Health Affairs
May/June 2003
Taiwan’s New National Health Insurance Program: Genesis And Experience So
Far
by Tsung-Mei Cheng
Taiwan’s NHI is a government-run, single-payer national health insurance scheme, financed through a mix of premiums and taxes, that compensates a mixed public and private delivery system predominantly on a fee-for-service basis. NHI enrollment is mandatory, to ensure adequate risk pooling and the broad-based collection of funds to finance the NHI.
Taiwan’s health care providers obtain their revenues from three sources: (1) payments by the NHI, (2) patient user fees and copayments, and (3) proceeds from the sale of products and services not covered by the NHI.
Experts in Taiwan appear to believe that the absolute level of fees paid by the NHI is too low and that many fees are considered to be below cost. In the absence of effective volume controls, providers’ simplest response to low fees is to expand the volume of services they provide while reducing the resources going into each unit of service (for example, shortened visit length). The BNHI’s chief executive officer, Hong-Jen Chang, remarked that “Taiwan’s doctors are well paid. But they work very, very hard to use volume to make up for the low fees.” Ta-Fu Huang, chairman of the DoH’s Quality Commission, has written extensively about Taiwan’s medical culture of the “three-minute patient visit” with physicians that is typical of doctors in Taiwan. That fee-driven practice style may lead to misdiagnosis, improper treatment, or delays in proper treatment.
A feature that Taiwan’s health system shares with other health systems in Asia is that hospitals are allowed to sell patients drugs at prices far above their acquisition cost, which they negotiate with the drug companies. In the Taiwan vernacular, the resulting profit margins are known as the “drug price black hole.” The U.S. analogue of this practice is the profits oncologists serving Medicare patients can earn on drugs they use in outpatient chemotherapy. Coupled with the PF system of rewarding hospital-based doctors, permitting hospitals to profit from the sale of drugs leads to a serious conflicts of interest, as it invites the overmedication of patients, including a perilous overmedication with antibiotics. According to a December 2002 study report by the DoH, close to half of the doctors in Taiwan prescribe four to five drugs per visit for upper respiratory infections, and 10 percent prescribe more than eight drugs; in only fourteen of 103,024 outpatient visits did the doctor not prescribe any drugs. The CEO of a large private hospital told me that 44 percent of his hospital’s income is derived from the prescription and sale of drugs to patients.
To the detached observer, Taiwan’s current health system conveys a confusing picture. The nation spends only 5.44 percent of its GDP on health care from all sources (or about 6 percent on a more inclusive measure). By the benchmark of the OECD countries, a nation with Taiwan’s current GDP per capita (US $14,188) would be expected to spend somewhere around 7.3 percent of its GDP on health care, give or take half a percentage point. This estimate could be taken to mean that Taiwan’s health system is underfunded. Not surprisingly, there have been calls for increased spending to improve equity and quality.
On the other hand, however, the accusation of widespread supply side-driven, provider-induced use of health care suggests a surplus of capacity, even at the relatively low spending level of only 5.44 percent of GDP. It leads critics of Taiwan’s provider community to argue that allocating a higher percentage of GDP to health care might make the problem of excess capacity even worse and merely increase the profits of providers.
A reconciliation of these contradictory perspectives may be to argue that what is actually in surplus is relatively low-quality care, whose expansion should not be encouraged with added funds. At the same time, it probably is true that a high quality, state-of-the art health system with longer patient visits, more accurate diagnoses, better-equipped hospitals, timely introduction of new drugs and technology, a better information infrastructure, and superior quality all around probably would require more than the current 5.44 percent of GDP. If that interpretation is valid, any move to a higher level of spending should be carefully targeted.
… additional funding should be directed to the development of an IT infrastructure capable of identifying waste, fraud, and abuse and, at the same time, inducing the delivery system to practice high-quality, evidence-based medicine.
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Comment: As we advocate for reform, it is important to understand both the problems that can arise with single payer systems and the solutions to those problems. We need to be able to counter the criticisms of the opponents of reform, and then we will need to be certain that mechanisms will be in place to ensure efficient utilization of our health care resources.
