Sat, Oct 30, 2004 page8

• Honesty is the best health policy

  • By Chou Li-fang 周麗芳
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  The uproar over health insurance reimbursement regulations has recently produced intense social unrest. Much of this is due to the wishy-washyness of the government, which has switched from the Excellence Program -- under which medical institutes must treat outpatients and inpatient at a 45:55 reimbursement ratio in order to receive extra funding -- to a citizen panel, which is hoped to achieve better control of medical resources and upgrade health services.

  The recent adjustment of the base rate for national health insurance premiums closely affects people's cash flow, and demonstrates the limitations of legislative power. During this chaotic period, thorough discussions on how to increase revenue and maintain our universal health insurance system are needed.

  Government-funded universal healthcare systems can be classified into two broad types. One is the Beveridge system (also called compulsory social insurance) seen in countries such as the UK and in northern Europe. This type of healthcare provision is funded through central taxation. To be precise, it's paid for by a government's general funds without setting up an additional levy category.

  The other type is the Bismarckian system (also called social insurance) widely used in Germany, other European countries and Japan. The funding source for this type of system is kept separate from the government's budget. This system levies on individuals a premium, also called a payroll tax because most countries levy the tax based on income.

  The base rate for health insurance premiums is primarily derived from salary, which isn't as fair as taking it from the base rate of income tax. In fact, income tax is a more recent form of taxation.

  Take Germany, the originator of social insurance, as an example. Its health insurance system was put into effect in 1883, but its income tax was not included as national tax until after 1920. How come the former health insurance payment -- a more primitive form of salary tax -- is still used by Germany?

  The real reason could be that Germany's initial health insurance system primarily targeted blue-collar workers (similar to Taiwan's labor insurance plan), and principally provided benefits in cash to compensate their income losses due to illnesses and ensure the survival of their families. As to in-kind medical benefits, they only served as a supplement to speed up laborers' recovery processes and help them return to their jobs in a timely fashion.

  Also, the less sophisticated medical science of the past meant that medical costs did not account for the largest amount of health insurance expenditure. Only when cash benefits and income levels are linked can a person maintain their original standard of living.

  Paying premiums based on job income, and receiving benefits in accord with these premiums meets the public's psychological expectations; this is also the essence of the "insurance" in the social insurance system.

  Today cash benefits in Germany's health insurance system are not as important as in the past, and have been replaced by pension insurance plans and insurance coverage for the elderly. The five basic categories of social insurance coverage (healthcare, occupational health, pension, unemployment and long-term care) interconnect and coordinate with one another and share the same rate base of taxation. This facilitates a more efficient administration, and weaves a better, more comprehensive network of social protection.

  In Taiwan, the previous labor insurance system was a comprehensive insurance plan, similar to those in Germany and Japan. But because the various insurance plans were not independent, medical reimbursements used up much of the reserves needed for pension funds, creating potential debt. National health insurance today, for example, has expanded to cover farmers and laborers and also their families and dependents.

  This innovative system is financially independent, and also differs greatly in essence from the labor insurance of the past. At the beginning, the base rate for national health insurance premiums partially followed the model of labor insurance. But after several legislative amendments, the model was found to be unusable.

  In Taiwan's national health insurance system, the consumption of medical services doesn't necessarily correspond to a person's premium. And cash benefits for labor insurance are now unrelated to the premium for the national health insurance. So it is understandable that people might protest against an increase of the health insurance premium.

  According to Ministry of Finance's taxation statistics and the Executive Yuan's survey of household income and expenditure conducted by the Directorate-General of Budget, Accounting and Statistics, among a sample of 6.73 million households in 2001, only 52 percent pay comprehensive income taxes.

  If we further widen the base rate of national health insurance to include personal assets, we will likely touch on two fundamental questions. Is redistribution of wealth the primary purpose of social insurance? Does Taiwan need, and can it effectively achieve, the goal of redistributing social income through social insurance?

  If we do keep following the current centralized management of health insurance, wouldn't it be administratively simpler to adopt the UK's compulsory social insurance, which replaces premiums with public government funds?

  There is no absolute standard of good and bad for types of taxation and base rates. It is simply a matter of whether people accept them or not. In recent years, reducing premiums and increasing the scope of healthcare coverage has increased the burden on many health insurance-related government officials, as well as contracted hospitals and clinics.

  While our government, through financial and administrative means, may stimulate its economy and create wealth, this is probably not suitable to the national health insurance sectors.

  In the meantime, honesty is the best policy. We should be plain with the public about what kinds of healthcare services can be purchased in a free market under current premiums.By making the bottom line clear, the government can list different possible plans with their advantages and disadvantages explained so that the people can make the best choice.

  Only when the success or failure of our national health insurance is not linked to any specific individual's political achievements can our universal health insurance system be reborn.

  Chou Li-fang is a professor and an associate dean in the College of Social Sciences at National Chengchi University.

  TRANSLATED BY LIN YA-TI
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