Adopting Single-Payer Drastically Reduces National Health Expenditures

“Before implementation of the NHI, annual growth of national health expenditures in Taiwan averaged in the double-digit range. During the period 1992–95, for example, average annual growth was 13.9 percent. 12 In the years immediately following the NHI’s introduction, that growth decreased to 6.0–9.0 percent. Since full implementation of the global budget system in July 2002, annual growth in national health expenditures has slowed further, averaging 3.0–4.5 percent ( Exhibit 3 ). 8 For 2015 the National Health Insurance Commission recommended a 3 percent annual growth rate.

Exhibit 3 Growth In Taiwan’s National Health Expenditures (NHE), 1992–2013

YearGrowth in NHE (%)Growth in GDP (%)NHE as % of GDP

SOURCE Author’s analysis of data from the following sources: (1) For 1994–2007: Health Statistical Trends 2010. National Health Expenditure 2010. Department of Health, Taiwan. 2011. Chinese. (2) For 2008–13: Taiwan Ministry of Health and Welfare. [Statistics and trends in health and welfare 2013] (Note  14 in text). NOTE GDP is gross domestic product.

Total national health expenditures in Taiwan were 6.63 percent of gross domestic product (GDP) in 2012 ( Exhibit 3 ). This is low when compared to the average of 9.3 percent for OECD countries in the same year. 13

Per capita health spending in purchasing power parity US dollars in 2012 was $2,668 in Taiwan. 14 In contrast, the average spending in 2012 was $3,484 for the OECD countries and $8,745 for the United States. 14

In 2013 NHI expenditures accounted for 52.2 percent of Taiwan’s national health expenditures. Out-of-pocket spending by the insured accounted for another 35.8 percent. 14 Government public health and general administration expenditures accounted for 6.0 percent, and health care investments (capital formation) accounted for 5.4 percent. 14

Out-of-pocket spending in Taiwan may appear high at first glance. But according to Huang San-Gui, director-general of the National Health Insurance Administration (personal communications, August 8 and September 4, 2014), only 33.8 percent of reported out-of-pocket spending was for medical expenses associated with office visits and inpatient care in the form of copays and coinsurance. Therefore, out-of-pocket spending in Taiwan associated with necessary health care (such as medical and dental care and drugs) amounted to only 12.1 percent of the national health expenditures in 2012…

…Taiwan’s experience demonstrates that with competence and goodwill, the challenge of adding a large influx of newly insured citizens can be met. Health systems appear to be adaptive, and the case of Taiwan illustrates that incremental improvements on reform are possible.

Taiwan’s experience also might induce Americans to think more deeply about the term freedom of choice . In health care, freedom of choice could mean choice among health insurance carriers and health insurance contracts, choice among health care providers, or both. For Taiwan’s citizens, freedom of choice among providers of health care trumped freedom of choice among insurance carriers and contracts. These citizens’ high satisfaction with their health system suggests that they still endorse that choice. By contrast, in the United States freedom of choice among insurance carriers and products ranks above freedom of choice among health care providers, which often is limited to narrow networks of providers.

A growing body of literature has shown that by international standards, enormous human resources are used in the United States to facilitate choice among insurers and insurance products, process claims, and annually negotiate a payment system that results in rampant and bewildering price discrimination. 23 Relative to the less complex health systems elsewhere in the industrialized world, the US system is a poor platform for the effective use of modern health IT.

According to a recent report by the Institute of Medicine, the US system has excessive administrative costs that in 2009 amounted to $190 billion. 24 That is more than it would cost to attain true universal health care in the United States. 25

Reflections On The 20th Anniversary Of Taiwan’s Single-Payer National Health Insurance System. Tsung-Mei Cheng, Health Affairs 2015 34:3, 502-510

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