Is there a trade-off between cost control and equity?

- Evidence from a single-payer

approach

J. Rachel Lu, Sc.D.

Chang Gung University, TAIWANand

Takemi Fellow, Harvard School of Public Health, USAEmail: Rachel@mail.cgu.edu.tw

Outline Outline

Introduction Universal coverage

Single –Payer Approach

Case study Taiwan’s National Health Insurance

IntroductionIntroduction

Universal Coverage Long achieved by most of the

European Union member state Still an unaffordable policy objective

by some nations? Mongolia: the only low-income

developing country to achieve the goal of universal coverage.

IntroductionIntroduction

Universal Coverage Common fear

Cost Debate over the “best” financing

mechanism to ensure sustainability

Single-Payer Approach

Single-Payer ApproachSingle-Payer Approach

Viewed as a non-market approach

Market approach Goods distributed on the basis of

supply and demand Price mechanism People can be priced out of the market

Violates equalitarian principle in delivering health care

One SingleAdministration

One GoverningRule

Adm entity Public or NFP NFP, private

# of insurers one multiple insurers

Service covered uniform uniform coreservices

Fee schedule uniform uniform

Countryexamples

Taiwan, Canada Belgium, France

Single-Payer Approach

Single-Payer ApproachSingle-Payer Approach

Canada Advantages of a single-payer

approach (Deber, 2003) Lower cost for universal coverage Avoidance of risk selection

Well embraced on the ground of equity as well as economic efficiency.

Taiwan’s NHI Program

National Health Insurance in Taiwan National Health Insurance in Taiwan

Taiwan implemented NHI in 1995. A compulsory payroll-tax financed

social insurance scheme Comprehensive service coverage to

23 million population.

National Health Insurance in Taiwan National Health Insurance in Taiwan

Bureau of National Health Insurance Quasi-governmental agency

By law, the only administration that operates the insurance program

Annual budget: US$ 10 billion Monopoly and monopsony in the

market place

National Health Insurance in Taiwan National Health Insurance in Taiwan

Taiwan Market-driven delivery system

A mix of publicly (35% of beds) and privately (65%) owned hospitals

63% physicians employed by the hospital on salary basis

A uniform FFS payment schedule with global budget

DOH reported 6% of GDP on health in 2002.

Note: %: percentage of total health expenditure from main sources) ;K index: Kakwani index

Source: O’Donnell O, van Doorslaer E, Rannan-Eliya RP, et al, “Who pays for health care in Asia”, EQUITAP

Project:Working Paper #1.

Financing Sources

Direct taxes

Indirect taxes

Social insurance

Private insurance

Direct payments

Total financing

%K

index%

K index

%K

index%

K index

%K

index%

K index

Japan(1998)

19.52% 0.095 13.68% -0.2232 54.00% -0.0415 No data No data 12.80% -0.2691 100% -0.0688

Korea Rep.(2000)

8.31% 0.2683 7.92% 0.0379 33.90% -0.1634 N/A N/A 49.87% 0.0124 100% -0.0239

Taiwan(2000)

5.60% 0.2438 3.24% 0.0404 51.97% -0.0749 8.93% 0.2053 30.26% -0.0780 100% -0.0292

Table 1. Health finance mix in Asia  

National Health Insurance in Taiwan National Health Insurance in Taiwan

NHI as a single-payer One single administration

Direct saving through market power Uniform claim filing system and uniform fee

schedule Sufficient information and tools for effective

management Payment reform

Avoid cost shifting and risk selection

Are the health care costs well contained?

Cost containment efforts The residuals for NHE growth rate for

pre-NHI and post-NHI year (Lu, Hsiao, 2003)

Decomposing into known causes Population growth Aging of the population Change in demand due to increases in income Input factor prices

Graph A: Residuals for Total Health Expenditure/Person (in real terms)

-0.01

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: The residual was computed based on Taiwan’s national health expenditures estimated by the authors. The detailed computation process is presented in Appendix A.

