Is there a trade-off between cost control and equity? - Evidence from a single-payer approach

1. Is there a trade-off between cost control and equity? - Evidence from a single-payer approach J. Rachel Lu, Sc.D. Chang Gung University, TAIWANandTakemi Fellow, Harvard School of Public Health, USAEmail: Rachel@mail.cgu.edu.tw

2. Outline • Introduction • Universal coverage • Single –Payer Approach • Case study • Taiwan’s National Health Insurance

3. Introduction • 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.

4. Introduction • Universal Coverage • Common fear • Cost • Debate over the “best” financing mechanism to ensure sustainability

5. Single-Payer Approach

6. Single-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

7. Single-Payer Approach

8. Single-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.

9. Taiwan’s NHI Program

10. 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.

11. 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

12. 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.

13. Table 1. Health finance mix in Asia 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.

14. 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

15. Are the health care costs well contained?

16. 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

17. Graph A: Residuals for Total Health Expenditure/Person (in real terms) Line represents the historical average of the residual for total health expenditure/person 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.

18. Is EQUITY in use of services sacrificed while costs are contained?

19. Equity 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-POORdistribution

20. 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).

21. 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).

22. So, is there a trade-off between cost control and equity?

23. Cost 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.

24. Reminder….. • Quality issues are not addressed in the equity study. • Equity study largely centered upon whether socioeconomic factors are deterrents to access to care.

25. Final 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.

26. Thank you for your attention.