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Medical tourism and the state in Malaysia and Singapore

Chee Heng Leng Global Social Policy 2010 10: 336 DOI: 10.1177/1468018110379978 The online version of this article can be found at: http://gsp.sagepub.com/content/10/3/336

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Global Social Policy 10(3) 336 357 The Author(s) 2010 Reprints and permission: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/1468018110379978 gsp.sagepub.com

Medical tourism and the state in Malaysia and Singapore

Chee Heng Leng

National University of Singapore

Abstract A striking feature of the medical tourist industry that has developed in Asia since the late 1990s is the involvement of States in supporting the private sector in marketing healthcare services to foreign patients. Malaysia and Singapore, two of the leading players in this field, have, since the 1980s, embarked on healthcare reforms, resulting in an enlarged private healthcare sector. The Singapore state, moving toward state corporatism, has advanced further in its healthcare reforms, and is therefore able to minimize the gap between government and private health services. The Malaysian state, fragmented and facing greater opposition, has not been able to advance as far in its healthcare reforms, and faces a growing gap between public and private health services. Nevertheless, both countries face a shortage of doctors in the public sector, and rising costs and user charges: problems that are exacerbated by a growing private market in healthcare to which the medical tourist industry contributes. As successful market economies, the cases of Malaysia and Singapore serve to illustrate the potential effects of healthcare reforms and commercialization of healthcare on social policy; particularly salient in the context of an emerging focus on trade in health services as a possible growth engine for countries economic development. Keywords healthcare reforms, healthcare system, Malaysia, medical tourism, medical travel, Singapore

Introduction
A novel aspect of the current phase in the international travel for medical care is the way in which States have led marketing efforts to bring foreign patients into their countries. Cuba appears, arguably, to have been the first country where the government had a deliberate strategy of encouraging foreign patients, when it leveraged on its well developed healthcare system in order to earn foreign exchange during its 19891993 economic crisis (Bradley and Kim, 1994; Diaz and Hurtado, 1994; Goodrich, 1993).
Corresponding author: Chee Heng Leng, Asia Research Institute, National University of Singapore, 469A Tower Block, Bukit Timah Road, #10-01, Singapore 259770. Email: arichl@nus.edu.sg

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In Asia, the major countries where international medical travel was first promoted as medical tourism were Singapore, Thailand, and Malaysia, followed by India and the Philippines, and more recently by South Korea and Taiwan.1 In all these countries, the governments are involved to various extents in either developing or supporting the medical tourist industry. Indeed, it is not possible to think about the emergence of the medical tourist industry and its initial development in Asia in the aftermath of the 1997 financial crisis without thinking about the role of the state. Nevertheless, throughout the 1960s and 1970s, access to healthcare was considered a crucial component of governmental responsibility, as expressed in the 1978 Declaration of Alma-Ata (WHO-UNICEF, 1978); and health services are not readily seen as a marketable commodity despite the existence of an international trade (Diaz and Hurtado, 1994: 4). Entitlement to healthcare was, and continues to be, a cornerstone of social citizenship, conceptualized within the framework of nation, and citizenship rights and obligations (Moran, 1991). Is there an inherent conflict between the states obligation to ensure healthcare access for its citizens on the one hand and its advocacy of medical tourism on the other? In the European welfare states, the debates surrounding state responsibility in cross-border healthcare utilization strike a distinctly different timbre from the clamor among Asian countries to get onto the medical tourism bandwagon.2 In the UK, for example, there was official anxiety regarding foreign visitors utilization of the National Health Service (NHS) despite the existence of regulations for charging patients who are not normally resident (Borman, 2004; Sheaff, 1997); while ways used to divert these patients to the private sector certainly did not reach anything that can be described as marketing. How then can we understand the active role played by states such as Malaysia and Singapore in the development of medical tourism? Malaysia and Singapore provide a good basis for comparative analysis. Their histories are integrally related,3 and they both have high achievement in population health status with low healthcare spending (Ramesh and Holliday, 2001). As developing countries that have achieved rapid economic growth in the last 50 years (Singapore having made the transition to developed status), they serve as role models for other developing economies. Singapores healthcare financing system in particular is a subject in international social policy debates (Hanvoravongchai, 2002), and has been held up for emulation (Callick, 2008; Taylor and Blair, 2003). The Singaporean and Malaysian experiences in healthcare reforms will thus be important contributions to global social policy discussions; particularly salient in the context of an emerging focus on trade in health services as a possible growth engine for a countrys economic development (Bookman and Bookman, 2007).

The state and economic development

The integral involvement of the state in the medical tourist industry in the two countries may be understood in relation to their economic development strategies and the character of the state and economy. Malaysia and Singapore inherited well developed bureaucratic state institutions upon becoming politically independent from Britain. The post-colonial states were developmental, adopting free-market capitalist models and placing economic development high on the agenda.

