Written by Chunhuei Chi
The Birth of a Modern Healthcare System
Taiwan began planning for a universal healthcare system, the National Health Insurance (NHI) system, in 1988. Taiwan’s Parliament passed the National Health Insurance Law on 19 July 1994. On 1 March 1995, Taiwan implemented its NHI system, administered by the Bureau of NHI (renamed NHI Administration or NHIA in 2013). This system covers all citizens and residents who stay in Taiwan for six months or longer (initially four months) for inpatient, outpatient, dental, prescription drugs, and Chinese medicine healthcare. Approximately 93% of healthcare providers are contracted with the NHI system. This new system puts Taiwan ahead of most Asian countries in implementing a universal healthcare system.
Taiwan’s NHI system was built upon a robust public health system. Japan modernised Taiwan’s medical education and public health system when Taiwan was part of Japan (1895-1945), providing a solid foundation for a modern healthcare system in Taiwan to expand.
The NHI system was financed primarily by a payroll tax supplemented by general tax revenues, special taxes, and cost-sharing. The payroll tax rate was 4.25% (shared by employers and employees), which went through numerous revisions. On 1 January 2021, it was increased to 5.17%, and the supplemental tax was increased to 2.11%. (All statistics are based on NHIA and the Ministry of Health and Welfare website https://dep.mohw.gov.tw/DOS/cp-5301-62356-113.html.) The payment system was a combination of fee-for-service, case payment system, diagnoses-related groups (DRG), and pay-for-performance under a global budget system that has effectively managed expenditure inflation.
Taiwan’s national health expenditure was 6.7% of GDP in 2020, with USD 1,873 (NT 56,199) per capita. Within this expenditure, 60.5% came from the public sector and 39.5% from the private sector. While the health system financing is predominantly public, the health care delivery system is primarily private. The private sector has 83% of hospitals, 74% of hospital beds (whereas Taiwan has seventy-three beds per 10,000 people), and 96.4% of clinics.
Achievements and Innovations of the NHI
The NHI system has seen numerous achievements since its implementation. Aside from over 99% of population coverage, it also achieved three objectives of WHO Universal Health Coverage
1. equity in access to health services,
2. the quality of health services should be good enough, and
3. people should be protected against financial risk.
More importantly, it improved population health through enhanced access to healthcare and integrated health promotion with healthcare. Having the NHIA under the jurisdiction of the Ministry of Health and Welfare facilitates such integration.
Other achievements of the NHI system include improved equity of financial burden in healthcare, effective costs control with exceptionally low administrative costs (while the insured are free to choose any provider at any level) and maintaining effective expenditure control. Further, it provides comprehensive and generous healthcare coverage with a high public approval rating that was persistently above 80%, reaching 91.6% in 2021.
Taiwan’s NHI system also received international attention. For example, Taiwan was ranked Number One among 96 countries compared in Numbeo Health Care Index by Country 2022 for four consecutive years.
The sophisticated information network of Taiwan’s NHI system was vital to the COVID-19 pandemic control. It expanded 2013’s PharmaCloud (a cloud platform for patients’ prescription records) into MediCloud in 2018, including diagnostic imaging records. MediCloud’s original purposes were improving the quality of care and reducing duplication of diagnostic procedures and prescription drugs. When the pandemic started, this information system was integrated with other systems and became vital for Taiwan’s universal facial mask rationing, identifying patients’ exposure history, and quarantine enforcement. In addition, when the mass vaccination began to roll out in the spring of 2021, this system was crucial in keeping track of residents’ vaccination status.
Challenges to Taiwan’s Healthcare System
One of the top concerns for Taiwan’s healthcare system is the quality of healthcare. Despite the international top rankings and compliments of the system, Taiwan fell short of the top-tier nations in healthcare quality. In the Lancet’s 2017 Healthcare Access and Quality Index among 195 countries-territories, Taiwan’s “Healthcare Access and Quality Index” was ranked number 45. This publication engendered Taiwan’s health academics to recognise it as a major weakness that needs improvement.
