Healthcare and GST: What goes up might not come down, says think tank

The imposition of the 6% GST contributed to double-digit medical inflation, expected to be around 17% this year, says think tank.

PETALING JAYA: A think tank has warned that overall healthcare costs may not immediately return to pre-goods and services tax (GST) levels despite the reversion to the sales and services tax.

“What goes up does not always come down immediately,” Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib said.

He said the GST had a complex impact on healthcare as it affected different things.

For example, he said, the increase in fees by private hospitals and clinics had resulted in a large number of patients seeking treatment at public hospitals instead.

“This led to problems of overcrowding and supply which strained the capacity of the public health sector.

“It led to increased expenditure on medicine, higher cost of hospitalisation and increased utilisation of limited resources. There were shortages of medicine, medical equipment and diagnostic tests.

“It also resulted in limits to the time actually spent and attention given by healthcare professionals treating patients.

“These problems will persist until the impact of the removal of GST spreads across the public and private healthcare sectors,” he told FMT.

Azrul said any shift back to private healthcare would not occur until that sector had benefited from the new policy and there were lower charges.

He said there would be a general adjustment of fees and prices but that private healthcare still had to deal with and compensate for the changes and increases in costs previously caused by GST.

He said this was because the smaller private healthcare practitioners and private hospitals had responded to the GST by increasing prices on all services provided to compensate for the tax.

“This caused a 3-5% increase in fees and prices within the private healthcare sector. This includes consultation fees for specialists and general practitioners in private practice.

“This affected the health-seeking behaviour of the population, with a shift to public hospitals,” he said.

The 6% GST was implemented on April 1, 2015.

Azrul said the imposition of the GST contributed towards double-digit medical inflation, expected to hover around 17% this year.

Medical devices, health insurance and drugs

Azrul said he expected the cost of medical devices to go down, which would benefit patients overall.

The GST, he said, had caused a drop in imports of these devices.

“Sales of medical aid equipment, such as hearing aids and wheelchairs, were subjected to GST.”

Policyholders of health insurance are also expected to benefit from not having the GST imposed on their premiums, which Azrul said had been a significant financial burden.

However, Azrul said the premiums were not expected to go down in view of the overall higher cost of medical services.

“According to one survey, more than a quarter of respondents avoided seeking medical aid due to the higher costs.”

Azrul said while many drugs were zero-rated, certain drugs and medical equipment were still subjected to GST, especially those purchased from retail pharmacies.

“Generally, those that were not in the National Essential Medicine List (NEML) were not exempted from GST.”

But the lower cost of essential drugs, particularly for chronic illness, would definitely help patients, he added.

Malaysian Medical Association president Dr Ravindran Naidu meanwhile called for the immediate removal of GST beginning June 1 for medical services by hospitals and private doctors.

“Medicines are GST-exempt. Contracted services are currently charged at 6%, so zero-rating should see a drop in laundry bills, for example,” he said.

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