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Through the years, both countries have evolved semi-authoritarian political structures with a dominant executive institution (Alagappa, 1995; Rodan, 2005). The two countries, however, are often seen as contrasting states. Singapore is the clean non-corrupt technocratic state, with a smoothly functioning bureaucracy (Barr, 2008). The governments interventionist policies permeate economics, politics, and often cross over into family and personal life. Malaysia, on the other hand, is ruled by a coalition of ethnic-based parties that is dominated by the Malay nationalist party. There are frequent factional infighting, negotiations, and compromises being forged within and between parties. The political system over the years has been built upon an extensive patronage system that reaches from the federal to state and district levels (Gomez, 1994). Early on, both countries embarked on a developmental path that eventually evolved into state capitalism. Slated as a strategy to overcome the limitations of the private sector, state corporations were created to use government funds to invest and spur growth in particular sectors of the economy. The Singaporean state has been moving toward a state corporatism since the 1980s (Brown, 1994), in which close links between the political leadership and the top echelons of the business community have led to a blurring of lines between the private and public sectors (Hamilton-Hart, 2000). The term Singapore Incorporated portrays this economic development strategy where state corporations play a dominant role (Goldstein and Pananond, 2008; Haley et al., 1996). In 2003, for example, Singapores state corporations accounted for 20% of the total market capitalization (Ramirez and Ling, 2003). Malaysia has basically the same model of state capitalism, but its ruling elite is fragmented, and its politics are dominated by explicit appeal along ethnic lines. In 1983, the government embarked on a privatization policy, encapsulated by the concept of Malaysia Incorporated (Jomo et al., 1995: 81). Aimed at carving out a Malay corporate sector, it has given rise to rentier capitalists who have greatly profited from the privatization of state entities as well as other state practices such as the preferential awarding of governmental contracts (Gomez and Jomo, 1999). Malaysia and Singapore are well integrated into the world economy, but the shaping of their economic policies are better explained by domestic politics rather than pressures from international organizations. In Malaysia, the shift in the economic policy toward privatization in the early 1980s has been attributed primarily to internal politics, and only secondarily to external pressures from international financial institutions (Chan, 2007; Jomo, 1995a,b). State institutions and public enterprises are used to achieve the countrys ethnic redistributive aims; while the privatization policy allowed public assets and governmental concessions to be divested to private companies owned by politically wellconnected individuals (Gomez and Jomo, 1999). The neo-liberal ideology that was hegemonic internationally at that time provided the context within which the shift occurred (Jomo, 1995a: 1, 5; Jomo, 1995b: 5556), but although Malaysia received technical assistance and policy advice from institutions such as the International Monetary Fund, the World Bank and the Asian Development Bank, the pressures that were more important came through the private financial market, such as for example the desire to maintain a high credit rating (Chan, 2007). Likewise, Singapores economic policies are shaped more by the needs of its strategy to be competitive in the global economy and to be a financial centre than by direct pressures from international financial institutions.

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Social policy and healthcare

The ideological base of the two nations was not modeled on social solidarity. This is reflected by the mandatory savings schemes that function as social security in the two countries. Originally set up by the colonial governments, both the Malaysian Employees Provident Fund (EPF) and the Singaporean Central Provident Fund (CPF) are funded in fixed proportions by contributions from employer and employee, and originally meant to be used for retirement. Both funds have undergone many changes, but they remain essentially individual savings schemes with no element of cross-subsidy except within families. In neither country are there any forms of state unemployment benefits. Indeed, rather than any concept of social solidarity, it was the developmental state that dictated social policies. In both countries, more emphasis was placed on economic development, productivity and job creation than on social sector spending. Healthcare was instrumentally seen as an important contributor to the former. Therefore, investment in the social sector and healthcare is largely motivated by the requirements of the industrialization strategies, and by the pragmatic need to cater to electoral constituencies rather than from any ideological adherence or social partnerships (Ramesh with Asher, 2000; Chua, 2005). Nevertheless, even within this restricted welfare framework, public healthcare services are subsidized in Singapore and universally accessible in Malaysia, although the development of Singapore Inc and Malaysia Inc have led to weakening the claims of healthcare entitlements among the citizenry. In the international arena, neither country were affected by the structural adjustment programs imposed by the international financial institutions on indebted countries in the 1980s, which had caused many other governments to curtail social sector spending. Their healthcare reforms, however, show a parallel with the international shifts toward emphasizing the private sector and markets in healthcare since the 1980s (Lee and Goodman, 2002).

Healthcare in Malaysia
The Malaysian healthcare system may be described as a mixed private-public system (Chee, 1990; Chee and Barraclough, 2007a). Total health expenditure (THE) at 4.3% of GDP in 2008, is relatively low (WHO, National Health Accounts [NHA]: Malaysia 2010). The private share of THE has increased, from 24% in 1983 (EPU, 1996: 18) to 56% in 2008 (WHO, NHA: Malaysia 2010). Public health expenditure is primarily from central treasury funds; while private health expenditure is mainly from out-of-pocket expenditures (73% in 2008) with a small but growing proportion (10% in 1995 to 14% in 2008) from private health insurance (WHO, NHA; Malaysia 2010). Healthcare provision at the primary level is through a well-developed network of governmental clinics in both urban and rural areas, and a concentration of private general practitioner clinics in urban areas. Hospital care, however, is dominated by the public sector. Studies carried out in the 1970s showed that healthcare was generally accessible and income was not a significant barrier to the utilization of public healthcare (Heller,

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1982; Meerman, 1979); but the growth of corporate healthcare since then poses challenges for the equitable access to healthcare services (Chee and Barraclough, 2007b). The 1983 privatization policy reached the healthcare sector with the privatization of the government medical store in 1993, and five hospital support services in 1997, resulting in huge cost increases in the government health budget (Kananatu, 2002; Wong, 2008: 197200, 220, 342348). The corporatization of public hospitals began with the National Heart Institute in 1992,4 followed by the teaching hospitals attached to the medical faculties of three public universities. There were plans to corporatize all other Ministry of Health (MOH) hospitals in 2000, but these plans were suspended due to political pressure (Chan, 2007: 92). Corporatization plans for the MOH hospitals are unlikely to proceed until and unless the MOH is able to restructure its healthcare financing to remove out of pocket payments at the point of utilization of services. Currently, services provided at the rural health facilities are free of charge, while user fees at urban clinics and hospitals are nominal (Wong, 2008: 306309). As a result, cost recovery is less than 5% (Kananatu, 2002). Studies for a social health insurance scheme have been carried out since the Mid-term Review of the Fourth Malaysia Plan (19815), but its implementation seems to be perpetually delayed (Malaysia Ministry of Health [MOH], 2005a: 190191, 2006a: 225226). Healthcare policy has closely followed the nations economic policy (Wong, 2008). In line with Malaysia Inc. and privatization, the Caring Society social policy enunciated in 1991 clearly stated that the aim is to establish a social system in which welfare will depend on the family rather than the state. This was reflected in moves to increase user fees in government hospitals, tax incentives to encourage private health insurance, enabling a portion of the EPF to be used for medical treatment, as well as appealing to the public, private philanthropy organizations, and even private corporations to provide health services on a charitable basis (Barraclough, 1999).

