Wed, Mar 17, 2010 page8

• Revamping the insurance system

  • By Lue Jen-der, Cheng Wen-hui, and Kuan Yu-yuan 呂建德，鄭文輝&
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  There is a consensus that the National Health Insurance (NHI) system cannot be allowed to go bankrupt.

  Currently, most discussion on the topic revolves around the differences between alternative rescue plans proposed by the Cabinet and the Department of Health. We must point out that even if the health department’s more rigorous version were adopted, it would only keep the program’s income and expenditure balanced for one year. Does this mean that these arguments about the budget will be repeated year after year?

  The problem must be tackled on two fronts. Insurance premiums must be adjusted as soon as possible to prevent the NHI system’s deficit from growing even bigger in the short term. Concurrently, the legislature must speed up deliberations on amending the National Health Insurance Act (全民健康保險法) to overhaul the system and lay the foundation for a sustainable health insurance program in the medium and long term.

  The rapid growth in the nation’s health expenditure can largely be attributed to the following factors: First, an aging population and the broader definition of serious injuries and illnesses has caused expenditures to skyrocket. These two items accounted for increased spending of about NT$78.8 billion (US$2.468 billion) and NT$76 billion respectively over the past decade.

  Second, because the healthcare industry is labor intensive, personnel costs account for a very large part of total health expenditure.

  Third, the rapid development of medical technology and the cost of new imported drugs have pushed medical spending upward.

  Fourth, following the easing of capital transactions in the health industry, healthcare has become a magnet for capital investment.

  Finally, asymmetry of ­information means there is latent potential in the health market for “supply creating demand,” leading to a waste of medical resources.

  Among these five factors, the first three have to do with broad social trends or arise from structural features of the health industry, so it is hard for the state to intervene effectively. That leaves management of healthcare capital and the medical profession as areas in which the state has more scope for taking effective measures to curb the growth of healthcare expenditure. Since the NHI program was launched in 1995, medical expenditure has grown faster than income. If this trend continues, premiums must be adjusted to pay for it. The question is, who should be held responsible for the growth in medical expenditure, and who should bear the cost of reform?

  The NHI program employs a single-insurer system and a single-payment structure, making it relatively easy to exert financial control. This system also generates the biggest possible risk-sharing group. This accounts for the success of the NHI, relative to some other countries, in achieving equity in health provision and in giving access to the underprivileged. Another feature of the single-insurer system, however, is that it ties everyone’s interests together.

  This can easily lead to “collective irresponsibility” because it is hard to pinpoint financial responsibility. To break this “collective irresponsibility” — this cycle of blame and denial — transparency is required. Measures to enhance ­transparency would make it clear whether and when increases in NHI premiums are justified.

  There are other defects within the NHI program that must be dealt with through policy deliberation and reform. Among these problems are the following. Lack of involvement of the insured themselves in policymaking results in an over-concentration of responsibility on the government. Unequal distribution of medical resources has led to regional gaps in healthcare provision. Because benefits are still largely provided only to those who pay NHI premiums, and with a very high threshold for exemption from premium payment, disadvantaged workers such as those who do not have a permanent source of income may be deprived of their right to healthcare because they are unable to pay their premiums.

  Proposed reforms intended to create a new NHI system are still sitting in the legislature. These proposals can be summed up as follows: First, there is a proposition to expand the base on which premiums are calculated from salary income alone to include all sources of income. This way, when the economy is in good shape, insurance premium payments would naturally increase along with rising incomes. In times of recession, on the other hand, the program’s income would not be so heavily affected by stagnant or falling salaries.

  The second possibility is dynamic adjustment of income and expenditure. Annual expenditure — the total being decided through consultation — should be considered together with income, thus eliminating the problem of annual shortfalls, while annual premium adjustments would just be fine-tuning.

  The third would be to spread the burden of premium payments more fairly. The insured would no longer be divided into six ­categories and 14 sub-­categories, as they are now. Instead, all citizens and eligible residents would pay premiums calculated according to their total household income, not just their regular salary. Government and employers’ share of total contributions would remain as they are now, but they would be calculated with regard to the public as a whole instead of having different levels of subsidy for different categories of people. Premiums would not be calculated according to the number of people in each household. Only in the case of those whose income falls below a certain level would calculation according to the number of members in a household be considered.

  The short-term issue in moving to a second-generation NHI is to increase premium payments to ensure the financial integrity of the healthcare program. In the medium term, it is to expand the premium collection base across all social classes, the purpose being to strengthen the program’s function of redistributing resources from those with high incomes to the less well off. In the long term, the aim is the integration of benefits and contribution rates within the health insurance system.

  A second-generation NHI system would not be a panacea that could solve all problems associated with health insurance. However, the train of health insurance reform must be put in motion without further delay. What is required is not piecemeal adjustments, but a thorough structural reform.

  Lue Jen-der is secretary-general of the Social Welfare Association of Taiwan and Kuan Yu-yuan is the chairman of the association. Cheng Wen-hui is a former coordinator of financial planning for the Cabinet task force on planning a National Health Insurance framework.

  TRANSLATED BY JULIAN CLEGG
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