Observations Atlantic Crossing

Humbled in Taiwan

BMJ 2008; 336 doi: https://doi.org/10.1136/bmj.39450.473380.0F (Published 10 January 2008) Cite this as: BMJ 2008;336:72
  1. Uwe E Reinhardt, James Madison professor of political economy, Princeton University, Princeton, New Jersey
  1. reinhard{at}princeton.edu

    Taiwan’s highly efficient system of national health insurance should humble and inspire the United States

    Tagging along with Tsung-Mei Cheng, an expert on Taiwan’s health system, on her recent visit to Taiwan’s Bureau of National Health Insurance, turned out to be a bit humbling for me as someone who focuses mainly on the US health system.

    The bureau is the government agency that administers Taiwan’s single payer national health insurance system. Its staff members fret when hospitals and walk-in clinics fail to submit completed claims within the required 24 hours after delivery of service. Private health insurance companies in the United States count themselves lucky if high priced actuaries can tell them in the middle of the year what the carrier ultimately will have to pay the providers of health care for services rendered in the previous year. Taiwan’s bureau can track almost in real time what goes on in the nation’s healthcare system. In the US even a vague idea of what has been going on a year or two ago can be had only with the aid of a multimillion dollar, highly sophisticated health services research industry. It is a safe bet that Taiwan will have an electronic medical record system that connects all providers of health care to the same data bank long before that will be feasible in the US’s pluralistic and highly fragmented healthcare system—whose myriad computing platforms make for an electronic tower of Babel.

    Taiwan introduced its national health insurance system on 1 March 1995, after less than a decade of planning that went ahead in textbook fashion. After visiting the health systems of numerous other nations, Taiwan’s policy planners used the insights gained to develop what has been described as “a car made from many parts produced abroad but assembled in Taiwan.” It took only 18 months for the plan to make its way through the legislative chambers in 1993-4. At the behest of Taiwan’s then president, Lee Teng-hui, it was implemented in less than a year. Overnight, health insurance coverage in Taiwan jumped from roughly 57% of the population before 1 March 1995 to virtually the entire population. For US policy makers and presidential contenders—who for half a century now have engaged in a perpetual “national conversation” on universal health insurance, only to see the number of uninsured people grow apace over the years—the speed of Taiwan’s move to a national health insurance system seems downright surreal.

    Taiwan’s system is financed in roughly equal share by the government, employers, and households in a complex scheme that includes subsidies, payroll taxes, and premiums paid by self employed people. Health care is delivered by a mixed system that includes private clinics, private non-profit hospitals, and public hospitals, among which patients have full freedom of choice. The main tool for cost containment has been sectoral global budgets; while effective in the short run, over the long run they have triggered some untoward side effects and should be replaced with more flexible tools to control costs.

    Although in opinion surveys some 70% of the population declares itself satisfied with the system—a very high satisfaction rate by US and European standards—the national insurance system has its critics, especially among doctors and hospital executives, who predictably chafe under its global budgets. The accusation is that the system begets low quality care. Often these claims are based on comparisons with top tier health care in the US, which now spends over 16% of its gross domestic product on health care (Taiwan spends 6.2%).

    The proper comparison, however, is not between Taiwan and top tier US health care but between health care in Taiwan today and that before the national health insurance system was created. In the absence of national health insurance Taiwan would today probably have a highly stratified healthcare system, with top tier, US style care for the rich funded by private insurance, a social insurance system for the employed middle class with highly variable quality of care, and much less or nothing for millions of uninsured poorer citizens.

    Taiwan could much improve its health system by allocating an additional, say, 1-2% of its gross domestic product to health care. Some of the additional funds could be used to reduce patients’ own spending, which is still higher than that in most European nations. Furthermore, much more should be allocated to the administrative budget of the Bureau of National Health Insurance, which now accounts for only an inadequate 1.5% of total spending on the health insurance system, compared with the 10% to 12% that premium commercial insurers in the US spend on administration, in addition to another 8% or so for marketing and profits. Recent research indicates that Taiwan’s healthcare system devotes too much of its tight budget to relatively trivial complaints, at the expense of upgrading the quality of more critically needed interventions. With its powerful IT platform it should be easier for Taiwan than it is in the US to enhance the cost effectiveness and the quality of Taiwan’s health care.

    Loss of health insurance and fear of bankruptcy over medical bills is a growing fear among millions of Americans; it has not been in Taiwan since 1995. In a globalised economy that subjects Taiwan’s low skilled workers to ever fiercer foreign competition from low cost labour elsewhere in Asia, the safety net of the national health insurance system represents one of Taiwan’s major public assets.

    Loss of health insurance and fear of bankruptcy over medical bills is a growing fear among millions of Americans; it has not been in Taiwan since 1995


    • This article was coauthored with Tsung-Mei Cheng, of the International Forum at Princeton University, on whose work it draws.

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