An Economic Analysis of Health Care Reform in Taiwan

In March 1995, Taiwan implemented a national health care insurance (NHI),
by integrating three separate health insurance programs—Labor Insurance,
Government Employee Insurance, and Farmer Health Insurance—and by expanding
the program to cover the remaining 43 percent of the uninsured population. By March
1997, at the end of a two-year period, the NHI program earned a 75 percent consumer
satisfaction rate, increasing from 33 percent satisfaction at the beginning of the
implementation period. The more than twofold increase in the satisfaction rate was
largely due to the removal of financial barriers to health care for those newly insured
and full coverage extended to chronically ill patients. Although there was strong opposition to the NHI program in the early stages from the provider side, providers embraced the status quo when a proposal was raised to privatize the Bureau of National Health Insurance (BNHI). They have realized that as the result of NHI, their average income has increased, and with guaranteed
payment. Under the fee-for-service system, providers (physicians) have enjoyed a
substantial financial return from NHI. While it could be argued that there is an increasing threat of health care cost inflation, the overall percentage of health care expenditures to gross domestic product (GDP) in Taiwan is still relatively low, 5.01 percent in 1994 to 5.32 percent in 1997,
as compared to many Western countries. Therefore, the health care cost inflation issue
in not urgent. It is important to keep in mind as well that resources are always limited.
If a country can maintain a relatively low share of GDP for health care, the remaining
share of GDP can be used for education, social welfare, highway improvement, or
other public services. Furthermore, it is always prudent policy-making to focus not
only on short-term symptoms but also on long-term contingencies.

Mariam Ahmad