Healthcare Monopoly 4: Taiwan's NHI

The last presentation during the Conference of Generic Drugs in Asia (CGDA) 2011 held in Taiwan three weeks ago was made by Atty. Ivan Liu of YesChain Pharma Group, "To the Rescue of Taiwan NHI: Generic drug policy reformatted". Here are the main points that Ivan made:

Taiwan's National Health Insurance (NHI):
- launched in 1995 and has won international recognition since then
- covers 98 percent of Taiwan's 24 M population
- reimburses almost everything, including outpatient care, lab tests, prescription drugs, dental, TCM, day care for mentally ill, nursing home care, even magnetic resonance imaging (MRI) scan and organ transplant
- patients enjoy ready access to all levels of healthcare providers without suffering from wait lists seen in advanced countries

However, there are a number of problems and risks to NHI:
- explosive growth in reimbursement, from $6 B in 1995 to $18.7 B in 2011 (3x over 16 years)
- ratio of NHI reimbursement/GDP: 2.66 percent in 1995 to 3.9 percent in 2011
- with flat premium rate, yearly deficit warranted, $2 B loss accumulated since launching
- without change, NHI bankruptcy is guaranteed but politically not allowed

So the 2nd generation NHI was promulgated in January 2011: generate an extra $0.66 B annual income through broader based for premium calculation and 2 percent (hike) supplemental premium
- criticized for raising only income but downplaying wastes and non-essential reimbursements
- heavily attacked by employers and high income residents because they will pay the largest portion of premium increase.

Drug reimbursement policy is problematic:
- drug reimbursement in 2011 alone $4.7 B
- drugs/total reimbursement ratio is 25 percent, vs. OECD countries' average of only 15 percent
- 25 percent of dispensed drugs, virtually free upon filing prescriptions, wasted by patients (estimates by hospitals and pharmacies)
- more drugs dispensed means higher profit for big hospitals because
(a) they prefer branded to generic drugs,
(b) generics share only 20 percent of prescriptions while the same share 65 percent of all NHI reimbursed prescriptions
(c) fat margin as big hospitals exercised concerted procurement and big bargaining positions, get lowest drug prices while NHI reimbursement is fixed.
- thus, NHI as a social insurance acts like private insurance.

Ivan thinks the hike in premium is unnecessary -- if savings compared to the projected income increase of $0.66 B can be made:
- if NHI will reimburse branded drugs only at the price of generic drugs (of same active ingredients, dosage, form)

Ivan recommends the following for the Department of Health (DOH) and the big hospitals:
- Investigation Bureau, up to 5 years imprisonment for illegally benefitting a 3rd party (foreign pharma companies)
- Control Yuan has jurisdiction to designate corrective measures to DOH and impeach derelict government officials
- Fair Trade Commission (FTC) bans concerted action without prior approval, penalty up to $3 M
- Government Procurement Act prohibits big hospitals' concerted procurement singling out non-patented brand name drugs.

Over dinner that day (November 20, 2011), I sat next to Ivan and discussed with him my observations about his presentation as there was no more time for Q&A that afternoon. I said that it never fails, if you give something for free or at highly subsidized price, demand will always be larger than supply. The result where S > D is almost always a product or service deficit. That deficit has to be financed by the service provider -- in this case the Taiwan government -- through borrowings, what else.

He agreed. That is why the Taiwan government wants to raise the premium, which he and many others oppose. I go with his proposal: if wastes (by patients) and over-reimbursement (or over-pricing) by big hospitals and other healthcare providers can be controlled or at least minimized, the deficit can be addressed and erased and hence, there will be no need to raise the annual premium or subscription payment.

Aside from health, Ivan and I also discussed many other things, like intellectual property rights (IPR) but his specialization is on IT, not pharma IPR; political philosophy, bureaucracy, etc. Nice chat, Ivan, thanks.

So for me, here are the important lessons based on the Taiwan NHI:

1. Health insurance monopolization and nationalization almost always attracts wastes and inefficiencies. One important solution is to deregulate the health insurance sector, allow private health insurance to compete with government insurance, and do not force or coerce people to become members of the government NHI.

2. Healthcare competition will discourage and limit wastes and inefficiencies. If health insurance A will prioritize branded and expensive drugs and charge higher premium compared to health insurance B, C and D (the latter companies or groups prioritize cheaper generic drugs at lower premium), so be it.
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See also:

Healthcare Monopoly 1: France and Canada, September 06, 2010
Healhcare Monopoly 2: United Kingdom, February 17, 2011

Healthcare Monopoly 3: China, July 20, 2011 

Healthcare competition 1: Switzerland, August 28, 2010

Healthcare competition 2: Singapore, August 29, 2010
Healthcare competition 3: Hong Kong, September 02, 2010
Healthcare Competition 5: Thailand, September 24, 2010
Healthcare Competition 6: United States, May 05, 2011 

PhilHealth Watch 7: Deregulate PhilSick, October 09, 2011

Taiwan Infra

My first time to set foot on Taiwan, and the first structure that one will see up close is the international airport. It's big, definitely bigger than the Manila airport, but I don't think it is as big as Singapore's Changi or Hong Kong's Chek Lap Kok, or Seoul Incheon's, or Tokyo Narita airports.