Healthcare in Singapore
In the two decades after independence, the structure of the healthcare services in Singapore was similar to Malaysias in that the public sector was dominant in financing, and in providing hospital services, while the private sector was largely constituted by general practitioners providing primary care (Phua, 1987). Healthcare reforms were announced in 1981, and set out in the 1983 National Health Plan; followed by the White Paper Affordable Health Care in 1993. Both are key documents setting forth the direction in health policy (Asher and Nandy, 2006; Phua, 1991; Purcal, 1989, 1995; Reisman, 2006). They emphasize that Singapore will not be modeled as a welfare state where healthcare is provided as part of essential welfare services. One of the five objectives of the White Paper, for instance, is to promote personal responsibility for ones health and avoid over-reliance on state welfare or medical insurance. The healthcare financing reforms, designed to move away from the taxation-based financing system, were instituted in stages. Medisave, a compulsory savings scheme, was introduced in 1984; Medishield, a catastrophic illness insurance scheme, in 1991, and Medifund, an endowment scheme for the needy, in 1993 (Singapore MOH, 2001).

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Medishield is an opt-out voluntary insurance scheme with very basic coverage. The public may also buy more expensive Medishield plans that are integrated with private insurance. In 2007, 78% of Singaporeans and permanent residents were covered (Teo, 2008). Reforms in healthcare provision were made through restructuring government hospitals, plans for which were announced in 1984. Essentially, this involves placing the hospitals under corporations that are wholly owned by government (Singapore MOH, 2001). Restructured hospitals increased user fees, which were then subsidized by an annual grant from government (Phua, 1991). Hospital wards are subsidized on a sliding scale no subsidy for class A, 2065% subsidy for class B, 80% for class C. In 2001, these subsidies accounted for 78% of the public health expenditure (Singapore MOH, 2001: 22, 26). Total healthcare expenditure, at 3.4%, is considered low. As a result of active restructuring, public health expenditure declined from 41.6% in 1995 to 35% in 2008 (WHO, NHA, Singapore, 2010).5 Nevertheless, in 2000, the government restructured hospitals still provide 81% of the hospital beds, and handle 78% of the admissions; while the proportions are reversed for primary care (Singapore MOH, 2001: 3, 4345).

Prelude to medical tourism

The medical tourist industry, as it has emerged in Malaysia and Singapore, is essentially a logical progression of the preceding period of privatization and corporatization of healthcare. Malaysia and Singapore were well-positioned to take advantage of the global growth in medical tourism from the late 1990s. Both countries had well-developed networks of public healthcare services and established institutions for the training of medical and nursing personnel (Phua, 1987). The foundation for the privatization of healthcare was laid early on by the adoption of free-market models of economic development. In Malaysia, the overall economic policy and lack of regulatory barriers provided a congenial environment for the rapid growth of the private hospital sector in the 1980s and 1990s. In 1980, there were 10 private hospitals (many of which were established charitable institutions), with private beds constituting 5.8% of total number of acute hospital beds (MOH, 1980). By 2003, the total number of private hospitals had grown to 128, and private beds constituted 26.7% of total acute hospital beds (Chee, 2008: 2147).6 In Singapore, the government had increasingly encouraged private sector medicine since as early as 1965 (Purcal, 1989: 130, 133).7 Private consumption of health services at current market prices grew at an average of over 13% per year for a decade after 1969, and the private health sector expanded to meet the demands that increased with rapid economic growth in the 15 years between 1965 and 1980. Part of the private sector healthcare growth was in response to the growing demand from overseas customers in the region, and the governments encouragement of specialist medical services for export so as to develop Singapore into a regional medical centre. By the end of the 1970s, a few specialists had a significant proportion of their patients coming from neighboring countries, and in 1984, some of them had 50% of their clients from surrounding countries.

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Phua (1991: 67) corroborates that as early as 1986, the Singaporean government had planned for the further development of private specialized medical services, and that this was with the overall objective of making the country into an international medical centre for patients from around the region. At this time, however, the linkage with tourism has not yet been made, and it was not called medical tourism. Overall, Singapore, a city-state with a small population, has been able to move faster in the direction of state corporatism. After successfully containing almost all opposition from political and civil sectors by the 1970s, the state was able to be more decisive in implementing its free market policies including the privatization of healthcare financing and corporatization of healthcare provision.In Malaysia, the fragmented ruling elites and stronger opposition meant that efforts to restructure healthcare were continually contested, while the lack of coherence makes it difficult to advance healthcare reforms at a comparable rate. This difference will have implications for the ways in which medical tourism could be managed.

