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 be 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.
GST and Private Healthcare
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 RM500,000 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.”
GST still applies to some drugs and medical devices
While many drugs are zero-rated, certain drugs and medical equipment are still subject to GST. The Customs Department has listed only around 8,630 medicine brands (expanded from previously 2,900 when GST was first implemented) and 126 medical devices as GST-exempt.
Any other drugs are exempted from GST only if prescribed by a doctor and bought from the hospital’s own pharmacy or any private practice. Without a prescription, 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 general practitioners (GPs), the prices of their consumables will increase and so will services such as housekeeping and laundry. The Customs must also be paid 6%.
As a result, we have seen a 3% to 5% increase in prices within the private and semi-private healthcare sector. Health insurances are also subjected to 6% GST as well.
So what happens now?
As many people have 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 2016 was not a wise move either.
• Rising medical care costs. According to consulting firm Mercer, the cost of medical care for companies in Malaysia is predicted to increase by 17.3% against an average inflation rate of 2.1%. Main culprits driving up this cost are heart diseases, respiratory conditions, gastrointestinal diseases and cancers. This increase is the second highest jump among our Asian neighbours.
• Increased strain on public healthcare. Medicines, medical equipment and diagnostic tests are often inadequate in many public hospitals to cope with the increased influx of patients. The strain on the public is high and will likely 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 impose 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, despite the fact that 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.
This year, the health ministry has also recorded a progressive rise of patients seeking services in the public health facilities and with current economic condition, this is only set to rise within the next year.
Whilst Mr 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.
According to our Prime Minister, the 2017 budget aims to “allow the poor and lower middle-income to reap the benefits of 1Malaysia clinics and subsidized medicine at government hospitals.”
• RM4 billion allocated for supply for drugs, consumables, vaccines and reagents to all government hospitals and health facilities.
• RM4.5 billion for operation of the nation’s Klinik 1Malaysia, Klinik Bergerak 1Malaysia, Klinik Kesihatan and Klinik Desa.
• RM536 million allocated for building of new hospitals and upgrading of selected current ones.
• RM80 million allocated for the National Community Health Empowerment Programme to expand its scope to prevention and control of diseases such as dengue and Zika.
• RM70 million allocated for medical assistance for underprivileged citizens.
• RM40 million for one-off grants for purchases of haemodialysis machines by government hospitals and health facilities.
• RM30 million for free mammograms and HPV vaccinations at government health facilities.
• RM20 million allocated in the form of loans for hospital equipment purchases. To reduce overcrowding in public hospitals, the government will cooperate with the private sector or NGOs to operate non-profit charitable hospitals based on government hospital rates.