Base health insurance plan is a necessary first step

The MHIT plan is positioned as the first phase of long-term healthcare reforms that offers significant benefits that outweigh its criticisms.

From Dr S Rajeentheran, Dr Musa Nordin, Dr Ahmad Faizal Perdaus and Dr Sng Kim Hock

The Galen Centre’s critique of Malaysia’s proposed base medical and health insurance and takaful (MHIT) plan in its article dated Jan 23, 2026, and the subsequent FMT article raise important concerns that merit serious consideration.

However, a more nuanced examination reveals that their analysis overlooks the plan’s strategic positioning within Malaysia’s broader healthcare reform journey.

Every strategy has pros and cons, but we believe the MHIT base plan is a value proposition that far outweighs its criticisms.

The plan is primarily designed for use at private hospitals in Malaysia, specifically targeting lower- and mid-tier private healthcare facilities. Public hospitals will remain the safety net for all citizens.

Introduced under Malaysia’s Reset (revamp, enhance, strengthen, expand and transform) strategy, the plan aims to enhance healthcare affordability, reduce reliance on cash, and provide a sustainable alternative to rising health insurance premiums.

A journey of a thousand miles begins with a single step, and the base MHIT plan represents that essential first step towards sustainable universal health coverage.

Below, we address the key concerns raised while positioning the plan within Malaysia’s healthcare evolution.

Cost-shifting and affordability

The Galen Centre states that the plan risks “creating a false sense of security, widening inequities in access to care, and shifting costs back to patients”. This may not necessarily be true.

The base MHIT plan is designed to establish a basic floor of protection against catastrophic medical bills.

Deductibles and co-payments are essential cost-sharing mechanisms that discourage unnecessary utilisation, encourage responsible use of healthcare resources, and keep premiums affordable for the wider population.

The goal is to prevent financial ruin from major health events, not to cover every ringgit of expense.

This structure is a prudent first step towards a broader social health insurance system.

Labelling deductibles and co-payments as mere “cost-shifting” misrepresents insurance design and social solidarity. Universal, comprehensive coverage with minimal personal contribution is economically unsustainable without massive tax increases.

The base MHIT plan uses carefully calibrated cost-sharing mechanisms not to burden patients, but to create a responsible consumption model that preserves the system for those who need it most.

The tiered deductible structure (RM500 for basic standard; RM10,000 to RM15,000 for standard-Plus) distinguishes between routine healthcare expenses, which public systems and personal savings should cover, and catastrophic health expenditures that can bankrupt families.

This approach encourages appropriate utilisation patterns and prevents systemic overuse that has bankrupted healthcare systems worldwide.

Regarding affordability for senior citizens, actuarial fairness necessitates higher premiums for higher-risk groups.

However, this design creates the framework for targeted subsidies to be administered precisely to those most in need, rather than diluted across all beneficiaries, regardless of financial circumstances.

While the Galen Centre correctly identifies implementation risks, abandoning the structural reform because of adjustable parameters like deductible levels would sacrifice transformative potential for fixable details.

Medical inflation

The Galen Centre argues that the plan fails to address “weak or absent regulation of pricing, limited disclosure of fees, variation in clinical practice, rising costs of medical consumables, technology and expertise.”

This critique wrongly demands that a financing mechanism solve market structure problems.

The base MHIT plan represents the first phase of a multi-phase reform.

Establishing a standardised, large-scale purchasing entity fundamentally changes healthcare negotiation dynamics.

History teaches that strategic purchasing power precedes effective cost control. The establishment of the base MHIT creates what economists call a “countervailing power” against provider monopolies.

Once millions of Malaysians are enrolled in standardised plans, the purchasing entity will possess the leverage to negotiate transparent fee schedules, standardise clinical pathways, establish technology assessment protocols, and demand price transparency.

The Galen Centre’s approach puts the cart before the horse. Without first creating this organised purchasing mechanism, attempts at price regulation would lack enforcement leverage and likely fail.

The plan builds the foundation for the reforms the Galen Centre advocates.

Malaysia cannot simultaneously solve decades of unregulated healthcare inflation and establish universal health coverage.

The base MHIT plants the necessary tree whose shade will eventually cool the entire healthcare landscape.

Network and geographic access

The Galen Centre states: “Malaysians should not be penalised through higher co-payments simply because the network does not include a suitable facility near them.”

The tiered network design is not a creation of inequity, but a strategic intervention into existing inequities. Geographic disparities in healthcare access predate the MHIT proposal. The plan acknowledges this reality and creates incentives to reshape provider distribution gradually.

The tiered structure incentivises using in-network facilities, which agree to negotiated rates and standards.

The challenge of rural access is a pre-existing systemic issue across all of healthcare, not one created by the MHIT.

The plan must start with a viable network; its success and expansion can drive investment and improvements in healthcare infrastructure in underserved regions over time. Public hospitals remain the safety net.

The 20% co-payment for out-of-network utilisation serves three vital functions — it prevents the “empty network” problem, creates market signals encouraging private healthcare investment in underserved regions, and preserves the public system’s role as the universal geographic safety net.

Moreover, this design consciously avoids the fatal flaw of many health reforms — promising what cannot be delivered.

By transparently acknowledging network limitations upfront, the plan builds trust through honesty rather than overpromising.

The base MHIT provides economic incentives to gradually redirect private healthcare development towards national needs rather than purely profit-maximising locations.

Remember: Rome wasn’t built in a day. The geographic distribution of private healthcare facilities represents decades of market-driven development.

The base MHIT provides the economic incentives to gradually but systematically redirect this development towards national needs rather than purely profit-maximising locations. - FMT

Dr Rajeentheran Suntheralingam, Dr Musa Nordin, Dr Ahmad Faizal Mohd Perdaus, Dr Sng Kim Hock are members of the Association of Specialists in Private Medical Practice.

The views expressed are those of the writers and do not necessarily reflect those of MMKtT.