As scrutiny over Bank Negara Malaysia’s proposed Base Medical and Health Insurance/Takaful (MHIT) continues, much of the criticism assumes the product’s success should be judged by whether it lowers medical costs or outperforms existing insurance plans. That expectation misunderstands what the Base MHIT is, and what it is not.
The Base MHIT is not a silver bullet for medical inflation. It is a containment tool, designed to stabilise insurance premiums in a system where costs are already high and rising, and where unchecked benefit design has contributed to volatility that ultimately hurts consumers.
Insurance did not create high medical costs, but it amplified them
Malaysia’s private healthcare inflation did not happen overnight, nor was it driven solely by insurers. I've argued this in another article. Weak price transparency, variation in clinical practice, fee-for-service incentives, rising input costs, and growing demand have all played a role.
But insurance design matters.
Over time, products offering very high annual limits, broad outpatient coverage, and minimal cost-sharing have changed behaviour across the system, not just among patients, but among providers and intermediaries as well. When almost everything is reimbursable, utilisation rises. When utilisation rises, claims rise. When claims rise, premiums follow.
This is not moral failure; it is economics.
Why blaming Base MHIT for cost pressures misses the point
Some critics argue that Base MHIT shifts costs to patients through deductibles and limits, framing this as a retreat from protection. But this ignores the alternative: uncontrolled repricing that eventually pushes people out of insurance entirely.
Cost-sharing is not inherently punitive. In many health systems, it is used to:
- discourage low-value utilisation
- preserve insurance for genuine financial shocks
- keep premiums within reach for longer
The problem is not that Malaysian insurance has limits, it is that those limits were often introduced after years of underpricing, suddenly and painfully.
Base MHIT attempts to do the opposite: set expectations upfront.
What Base MHIT is actually trying to stabilise
Those who actually read BNM's White Paper would know that the real objective of Base MHIT is not cost reduction, but premium predictability.
By anchoring pricing to actual claims experience, tightening benefit definitions, and spreading risk across participating insurers and takaful operators, Bank Negara is trying to dampen the boom-bust cycle that has characterised medical insurance repricing in recent years.
This matters because premium shocks hurt the same groups repeatedly:
- older policyholders
- people with chronic conditions
- families already juggling rising living costs
When premiums spike, coverage lapses. When coverage lapses, pressure shifts back to public hospitals.
Why “just regulate hospitals” is not enough
Another common argument is that the government should focus solely on regulating private healthcare prices, instead of redesigning insurance products.
In reality, both are needed, but they operate on different timelines.
Price regulation and structural healthcare reform are complex, politically sensitive, and slow-moving. Insurance instability, on the other hand, is immediate. Bank Negara’s remit is financial stability, not hospital fee schedules.
The Base MHIT sits squarely within that mandate: preventing a systemic insurance failure while broader healthcare reforms remain unfinished.
A base, not a ceiling
One of the most persistent misunderstandings is reading Base MHIT as a statement of what healthcare should cost, or what coverage should look like.
It isn’t.
Base MHIT is a floor, not a ceiling. Malaysians who want, and can afford, more comprehensive coverage will continue to buy it. Insurers will continue to innovate above the base.
What changes is that the “base” is now explicitly defined, disciplined, and standardised, rather than implicit, fragmented, and reactive.
Reform is about trade-offs, not perfection
Health financing reform is rarely popular because it forces uncomfortable trade-offs into the open. Unlimited coverage with low premiums is politically attractive, until it collapses.
Bank Negara’s Base MHIT makes a different bet: that Malaysians are better served by a product that does fewer things, more predictably, over time.
It will not solve medical inflation. It will not please everyone. But if it succeeds in keeping more people insured for longer, without sudden repricing shocks, it will have achieved something Malaysia’s medical insurance market has struggled to deliver.
Stability is not flashy. But in health insurance, it may be the most valuable feature of all.
Teck Jin Wong (wteckjin90@gmail.com) is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
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