Sustainability Of Long-Term Care Financing
BMI Core View: Demand for products to aid non-institutional chronic disease management and improve independence among elderly patients will increase. The expected growth of the world's ageing population over the next 50 years will have an unprecedented effect on the provision of healthcare. The elderly require more medical check-ups and care than young people as the result of an increased prevalence of chronic disease with age, and therefore consume a disproportionately large share of healthcare services. Traditional healthcare channels, such as hospitals and clinics, will not be able to meet demand, shifting the administration of medical service to homes of patients.
Following a visit to Japan with Wang Tsung, the deputy director of the Taiwanese Department of Health (DoH)'s Bureau of Medical Affairs, Taiwanese legislator Liu Chien-kuo has said it should try to learn from Japan's long-term care policies. Liu also said it is difficult for the central and local governments in Taiwan to work together, unlike their Japanese counterparts.
BMI believes it is vital that Taiwan establishes a long-term healthcare strategy. Similarly to other Asia Pacific economies such as Singapore, South Korea, Thailand and Australia, Taiwan's population is rapidly ageing, which will result in an increase in the burden of non-communicable diseases. Therefore, if the governments continue to rely on the current level of health insurance coverage, these patients will place a heavy burden on the public healthcare system as they will receive more subsidies staying in hospitals rather than hiring a caregiver or staying in a care home. In Taiwan, approximately 11% of the population is 65 and above, and this figure is set to increase to 17% by 2021 and 38% by 2050, highlighting the need for the island to create a sustainable healthcare system that can cater for the ageing population's needs.
|Increasingly Ageing Population|
|Taiwan's Ageing Profile|
Taiwan Proposed Long-Term Care Insurance Policy
In 2010, the Long-Term Care Insurance Preparatory Taskforce, which was set up in July 2009, proposed a long-term health insurance plan and subsequently submitted it to the legislature in March 2011. However, to date the bill has yet to be approved and passed. Taiwan plans to launch the system by 2016. Currently, it is engaged in the 10-Year Plan For Promoting Our Long-Term Care System, under which only senior citizens who have difficulties performing instrumental activities for daily living (IADLs) qualify for care.
|Family's financial status||Government subsidy||Self-pay (co-pay) percentage|
|People requiring assistance in daily living activities, including the following types of disabled and elderly people: ||Low-income households||100%||0%|
Some of the services provided under the 10-year plan include home-care nursing and services, home and community rehabilitation, improvement of a home barrier-free environment, respite care, transport services and institutional long-term care services. Most households are required to pay 30% of the costs, but in lower-income households the government will subsidise 90-100% of the cost.
Under the proposed plan, some of the key points include:
Everyone is likely to be covered by the proposed policies or the coverage will start when a person reaches 40 years old.
90% of the long-term care financing will come from the current national health insurance premiums, with the remaining 10% as co-payments.
|Plan option||Plan contentsThe insured: employer: government||Average premium sharing percentage|
|Option 1||Comparable to the current national health insurance sharing percentages1.Employees, 30:60:10 2. Members of occupational unions or self-employed, 60:0:40 3. Farmers and fishermen, 30:0:70 4. Other citizens, 60:0:40||39%||35%||26%|
|Option 2||1.Employees, 30:30:40 2. Members of occupational unions or self-employed, 60:0:40 3. Farmers and fishermen, 60:0:40 4. Other citizens, 60:0:40||39%||18%||43%|
After assessing the level of disability, the insured will be eligible to receive a certain amount or some types of benefits
There are two types of benefits : benefits in kind and benefits in cash:
Benefits in kind: home, community and institutional care (only for severely disabled people), care consultation, free care course and support for caregivers, meals-on-wheels services.
Benefits in cash for severely disabled people, though households hiring foreign caregivers are not allowed to collect this benefit.
Japan's Long-Term Care Insurance System
While the services provided by Japan's long-term care system are largely in line with Taiwan's, much of the financing for the system comes from taxes collected by the central government (25%), prefectures (12.5%) and municipalities (12.5%). Premiums collected from citizens are split by age group, with those 65 and older paying 17% of the premiums, while those aged 40-64 pay 33%.
Sustainability Of The System
In both the proposed long-term care insurance and Taiwan's overall health expenditure, the government is contributing less than its citizens (insured individuals and employers). In order to be as successful as their Japanese counterparts, the Taiwanese government's contribution rate by the government has to increase, in our view. In 2011, government health expenditure reached US$7.8bn, which accounted for a low 24.3% of total healthcare expenditure (US$32.4bn). In contrast, the Japanese government spent US$464bn on healthcare, which made up 79.6% of total healthcare expenditure (US$582.1bn). An ageing population requires more premiums to be collected over time, so if the Taiwanese government fails to financially support the system a sharp increase in premium rates will increase the financial burden on citizens.
|Low Government Expenditure In Taiwan|
|Taiwan's (LHS) And Japan's (RHS) Health Expenditure (US$bn)|
In January 2011, various civic groups opposed to the draft legislation for long-term care insurance as they are concerned the use of an insurance system will not be financially viable over the long term. This situation is happening in Japan, where in 2009 the country spent about JPY99.9trn (US$1.1trn), or a considerable 29.44% of the national income, on welfare systems. This amount was higher than what the government collected in taxes and insurance premiums, which totalled JPY94.6trn (US$1.0trn). 
A similar scenario is affecting Taiwan's National Health Insurance (NHI). Since 2007, the accumulated balance has been in negative territory despite a rise in premiums being collected. The introduction of a long-term insurance care plan may follow this trend.
|Financial Status Of Taiwan's NHI|
 Business Monitor Online - Industry Trend Analysis - Welfare System On Unsustainable Course - June 22 2012.