MHIT Plan & DRG System: What Malaysians Need to Know About Private Healthcare Costs
Private healthcare costs in Malaysia are becoming increasingly burdensome. Health insurance premiums have surged between 40% to 70% in recent years, forcing many Malaysians to delay treatment or rely entirely on government hospitals. Out of over 33 million Malaysians, only around 22% have medical insurance or takaful coverage - meaning nearly 8 out of 10 people remain financially exposed in the event of serious illness.
To address this crisis, the government through the Joint Ministerial Committee on Private Healthcare Costs (JBMKKS) has introduced two major initiatives: the Base MHIT Plan (Medical and Health Insurance/Takaful) and the DRG pricing system (Diagnostic-Related Group). Both mechanisms aim to make private healthcare more affordable, transparent, and sustainable.
This article explains in detail what MHIT and DRG are, how they work, who is eligible, how much premiums will cost, and what impact they will have on you as a Malaysian.
What Is the Base MHIT Plan?
The Base MHIT Plan is a medical insurance and takaful product standardised by Bank Negara Malaysia (BNM) to provide basic coverage for Malaysians who can afford private healthcare premiums but do not yet have any coverage.
Unlike conventional health insurance policies that have varying terms and conditions across insurance companies, the Base MHIT Plan sets a uniform standard benefit package. This means whether you choose the Base MHIT Plan from Company A or Company B, the basic benefits you receive are the same.
According to a survey conducted, 87% of surveyed respondents found the proposal attractive and meaningful - indicating strong demand among Malaysians for more affordable health coverage.
Key Objectives of the Base MHIT Plan
- Expanding access - Enabling more Malaysians to have private health coverage
- Stabilising premiums - Reducing annual premium increases through standardisation and cost control
- Increasing transparency - Citizens know clearly what is covered and the actual costs
- Promoting value - Shifting from a "fee-for-service" model to a more efficient diagnosis-based model
Two Plan Options: Standard and Standard Plus
The Base MHIT Plan offers two options to meet different needs and affordability levels:
Standard Plan
- Annual policy limit: RM100,000
- Monthly premium (age 31-35): RM80 - RM120
- Monthly premium (age 61-65): RM280 - RM350
- Monthly premium (age 75+): RM500 - RM780
- Suitable for individuals seeking comprehensive basic coverage
Standard Plus Plan
- Annual policy limit: RM300,000
- Monthly premium (age 31-35): RM50 - RM70
- Monthly premium (age 61-65): RM220 - RM280
- Monthly premium (age 75+): RM400 - RM660
- Lower premiums but comes with a higher deductible
- Suitable for those willing to bear higher upfront costs for more affordable premiums
Important note: Standard Plus Plan premiums are lower because it uses a deductible concept - you need to pay a portion of treatment costs first before insurance coverage kicks in. This is similar to the "excess" concept in motor insurance.
What Is Covered?
The Base MHIT Plan covers a wide range of private healthcare services sufficient for most medical needs:
- Room and board - hospital room charges
- Surgery and anaesthesia - including day surgery
- Doctor visits - specialist physician visits during hospitalisation
- Medications - treatment-related drugs, including expensive outpatient drugs for serious illnesses such as cancer
- Ambulance services - emergency transportation
- Intensive care unit (ICU) - intensive care
- Operating theatre - surgical room charges
- Pre and post-hospitalisation - including consultations, diagnostic tests, and medications
This coverage encompasses the most critical medical needs - from routine hospitalisation to treatment of serious diseases.
Co-Payment Structure
An important feature of the Base MHIT Plan is the two-tier co-payment model:
In-Network Hospitals
- No co-payment for hospitals that comply with cost-efficiency standards
- These hospitals have agreed to follow the set DRG pricing
- This means your costs are lower when you choose an in-network hospital
Out-of-Network Hospitals
- 20% co-payment of the treatment bill
- Maximum cap of RM3,000 per disability
- You are still covered, but need to bear a portion of the costs
This structure incentivises patients to choose in-network hospitals, which in turn encourages more private hospitals to adopt DRG pricing.
Pre-Existing Conditions Are Covered
This is perhaps the most important news for many Malaysians - the Base MHIT Plan will cover pre-existing conditions. According to the Health Minister, individuals who already have chronic conditions such as diabetes, hypertension, or heart disease will not be rejected from this plan.
This is fundamentally different from most existing health insurance policies that often reject or exclude pre-existing conditions. For existing policyholders, the transition to the Base MHIT Plan can be made without new medical underwriting - meaning you do not need to undergo a new health examination.
What Is the DRG System?
DRG or Diagnostic-Related Group is a medical treatment pricing system based on diagnosis, not on each individual service item used.
How the Old System Works (Fee-for-Service)
In the current model, hospitals charge for each service separately: room charges, doctor fees, medication costs, blood test fees, and so on. This model incentivises hospitals to conduct more tests and procedures - because more services means more revenue. Medical inflation in Malaysia has reached around 12.5% - among the highest.
How the DRG System Works
In the DRG model, hospitals receive a fixed payment based on the patient's diagnosis. For example, a patient admitted with an appendicitis diagnosis will be charged a fixed amount covering ALL services - room, doctor, medication, tests, and surgery. The hospital must manage resources within the set budget.
