【Column Article】Liberty Republic “Lee Po-Chang’s Column |The Current Trends and Urgency of Reform in Taiwan’s National Health Insurance”
Lee Po-Chang / Chair Professor, College of Public Health, Taipei Medical University
Every time I see my colleagues in the medical system insulting Taiwan’s National Health Insurance (NHI), I truly feel deep pain in my heart. And when I see government officials facing endless waves of public anger, I feel a strong sense of sympathy. Taiwan’s NHI has been globally recognized as a major milestone in achieving universal health coverage—so why has it come to this point today? Do we, as Taiwanese people, truly feel it? Do we really acknowledge our own responsibility?
Since its establishment in 1995, this compulsory single-payer system has successfully expanded coverage to virtually all citizens and legal residents. Currently, over 93% of healthcare providers have contracts with the NHI. Operated under a global budget negotiated annually, the system emphasizes fairness and accessibility, and has improved administrative efficiency through highly digitized management, earning Taiwan a positive reputation internationally.
However, despite multiple reforms and adjustments, the NHI system still faces structural financial challenges and deep policy dilemmas. The long-term adoption of a fee-for-service payment model has incentivized volume over value, resulting in physician overwork, inadequate compensation, and distorted incentives. This further undermines care quality and system sustainability. Analysis of publicly available NHI big data clearly reveals various hidden concerns in resource allocation and utilization, reminding us of the need to think about the direction of future system reforms.
From 1996 to 2021, the composition of NHI expenditures has shifted significantly:
(i) “Treatment expenses” (including surgery and anesthesia) dropped from over 40% to 35.1% (about NT$272.3 billion), reflecting the increasing popularity of outpatient services and minimally invasive treatments.
(ii) “Pharmaceutical expenses” rose sharply to 28.9% (about NT$224.5 billion), influenced by costly cancer drugs and the growing prevalence of chronic diseases.
(iii) “Examination expenses” increased to 12.7% (about NT$98.5 billion), indicating a rising reliance on diagnostic imaging and molecular testing.
Meanwhile, “Diagnosis expenses” fell to 16.8% (about NT$130.4 billion), reflecting the undervaluing of clinical judgment and consultation time.
(iv) Other categories, such as “special materials expenses” and “dispensing service fees,” also grew slightly to 4.1% and 2.4%, respectively.
Imbalance between outpatient and inpatient expenditures: a longstanding structural issue
A longstanding structural problem in Taiwan’s NHI is the imbalance between outpatient and inpatient expenditures. Outpatient services account for about 70% of spending, while inpatient services account for only 30%, despite hospitals bearing the burden of major surgeries, emergencies, and complex treatments. This imbalance stems from the initially low reimbursement rates for inpatient care, which over time discouraged young physicians from pursuing hospital-based specialties and overnight on-call positions, reinforcing a “sweatshop hospital” culture. Without fundamentally adjusting the reimbursement structure for inpatient and primary care, no reform can achieve substantial improvement.
This disconnect is particularly evident given the dual expectations placed on NHI to provide “universal healthcare protection” and to “achieve financial self-sufficiency.” Unlike the UK’s NHS, which is funded through taxes, Taiwan’s NHI relies heavily on premium revenues, but premium adjustments are often delayed for political reasons, worsening structural deficits. For years, society has maintained an unrealistic expectation of “unlimited services with limited resources,” which is the fundamental reason NHI cannot operate soundly.
Patterns of healthcare utilization also reveal inefficiency and resource waste. On average, each person in Taiwan visits a doctor about 15 times per year—one of the highest rates globally. Meanwhile, the aging population consumes nearly 40% of healthcare expenditures. Despite Taiwan’s advanced medical facilities, its average life expectancy has gradually fallen behind that of neighboring countries such as Japan and Singapore, demonstrating that high utilization does not necessarily lead to better health outcomes.
Looking closely at primary clinics, most visits are for acute and minor illnesses (about 156 million visits per year), while only 37 million visits involve long-term chronic disease management. By contrast, hospital outpatient visits are roughly split between non-chronic (55 million) and chronic (53 million) patients. This disparity underscores the insufficient role of primary care in chronic disease management and reflects the failure of a hierarchical referral system and a lack of public trust.
