SST on private healthcare may drive up cost

New Straits Times

3 days ago

ISKANDAR PUTERI: The newly imposed six per cent expanded Sales and Service Tax (SST) on private healthcare services for non-citizens could quietly inflate medical costs across the board, raising real concerns over affordability, equity and long-term system resilience.
Gleneagles Hospital Johor chief executive officer and regional chief executive officer of Southern and Eastern IHH Malaysia, Dr Kamal Amzan, said that while the government maintains the tax targets medical tourists and expatriates, its ripple effects may land much closer to home.
"Healthcare is not made up of standalone bills. It's an ecosystem held together by hundreds of interdependent services," Dr Kamal said.
"By taxing services like cleaning, linen supply, lab logistics and security, which are integral to hospital operations — you are essentially taxing the cost of care itself," he told the New Straits Times.
These costs are not peripheral. They form the architecture of safe, modern healthcare.
Yet under the current tax framework, many contracted support services are now subject to SST — a move that could compound financial pressures on hospitals already grappling with medical inflation, wage hikes and post-Covid service recovery.
"Hospitals facing slimmer margins may resort to fee increases, administrative charges, or cuts in services to stay afloat. This isn't reform — it's erosion," said Dr Kamal.
This policy arrives at a time when the cost of private healthcare in Malaysia has already outpaced wage growth, with a recorded 12 per cent increase last year alone. In many hospitals, margins are tightening even as expectations for quality and safety rise.
"We are taxing the scaffolding of care while pretending the house will still stand," he added.
Contrary to popular belief, private hospitals are not the exclusive domain of the wealthy. Middle-income families often rely on them to avoid long queues at public hospitals. Employers turn to private facilities to minimise workplace absenteeism. Many cancer patients move between public and private care as public oncology services buckle under rising demand.
"Private hospitals are the pressure valve for an overstretched public system. When access narrows in the private sector due to rising costs, patients will inevitably default to public hospitals — and they're already under immense strain," said Dr Kamal.
To avoid that outcome, Dr Kamal urges the government to exempt core hospital services — such as linen supply, lab transport, cleaning and security — from SST when provided to licensed healthcare facilities.
"These aren't luxuries. They're the minimum conditions for safe care," he said.
The argument isn't about shielding providers from taxes. It's about aligning policy with national goals. The government is trying to rein in medical inflation. Yet this tax expansion works in the opposite direction — quietly raising costs, eroding efficiency and ultimately, reducing access.
"We should be reducing the cost to deliver care, not layering it. Taxing the backbone of hospital operations while asking the industry to absorb payor discounts is a contradiction we can't afford."
While the government has maintained that medicines and services for Malaysians remain tax-free, stakeholders warn that this new layer of indirect cost will ultimately find its way into patient bills — especially for those on the margins of affordability.
"If we're serious about protecting the rakyat from rising healthcare costs, then exempting services that keep hospitals running isn't charity — it's common sense," said Dr Kamal.
Because no hospital can deliver modern care without its invisible hands — the ones who clean, sterilise, transport and guard its patients and staff.
"We've exempted apples from tax. Maybe that's fitting," Dr Kamal added wryly.
"After all, an apple a day keeps the doctor away — especially when seeing one gets more expensive," he added.