Designing the National Health Insurance (NHI) program entailed applying a lot of the theoretical principles of healthcare economics. The most prominent feature of this approach is that it tries to apply the principles of classical economics to health services. This has led to linear thinking and involves a lot of assumptions that are often wrong. What is more, mistakes of this kind are sometimes repeated. Theories that were proven wrong and shot down years ago may sometimes rise from the dead and walk once more among the living, like zombies. Premier Sean Chen’s (陳冲) recent proposal that the NHI should cover the cost of major illnesses, but not minor ones, is a typical example.
Chen’s comment was prompted by a CNN report stating that Taiwanese on average visit the doctor 14 times a year, compared with an average of four times a year for people in the US. The implication is that Taiwan wastes healthcare resources — spending tens of billions of New Taiwan dollars a year on treating colds and influenza. However, such an interpretation involves a string of errors.
First, different countries have different ways of calculating the numbers of clinical visits. Many countries do not include referrals to hospital clinics in the figures. Some countries do not include dental appointments, and of course very few countries include visits to practitioners of traditional Chinese medicine.
Second, the number of doctor’s appointments is not a good standard for judging a country’s overall efficiency in using healthcare resources. The fact that healthcare spending accounts for more than 16 percent of GDP in the US, compared with less than 6 percent for Taiwan, should make that quite clear.
Third, Germany and Japan have long had more clinical visits per person than Taiwan. How often people go to see a doctor has to do with people’s habits in seeking medical treatment in different countries, and with the traditional structure of their healthcare systems, so it is very hard to make direct comparisons.
Fourth, if Taiwan is able to expend very few resources, but still provide a lot of healthcare services, then the government and public should thank local clinical healthcare workers for their hard work and should design still more efficient systems and pay healthcare workers salaries that are commensurate with their contributions.
The idea that the NHI should cover major illnesses but not minor ones is rather like how people may choose to buy insurance for newly purchased cars, but not for scooters, because the risk of cars and scooters being stolen is not the same, and the monetary risk involved if they are indeed stolen is also different. The “expected utility” theory of classical economics holds that insurance does not offer people a high utility in respect of events that are likely to occur, but which involve a small financial loss. Scooter theft relative to car theft is an example of this kind of event, as is outpatient service relative to inpatient treatment in hospitals. According to this theory, having the NHI cover major illnesses, but not minor ones, should be the policy choice that offers the public the greatest utility.
The problem with this theory is that automobile insurance and health insurance is not analogous. The theft of a scooter will not start a chain reaction leading to the theft of a car, but the result of not dealing with a clinical problem may lead to the development of a serious illness that can only be treated by having the patient stay in a hospital. The reason for this difference is “health heterogeneity.” Daily headaches might be caused by hot, humid weather and lack of sleep, but they could also be an early symptom of a brain tumor. People might not be able to judge whether their daily headaches are a serious illness or a minor one, so if the NHI does not pay for clinical visits, they might choose not to visit a doctor and so delay treatment. As simple and obvious as this may be from a medical point of view, thinking about it according to economic logic can easily lead to a major policy error.