The Fiscal Disciplinary Act (財政紀律法), enacted in April, aims to improve the finances of central and local governments. The law adopts a zero-base budgeting method to ensure moderate expenditure at all levels of government and applies strict controls regarding budget planning and public debt to achieve sustainable development.
Article 7 stipulates that when the central or local governments and the legislature create or amend laws, regulations or self-governing rules, they may not request an increase in the fixed amount or percentage of tax incomes allocated to support special funds, or limit government incomes for certain funds to use. Based on this regulation, the Long-term Care 2.0 program — funded mainly by revenue from specific taxes, such as integrated house and land sales, inheritance, gift and tobacco taxes — contravenes its rules on fiscal discipline.
The Ministry of Finance last month in a report warned about the possibility of such a conflict, suggesting that the Ministry of Health and Welfare evaluate the viability of adopting an insurance system to support the long-term care services development fund.
The health ministry in particular suffers from a split personality. On the one hand, it encourages people to quit smoking, given that it is a health authority, while on the other it might expect people to smoke more so that they would contribute to the tobacco tax revenue to support long-term care services.
As the need for long-term care is expected to grow due to Taiwan’s rapidly aging population and low birthrate, there is increasing doubt over the sustainability of using those specific taxes to finance the program.
Moreover, since revenue from those taxes is unstable and the amount might not be sufficient in the long term, it is reasonable for the government to strictly control how the money is used. However, in doing so, the long-term care services will have limited coverage, especially for those with dementia or severe disabilities living in care institutions.
Long-term care for those living in care institutions is expensive. According to various estimates, the average cost of such services is NT$30,000 to NT$70,000 (US$969 to US$2,260) per month, with people needing services for an average of seven to 10 years. While the Executive Yuan has approved NT$2.9 billion in subsidies for people with dementia or severe disabilities who live in care institutions, or up to NT$60,000 a year per person, the issue of sufficient and stable funding sources remains a challenge.
Some have suggested other financing options, such as a long-term care insurance program that is funded by the public and the government. Insurance-based funding is better than the tax-based program in terms of adequate and stable funding, and the burden on the public — divided among the government, employers and employees — would be much lower than it is with the National Health Insurance program. However, an insurance-based program still means an increase in the financial burden for everyone, and is no different from a tax increase. Such an option would require persistent communication with the legislature and would need the public’s approval.
Regardless of whether tax-based or insurance-based financing is used, there is no way that the government can bear the responsibility of financing long-term care alone. Instead, the government should emphasize its management role and properly use the limited funds to serve the needs of those who require long-term care. Before attempting to reach a consensus on how to fund the long-term care program, the government should try its hardest to make appropriate use of profit-making institutions, non-profit social welfare groups, local communities and even family caregivers.
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