Financial strategies to help enhance our public health system

Our public hospitals are already bursting at the seams with an overwhelming number of patients who need admission for multiple ailments.

Fiscal policies are arguably one of the most important items in the toolbox that a government can use to impact public health.

Government spending, taxation and procurement practices enable allocation of resources toward healthcare and addressing social determinants of health, as well as incentivising healthier behaviours.

Progressive fiscal policies can also promote innovation, enhance equity and foster sustainable practices, all of which can improve public health.

Allocating resources for healthcare

Under Budget 2024, RM41.2 billion was allocated for health.

As a quick visit to our healthcare facilities will tell you, this amount is insufficient to address the needs of the public.

It also falls far short of the desired 5% of gross domestic product (GDP) that should ideally be allocated to health.

For Budget 2025, public funds must be used to improve accessibility, quality and affordability of health services.

Increased investment in healthcare infrastructure, personnel and programmes not only improves individual health outcomes but also strengthens the overall resilience of public health systems.

There is a tendency to forget how stressed the system was during the Covid-19 pandemic; it would be a shame if the lessons learnt are not applied before the next pandemic hits.

However, increasing allocation of funds is not sustainable in the long-run – for this to improve, both the Health Ministry (MOH) and the Finance Ministry (MOF) will need to make tough decisions regarding an appropriate form of health and social care financing.

In the short to medium term, the current use of funds should be scrutinised closely to minimise leakage via continuous review of procurement and proper governance structures.

A tax on sugar-sweetened beverages (SSB) is one tool that can increase the government’s revenue and improve health outcomes over time. — Photos: Filepic

Smarter taxation for healthier behaviour

Taxation is a powerful tool that governments can use to influence public behaviour, particularly in relation to health-related products like tobacco, alcohol and sugary drinks.

By imposing higher taxes on these products – often referred to as “sin taxes” – governments can discourage harmful consumption patterns, reduce the incidence of lifestyle-related diseases and generate revenue to fund public health initiatives.

Although Malaysia has not increased its tobacco tax since 2015, the effectiveness of tobacco tax as a public health policy is undebatable.

A review in the journal Tobacco Control from as far back as 2012 states: “Well over 100 studies, including a growing number from low-income and middle-income countries, clearly demonstrate that tobacco excise taxes are a powerful tool for reducing tobacco use while at the same time providing a reliable source of government revenues.

“Significant increases in tobacco taxes that increase tobacco product prices encourage current tobacco users to stop using, prevent potential users from taking up tobacco use, and reduce consumption among those that continue to use, with the greatest impact on the young and the poor.”

A tax on sugar-sweetened beverages (SSB) is another tool that serves to both increase revenue for the government but more importantly improve health outcomes and reduce healthcare costs over time.

More than 50 countries have implemented this tax, with data from countries such as Mexico and South Africa showing that SSB taxes have successfully led to a reduction in sugar consumption.

Data from countries like the United Kingdom has shown that the SSB taxes have led to manufacturers reducing sugar content in these drinks.

It would make sense for the Malaysian government to increase both these taxes in Budget 2025, especially in the context of increasing prevalence of heart and lung disease, as well as cancer and diabetes.

More informal interventions, such as Prime Minister Datuk Seri Anwar Ibrahim’s decision to not serve pre-mixed sweetened beverages at his office, also send strong signals.

Financial incentives

The MOH’s Health White Paper highlights the fact that the majority of health issues stem from social determinants of health, e.g. education, housing and income, have profound effects on public health outcomes.

Progressive fiscal measures aimed at reducing inequality can have a direct impact on improving health equity by ensuring that vulnerable populations have access to necessary services and resources.

A celebrated example is Brazil’s Bolsa Família Program, a conditional cash transfer programme that was implemented in 2003.

It links financial assistance for low-income families to their engagement with healthcare and education services, e.g. cash is not given if a child is not vaccinated.

By requiring families to ensure their children attend health check-ups and receive vaccinations, the programme has contributed to reductions in child malnutrition and infant mortality by more than 50%.

The Healthy Start Scheme in the UK provides low-income pregnant women and families with young children, with vouchers to buy fresh fruit, vegetables and milk.

By reducing the financial barriers to purchasing nutritious foods, the policy encourages healthier diets among vulnerable groups, helping to prevent malnutrition and related health issues.

This fiscal incentive helps guide low-income families toward better dietary habits and improved long-term health outcomes.

Changes within institutions are impactful too – UK’s Social Value Act of 2012 has used procurement policy to address social equity.

Public sector organisations are required to consider how the services they procure can improve societal well-being.

For example, contracts may prioritise companies that create jobs for marginalised groups or provide services that improve community health.

This policy has enabled the UK to address disparities in health outcomes by directing public funds toward inclusive, equitable projects.

In Brazil, cash is given to poor families who ensure their children attend health check-ups and receive vaccinations; this has significantly reduced child malnutrition and infant mortality. — TNS

Environmental sustainability

Fiscal policies that incorporate environmental factors also have an impact on public health.

Government green procurement and investment policies help promote sustainability, reduce pollution, and mitigate the public health risks associated with environmental degradation.

Denmark’s Strategy for Green Public Procurement prioritises the purchase of energy-efficient and eco-friendly products.

It looks at both long-term procurement strategies to reduce the public sector’s contribution to climate change as well as short-term measures such as introducing vegetarian food two days a week in all government staff canteens.

The European Union’s Green Public Procurement initiative encourages the use of innovative, sustainable products in public projects.

By prioritising suppliers that offer environmentally friendly solutions, the EU has driven the development of cleaner technologies and fostered competition in sectors such as renewable energy and energy-efficient construction.

The long-term health benefits of such policies include reduced pollution, lower greenhouse gas emissions, and improved public health outcomes.

Budget 2025

In preparing Budget 2025, Malaysia’s MOF will have plenty of opportunities to continue as well as introduce new measures that affect our health.

It is clear that fiscal policies are powerful tools for improving public health.

Whether through increased healthcare spending, taxation of harmful products, addressing social determinants of health, or promoting environmental sustainability, there is sufficient evidence demonstrating the potential of these policies to achieve significant health improvements.

Dr Helmy Haja Mydin is a consultant respiratory physician and Social & Economic Research Initiative senior policy advisor. For further information, email [e-mail]. The information provided is for educational and communication purposes only. The Star does not give any warranty on accuracy, completeness, functionality, usefulness or other assurances as to the content appearing in this column. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.