Emergence and development of the medical tourist industry

The Malaysian private healthcare sector was badly affected during the 1997 Asian financial crisis. During this crisis, healthcare consumers reverted to public facilities, which registered an 18% increase in patients, while visits to private facilities decreased (Wong, 2008: 226). Furthermore, when the Malaysian currency dropped rapidly following the Thai baht, prices of imported pharmaceuticals and medical supplies rose between 20 to 120%, and most private hospitals experienced a 49 percentage point deterioration in their operating margins (Rabobank International, 1999: 28). An UNFPA (1998: 8586) study reported an increase of 10 to 30% (sometimes 50%) in the cost of imported drugs, which made up more than 60% of the drugs used in the whole country, and obtained direct feedback from private hospitals that increase in operating costs were the main problem, although this was made worse by a decrease in patient load and no increase in professional consulting fees. One of the responses of the private hospitals was to seek ways to expand the market by promoting their facilities and services abroad, and in support, the government set up a national committee to look into ways in which medical tourism can be expedited (MOH, 2002: 107). In Singapore at this juncture, the number of foreign patients, mostly from Indonesia and Malaysia, declined, falling by more than a third between 1997 and 1998. Foreign patient load, measured by episodes of care, had risen steadily from 11,464 inpatients and 2823 day surgeries in 1993 to 15,247 inpatients and 5767 day surgeries in 1997; but in 1998, only 9703 inpatients and 3522 day surgeries were recorded (Khoo, 2003). Singapores financial sector and currency were not badly affected in the 1997 financial crisis, but the sharp drop in foreign patients together with a shift to public hospitals by local patients resulted in a contraction in private hospital occupancy rates from over 70% to 55% (Rabobank International, 1999: 26). The 1997 Asian financial crisis was therefore a turning point. While in Malaysia, it largely signalled the start of the medical tourist industry; in Singapore, it stimulated efforts to attract patients from a more diverse range of countries.

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Table 1. Malaysia: Foreign patients and receipts, 19982008 Foreign patients Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 No. of 39,114 59,926 56,133 75,210 84,585 102,946 174,189 232,161 296,687 341,288 374,063 Avg from 2004 to 2008
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Receipts % growth 53.2 -6.3 34.0 12.5 21.7 69.2 33.3 27.8 15.0 9.6 21.4 (RM mil) 14 22 33 44 36 59 105 151 204 254 299 (USD million)1 4.3 6.7 9.9 13.4 10.9 17.8 31.8 45.6 61.6 76.8 90.5 Avg from 2004 to 2008 % growth 56.0 48.4 35.7 -18.7 63.6 78.2 43.8 35.0 24.6 17.8 30.3

Exchange calculated at the 10 June 2010 rate of 0.3024. Sources: 19981999, 20012006: Siti Saadiah Sheikh Bakir (2008) Perspectives from Malaysia on capacity building, patient care, quality & standards & positioning for tapping new opportunities of growth and development, paper presented at the International Medical Travel Conference, Crowne Plaza Hotel, Kuala Lumpur, 27 February. 20002001: Ministry of Health (2002) (based on 10 private hospitals), Malaysias Health, p. 108. 20032007: Socio-economic Research Institute (SERI) (2009) Penang Economic Monthly 11(4). 2008, 1998: The New Straits Times (2009) Council to promote medical tourism, 22 July 2009; The Sun (2009) Driving healthcare travel, 10 June 2009.

Current status
The number of foreign patients in Malaysia grew from 39,114 in 1998 to 374,063 in 2008, with an average annual growth rate of 21.4% from 2004 to 2008 (Table 1). The estimated revenue was RM 299 m (US$90.5m) in 2008, having grown at an average 30.3% per year from 2004 to 2008.8 These statistics are collected by the Association of Private Hospitals Malaysia (APHM), and constitute all foreign patients, including those who are residents in the country and foreign visitors who happen to need medical care while in the country. In Singapore, estimates are based on exit interviews by the Singapore Tourism Board (STB) (Table 2). The STB numbers only include foreign patients travelling specifically for healthcare, and are therefore not comparable with the APHM statistics. Nevertheless, a very gross comparison shows a much faster growth rate in the last five years for Malaysias foreign patient numbers, which has caught up with Singapore. Malaysias revenue from foreign patients however is much lower, for example, in 2008, Malaysia earned US$90.5m, which is about one-eighth of what Singapore earned. In both countries, but more so in Malaysia than Singapore, the nature of the medical tourist industry is largely regional, as the majority of the foreign patients are from Indonesia, a neighboring country. The major flows are from Malaysia and Indonesia to Singapore, and from Indonesia to Malaysia. In Malaysia, over 20068, Indonesians averaged 76.7% with much smaller proportions coming from Japan (3.4%), Europe (2.7%), and India (1.8%). An increasing trend could be seen, although percentages were still very small, for patients from China (from 1.3% to

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Table 2. Singapore: Foreign patients and expenditure on medical services and items, 20042008 YEAR Foreign patients travelling specifically for healthcare No. 2004 2005 2006 2007 2008 320,000a 374,000b 410,000c 348,000d 370,000e Average
1

Total expenditure of visitors on medical services and items (S$ million)e 383 561 763 947 1,025 (USD million)1 271.2 397.2 540.3 670.6 725.8 Average % growth 46.5 36.0 24.1 8.2 28.7

% growth 16.9 9.6 -15.1 6.3 4.4

Exchange calculated at the 10 June 2010 rate of 0.7081. Sources: aThe Edge Malaysia (2005) Creating a health hub, 21 November 2005. b The Straits Times (2006) Foreigners flocking to Singapore hospitals, 29 March 2006. c Singapore Hansard (2009) 22 January 2009 Parliament no. 11, session no. 1, vol no. 85, sitting no 8, section on Oral answers to questions, Medical Tourism. d Singapore Medicine (2010) Media Fact Sheet (updated February 2010) Singapore more than just a worldclass healthcare destination. e Singapore Tourism Board, various years, Annual Report on Tourism Statistics.

