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The Taiwanese health care system under efficiency scrutiny

Schreyögg, J

Diskussionspapier 2004/17, Technische Universität Berlin, Fakultät Wirtschaft und Management, Berlin


This thesis describes the status quo of the Taiwanese health care system in the year 2000, 5 years after the reforms, analyses the economic efficiency of single components of the new health care system and searches for possible solutions to solve uncovered problems. For a better understanding of the Taiwanese health care system, the economic, political and demographic environment is described first of all. Although the Taiwanese economy developed rapidly, the health care system was still looking like that of a underdeveloped country. To analyze the efficiency of the Taiwanese health care system it is necessary to have a general look at the possible composition of health care systems and their incentives on the actors of the system. A health care system can be divided in finance and reimbursement. After presenting basic models of financing a health care system, different methods of reimbursing in-patient, out-patient and pharmaceutical services are described. Before the reforms in 1995 the Taiwanese health care system was characterized by unequal access to health insurance leading to a proportion of 50% uninsured Taiwanese. Furthermore, all reimbursement systems provided disincentives for providers to act economically. The whole system led to a misallocation of resources. Subsequently the situation of the health care system in the year 2000, 5 years after the reforms, is described and analyzed. A mandatory National Health Insurance has been introduced in order to provide comprehensive health insurance to everyone. Premiums are paid in proportion to the income of each insured person. The National Health Insurance has been running a deficit for some years, which is on the on hand due to very low premiums and co-payments and on the other hand a result of the inefficiency of reimbursement systems. In-patient services are more and more reimbursed by DRG’s, which led to cost savings, but they are only introduced for certain cases. The non-DRG cases are still reimbursed via the fee-for-service payment leading to inefficient use of resources. Expenditures for out-patient services represent half of the whole total health care expenditures. This is primarily due to high costs of treatment and a very high frequency of visits. Patients frequently request out-patient services in case of minor diseases and usually wish to be treated by large teaching hospitals causing high costs of treatment. Although capitation payment has been introduced for diagnosis services costs of out-patient treatment still remain high. The procedure of registering pharmaceuticals in Taiwan is very complicated and can take up to 3 years. Due to many kinds of market intervention the reimbursement of pharmaceuticals in Taiwan is very difficult and possible innovations are distorted in this way. Finally, future actions of the Taiwanese government are evaluated and own suggestions are revealed. Due to the high health insurance deficit the government announced to introduce global budgets in the year 2001. But instead of rationing health care it should rather try to increase rates for premiums and co-payments. In addition a working referral system and the introduction of capitation reimbursement for outpatient treatment could decrease costs and lead the system towards an optimal allocation of resources. Furthermore, it could be considered to change the financing system to a system with several competing insurance companies.


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