Health Financing Notes

Topic Overview

• Malaysia National Health Account (MNHA)

• Sources of revenue and financial flows

• Overview of the statutory financing system

• Total Expenditure on Health (THE)

• Identify various financing mechanism

• Out-of-pocket payments

• Voluntary health insurance

• Other financing

• Payment mechanism

Healthcare Finance

• It is important to keep organization going and resources are allocated the best possible. This involves efficient budgeting, resource mobilization, and financial controls to ensure that healthcare services can continue to operate effectively.

• It details out acquiring and disbursing the fund. Understanding the processes for securing funds and allocating them appropriately across different healthcare needs is crucial for financial management.

• Requires understanding of how health services operate and the influence of political system, economics and environment. This includes awareness of delivery models, policy frameworks, economic trends, and environmental factors that affect healthcare financing.

• Basic model of underlying health care:

  • Input

  • Process

  • Outcomes

INPUT

• Resources used to produce health care. These resources are essential for delivering health services and ensuring the overall functioning of the healthcare system.

• E.g. Staff, Assets, Facilities, Medical Equipment, Medical Consumable

• Can be measured from monetary perspective. Expressing these resources in monetary terms allows for budgeting, cost analysis, and financial planning to improve healthcare finance.

PROCESS

• Activities so the outcomes required is achieved. These activities form the core of healthcare operations and must be managed efficiently to achieve desired health outcomes.

• E.g. Collecting payment, payment for rental, buying drugs and medical supplies from supplier, number of x-ray, operations, vaccination

• The need to be accurate, timely and relevant. Accurate and timely recording and analysis of these activities are essential for decision-making and performance monitoring.

OUTCOME

• The changes of the patient’s health status after health services are rendered. Outcomes reflect the effectiveness and impact of healthcare services on patients' health.

• Measurement: Quality of Life, Survival

• Is used to measure the number of input required for another unit of healthy life year (economic evaluation). This measurement helps in evaluating the economic efficiency of healthcare interventions.

HEALTH EXPENDITURE

• Can we sustain the health expenditure? Evaluating the sustainability of health expenditure is vital for long-term financial planning and resource allocation.

• Increasing trend of health cost. This trend poses challenges to healthcare affordability and accessibility, requiring strategic interventions to manage costs effectively.

• Operating expenditure Vs Development expenditure. Differentiating between these expenditures is important for budgeting and financial planning to ensure efficient resource allocation.

• Public health spent more $(52.$ million than private $(47.3$ million.

Malaysia National Health Accounts (MNHA)

• The MNHA established in 2005

• Describe the systematic tracking and analysis of health expenditure in Malaysia. MNHA provides comprehensive information on how much the country spends on healthcare, where the money comes from, how it is spent, and on what services or beneficiaries.

• National level health expenditure data over a time period that comprises data from both public and private sector stakeholders.

• The data is macro level health expenditure estimation which is produced using standardized, internationally acceptable methodology.

• It assists in developing evidence-based health polices. By providing reliable data on health expenditure, MNHA enables policymakers to make informed decisions and develop effective strategies for healthcare financing.

Healthcare Spending: Key Questions

• How much is spent?

• Who spent it? (Sources of financing)

• Where was it spent? (Providers of healthcare)

• What was it spent for? (Functions)

Methodology for Health Expenditure Data

1. Data Source Preparation

2. Data Collection

3. Data Analysis

4. Data Verification & Validation

• 4 Criteria for Health Expenditure:

  1. Primary Intent

  2. By Qualified Healthcare Providers

  3. Consumption is for Health

  4. Transaction Final Use

• Total Agencies: 4,408

• Data Types: Direct & Indirect, Primary & Secondary

• Sectors Covered: Public & Private

• Focus: Spending for Health, Direct Spending for Health

• Public Sector Examples:

  • MOH HQ, Pharm HQ, JKN, PKD, Vector states, PDN, Hospitals, PPD, Kolej, Institutes, MKAK, Bloodbank, Akaun Amanah, COVID-19 KKM, KWC, KWAN, AAB, PKU, DOSH, NIOSH, TCM, IJN & others

• Private Sector Examples:

  • Private Hospitals, Private Medical Clinics, Private Dental Clinics, Private Haemodialysis Centres, Community Pharmacies, FOMEMA, MCO & others

• Indirect Spending for Health

  • Public: Federal Statutory Bodies, State Statutory Bodies, Local Authority Bodies, BNM, MAIN/Zakat, SOCSO, EPF, MOHE, APM, MOSTI, TH, JAKOA, JPA, IPTA, Pension, LPPKN, State Governments, JBA, JKM, AADK, NADMA, MOD, EMRS, Institut Sukan Negara & others

