Malaysia is home to some of the world’s most renowned hospitals. This is supported by a per capita spending of RM1,927, amounting to 3.8% of GDP
by IFAST RESEARCH TEAM
IF I were to ask you to list everything Malaysia’s known for, what would be on that list? Food would definitely be on there, alongside culture and maybe the climate. Few people, if any, would immediately think of healthcare. But believe it or not, even as a developing country, Malaysia often punches way above its weight class when it comes to medical services.
A Robust Public Sector
In terms of the public sector, I would describe it as both accessible and effective in producing outcomes. Treatment is ver y affordable with co-payments for almost all procedures merely being RM1. Additionally, drug prices are very reasonable with Malaysia receiving a healthy supply of generic drugs. Prices are brought down even further by subsidies provided by the Ministry of Health under the prescription cost-sharing model. There is also a healthy supply of doctors with Malaysia’s doctors per 1,000 people standing at 2.2 compared to the world average at 1.8.
These factors combine to produce favourable outcomes, one of which being short wait times. While post Covid-19 figures are currently unavailable, pre-Covid wait times came in at under 60 minutes. Malaysia also has very low child mortality rates standing at 5.3 per 1,000 live births compared to the world average of 37. Life expectancy is also steadily increasing with the current average being 76.31 years, far outpacing the world average of 72.75 years.
Given the quality of public healthcare, one has to assume that there would be no need for private healthcare, right? Not true. In fact, Malaysia is home to some of the world’s most renowned hospitals. This is supported by a per capita spending of US$437 (RM1,927), amounting to 3.8% of GDP. That spending is mainly funded through insurance for private healthcare.
This poses the question: “How much is this industry likely to grow?” Quite a bit. We believe that healthcare spending is likely to pick up in the short term for two reasons. First, delayed spending from Covid-19 is likely to cause a surge in demand. And second, we are likely to see a spike in medical tourism due to the reopening of international borders.
Delayed Covid-19 spending: There are two types of procedures that were most likely delayed during the pandemic. The first being medical check-ups and the second being elective procedures like surgeries. In initial phases of the pandemic, governments, including ours, implemented lockdowns to prevent the virus from spreading. This meant that people were unable to travel and were advised to stay at home.
Given that both procedures described are by their nature voluntary, almost everyone chose to delay their appointments. Even if they wanted to get it done, hospitals were likely overwhelmed with patients and had to postpone these procedures until further notice. In the post-pandemic period, we are likely to see patients, armed with higher savings, finally going back to the hospital and getting their treatment. Additionally, because most medical bills are paid for via insurance, we are likely to see spending be inelastic. This means that consumers will not be sensitive to healthcare costs and will likely opt for more expensive procedures.
Evidence of this can be seen in data from the biggest hospital group in Asia, IHH Healthcare Bhd. Taking a look at occupancy rates, we see a steady growth with a significant decrease during Covid-19. Since then, rates have seen a rebound, with numbers recovering to pre-pandemic levels in 2021. This recovery in occupancy rates came alongside the increase in the number of operational beds. While more facilities are being built, patients have also been filling up the capacity. We see this reflected in the number of inpatient admissions. Throughout the entire period of observation, including Covid-19, saw a steady increase in admissions over time.
Open the Borders!
Another reason for the increase is the recent reopening of international borders causing medical tourism to recover.
A few factors make Malaysia a good destination for medical tourism. First, cost of care is low relative to other countries. This is due to our weak currency and a low purchasing power of the average Malaysian. Second, private medical care in this country is fairly high quality. Among other things, facilities are modern and well-maintained. The staff is also likely to be multilingual, making it easy for them to cater to the needs of foreign patients.
Additionally, Malaysia is also one country at the forefront of medical device technology, integrating techniques that are sometimes not seen outside of the US. This speaks to the aptitude of physicians in the country whose supply is supported by a number of local medical schools.
As evidence of this recovery, we take a look at medical tourism numbers from the Malaysia Healthcare Travel Council, an agency under the Ministry of Health. While the data only goes up till 2019, we see a clear upward trend in the number of medical tourists over time. Even with Covid-19 depressing numbers in 2020 and 2021, we expect this segment to recover over the next year or so. This is not to mention the additional growth in the segment over time. As countries like China continue to loosen Covid-19 policies, we are likely to only see the growth in medical tourism increase.
While many Malaysians don’t think of our healthcare as being one of the best in the world, evidence has shown that people are willing to travel large distances just to receive care here. In addition to the domestic and international Covid-19 recovery wave, it leads us to believe that Malaysia’s healthcare service industry is one worth looking out for.
The views expressed are of the research team and do not necessarily reflect the stand of the newspaper’s owners and editorial board.
- This article first appeared in The Malaysian Reserve weekly print edition
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