Tsung-Mei Cheng on the success of Taiwan’s single payer system

Reflections On The 20th Anniversary Of Taiwan’s Single-Payer National Health Insurance System

By Tsung-Mei Cheng
Health Affairs, March 2015


On its twentieth anniversary, Taiwan’s National Health Insurance (NHI) stands out as a high-performing single-payer national health insurance system that provides universal health coverage to Taiwan’s 23.4 million residents based on egalitarian ethical principles. The system has encountered myriad challenges over the years, including serious financial deficits. Taiwan’s government managed those crises through successive policy adjustments and reforms. Taiwan’s NHI continues to enjoy high public satisfaction and delivers affordable modern health care to all Taiwanese without the waiting times in single-payer systems such as those in England and Canada. It faces challenges, including balancing the system’s budget, improving the quality of health care, and achieving greater cost-effectiveness. However, Taiwan’s experience with the NHI shows that a single-payer approach can work and control health care costs effectively. There are lessons for the United States in how to expand coverage rapidly, manage incremental adjustments to the health system, and achieve freedom of choice.

Lessons Learned

The most important lesson of Taiwan’s experience is that the single-payer approach can offer all citizens timely and affordable access to needed health care on equal terms, regardless of the patient’s social, economic, and health status; sex; age; place of residence; and employment status.

A second lesson is that a single-payer model such as Taiwan’s can control costs effectively. It is administratively simple and inexpensive and is the ideal platform for a powerful health IT system. It also facilitates global budgeting, if that is the only way to keep health spending in line with the growth of GDP.

A third lesson is the importance of investing heavily, up front, in a modern IT infrastructure. A modern IT system such as Taiwan’s allows the government to have information about health utilization and spending in almost real time.

Fourth, Taiwan’s case illustrates that health policy makers should not miss windows of opportunity for major health reform. Enabling factors include rapid economic growth, which makes it easier to redistribute resources; strong popular demand for reform; strong political leadership; a broad social and political consensus on the ethical principles that guide the health system; and the availability of a cadre of competent civil servants motivated and able to implement reform.

Lessons For The United States

Taiwan’s experience demonstrates that with competence and goodwill, the challenge of adding a large influx of newly insured citizens can be met. Health systems appear to be adaptive, and the case of Taiwan illustrates that incremental improvements on reform are possible.

Taiwan’s experience also might induce Americans to think more deeply about the term freedom of choice. In health care, freedom of choice could mean choice among health insurance carriers and health insurance contracts, choice among health care providers, or both. For Taiwan’s citizens, freedom of choice among providers of health care trumped freedom of choice among insurance carriers and contracts. These citizens’ high satisfaction with their health system suggests that they still endorse that choice. By contrast, in the United States freedom of choice among insurance carriers and products ranks above freedom of choice among health care providers, which often is limited to narrow networks of providers.

A growing body of literature has shown that by international standards, enormous human resources are used in the United States to facilitate choice among insurers and insurance products, process claims, and annually negotiate a payment system that results in rampant and bewildering price discrimination. Relative to the less complex health systems elsewhere in the industrialized world, the US system is a poor platform for the effective use of modern health IT.

According to a recent report by the Institute of Medicine, the US system has excessive administrative costs that in 2009 amounted to $190 billion. That is more than it would cost to attain true universal health care in the United States.

It is not this author’s role to prescribe what Americans should or should not do in regard to freedom of choice. But it is appropriate to invite readers to think more deeply about the relative benefits and costs of their choices. It is remarkable that in cross-national surveys, Americans have consistently given their health care delivery system relatively high marks, but their health system relatively poor ones.

Tsung-Mei Cheng is a health policy research analyst at the Woodrow Wilson School of Public and International Affairs, Princeton University, in Princeton, New Jersey.



By Don McCanne, MD

The people of the United States have continued to watch our health care spending increase far beyond that of all other nations. We have watched the quality of our insurance coverage deteriorate as insurers take away our choices of physicians and hospitals and shift more costs to those with health care needs, often causing the very financial hardships that health insurance should be preventing. And we have continued to tolerate leaving tens of millions uninsured.

For the past generation we also have been observing the natural experiment in single payer healthcare financing taking place in Taiwan - Taiwan serving as the experimental subject and the United States as the control. As Tsung-Mei Cheng explains in this Health Affairs article, it has been a spectacular success for Taiwan. Had we adopted a similar program twenty years ago, today everyone would be covered, no one would face financial hardship because of medical bills, we would have freedom of choice of our physicians and hospitals, we would have eliminated much of our profound administrative waste, and our total national health expenditures would have followed a lower trajectory and thus would be much less than they are today.

What is it about American exceptionalism? In our stubbornness, we are going to continue our feeble search for policy solutions to our intolerable deficiencies and inequities in health care, when we have before us one of the nearest to perfect natural experiments ever completed - in precisely the reform that we need. By the definition, “much better than average,” exceptional we are not. Or by the definition, “deviating from the norm,” we should have no pride in either our health care system or in our obstinate refusal to apply proven health policies that would inject much needed remedies into our sick system.

At our PNHP meetings and in the health policy literature, Tsung-Mei Cheng has provided us with an abundance of observations and data that should illuminate for us a clear path forward for reform. We just have to make good use of her contributions. We can begin by sharing this Health Affairs article with others who care about the future of our health care system.