Taiwan’s New Universal Health Insurance Program

Despite Taiwan’s high annual per capita income (at more than $13,000 in 1997), its healthcare expenditure has been consistently lower than the average for other member countries of the Organization for Economic and Cooperative Development (OECD). It was only recently, in 1995, that the government implemented a universal health insurance program.

The National Health Insurance Program (NHI) replaces a patchwork system in which three major social insurance systems were in operation, offering at least 10 different health insurance programs. Labor, government, and agricultural workers were covered by these programs, but only government employees received coverage for their dependents. In all, only about 60% of the total population was covered, leaving 8.5 million people uninsured, mostly school age children and the retired.

Medical facilities are another important consideration for public health. The majority of Taiwan’s medical facilities are private, with only 12% in the public sector. Because public facilities are generally larger, however, they offer 35.6% of total hospital beds. Currently, there is one hospital bed per 208 people and one physician per 804 people in Taiwan. These figures compare unfavorably with those of Japan, which has one hospital bed per 74 people and one physician per 556 people. Even Mainland China has more physicians per capita than Taiwan, one for every 647 people.

Major causes of death in Taiwan have shifted, from acute infectious diseases (such as gastritis and tuberculosis) to health problems like cancer, heart disease, and automobile accidents. More basic information about Taiwan health issues is listed in Table 1.

Table 1: Social and Health Indicators

Source: Evaluation Report of National Health Insurance’s Two Years Implementation. ROC Department of Health, 1997.

THE NEW UNIVERSAL HEALTH COVERAGE PROGRAM

NHI was designed to provide affordable, quality, universal coverage to benefit every citizen. Because participation in the program is mandatory, 96% of the total population receives coverage, including almost eight million Taiwanese who previously had no health insurance.

The Bureau of National Health Insurance (BNHI), the DOH agency that administers NHI, is required by law to become economically self-sufficient. To discourage abuse of the system, BNHI distributes benefits on a fee-for-services basis, and beneficiaries must participate in a co-payment program.

Some Key NHI Program Features

1. Medical Services

BNHI’s branch offices and clinical centers are located throughout the island, to provide greater access to its services. In addition, NHI benefits include outpatient and inpatient care, dental services, Chinese medicine, hospitalization, home care, preventive services and prescription drugs – the most comprehensive health insurance on the market. As of August 1997, more than 90% of medical institutions participated in NHI: 736 hospitals, 8,190 physician clinics, 4,953 dental clinics, and 1,783 Chinese medicine clinics. Furthermore, NHI has authorized 3,250 pharmacies, 223 medical laboratories, 138 home care facilities, 28 midwife clinics, and 9 psychiatric rehabilitation centers to participate in activities covered by the new program.

2. Enrollment

All employed and resident citizens join the NHI according to one of the following six categories:

Category 1: Wage earners in the private or public sectors;
Category 2: Union workers and civilian sailors;
Category 3: Farmers and fishermen;
Category 4: Military dependents;
Category 5: Low-income persons; and
Category 6: Veterans and community groups.

Enrollees join NHI through the appropriate group insurance unit (e.g., wage-earners through their companies and farmers through their labor unions) each of which receives a fixed percentage of the premium (see Table 2, below).

3. Premiums

Employees, employers, and the government pay premiums on a monthly basis to BNHI, based on the employee’s reported income. After May 1998, this income percentage was fixed at 4.25%. The percentages that must be paid by employees, employers and the government are listed in Table 2 for each category.

Table 2: Health Insurance Premium Contribution (%)

Type	Employee	Employer	Government
Category I: Wage-earner (private or public sectors)
1. Government	40	60	—
2. Private schoo	40	30	30
3. Private sector	30	60	10
4. Self-employed	100
Category II Union workers/sailors	60	—	40
Category III Farmers/fishermen	30	—	70
Category IV Farmers/fishermen	30	—	70
Category IV Military dependents	40		60
Category V Low-income group	—	—	100
Category VI Community group
1. Veterans	—	—	100
2. Veteran’s dependents	30		70
3. Others	60		40

Source: The National Health Insurance Hand Book, Bureau of National Health Insurance, ROC Department of Health,1997.