1.8%) and the Middle East (from 0.5% to 1.0%), while patients from Singapore stayed at around the 1.1% level for the three years (Malaysian Tourism Promotion Board, 20068).9 In Singapore, an MOH study reported that between the periods 19937 and 1998 2002, the percentage of foreign day surgery patients from Indonesia dropped from 56 to 48.5, and of foreign inpatients from 48.8 to 43.9; while Malaysian day surgery patients dropped from 24.7% to 22.4%, and Malaysian inpatients from 25.7% to 19.4% (Khoo, 2003). In this period, progress was made in diversifying source countries and regions to Britain, North America, South Asia, Japan, Australia, and New Zealand (Khoo, 2003).10 More recent figures from a business source show that the majority of foreign patients in Singapore in 2005 were still constituted by Indonesians (50%) and Malaysians (11%), although they also report that Parkway and Raffles Medical, the two largest private hospital companies in Singapore, have been successful in efforts to diversify their sources of foreign patients (Nomura Singapore, 3 March 2009). Nevertheless, a decline in medical tourist numbers has been noted in Singapore. As reported in the business media, several reasons might account for this: the global economic recession, market saturation (too many hospitals opening up) and less competitive prices as neighbors, such as Malaysia and Thailand, entered the medical tourism industry (The Business Times Singapore, 30 July 2009;11 The Edge Singapore, 27 July 2009). Medicine in Singapore has been sold internationally on the basis of highly skilled practitioners and state of the art technology rather than price, because the high value of its currency makes it expensive compared to Malaysia, Thailand, and India. The private healthcare corporations in Malaysia and Singapore have expanded beyond their shores in progression with the expansion of the medical tourist market (Chee, 2008). The significance of medical tourism to the private hospitals is reflected in the percentage of foreign patients, which is about 30% in the Parkway hospitals,12 and 3040% in Raffles Medical Hospital in Singapore, and 20% in the Pantai hospitals in Malaysia (Nomura Asia Healthcare Research Team, 9 December 2009: 49).

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State involvement in medical tourism

Governments in both Malaysia and Singapore have created administrative structures to coordinate and spearhead various efforts to develop the medical tourist industry. In Malaysia, the inter-ministerial National Committee for the Promotion of Medical and Health Tourism (henceforth MNCPHT) was formed by the MOH in January 1998 to promote health tourism as an industry and foreign exchange earner (MOH, 2002: 104113). An administrative unit, the Health Tourism Section, was later set up in 2003 under the Medical Practice Division of the MOH, to act as secretariat to the national committee, which was chaired by the Director-General of Health. In September 2005, this section was moved to the newly created Corporate and Health Industry Division (MOH, 2005a: 153). In Singapore, Singapore Medicine, a multi-agency governmentindustry body, led by the MOH and supported by the STB and two other government agencies, was launched in 2003. The Singapore state supports medical tourism by directly carrying out promotion and marketing. This is mainly done through Singapore Medicine, whose primary functions are to coordinate and carry out marketing efforts for the Singapore brand as a whole. Hence for example, it provides information through its website, produces information materials, and sponsors publications such as Patients Beyond Borders Singapore Edition (Woodman, 2007). It also participates in various industry conferences by speaking, exhibiting, or sponsoring an item, so as to project a presence, and advertises the Singapore brand in various venues. The Malaysian states efforts to develop and support the medical tourist industry are more varied, and may be summarized as (1) facilitating or creating enabling conditions, (2) providing material incentives, and (3) actively carrying out promotional activities. Under the MNCPHT, therefore, subcommittees were set up to identify suitable source countries for promoting health tourism, and to draw up proposals for tax incentives, fee packaging, accreditation guidelines, and amending rules and regulations regarding advertisements for medical establishments (MOH, 2002: 104113). The first type of efforts could be seen in the relaxation of regulations for advertising medical services, and in setting up an accreditation system for hospitals. The Medicine Advertising Board agreed to expedite applications from APHM, and advertising regulations were relaxed in time for the 16th Commonwealth Games 1998, which Malaysia hosted, so that medical screening packages could be advertised in brochures and distributed in hotels, hospitals, and travel agencies (MOH, 2002: 104113). Since mid-2005, advertising regulations have been further liberalized (MOH, 2005b: 199). In 1997, the MOH collaborated with the Malaysian Society in Quality Health (MSQH) to implement a system of accreditation, which gave hospitals a way to attain and advertise a government certified standard of quality that was considerably less expensive than the internationally recognized Joint Commission International (JCI) accreditation process, set up by the Joint Commission on Accreditation of Healthcare Organizations of the United States. It was only in 2008 that the first hospital in Malaysia obtained JCI accreditation (The Business Times Malaysia, 28 April 2009; Penang Adventist Hospital website, accessed 1 July 2010).13

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Second, the Malaysian state supports the development of medical tourism through providing tax incentives. Tax incentives are already in place for building hospitals, using medical equipment, pre-employment training, and the use of information technology; while for medical tourism specifically, private hospital operators can claim double deduction for expenses incurred on the promotion of their services abroad (MOH, 2002: 110). Revenues from foreign patients were exempted from income tax by 50% on the value of increased exports, and this rate was increased to 100% in the 2010 national budget (Malaysia Prime Ministers Department, 2009). Tax deductions were also announced for setting up international patient units, and for expenses incurred to gain international accreditation (IWHTA Newsletter, March 2010), and in one of the governments main development projects, the Iskandar Develop ment Region, tax holidays will be available for pioneer industries, which includes healthcare. The third way in which the Malaysian government supports medical tourism is by organizing and conducting road shows and marketing promotions. For example, the Malaysia External Trade Development Association (MATRADE) organized three specialized healthcare missions to promote health tourism in 20001 which included the Middle East, Myanmar, Vietnam, Jakarta, and Surabaya (MOH, 2002: 108109), and in 2007, there were healthcare marketing missions to Oman, Jordan, Muscat and Amman in March, four destinations in Indonesia in August, and Sri Lanka in October (APHM website, accessed 13 June 2010). Despite all these measures, the perception of private hospital executives is that government efforts to boost the medical tourist industry have not been adequate, particularly when compared to Singapores.14 These executives have expressed anxiety that the majority of Malaysias medical tourists are from Indonesia, and unless new markets are found, the more aggressive efforts of the surrounding countries, and the development of the Dubai Healthcare City (leading to shrinking of the Middle East market) will be to the detriment of the industry in Malaysia. Furthermore, the private sector players feel that Malaysia has failed to use its Muslim credentials to its advantage in attracting medical tourists from the Middle East, and has lost out to Singapore and Thailand in this market sector. In 2009, following proposals from the business sector, the Malaysia Healthcare Travel Council, comprising representatives from government and private sector, was established as the primary agency to promote and develop the industry and position Malaysia as a healthcare hub in the region (The New Straits Times, 22 July 2009; International Medical Travel Journal, 29 July 2009). The new branding effort had begun with the Health Minister launching a logo and the website Malaysia Healthcare (accessed 5 September 2009) (The Sun, 10 June 2009).

