MYSALAM, which provides critical illness insurance to B40 households, will be extended for two more years. The five-year programme was to have ended this year.

The Madani Medical Scheme was introduced this year to grant B40 access to private clinics for specific acute primary care services. The former targets critical illnesses and the latter, on acute primary care.

Without understanding the public policy design of mySalam, it is challenging to ascertain why it should continue for B40 households.

Public health insurance invariably involves a trade-off between financing and coverage. I will argue why mySalam is unsuitable for M40 households, which are excluded from this social programme.

The funding source for mySalam has been controversial, violating the principle of conflict of interest.

In the future, mySalam should persist for B40, and the federal government should safeguard the interests of low-income citizens through funding and the establishment of an independent administrator for this social policy.

Policy design

The public policy design of mySalam is exclusively suitable for B40. B40 is associated with large households, low income, and involvement in informal sectors leading to no fixed income.

When a person in a B40 household’s illness reaches a critical stage, the person is unable to work and loses income if engaged in part-time/informal jobs.

A cash transfer of RM8000 is significant for B40 households, and they can decide how to use it, for example, for medical purposes or unemployment benefits.

Even if a member of B40 households falls ill before the critical illness stage, they will tend to seek treatment in the least costly way. The situation is markedly different for M40 households.

M40 insurance needs

With higher incomes than the B40, M40 households are more diversified in the insurance needs, encompassing life insurance (death benefit, permanent total disability, critical illness), medical cards (compensation for hospitalisation costs used for treatment and daily fees while in hospital), cash value (the investment value gained), or additional coverage for accident insurance. mySalam, indemnified for critical illness, cannot meet the insurance needs of M40 households, especially the demand for medical cards.

The limitation of mySalam prevents it from addressing the insurance needs of M40, as the original intention and beneficiaries of the programme are exclusively for B40.

Previously, the RM4000 compensation for M40 was insignificant, as life insurance compensation in the private insurance market starts from at least RM10,000 per insured.

Moreover, if the scope is narrowed down to critical illness only, given the trend of insurance product fragmentation, critical illness insurance can be purchased online, is affordable, and offers higher coverage than mySalam.

Conflict of interest

Great Eastern’s five-year RM2 billion programme allows it to be exempted from the 30% local ownership requirement, sparking controversy over the legitimacy of the programme.

The programme is likely to continue until the full RM2 billion fund is exhausted. In the future, the programme should be maintained and funded directly by the federal government.

Although Great Eastern is a private insurance company, and Great Eastern Takaful Berhad is currently the sole administrator of the public health insurance scheme, B40’s right to benefits is still protected.

In the future, the dederal government should consider establishing an independent administrator for the mySalam programme.

Inequality

In a scenario of limited social mobility, money is likely to be spent on unhealthy lifestyles, such as poor eating habits.

Avoiding high health expenditure unrelated to social mobility is crucial, as low-income households have a low marginal propensity to save due to their income levels.

However, high health spending by low-income households can exacerbate inequality, consuming household savings, representing the opportunity cost of educating a child, or leading to household debt.

The government should strive to raise awareness of healthy lifestyles among B40 households to prevent high health expenditure due to the burden of disease in the future.

Simultaneously, mySalam should continue to provide cash benefits to B40 to alleviate the burden of health expenditure when they have contracted a critical illness. – December 4, 2023.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.