4. Medical Expense Payment Methods

BNHI envisions a single, comprehensive, and integrated system for medical expense payment under NHI. Also in development is a comprehensive point system schedule, in which there are already more than 3,290 items listed. In addition, BNHI is in the process of combining its 20,054 approved pharmaceuticals into groupings and determining pricing methods.

Currently, BNHI pays medical expenses on a fee-for-services basis. The fees are decided under different methods, some services and procedures paid on a point system, others on a per-case basis (such as hemodialysis, vaginal deliveries and Cesarean sections). NHI covers more than 5,280 medical devices, with prices set based upon hospital recommendations.

IMPORTANT RESULTS FROM THE NHI PROGRAM

Coverage

Already, NHI is close to completing its most important goal of universal health coverage, with 96% of the population covered. Those one million citizens not covered by the program include aborigines, the unemployed, the homeless, and orphaned children. The primary reasons these groups have not joined NHI are inability to afford the premiums, ignorance of the program, and distrust of the government.

BNHI is attempting to identify this missing 4% by comparing household registration information from other government agencies with its own records. BNHI will also work with social welfare organizations to subsidize and otherwise help those who are unable to afford premium contributions.

Total Health Expenditures as part of Taiwan’s GDP

National healthcare expenditures reached $14.9 billion in 1996, about 5.5% of GDP. Of this amount, $5.33 billion went to beneficiary and private sector payments, $1.54 billion to reimbursement and other payments by the government, and $8.04 billion to administer NHI. Although Taiwan’s health expenditure compares unfavorably with the higher figures in Western countries, Taiwan’s total health expenditure increased by 10.41% from 1995 to 1996 while nominal GDP increased only by 8.5%.

Healthcare Utilization

Annual ambulatory visits grew to 16.11 per capita in 1994, a 9.9% increase from 1990. By the end of 1995, however, these visits fell to 12.53 per capita. The drop occurred most likely from a combination of factors, including NHI’s co-payment requirements (begun that year), the introduction of the new, and perhaps confusing, NHI health insurance card, more attention to auditing, and reduced physician payments. Per capita visits rose slightly in 1996 to 12.96, possibly as a result of greater familiarity with the program.

It appears that the NHI has made healthcare more efficient. Average annual inpatient admissions per capita increased by 1.64% in 1995, but then decreased by 3.88% in 1996. Number of hospital stays were reduced, as well; in 1996, they had dropped nearly 10% from pre-NHI levels.

Public Response

Although initially, public satisfaction was rated at only 33% in 1995, approval rose to 70.5% by the end of 1996. The public response to services provided by medical institutions trailed behind, at 65.2%. Complaints focused on high premiums and co-payments and inadequate quality of care. Public dissatisfaction pointed to poor attitudes of service-providers and short physician interviews for ambulatory care.

System Cost Control

Although only 5.48% of GDP was spent on national health expenditures in 1996, the annual growth rate in expenditures was 10.41%, while nominal GDP only rose by 8.5%. The government tries to maintain the health expenditure growth rate below 1% of the GDP growth rate. While health expenditure growth should be minimal in the next two to five years, a higher cost increase may occur if the government does not apply cost containment measures. As the new program’s participants, hospital beds, pharmaceuticals covered, and technologies used all grow within the system, costs will necessarily rise.

For example, prescription drug use is extremely expensive in the NHI, constituting 25% of all medical expenditures. Although this percentage is an improvement on the old system, in which prescription drugs took a 30% share, these expenses need to be brought down. NHI is using several methods to reduce prescription expenses, encouraging generic drug use and enacting a prescription price ceiling.

Summary

Statistics show that NHI’s single-payer system offers equitable coverage and has gained wide public support. Most importantly, the program contains strong cross-subsidization between upper and lower income groups and urban and rural residents, “spreading the risk” of the new insurance program.

