VHI(Msia) vs Medicare(Aus)

In budget 2018 , the govt announced RM50million to initiate the Voluntary Health Insurance or VHI.  It is a policy solution to reduce the out of pocket(OOP) healthcare spending.

I admit ,VHI is a decent solution when comes to reducing out of pocket spending. In principle, it is a smarter idea than Selangor's Skim Peduli Sihat in terms of reducing OOP

However, it is also unnecessary. There is already an existing Social/Public Health Insurance in place. Its called the General Taxation administered by LHDN.

VHI is only effective if govt manage to entice Malaysians to subscribe to it en-masses. This allows VHI to pool risk, to cross subsidize. Insurance are basically healthy ones paying for those who sick. Otherwise, govt will have to pay for the VHI claims directly from general taxation.

VHI wld provide coverage for private hospitals. Is private hospital truly cost efficient? Private hospital have higher cost of capital than govt(govt borrows at risk free rate), so they must compensate with higher operating cost efficiency in order to be cheaper than public hospital. Why wld govt pay for treatment in private hospital when same treatment cost a fraction in govt hospital?

There is no conclusive evidence that private hospital have lower operating cost than govt. In fact , its govt that is trying to rein in private sector cost by enforcing bundling of services indicative tht govt hospitals are more cost efficient than private. Any extra cost in treatment outside of the package wld need to be borne by the hospital , which means private hospital wld compensate that with higher package cost.

Its lot easier for govt to focus on expanding & running public hospital. Why bother trying to micro manage private hospitals which it doesn't own. Even if private hospital achieve operating cost efficiency, would it compensate for the higher cost of capital than govt. Besides cost of capital , private hospitals also have to factor in higher land cost than public hospitals. Govt not only own land & can flex legislative muscle to acquire private land for public use at more competitive price.

With VHI, you also need to set up an entire new bureaucracy to collect payment, dispense them. So the added bureaucracy cost, also potential abuse in funds will now lead to might lead to govt paying claims at inflated price directly from the govt consolidated fund(general tax).
 
Alternative to VHI
We can either increase income tax or corporate tax back to pre GST levels. Or we can have an dedicated health tax like Australia. Australian public healthcare is paid via the Medicare levy. Medicare levy is basically a flat tax sequestered for healthcare in Australia. Then we simply use this extra tax revenue to expand our public healthcare. Providing quality care on need basics.

Medicare Levy 
Basically the medicare levy is  2% flat tax on taxable income for those who earn above the income threshold. 
A single resident with no dependent pays Medicare levy if he/she earns above AUD27,069 or family pay medicare levy if family income is above AUD36,451(increase AUD3356 for every dependent/student). Higher threshold applies for pensioners/senior which is AUD47,670.

Medicare levy surcharge. 
On top of Medicare levy , there is also Australian Medicare Levy Surcharge. Basically , if your income for surcharge purpose exceed certain threshold , you pay up to 1.5% flat tax on top existing Medicare Levy

Private Insurance Rebate. 
The Aussie Tax Office also provide you with tax rebate if you already have private insurance.  It is tested which means if your income is above a certain threshold, you don't receive a rebate.

source : Australian Tax Office (ATO)

Australian public spend on healthcare(Medicare) is at an healthy 67.3% unlike Malaysia's 52%. Out of Pocket expenditure in Australia consist of 17.3% compare to Malaysia's 39% (AIHW)

Conclusion

My point is this. there is no need for an expensive VHI when all you need is tax reform. Tax reform should make the system more progressive either by increasing income & corporate tax to pre GST levels to pay for better . more robust public healthcare. Why bother creating a voluntary scheme, spending millions in administrative cost which doesn't result in better care.

I must emphasize, Aussie Medicare is just an example of dedicated health tax to fund public healthcare.

Taxes are most cost efficient way to pay for healthcare,education etc. I don't know why folks balk at more taxes. its either taxes or you pay inflated private insurance premium.

Our healthcare is at crisis level, we need to spend more to rapidly expand it. Ideally, govt spending on healthcare shld be RM72billion, right now it is approx RM25billion. More on this later.