By Jane Rickards
For the time being, Taiwan’s highly popular universal healthcare program is still solvent. But due to rising costs and a rapidly aging population, the system may run out of funds within two years unless increased premiums and other reforms are put in place.
Taiwan’s National Health Insurance (NHI) system is currently living beyond its means. For the last two years, expenditures have outpaced revenues and only a reserve fund is keeping the system afloat.
The reserve fund is being steadily depleted, however. Experts say it will be empty by next year or the year after, at which point the government will have no alternative but to make the politically unpopular move of raising premiums. Even broader and more fundamental reforms may be needed.
Instead, says NHIA Director General Lee Po-chang, the administration’s current focus is on improving management efficiency through the use of cloud computing and other advanced technologies adopted over the last several years. These systems help reduce waste by, for example, raising an alert when a patient takes the same expensive medical test at two different hospitals or identifying suspected fraudulent claims from dishonest doctors.
NHI’s structure as a “single-payer system” helps keep healthcare spending relatively low through the power of monopsony – a market situation where there is only one buyer. Every year, the NHIA adopts a system-wide global budget, which this year stands at NT$714 billion. It then uses its powerful market leverage with contracted providers – which include 93% of the island’s hospitals and clinics, as well as pharmacies, drug companies, and medical device makers – to hold spending within budget by playing a central role in setting drug and medical device prices, as well as medical service fees.
“Because we control the global budget, it is easy for our government to offer [reasonably priced] medical care to all the Taiwan people,” NHIA Director General Lee says.
Another controversial aspect of the NHI system has been the impact on drug prices, especially for new and innovative medicines. Reimbursement prices tend to be much lower than in OECD countries because of the government’s single-payer status, and the hospitals then typically negotiate with the pharmaceutical companies for discounts.
Five years ago, the NHIA introduced the Drug Expenditure Allocation Ratio Target System (known as DET), which sets yearly targets for prescription medication expenditures. If actual expenditures exceed the annual target, a process to lower drug prices is automatically initiated the following year.
For years, drug companies have been warning that low prices discourage the launch of new, innovative products in Taiwan.
Another impact of the low reimbursement prices is that new drugs tend to be launched in Taiwan much later than certain other markets, says IRPMA’s Lin. Pharmaceutical companies want to avoid having a low price in Taiwan that other, larger markets might use as a reference point in setting their own pricing.
As mentioned above, a complicating factor is that the drug reimbursement price set by NHIA is hardly ever the price at which the drug is purchased by the hospitals. The hospitals normally insist on additional discounts, and have grown reliant on purchasing drugs at prices below the NHI reimbursement level as a source of income.
In the end, to bolster the NHI finances, Taiwan may have to institute broad-reaching third-generation reforms, but “so far there is no formal discussion of a 3G NHI system,” NHIA Director General Lee says.
Still, he predicts that premiums, which have been raised just twice since NHI’s inception in 1995, will most likely be raised two years from now. “If we cannot control this condition, a premium rise is the next step,” he says. He also downplayed the likelihood of any cuts to services, while raising the possibility that patients may need to pay out of pocket for more drugs, either in whole or in part.
【2019-05-16 / AmCham Taipei】
