Concept risks burdening low income households, say experts
PETALING JAYA: Experts have said the MediSave model may work in Singapore, but Malaysia is not there yet, adding that compulsory health deductions could hit poor communities the hardest.
MediSave is Singapore’s national health savings scheme under the Central Provident Fund, in which individuals must set aside part of their monthly salary to cover hospital stays, selected outpatient treatments and health insurance premiums for themselves and their families.
Economist Prof Geoffrey Williams said introducing a compulsory health savings scheme would effectively amount to a new tax on Malaysians.
He added that Malaysians spend about RM30 billion annually on out-of-pocket medical costs, equivalent to RM1,000 per person or about RM83 per month.
“This is already a tax incidence of nearly 5% on minimum wage earners and 2.8% on those earning the median wage.
A mandatory scheme would therefore be regressive.”
He also said diverting funds from the Employees Provident Fund (EPF) for such purposes would also be risky, as many contributors are saving too little for retirement and EPF coverage extends to only about half of the population.
“How would 7.2 million people outside of the labour force with no regular income pay into such a scheme?
“Low-income families tend to have more children and dependent parents, so to save into such a scheme would involve payments for multiple people.
This would be a huge burden.”
Williams proposed introducing a 1% e-payment tax as an alternative, which could raise about RM28.8 billion, enough to cover out-of-pocket health spending of Malaysians.
He added that this could also make basic healthcare free at the point of use, with private doctors recovering fees directly from the government.
UniKL Business School Islamic Finance associate professor Dr Aimi Zulhazmi Abdul Rashid said a MediSave-style scheme might not be suitable for Malaysia as medical treatment at public hospitals remains highly subsidised, with most Malaysians paying minimal fees.
He said those who seek treatment at private healthcare facilities are usually covered by insurance or employer-provided medical benefits, reducing the need for a compulsory health savings account.
“Nonetheless, a MediSave-like model may align with the government’s targeted subsidy approach, provided that healthcare benefits are managed efficiently.”
He added that EPF savings should remain focused on retirement needs, especially as living costs continue to rise and the life expectancy of Malaysians increases due to healthier lifestyles and advances in medical treatment.
Federation of Malaysian Consumers Associations (Fomca) CEO Dr Saravanan Thambirajah said the concept of a compulsory health savings account may look attractive in theory, but it risks burdening low-income households in practice.
He said many Malaysians, especially those without fixed incomes, are not in a position to set aside a portion of their salary for medical expenses when basic needs take up most of their earnings.
“Healthcare is a fundamental human right, not a commodity.
READ MORE: Fomca against move to use EPF for insurance
Any plan must ensure transparency, accessibility and affordability for all, not just those with stable incomes.”
He added that while Singapore ensures strong governance and digital systems, it still faces rising medical costs, showing that savings schemes alone cannot curb inflation.
“Malaysia and Singapore are not ‘apple to apple’.
Wage structures, tax bases, labour informality and social protection differ significantly.
“Without first addressing income adequacy, price regulation and coverage gaps, a compulsory savings model would be regressive in practice.”
He also said the priority should not be introducing another deduction, but ensuring government-led measures to keep healthcare costs under control and guarantee universal access.
“Using EPF to pay premiums or medical bills is a red flag that healthcare has become expensive.
It solves today’s bill by creating tomorrow’s poverty.”
He said while EPF withdrawals could help keep insurance policies active during financial hardship, the long-term consequences such as reduced savings, lost growth and a higher risk of elderly poverty far outweigh the short-term relief.
“Fomca opposes using EPF to fund insurance premiums or routine healthcare.
Retirement and healthcare are both pillars of social protection.
“One must not be funded at the expense of the other.”
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