Line represents the historical average of the residual for total health expenditure/person

Is EQUITY in use of services sacrificed

while costs are contained?

Equity performanceEquity performance

Horizontal equity principle Equal treatment for equal medical need

Index of horizontal inequity was employed Developed by Wagstaff and van Doorslaer (2000) Standardize for differences in need

Proxied by age, gender and common health indicators Negative value indicates a PRO-POOR

distribution

Note: WM: western medicine; CM: Chinese medicine. Types of services ranked by inequity index (HI) for total number of visits (last column). Statistically significant indices in bold type (p<0.05).

Table 2. Inequality and inequity in uses of health services In Taiwan, 2001

GP visits Probability of a visit Conditional # of visits Total # of visits

Inequality(Cm)

Inequity(HI)

Inequality(Cm)

Inequity(HI)

Inequality(Cm)

Inequity(HI)

TAIWAN

Admissions -0.1285 -0.0391 -0.0186 0.0161 -0.1489 -0.0251

Physician visits -WM practitioners -0.0161 0.0233 -0.0405 -0.0115 -0.0562 0.0102

Emergency visits -0.0351 0.0116 -0.0043 0.0214 -0.0378 0.0285

Visits - dentists 0.0592 0.0778 -0.0463 -0.0462 0.0160 0.0351

Physician visits -CM practitioners 0.0475 0.0765 -0.0109 -0.0075 0.0400 0.0740

Visits -traditional healer 0.0511 0.0910 0.0201 0.0393 0.0717 0.1267

Note: Figures for Austria, Belgium, Germany, Denmark, Netherlands and UK are adopted from Van Doorslaer E, Koolman X, Jones AM, 2004, “Explaining income-related inequalities in doctor utilization in Europe”, Health Economics 13(7): 629-647; Figures for Taiwan are computed by JR Lu. Statistically significant indices in bold type (p<0.05).

Table 3. Inequality and inequity in uses of health services in selected European countries and Taiwan

Probability of a visit Conditional # of visits Total # of visits

GP visits, 1996Inequality

(Cm)Inequity(HI)

Inequality(Cm)

Inequity(HI)

Inequality(Cm)

Inequity(HI)

Belgium 0.0037 0.0121 -0.1183 -0.0564 -0.1145 -0.0508

Germany -0.0124 -0.0082 -0.0513 -0.0173 -0.0636 -0.0268

UK -0.0076 0.0109 -0.0930 -0.0301 -0.1006 -0.0240

Netherlands -0.0019 0.0103 -0.0517 -0.0201 -0.0535 -0.0113

Denmark -0.0200 0.0061 -0.0631 -0.0085 -0.0831 -0.0008

Austria -0.0082 -0.0018 -0.0417 0.0114 -0.0499 0.0146

Specialist visits, 1996

Belgium 0.0125 0.0344 -0.0394 -0.0008 -0.0269 0.0255

Netherlands -0.0041 0.0307 -0.0137 0.0197 -0.0178 0.0413

Germany 0.0130 0.0243 0.0029 0.0269 0.0158 0.0517

UK 0.0163 0.0723 -0.0397 -0.0062 -0.0234 0.0524

Austria 0.0108 0.0214 0.0237 0.0554 0.0345 0.0740

Denmark -0.0074 0.0223 0.0297 0.0581 0.0223 0.0844

Physician visits, 2001

TAIWAN -0.0161 0.0233 -0.0405 -0.0115 -0.0562 0.0102

So, is there a trade-off between cost control

and equity?

Cost control and equity performanceCost control and equity performance

The trade-off between cost control and equity in access to care can be minimized. TAIWAN, through a single-payer

approach, can achieve gains in economic efficiency.

Cost growth well managed. Fair equity performance of the system.

Reminder…..Reminder…..

Quality issues are not addressed in the equity study. Equity study largely centered upon

whether socioeconomic factors are deterrents to access to care.

Final wordsFinal words

Each health care system has unique features Generalization may not be

applicable.

Exchange of hard-earned experiences may still minimize the chances of painful lessons.

Thank you for your attention.