Sometimes I feel that the government tends to take the easy way out when handling problems affecting the rakyat, even if their actions have a serious long-term impact.

A case in point is a plan to allow EPF members to use money in their Account 2 to pay their health insurance premiums.

This account, one of three members’ accounts, comes under the most scrutiny as the funds are used for education, healthcare, housing and withdrawal at 50 years of age.

Monthly EPF contributions are split three ways: 75% into Account 1 (retirement fund), 15% into Account 2 (prosperity account) and 10% into Account 3 (Flexible account). The first account can only be touched upon reaching 55, but any amount can be withdrawn from the flexible account at any time.

Special withdrawals allowed during the Covid-19 pandemic had resulted in about 50% of the 16 million members having less than RM10,000 in their savings, with many reportedly having zero savings in their Account 2 after these withdrawals. They are yet to recover from this setback.

As of October last year, only 36% of EPF members aged 55 had minimum savings of RM240,000 or enough to sustain expenditure of RM1,000 a month for 20 years.

Let’s quantify the withdrawals for medical insurance premiums if it is allowed. They don’t come cheap these days, ranging from RM200 to RM500 a month for a basic policy. This works out to about RM2,400-RM6,000 a year.

If you contribute for 20 years, the amount is huge, especially for those with small balances which involves more than 50% of the contributors. Remember, this is not a savings but something which will not be returned to your account if you don’t use it.

Health minister Dzulkefly Ahmad’s contention that only 1% of the fund will be used for insurance premiums is a misleading argument. If a member having RM50,000 uses RM6,000 annually for medical insurance, it works out to 12% of his account. So the amount paid out is relative.

That’s a big amount to be honest. And the member loses all the compound interest he will accumulate if the money is retained in EPF. Contrary to what the minister said, it does come out of their pockets indirectly as it comprises a percentage of their salary and their employer’s share.

EPF savings grow through compound interest. By withdrawing funds, members miss out on the potential growth of their savings, which could be substantial over time.

Government reducing its burden?

One obvious reason for this move, in my opinion, is the high cost of healthcare being funded by the government, which is growing by leaps and bounds as Malaysia becomes an ageing society.

With patients thronging public health institutions which are becoming tough to manage with lack of medical equipment and specialists, the government hopes to offload these patients to the private sector.

The government’s move will inadvertently enrich private hospital owners and major insurance companies at the expense of the EPF members. It has been reported that only an estimated 10% of those insured make claims, which means the companies are still making huge profits.

With increase in life spans, there is an obvious need to reform healthcare financing. However, passing it on to the rakyat in this manner is not the solution as depleting EPF savings will burden the government more when citizens grow old and do not earn an income.

The government should work on an effective national health financing scheme that will resolve the growing problem in the long-term. And this must be done without touching the EPF.

Relying on EPF savings for medical insurance may be a short-term fix rather than a sustainable long-term strategy. It does not address the underlying issues of rising healthcare costs and may lead to a false sense of security regarding financial preparedness for retirement.

Careful consideration and financial planning are essential to ensure that this approach does not compromise future financial security for the older folks.

The bottom line is that the government should stop turning to the EPF every time it faces a problem as we have an old-age time bomb on our hands which needs attention.

The views expressed are those of the writer and do not necessarily reflect those of FMT.