Ever since the introduction of the Goods and Services Tax (GST) in April 2015, the public has been uneasy about whether the tax would apply to the healthcare sector. So it came as a sigh of relief when it was announced that the GST will exempted from public healthcare services.

But the past year has seen some discord over this matter. The public healthcare system may have been exempt from the GST, but the private healthcare sector is not.

Private consultation, drugs and medical equipment main victims

This means that doctors who consult at private hospitals or clinics have no choice but to charge 6% GST on their fees if they are not employed by the hospital or clinic, and earn more than 500,000 a year. This would likely result in a lower volume of patients.

This poses a problem as explained by Federation of Malaysian Consumers Association secretary-general Datuk Paul Selva Raj: "Private healthcare is not just for rich people, it is also used by middle-class people and even poor people when they are in a hurry."

To make matters worse, while many drugs are zero-rated, certain drugs and medical equipment are still subject to GST. Drugs are categorised into three, depending on the type of medicine and place of purchase. The Customs Department has listed only around 8,630 medicine brands (which was previously 2,900 when GST was first implemented) and 126 medical equipment to be exempted from GST.

Any other drugs are exempted from GST only if prescribed by a private doctor and bought from the hospital's own pharmacy or private practice. Otherwise it will be subjected to 6% tax when purchased at a retail pharmacy. For drugs from multinational companies, it would be cheaper as there is 10% less of sales tax but 6% more for GST. Locally manufactured drugs on the other hand do not face a sales tax but are subject to 6% GST.

Dr. Ng Swee Choon a consultant cardiologist under the Federation of Private Medical Practitioners' Association Malaysia said that for private hospitals and GPs, the prices of their consumables will increase and so will services such as housekeeping and laundry. The Customs must also be paid 6%.

Unfortunately most hospitals and GPs cannot increase cost without justification as the market forces dictate the cost of GP care. The GPs have always been caught in between third party administrators (TPA)/ managed care organisations (MCO) and their terms, the PHCFS Act and market forces. In the past year and a half, they have had to carry the burden of the GST as well.

All these have seen a 3% to 5% increase in prices within the private and semi-private healthcare sector. Health insurances are also subjected to a 6% GST as well.

Repercussions seen one and a half years later

As predicted, the implementation of GST in the private healthcare sector has caused the public to turn towards the public healthcare sector, causing overcrowding in public hospitals and clinics. Recent reports have suggested that the slash in budget during the beginning of the year was not a wise move either.

According to Mercer, the cost of medical plans in Malaysia is predicted to increase by 17.3% against an average inflation rate of 2.1%. In 2015, diseases of the circulatory (59%), cancer (52%), respiratory conditions (46%) and gastro-intestinal diseases (46%) were the main cause of claims cost by patients in 2015.

Medicines, medical equipment and diagnostic tests are lacking in many public hospitals. MPs have urged the government to allocate a higher budget for the healthcare sector for the next year. The strain on the public is high and will worsen in the next 20 years. What more, for the chronically ill, some treatments and medicines are still subject to GST, especially those undergoing cancer treatments.

As such, DAP lawmaker, Charles Santiago has called for the removal of any and all GST charges for cancer treatment. He said that the government should impost a higher GST on luxury items or cars. Currently, only all medications listed in the National Essential Medicine List (NEML) that is issued by the Ministry of Health and approved by the Ministry of Finance, are exempted from GST. Cancer medicines are not part of the list.

Earlier this year, Deputy Health Minister Dr. Hilmi Yahaya revealed that cancer was the fourth highest cause of death in government hospitals.

"Most people, especially those in the middle and working class, are unable to work and support themselves and thus unable to pay for treatment, rent and mortgage," he said, adding that a number were left bankrupt as a result.

Moving forward ahead of Budget 2017

This year, the health ministry has also recorded a progressive rise of patients seeking services in the public health facilities and with current economic conditions, this is only set to rise within the next year.

Whilst Santiago has asked for all GST charges related to cancer treatment to be removed, Datuk Raj has already suggested that healthcare, like public transportation, to be zero-rated last year.

Will we see a zero-rated healthcare in 2017? Most likely not. However, many doctors and MPs have urged the government to expand the number of medicines to be included in the NEML and allocate a higher budget for the healthcare sector next year. MIMS

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