Ever since universal health insurance coverage was introduced in March 1993, it has been the subject of considerable pride for people in Taiwan. Unfortunately, the system has always been beset with financial woes.
The Bureau of National Health Insurance (BNHI) has become the medical industry’s sole high volume provider and client, collecting insurance fees and planning and financing all medical services provided by medical institutions nationwide. This has allowed the government to reduce the financial burden and risk of running state hospitals. In the past 15 years, health insurance has had a massive influence on how medical care is provided in Taiwan, the most conspicuous of which has been the trend for hospitals to expand.
The number of non-profit proprietary hospitals has shot up as a result not only of health insurance spending and hospital accreditation, but also because of cost savings resulting from rent and tax breaks. This has seen a corresponding reduction in the amount of smaller-scale private hospitals, which are now gradually withdrawing from the market.
In terms of the number of hospital beds, just over 10 large proprietary hospitals, the majority — 24 percent being state-run — enjoy about 40 percent market share. Of these state-run institutions, the largest share, 10 percent, belong to those run by the Veterans Affairs Commission, followed by the Department of Health General Hospitals at 8 percent, the military hospitals at 4 percent and National Taiwan University Hospital at 2 percent.
The reason why state-run hospitals have the largest share are both historical and political in nature. The nation inherited, for example, the public hospitals’ real estate left behind by the Japanese, and the Chinese Nationalist Party (KMT) built hospitals to accommodate military and administrative staff when it came over from China after the Chinese Civil War.
With a 6 percent market share, the largest of the non-profit proprietaries are the Chang Gung Memorial hospitals. Many years ago, their founder, Wang Yung-ching (王永慶), proposed to the government that if it gave the money spent on annual subsidies for the National Taiwan University Hospital and the Veterans’ General Hospital to Chang Gung, the public could get free medical care. This offer laid the foundation for close to 34 years of growth for Chang Gung, and in the last few years annual health insurance has provided as much as NT$30 billion (US$927 million).
Of the other non-profit hospitals, Mackay Memorial, Tzuchi and Show Chwan Memorial, each have about 2 percent of the market. Cathay General, Changhua Christian and Chimei have about 1 percent each.
The private hospitals were relatively quick off the mark in dealing with complicated changes in the health insurance expenditure system. They instigated, for example, a global budget system, defined what was “a reasonable load for outpatient services,” improved verification of medical cost declarations and set up the diagnostic related groups system to determine how much the hospital was owed for services rendered. Their added-value service gave them the competitive edge needed to survive in the market: They were in fact more effective than the state hospitals that received government subsidies.
There has never been a patient referral system in place and people are now used to choosing whichever hospital they prefer. Because the BNHI is the sole customer, there is little price competition between hospitals. Even with items that individual hospitals do have some control over, such as the fee charged for making appointments, there is little difference from one hospital to another. This means hospitals tend to compete with the equipment and software they use, the personnel they are able to attract and the high-tech medical procedures they use. This has the advantage of increasing demand for medical treatments, which means they are able to charge more.
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