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.
Another big logical error is revealed by the fact that, after the government made households responsible for paying for some healthcare services that were originally covered by the NHI, it did not lead to any cost savings. All it means is that the costs are borne by different sectors of society. In 2009, private-sector healthcare spending accounted for 42 percent of total medical and health expenditure. Of this, 35 percent was spent by households, 6 percent by non-profit organizations and 1 percent by administrative fees for commercial insurance. In very few industrialized countries does private-sector spending account for more than 30 percent of total healthcare spending. In most such countries, the proportion is less than 20 percent. Only in South Korea is the figure similar to that of Taiwan.
If you have a national health insurance system where people still have to pay more than 40 percent out of their own pockets, then the significance of having social insurance will be diminished and so will public support for the system.
Requiring people to pay out of their own pockets may lead to some savings in the short term, but in the long term the government would be unable to monitor and control the items that people pay for privately. Healthcare providers, on the other hand, can have a real influence on how people judge their own needs. If, in future, commercial insurance companies reinsure privately paid healthcare items, or cover part of the cost, then the private costs will still be a secondary consideration for people when they seek treatment. In the long term, this could cause total medical and health costs to rise even faster. The same logic applies no matter whether the government tries to control healthcare expenditure by increasing part of the load that patients must bear, or by reducing the range of services that the NHI covers.
There are better ways of curbing healthcare expenditure. For example, if the system of payment for clinical services were based on the number of patients seen rather than the amount of service provided, then the financial incentive would encourage doctors to teach people the right ways to handle a cold or influenza, rather than to prescribe lots of different medicines.
Even according to economic logic, one should clearly distinguish between overall and individual considerations and between long-term and short-term effects. In that case, “zombie theories” would still be bothersome, but they would at most only appear occasionally and would not become mainstream ideas or dominate national policy.
The overall development of a national healthcare system consists of three stages. The first stage is to provide healthcare safeguards for all citizens. The second stage is to control healthcare expenditure. The third stage is to establish a system for allocating healthcare services that takes into account both overall expenditure and the quality of service.
If government leaders continue to be obsessed with controlling healthcare expenditure, then Taiwan’s healthcare system could remain stuck in its second stage of development for another 15 years.
Lee Jwo-leun is an associate professor in the Department of Senior Citizen Service Management at National Taichung University of Science and Technology.
Translated by Julian Clegg
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