NKEAs) under the economic reform programme is a further expansion of this process. Nonetheless, barriers to foreign investment in health care remain. For instance, tenders for public hospitals continue to operate on a preferred bidder basis, with a requirement for interested parties to be majority-controlled by ethnic Bumiputra.
The government is also looking at ways to reduce the burden on the health service from non-communicable diseases by encouraging healthier lifestyles. A National Sports Day was held in 2015 for the first time, and Sports Minister Khairy Jamaluddin has proved an enthusiastic champion of FitMalaysia, a programme to encourage more Malaysians to take up a sport. As for dengue, officials are focusing on prevention, encouraging people to keep their neighbourhoods clean and free from mosquito breeding grounds.
Public Vs Private
Malaysia’s health system is subject to 28 different pieces of legislation, which cover areas from medicine (traditional or otherwise) to the prevention and control of disease. In addition, private health care is regulated by the Private Health care Facilities and Services Act of 1998, while the Private Aged Healthcare Services and Facilities Act is currently in draft form. The latter act is Malaysia’s first to focus specifically on elderly care and the quality of care delivered by nursing homes. Additionally, regulations ensuring global standards within the medical device industry took effect in July 2015 as part of the country’s continuing economic reforms.
Government efforts to encourage the development of the private sector have been helped in recent years by rising incomes, the expansion of health insurance and the opening of specialist facilities. From a split of about 80:20 between public and private facilities a decade ago, it is now closer to 70:30, according to estimates from UKTI’s Yen and APHM’s Thomas.
The current incentive regime for the private sector is “very generous”, according to Thomas. The government provides tax rebates for setting up a new hospital, refurbishing an existing establishment, purchasing new equipment and applying for international accreditation. He adds that the industry is “happy” with the current set of incentives.
From 201 private hospitals in 2009, there were 210 by 2013. By that year, the private sector was providing 14,033 beds out of a total 54,236 beds. Under the 11th Malaysia Plan, the government has set a target of 73,000 beds across the system by 2020.
Still, practitioners note that resources at public facilities remain stretched, with long waits for non-emergency surgery common and demand for beds substantial. Rising cost of living and the introduction of a goods and services tax in April 2015 (which applies to some private health services) has encouraged many locals to return to the public system, according to Dr Raymond Azman Ali, director and dean of medical faculty at UKM Medical Centre’s Hospital Canselor Tuanku Jafar, the 1000-bed teaching hospital at the National University of Malaysia. The WHO reports out-of-pocket health expenditure has been rising since 1996, reaching about 40% of the total in 2012. For UKM, as for the government, the biggest challenge is to “provide the same quality of care with this sudden influx of patients,” said Dr. Ali.
As part of the general drive towards the market, UKM and the two other teaching hospitals attached to the medical departments of Malaysia’s other public universities are being encouraged to find new sources of funds. In UKM’s case, it has chosen to specialise in eight areas, including neurology, infertility services, cardiac and respiratory health, and children’s health. As part of these specialisations, it has developed an Advanced Surgical Skills Centre with the Royal College of Surgeons Edinburgh (RCS). Courses are open to outsiders and profits are shared with RCS. UKM has also established an international training centre in collaboration with the American Heart Association.
Foreign companies are also looking into investing in Malaysia’s private health care companies. Ramsay Health Care and Sime Darby formed a joint venture in 2013 with three hospitals and a health sciences college in Malaysia and three health centres in Indonesia. Columbia Asia, which is 30% owned by Malaysia’s Employees Provident Fund and 70% by US-based International Columbia USA, operates 28 facilities across Asia, including 11 in Malaysia. IHH Healthcare, the publicly listed hospital operator, has further operations in an estimated 40 countries.
Health Tourism
In the process of growing its private health sector, Malaysia has stepped up efforts to develop medical tourism. The 11th Malaysia Plan notes that the number of visitors travelling to Malaysia for purposes of medical treatment rose from 392,956 in 2010 to 770,134 in 2013 and 882,000 in 2014, with revenue growing significantly faster than the named 10th Malaysian Plan target of 10% a year. One of the reasons is that Malaysia offers affordable, quality treatment, said APHM’s Thomas. The ringgit decreased by more than 20% in 2015, making Malaysian hospitals even better value for money. In addition, Malaysia was named “Medical Travel Destination of the Year” at the International Medical Travel Awards in 2015.
Consultancy Frost & Sullivan estimates the medical tourism market in Malaysia will grow to $533m in 2019, compared to $228m in 2014. This is still far behind its two major competitors, Singapore and Thailand, whose medical tourism industries are expected to reach $1.45bn and $2.5bn, respectively, by 2019.
Medical tourism is coordinated and promoted by the Malaysia Healthcare Travel Council (MHTC), which acts as a “one-stop centre” for all issues related to medical travel. Some 74 hospitals were registered with the MHTC in 2014 and MHTC has set up overseas marketing offices in Jakarta, Dhaka and Hong Kong. In further welcome news, Sherene Azura Ali, CEO of MHTC, told OBG that a June 2015 agreement with Vietnam means that major insurers there will allow policyholders to have their treatment in Malaysia.