NHI’S IMPACT ON FOREIGN MEDICAL COMPANIES

Medical Devices

Despite consistent discriminatory practices, Taiwan is the third largest emerging market in Asia for US medical device exports, with US companies receiving a 40% market share. Taiwan has continued its price setting and regulatory controls, even though it recently signed an agreement with the US to liberalize medical device pricing. The NHI, a major buyer for medical device products used in Taiwan, has only exacerbated this discrimination.

The agreement reached by the US and Taiwan in 1996 set specific goals concerning national treatment, transparency, openness, predictability, and functionality to have “prices reflect the relative value of technology.” Taiwan has yet to fulfill its promises, particularly that of functional pricing. The December 1997 NHIB decision to apply a “generic” pricing system to all medical devices violated the 1996 agreement with the US. Foreign device prices were reduced almost to the level of domestic products.

The NHI’s registration and reimbursement policies also reduce foreign companies’ market share. The reimbursement system does not evaluate on the basis of quality standards, such as GMP or ISO 900, putting importers at a competitive disadvantage. Unlike domestic manufacturers, importers must re-register second and third generation versions of previously approved products, further limiting their access to Taiwan’s medical market.

Pharmaceuticals

Price and regulatory controls also plague the pharmaceuticals market. The NHI sets artificially low prices for (mostly imported) brand name products and high prices for (mostly local) generics, which are already exempt from R&D and testing fees. In addition, foreign manufacturers are subject to long delays and inconsistencies during the regulation process. Furthermore, the MOH does not allow one company to market more than one drug with the same active ingredient and dosage, nor does it allow the import of a drug that has used multi-site sourcing.

Conclusion

Even as Taiwan expands its health services to its citizens, it escalates price-setting and regulatory controls, limiting the amount of quality pharmaceutical and device imports available to its people. Taiwan’s discriminatory practices show that its government is setting cost recovery and protectionism above healthcare quality.

BNHI: STRATEGY FOR THE FUTURE

BNHI has established the following strategic guidelines for its future operating plans:

Increasing Cost-Sharing

Low ambulatory expenses have led to an overuse of the system. Patients pay 8% – 9% of their total ambulatory care expenses currently, and 7% – 8% of hospitalization costs. BNHI plans to increase the patient’s share to 10% – 15%. BNHI will raise co-payment rates for non-referred and referred patients, in the hopes of deterring non-referred patients from attending larger hospitals and under using smaller health facilities.

Developing a Case-Payment Schedule

NHI hopes to develop a more efficient case payment system. Three procedures are currently paid on a case-by-case basis: hemodialysis, vaginal birth, and Cesarean section. BNHI hopes to add 50 surgical conditions into a case payment system. This system would push health-care providers to initiate cost containment mechanisms, reduce administrative fees, improve hospital management, and reduce total costs. Because cost data for several diseases are not yet available, NHI has had difficulty in establishing a case payment fee schedule.

Developing a Better Budget

The first step in establishing a long term cost containment mechanism is designing and implementing a new budgeting system. The system must take several factors into consideration, such as population increase, scope of coverage, inflation trends, new pharmaceuticals and technology, and the supply of health resources. These factors are critical to ensuring proper management of usage, quality of care, and appropriate budgeting.

CONCLUSION

Five key elements are basic to healthcare reform: coverage equity, cost containment, quality of care, administrative efficiency, and financial self-sufficiency. Taiwan’s NHI already covers almost all its citizens, vastly reducing previous inequities. Efforts toward cost containment and administrative efficiency have shown substantial improvements. As the NHI system matures, BNHI must study other reform programs and learn from the experience of other countries, to continue to provide Taiwan’s citizens with high-quality and reasonable-cost healthcare services in the 21st century.

SOURCES

• OECD Health Data, 1997.
• OECD Health Data, 1997.
• The World Almanac and Book of Facts, 1997.
• Bureau of National Health Insurance, 1997.
• There are nine major aboriginal peoples in Taiwan. Their ancestors moved from southern China and Austronesia to Taiwan at least 500 years ago. Each indigenous group has their own set of aboriginal languages. Some of them currently still live on mountains and maintain their cultural identities by resisting intermarriage with the Han, the largest ethnic group in Taiwan. They have undergone Han assimilation to different degrees.