Thursday, April 1, 2010

qotd: Taiwan to move towards more equitable financing

Focus Taiwan News Channel
March 30, 2010
Talk of the day -- Health insurance overhaul nearly ready
By Sofia Wu

The health insurance premium rate will be raised from the current 4.55 percent to 5.17 percent April 1, but Department of Health (DOH) Minister Yaung Chih-liang said Monday the public could end up paying less in premiums when a second-generation health care system is adopted in two years.

Earlier Monday, Yaung briefed Premier Wu Den-yih on draft amendments to the National Health Insurance Act that will pave the way for the introduction of a new generation of health care insurance.

After listening to Yaung's briefing, Wu said the executive branch will lobby lawmakers to pass the draft package during its current session to allow for an early implementation of the second-generation system.

Under the new system, premiums will be paid by the insured, employers and the central government. At present, the government's contribution is financed by both central and local governments.

The new system will calculate premiums based on total household income (including wages, stock dividends, rental income and other unearned income) instead of the current model that considers only the insureds' salaries or earned income.

Yaung said the new system will be more equitable, as wealthy households whose income does not mainly rely on earned income will have to pay higher premiums.

Comment:  Taiwan's single payer system has been phenomenally successful, though they, like all other nations, have had to confront increases in health care costs. Under the current financing system it has become necessary to increase the percent of income paid as insurance premiums, to the displeasure of the citizens of Taiwan. That has prompted recommendations to improve the financing system.

The most important change is to shift from a premium based on a percentage of earned income to a percentage of all household income, including wages, stock dividends, rental income and other unearned income. The obvious impact of this is to make the contribution more equitable by increasing the progressive nature of the health care tax. This acknowledges the necessity of instituting a transfer not only from the healthy to the sick, but also from the wealthy to those with more modest incomes. Costs are too high to do otherwise.

Another change is to eliminate the contribution of local governments, which frequently struggle with their budgets, and to shift the full responsibility for the government contribution to the central government.

When you think about, we've already adopted these principles for our Medicare program. The program was established as a federally funded program, unlike Medicaid which depends on state funding as well. Also, the reconciliation bill just signed by President Obama includes a Medicare tax on the unearned income of wealthier individuals. 

But there is one glaring difference between the approaches of Taiwan and the United States. Taiwan uses an exceptionally efficient single payer system that covers everyone, whereas we lose almost all of the advantages of the single payer model by limiting our Medicare program to less than 15 percent of our population.

It's great that we've accepted the principle of equitable financing of health care, but wouldn't you think that our government stewards would be smart enough to know that we also need a stable, efficient financing infrastructure, if for no other reason than to ensure that everyone benefits from equitable financing? The Taiwanese stewards have already figured that one out.

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