Taiwanese national health insurance

by Tyler Cowen on November 17, 2005 at 7:09 am in Medicine | Permalink

Paul Krugman, in a recent column, cited Taiwanese national health insurance as a success. I have been unable to form a clear picture of how the Taiwanese reforms are working (albeit using only Google). Nonetheless Tzuhao Huang, one of my Taiwanese Ph.d. students, sent me the following article:

Once the cornerstone of social development, Taiwan’s National Health Insurance (NHI) will teeter on the brink of demise if public resistance to premium hikes continues, foreign health experts observed at an international symposium to celebrate the NHI’s 10th anniversary in Taipei yesterday.

Although the rest of the world envies Taiwan for its success in providing easy, affordable and universal healthcare, Taiwan’s NHI is suffering from a recurrent financial crisis that also besets other nations like the UK, US, Germany and South Korea. As in these countries, health insurance is a highly politicized issue in Taiwan.

"Taiwan NHI’s financial problems stem from two factors: people’s mindset and politicians’ intervention," said William Hsiao, a professor of economics at Harvard University who helped design the NHI a decade ago.

In Hsiao’s opinion, the government failed to incorporate public participation at the launch of the NHI a decade ago. Deprived of adequate information, Hsiao said, people soon developed "free-lunch syndrome" and go doctor-shopping. "Taiwanese people think that they don’t need to pay more since they’ve got NHI. In fact, the rise of insurance rates is an inevitable trend as the society grows older, richer and demands more medical care," Hsiao said.

As Taiwan matures from a one-party state to a vibrant democracy, the insurance rate has increasingly become a bargaining chip in party politics, according to Hsiao. When the financing of the NHI was legislated under an authoritarian system, the executive branch was empowered to raise the premium rate whenever the program faces a deficit. But when faced with the opposition-dominated Legislative Yuan that now exists, the executive branch has lost its power and political conflicts flare up.

Here is information on the origins of the system. Uwe Reinhardt suggests that premium hikes will keep the system solvent, so file this under "Developing…" But keep in mind:

a) these strains are arising while Taiwanese health care is only 4.6 percent of gdp, and,

b) politicians are resisting necessary premium hikes

My worry is that U.S. national health insurance will be used to win votes, and not to correct micro-imperfections in the insurance market. Let’s say that you are a left-wing blogger, and, for purposes of argument, that your entire critique of the Bush Administration is correct. Remember, this guy was re-elected. You are relying on these very same voters, and this very same "policy correction mechanism" to make politicians accountable for a well-functioning health care system. You should hear my in-laws or my mother complain about the Medicare prescription drug bill, and that was supposed to help them. Scary, no?

Comments are open, especially if you know more about Taiwan.