SST on private healthcare may drive up costs

New Straits Times

5 days ago

ISKANDAR PUTERI: The newly imposed 6 per cent expanded Sales and Service Tax (SST) on private healthcare services for non-citizens could inflate medical costs across the board, raising concerns over long-term affordability and system sustainability.
Gleneagles Hospital Johor chief executive officer and regional CEO of Southern and Eastern IHH Malaysia, Dr Kamal Amzan said while the government insists that the tax targets medical tourists and expatriates; and not Malaysians, yet the ripple effects may hit closer 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.
Dr Kamal, who has written extensively on health system policy, also said under the current service tax framework, many contracted hospitals support services are subject to SST.
But unlike the former Goods and Services Tax system, private hospitals are unable to claim input tax credits, which meant the costs were absorbed directly or passed on to patients.
The move to impose SST, comes at a time when private healthcare inflation has already outpaced wage growth, with a 12 percent increase recorded last year.
He said healthcare providers are grappling with rising medical equipment costs, wage hikes for healthcare workers and delayed treatments post-Covid.
"Hospitals facing slimmer margins, may resort to fee increases, administrative charges, or cutbacks in services to stay afloat.
"This is not a policy that strengthens the healthcare system. It's a revenue patch that risks further weakening it.
"We are taxing the scaffolding of care while pretending the house will still stand.
"Contrary to public perception, private hospitals do not serve only the wealthy. Many middle-income families rely on them to avoid long public sector queues, while employers use them to reduce workplace absenteeism.
"Private hospitals are a pressure valve for the overstretched public system. When access narrows in the private sector due to rising costs, patients will default to public care. And our government hospitals are already under immense strain," he said.
To minimise unintended fallout, Dr Kamal urged the government to exempt core hospital support services such as linen supply, lab transport, cleaning, and security from SST when provided to licensed healthcare facilities.
"These aren't luxuries. They are the minimum conditions for safe, modern care," he said.
"While the government has maintained that medicines and services for Malaysians remain tax-free, critics argue the new policy amounts to a stopgap solution rather than a long-term fix.
"If we must impose taxes on care, let's at least be honest that it's to plug the revenue gap and not pretend its healthcare reform because a system that survives by charging more isn't being strengthened," he added.