PETALING JAYA: For many Malaysians, the biggest worry isn’t getting sick – it’s paying for treatment without going broke.
The government’s proposal to allow limited EPF Account 2 withdrawals to fund basic medical insurance has drawn mixed reactions: supporters say it could widen coverage, while critics warn it must be tightly designed to avoid eroding retirement savings.
The proposal comes as the government and EPF discuss allowing Akaun Sejahtera (Account 2) withdrawals to pay for the new base medical and health insurance/takaful (MHIT) product.
The Base MHIT, introduced by Bank Negara on Jan 22 under the RESET effort, is a voluntary, standardised product offering baseline private hospital cover.
It provides annual coverage of at least RM100,000 (rising to RM150,000 for those over 60), with indicative premiums of about RM80-RM120 a month for adults in their early 30s, or RM50-RM70 under a lower-cost “Standard Plus” option with higher out-of-pocket costs.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the proposal fits Account 2’s purpose, which covers essential needs such as education, housing and healthcare.
“Health protection is not just a social issue; it also affects productivity and economic stability,” he said in an interview, adding that affordable cover can help households avoid financial shocks from illness.
But he said the trade-off is real: withdrawals today could weaken retirement savings in the long run.
Afzanizam added that pressure on households is linked to wider constraints in healthcare financing.
“Public healthcare spending is about 2% of GDP, below a commonly cited 5% benchmark.
“EPF has increasingly become one of the few financial buffers available to households,” said Afzanizam, arguing that stronger public finances are needed to expand healthcare funding sustainably.
Licensed financial planner Nur Mahfuudhzah Normin said an EPF-linked MHIT could widen basic cover for lower- and middle-income Malaysians, but only with a large risk pool.
“The scheme’s sustainability depends on broad participation,” she said.
She added that it could help micro and small firms that cannot afford group insurance, and should be designed to include gig workers, with platform contributions supported by targeted incentives.
However, she said withdrawals must be tightly controlled because Malaysia already faces a retirement adequacy problem.
“Account 2 is for medical needs, but frequent withdrawals can erode retirement savings,” she said, calling for clear eligibility rules, caps and disclosure on long-term impact.
Nur Mahfuudhzah also urged stronger public healthcare capacity and tighter oversight of private hospital pricing and billing.
She said the proposed two-tier co-payment model can help manage costs, but warned rural patients may be disadvantaged because private capacity is concentrated in urban areas.
Economist and policy expert Dr Geoffrey Williams warned that EPF-linked financing could shift healthcare costs onto retirement savings without addressing access.
He said many would still be left out, including informal workers who are not active EPF contributors and members with low balances who may not be able to sustain recurring premiums.
“Actively contributing EPF members are only a fraction of total members and many of them already have inadequate balances,” said Williams, adding that encouraging withdrawals for insurance could weaken savings at a time when Malaysians should be accumulating more for old age.
He also warned of market distortion.
Higher-income groups, he said, may switch to cheaper Base MHIT products funded via EPF while keeping private savings, weakening risk pools and leaving more people underinsured.
“Rather than expanding protection, the approach risks weakening retirement adequacy while failing to address gaps for those outside the EPF net,” he said, adding that cost inflation remains a risk.
Without tighter regulation, he said, expanded insurance funding can encourage over-treatment and over-prescription.
“The real danger is not just funding access, but how that funding is used,” said Williams, calling for regulatory controls to prevent exploitation of insured patients and to keep costs from escalating.
From a consumer protection perspective, the Federation of Malaysian Consumers Associations (Fomca) took a firmer stance, warning that using EPF for recurring premiums could weaken the fund’s retirement purpose.
Fomca chief executive officer Saravanan Thambirajah said even small, repeated withdrawals could add up because members also lose years of compounding interest.
“What begins as short-term relief becomes long-term vulnerability,” he said, warning it could worsen retirement adequacy and raise old-age poverty risks.
Saravanan also added that any health protection gains could be offset by higher old-age poverty risks and greater future dependence on government assistance.
He said healthcare affordability should be addressed through targeted subsidies, dedicated assistance funds and broader risk-pooling mechanisms.
“Healthcare financing and retirement security must be treated as two separate pillars.
“Solving one by weakening the other is not a sustainable policy,” said Saravanan.
