Written By Tsung-Mei Cheng.
As the world continues to reel from the pains of lives lost and economic devastation caused by the global Covid-19 pandemic, Taiwan finds itself in a very different reality. As of September 30, of the world’s 33.9 million confirmed Covid cases and over one million deaths, Taiwan accounted for 513 cases and seven deaths. Taiwan’s success in containing Covid-19 is an extreme contrast to the United States, which has seen more than 7.2 million cases and over 200,000 deaths.
Life has returned to normal for Taiwan’s 24 million residents; all the children are in school, and the economy is growing instead of shrinking. According to the newly released interim economic outlook report from the Organisation of Economic Cooperation and Development (OECD), the world economy will contract an average of 4.1% in 2020 amidst “significant economic uncertainty” because of Covid-19. Taiwan’s economy, on the other hand, is projected to grow by 1.77% in 2020.
Having successfully dealt with the Covid-19 crisis, Taiwan’s government is poised to tackle its next national emergency: the looming financial crisis facing its treasured health care system, the National Health Insurance, or NHI.
Taiwan’s High-Performing Health Care System
A significant factor in Taiwan’s hitherto successful containment of the Covid-19 pandemic is its high-performing government-run single-payer NHI. This covers all citizens and foreign residents with the same comprehensive benefits without long waiting times seen in other single-payer systems such as UK’s National Health Service and Canada’s Medicare.
Access without worrying about how to pay for their care in Taiwan is a sharp contrast to the US where close to 20% of Americans have difficulty paying for needed Covid care, and 30 million are currently without health insurance. Another new study predicts some 12 million more Americans will lose their health insurance by the end of 2020.
As Figure 1 shows, total health spending is significantly lower in Taiwan than in all the rich OECD nations. Taiwan’s total health spending was 6.1% of its gross domestic product (GDP), significantly lower compared to the OECD average of 8.8% in 2018; and far lower than the 16.9% for the US, 10.9% for Japan, 9.3% for Australia, 10.7% for Canada, 9.8% for the UK, 11.2% for Germany, 11.2% for France, and 12.2% for Switzerland.
The Achilles Heel of Taiwan’s Health Care System: Financial Stability
Financial instability has been a “chronic condition” of the NHI. Despite provisions in the NHI Law protecting the financial stability of the system, this has dogged the NHI for most of its 25-year history. By law, the government can raise the premium rate when the required legal reserve fund is less than one-month of NHI expenditures based on actuarial determination.
Nevertheless, raising the premium rate is considered the unwelcome hot potato by Taiwan’s government, legislature and public. No wonder that since inception in 1995 the government had raised premium rates but twice, in 2002 and 2010.
The 2010 premium rate increase eliminated NHI’s large accumulated debt from previous years. It enabled the NHI to accumulate surpluses, which by 2013 began to exceed the legal limit set by the NHI Law. The government acted according to law and adjusted the premium rate downward to reduce the surpluses.
The NHI at the Crossroads
Today the NHI finds itself at a crossroads once again over its financial stability. In a column in July, Lee Po-Chang, Director-General of the NHI Administration, wrote that in 2019 NHI expenditures were approximately 5% over its revenues. The most recent government estimates, announced in September, anticipate that total 2020 expenditures will exceed revenues by almost 9% by the year-end. Moreover, by the year-end of 2021,the NHI will not have sufficient funds to meet its minimum legal reserve requirement of one-month of NHI’s expenditures.
The stark reality is that the government must now find ways to increase revenues for the NHI to stave off another financial crisis. Indications are that premium rate increase is the favoured choice of the health minister, Shih-Chung Chen, the commander-in-chief of Taiwan’s Covid taskforce that wrested Taiwan from a potential catastrophe in the event Covid-19 containment failed.
Members of different political parties in Taiwan’s parliament responded by questioning the “absolute necessity” of increasing premium rates to balance the NHI’s budget. They pointed to alternative solutions such as reducing waste in the system, reforming the delivery and payment systems to achieve higher efficiency, or increasing the government’s share of the premium revenues, etc.
Such arguments and doubts are déjà vu. They had been raised in the past whenever the question of premium rate increase came up.
Investing in Health and Reducing Waste
Studies show that access to high-quality health care substantially improves many health outcomes. In the 2017 Lancet Healthcare Access and Quality (HAQ) Index based on mortality from causes amenable to health care in 195 countries and territories from 1995-2015, Taiwan scored 78 on a scale of 0-100, lower than many nations with lower per capita GDP than Taiwan. The data highlights areas where “potential gains in HAQ are possible by strengthening health care quality and access” in Taiwan, and are helpful to Taiwan’s policymakers in identifying priorities for reforms and future investments in health care.