In 2023, pharmaceutical expenditures accounted for 32.58% of the total NHI budget, with outpatient prescriptions making up about 87% of this. The ingrained belief that “a consultation should come with medication,” combined with low co-payments failing to serve as a deterrent, has led to medication overuse. The fee-for-service model inadvertently encourages healthcare providers to pursue patient turnover rather than continuity or integrated care. Furthermore, defensive medicine driven by fear of medical disputes has led physicians to order more tests and prescribe more medications, further driving up costs.
Other countries have already implemented corrective mechanisms. Singapore combines “Medisave” accounts with targeted subsidies and shared responsibility, fostering greater public awareness of healthcare costs. Japan imposes moderate co-payments on elderly patients to discourage excessive visits. South Korea actively promotes a hierarchical referral system to enhance primary care capacity. These experiences remind us that reforms must balance fairness and financial sustainability; merely suppressing reimbursements or increasing subsidies cannot keep up with changing times.
In fact, Germany’s social insurance system shares premium contributions between employers and employees and operates “sickness funds” regionally to maintain flexibility and equity. The Netherlands requires basic mandatory insurance while allowing private insurers to operate alongside it and uses a risk equalization fund to prevent the exclusion of high-risk populations. All these mechanisms highlight that for NHI to remain sustainable, it must strike a balance between protecting the vulnerable, maintaining financial stability, and encouraging rational use.
Facing rapid population aging and rising chronic care needs
Taiwan’s rate of population aging is among the fastest in the world. By 2034, one in five people will be over 65, and demands for chronic and long-term care will multiply. If we continue with a “more is better” system design, it will not only further exhaust medical personnel but also force harsher austerity measures when finances hit a critical point, ultimately harming public interests.
Now is the time for open dialogue—frank discussions on how to adjust premium structures, strengthen the referral system, and bring healthcare spending back to a sustainable path.
For example, National Taiwan University Hospital’s “Star-Moon Project” involves collaboration between medical centers and community clinics, improving efficiency through division of labor and information sharing, and gradually rebuilding public trust in primary care. This kind of cross-level cooperation will be essential moving forward. In recent years, with support from NHI Committee members, former Chunghwa Telecom Chairman Cheng Yu, and Legislator Liu Chien-kuo, the NHI Administration has established a robust “cloud-based medical information sharing” infrastructure. More importantly, we must ensure that hospitals at all levels implement it practically. My insistence that data must be uploaded before payments are issued embodies the principle of “spending money where it truly matters.” When people can easily access big hospital records, they will better accept the concept of hierarchical medical care.
The system must move beyond a mindset of “accessibility at any cost” and transition toward “modern governance that balances equity, quality, and sustainability.” Only by honestly confronting financial realities and valuing professional commitment and system incentives can the NHI go the distance and continue safeguarding public health.
In conclusion, NHI management is not as complicated as it seems. Future key strategies should include:
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Adjust co-payment policies:
Implement a tiered design—maintain subsidies for low-income and disadvantaged groups while requiring higher out-of-pocket payments from those making unnecessary frequent visits, thus reinforcing cost awareness. -
Strengthen the hierarchical referral system:
Implement a family physician system, enhance primary clinics’ capacity for chronic disease care, and reduce arbitrary cross-level visits through digital medical record tracking and referrals. -
Reassess fee-for-service payments:
Gradually shift from volume-based to outcome-based payments, creating incentives for integrated care so that physicians have the time to accompany patients in long-term management. -
Increase inpatient reimbursement:
Adjust compensation for critical and nighttime inpatient care to support young physicians entering high-intensity specialties and reduce workforce shortages. -
Establish financial adjustment flexibility:
Design statutory mechanisms for regular review of premiums, global budgets, and payment standards to mitigate the political risks of policy delays.
Finally, it is worth reiterating that NHI is not merely an accounting issue but a generational value choice. Taiwan now stands at a crossroads, needing to decide whether to have the courage to pursue deep reforms so the system can maintain fairness, universality, and high quality over the next decade.
The NHI symbolizes social solidarity. Only by understanding reality and facing challenges head-on can we protect this precious public good and allow it to continue fulfilling its essential role for future generations.
Source: Liberty Republic, “Lee Po-Chang / The Current Trends and Urgency of Reform in Taiwan’s National Health Insurance”
