This article first appeared in The Edge Malaysia Weekly on May 25, 2026 - May 31, 2026

WITH the Medical and Health Insurance and Takaful (MHIT) base product set to be piloted in the second half of this year ahead of its 2027 launch, policymakers are racing to implement critical reforms to curb medical inflation, improve pricing transparency and prevent more Malaysians from being priced out of private health insurance coverage.

Ironically, the push to make private healthcare more affordable through wider insurance coverage stems from the fact that Malaysians still pay more for a plate of nasi lemak, a slice of roti canai or a glass of teh tarik than for outpatient treatment at public hospitals, where medication, procedures and specialist consultations remain heavily subsidised for all citizens regardless of income.

Even the rich and well-connected are seeking treatment at publicly funded Hospital Kuala Lumpur (HKL), where they are not allowed to jump the queue, its director Datuk Dr Harikrishna KR Nair told Berita Harian last September. The remark gained traction on social media amid public anxiety over rising medical insurance premiums and ongoing debate over who truly qualifies as the top 20% (T20) income group — and whether they are genuinely wealthy.

Why should policymakers worry about ensuring middle-class Malaysians can afford private healthcare and insurance when public hospitals such as HKL are considered good enough even by “Datuk Seris” and “Tan Sris”?

Why pay hundreds or thousands of ringgit a month for private health insurance when outpatient treatment at a public hospital costs RM1, specialist consultations, including basic tests, at HKL cost RM5, and more advanced scans or imaging only RM50 to RM100 more?

Yet, push factors remain. Longer waiting times, overcrowding and mounting strain on overworked healthcare workers are increasingly driving middle-class patients towards the speed and convenience of private care.

Some public healthcare workers have taken to social media to lament feeling underappreciated for providing medical care and services that would cost far more at full market rates.

“At public hospitals, the real cost of treatment and medication is often not shown. So, patients may not know or fully appreciate the value of what they are receiving,” a public healthcare worker tells The Edge.

An observer draws parallels with RON95 fuel subsidies, noting that many Malaysians had little idea how much petrol actually cost until the unsubsidised price was displayed on receipts, following the implementation of Budi95. “And even when the real price is more than double, how many Malaysians are willing to pay a bit more?”

Similarly, Malaysians have grown accustomed to blanket healthcare subsidies that keep out-of-pocket costs unrealistically low, leaving many unaware of how much subsidy they receive with every public hospital visit or medical procedure. This, in turn, makes it politically difficult to introduce limits to public healthcare subsidies.

Many countries around the world subsidise healthcare, but in more fiscally prudent systems, the level and scope of subsidies are clearly defined to ensure long-term sustainability, experts say.

In 2024, 49% of total healthcare expenditure was privately funded, including about 8% from private health insurance. The MHIT sector accounts for 13% to 15% of Malaysia’s total current healthcare expenditure.

About 22% of the population have individual MHIT plans, a level that Bank Negara Malaysia says places the country “at the lower end of the spectrum among countries with reasonably developed private healthcare insurance systems”. Employers are required to contribute to Socso (Perkeso) under the Employment Insurance Scheme for work-related injuries, but are not legally required to provide medical insurance to employees.

Bank Negara’s white paper on the base MHIT product notes that “people who can no longer afford private healthcare or insurance end up falling back to public healthcare services, creating a vicious loop in which private healthcare spending continues to rise without sustainably improving equitable access to care”.

Beyond the uninsured, the MHIT base product also targets individuals seeking “more affordable alternative options to their existing MHIT plans due to significant premium increases over time, especially at older ages”.

Tellingly, more than 340,000 MHIT policies were either surrendered or cancelled by policyholders who could not afford the higher premiums after coverage was repriced upwards between January 2024 and June 2025 to reflect medical inflation.

Bank Negara did not provide an age breakdown of the 340,000 policies — about 5.2% of MHIT coverage — that were repriced upwards. At the time the figure was released, a one-year freeze on premium adjustments for policyholders aged 60 and above was still in effect.

Given that only about one-fifth of the population has medical insurance coverage, the 5.2% who were priced out of their MHIT plans may not appear so small when set against the fact that, last year, three million Malaysians, or 9.4% of the population, were aged 65 and above and 4.4 million, or 13.7%, were aged 60 and above.

In the coming decade, the number of people aged 60 and above is expected to reach seven million, or 17.4% of the population, of which 6.2 million are Malaysians, official projections show. About five million are expected to be aged 65 and above, making up 12.6% of the population by 2035.

If most cannot afford private medical insurance, queues at public hospitals are likely to lengthen further, as Malaysia is expected to see an increase of about one million elderly people every five years.

With the steep MHIT premium repricing in 2024 and 2025, many Malaysians discovered that medical insurance premiums do not remain fixed for life, but rise with medical inflation and age — often becoming more burdensome at retirement, when monthly income stops and employer-based coverage is no longer available.

That should come as no surprise, given that healthy life expectancy (HALE) is generally shorter than overall life expectancy, implying greater medical needs with age. In Malaysia, HALE at birth was 67 years in 2020 (66.7 for men, 67.6 for women), about 10 years lower than life expectancy at birth of 76.8 years (75.5 for men, 78.6 for women), according to World Health Organization (WHO) data.

