Written by Tsung-Mei Cheng.

As the era of the Millennium Development Goals (MDGs) is drawing to an end, United Nations member states are defining the post-2015 Sustainable Development Goals (SDGs), which build on the MDGs. The post-2015 SDGs are to be presented at the upcoming United Nations Sustainable Development Summit 25-27 September this year.

Universal health coverage (UHC) is recognized as a significant means to achieving many of the health targets sought in the third objective of the proposed SDGs, namely, “ensure healthy lives and promote wellbeing for all at all ages.” Indeed, the author stated, during a keynote presentation to the 63rd General Assembly of the International Federation of Medical Students Associations, titled, ‘Sustainable, Universal 21st Century Health Care: What Can Future Physician Leaders Contribute?”’ the following:

“UHC” may be defined as “access on equal terms for all citizens, rich and poor, to a specified package of health-care benefits without any citizen suffering financial distress as a result.”

Achieving the twin goals of equal access to needed health care and equal protection from the financial burden of illness requires health insurance coverage that offers the same benefits to all. It also requires a health-care system capable of delivering timely and needed health care to all who need it.

The health systems of the most advanced countries in Western Europe, Canada, Australia, New Zealand, Japan, South Korea, and Taiwan can be said to have achieved UHC. The United States, however, has never achieved that goal, in large part because there is no political consensus on the distributive ethic to be imposed on health care. Roughly half the American population appears to aspire to the UHC that was achieved long ago in many other industrial countries. The other half appears to support a more market driven health care system that inevitably rations health care by price and ability to pay.

Taiwan’s health system, the National Health Insurance (NHI), provides an instructive model that might be used by low- and middle- income countries now exploring that issue. Compared to the UHC systems in Europe, Canada, Japan, and Australia and New Zealand where average annual national health spending averages around 9% of their respective GDP, Taiwan’s national health spending, at 6.6% in 2014, is low. The NHI operates under an overall annual global budget which sets a limit on total health spending for the year.

Taiwan’s single-payer NHI passed into law in July 1994 and was implemented on 1 March 1995. It provides Taiwan’s population of 23.4 million people with government-run comprehensive health insurance with generous benefits (inpatient and outpatient care, prescription drugs, dental and vision care, traditional Chinese medicine, dialysis, etc.) and timely and affordable access to needed health care. The system is financed with a mixture of premiums paid by the insured (38%), government subsidies to low-income households (34%) and employer contributions (28%). Public satisfaction with the NHI has been consistently high, averaging in the 80% range in recent years.

Taiwan’s policy makers settled on this model during a planning phase that began in the late 1980s. During this phase, Taiwan’s planners examined a variety of operating models abroad in the hope of finding one or two approaches that might serve as models for the country.

The single-payer, government-run model Taiwan eventually adopted was recommended to them by Princeton economist Uwe Reinhardt in 1989, for several reasons. Firstly, by its very nature a single-payer health-insurance system affords the payment side of health care easy control over total health spending. Secondly, such a system is the ideal form to achieve equity in the distribution of health care, the goal specifically posited for Taiwan’s reformed health system. Thirdly, a single-payer health insurance system is administratively simple and therefore inexpensive to operate. It is also easily understood by the public and by the providers of health care. Finally, a single-payer health system provides a detailed database covering all of the health care received by the population. Even in the 1990s such a data base allowed the administrators of the system to track total health spending and its breakdown into types of spending. With today’s powerful information technology, the administrators of single-payer systems like Taiwan’s NHI can track health care utilization and health spending in real time.

Reinhardt warned that a looser, more market-driven approach, such as the American system, would be needlessly expensive and would not reach the ethical goals Taiwan had posited at the outset for its to-be-developed system, nor would it reach the goal of UHC. In addition, market-driven approaches, such as the American system, are extremely confusing to patients and providers and therefore trigger frustration and anger. Finally, the administrative costs for market driven systems tend to be high.

As noted earlier, for resource-constrained low and middle-income countries seeking UHC Taiwan’s single-payer approach, coupled with global budgeting, could serve as a role model in part because it facilitates cost control.  However, a fellow single payer system user, South Korea, has not been able to control costs well because it lacks a global budgeting system.

A danger, however, is that a single payer system might be underfunded, leading to a shortage of capacity to deliver adequate health care. A natural consequence of underfunding is the eventual splitting of the health system into two or more tiers—an underfunded system for low-income citizens with limited access to needed health care services and a better-endowed largely private system for the upper-income classes.

Another danger is that the payment system used by single-payer systems,  as in other systems, which are still mainly fee-for-service payments may lead to distortions in clinical practice. For example, if fees for particular services such as office visits or procedures are set too low, those services may not be delivered in adequate quantities (if fees do not cover variable costs); or the fee schedule will trigger what is called “supply-induced demand” (SID), that is, providers of health care will increase the volume of services leading to overuse or misuse of health-care resources.

Achieving or maintaining a system of sustainable UHC is a challenge for every country – even for advanced economies. It involves a constant struggle between what modern medical technology makes possible and what countries can afford to spend on health care. Although no country does this perfectly well, it appears that so far Taiwan’s health system has been up to the challenge (For more detail on Taiwan’s system, see here). It is a system whose genesis and modus operandi are worth a closer look by low and middle-income countries contemplating UHC.

Professor Tsung-Mei Cheng is a Health Policy Research Analyst at the Woodrow Wilson School of Public and International Affairs, Princeton University. Image credit: CC by 黃 基峰/Flickr.