KUALA LUMPUR, 2 September 2026 — Budget 2027 must move beyond incremental increases in healthcare spending and address structural weaknesses which continue to undermine the sustainability, affordability and resilience of Malaysia’s healthcare system, especially the public service. It cannot afford half measures.

Malaysia’s population is increasingly suffering from a non-communicable diseases crisis that began long before the COVID-19 pandemic. The pandemic made it worse. The country faces an increasing ageing population, a massive healthcare workforce shortage, ageing health infrastructure, and rising healthcare costs that affect affordability and financial sustainability.

Successive governments cannot keep kicking these issues down the road for other Ministers or administrations to solve. Hard decisions and out-of-the-box thinking are needed to overcome these challenges,” emphasised Azrul Mohd Khalib, Chief Executive of the Galen Centre for Health & Social Policy.

These challenges cannot be solved through annual budget increases alone. Budget 2027 needs to implement a comprehensive approach that combines higher public investment, new sources of health financing, stronger prevention, better regulation, and long-term institutional reform.

The Galen Centre proposes the following five priorities for Budget 2027 in order of urgency.

1. Implement aggressive healthcare workforce reforms and recruitment

Recent improvements to allowances and permanent appointments are important but are not sufficient to resolve Malaysia’s healthcare workforce challenges. Some may even argue it is too little, too late. The public healthcare system is haemorrhaging specialists, medical officers, nurses of all grades, medical assistants, and other personnel. They are moving to the private sector, other countries or quitting the healthcare sector altogether. Wards cannot be fully staffed, services must be restricted, emergency departments need to be triaged, and newly built hospitals and clinics cannot be operationalised.

Every experienced nurse, specialist, pharmacist or allied health professional and even trainee doctor who leaves the public system represents a loss of capability which may take years and significant public expenditure to rebuild. Thousands have already left. This is not business as usual.

Budget 2027 should provide additional funding for specialist training, nursing training, recruitment and retention measures, medical education incentives, and better working conditions.

“Other countries are implementing recruitment drives that secure a supply of healthcare professionals for at least a decade. Where is Malaysia’s plan?” Azrul asked.

Budget 2027 should fund an aggressive, multi-year recruitment and retention programme for doctors, specialists, nurses, pharmacists and allied health professionals in the public sector, targeting both Malaysian and non-Malaysian talent and qualified healthcare professionals. Local supply cannot meet the gap in doctors, nurses, and other healthcare professional vacancies. Obviously, local talent should be preferred, but we must also recruit foreign labour to fill these positions.

Countries that can attract and retain internationally trained healthcare workers will be best placed to address workforce shortages.

“Recruitment must be matched by stronger retention measures, because Malaysia cannot simply recruit more workers while continuing to lose experienced staff. The goal should be to make Malaysia’s public health service one of the most attractive healthcare employers in Southeast Asia,” Azrul emphasised.

2. Establish an independent Health Services Commission

“An independent Health Services Commission is needed because Malaysia’s healthcare workforce has specialised staffing, training, deployment, remuneration and career-development needs that are poorly served by the general civil service (JPA) framework,” said Azrul

An independent commission could enable more flexible, responsive workforce planning, accelerate recruitment and permanent appointments, develop clearer specialist and leadership pathways, improve deployment to underserved areas, and design remuneration and retention packages that reflect the realities of clinical work. 

It would also strengthen accountability by basing workforce decisions on service needs, vacancy rates, workload, and future health demand rather than broad public-sector rules.

A Health Services Commission would help Malaysia compete for scarce healthcare talent and retain experienced professionals in the public system.

3. End sugar subsidies and strengthen fiscal measures against unhealthy consumption

End public subsidies to sugar refineries amounting to between RM 400 million and RM 500 million annually. “Sugar subsidies directly undermine Malaysia’s efforts to reduce obesity, diabetes and other non-communicable diseases by artificially keeping the price of sugar low and encouraging continued high consumption. It does not make sense,” emphasised Azrul.

It is contradictory for the government to tax sugary drinks and promote a “War on Sugar” while simultaneously using public funds to subsidise one of the main ingredients driving excessive sugar intake.

Removing the subsidy would allow prices to better reflect the health costs of consumption, reduce a distortion that favours unhealthy diets, encourage reformulation of recipes depending on heavy use of sugar, and free up hundreds of millions of ringgit that could be redirected towards diabetes prevention, nutrition programmes, screening, primary care and healthier food policies.

“Budget 2027 should support public health objectives rather than work against them,” Azrul emphasised.

4. Substantially increase tobacco excise duties

Tobacco excise duties should be increased substantially in Budget 2027. This year’s increase of just 2 sen per cigarette, from RM0.40 to RM0.42 per stick, or around 5%, was too low. Cigarette excise had practically been on a tax holiday, remaining unchanged for a decade. There should be a predictable schedule of future increases.

Budget 2027 should therefore raise cigarette excise by at least 20%, from RM0.42 to around RM0.50 per stick, as an immediate step, with a longer-term pathway towards the Galen Centre’s proposed RM0.77 per stick. This could potentially generate approximately RM771.8 million in additional tax revenue annually,” Azrul pointed out.

A larger increase would reduce smoking prevalence, discourage smoking initiation, particularly among young people, reduce the enormous health costs associated with tobacco use, and generate additional government revenue that could be earmarked for smoking cessation, tobacco control enforcement, and health promotion.

“Tobacco taxation remains one of the most effective tools to improve health outcomes and raise revenue simultaneously. The government should not be reluctant to make use of this tool.”

5. Commit to establishing National Health and Social Insurance

Malaysia’s health system remains overwhelmingly dependent on annual federal allocations. This will become increasingly difficult to sustain as the population ages and demand for chronic disease management, medicines, and long-term care increases.

“Malaysia should formally begin introducing a National Health and Social Insurance scheme to provide a more sustainable and predictable funding source for healthcare and long-term care. Based on the SOCSO model,  70% of funds collected would be allocated to health, while 30% would be for aged care,” Azrul proposed.

As the population ages and the burden of chronic disease increases, a contributory social insurance model involving employers and employees could mobilise additional ring-fenced resources, strengthen financial protection for households, and reduce pressure on government finances while preserving universal access.

It could help improve access to innovative and high-cost medicines, and provide sustainable support for long-term care for seniors.

Crucially, it should complement rather than replace existing tax-funded healthcare, creating a broader financing base better able to support rising demand, new technologies, medicines, and aged-care needs over the long term.

Budget 2027 should announce a clear roadmap for consultation, legislation, governance and implementation.

Conclusion

“The health system depends on its people. If doctors, nurses and other healthcare workers do not see a sustainable future for themselves in the public system, additional hospitals, equipment and allocations will not solve the underlying problem.”

“We need to spend more on health, but we must also decide where that money will come from. That means developing social health insurance, taxing products which contribute to disease, stopping subsidies which undermine public health and making better use of existing healthcare capacity.”

The Galen Centre believes Budget 2027 offers an opportunity to shift from reactive annual spending to a more sustainable model of healthcare financing and delivery.

Malaysia needs a health system capable not only of treating illness, but also preventing disease, retaining its healthcare workforce, providing affordable access to medicines, and managing the demands of an ageing society.

“We can make the next decade better than what Malaysia and Malaysians have experienced in the past 10 years,” emphasised Azrul.