Posted on May 8, 2003

Taiwan's Single Payer System: A Phenomenal Success!


Health Affairs
May/June 2003
Does Universal Health Insurance Make Health Care Unaffordable? Lessons From
by Jui-Fen Rachel Lu and William C. Hsiao

…Taiwan’s single-payer NHI system enabled Taiwan to manage health spending inflation and that the resulting savings largely offset the incremental cost of covering the previously uninsured. Under the NHI, the Taiwanese have more equal access to health care, greater financial risk protection, and equity in health care financing.

Major Lessons

Taiwan offers an opportunity to study how an advanced economy can structure its health care system to advance societal goals. Taiwan learned from worldwide experience that while the free market can often produce products and goods efficiently, it is incapable of distributing the goods equitably because the income and wealth of households are not distributed equitably. Moreover, the health insurance market suffers major market failures from adverse selection and risk selection. When a society is seriously concerned about its people having equitable access to care and about pooling health risks efficiently, the free market is not a good choice. Evidence from the United States amply supports this conclusion also.

Taiwan established a compulsory national health insurance program that provided universal coverage and a comprehensive benefit package to all of its residents. Besides providing more equal access to health care and financial risk protection, the single-payer NHI also provides tools to manage health spending increases. Our data show that Taiwan was able to adopt the NHI without using measurably more resources than what it would have spent without the program. It seems that the additional resources that had to be spent to cover the uninsured were largely offset by the savings resulting from reduced overcharges, duplication and overuse of health services and tests, transaction costs, and other costs. The total increase in national health spending between 1995 and 2000 was not more than the amount that Taiwan would have spent, based on historical trends.

Additionally, Taiwan did not experience any reported increase in queues or waiting time under the NHI. Meanwhile, the government has taken regular public opinion polls every three months to gauge the public’s satisfaction with the NHI. It continuously enjoys a public satisfaction rate of around 70 percent, one of the highest for Taiwanese public programs.

One notable result that should interest Americans is that Taiwan’s universal insurance single-payer system greatly reduced transaction costs and also offered the information and tools to manage health care costs. Alex Preker, a leading health economist at the World Bank, came to a similar conclusion from his research of OECD countries. He concluded that universal health care led to cost containment, not cost explosion. Equally important, a single-payer system can gather comprehensive information on patients and providers, which can be used to monitor and improve clinical quality and health outcomes.

Comment: Amazing! Single payer reform really does accomplish its intended goals. Taiwan now has equitable, affordable, comprehensive care for everyone. Taiwan has provided us with a real life laboratory for precisely the reform that we need in the United States.

So let’s fix our system… now!