Taiwan’s Single-Payer National Health Insurance at a Crossroads: Barbarians at the Gate and Way Forward 

Written by Tsung-Mei Cheng 

Image credit: image by FedEx/twitter. License: CC BY-NC-ND 2.0

Taiwan established its now internationally acclaimed single-payer healthcare system, National Health Insurance, in March 1995. Previously Taiwan had more than 13 separate insurance schemes that covered different populations groups – Labor Insurance, Government Employees Insurance, Farmers Insurance, Fishermen’s Insurance, etc., but they covered only 59% of the population, leaving the rest 41% uninsured, who overnight came under the NHI’s protective umbrella immediately following the NHI’s implementation. By the end of 1995, the government had successfully integrated disparate insurance schemes into the single-payer NHI and enrolled 92% of the entire population. Today, the NHI covers over 99.9% of Taiwan’s population of 23.8 million, including foreign residents.  

NHI as keeper of social peace 

All in Taiwan regard the NHI as one of its most important public policies. The public satisfaction rate is over 90%. Enrolment is mandatory, and government subsidies help pay for the care of the poor and disadvantaged. The NHI provides equal access for everyone, and a national uniform benefits package means that everyone receives the same benefits regardless of one’s socio-economic status. NHI’s benefits are generous – they include inpatient- and outpatient care, prescription drugs, dental care, Chinese medicine, dialysis, etc.  

Taiwanese enjoy free choice of providers and can go to any doctor or hospital anytime, anywhere, and as often as they want. The average number of doctor visits in Taiwan is more than 12 times a year, more than twice the average of 5.7 times in OECD countries. Taiwanese also enjoy convenient and timely access to care. Waiting time is generally not a problem like in fellow single-payer countries Canada, and the UK.  

NHI’s Achilles’ heel  

Unlike tax-financed single-payer systems such as UK’s National Health Service and Canada’s Medicare, Taiwan’s NHI is a premium-based system jointly financed by the insured, employer, and government. As a single-payer system, the NHI is administered by the NHI Administration (NHIA) under the Ministry of Health and Welfare.  

Except for the first three years after implementation, where the NHI had a surplus, the NHI’s financial status has not always been stable. Many years saw deficits, despite the NHI Law provision that permits premium rate increase every two years as needed to balance the budget. The premium rate increase is a politically sensitive issue in Taiwan and only three times in NHI’s 27-year history did the government succeed in raising the premium rate. In this writing, the NHI is in its sixth year of deficits (2017-June 2022). The Minister of Health and Welfare “plans to adjust the premium rate after 2024” – 2024 is the year of the presidential election in Taiwan, according to Cheng-Hua Lee, MD, senior deputy director of NHIA (personal communication, 1 NOV 2022.)  

Barbarians at the gate  

Chronic financial instability and the difficulty the government has with raising the premium rate to balance the budget aside, the NHI faces myriad other challenges, including rising patient-consumer expectations and demands for ever more and better health care, the high cost of new medical technology and its coverage, provider payment reform, health care workforce shortages, ageing of the population, building long term care, etc.  

I once asked a former NHIA head, Jian-Hsiang Liu, at a meeting with him what he found to be the toughest challenge for him as NHIA chief. Liu answered quickly: “managing the public’s rising expectations!” A case in point is NHIA’s policies on rare diseases coverage, currently a hot topic in Taiwan. Lacking sufficient funds to adequately cover rare diseases, NHIA restricts care for rare diseases in several ways: by gradually reducing coverage, lengthening patients’ wait time for treatment approval, tightening eligibility criteria, and freezing growth in designated funds for rare diseases. As a result, the average wait time for approval of drug treatment for rare diseases is 30.3 months; of the 95 approved drugs for 240 government-recognized rare diseases, the NHI covers only 61; and 85% of rare diseases are not being treated under the NHI.  