Medical tourism in public and state corporation owned hospitals

In Singapore, the restructured government hospitals treated 20% of the medical tourists in 2002 (Khoo, 2003). In Malaysia, corporatized hospitals such as the National Heart Institute compete with private hospitals to attract foreign patients. Furthermore, there are

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plans to set up centres of excellence for certain specialities in particular government hospitals for medical tourism, and to upgrade Hospital Langkawi to become a health screening hub for foreign tourists (MOH, 2005a: 153). The position of the state vis-a-vis medical tourism also has to be understood in the overall political economic context. In both countries, sovereign wealth funds operated by state holding corporations are invested in healthcare corporations in their home countries as well as in other countries of the region. Profits or losses, as the case may be, accrue to government, but there is no direct channel for profits to be invested into the public healthcare services. Khazanah, Malaysias sovereign wealth fund, now has a 95% shareholding in Parkway Holdings, the leading regional medical tourism player based in Singapore, which in turn owns 40% of Pantai Holdings, a major private hospital corporation in Malaysia.15 Khazanah also has majority (60%) direct ownership of Pantai as well as a 12.5% stake in Apollo Hospitals in India. Temasek Holdings, Singapores sovereign wealth fund, has a 4.9% shareholding in Raffles Medical Group, Singapores second (after Parkway Holdings) major private healthcare provider, as well as shares in other regional healthcare providers (Nomura Singapore, 3 March 2009). The key question is whether such direct state interests in private healthcare will lead to a conflict of interest with the states obligations and responsibilities to the people who are dependent on public healthcare. Furthermore, if medical tourism becomes a larger source of revenue for private healthcare, will the states vested interests lead to policy measures that cater more for the medical tourists than for the citizens?

Effects of medical tourism on healthcare services

State involvement in developing the medical tourist industry has been predicated on the premise that it is an export industry that earns foreign exchange, and contributes to economic development. Bookman and Bookman (2007) argue that the highly skilled jobs, capital intensive technology, and foreign exchange that medical tourism generates will help less developed countries escape from the economic dependency that extractive industries create. Theoretically, there is also a possibility of direct benefits to the public health system. A Malaysia MOH document, for example, states that the income from foreign patients can be utilised to improve the national health services for the benefit of the local population (MOH, 2003: 51). In the Singaporean case, the rationale is that the population is too small, hence enlarging the patient market through medical tourism enables hospitals to gain economies of scale, and to justify the heavy capital investment required for high technology medicine.16 Both governments have felt it necessary to reassure the public of their access to healthcare in the face of competition from foreign consumers. For example, the directorgeneral of the Malaysian MOH in responding to reservations expressed by doctors and non-governmental organizations that the overemphasis on medical tourism by the government would result in poor healthcare for the locals as resources would be diluted, said that Malaysias efforts to promote its medical tourism amongst foreigners will

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not affect the quality of healthcare now being enjoyed by locals (Bernama, 21 July 2009). In another example, Singapores Health Minister Khaw Boon Wan when addressing Parliament, reassured Singaporeans that the restructured hospitals do not take part in overseas marketing, and that foreign patients form less than 3% of their patient load (Singapore Hansard, 22 February 2010), and that we will never neglect local patients and simply chase the foreign patient load (Singapore Hansard, 14 September 2009).

Shortage of medical expertise

The most serious problems will arise from a draining of medical expertise out of the public sector, and an upward pressure on costs. The movement of doctors from the public to the private sector is a long-standing problem, and cannot be solely attributed to medical tourism. Nevertheless, medical tourism, by making the private hospitals increasingly more lucrative to work in, contributes to an exacerbation of the problem. The public healthcare services in both countries face this problem, but so far they have been able to ameliorate the situation by recruiting foreign doctors. In Malaysia, public sector medical practitioners constituted between 539% of total in 197280, but has since decreased to 423% in 200006 (Chee, 1990: 77; MOH, 2006a: 165). The rapid growth of the private healthcare sector has led to an exacerbation of this problem, as doctors leave for the more lucrative private sector (MOH, 2005b: 4344; Wong, 2008: 288). Although the MOH is the major tertiary care provider, it only has 44% of all the specialists in the country (MOH, 2005b: 30). The government has tried to address this issue by various administrative measures designed to improve public doctors earnings, as well as by hiring foreign doctors (MOH, 2005b: 4344). At the end of 2005, 387 (out of 7327) medical officers and 238 (out of 1321) specialists were contracted from India, Myanmar, Pakistan, Indonesia, Bangladesh, Sri Lanka, and Egypt (MOH, 2005a: 18, 20). In Singapore, the Health Minister explained that medical professionals were still leaving the government-owned health services even after the reforms were instituted, because remuneration is still lower than the private sector; and although more than 200 doctors graduated from local institutions in 2007, more than 400 foreign doctors were recruited from overseas (Singapore Hansard, 3 March 2008). In 2008, out of 1248 doctors registered, 739 were foreigners (Singapore Medical Council, 2008: 11).

