Buckling public healthcare needs support

Discussions have been ongoing among stakeholders and some sections of the public ever since the government released the base medical and health insurance/takaful (MHIT) plan in January to address medical cost inflation in the private healthcare sector, with media reports and the occasional opinion editorial on the merits of the plan.

These discussions continue, as on March 13, the Citizens’ Health Initiative, Universiti Kebangsaan Malaysia’s (UKM) School of Liberal Studies and Vital Signs, a healthcare information platform, will hold a panel discussion on “Taxation, Public Finances & Healthcare Funding”.

Among the questions the panellists want to explore is why the government is not spending more on the public healthcare sector and the organisers have actually issued an invitation to the Finance Ministry to have a representative on the panel.

The question is pertinent because the deputy finance minister, Liew Chin Tong, said recently that government revenue from taxation is projected to increase this year.

In the Fiscal Outlook and Federal Government Revenue Estimates 2026 report released last October, total revenue, including from non-tax sources, is projected to rise 2.7% to RM343.1bil compared to 2025.

The base MHIT plan is a contentious issue for advocates of a stronger public healthcare sector, on which four-fifths of Malaysians rely.

They point to how Malaysia’s public healthcare sector spending fluctuates between 2% and 2.5% of gross domestic product (GDP). Despite calls for public healthcare spending to hit 5% of GDP in 2026, it fell far short at 2.4%, the same as 2025.

A recent StarBiz 7 cover story on the base plan showed that on average, upper middle-income countries spent 3.1% of GDP and upper income countries, a group to which Malaysia is on the verge of joining, spend an average of 8.3%.

Public healthcare advocates regard the base plan as a temporary measure to address the problem of medical cost inflation, as even the authors of the white paper outlining the base plan – Bank Negara Malaysia (BNM) and the Finance and Health Ministries – admit that premiums can and will eventually rise.

While the authors of the white paper have correctly pointed out that to keep premiums affordable, there must be effective controls over unnecessary medical procedures and services that cause costs to spiral, not much is known about how this will be done.

An effective monitoring system is crucial for the base plan to have some measure of success.

But the fact remains that the country’s public healthcare sector suffers from chronic underfunding and understaffing, as a healthcare advocate shared with StarBiz 7 recently.

BNM deputy governor Aznan Abdul Aziz, in a reply to StarBiz 7, says the base MHIT plan reflects the government’s commitment to keeping private healthcare accessible and sustainable for all.

“We want Malaysians to have peace of mind, knowing they have options that are built to last,” he says, adding that it is important to note that the plan is meant to work alongside the public healthcare sector.

“Public hospitals will always be the main safety net for all Malaysians.

“The base MHIT plan is simply another option for those who want extra peace of mind and the flexibility of private treatment. It includes features like co-payments and standardised benefits to encourage responsible use and avoid unnecessary costs,” Aznan says.

BNM believes that the base plan, simple and straightforward, and without bundling with any investment product, provides the essential medical protection covering roughly 99% of treatment needs.

“By keeping the coverage focused, we’re able to keep premiums more predictable and manageable,” he says.

Aznan points out that the RESET strategy announced a year ago to transform private health insurance offerings in the market is a crucial step for the country in tackling the deeper, long-term challenges of the private health insurance industry, rather than just focusing on short-term issues.

He says the strategy, of which the base MHIT plan is a key component, is also about working on other important improvements, such as making prices more transparent and encouraging closer cooperation among all the key players – in particular, hospitals, insurers, doctors and regulators.

The elephant in the room is the diagnostic-related group (DRG) payment system, and its implementation. Originally slated to be rolled out in mid-2025, it has now been postponed to 2027.

The DRG is to transition private healthcare services from the fee-for-service system, from which private hospitals have benefitted, to one with fixed fees based on patient diagnosis to better manage costs.

It continues to be plagued by issues, and the delayed rollout is ostensibly due to technical problems such as integrating data among private hospitals and looking over cost structures.

Without effective monitoring, the DRG may not work even if implemented.

An argument can be made that public healthcare should be the focus, as there is no telling whether those who have given up their insurance or takaful policies in the wake of the hike in premiums will be persuaded to take up the base MHIT plan given the broader concerns over cost-of-living issues.

There is now an influx of middle-class Malaysians in government healthcare facilities seeking treatment, and the situation becomes ever more urgent as the country’s ageing population grows and non-communicable diseases become more prevalent.

If crowded public hospitals, overworked staff and tired infrastructure cannot persuade the government to invest more, what then will it take?

The base MHIT plan, which is essentially risk-rated, may compound the problem as premiums of those who are older can become unaffordable, which will mean having these people fall back on the public healthcare sector.

A fast-ageing population and low retirement savings rate, as Employee Provident Fund savings can be used to pay the premiums, are concerns too.

At the March 13 discussion, if a Finance Ministry representative does make it as a panellist, one question that will be asked is why the central bank allows risk-rated insurance/takaful.