KUALA LUMPUR (Feb 2): The Galen Centre for Health and Social Policy is opposing a proposal to allow Employees Provident Fund (EPF) contributions to be used to pay premiums for the proposed medical health insurance/takaful (MHIT) plan.
This comes after the think tank said the MHIT plan may be worse than existing health insurance products on the market.
Responding to Finance Minister II Datuk Seri Amir Hamzah Azizan’s recent remarks that the ministry and EPF were discussing whether insurance purchasers could tap their EPF savings, Galen Centre chief executive Azrul Mohd Khalib warned that such a move could further weaken retirement security and widen inequity.
“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. Allowing premium deductions from EPF savings may create a false sense of protection, while quietly worsening a retirement crisis that is already severe,” he said in a statement on Monday.
“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,” he added.
He noted that EPF withdrawals under the i-Lestari, i-Sinar and i-Citra schemes 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 highlighted that even though 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. In practice, EPF-funded premiums could provide the appearance of protection while increasing household financial vulnerability in both the near and long term.”
“Co-payments and standardised premiums do not automatically equal affordability or real protection. If underlying costs remain unchecked, Malaysians will pay twice. First through their retirement savings, and later through higher out-of-pocket spending when exclusions, deductibles, caps, and rising premiums hit them.”
He also observed that using EPF savings to pay for MHIT premiums is likely to advantage those with higher balances, while many in the bottom segments will be burdened by continuous premium payments.
Azrul stressed that without stronger cost controls to work in tandem, such as the diagnosis-related groups (DRG), transparency, and better purchasing and payment reforms, the base MHIT product risks becoming another layer of financing pressure rather than a durable solution.
“The fundamental challenge is not that Malaysians lack a way to pay premiums. It is that healthcare costs and medical inflation continue to rise, and the system remains fragmented across public and private sectors. Insurance and takaful premiums do not exist in a vacuum.”
Originally set for mid-2025, the DRG rollout has been delayed to 2027 to allow time to build the system, finalise cost models, integrate hospital data and run pilot tests. It is a fixed-fee, diagnosis-based hospital payment model aimed at addressing rising private healthcare costs.
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