When the COVID-19 pandemic hit in 2020, it put Taiwan’s healthcare system through a stringent trial. During the spring of 2021, when Taiwan experienced its first wave of major domestic outbreaks, the high COVID-19 case-fatality rate (CFR) of over 5% was an embarrassment to Taiwan’s healthcare system. While the prevalence of COVID-19 can be attributed to broad public health and demographic factors, CFR is more sensitive to healthcare capacity. Taiwan’s CFRs during the three years of the pandemic were 0.88%, 4.96%, and 0.15%. Compared to Asia’s 317.21 cumulative deaths per million, Taiwan has 496.36. Although it was lower than the world’s 830.27 or high-income nations’ 2,165.93, it was higher than neighbouring Vietnam (442.76), Japan (368.57), and Singapore (300.90) – those nations whose healthcare systems were ranked lower than Taiwan in international comparisons. (All statistics were as of 15 October 2022)
One major contributor to the high CFR in 2021 was Taiwan’s hospitals’ near-capacity occupancy before the pandemic. As a result, there was a considerable motivation for Taiwan to achieve zero COVID in 2020, as the policymakers knew that Taiwan could not afford to have any major community outbreak that could overrun Taiwan’s hospitals’ capacity. But unfortunately, Taiwan’s healthcare did not stand up to the test during the spring of 2021.
Ironically, this near-capacity system was considered a strength is contributing to Taiwan’s highly efficient healthcare system before the pandemic. However, when the strength turned into weakness during the pandemic, it forced Taiwan to re-evaluate its healthcare priority. For example, such an “efficient” system came at the price of underinvestment in quality and capacity.
Taiwan’s weak primary care system is another weakness related to its healthcare system’s quality and capacity. The lack of uniform quality of care among its primary care clinics led to the over-expansion of tertiary care hospitals dominating Taiwan’s outpatient primary care delivery. The free choice of any level of providers under the NHI system did not help. NHIA’s attempt to encourage the public’s use of primary care clinics by implementing tiered cost-sharing across levels of providers did not seem to work. This weak primary care system also contributed to the high COVID-19 CFR in 2021, when clinics could not play a significant role in caring for COVID-19 patients. To improve Taiwan’s healthcare quality, it is vital to significantly improve the overall quality of its primary care clinics and strengthen its role in population health, especially in caring for the ageing population. Further, strengthening primary care clinics is imperative for Taiwan’s transition into a post-pandemic world to allow the population to live safely with SARS-CoV-2.
The last major challenge, health system governance, is common to most nations’ health systems. A focal point of governance is the process of decision-making that reflects fair participation and the population’s value, not just the outcome. Among crucial health policies, populations’ voices should play a major role in the system’s priority, financial burden distribution, and healthcare access. A common misperception is to consider health priority setting as a positive science that should be left to the experts, which confuses science with politics. To evaluate which healthcare services are effective or cost-effective is science. To decide which healthcare services should be prioritised is about politics, which requires democratic governance. Although the World Health Organization has been promoting good governance for over two decades, governance was seldom seriously considered in most nations’ health systems. During the third year of the pandemic, this issue emerged among academics concerned about the erosion of democratic governance during the prolonged pandemic emergency that often resorted to very top-down authoritarian decision-making.
Towards A Resilient Healthcare System
The healthcare system can be treated either as an industry (as they often were) or as a social institution. How society regards its healthcare system profoundly impacts the development, function, governance, and goals of the healthcare system. As a social institution, a nation’s health system has the common function and goal of maintaining and promoting its population’s health equitably and efficiently.
Beyond the pandemic, our healthcare system will face more future challenges, from chronic diseases of the ageing population and emerging new infectious diseases to the health impacts of climate change. We need a strengthened healthcare system that is innovative, adaptable, trusted, and governed by the people to face these challenges. As for sustainability, Uwe Reinhardt said “Sustainability is about people’s willingness to share.”
In his last book, Gavin Mooney (2012) argued that the healthcare system reflects “what sort of community would we prefer to live in?” Along the same reasoning, we may recognise that a nation’s healthcare system tells us the people’s and society’s nature. Therefore, it is up to the people of Taiwan to decide how Taiwan’s health system may reveal the nature of the Taiwanese people and society.
Chunhuei Chi is the Director of the Center for Global Health and professor in the Global Health Programme and Health Management and Policy Programme at Oregon State University. She is also a visiting scholar at National Chengchi University, Taipei Medical University and National Yang Ming Chiao Tung University.
This article was published as part of a special issue on healthcare in Taiwan.