  • Private: Corporations, NGO, Private Insurance, ROW, IPTS & others

• Source: OECD/Eurostat/WHO (2017), A System of Health Accounts 2011: Revised edition, OECD Publishing, Paris

Summary of 2023 Health Expenditure

• TEH as % of GDP: 4.6%

  Total Expenditure on Health (TEH): RM 84,192 million

• TEH Per-Capita: RM2,521

• OOP % of TEH: 36.0%

• Who paid for it?:

  • Public: 52.7% (RM44,367 million)

    • MOH: 43.0%

    • Other Government Agencies

  • Private: 47.3% (RM39,825 million)

    • OOP: 36.0%

    • Other Private Agencies

• Where was it spent?:

  • Hospital: 53.4%

  • Ambulatory Provider: 7.6%

  • Other Providers: 60.9% (RM51,315 million)

• What was it spent on?:

  • Curative Care: 55.7% (MOH + Non-MOH)

    • Inpatient: 50.3%

    • Outpatient: 42.1%

  • Other Functions

Total Expenditure on Health (TEH) and TEH as Percentage of Gross Domestic Product (GDP), 2011-2023

• The trend of TEH in nominal (RM Million) from 2011 to 2023 is shown in a graph. Correspondingly, a graph shows TEH, constant (MNHA GDP Deflators, 2023 as base year) (RM Million) and TEH (Nominal) as % GDP.

Total Expenditure on Health (TEH) & Current Health Expenditure (CHE) as percentage of GDP 2011-2023

• The trend of CHE in nominal (RM Million) from 2011 to 2023.

• CHE, Nominal as %GDP

• Total Health on Expenditure (TEH), Nominal (RM Million)

• Percentage of GDP values are shown.

Total Expenditure on Health (TEH) vs. Current Health Expenditure (CHE)

Per Capita Expenditure on Health, 2011-2023

• Trend of Per Capita TEH, Nominal (RM)

• Trend of Per Capita TEH, Constant (RM)

Expenditure on Health by States, 2022-2023 (RM Million)

• Selangor: 16,675 (2023), 14,162 (2022)

• Kuala Lumpur: 7,831 (2023), 6,385 (2022)

• Johor: 5,939 (2023), 5,706 (2022)

• Pulau Pinang: 5,687 (2023)

• Perak: 4,069 (2023)

• Sabah: 3,753 (2023)

• Sarawak: 3,544 (2023)

• Kedah: 3,086 (2023)

• Pahang: 2,944 (2023)

• Kelantan: 2,442 (2023)

• Negeri Sembilan: 993 (2023)

• Melaka: 766 (2023)

• Terengganu: 209 (2023)

• Putrajaya

• Perlis

• Labuan

  Note: Values include health expenditure that cannot be allocated to states (mainly expenditure by Private Insurance, MOH, MOSTI etc), which has been reproportioned to each state.

TEH by Sources of Financing

• Public & Private Sources, 2011-2023

• The graph illustrates the trend of Public and Private health expenditure in RM Million from 2011 to 2023. TEH (Nominal) as % GDP graph is presented.

TEH by Public & Private Sources of Financing as Percentage of GDP, 2011-2023

• Trend of Public % GDP

• Trend of Private % GDP

• Percentages shown are rounded to one decimal place.

Public Sector Health Expenditure (PSHE) as % of Public Sector Expenditure (PSE), 2011-2023

• Public Sector Health Expenditure (PSHE), (RM Million)

• Public Sector Expenditure (PSE), (RM Million)

TEH by Sources of Financing, Public & Private Sources, 2011-2023

• Breakdown of sources:

  • Ministry of Health (MOH): 43.0%

  • Other Federal Agencies: 5.1%

  • All Other Agencies: 4.5%

  • MOHE: 1.5%

  • Corporations

  • Private insurance: 8.0%

  • Private Household OOP: 36.0%

Sources of Financing - Ministry of Health (MOH), 2011-2023

• Trend of MOH Expenditure

• Total Expenditure on Health

• MOH as % TEH

Sources of Financing - Private-Out-of-pocket (OOP), 2011-2023

• OOP Expenditure

• Total Expenditure on Health

• OOP as % TEH

Sources of Financing - Private Source, 2023

• Private Insurance: 17%

• Private MCO and other similar entities: 3.5%

• All others: 3.5%

• Private Household OOP: 76%

Sources of Financing - Private - OOP - Providers of Healthcare, 2023

• Private Hospitals: 46.4%

• Private Medical Clinics: 18.3%

• Community Pharmacies: 16.5%

• Private Dental Clinics: 11.5%

• TCAM Providers: 4.7%

• All other providers: 2.6%

Sources of Financing - Private - OOP - Functions of Healthcare, 2023

• Inpatient Services: 39.1%

• Outpatient Services: 22.8%

• Pharmaceutical: 16.5%

• All Other Functions: 9.4%

• Education & Training: 5.6%

• Med Appliances & Non-Durable Goods: 4.6%

• TCAM Medicines: 1.9%

TEH by Providers of Healthcare, 2011-2023 (Percentage)

