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Editorial: Rate hikes only the first step

The Department of Health has decided to raise National Health Insurance (NHI) premium rates by 7 percent starting Sept. 1. The ceiling for salary-based premium fee calculations will also be raised starting Thursday. In other words, people who earn higher salaries will be paying more for health insurance than they used to. Special treatment for servicemen, civil servants and teachers will also be downscaled, as their premium fees will be calculated on the basis of 80 percent of their salaries, as opposed to the current 50 percent. Meanwhile, the patient's co-payment rates at large hospitals will also be raised by more than twofold. This three-pronged measure will increase the NHI program's annual revenue by NT$34 billion -- enough to strike a financial balance over the next two years.

Taiwan's eight-year-old National Health Insurance program has won kudos from the public for providing quality service at a cheaper price compared to similar programs in other countries. It has been a blessing for many patients with serious illnesses as well as their families. The adjustments this time will allow the NHI to continue operations without adding too much to the insurer's financial burden. But that does not mean the NHI system has reached a flawless state.

The abuse of medical resources is one question that no health insurance program can evade. Effective market functions can prompt patients to choose their medical treatment carefully -- cheap and reliable medical institutions, the most economical choice of drugs, tests and operations. In the NHI program, however, a large chunk of the costs are shouldered by parties other than the patient, except for the limited out-of-pocket co-payments. This entices patients to seek unnecessary treatments, drugs and tests, thereby distorting the market mechanism. Raising the co-payment ratios can curb this abuse. However, because the planned rise in the co-payment rates is not high, the patient can hardly feel the difference and the impact on the waste of medical resources will therefore be minimal. On top of this, medical institutions and pharmacists encourage patients to seek unnecessary treatments in order to increase their own income. For example, they encourage patients to choose drugs for which the NHI offers higher reimbursements.

A seriously lop-sided cost-sharing system is another big problem for the NHI. After the rate hikes, servicemen, civil servants and teachers still have their premium fees calculated on the unequal basis of 80 percent of their salaries.

In fact, capital income and business income are the main money sources for high-income people. By excluding these two types of income from the revenue base, the NHI has actually put high-income people in low-income categories. In other words, salary earners are shouldering the medical expenses of rich business people.

Next, local governments owe a total of more than NT$30 billion to the NHI program -- Taipei and Kaohsiung cities each owe NT$9 billion -- seriously dragging down the NHI's finances. The Executive Yuan should push the local governments to pay up, or the debts should be deducted directly from central government subsidies for the local governments.

The NHI is one of Taiwan's most important public welfare systems and failure is not permissible. The Department of Health should immediately impose stringent controls on drug quality, pricing and volume. It should also launch in-depth investigations into the aberrations and build a deterrent mechanism to punish those who profit fraudulently from the NHI system. These measures may plug the leaking holes in the system.
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