Segmentation and increasing costs

In Malaysia, medical tourism, by enlarging the patient market, will exacerbate a growing gap between a corporate sector catering to a paying (domestic and foreign) clientele, and a depleting public sector for the others. The MOH acknowledges this problem, and sees that its solution is in restructuring the public hospitals (MOH, 2003: 52, 54). But even with the restructuring of public hospitals, equitable access will still depend greatly on whether the government can stem the flow of medical expertise from the public to the private sector, and how the financing scheme is structured. Even now, the imbalance

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between the public and private sectors has meant that the government has had to outsource specialist services to the private sector (MOH, 2006a: 179). In order to match the high incomes of private sector specialists and other personnel, either the government will have to commit ever greater resources, or users will ultimately have to pay more. In Singapore, because of the way that financing and provision have been restructured, there is less of a gap between public and private services. The narrowing of the divide, however, has the consequent impact of escalating costs and user fees in public facilities. Costs are managed through a range of administrative controls, for example, adjusting the number of subsidized hospital beds, limiting the conditions for which one can draw from Medisave or claim through Medishield, a maximum cap on claims, as well as deductibles and co-payments. Co-payments could range from 73% for bills below S$3000 (US$2210) to 56% for bills between S$10,00020,000 (US$7,06614,132) (Teo, 2008). In 2009, means testing was instituted for hospital wards in an effort to limit subsidies to targeted groups (The Straits Times, 1 January 2009). Much of these increased costs are now paid by the user through out-of-pocket payments, which in 2008 constituted 94% of private health expenditure (WHO, NHA: Singapore, 2010).17 A parliamentarian complained in 2008 that even the most subsidized user (C class) of the restructured hospitals pay an average bill of S$1,112 (US$795), 30% more than the 2005 average, and that one in five patients with chronic conditions were found in a survey not to be able to afford to keep up with their medication (Singapore Hansard, 3 March 2008). Such out-of-pocket payments including co-payments and deductibles chip away at healthcare entitlements (Moran, 1991). Equitable access will depend on the continuation of subsidies at increasing levels and with an ageing population in both countries, claims on these entitlements will pose an increasing health governance and financing challenge. Beginning 1 March 2010, the Singapore government has allowed Medisave funds to be used at specific private hospitals in Malaysia (The Edge Singapore, 1 March 2010: 16).18 The Minister explained that this would help individuals preserve their Medisave accounts, since hospital care is cheaper in Malaysia (Singapore Hansard, 22 February 2010). Interestingly, this came one year after the same Minister was queried whether he was trying to outsource the governments responsibility to provide affordable healthcare to Malaysia (Singapore Hansard, 10 February 2009).

Conclusion
The World Trade Organization governs international trade in health services, but there, the idea is to liberalize markets rather than to protect healthcare access, equity and social justice. The latter is a function of the World Health Organization (WHO), but its efforts have so far been limited (see Whittaker, this issue). Yet the medical tourism of one country profoundly affects the people of another country. When middle class and affluent patients from Indonesia forsake their own health services, for example, Indonesia not only loses foreign exchange, but also the vocal and politically influential support of its upper and middle classes for their domestic public healthcare system, leading to its deterioration, to the detriment of poorer groups that rely upon it. When the private healthcare

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services in Singapore and Malaysia are enlarged by the demand of medical tourists, they start a chain reaction, drawing medical expertise from the public sector, which in turn recruits from other, usually poorer, countries. Healthcare has remained within national jurisdictions, even as medical professionals, patients and investment capital move between countries. State institutions regulate medical practice, financing, and resource allocation. In mixed healthcare systems such as exist in Malaysia and Singapore, the balance between private and public sectors has an important bearing on the social security function of healthcare for the population. If the state is involved in generating markets for private healthcare, how will it play its role as regulator, and how will public interests be protected? In this article, I have used the cases of Malaysia and Singapore to situate state support for medical tourism within an understanding of the nature of the state and its economic development, and to show the potential negative effects it may have on healthcare equity and social security. Many of the problems arise from the public-private divide, but are exacerbated when the domestic private sector is strengthened by state support for medical tourism. The paths taken in healthcare reforms were the main drivers for private sector growth; while the private sectors imperative to seek out larger markets, particularly when faced with the 1997 Asian financial crisis, logically extended to medical tourism. The cases of Malaysia and Singapore illustrate the effects of healthcare reform in commercializing the healthcare sector, and are particularly relevant to the current global health policy debates on the scope for healthcare commercialization in the context of negotiations on trade in health services. As successful players in the medical tourism market, these countries could serve as models for others. It may well be that the medical tourism industry brings benefits to a countrys economy. Nevertheless, those concerned with issues of equity should urge a deeper examination of the effects on social security and healthcare entitlements, so as to understand the social costs as well. Acknowledgements
This article draws from a 2007 research project funded by the Asia Research Institute.

Notes
1. In this article, medical tourism and medical travel will be used interchangeably to mean the organized travel outside ones healthcare jurisdiction (usually corresponding to national territorial boundaries) for medical intervention (Carrera and Bridges, 2006). Goodrich and Goodrich (1987) first used the terms healthcare tourism or health tourism to refer to tourism derived from a deliberate marketing strategy on the part of a tourist destination that specifically promotes health services and facilities ranging from spas, special diets and thermal swimming pools to medical check-ups and minor surgery. Later, following popular usage, medical tourism was used to refer to travel for medical services, and set apart from the part of health tourism that focuses on spas and alternative therapies. Medical tourism as it is now widely used no longer necessarily includes the recreational aspects of tourism (Pennings, 2007). 2. The editorial in the 12 July 2008 issue of Lancet (372: 87) provides a summary. 3. Both were British colonies. Malaya was granted independence in 1957, and six years after, joined with Singapore and the British protectorate states of Sabah and Sarawak to form Malaysia. In 1965, Singapore separated, and became an independent nation on its own. Singapore is an

