The public health system is the actualisation of “a caring society”. It makes our country a more compassionate one.

Public healthcare is more than just an essential service. It serves as a glue that binds us together and consolidates our common identity. In a very real way, it defines the ‘soul’ of the nation!

This public healthcare system must be defended and strengthened, so that it can continue to provide high-quality services to our people, regardless of their economic status or their ability to pay.

However, we are alarmed by some statements from political leaders and senior Ministry of Health (MoH) officials. These statements suggest a departure from the principles of universal healthcare towards a new system with elements of commercial calculations.

Among the concerns are:

1. Establishment of a ‘strategic buyer’ agency

According to the proponents of this recommendation, which includes the Parliamentary Special Committee on Healthcare, the role of the strategic buyer is to pay for the cost of treatment both in government hospitals and private hospitals.

One objective of this proposal is to integrate the public and private treatment systems so that everyone can benefit from the expertise that exists in both sectors.

However, to implement this proposal, all government hospitals will have to be corporatised so that they can function as companies. They would then have to apply for a reimbursement from the strategic buyer for each patient they treat.

The thinking is the government hospitals would thus compete on a ‘level playing field’ with their privately owned counterparts.

But this would mean a major change in how government hospitals are funded.

Currently, government hospitals receive a ‘global budget’ based on their expenditure for treating patients the previous year.

The new funding system requires public hospitals to submit charges for each patient they treat.

This will change the way patient care is practised in government hospitals. The new system will force government hospitals to act like businesses. It is likely to create the following problems:

• a tendency for more serious diagnoses because these would elicit larger payments from the fund. For example, a diagnosis of “unstable angina” will get a bigger payment than a diagnosis of “chest pain for investigation”
• the lowering of thresholds for interventions – such as angiograms for chest pains, appendicectomies for patients with abdominal pains, and lower segment Caesarean section (LSCS) surgeries for pregnant women – because hospitals can charge more for such interventions
• the likelihood that under this new funding system, activities that do not need much financial compensation – such as health education, preventive measures and screening for non-communicable diseases – will tend to be neglected
• increased management costs because each case must be claimed from the strategic buyer. Bureaucracy will increase dramatically. The cost of auditing to prevent fraudulent claims will also raise costs

But the biggest negative impact is that the ethos in public hospitals will change towards a business ethos.

The current ethos is more holistic and based on clinical needs.

The issue of cost and how to increase the amounts claimed from strategic buyers will become dominant if public hospitals are corporatised.

2. Rakan KKM Scheme

PSM is not comfortable with this scheme.

About 70% of specialists with over 10 years of post-specialisation experience, are in the private sector. Meanwhile 70% of patients requiring in-patient treatment are treated in public hospitals.

The shortage of specialists in the government sector is the main cause for:

• the long waiting lists for specialist appointments
• delays in scheduling angiograms, surgeries and other such interventions
• dissatisfaction among the public
• mental stress and burnout among government doctors.

The shortage of specialists is a core problem!

The implementation of ‘Rakan KKM’ (Friends of the MoH) will cause this imbalance to become worse because a portion of senior specialist doctors will be involved in this scheme, and their time to care for non-paying public patients will be reduced.

Inadequate allocation for MoH

In our understanding, both the above schemes have been proposed because of the long-standing under-allocation of funds for the MoH.

The MoH receives the second largest budget allocation among government ministries. The allocation for the ministry for 2025 is RM46bn or almost 12% of the total national budget.

But to us, this is not enough. Developed countries allocate about 19% of their budgets for the public healthcare system (see table below).

Our recommendation is that Malaysia should increase its allocation for public health services to 5% of gross domestic product (GDP) within five years.

We are well aware that the Malaysian government is saddled with a debt of RM1.2tn (or about 62% of GDP), while the 2025 budget deficit is about 4% of GDP.

But it is important to step back and ask ourselves a key question: how has this happened in a country that has experienced 3-8% annual GDP growth for the past 30 years?

Why opt for market-driven measures which have created many of the problems in the first place?

The following chart summarises our analysis.

Chart One: Real GDP growth 1970-99

The calculations above are based on official government figures. As illustrated, the GDP in real terms (taking into account inflation) in December 2019, was 26 times greater than in 1970.

However, government revenue as a percentage of GDP declined from 30% of GDP in the 1980s to 16% of GDP today. (This downward trend is reflected in the chart below for government expenditure, which closely mirrors the revenue trend.)

Chart Two: Federal government expenditure (% of GDP)

(Chart presented by Dr Dzulkefly Ahmad during his first term as health minister)

And the main reason for this phenomenon (which is replicated in almost all countries in our world)? Corporate tax in Malaysia, the main source of government revenue, has been reduced in stages from 40% of corporate profits in 1988 to 24% of profits this year.

