Taiwan’s path to universal health coverage—an essay by William C Hsiao

Planning like a doctor

I initiated a planning approach that was based on the systematic process that physicians take with patients. We first diagnosed the causes of Taiwan’s major health problems with solid evidence, then we gathered the global knowledge and experience to treat these problems effectively, in a way that would work for the patient in front of us: Taiwan.

The diagnostic process required the taskforce to collect and analyse Taiwanese health and socioeconomic data as well as examine the historical development of Taiwan’s health system. Around 20 professionals collected and analysed the data and created a cost projection and financing model.

Taiwan had defaulted its financing and delivery of healthcare to the free market. As a result, it had a patchwork healthcare system. The quality of healthcare was highly varied. Some of the physicians and nurses were unqualified, and there was little quality assurance. Privately practising physicians charged high prices and made handsome profits from overprescribing. There was no effective constraint on health expenditure and no government regulations or market forces to encourage efficiency. Delivery of healthcare was fragmented, with separation of prevention, primary, and tertiary care. Government was responsible for prevention, and private clinics provided primary care. Inpatient hospital services and specialist services were a mixture of public, non-profit, and for-profit.

In 1989, we organised a three day international conference that commissioned papers and brought the top academic experts from the UK, US, Canada, Germany, and Japan to share the successes and failures of their health financing and delivery approaches with the taskforce and Taiwan’s top policy makers. Taskforce members also visited several countries to get a more in-depth understanding.

The taskforce had to tackle a broad question: the role of government versus private markets. Ideologies were debated and argued—sometimes heatedly. We organised several meetings with academics and politicians to debate this issue. Eventually, evidence convinced most people that the private market would not be able to achieve universal coverage or finance it, and that the sales and administrative expenses of private health insurance would be huge. Delivery of healthcare could be a mixture of government and private.

At the international conference, the tremendous advantages of a single payer system were brought out by Canadian and US experts. This information convinced the taskforce and leading policy makers to adopt a single payer approach.

Designing the benefit package was the greatest challenge. We knew we couldn’t reduce what some people already had. There were fundamental decisions about what should be covered—Prevention? Primary care? Long term care? Rehabilitation? Three areas were particularly controversial: dental care, eye care, and Chinese medicine. So we examined the cost and effectiveness of various services.

Meanwhile, many economists argued that health insurance created “moral hazard”—insurance providing free or reduced priced services and drugs induces some patients to demand more than they need medically. There was worldwide evidence for that. The economists therefore suggested co-payments, but some on the taskforce worried that co-payments, co-insurance, and deductibles would deter patients from seeking necessary preventive and medical services.

The taskforce also grappled with incentive systems to pay providers (that is, physicians and hospitals) to enhance efficiency and quality of healthcare. We were mindful that the existing fee-for-service payment method promotes increased expenditure. Better methods have been adopted by many advanced nations. There were some good options: capitation, salaried physicians, hospital global budget, bundled payment, and diagnosis related group payment for inpatient hospital services.

The taskforce developed a model to estimate the costs of different options in benefit coverage and payment methods. Next, we explored various methods of financing them and presented the options to the policy makers. Ultimately, what determined coverage were the costs and the estimated amount of financing required to sustain a plan over 10 years.

In 1989, once we had determined the causes of Taiwan’s major health problems, President Teng-hui Lee asked me to brief him every month. I also met regularly with several other leaders, including K T Li, a political leader from the moderate wing of the KMT. The business community was concerned about the cost of UHC and what it must pay. (It was eventually convinced by the argument that it would maintain the loyalty of workers in a tight labour market by offering health insurance that included family members.)

The planning commission organised public meetings for the taskforce to present our preliminary recommendations and obtain public feedback in 1990. We also presented a proposed plan to various legislative committees. We revised our recommendations based on the feedback, including adding Chinese traditional medicine to the benefit package.

The plan

We issued the final plan in 1990, called the national health insurance (NHI) plan. A new team was appointed in the Ministry of Health to flesh out the details of the plan, and the president began strongly pushing the Taiwanese legislature to pass the plan in 1993. As a result, the legislature made only modest revisions and passed it in 1994.

