REFORMING TAIWAN’S NHI WITH MANAGED COMPETITION

REFORMING TAIWAN’S NHI WITH MANAGED COMPETITION
BY CHIU-CHENG CHANG

TAIWAN’S NATIONAL HEALTH INSURANCE PROGRAM

• Implemented in March, 1995

• Compulsory single-payer scheme combining 13 existing plans

• Covers 96% of population

• Provides comprehensive health care services

OBJECTIVES OF TAIWAN’S NHI PROGRAM

• To provide equal access to health care for all Taiwanese

• To ensure both quality and efficiency in delivering services

• To control health care cost

SOURCES OF NHI’S REVENUE

• Payroll-related premiums contributed by employees, employers and government

• Contribution rates vary among six categories of employment

• Insureds contribute most in total, followed by government and employers

NHI’S PAYMENT SYSTEM

• Insureds are required to copay

• User fees are charged for ambulatory & inpatient care

• Mainly fee-for-service, supplemented by case payment, payment for disposables and drugs

EVALUATION OF TAIWAN’S NHI PROGRAM

• As of May, 1997, NHI collected 18 billion premiums & paid 16.5 billion

• Overstatement of household size leads to premium overcharge

• Would have been in loss situation if correct household size were used

EVALUATION OF TAIWAN’S NHI PROGRAM(CONT’D)

• Growth rate for healthcare expenditure accelerates at 11.2% while that for GDP at 8 %

• Outpatient care expenditure grows at 15%

• Outpatient care exceeds 54% of total claims

• Drug expenses surpass 25% of total expenditure

• Healthcare utilization rate & cost per capita increase rapidly

EVALUATION OF TAIWAN’S NHI PROGRAM(CONT’D)

• Inability to deliver healthcare services efficiently

• Inability to assure quality of care

• Failure in providing the freedom of choice of insurers

• Difficulty in access to health services

A MANAGED COMPETITION MODEL

• A competitive market for allocating resource and setting price

• Managed competition among insurers, health plans and providers

• Rules are set to achieve equity and efficiency of the competitive market

• To force rival insurers/health plans to compete honestly and fairly for enrollees

A MANAGED COMPETITION MODEL(CONT’D)

• Insureds receive subsidies to buy compulsory health insurance

• Subsidies are paid to qualified insurers/health plans chosen by insureds

• Subsidy per insured is independent of chosen insurer/health plan

• Subsidy equals expected per capita coat for the insured’s risk group minus a common fixed amount

A MANAGED COMPETITION MODEL(CONT’D)

• A flat rate premium is paid by insured to insurer/health plan of his choice

• Difference between actual costs and risk-adjusted payment will not be the same for all insurers/plans

• Difference will be reflected in flat rate premium that competing insurers/ plans quote

• This creates incentive for insurers/plans to be efficient

A MANAGED COMPETITION MODEL(CONT’D)

• Insurers/plans function as intermediary between insureds and providers

• Insurers/plans and providers are free to negotiate contract terms and conditions

• All qualified healthcare suppliers are allowed to provide services, greatly increasing competition

• Insurers/plans are allowed to offer different insurance options

• Insureds are free to choose the insurance policy they like most

• Premiums reflect efficiency and cost-generating behavior of contracted providers

EOUITY, COST CONTAINMENT, EFFICIENCY AND QUALITY

• Managed competition can improve efficiency, quality, innovation and responsiveness

• Can achieve all these within constraints of equitable access

• May not achieve cost containment, especially if three conditions hold:
Additional healthcare can contribute to one’s health
Competition can yield more value for money
A good health status is believed to be most important in life

COST CONTAINMENT UNDER MANAGED COMPETITION

• Government could impose a global budget on total healthcare expenditure, making managed competition unworkable

• Government’s objective is to provide access to healthcare for every citizen

• Access to care for sick and low-income people means cross-subsidies from healthy and high-income people

• It should let market determine optimal level and allocation of healthcare resources

• What market determines must be the nation’s choices and preferences

A TWO-TIER HEALTH CARE SYSTEM

• No country can afford guaranteed access to all care, regardless of costs

• Cost-ineffective care should be excluded from compulsory health insurance system

• Insurers/plans should refuse to reimburse charges arising from cost-ineffective care

• Only equal access to cost-effective care is guaranteed

• Those who can afford are free to buy all-inclusive policies and those who can’t will not receive cost-ineffective care

CONCLUSION

• Offer managed competition model to help Taiwan’s NHI achieve its objectives

• The model can improve efficiency, quality and innovation within constraint of equitable access

• If it can’t contain cost, let the market determine optimal level and allocation of resources

• If government intervenes the market, cost-ineffective care should be excluded from NHI program

• Equal access to cost-effective care only is guaranteed

• A two-tier health care system is inevitable