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urban island state with a population of 4.9 million in 2009 (64% were citizens, 11% permanent residents, and 25% non-residents); while Malaysia, with a population of 27.2m (2007), still has a substantial rural sector (37% in 2005) despite rapid urbanization in the 1980s and 1990s (Malaysia Department of Statistics, 2007; Malaysia Economic Planning Unit [EPU], 2006; Singapore Department of Statistics, 2009). 4. The term corporatization is used by the government to mean the restructuring of a public hospital into a corporate entity with 100% of the shares owned by government. 5. The WHO considers Medisave as private health expenditure, but Medishield as social security and therefore as part of public health expenditure. Strictly speaking, however, both Medishield as well as the Medishield integrated plans are voluntary insurance (Singapore CPF Board website, accessed 8 September 2009). Other researchers estimate that the governments share of THE declined from about a third in 1980 to about a quarter in 2000 (Lim, 2004, 2005; Purcal, 1989, 1995). 6. At the end of August 2007, 199 private hospitals were licensed (MOH, 2006b: 183). The MOH Annual Report has not provided figures of private hospital beds since 2004. 7. The information in this paragraph is from this source. 8. Not all private hospitals submit statistics, but the more recent figures would include all the large hospitals that are the main players in the medical tourist market. The rise in the 10-year period may therefore also reflect an increasing number of hospitals that comply with the submission of statistics. The average annual growth rate over the last five years is therefore a more accurate reflection of actual growth. 9. Meghann Ormond generously provided me with these statistics. 10. This study reported 13,576 foreign inpatients and 6,805 foreign day surgery patients (private and public) for 2002 (Khoo, 2003), based on counts of episodes of care for foreigners who come into the country for the specific purpose of medical treatment. These figures are not comparable to the STB statistics, which include foreigners who come for outpatient treatment other than day surgery. 11. This is a report in the series Singapore International, which is jointly produced by The Business Times and IE Singapore, or International Enterprise Singapore, which is the agency under the Ministry of Trade and Industry spearheading the development of Singapores external economy. 12. In 2008, Parkway hospitals accounted for 44% of all private hospital admissions and Raffles Hospital for 13% (Nomura Singapore, 3 March 2009: Exhibit 75). 13. From long-term observation and monitoring. 14. This paragraph draws from the authors primary data collection in 2007, and is supported by information in SERI (2009). 15. Khazanah gained majority share ownership of Parkway in August 2010, after a tussle with Indias Fortis Healthcare (The Edge Singapore, 1420 June 2010; The Edge Singapore, 17 August 2010). 16. See for example, Jason Yaps article (2006) in the newsletter of the Singapore Medical Association, written when he was the Director (Healthcare Services) in the STB. 17. Part of this may be paid by employers as employees benefits. 18. These hospitals are limited to those belonging to Parkway and Health Management International, both Singaporean companies, although the Malaysian government has a sizable stake in Parkway.

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Rsum Lien entre lEtat et le tourisme mdical en Malaisie et Singapour

Limplication des autorits dans le soutien accord au secteur priv pour quil propose des prestations de sant des patients trangers constitue une caractristique notable du tourisme mdical qui se dveloppe en Asie depuis la fin des annes 1990. La Malaisie et Singapour, deux acteurs majeurs dans ce domaine, ont entam des rformes dans le secteur de la sant depuis les annes 1980, ce qui a entran une expansion du secteur priv des soins de sant. LEtat de Singapour, qui soriente vers un corporatisme dEtat, a poursuivi ses rformes et a par consquent les moyens de rduire lcart entre les prestations de sant publiques et prives. En revanche, le gouvernement malais, divis et confront une plus forte opposition, na pas t en mesure de progresser autant dans ses rformes du secteur de la sant, le foss entre services de sant publics et privs se creusant davantage. Cependant, ces deux pays font face une pnurie de mdecins, un accroissement des cots et une augmentation des frais dutilisation - des problmes exacerbs par un march priv en pleine expansion auquel le tourisme mdical contribue. En tant quconomies de march qui ont russi, les cas de la Malaisie et de Singapour permettent dillustrer les effets potentiels des rformes de la sant et de la commercialisation des soins de sant sur la politique sociale - effets particulirement notables dans un contexte o le commerce des prestations de sant fait lobjet dune attention grandissante en ce sens quil peut servir de moteur de croissance au dveloppement conomique des Etats.

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Resumen El Estado y el Turismo Mdico en Malasia y Singapur

Una caracterstica a destacar sobre el turismo mdico que se ha venido desarrollando en Asia desde finales de los 90 es la implicacin de los estados a la hora de ayudar al sector privado en la comercializacin de los servicios de asistencia sanitaria para pacientes extranjeros. Malasia y Singapur, dos lderes en este campo, se han embarcado, desde los aos 80, en reformas de asistencia sanitaria y, como resultado, se ha obtenido un sector sanitario ampliado. El estado de Singapur, cambindose hacia el corporativismo de estado, ha avanzado ms en sus reformas de asistencia sanitaria y, por lo tanto, puede reducir el hueco existente entre los servicios de salud pblicos y privados. El estado de Malasia, fragmentado y frente a una gran oposicin, no ha podido llegar tan lejos en sus reformas de asistencia sanitaria y se enfrenta a un hueco creciente entre los servicios de salud pblicos y privados. Sin embargo, ambos pases se enfrentan a una escasez de mdicos en el sector pblico y a costes crecientes y a honorarios de usuario, problemas que se ven exacerbados por el creciente mercado privado en la asistencia sanitaria al que la industria del turismo mdico contribuye. Como economas prsperas de comercio, los casos de Malasia y Singapur sirven para ilustrar los efectos potenciales de las reformas de asistencia sanitaria y la comercializacin de la misma en poltica social; particularmente en el contexto de un foco emergente en el mercado de los servicios de asistencia sanitaria como un posible motor de crecimiento para el desarrollo econmico de los pases. Biographical note Chee Heng Leng is Senior Research Fellow at the Asia Research Institute, National University of Singapore.

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