Taiwan’s NHI plan covers all citizens with a comprehensive set of services, including secondary prevention; all physician, inpatient, and rehabilitation services; Chinese traditional medicine; eye and hearing care; most dental care; and visiting nurses. But it doesn’t cover long term care in institutions. Patients must make modest co-payments for clinic visits and drugs, but the total amount any family must pay is capped each year. Employers, workers, and government each pay one third of the cost of employed workers’ insurance. The government pays the premiums for poor people and veterans as well as subsidies for workers in the informal sector. People can buy private insurance for services not covered by the plan such as cosmetic surgery, private hospital rooms, private nursing, and uncovered new expensive but less effective drugs.

A fundamental principle in controlling expenditure was established by Premier Chan Lien when he reviewed the taskforce’s report. The amount of NHI revenue determines the payment rates and amounts paid to healthcare providers. However, subsequent governments have been reluctant to raise the taxes or premiums, which put pressure on lowering the payment to providers. The NHI Administration, a quasi-government agency set up to oversee the plan, also established mechanisms to control the use of new expensive medical technology and drugs to moderate the pressure for expenditure increases.

The taskforce recommended that Taiwan reform its payment system to healthcare providers by introducing bundled payments and diagnosis related group payment methods as well as capitation. Moving away from a fee-for-service system would also reduce the incentive for increased usage induced by physicians. President Lee assured me he’d fight for the payment reforms, but in the end strong opposition from physicians stopped them. Taiwan continued to pay providers on a fee-for-service basis but with a point system to cap the total amount that would be paid out each year. This point system remains today.

The taskforce also recommended prioritisation of quality improvement. This included periodic recertification of hospitals, continuing education of physicians, and, most importantly, monitoring the quality of medical services and discipline the poor performers. However, the progress is slow.

At the recommendation of the taskforce, the government set up a board of directors for NHI which included representatives of payers and payees. Members negotiate what changes in benefits and payments the two sides can agree on, with “neutral” members, including academics, breaking any tied votes. This approach takes the government out of the middle.

Did it work?

Taiwan was fortunate to appoint a capable official to implement the plan, Dr Ching-chuan Yeh. He did a superb job. Since the plan came into effect in 1995 no major revisions have been made, except for financing. In 2012, the legislature added a new source of revenue: an earmarked tax on unearned income.

Now, the plan covers 99% of Taiwan’s citizens with comprehensive benefits; the remaining 1% reside overseas and did not enrol.1 The health status of Taiwanese people continues to improve. Infant mortality is 4.3/1000 live births and life expectancy 81 years,1 which is comparable with the UK and better than the US. Impoverishment caused by medical expenditure is minuscule. (That said, personal expenditure on long term care is substantial.) Patients have free choice of providers, with no gatekeeper. Almost all patients can access physician services within 24 hours. There are no long waits for specialty services, imaging, or laboratory tests. Health expenditure is well controlled, with the annual rate of increase in line with growth in gross domestic product (GDP). In 2016, Taiwan spent 6.3% of its GDP on health compared with the UK’s 9.7% or US’s 17.1%.2

According to the government’s monthly poll, more than 70% of people are very satisfied or satisfied with Taiwan’s health system.3 Nevertheless, there are media reports of some Taiwanese patients and physicians complaining that Taiwan is too slow in using the latest expensive medical technology and drugs. A comprehensive evaluation of NHI by the government found some specialists believe they are overworked and underpaid, which resulted in a shortage of physicians in these specialties.4

Although there is no pressing political demand to improve Taiwan’s health system, there are latent problems. The plan is slightly underfunded because the government and the public are reluctant to impose higher tax or premium rates. Consequently, some provider complaints about inadequate revenues are legitimate. I would like to see the clinical quality of healthcare improved in Taiwan—a real challenge given that quality data are controlled by medical specialty societies that are mostly concerned about physicians’ earnings rather than assuring quality of care. Taiwan’s capped fee-for-service payment method impairs the prevention of non-communicable diseases. At the same time, it encourages providers to increase the number of services they provide, increasing health expenditure. Meanwhile, the organisation of Taiwan’s health system remains fragmented with the separation of primary care, specialist, and hospital care. As a result, Taiwan lacks continuity and integration of healthcare.

Taiwan’s experience in establishing and sustaining UHC shows the need for political determination, leadership, technical expertise, and data and that technical design must consider the political realities.5 International knowledge, experience, and evidence played a major role in informing the design. Taiwan found it was easier to establish a new funding mechanism for UHC than to reform the payment and healthcare delivery system, which requires wide support from the captains of the medical ship: physicians, hospital directors, and nurses.