Tsung-Mei Cheng explains Taiwan’s single-payer lesson for America

May 20, 2020

Topics: Quote of the Day

By Tsung-Mei Cheng
Milken Institute Review, May 4, 2020

If Americans are somewhat familiar with any single-payer system, it’s the one in Canada. Here, I outline another single-payer system built almost from scratch more recently — and in a place that’s even more affluent than Canada: the island of Taiwan. Arguably the most startling aspect of Taiwan’s National Health Insurance (NHI) system is how they manage to get high-quality outcomes for a small fraction of what Americans pay — and how well they have managed the coronavirus pandemic.

Insights for the United States

Despite vast differences between the two cultures and insurance structures, Taiwan’s high-performing single-payer NHI does offer some insights.

Distributive Ethics Matter

In his final book, Priced Out, Reinhardt observed:

“Health reformers in Europe, Canada, or, say, Taiwan (which operates a government-run single-payer system) usually begin their debate on health reform by making explicit the ethical principle that should constrain health policy. … In Germany, for example, policymakers frequently recite the principle of social solidarity. … The U.S. is different … in that it has never been able to reach a politically dominant consensus on a distributive ethic for American health care. My personal experience is that merely bringing up the topic of distributive ethics for health care can easily raise the ire of an audience, because it is viewed as ‘too personal,’ ‘too political,’ and ‘too divisive.’ So instead, we prefer to discuss health reform mainly in technical terms — usually economic terms — and let social ethics fall where they may.”

The United States stands out today as the only country in the developed world that does not recognize health care as a right and have health insurance for everyone. This is an “American exceptionalism” that Americans cannot take pride in.

Cost Containment

Taiwan provides health insurance with generous benefits for its whole population at a cost of 6.1 percent of GDP, or just 36 percent of what the United States spends as a percentage of GDP. On a per capita basis, the contrast between Taiwan and the United States is even starker: Taiwan’s per capita health spending of $3,047 (in terms of purchasing power) was just 30 percent of U.S. spending per capita of $10,207 in 2017.

No Surprises or Price Discrimination

Since the government sets all health care prices, and extra billing above the government-set fee is not allowed (except for a few government-specified medical devices, such as artificial joints), Taiwan is noted for its conspicuous absence of “surprise” medical bills. By the same token, Taiwan does not have to cope with price discrimination, in which hospitals charge vastly different amounts for identical services.

Note, too, that, although hospital mergers do take place in Taiwan, such mergers only expand the market share of acquiring hospitals, but cannot create market power that increases the prices of services and products. The United States, by contrast, has seen rapid concentration in the market for hospital services precisely because size provides more bargaining power with insurers.

Indeed, it appears that consolidation on both the hospital and insurance sides of the equation in the United States has made a mockery of the idea that competition can contain prices.

Administrative Savings

The simplicity and IT-enabled efficiency of Taiwan’s NHI make its overhead cost extremely low. NHI’s administrative cost accounted for 0.87 percent of the total NHI expenditure in 2018.

This is far, far lower than the average of 3 percent of total health spending in OECD economies (in 2014), and strikingly lower than U.S. insurers, whose administrative cost is 7 percent for traditional government-run Medicare and Medicare’s private plans (Medicare Advantage) combined, and 13 percent (no misprint) for private health insurance plans. It long has been known that excessive administrative costs are a significant part of the waste in U.S. health spending.

Satisfaction

The latest NHI satisfaction poll, conducted in November 2019, showed a satisfaction rate of 90 percent, a new high for the NHI. Reasons given for patient happiness: easy access to health services, reduced financial burden of medical care and the “reasonable” premiums. Many Taiwanese-Americans continue to pay their NHI premiums and go back to Taiwan for their medical care. (Our Taiwanese-American daughter-in-law returned to Taiwan to obtain her highly technical, life-saving surgical care – DMc)

Live and Learn

Taiwan is the poster child for how a wellrun single-payer system can do the job efficiently and still enjoy high public satisfaction. Taiwanese regard the NHI as a national treasure and the guardian of social peace.

But a single-payer Medicare for All for the United States may be a bridge too far, if only because the $3.6 trillion (in 2018) American health care system has effectively been captured by interests ranging from private insurers to hospitals to physicians to organized groups of chronic illness sufferers seeking preferential access.

https://www.milkenreview.org…

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Comment:

By Don McCanne, M.D.

Tsung-Mei Cheng has provided us with another excellent article on the features of single-payer national health insurance in Taiwan. This time she also provides us with insights for the United States. The full article is well worth downloading and saving as a reference on Taiwan’s very successful single payer system.

She cites her late husband, Uwe Reinhardt, in cautioning that we have a problem with distributive ethics, limiting our reform discussions to economic terms and letting social ethics fall where they may. She points out that single-payer Medicare for All may be a bridge too far for the United States since our health care system has effectively been captured by financial interests. In contrast, the Taiwanese regard their national health insurance as “a national treasure and the guardian of social peace.”

As noted in the parenthetical comment above under “Satisfaction,” we have the utmost reason to be thankful for the services of Taiwan’s national treasure. May our health care system be transformed from a system captured by financial interests to a system that is the guardian of social peace.

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