THE Galen Centre for Health and Social Policy has slammed a government proposal to allow Employees’ Provident Fund (EPF) retirement savings to be used to pay for the Base Medical and Health Insurance/Takaful (MHIT) Plan.
Its chief executive Azrul Mohd Khalib warned that such a proposal could further weaken retirement security and widen inequity, noting that retirement security must not be traded for health coverage.
“The EPF is meant to protect Malaysians from poverty in old age. It should not be treated as a convenient funding tap for a healthcare financing experiment,” he emphasised.
“Allowing premium deductions from EPF savings may create a false sense of protection, while quietly worsening a retirement crisis that is already severe.
“Using EPF savings to pay for MHIT premiums is a sticking plaster action that creates a bigger long-term problem. Retirement savings are meant to safeguard dignity and security later in life.
“Diverting them to monthly or annual premiums risks leaving members exposed at the point they most need financial protection.”
Finance Minister II Datuk Seri Amir Hamzah Azizan told the Dewan Rakyat last Thursday that the government was in discussions with EPF to allow contributors to use their retirement savings in Account 2 Sejahtera to pay for the Base MHIT.
The Galen Centre pointed out that the i-Lestari, i-Sinar and i-Citra EPF withdrawals over the past few years have resulted in a larger proportion of low income earners with low EPF savings and not having enough for retirement.
“Using EPF’s Account 2 to pay for monthly premiums risks compounding this vulnerability,” Azrul said.
“It may sound pragmatic by letting people tap into their own savings to purchase basic health insurance to bridge the gap in healthcare coverage and protection from financial catastrophe.
“With rising healthcare costs, especially in the private sector, many Malaysians feel squeezed between inadequate public services and unaffordable private healthcare.”
Azrul further pointed out that even when MHIT is positioned as a ‘basic’ plan, health insurance is not a one-off expense.
“The base MHIT premiums will rise over time. Its benefits will have limits and exclusions. Its co-payments and deductibles can still leave families facing significant out-of-pocket costs during serious illness,” he remarked.
“In practice, EPF-funded premiums could provide the appearance of protection while increasing household financial vulnerability in both the near and long term.”
Although Bank Negara Malaysia’s (BNM) White Paper promises “greater premium stability” with the Base MHIT Plan, the document explicitly states that premiums will be subject to repricing based on the claims experience of the risk pool, medical inflation, and any revision to benefits covered.
The Base MHIT Plan does not cover pre-existing conditions either, as the product will be risk-rated based on an individual’s age, gender, and health status.
Neither is the central bank guaranteeing claim payouts; existing insurance and takaful operators (ITOs) are expected to underwrite the Base MHIT Plan, not the government.
“It is bewildering why BNM and the Ministry of Finance (MOF) would propose this measure,” Azrul continued.
“BNM’s 2024 annual report showed that the percentage of Malaysians who had difficulty raising RM1,000 in an emergency increased from 47% in 2021 to 61% in 2024.
“Median EPF saving levels have also not fully recovered after the COVID-19 pandemic. Why would BNM and MOF propose something that would reduce Malaysians’ retirement savings knowing the precariousness of the situation?”
According to Azrul, the fundamental challenge is not that Malaysians lack a way to pay premiums but that healthcare costs and medical inflation continue to rise and the system remains fragmented across public and private sectors.
“Without stronger cost controls to work in tandem such as the Diagnosis-Related Groups (DRGs), transparency, and better purchasing and payment reforms, the base MHIT product risks becoming another layer of financing pressure rather than a durable solution,” he stressed.
“Malaysia needs sustainable health financing and serious cost control. We should not solve health care affordability by undermining retirement security.
“We should not solve healthcare affordability by undermining retirement security. We must focus on reforms that lower costs, improve value, and protect households without sacrificing their future.” ‒ Focus Malaysia
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