• Hospitals: The percentage contribution of hospitals towards Total Expenditure on Health (TEH) has been shown from 2011-2023

• Ambulatory healthcare providers

• All other providers

• Institutions

• Medical goods providers

• All health administration providers

Providers of Healthcare - Hospitals over 10 years, 2014-2023 (Percentage)

• Public Hospitals

• Private Hospitals

TEH by Functions of Healthcare, 2011-2023

• Trend of each function as a percentage of TEH from 2011 to 2023:

  • Curative care: 60.9%

  • Prevention and public health services: 6.0%

  • Education and training: 3.2%

  • All other functions: 1.1%

  • Administration and health insurance 9.7%

  • Capital formation

  • Medical goods

Prevention and Public Health, 2011-2023

• Trend of spending on prevention and public health in RM million from 2011 to 2023.

SOURCES OF REVENUE

• Public

  • General taxation

  • Non-tax revenue

  • Allocation is based on the historical values

  • Emergency fund needs if there is an outbreak (pandemic/endemic)

  • Providers (MOH, MOHE & MINDEF)

TOTAL EXPENDITURE ON HEALTH (THE)

• The total expenditure on health (THE) is the sum of aggregate public and private health expenditure in a given year, calculated in Ringgit Malaysia.

STATUTORY FINANCING

• Dual-tiered healthcare system

• Public healthcare services are wide and accessible, main provider

  • Primary, Secondary and Tertiary Care

  • Rural Healthcare Service

• Private health services mainly located at urban areas

STATUTORY FINANCING COLLECTION

• Public

  • Taxes and any development spending will be under 5-year National Plan

• Private

  • OOPs by the individual and private health insurance (individual and firm sponsored insurance)

PRIVATE FINANCING SOURCE

• Out-off-pocket (OOP)

• Voluntary health insurance:

  • Employer sponsored insurance & Personal Insurance/Health Insurance

• Private Managed Care Organization

PAYMENT MECHANISMS

• GPs and private practitioners:

  • Professional fees under Private Health Care Facilities and Services Act 1998

• Public practitioners:

  • Paid according to civil service rate (with recent improvement on locum payment)

International Comparison 2021

• Current Health Expenditure (CHE) as % of GDP, 2021

  • Selected Country Comparison: Malaysia, Indonesia, Republic of Korea, Singapore, Thailand, Australia, Türkiye, United Kingdom

• Public-Private Share in Health Expenditure, 2021 (%)

  • Comparison between: United Kingdom, Australia, Republic of Korea, Singapore, Thailand, Türkiye, Malaysia, Indonesia

    • Domestic General Government Health Expenditure (GGHE-D) as % Current Health Expenditure (CHE)

    • Domestic Private Health Expenditure (PVTO) as % Current Health Expenditure (CHE)

    • External Health Expenditure (EXT) as % of Current Health Expenditure (CHE)

• Out-of-Pocket (OOP) as % of CHE, 2021

  • Comparison between: Malaysia, Republic of Korea, Indonesia, Singapore, Türkiye, Australia, United Kingdom, Thailand

MNHA as data producer - objectives

• To effectively sharing and communicating health expenditure data to relevant stakeholders to ensure it is widely known and utilized

• To spend more & to spend better for health

• Malaysia needs to align with HIC healthcare spending trends¹

• Health system that is resilient to future changes²

• Social protection from catastrophic health expenditure

• MOH recommendations for gradual increase of public spending of 5% of GDP³

• <20% Out-of-Pocket (OOP) from Total Expenditure Health4

Recommendations Based On International Best Practices

• To reduce out-of-pocket (OOP) health expenditure¹

  • Pooling mechanism

• To reduce healthcare inflation²

  • Strengthen strategic purchasing

  • Improve provider payment mechanism - outcome-based payment

  • Increase bargaining power

• To increase public financing³

  • Increase public investment into healthcare

  • Earmarked tax for healthcare e.g. sin taxes

• To increase investment on Primary Health Care (PHC) by public financing4

  • Enhance and strengthen PHC services - to improve population health and better control of NCDs

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