This model encourages hospitals to:
- Reduce unnecessary procedures - as additional costs are borne by the hospital
- Improve efficiency - better resource management
- Focus on quality - rewards based on outcomes, not volume
26 Common Medical Procedures
As a first step towards price transparency, the industry has published price ranges for 26 of the most common medical procedures. This allows patients to compare prices between hospitals before choosing where to seek treatment.
Additionally, the government is also developing a health insurance calculator to help citizens plan their premiums and co-payments more accurately.
Can You Use EPF Savings to Pay for MHIT?
One of the most exciting developments is that the government is discussing allowing EPF contributors to use funds from their Sejahtera Account to pay for Base MHIT Plan premiums.
According to Finance Minister II Datuk Seri Amir Hamzah, the government is evaluating whether this concept can be accepted as an approved product for EPF withdrawal. This is not without precedent - the government has already allowed contributors to use the Sejahtera Account for the "I Lindung" product, which includes critical illness protection.
If approved, this means Malaysians could obtain private health coverage without spending out-of-pocket - using EPF savings that are inherently meant for their wellbeing.
Implementation Timeline
| Period | Event |
|---|---|
| January 2026 | Official JBMKKS announcement, publication of prices for 26 common procedures |
| February 2026 | Launch of health insurance calculator, MHIT White Paper publication |
| H2 2026 | Base MHIT Plan pilot phase (voluntary) |
| Early 2027 | Full launch of Base MHIT Plan, coinciding with expiry of BNM interim measures |
| 2027 | National DRG system implementation at all private hospitals |
Who Should Pay Attention?
The Base MHIT Plan targets two main groups:
- Malaysians without insurance - Those who can afford premiums but have not yet taken steps to get coverage. With premiums as low as RM50 per month (Standard Plus Plan), the cost barrier has been significantly reduced.
- Existing policyholders - Those currently paying high premiums who want to switch to a more affordable alternative without losing basic coverage.
For private sector workers who depend on employer health benefits, the Base MHIT Plan can also serve as valuable supplementary coverage - especially after retirement when company benefits have ended.
Impact on the Industry
The Base MHIT Plan is not just another new insurance product - it marks a major transformation in Malaysia's private healthcare ecosystem.
For private hospitals, the shift to DRG means they need to optimise operations and reduce waste. Efficient hospitals will gain a competitive advantage, while those dependent on the "charge as much as possible" model will need to adapt.
For insurance and takaful companies, this plan creates a more uniform playing field. BNM expects most insurers and takaful operators to participate in the programme voluntarily.
For Malaysians, it brings hope that private healthcare will no longer be an exclusive luxury for the high-income group alone.
Context: Why Malaysia's Healthcare Spending Needs to Change
Data shows that out-of-pocket healthcare spending accounts for 39% of total national health expenditure in 2024, while insurance contributes less than 8%. This means Malaysians still rely heavily on personal savings to cover medical costs.
This dependency is particularly concerning when combined with demographic realities - Malaysia's population is ageing, chronic diseases are increasing, and medical costs continue to rise every year. Without an affordable and comprehensive protection system, many families risk falling into financial hardship due to just one episode of serious illness.
Frequently Asked Questions (FAQ)
Is the Base MHIT Plan mandatory?
No. The Base MHIT Plan is offered on a voluntary basis. You are free to choose whether to take it or not. However, BNM expects most insurance and takaful companies to offer this product.
When can I start enrolling?
The pilot phase is expected to begin in the second half of 2026, with full launch in early 2027. Detailed registration information will be announced by BNM and participating insurance companies.
Do I need to cancel my existing policy to take the Base MHIT Plan?
Not necessarily. The Base MHIT Plan can serve as primary or supplementary coverage. If you want to switch, you can do so without new medical underwriting - meaning no new health examination is required.
What if I have a chronic condition like diabetes?
Pre-existing conditions will be covered under the Base MHIT Plan. This is different from most current insurance policies that often exclude pre-existing conditions.
Can I use EPF savings to pay premiums?
The government is discussing allowing withdrawals from the EPF Sejahtera Account for this purpose. A final decision has not been announced, but there is positive precedent through the I Lindung product that already allows EPF funds.
What is the difference between the Base MHIT Plan and MySalam?
MySalam is a free government takaful scheme providing limited protection for the B40 group. The Base MHIT Plan is a paid insurance/takaful product targeting citizens who can afford premiums - with far more comprehensive coverage.
What is DRG and how does it reduce costs?
DRG (Diagnostic-Related Group) is a system where hospitals are paid a fixed amount based on the patient's diagnosis, not based on each service item. This reduces the hospital's incentive to conduct unnecessary tests and procedures.
Which hospitals are included in the MHIT network?
The list of in-network hospitals has not been finalised yet. However, hospitals that adopt DRG pricing will become part of this network, and patients will benefit from lower co-payments at these hospitals.
Conclusion
The Base MHIT Plan and the DRG system mark a major step for Malaysia towards more affordable and transparent private healthcare. With premiums as low as RM50 per month, pre-existing condition coverage, and the potential use of EPF savings, this plan has the potential to transform the nation's healthcare landscape.
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