Sustainable Universal Health Coverage: Lessons from Taiwan’s Single-Payer National Health Insurance – A Tribute to Uwe Reinhardt

Written by Tsung-Mei Cheng.

Image cradit: Even then by Kevin Morris/Flickr, license CC BY-NC 2.0

1 March 2020 will mark the 25th anniversary of Taiwan’s National Health Insurance (NHI), a government-run single-payer health care system that covers the health care needs of Taiwan’s 23.5 million citizens and approximately 800,000 foreign residents. Before the NHI’s Implementation in 1995, 41% of Taiwan’s population had no health insurance coverage. Access to health care depended on the ability to pay for it, which often led to bankruptcy and impoverishment; or at its worst, meant no care. The NHI enrolled 92% of the population at the end of its first year of implementation, and quickly achieved universal health coverage (UHC), covering more than 99% of Taiwan’s population today.

Taiwan’s NHI protects all Taiwanese from the financial risks often associated with the costs of illness while providing timely access to needed health care without the long waiting times widely associated with single-payer systems around the world.

The ethical principle that underlies the NHI is solidarity. All countries that offer UHC to their citizens, including the UK, Canada, Germany, France, the Netherlands, Switzerland, the Nordic countries, Australia, etc., share this same principle. In his 2019 book, Priced Out: The Economic and Ethical Costs of American Health Care, Princeton economist and giant of health policy Uwe Reinhardt points out that all countries that have UHC make explicit first the ethical principle that constrains their nation’s health policy, and then build the nation’s health system around that ethical principle. It is the single most important lesson for countries that seek UHC. Without a majority political consensus on a distributive social ethic, it is difficult, if not impossible, for a nation to achieve UHC.

The most striking example is the United States, which has the distinction of being by far the most expensive health care system in the world, and the only nation in the developed world that does not have UHC. The US has never been able to agree upon an ethical principle that should constrain its national health policy. It never could agree whether health care is a right or a private consumption good and is yet to provide a clear-cut answer to the question Reinhardt asks in his book: “To what extent should the better off members of society be made to be their poorer and sick brothers’ and sisters’ keepers in health care?” The tragic consequences of this unique American circumstance are such that as of January 2019, 13.7% of American adults were uninsured. The number of uninsured children is also increasing. According to the US Census Bureau’s annual Health Insurance Coverage in the United States: 2018 Report released on 10 September, 2019, “5.5% of children under the age of 19 were uninsured, largely because of a decline in public coverage.”

How did Taiwan come to be a single-payer system? As an adviser to Taiwan’s government during the NHI’s planning stage, Uwe Reinhardt recommended the single-payer system to Taiwan’s government in 1989. Reinhardt based his recommendation on what he believed are three strengths of the single-payer approach: first, a single-payer system offers equity for all citizens; second, it can achieve cost control in an egalitarian way; and third, single payer systems are cheap to administer and easily understood by voters. Taiwan’s government officially accepted Reinhardt’s recommendation in 1990, based on which it built the NHI.

The NHI is a high performing health care system. It is an outstanding example of how a well-run single-payer system can achieve the policy goals of equity, good cost control, and administrative efficiency all at once for the benefit of the public. The following is a closer look at each of these strengths as integral parts of Taiwan’s single-payer UHC scheme.

First, equity. Enrolment in the NHI is mandatory. There is no adverse selection since everyone pays into the risk pool, insuring the broadest possible base for financing the NHI. Government premium subsidies are available to people who need them. Once insured, everyone is entitled to the same generous benefits package regardless of socio-economic status. This is in sharp contrast to the US, where health care is tiered by the patient’s ability to pay.