So Malaysia is in a race to the bottom with our Asean neighbours as we compete for foreign investors. The corporate tax rate in Thailand is currently 20% of corporate profits, and it is only 17% in Singapore.

Why are we not engaging in a dialogue with our Asean neighbours to stop this race, which is severely restricting the capacity of our governments to care for the people and to mitigate climate change?

This is PSM’s question to the “Madani” (civil and compassionate) government and to the governments of neighbouring countries.

In our view, any attempt to shift the financial burden onto the shoulders of ordinary people through compulsory salary deductions to fund health expenses or through taxes such as the Goods and Services Tax (GST) is irresponsible.

Remember, in this country, wages have been pushed low. Electronics factory workers in Bayan Lepas enjoy wages that are only one-eighth the wages of their counterparts in California – even though the machines and technology they use are the same.

There is severe wage suppression in Malaysia and other Asean countries.

According to PSM’s calculation, the distribution of national income is as shown in the chart below:

Chart Three: Distribution of national income in Malaysia 2024

We are not naive. We understand that if Malaysia increases corporate tax unilaterally, investors could well move to neighbouring countries and job creation in our country will plummet.

However, if the increase in corporate tax can be synchronised with Thailand, Indonesia, Vietnam and the Philippines, the negative impact on our economy can be minimised.

Has this concept been brought up for discussion among Malaysia’s political leaders and economic planners?

Agreed, this proposal will be a hard sell – it will take time to gain consensus among Asean countries. But has the effort to discuss this important issue even begun?

This is the PSM’s question to the Madani government.

Migration of specialists to private hospitals

This is a major problem that worsens the imbalance between specialists and patients in the public sector compared to the private sector.

PSM’s recommendations to address this crucial issue:

A moratorium on the construction of new private hospitals for the next 10 years – Because, every time a new private hospital starts operations, the senior managers of the hospital will persuade dozens of specialists serving in government hospitals to move to the new private hospital.

It is not only specialist doctors. Trained nurses from the operating theatre and intensive care unit; and technologists from the laboratory, cardio unit, X-ray department and other units could also move. They will be persuaded by these private hospital managers to resign from their positions in public hospitals and work in private hospitals.

A moratorium on new private hospitals will greatly assist the MoH to fill up the vacancies for specialists, trained nurses and medical technologists so that the quality of health services offered to our people can continue to improve.

This might erode (a bit) the profits of the government-linked companies that own several private hospital chains. (But they certainly will not go bankrupt because of this.)

What are our priorities as a nation? Isn’t the people’s wellbeing more important than the profits of government-linked companies?

Our additional recommendation would be to use the service scheme at the National Heart Institute as a template for the terms of service for MoH staff.

Civil Medicine Scheme (Skim Perubatan Madani)

This scheme, launched in July last year in ten districts, provides funds for the people to go and see private clinics free of charge.

The objective is to reduce the severe congestion in government facilities in these districts. So far, 2.5 million patients have been diverted to private clinics.

We welcome the government’s approach to think outside the box.

But we think it would be better if this scheme could be modified to enhance the quality of follow-up for patients with non-communicable diseases (NCDs) – such as diabetes, high blood pressure, gout and asthma – by offering them a personal doctor.

The PSM proposal is to offer patients with such diseases follow-up with a private clinic near their home for free. The GPs who participate in this scheme will be paid a capitation fee for each NCD patient they care for. Private clinics will not charge any fees for these patients and will be supplied with medicines free of charge by the MoH. The cost of blood testing will also be borne by the government. The patients opting for this scheme will benefit from shorter waiting times and more personalised treatment.

Private clinics participating in this scheme should be required to follow standard procedures to care for patients with NCDs in terms of blood pressure monitoring, weight, blood tests and health education.

Better follow-up with NCD patients will prevent complications and thus improve their health status and reduce healthcare costs in the long run.

The capitation fee paid to GPs under the National Health Service (NHS) system in the UK is about RM24 per patient per month. This fee is paid to the clinic whether or not the patient visits the clinic that month. The fee for GPs in Malaysia should be determined through discussions with the private doctors’ union.

PSM’s recommendation is to launch this programme in one or two districts as a pilot project to study how it can be implemented more widely without problems.

National asset

We express our sincere gratitude to the MoH and the health minister for this opportunity to share our views and recommendations.

We are always ready to work with the MoH to improve the quality of health services in our country.

The public service system in our country is a national asset that must be preserved and protected from business influence.

We appreciate the efforts and sacrifices of all MoH staff in carrying out their noble duties. You make Malaysia a better place.

This is a slightly simplified version of a memorandum that Dr Jeyakumar Devaraj handed over to Health Minister Dr Dzulkefly Ahmad on 10 March 2025.

Jeyakumar Devaraj

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