UHC Forward: Towards Universal Health Coverage

Providers obtain their revenues from 3 sources: 1) payments by the NHI; 2) patient user fees and co-payments; and 3) proceeds from the sale of products and services not covered by the NHI.

The government acts as the single-payer system with a uniform payment schedule that has effectively controlled the cost shifting that occurred frequently before the implementation of NHI. Initially, NHI providers were paid on a fee-for-service basis, however providers were able to make sizable profits by overprescribing medications and ordering unnecessary procedures, leading to quickly rising per person expenditures. Hospitals in Taiwan reward their staff physicians individually for bringing in revenue, known as a “professional fee,” further encouraging physician-induced over-prescription. The Bureau of National Health Insurance (BNHI) estimates that overuse and misuse of health care may constitute up to a third of BNHI’s expenditures.

Facing the need for cost containment, BNHI introduced a reasonable volume standard for outpatient visits coupled with a sliding fee schedule for visits above the volume standard, which discouraged supply-induced demand and reduced the number of visits per person. BNHI also reduced the high profit margin that clinics and hospitals can obtain from dispensing drugs by reducing the reimbursement rates for drugs, using reference pricing, and encouraging the use of generic drugs. The NHI experimented with different payment systems, such as diagnosis-related groups (DRGs) for hospitals, primary care capitation for certain population groups, and even performance-based payments. DRGs were phased in for the 50 most common diseases and treatments, which effectively reduced the average length-of-stay in hospitals.

The ultimate cost control measure, however, has been the imposition of global budgets for hospital outpatient and inpatient services in 2002. This remains highly controversial because global budgeting incorporates an aggregate fixed sum budget imposed on all hospitals in Taiwan collectively, creating a zero-sum game in which the players cannot effectively police one another. Reimbursement contracts are negotiated with health care providers on a fee-for-service basis with a uniform pay schedule. A deflation mechanism engages once a service quota is reached, resulting in declining reimbursement rates. Under the global budget payment system, the NHI Medical Expenditure Negotiation Committee convenes and negotiates overall caps on total medical payments based on a set of equations and indicators prior to the beginning of a fiscal year.

Along with the implementation of global budgets, the NHI took several measures to control the demand for selected types of health care, such as increasing copayments for high users of drugs and outpatient services. The global budget payment system with these measures has been successful in containing the annual growth in the health insurance system's expenditures with spending growth leveling out at below 5% a year since it was fully implemented in July 2002.

Providers are paid on a by-intervention basis, where a specified rate is set by Aarogyasri Trust in consultation with medical experts. For each approved procedure, the payment covers the entire cost of treatment, from the date of admission to discharge, as well as a maximum of 10 days after the discharge and any complications while in the hospital. The package rate includes consultation, medicine, diagnostics, implants, food, cost of transportation, hospital charges, and post-operative hospital stay.

A comprehensive list of benefits and associated payment pricing can be found on the Aarogyasri web site.

Seeking care is truly cashless for the patient. On the back-end, the provider must submit a pre-authorization to the insurance company (Aarogyasri I procedures) or to Aarogyasri Healthcare Trust (for Aarogyasri II procedures). The insurance company/Trust appoints medical officers who work on pre-authorizations. After pre-authorization and treatment, the insurance company or Trust (depending on which Procedure the beneficiary was enrolled in) will settle claims from hospitals within seven days of receipt of claim, discharge summary, and a satisfaction letter from the patient.

To prevent fraudulent claims, the claim settlement history of each hospital is scrutinized and reviewed by the Trust at regular intervals. In addition, the insurance company recruits specialized doctors, known as vigilance officers, for regular inspection of hospitals. These specialists also attend to complaints from beneficiaries directly or through Arogya Mithras for any deficiency in services reported. The specialists also to ensure proper care and counseling for the patient at network hospitals by coordinating with Aarogya Mithras and hospital authorities.