MP Warns Of Europe-Style Tax Rates If Private Health Care Too Costly

KUALA LUMPUR, Sept 11 — The government may be forced to raise taxes significantly if more Malaysians seek public health care due to the cost of private care, says Bayan Baru MP Sim Tze Tzin.

The Public Accounts Committee (PAC) member said Malaysia’s dual health care system – where public services are heavily subsidised and private providers are funded by insurance or out-of-pocket payments – risks becoming unsustainable as medical inflation in the private sector climbs 15 per cent annually.

“It’s important to have both systems (public and private) to be healthy and sustainable. From the public side, the government is spending more and more now. We have already spent 3.5 per cent of our GDP (gross domestic product), almost RM46 billion given every year to our health care system.

“However, on the private side, if we are not careful, it becomes too expensive, everyone will go to the public and eventually the government can’t afford it. Everyone will be paying higher tax, just like in Europe where they pay 40 to 50 per cent tax to get a health care system. 

“So now, it’s important that we maintain a sustainable public and private health care system,” Sim said in his opening speech yesterday at the Industry Leadership Summit 2025, organised by the Galen Centre for Health and Social Policy in partnership with PMCare Sdn Bhd.

Sim is incorrect about the GDP proportion of public health care spending in Malaysia. 

According to the Ministry of Health’s (MOH) Malaysia National Health Accounts (MNHA) report published in December 2024, the country’s total health expenditure reached 4.6 per cent of GDP in 2023, split between 2.4 per cent public and 2.2 per cent private financing.

While this is below the World Health Organization’s (WHO) recommended five per cent benchmark, health spending has been rising steadily. 

MOH received RM45.3 billion for its budget this year, an increase of nearly 10 per cent from the RM41.2 billion allocated for Budget 2024.

Sim said the government had recognised the urgency of reform after private medical inflation pushed insurance premiums up by as much as 70 per cent last year.

“This thing becomes so big that it gets the attention of MPs like me, and we all raise it up in our [parliamentary select committees] and we bring up the issues of escalating health care costs. Eventually, the prime minister heard our voices, heard the rakyat’s voices, and he instructed a reform in our public-private health care,” the PKR lawmaker said.

He noted that Malaysia’s dual health care system had worked for decades, with taxpayers funding public health care for all income groups while private hospitals offered faster access to those able to pay out-of-pocket or through insurance.

But Sim cautioned that 15 per cent annual inflation in the private sector was pushing even higher-income groups back into the public health care system.

“When private health care has an inflation of 15 per cent, it becomes unsustainable, and the system now pushes the T20, or even people in the private side to push them to the public side. 

“When the public side gets too congested, the queue becomes longer, and eventually it will be a burden on the government to pay more, and eventually, if we are not careful, it may collapse,” the PKR lawmaker said.

To address this, the government formed a joint task force between the Ministry of Health (MOH) and the Ministry of Finance (MOF) in June, which has developed 11 reform initiatives under Bank Negara Malaysia’s Reset strategy targeting private health care. 

Sim highlighted four major reforms: the proposed base medical health insurance scheme, adoption of diagnosis-related group (DRG) payments in private hospitals, introduction of premium paid services at government hospitals (Rakan KKM), and rollout of electronic medical records (EMR) to reduce duplication.

Rakan KKM, which has yet to launch, was widely criticised for creating a two-tier service within the public health care system by offering expedited elective procedures to people who can afford to pay for priority treatment. 

Sim warned that if Malaysia’s private health care inflation is left unchecked, the government may have to consider European-style taxation levels to sustain the public system.

In the United Kingdom, residents contribute through general taxation and National Insurance to fund the National Health Service (NHS), which provides universal coverage free at the point of use for most core services. Total health expenditure is about 11 per cent of GDP.

To compare, the Netherlands requires all residents to buy statutory health insurance from private insurers, which must accept all applicants under government regulation. Financing comes from premiums, taxes, and subsidies, with the government covering children’s coverage up to age 18. 

Standard benefits include hospital, physician, mental health care, and prescription drugs, with adults paying monthly premiums, deductibles, and some cost-sharing.

Sim said Malaysia must avoid the tipping point where the dual health care system collapses into an overburdened public service funded by higher taxes. “This is where we put our private or company interests lower. The nation comes first.”