~from Mr. Chih-Liang Yaung, Minister of Health
Ever since the National Health Insurance (NHI) system was launched fifteen years ago, it has become an important form of social security and an inseparable part of people’s lives in Taiwan. However, the public is often oblivious to the differences between social and commercial insurance and are also sometimes puzzled due to some misconceptions about what NHI entails. Since these myths have become very counterproductive to moving forward with any type of health insurance reform, a reintroduction of the principles of social insurance is necessary. This document aims to provide information that will clear up misunderstandings and irrational thoughts regarding healthcare in Taiwan and help Taiwanese people better understand the NHI.
Social insurance (nationalized insurance) and commercial insurance (privatized insurance) are similar in terms of risk-sharing, which is based on the law of large numbers. However, they differ in several key aspects. For example, social insurance is designed to enhance social security and safety, while the main goal of commercial insurance is to be profitable. Social insurance premiums are rationalized by a person’s ability to pay, while those of commercial insurance are based solely on risk. Healthcare payment is universal in social insurance, whereas payment differentiates according to each individual insured’s premium in commercial insurance. Social insurance includes all eligible citizens, while commercial insurance can refuse customers or cancel their insurance due to their calculated risk or other reasons. In addition, the government plays a heavier role in social insurance and sometimes has to bear the ultimate financial responsibility for healthcare costs.
Should the NHI cover only serious diseases and spare milder ones?
When media outlets reveal the financial difficulties the NHI is facing, some people respond by suggesting the NHI should be modified to cover only serious diseases and cease covering milder illnesses and treatments such as the common cold and dental-care. To be sure, taking measures like these could indeed reduce NHI payments. However, for more disadvantaged individuals, paying for the medical expenses of these smaller illnesses out-of-pocket may result in a great financial burden. If the NHI umbrella were to only cover serious illnesses, not only would more disadvantaged people within the population be deprived of their right to healthcare, but social security and stability would be compromised. Furthermore, providing treatment for simple or so-called mild illnesses may have a better chance of curing or preventing them from ever developing into more serious or life-threatening diseases, thereby averting higher medical expenses at a later stage. In many countries, social insurance systems cover serious and mild diseases alike. There is a growing trend in insurance systems which favor a payment structure that provides low-cost / high-benefit preventive healthcare. It is important to keep in mind that as a disease becomes more critical, patients will usually consume more medical resources. But if a patient eventually dies, the effectiveness of insurance compensation is zero from both the perspectives of the individual and society. Health insurance is therefore very different in nature from other types of insurance, whose compensation—in the form of money or goods—remains valuable after payment is made.
Can ceasing the NHI lower medical expenses?
Currently, Taiwanese people enjoy a great deal of convenience when it comes to healthcare due to their insured status under the NHI. But because of the third-party payment system, there is a potential for abusing and overusing medical resources. Some people have suggested shutting down the NHI system so as to waste less medical resources and subsequently lower health expenditures.
When looking at this issue from another perspective, the NHI means compulsory social insurance for all; thus, as the only insurer of healthcare services in a single-payer system, the NHI system holds the greatest amount of bargaining power, which is far more than any one individual can have. With limited resources, the insurer can offer more cost-effective coverage items by negotiating with healthcare providers. Additionally, the NHI can lever various review mechanisms to better serve as a gatekeeper for medical expenses. On the other hand, if NHI were to cease, so too would quality-checking and control over the growth of health expenditures. People would be unable to obtain information about the quality and price of the medical services they need. The growth of health expenditures would rapidly increase far beyond anyone’s expectations.
According to the statistics, national health expenditures grew by 280% during the decade before NHI was implemented, while the decade after NHI began only saw a 71% increase. The stark comparison between these two figures proves that the NHI serves as an effective mechanism to curb rising healthcare costs. The same conclusion has been drawn from the experience and data of other countries.
Is the NHI deficit a result of poor overhead management?
Social insurance is very different from profit-oriented commercial insurance. If the target of the NHI was to make a profit, the most direct solution would be to simply raise premiums every year and cut payments. These measures could bring in a sizable amount of revenue, but would definitely be unacceptable to the Taiwanese people.
The key to the NHI’s financial well-being is balancing revenues and expenditures. In recent years, medical expenditures have been on the rise while revenues from premiums have remained stagnant. The premiums rating system has not been functioning up to par because of several factors. For example, total medical expenditures are primarily added up by the Medical Expenditure Negotiation Committee, which consists of representatives from various trades. Conversely, premium rates are calculated by the Department of Health and then approved by the Executive Yuan. Neither one of them is decided by the Bureau of National Health Insurance (BNHI). Moreover, if neither premium increases nor payment reductions are possible, the existence of a deficit would be a certain outcome. There is plenty of room for the Bureau’s management to improve, of course, but it would be unfair to blame the deficit on those who work at the Bureau, who have put forth a concentrated effort for years to provide NHI services. It is necessary to reiterate that the aim of social insurance is to seek social security rather than profit. Measuring the system’s success should not rely solely on whether or not it maintains a deficit or surplus, but rather should focus on individual medical expenditures and the general health status of the country as a whole. In regards to the latter, Taiwan is widely-recognized as a leader when compared with many other nations.
Should people who pay higher premium have access to better healthcare?
The NHI as a social insurance system is based on risk-sharing, “self-help and mutual-aid,” and financial sustainability. Its aim is to promote social security, which is different from the goal of private (commercial) insurance. Private insurance companies collect premiums at varying rates according to different risks calculated on insureds. They then provide different degrees of healthcare services in proportion to the insured’s premium level. Their risk-management and profit-seeking strategies differ greatly from that of the NHI system. If a person’s level of healthcare were to be determined by the premium they paid, adequate care would not be available to those financially disadvantaged people who could not afford higher premiums. This is an unacceptable outcome that would completely go against the NHI spirit of self-help, mutual-aid, and universal healthcare for all.
Should people who have consumed less NHI resources pay lower premium?
The NHI is a form of social insurance characterized by the spirit of “self-help and mutual-aid” and risk-sharing. All insureds are required to pay the insurance premium based on their ability to pay. Under the principles of social fairness, the same premium rate applies to every individual of the same income level, and those with higher income levels pay a higher premium. The premium does not vary with personal medical risks. When seeking help, each individual receives the same quality of healthcare. The above design is different from commercial insurance, which provides insureds with varying levels of compensation for medical services according to their premium rates.
Therefore, an insurance premium structure based on the usage of medical resources is not only against the spirit of social mutual aid, but is also unfair to those in imminent need of healthcare. If people who consumed few or no medical resources were permitted to pay a lower premium or even none at all, the aforementioned fundamental social insurance principle of group risk-sharing would be undermined, and the NHI system would be unable to maintain fiscal balance. As a result, the goal of reaching a sustainable operation would also be compromised. In the end, there is no guarantee that people who seldom use their NHI benefits today could not contract a critical illness tomorrow and become a heavy consumer of medical resources in the future.