Can the U.S. Learn Something from Taiwan’s Healthcare?

Several of the candidates for the Democratic nomination for U.S. president are advocating a government-run plan to provide health-insurance coverage to all Americans, sometimes referred to “Medicare for All.” As a single-payer healthcare system, this type of plan is similar to Taiwan’s National Health Insurance (NHI). Could the Taiwan experience serve as a practical reference for the U.S. to study?

For two reasons, the answer is probably “no.” First, while private health insurance companies are firmly entrenched in the American market, there were hardly any private health-insurance companies in Taiwan when the NHI was introduced in 1995. In the U.S. the insurance industry strongly opposes adoption of a single-payer system, and many citizens are quite satisfied with their current private coverage and would object to having to give it up.

Second, in the 1990s Taiwan had a super-strong government in the form of a one-party authoritarian political system.  As the NHI system was being designed, technocrats pretty much had a free hand. Aside from reservations raised by some disgruntled bureaucrats and the drug industry, there was hardly any resistance to universal health coverage.

In the U.S., in contrast, the way the healthcare system should be structured is a highly contentious political issue.

Planning for Taiwan’s NHI system began in 1988, a year after martial law ended but eight years before the first direct presidential election. 

The government’s Council for Economic Planning and Development, the forerunner of the current National Development Council, assembled a task force composed of Taiwanese public-health scholars to design the system. After soliciting advice from foreign experts and studying the best foreign practices, they settled on a single-payer system with a global budget because of its efficiency.

The proposal had wide public acceptance. Taiwan’s economy at the time was booming, with average GDP growth in the 1980s of 7.7%. In that environment, both employers and workers were willing to contribute to funding the plan. Employers were motivated by the tight labor market, while employees did not mind paying higher premiums because of steadily rising wages.

Before 1995, the government had established four major social insurance programs: Labor Insurance, Government Employees’ Insurance, Farmers’ Insurance, and Low-Income Household Insurance. These programs mainly covered wage earners but not their dependents. In total, they covered only 57% of the population and excluded many of those who were most at risk.

The NHI program rolled these four systems together and extended coverage to the remaining 43% of the population. As the new system was so similar to the old Labor Insurance system, “the transition was quite smooth without any structural changes,” says Cheng Shou-hsia, a professor of public health at National Taiwan University.

And because the pie had been expanded, doctors and other medical providers were happy to get the extra business, Cheng adds.  “They could see more patients, especially those older patients or the very young, who tended to have greater medical needs.”

In addition, in that era private insurance in Taiwan was mainly focused on life insurance. “There wasn’t much resistance from insurance companies because health insurance was only a small slice of their income,” Cheng says. 

After the NHI’s establishment, private health insurance actually increased rather than decreased, says Lee Yue-chune, a professor of health and welfare at National Yang Ming University.  Previously, families relied mainly on their savings and never considered private health insurance, but the NHI’s inception raised awareness of the need for health coverage, she explains.

Even if U.S. policymakers can draw few lessons from the way Taiwan set up its single-payer system, they might learn something from the results it has produced.

The U.S. has a complicated, multilayered system that eats up almost 18% of GDP and, according to many analysts, results in billions of dollars of waste each year. Lee Yue-chune says the major problem in the U.S. is the administrative costs incurred as hospitals contend with paperwork from numerous different insurance systems. In contrast, healthcare spending in Taiwan as a proportion of GDP, at 6.4%, is considered by many to be too low.

Citing another problem with the U.S. arrangement, Lee notes that the multiple systems in place make it difficult for policy makers to see the national health picture as a whole. On the other hand, the Taiwanese government has health information about its entire population, which helps direct policy.

Leave a Reply

Your email address will not be published. Required fields are marked *