On provider payment, it can be said that providers in Taiwan, with near unanimity, view the NHI fees paid to them as unreasonably low. Low fees, real or perceived, lead to distortions in provider behaviour, which has far-reaching consequences for the NHI, patients, and the public. For example, providers increase volume or induce demand for unnecessary medical services and products to compensate for low fees. It is not uncommon for doctors to see 70 or more patients in a single session. Naturally, time spent with each patient is short, many just 3 minutes. Low fees and long hours also led many doctors to flee and join the ranks of more profitable and “easier” specialities such as cosmetic surgery or open private “health examination centres,” where they can set their own fees and offer an array of healthcare services and products. Flight of doctors to non-core medical specialities have contributed to shortages in core specialities, further aggravating the long-existing low physician-population ratio compared to advanced OECD countries, as Figure 1 shows. At present, there is an acute shortage of internists and surgeons in Taiwan.  

Taiwan also suffers from a severe shortage of nurses. Figure 1 shows that the average OCED nurse-population ratio is nine nurses per 1,000 population (2020), and wealthy OECD countries have ratios that are typically higher than that. Taiwan ranks lowest with 7.6 nurses per 1,000 population. 

Chronic underfunding erodes equity and quality  

When Princeton economist Uwe Reinhardt, a listened-to voice in health care, recommended a single-payer system to Taiwan’s government as a senior adviser during the crucial planning stage of Taiwan’s historic health reform in 1989, he told the government not just the strengths of the single-payer approach, but also its weaknesses, so the government could weigh the pros and cons and make an ‘evidence-informed’ decision on whether to go for a single-payer system or something else. Reinhardt gave three main strengths of the single-payer approach: equity, cost control, administrative simplicity and ease for the public to understand; and two weaknesses: underfunding and the system-wide impact of policy mistakes. He, in particular, warned the government of the danger of underfunding in a single-payer system.  

Since NHI’s implementation in 1995, Taiwan has reaped great benefits of all three of the strengths of single-payer systems Reinhardt told them. But Taiwan also fell victim to some degree of underfunding for its NHI, which is the source of NHI’s persistent financial instability. Taiwan’s national health expenditure has been, and remains, low compared to comparable OECD countries. Figure 2 shows NHE as % GDP in Taiwan and comparable OECD countries in 2020.  

Underfunding can be addressed with a number of policy responses. For example, global budget, spending caps, coverage limitations, access restrictions, wait times, price freeze or lowering, low fees for providers, thresholds for coverage, etc. Usually, different combinations of these countermeasures are used, such as those seen in NHIA’s policy response to rare disease coverage discussed earlier.  

Source: OECD Health Statistics 2022. Data for Taiwan based on the Ministry of Health and Welfare 2018 Health and Welfare Trends Report 2018. 

Underfunding and policy responses to underfunding, unfortunately, jeopardize equity and can lead to the erosion of solidarity. In Taiwan, one already sees the budding of a two- or multitier healthcare reality as wealthy patients pay out-of-pocket for expensive treatments and other healthcare services and products not available under the NHI.  

Way forward  

Healthcare in Taiwan is currently at a crossroads. How Taiwan decides which way forward depends on what kind of health care Taiwanese want for themselves in the 21st century, an age when advances in medicine and the life sciences hold so much promise for health, life, and quality of life.  

Suppose Taiwan wishes to retain its original policy objectives of solidarity, cost control, and administrative simplicity for their health care, which served Taiwan so well, and at the same time, have more and better health care. In that case, the answer is simple: go for higher spending on health care. 

Could Taiwan afford higher spending on health care? The strength of Taiwan’s economy can, without doubt, support a far higher level of healthcare spending. Taiwan’s GDP per capita of ($PPP) $69,500 positions Taiwan as the world’s 13th richest economy in 2022, surpassed only by Switzerland ($84,469) and the United States (75,180), comparable with Denmark ($69,845) and Netherlands ($69,715); and surpassing Sweden ($63,877), Germany (63,835), Canada ($57,827), France ($56,200), United Kingdom ($55,862), South Korea ($53,574), Japan ($48,813).  

All these countries above spend more, some far more, on health care than Taiwan, as Figure 1 makes clear. An easily achievable target for Taiwan is raising healthcare spending from the current 6.5% of GDP to 7%-7.5%. I have repeatedly called for higher health spending for Taiwan for the past 20 years, a call strongly endorsed by Uwe Reinhardt. 

The real question is whether Taiwan is willing (as opposed to “able”) to spend more on health care. The key to the future of health care in Taiwan, a vibrant democracy with a robust economy, is in the hands of the Taiwanese, who deserve more and better health care.  

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

This article was published as part of a special issue on healthcare in Taiwan.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s