The National Health Insurance Bureau (NHIB) has recently become a target of public animosity because of the "dual increase" in costs. In August, while the Legislative Yuan was in recess, the Department of Health and the NHIB decided to raise both the percentage deducted from paychecks for health insurance premiums and the "co-payment" (i.e. the amount that individuals seeking medical treatment must pay themselves).

As of September 1, the national health insurance deduction was increased from 4.25% to 4.55%. Calculations suggest that individual payments have gone up anywhere from NT$17 to NT$1400 monthly, with the average being about NT$40 per person per month.

The NHIB says that the reason for the increase in the co-payment is to reduce the number of routine patients visiting the core health-care-providing institutions in order to increase the willingness of those institutions to provide more care to emergency and seriously ill patients. Thus, the co-payment for visits to medical centers (the highest rung in the health insurance system) and regional hospitals (the second rung) has been increased respectively from NT$150 to NT$210 and from NT$100 to NT$140.

Taking both of the "dual increases" into account, it is estimated that the national health system will take in an additional NT$340 billion per annum, which should keep income up to the level of expenses for at least two years.

According to the laws governing national health insurance, every five years a new set of rates should be calculated to cover the following five years. In addition, whenever the system's reserve fund goes below the equivalent of medical costs for one month (currently, that figure is about NT$250 billion), then the insurance rates can be raised automatically. Since the fund has been below this level since last summer, and this is the first increase in insurance rates since the national health insurance program went into effect seven years ago, there seems little room for strong criticism.

However, since the economy is in the doldrums, many people feel that this is not the appropriate time to increase insurance rates. Some argue that it is precisely during a recession that rates should be increased, so that people with moderate and high incomes can ensure that services continue to those less well off. But the fact is that at present about 300,000 people in Taiwan have had their health insurance cards canceled because they've failed to make their payments, on top of another 85,000 who never even paid into the program in the first place. The health insurance relief fund, since its establishment last June, has handled more than 9000 applications and has paid out NT$600 million. From this you can see that for many people, it is already difficult to afford national health insurance at all.

In addition to bad timing, another reason that these rate increases have sparked such a backlash is that the NHIB does not appear to have done all it can to cut back on expenses. The most highly criticized problem area is known as the "black hole of pharmaceutical costs," which is a very longstanding issue.

The "black hole of pharmaceutical costs" refers to the difference between the amount paid by the NHIB for medications and the prices paid for them by health care providers. There are at least three major bones of contention: (1) When health care providers buy large batches of medications, pharmaceuticals companies give them discounts, but these are not reflected in the fees charged to the NHIB. (2) Basic level health care providers provide only basic reports on total pharmaceutical use, rather than case-by-case reports, and there is a gap between the amount paid by the NHIB for daily doses and the actual costs of the pharmaceuticals. (3) Health care providers use low-cost substitutes but charge the NHIB for the high-cost originals. There are also problems of false reporting and over-reporting to earn inappropriate profits. Taking the antidepressant Sinzac for example, Chang Gung Memorial Hospital buys the drug at NT$2.4 per dose, but the NHIB pays NT$41.5.

Shen Fu-hsiung, a legislator who is also an MD, says that the total annual cost of medication in Taiwan, as declared by hospitals to the NHIB, is about NT$80 billion, which is about NT$20 billion more than the amount paid to the pharmaceuticals manufacturers. Of this, as much as NT$10 billion falls under the second category described in the previous paragraph, of the differential that appears under the simplified reporting system. Since this is the result of a legitimate effort to simplify paperwork at the local level, it should not be included in the "black hole." Thus the genuine gap is somewhere between NT$10 and 20 billion.

Legislator Sisy Chen believes that the NHIB should make public the amounts it pays for all medications and the actual market price. This will at least make pharmaceuticals prices transparent. The only way for the black hole to disappear will be to bring the NHIB's reimbursement levels into line with market prices.

Some claim that plugging this "black hole" will do nothing for NHIB finances, but will merely transfer the profits earned by hospitals on pharmaceuticals back to the pharmaceutical manufacturers. That's because hospitals which now pocket the difference between the discount prices they get from manufacturers and what they get from the NHIB will simply stop asking for discounts, and will pay the full NHIB payment over to the pharmaceuticals companies. Even if this turned out to be true, however, if the black hole is not filled in, and hospitals make commercial profit the main consideration in use of medications, then the people of Taiwan are simply being turned into laboratory mice for drugs, and Taiwan will be a heaven for dumping of drugs that are unpopular elsewhere.

The Taiwan Pharmaceutical Manufacturers Association points out that foreign pharmaceuticals makers account for one-third of the market for medications in Taiwan, but take up 70% of NHIB payments for meds. Not only does the NHIB pay excessively high prices for drugs which hospitals must purchase from the patent-holding manufacturers, even many products whose patents have expired continue to enjoy inappropriately high prices.

In order to respond to the demand from the public to solve the "pharmaceuticals price black hole," NHIB CEO Chang Hong-jen states that before the end of 2002 the NHIB will publish standard prices for new medications, and will greatly reduce the payments for medications whose patents have expired. It is expected that these measures will reduce outlays by nearly NT$10 billion. In addition, next year the NHIB will institute a new system in which all discounts, kickbacks, and gifts given by pharmaceuticals manufacturers to health care providers will be seen as "public property," to be shared among all citizens.

Lee Ming-liang, former director general of the Department of Health and currently a professor at Buddhist Tzu Chi General Hospital, avers that the pharmaceuticals price differential problem is rooted in the unsound structure of medical payments. Health care institutions rely on the profits from medications to compensate for what they consider to be inadequate payments for professional services. Thus, he says, the government should work toward putting the payment structure on a more sound footing.

Why can't the NHIB do anything about long-term unpaid health insurance premiums? Is it right for the NHIB to use income from premium payments to pay bonuses and benefits to employees? Who is going to take responsibility for wasting of medical resources or the amount of money lost in the pharmaceuticals black hole? Is the "dual increase" appropriate? Until the answers to these questions are clarified, people will continue to feel that the increased costs of health care are dubious. In recent days, 53 legislators have signed a proposal asking that the government halt the dual increase. It will be a major challenge for the government to figure out how to keep the national health insurance system running smoothly for all of Taiwan society, including its hospitals and doctors.

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(facing page) Since the "dual increase" in fees for national health insurance, visits to medical centers and regional hospitals are down. Many people now feel that they "can't afford to get sick." (photo by Hsueh Chi-kuang)