Notably, Malaysia’s life expectancy at birth has fallen to 75.3 years in 2025 (73.1 men, 77.9 women), while those reaching the age of 60 are expected to live at least another 20.1 years (18.8 years men, 21.6 years women) to 80.1 years (78.8 men, 81.6 women) on average. Those already 65 in 2025 are expected to live another 16.4 years (15.3 years men, 17.6 years women) to 81.4 years (80.3 men, 82.6 women) on average, according to the Department of Statistics Malaysia (DoSM).

The base MHIT plan, with regulated premiums, will provide coverage up to age 85, with a maximum enrolment age of 70, according to Bank Negara’s white paper. Top-ups may be available for those seeking coverage beyond 85.

There is evidence that healthcare costs are higher for those above 60, according to price ranges for 26 common medical procedures by age group published by the Life Insurance Association of Malaysia (LIAM) on its website, based on actual medical insurance claims for treatment at private hospitals in 2024 (see Table 3).

Private medical claims among those aged 65 and above account for a larger share of total bills (8.9% in 2023 and 9.3% in 2024), despite making up a smaller share of total claims (6.6% in 2023 and 6.9% in 2024), according to World Bank Group researchers analysing MHIT claims data in Malaysia.

This reflects “higher treatment costs among the small number of older patients not excluded from coverage”, even as “most private medical claims and spending are concentrated among the working-age population (ages 25 to 64)”, the researchers write in a report titled “Cost Drivers in Malaysia’s Medical and Health Insurance/Takaful Sector: A First Look at the Centralized Claims Database (April 2026)”, prepared at the request of the government under the Joint Ministerial Committee on Private Healthcare Costs (JMCPHC) as part of the RESET strategy involving the Ministry of Health, Ministry of Finance and Bank Negara and other key stakeholders.

Claim frequency and costs increase with age, the World Bank researchers found. Utilisation rates for medical insurance “become steep among older age groups, with the highest utilisation rate observed among those aged 70 and above”. Claims per insurance member also rise among older members, particularly after age 60, suggesting that not only do older insured individuals use services more frequently, but the services they consume are also more expensive.

Already, experts — including those at the Universiti Malaya Social Wellbeing Research Centre (UM-SWRC) — have urged Putrajaya to treat healthcare spending as an investment rather than an expenditure.

“Malaysia’s 1.98% of GDP for public health versus a world average of 4.27% in 2022 confirms that the level of public investment is not just low by developed economy standards, but is also significantly below the global norm,” write UM-SWRC director Professor Emeritus Datuk Norma Mansor and deputy director Muhammad Aizat Zainal Alam in a 2023 paper. The paper also notes that Malaysia’s public health spending was below the then Asean average of 2.03%.

Checks on official data between 2014 and 2024 show that the Ministry of Health’s actual total expenditure is usually higher than originally budgeted, although there have been instances where spending fell short, as seen in 2014, 2015, 2016 and 2024.

As a percentage of GDP, Malaysia’s total public healthcare spending peaked at 2.2% in 2020, with budgeted figures suggesting 2025 could match that level. Doubling this to 5% of GDP would require at least an additional RM50 billion a year in allocations, back-of-the-envelope estimates show — a target that would be impossible without stronger revenue streams, especially if fuel subsidies remain elevated.

Based on findings in the World Bank report — the first external analysis of the newly developed central medical claims database — the quality of the data still requires significant improvement. Regulators need to strengthen their capacity to compile and analyse medical billing data to detect over-utilisation, identify suspicious billing patterns and curb the upward spiral of medical cost inflation.

Bringing together financial, clinical and administrative data to enable empirical assessment of the MHIT sector will not be easy, as the completeness of reported data varies across insurers. The World Bank report notes that data quality is expected to improve as reporting of certain fields becomes mandatory in future. It recommends standardised reporting rules and the publication of “completeness scores” for insurers and hospitals, effectively turning data transparency into a regulatory tool.

In the meantime, there is a need to ensure that the base MHIT product pilots successfully in the coming months.

So far, criticism has focused on limitations in the base MHIT product, which Bank Negara has said all insurance and takaful operators (ITOs) must offer if they wish to continue to provide their own MHIT products. There is also concern over whether coverage of RM100,000 (below age 60) and RM150,000 (age 60 and above) is sufficient, even though Bank Negara says it would cover 99% of common procedures. Figures on common procedures on LIAM’s website exclude pre- and post-hospitalisation costs, according to appended notes.

Still, the key draw of the base MHIT product is that premiums — unlike most private MHIT products, which are linked to investment components — will be regulated by Bank Negara to reduce pricing shocks for consumers, especially at older ages. For this to work without creating a significant fiscal burden, it requires sufficient take-up among healthier consumers while ensuring ITOs remain on board.

While retirement savings with the Employees Provident Fund (EPF) can be used to pay medical insurance premiums, including the base MHIT product, some believe it is better to preserve retirement savings and rely on public hospitals instead.

The concern is that consumers may initially believe they can afford MHIT premiums, but later find themselves unable to maintain payments beyond age 70, when the likelihood of needing medical care rises sharply.

It is likely that, in anticipation of the potential fallout from consumers being priced out of private MHIT schemes in old age, policymakers are designing the base MHIT product with controlled premium increases. “Controlled” here means premiums would still rise in line with medical inflation, but with some smoothing to “flatten the curve”.

Consumers need greater awareness of their options and the risks ahead, as they — rather than insurers or private healthcare providers — are most likely to bear the brunt of any shortcomings in implementation. Ultimately, for Putrajaya, that point could return to roost at the polls.

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