Second, good cost control. Total national health spending in Taiwan was 6.1% of Taiwan’s domestic gross product (GDP) in 2017, just 35% of the 17.2% of GDP the US spent, 64% of UK’s 9.6% of GDP, 57% of Canada’s 10.7% of GDP; and 69% of the average of 8.8% of GDP for OECD countries in 2017. The Figure below shows the national health spending as a percentage of GDP in select OECD countries and Taiwan in 2017.

pic 1

Differences in per capita spending are even more remarkable: Taiwan’s per capita health spending in 2017 was USD3,047, compared to USD10,207 for the US, USD4,812 for Canada, USD5,848 for Germany, USD3,943 for the UK; and average of USD3,992 for OECD countries. The extraordinarily high health spending of the US is a major reason why more and more Americans are becoming uninsured and not getting the health care they need.

Third, single payers are the most cost-effective in terms of administrative costs, which can account for a significant share of the total health spending of a country. Administrative costs in Taiwan’s NHI was less than 1% in 2017. This compares favourably with Germany’s administrative costs of 5%, the US’s 13% (for private insurers), and the average of 3% for OECD countries. A single government agency, the NHI Administration (NHIA), administers the NHI through six regional offices. A powerful IT system supports the multiple tasks NHIA is responsible for: enrolment, premium collection, risk pooling, claims processing, provider payment, medical reviews, oversight of utilisation and expenditures, and quality. The NHIA also makes coverage decisions for new drugs and medical technology based on cost-effectiveness analyses, provider fee-setting, and measures to contain costs, such as price reductions for prescription drugs, etc.

All healthcare systems in the developed world face similar challenges, and Taiwan is no exception: ageing of the population and low fertility leading to increases in the dependency ratio and the prospect of future labour shortages, rising burden of non-communicable disease, fiscal sustainability of the system, managing the public’s rising expectations for more and better health care, etc. Taiwan also has the additional challenge of establishing a first-rate long-term care system to look after its rapidly ageing population, an urgent task currently in its early stage of development.

Three long-term trends put Taiwan in a considerably more favourable position than most other health care systems around the world to deal with these challenges. First, the strength of Taiwan’s economy. Taiwan’s per capita GDP of Int$53,023 in 2018 ranks as the 14th highest in the world, above that of Germany (Int$52,559), Australia (Int$52,373), Denmark (Int$52,121), Canada (Int$49,651), France (Int$45,775), UK (Int$45,705), Japan (Int$44,227), and Korea (Int$41,351). By any measure, Taiwan is a high-income economy.

Second, Taiwan’s national health spending, at 6.1% of GDP compared to the average of 8.8% for OECD countries, is low. The low health spending and the high national income combined means that Taiwan is in the enviable position of being able to increase health spending to meet the growing need for higher health spending. The NHI is economically sustainable.

Finally, the consistently high public satisfaction the NHI has enjoyed over time lends the NHI the additional benefit of political sustainability, which is equally vital to its future. Public satisfaction in 2019 is 90%.

In conclusion, Taiwan’s NHI has been successful in not only providing universal coverage and equitable access to health care services and goods for all Taiwanese, but also has done so with remarkably effective cost control. The large discrepancy in health spending between Taiwan and other rich countries, however, may also suggest that Taiwan could be underfunding its health system in certain areas. For example, in addition to the lack of a well-established long-term care program mentioned above and despite the urgent need for one, Taiwan has lower doctor- and nurse-population ratios compared to other rich countries. There have been discussions of workforce shortages, which may adversely affect patient safety and quality of care. Taiwan is also slower in adopting new medical technology, including new cancer therapies, than many other health systems, which may explain the lower five-year survival and higher mortality rates for certain cancers (colorectal and cervical cancer) in Taiwan compared to many OECD countries. The NHIA’s low administrative budget hinders its ability to engage in more operations research to improve the NHI’s efficiency further, such as more policy and program innovations to improve care coordination, and development of its health technology assessment capabilities, etc. These are just a few areas in which Taiwan should spend more. Both Uwe Reinhardt and I have called for, in numerous previous writings, Taiwan to allocate 1-2% of its GDP to improve its health system’s overall efficiency, quality and patient safety.

Tsung-Mei Cheng is Health Policy Research Analyst at the Woodrow Wilson School of Public and International Affairs, Princeton University.

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