Taiwan’s health system, like all health systems around the world, has problems of overuse, underuse, and misuse. The problems are simultaneously attributable to both the supply and demand sides – providers, patients, and the public – and administrators charged with regulating and running the system.
For example, there is evidence of overuse and misuse of CT and MRI imaging and prescription drugs. Not to mention the unduly long length of stay in hospitals not based on medical grounds but are caused by patient demand and their families, etc. Examples of underuse include low nurse-to bed ratios, inadequate supply of long-term-care-beds for seriously ill and disabled patients, waiting times in the adoption of efficacious new technology, etc. Taiwan lags behind many rich OECD nations in the adoption of new technology, including new cancer treatments because of cost considerations.
Examples of other essential areas needing additional investments include a good long-term-care program to meet the urgent needs of the rapidly ageing population, and payment reform based on care quality and informed by comparative effectiveness analyses, etc. The NHI should only pay for health care services and products that meet both clinical- and cost-effectiveness criteria determined by a rigorous health technology assessment (HTA) agency. Examples of such agencies are the UK’s National Institute for Care Excellence (NICE) or Germany’s Institute for Quality and Efficiency in Health Care (IQWiG).
Another priority area is improving child health, including reducing infant mortality, which, at 4 per 1,000 live births in 2018, was higher than all rich OECD member nations (except Luxembourg), and only slightly below the OECD average of 4.1 per 1,000 live births. This is curious. Many of the 36 OECD member nations are emerging market economies whose per capita GDP are far lower than Taiwan’s, so in theory, Taiwan should have considerably lower infant mortality than it does now.
Political Leadership Matters
The late famed Princeton economist and health policy expert Uwe Reinhardt, who recommended the single-payer system to Taiwan in 1989, had long warned nations of a significant weakness of single-payer systems: that a single-payer system can easily be underfunded. Such was and still may be the case with UK’s National Health Service and Canada’s Medicare. For many years, both Reinhardt and I – specifically in a 2003 paper and elsewhere – had called for higher health spending in Taiwan.
As the successful management of the Covid crisis amply demonstrated, political leadership at the top is critical in meeting national emergencies. Now, as the NHI faces another looming financial crisis, leadership at the top is essential at this critical juncture.
Taiwan’s top policymakers should communicate to Taiwan’s public the reasons why it is now necessary to increase premium rates. They should also share with the public the government’s reform plans targeting specific areas such as those mentioned above and others.
It behoves Taiwan’s top policymakers to show the public that health spending as a percentage of its GDP in Taiwan is low compared to all OECD nations, as Figure 1 shows. Moreover, they should show that it also is low relative to Taiwan’s wealth measured in per capita GDP adjusted for purchasing power parity (PPP). For example, in 2020, per capita GDP (PPP) in Taiwan was US$57,214. This was higher than many OECD nations that spend far more on health care than Taiwan: Germany US$55,306, Sweden US$55,989, Denmark US$55,675, Australia US$54,799, Canada US$52,144, France US$48,640, UK US$48,169, Japan US$46,827, South Korea US$46,452, etc.
Knowledge of Taiwan’s comparative wealth should convince both Taiwan’s public and Taiwan’s policymakers that relative to many rich OECD nations whose per capita GDP are lower than that of Taiwan’s — and whose health spending higher than Taiwan’s — Taiwan is in an enviable position to be able to spend more on health care.
Public Trust and Cooperation Matters
Taiwan’s public trusted, supported and cooperated with the government’s Covid-19 policies and actions, which resulted in the successful prevention of the spread of the deadly virus. Taiwan’s government openly credits the public for the vital role it played.
Taiwan’s government now once again needs the trust, support, and cooperation of Taiwan’s public and its representatives in parliament — this time to help solve the financial problems of their much-treasured NHI.
As recent as the end of 2019, Taiwan’s public gave the NHI a 90% satisfaction rating. The questions at hand are: how will Taiwan’s public and their representatives in parliament respond to the urgent need to balance NHI’s budget in the near-immediate term? Moreover, how will they help build a health system of greater efficiency and quality in the longer term by agreeing to pay more for the health care they have come to expect? Citizens of Taiwan should realize that — in return for higher health spending through paying somewhat higher premiums — they will be the ultimate beneficiaries of more of the quality health care and benefits they aspire to. This would extent to superior nursing care, excellent long term care, faster and greater access to new technology, lower infant mortality, and lower out-of-pocket spending, etc.
Tsung-Mei Cheng is a Health Policy Research Analyst at the Princeton School of Public and International Affairs, Princeton University.
This article is part of a special issue on Challenges to Taiwan’s medical system beyond COVID-19.