Friday, April 9, 2010

Taiwan’s highly acclaimed healthcare system confronts financial challenges

Universal healthcare has been a contentious issue in both Taiwan and the United States. Whereas the US Congress recently passed the healthcare reform bill after 14 months of debate, the rising cost of Taiwan’s universal healthcare has also caused major disagreements in Taiwan. The problem came to a head when Taiwan’s health minister Yaung Chih-laing, who insisted on raising the premiums, sought to resign over this issue.

NHI covers almost all citizens

Taiwan’s universal healthcare system, known as the National Health Insurance (NHI), is a single-payer compulsory social insurance plan administered by the government that centralizes the disbursement of healthcare funds. Launched in 1995, the NHI offers comprehensive healthcare to every person in Taiwan regardless of income. Currently covering 99 percent of the legal local residents, with citizens living overseas and foreign nationals accounting for the remaining one percent, NHI is mainly financed through insurers’ premiums based on the payroll tax and direct government funding.

US Nobel Laureate Paul Krugman has spoken highly of Taiwan’s health insurance system. It has improved Taiwan’s general life expectancy and insurers’ health as well. However, the NHI faces the growing challenge of balancing its expenditure, which is rising at 5.5 percent, with revenues averaging 4.7 percent.

Hike essential to NHI

Yaung’s original proposal called for hiking the premium from 4.55 percent to 5.09 percent, which would impact 41 percent of Taiwanese insurers, and generate an extra premium income of NT$45 billion (US$1.4 billion) a year. This would be enough to offset much of the existing deficit of NT$58.8 billion (US$1.84 billion) accumulated by the end of 2009. Without the rate hike, the NHI debts will likely reach NT$101.5 billion (US$3.17 billion) by the end of 2010.

This is one solution that both the ruling Kuomintang (KMT) and the opposition Democratic Progressive Party are cautious of supporting for fear of the backlash come election time. Instead, the Executive Yuan favored a differential premium rate set to people’s income level, that would exempt 75 percent of the local people from the premium hike and have less of an election impact for the KMT.

Yaung’s frustration at the government for not addressing the problem led him to submit his resignation. He asserted, politicians catered too much to winning votes rather than seeing to needed reform, long term policy or national development.

Temporary measures

With President Ma Ying-jeou’s mediation, the Executive Yuan finally came up with a resolution to increase the premium to 5.17 percent effective April 1. This 0.62 percent hike, higher than the one Yaung originally proposed, marked the second rate hike since NHI’s inception. It would add NT$52.2 billion (US$1.65 billion) in annual premiums to help keep the NHI financially balanced for about two more years. This would also leave 78 percent of the insured unaffected due to the 100 percent government subsidy to people with monthly insurance payments of NT$40,100 (US$1,250) or lower.

In the announcement of the resolution, the Executive Yaun said the subsidy is a temporary measure only in place until the reform bill, the so-called second generation NHI, is instituted. With the increase in premiums, Yaung agreed to continue in his ministerial post to promote the second generation of the NHI passage in the Legislature and to carry out its implementation.

Still trouble ahead

Even with the hike, not all of NHI’s problems will be solved. According to the Taiwanese Association of Social Welfare, NHI expenditures have been getting bigger and bigger due to 1) an aging population and the increase of severe wounds and diseases, 2) high human costs characteristic of the medical health industry, and 3) new technology and drug development pushing up the costs.

In its article in the Taipei-based China Times, the association noted that Taiwan’s second generation NHI needs to include the following key points: 1) enlarging the premium base from the current payroll to include all income sources, 2) automatic adjustment of both expenditures and revenues to avoid a big deficit and only a minor adjustment of premiums every year, 3) changing the premium calculation from individual’s payroll to the total income of local households.

In the short term, the second-generation NHI will generate more income from the premium rate hike and improve the financial health of NHI. In the meantime, the NHI will cross over to achieve a more equitable redistribution of wealth from high-income classes to low-income classes. In the long term, it will establish better system integration between the NHI disbursement payments to service providers.

Even though the much-anticipated second generation health reform bill is not a panacea for all NHI issues, it is a must for Taiwan’s health reform, which needs not just a minor adjustment but a structural change.

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About Me

The Press Division of the Taipei Economic and Cultural Office (TECO) in San Francisco represents the Government Information Office (GIO), Executive Yuan, Republic of China (Taiwan). GIO maintains nine Press Divisions in the United States, including the San Francisco office. The Press Divisions are in charge of promoting Taiwan's public relations and cultural exchanges. This blog is updated by the Press Division, TECO in San Francisco.