Addressing Taiwan’s Healthcare Challenges

Taiwan is rightfully proud of its National Health Insurance (NHI) system, which has been providing affordable universal healthcare to its citizens and foreign residents working in Taiwan for nearly three decades. We are often told that Taiwan’s national healthcare insurance system is the best in the world. Is it fact or myth? If Taiwan NHI were No. 1 in the world, it should have become a world model for the implementation of health insurance. All countries could then learn from Taiwan. Why hasn’t this been happening? 

What is the inconvenient truth about Taiwan’s NHI world first?  A comparison with neighboring countries, Japan and Korea shows that over time Taiwan has been falling behind in terms of key indicators of healthcare outcomes. In 1996, life expectancy in Taiwan was 74.95 years, while in Korea its was 74.15 years, with Taiwan at an advantage. However, in 2020, 24 years later, Taiwan became 81.32 years vs. Korea 83.43 years, Taiwan came behind Korea by 2.1 years of life expectancy instead. Further, compared to both Korea and Japan, Taiwan’s infant mortality rate is higher and the cancer survival rate lower.  

What are the possible factors for this difference? Calculated based on the current healthcare expenditure (CHE) as a percentage of GDP, Taiwan’s expenditure from 2002 to 2021 has increased from 5.5% to 6.1% in the past 20 years, an increase of only +0.6%. Compared with Japan and Korea, Korea’s CHE as a percentage of GDP increased by +4.2% over the same period, from 4.2% to 8.4%, and Japan also increased by +3.7% from 7.4% to 11.1%.  Taiwan CHE lags far behind that of Japan and Korea both in terms of % GDP and CHE growth rate.  

In addition, the statistical report of the Ministry of Health and Welfare (MOHW) also pointed out that in 2021 Taiwan’s drug consumption expenditure accounted for 1.2% of GDP, which is also lower than Korea’s 1.6%. As for Japan, its %GDP reached 2.3% as early as 2019. Undoubtedly, Taiwan’s global budgeting system has successfully curbed the growth of healthcare expenditure, and the price Taiwan has paid is that it lags behind Japan and Korea in the above key health indicators.  

“Taiwan has clearly been lagging behind its neighbors in terms of investment in healthcare, and a key area where that can be seen is the insufficient funding for new and innovative drugs,” observes C.W. Chen, Chief Operating Officer of the International Research-based Pharmaceutical Association (IRPMA). In 2002, Taiwan NHI fully implemented the “global budget” system, which sets an annual cap on total national healthcare insurance spending. While the efficiency of the licensing process for pharmaceuticals has improved greatly in recent years, he notes, the current problem relates to the restricting of drug reimbursement prices by the National Health Insurance Administration.  

The reimbursement approval process for new drugs is lengthy and time-consuming – 400 days on average, and for the much-needed cancer drugs, even much longer, sometimes exceeding 787 days, compared to 60 to 90 days in Japan. This means that Taiwanese patients and physicians cannot gain access to new medications until long after they have been introduced in other markets around the world. Furthermore, the reimbursement prices offered are actually much lower than global standards, given the Price Volume Agreement (PVA) and Managed Entry Agreement (MEA), which require pharmaceutical manufacturers to return a percentage of drug spending expenditure to NHIA. Compounding the problem, new drugs that are reimbursed will then face restricted indications and hospital price discounts challenges.  

As Taiwan’s patient organizations have been vocal in pointing out, the combined effects of these policies often result in the unavailability of latest lifesaving, life-prolonging, and life-enhancing medications in Taiwan. 

Two other factors are adding to the pressure on the healthcare system. The first is the rapidly aging Taiwan population, which not only adds to the demand for medical treatment but also leads to a shrinking workforce to pay the premiums that support the NHI program. The second is the speed of advances in medical technology, creating new or improved – and often expensive – treatments competing for a place in the NHI budget. 

In its 2023 work plan, IRPMA suggests a two-pronged approach to addressing these challenges. Fundamentally, the NHIA will need to find ways to make up for the projected decline in premium income as the working population shrinks. Besides reviewing and revising the premium system and raising co-payment, another possibility is to amend the law to permit funding from tax revenue as Japan has done.  

In addition to more investment, the reallocation of existing resources would help bring greater access to new and innovative medicines. Currently, any savings that NHI derives from PVAs, MEAs, and price adjustments under the Drug Expenditure Target program are plowed back into the system, where they are used to make up for depreciations in hospitals’ funding for medical services. The combined savings from these various sources regularly exceed NT$10 billion per year. “It seems only fair that at least a portion of the savings coming from medicines be used to support the introduction of new medicines,” says C.W. Chen. “It would go a long way toward relieving the current problem.” 

IRPMA, together with seven other industry associations, issued a “2023 Taipei Healthcare Declaration” to emphasize that “healthcare spending is an investment, not a cost.” The declaration urges the Taiwan government to achieve an increase in national healthcare expenditure from the current 6.1% of GDP to 8% or more by 2028, noting that “such an increase will bring the level of health investment more in line with international standards, strengthening national competitiveness, and accelerating Taiwan’s ability to become a global leader in healthcare, biomedical innovation, and economic growth.” 

To promote these objectives, IRPMA and the Taiwan College of Healthcare Executive (TCHE) collaborated with other stakeholder associations to hold an “Invest in Health” forum in February this year to learn from the experience of other countries, and it plans to conduct similar events throughout the year to exchange views with Taiwanese policymakers and other domestic and foreign experts, and provide suggestions for optimizing Taiwan’s national healthcare insurance system.