But growth has not been as fast as Malaysia had hoped, because of fewer arrivals from Indonesia, the biggest source of foreign patients into the country. The introduction of a health insurance scheme in 2014 meant the number of Indonesian medical visitors fell to 377,815, compared with 437,157 in 2013.
As a result, revenue of RM685m ($169.56) was well short of the initial target of RM793.5m ($196.42m). Malaysia is now reconsidering its strategy to diversity the sources of its patients and ensure its 2020 target of RM2bn ($495.07m) revenue can be achieved, according to the Malaysian government’s Performance Management and Delivery Unit.
Private hospitals are also being encouraged to obtain international accreditation to support health tourism initiatives. The authorities have already been tightening regulations for licensing to ensure that hospitals are purpose-built and appropriately situated. According to the 11th Malaysia Plan, 51 private hospitals in Malaysia have received accreditation from the Joint Commission International, the International Society for Quality on Healthcare and the Australian Council on Healthcare Standards.
The Malaysian Society for Quality in Health (MSQH) have developed national standards for health care providers to enhance the quality of care available and reassure patients seeking care in MSQH-accredited facilities. Since 2009 all public hospitals are required to undergo the accreditation process, and more than 30 private hospitals have also received MSQH accreditation status, according to Dr Kadar Marikar, CEO of MSQH. The standards developed by MSQH are recognised by Standards Malaysia and are also certified by International Society for Quality in Healthcare. The fifth edition of the hospital accreditation standards will be released in 2017, and the accreditation programmes are being expanded to include medical clinics, dialysis centres and dental clinics.
“We need to go beyond licensing requirements,” Kadar told OBG. ”It is about safe work processes, identifying and addressing risks, measuring outcomes and making continuous improvements. It is about assuring patients and the public that the providers are doing good work – that is, that they have safe processes and outcomes in place.”
Ancillary Industries
The expansion of Malaysia’s hospitals and clinics has created new opportunities for companies in the medical supply chain. Since the start of the ETP, Malaysia has been able to lure more investments from private companies, and local firms have started to manufacture new products in partnership with multinational companies, according to Dr. Subramaniam Sathasivam, the Malaysian Minister of Health. Pharmaceutical exports rose 9% to RM611m ($151.24m) in 2014, compared with RM561m ($138.87m) the year before. Exports were targeted for growth of 10% in 2015.
In a development of significance to foreign investors, Malaysia has finalised procedures for offtake agreements to encourage the production and consumption of Malaysian-made health products. The revised offtake purchase agreements will run for three years (with an additional two years if export criteria are met), rather than the standard two-year contract to supply the government.
The government is keen to make Malaysia a regional focal point for clinical trials. By 2020, it aims to have 1000 such trials performed in Malaysia, but regulatory issues and a lack of specialist interest have slowed progress. There have been some successes, however. Malaysia was one of five South-east Asian countries that participated in clinical studies for Sanofi-Pasteur’s new dengue vaccine. The Phase III study involved a total of 10,275 children aged 2-14.
Malaysia is also aiming to develop the medical device industry as part of its development plans for health care, and is working to bring standards and regulation in line with international benchmarks. The government expedited the Medical Devices Act to regulate the industry according to global safety standards. From July 2015, all new medical devices are required to be registered with the Medical Device Authority, which also recognises testing and approvals from the US, the EU, Japan, Australia and Canada.
Standards have also been made consistent and the registration processes simplified across ASEAN, with all 10 member countries signing the ASEAN Medical Device Directive in 2014. The move should help Malaysia-based manufacturers access the ASEAN market, according to Zamane Abdul Rahman, chief executive of the Medical Device Authority.
Ageing Population
The government estimates that 10% of Malaysia’s population will be 60 years or older by 2020, a percentage that will rise to 15% by 2030. Traditionally, elderly parents have been looked after in families, but as life expectancy increases, the country is likely to face increased demand for elderly care. The health care NKEA focuses on three areas: mobile health care services, institutionalised aged care and retirement villages, with the Malaysia Investment Development Authority and the Ministry of Finance reviewing an incentive package for developers and operators of elderly facilities and services.
The government itself has introduced measures to enhance the skills of caregivers with the development of a syllabus on Elderly Care Centre Operation, Elderly Care Centre Administration and Elderly Care Centre Management. The syllabus was developed by the Department of Skills Development and is part of the National Occupational Skill Standard.
Outlook
Malaysia’s health care system has gained a reputation for providing a high-quality service at an affordable price, but the changing health profile of its population is set to continue to put pressure on the capacity and specialisation of its hospitals and clinics. As the country adapts to these new challenges, it is becoming ever more open to foreign investment, whether in the provision of medical services, professional expertise or key parts of the supply chain.
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