The upper photo I took myself on the way to immigration and the exit. Lower photo I got from the web. This should be the view before the departure lounge, I will see this on my flight back to Manila on Tuesday.

What impressed me was the good road infrastructure they have, like many other developed Asian economies like the countries I mentioned above. Malaysia too has good road infra, I was there last month.

Here they are building a two-level skyway, this is the road from the airport to Taipei. Huge and long structures.

I don't know if this is government-built or private sector-led tollway project, but definitely they are huge. If the former, then the Taiwan government is doing a good job in anticipating more land traffic in the future. If it is a private sector project, then it shows their deep pockets to undertake this kind of project.

Here are portions of the semi-finished skyway. Once finished, it should be like a one-way, race track type of road with zero threat of oncoming vehicles on the other side.

More photos of their skyways under construction between Taipei and the Tao Yuan international airport. There is another airport within Taipei but it's a smaller one, mainly for domestic flights, a few international flights like Tokyo.

I arrived at my hotel yesterday afternoon. Then we were treated to a sumptuous dinner by the conference co-sponsor, the Pharmaceutical Society of Taiwan. It was a 15 to 20 course meal, I think. It bordered between high hospitality and gluttony due to the big number of food served in our table.

Some of the last servings. They came in bigger bowls. The only consolation is that they did not serve rice anymore. There simply was no more space in our tummy with all those food. 

I kidded two guys beside me, both from generic drug manufacturers, that perhaps someday, some of them should produce a drug that hastens or quickens the food digestion system. So that what you eat by 6:30 or 7pm will be digested by around 8:30pm, so your tummy will have more space for food that are still coming by 9pm. If ever this drug is invented, it should be a hit in countries where there is high percentage of fat and obese people. They both laughed.

The "Asia Generics Conference" will officially start today. Last night was just an unofficial dinner-networking among the conference organizers, sponsors and speakers.
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See also Migration and Freedom 12: Visa-free entry in Asia for some photos of Taiwan.

Migration and Freedom 12: Visa-free entry in Asia

Next month, I will go to Taipei, Taiwan, to attend a conference on generic drugs in Asia. I have not been to Taiwan before, so I am excited to see this place.

In the Association of South East Asian Nations (ASEAN), citizens of the 10-member countries (Philippines, Thailand, Vietnam, Cambodia, Laos, Myanmar, Singapore, Malaysia, Brunei, Indonesia) can travel to other member-countries visa-free for visits of 30 days or less. I am not sure though if Myanmar gives the same privilege to all citizens of the other 9 countries.

Since Taiwan is not a member of the ASEAN, then I must get a visa even for short stay (just 4D/3N). I went to their embassy website to see the procedures in getting a visa.

I was very happy to see this:
Notice: Online for visa-free entry into the Republic of China (Taiwan).

Effective from 3:00 pm, March 15, 2011, passport holders of the Republic of the Philippines may apply for an authorization certificate online for visa-free entry into the Republic of China (Taiwan).

These photos are from www.tripadvisor.com.

Yes! The notice gives this detail:

Passport holders of the following five （5）countries traveling to Taiwan are exempt from visa and can stay in Taiwan up to thirty (30) days provided that they have never worked in Taiwan as blue-collar workers before and are currently holding valid visas or permanent resident cards of U.S.A., Canada, Japan, U.K., EU Schengen, Australia and New Zealand.

1. Philippines（菲律賓） 2. India （印度） 3. Indonesia（印尼）
4. Thailand （泰國） 5. Vietnam（越南）

Since I have a 10-years multiple entry US visa (2010-2020), then I am qualified for online visa-free entry into Taiwan.

I have argued before that in really free societies, migration and visit to other countries should be free, meaning visa should be waived if not abolished, except for those with outstanding criminal cases, or have records of engaging in political violence in the past. For the latter group of people, then visa requirements should apply. This should be one incentive for people to abide by the laws of their own country as much as possible.

I hope that more countries in the future will relax their visa restrictions. Despite the threats of terrorism, only a very-very small portion of the world's population is engaged or be attracted to engage in terrorism, so why punish the majority who are law-abiding people through bureaucratic and costly visa application process? Sure, collections from visa application is one source of revenue for many governments. If that is their goal, then just slap a specific fee that should not be too high that will effectively act as restriction to people mobility.
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See also:
Visa-free entry and people mobility, February 23, 2006. It's about the 145 countries whose citizens can enter the Philippines visa-free.
Pilipinas Forum 10: Migration and Singapore as a Social Contract, September 17, 2011
Migration and Freedom 6: Passport and People Mobility, November 30, 2010
Migration and Freedom 7: Restrictions to OFWs , April 13, 2011
Migration and Freedom 8: Denmark's immigration policy, May 17, 2011
Migration and Freedom 9: Immigration bureaucracy, July 19, 2011
Migration and Freedom 10: Multiculturalism and the Norway massacre, July 25, 2011
Migration and Freedom 11: Two migration theories, September 03, 2011