PETALING JAYA: Bank Negara Malaysia (BNM) believes rising medical costs are a real concern for many Malaysian families, following discussions with stakeholders, including from the government, the private healthcare sector and consumer groups.
While the central bank shares the concerns of healthcare advocates on rising medical costs, its stance in a white paper on the base medical and health insurance/takaful (MHIT) plan released in January and co-authored with the Finance and Health Ministries, proposes different solutions compared to these advocates.
A key component of the RESET strategy announced in March 2025, the base plan aims to provide medical coverage at an affordable premium, and to transition the private healthcare services to the diagnostic-related group payment system from the current fee for service payment system to better manage escalating costs.
BNM deputy governor Aznan Abdul Aziz, in a reply to StarBiz, said the base plan reflects the government’s commitment to keeping private healthcare accessible and sustainable for all.
“We wanted to create a plan that is clear and easy to understand; one that provides essential medical protection and remains affordable over time.
“This plan stands on its own and isn’t bundled with any investment product, so you know exactly what you’re paying for and what you’re getting,” he said.
“We know that some people find current insurance plans complicated or are worried about rising premiums. The base MHIT plan aims to be straightforward and stable, especially for those who want something they can keep up with, year after year.
“It’s not meant to cover every possible scenario. Trying to do so would make premiums much higher. Instead, it’s about providing meaningful coverage for what matters most, while keeping costs sensible with better outcomes for patients,” Aznan added.
He said the base plan aims to give more inclusive access to medical insurance and takaful protection for individuals with pre‑existing medical conditions that remain stable and controlled, and this could be done without compromising long-term sustainability of coverage for all policyholders.
“Today, such individuals face difficulties getting any form of insurance coverage even if risks to the broader pool could be contained,” he said, pointing to the “no look-back” provision giving policyholders greater certainty that their protection would not be taken away when they need it the most.
Healthcare advocates believe that the base MHIT plan remains a temporary measure to the longer-term challenges facing Malaysia’s healthcare system.
They said government initiatives would best be served by pouring in more resources to the under-funded and under-staffed public healthcare sector, to which some four-fifths of Malaysians rely on for services.
The steep increase in healthcare insurance and takaful premiums have led to 5.2% of policies, or an estimated 340,000 MHIT policies, surrendered between January 2024 and June 2025, according to the white paper.
Healthcare advocates have raised concerns that the already overwhelmed public healthcare sector would be facing ever more pressure as people who have surrendered their policies rely on government hospitals.
Another issue raised concerns the impact of the base plan on the whole healthcare funding ecosystem. “By introducing a government-backed cheap product there is a risk that people will switch into that from their current insurance, which is likely to be more expensive,” economist Geoffrey Williams noted.
“This will then mean that they may be under-insured and the demand for MHIT services will be too high based on the premiums. This would make MHIT under-funded and it would need a government bailout pushing money to private insurance and private commercial healthcare companies,” Williams said.
He said the option enabling Employees Provident Fund (EPF) withdrawals to pay for the base plan premiums have to consider pension adequacy. “There is a crisis in under-funded retirement savings and drawing down RM50 per month or RM600 per year will draw down the retirement savings of low-income groups,” Williams said.
He said all this option would do “is to push billions of ringgit from people’s retirement savings into private insurance and private healthcare companies”.
“A better outcome can be achieved by the government acting as the purchaser of private healthcare, cutting out the insurance middlemen and regulating service quality and fees in the private sector,” Williams said, adding that this outcome would be more efficient, more effective and more equitable.
Another economist, Manokaran Mottain from Universiti Kebangsaan Malaysia, also disagrees with the option allowing EPF withdrawals. “Retirement savings are low as it is, and there are already too many caveats that allow for EPF withdrawals,” he said.
EPF members have the option to withdraw from their Account 3 since May 2024 without any exceptions following pressure to allow withdrawals to meet rising living costs. Members can withdraw money from their Account 2 for a number of reasons, with making downpayments for property purchases, paying down housing loans and education being among the top reasons.
Additionally, Account 2 can also be used to purchase approved insurance and takaful schemes under the i-Lindung programme, as well as to purchase approved medical treatments, critical illnesses or purchase of medical equipment.
Also, assuming that the plan begins a planned rollout next year, Manokaran feels that the premium for senior citizens has been set too high, given the expressed purpose of controlling the rise of premiums. “There needs to be a balanced approach if this is to work,” he said.
According to the white paper, the proposed premium for those aged 60 to 65 would be set from RM280 to RM350, with a RM1,000 deductible and an annual limit of RM150,000. For those aged 75 and above, the proposed premium would be set from RM500 to RM780.
Full Q&A with the deputy governor can be found at www.thestar.com.my.
