Since the mid-1990s, Taiwan has made great strides in providing comprehensive health benefits to its people. Today 96 percent of them have health insurance, compared with 55 percent in 1995, when the government established a national health insurance program (Exhibit 1). In recent surveys, more than 70 percent of all Taiwanese viewed the health insurance system positively. Another survey ranked Taiwan second best in medical practice among developed and newly industrialized countries and as the world’s second-healthiest country.
Nonetheless, the rapid expansion of medical coverage has sent shock waves through Taiwan’s health system. The program faces insolvency, and many health care providers, motivated by poorly conceived incentives, are delivering inappropriate services. Faced with this untenable situation, Taiwan’s president, Shui-bian Chen, created the Task Force on Reforming the National Health Insurance System, in July 2000.
A basic problem is the fact that revenue generated from health insurance premiums has failed to keep up with expenses. The Taiwanese system is compulsory, with insurance premiums set at 4.25 percent of a worker’s salary or income, up to a ceiling. Government and employers each contribute about 30 percent and employees 40 percent. The government, through the Bureau of National Health Insurance, is...