Prompted by growing pressure from the public and from the Democratic Progressive Party (DPP), the ROC government has put social welfare at the forefront of its policy agenda for 1994. Last October, the Ministry of the Interior (MOl) drafted comprehensive Guidelines for Social Welfare Policies, which are expected to be approved by the Executive Yuan. The draft calls for government welfare programs in five major categories: unemployment insurance, a national pension program, welfare services for senior citizens and the handicapped, public housing, and a national health insurance program.
Most extensive among these is the health insurance program. After five years of preparation, last fall the Executive Yuan approved the draft of the National Health Insurance Law, designed to provide comprehensive medical care for Taiwan’s 21 million people. The draft has been forwarded to the Legislative Yuan for deliberation and is expected to become law by the end of this year.
Giving a helping hand—Insurance for the handicapped is part of the social welfare guidelines under consideration. Existing insurance programs have left certain sectors of society uninsured.
The main beneficiaries of the new system will be the 9 million residents who are not currently covered by any of the thirteen public insurance programs now in force. The medical insurance included in these programs—which cover civil servants, teachers, military personnel, laborers, and farmers—will be incorporated into the new national health insurance network. The network will be administered by a central health insurance bureau. Thus, the bill establishes a compulsory program that every ROC citizen must join (except those living overseas).
The new provisions will be costly. The central and municipal governments will pay 34 percent of the premiums annually, an expense of NT$109 billion (US$4.2 billion), more than double the NT$49.7 billion set aside for social insurance premiums during FY 1994. To address concerns over the costs of the new National Health Insurance Law, the draft calls for several cost-controlling measures. To deter patients from overusing medical resources, those seeking medical care would pay 20 percent of their out patient bills and a minimum of 5 percent of their hospitalization bills. In addition, patients would be required to use local clinics and would only be able to transfer to a larger, more expensive hospital if deemed necessary by a doctor. Patients willing to pay a larger percentage of their bills could go directly to a larger hospital.
In another measure designed to discourage unnecessary medical expenditures, the government’s annual outlays for medical care will be set in advance and allocated to the hospitals and clinics based on their case load and type of services rendered. Thus, the more cases that the hospitals submit, the lower the per-case amount paid by the government.
The bill sets the insurance premium at between 4.5 percent and 6.5 percent of an employed person’s official salary, as determined by a standard pay scale for various occupations. Forty percent of this will be paid by the employees, the rest by the employer. Those who are self-employed or are unemployed will have to pay 60 percent of their premiums, with the government paying the remainder. If the program should fall into a deficit, premium rates would be increased to rectify the imbalance.
A second social welfare initiative is being developed for senior citizens. Formation of this policy was spurred by the major opposition party, the DPP. During the November 1993 election for county magistrates and city mayors, DPP candidates proposed a monthly stipend of NT$5,000 (US$190) for anyone over 65 who is not covered by existing social insurance programs. DPP officials estimated that about half of Taiwan’s 1.4 million senior citizens are not insured.
The DPP also alleged that at least NT$400 billion (US$15.3 billion) of the central government’s annual spending or almost one-fourth of the budget—is wasted on corruption or overspending. They charged that a fraction of that waste could cover a pension program for senior citizens.
The Kuomintang (KMT) has criticized the DPP program as irresponsible for failing to take into account the financial strain it would incur. They also labeled it wasteful because of its indiscriminate coverage, which would include wealthy citizens. They stressed that the pension systems prevalent in many developed nations require that those covered first pay into the program, rather than receive free government subsidies.
Despite the criticisms of the DPP plan, it gained enough support that KMT officials rushed to offer an alternative program for the elderly. The move was considered crucial in the KMT’s bid to maintain its majority in the November 1993 elections for county magistrates and city mayors. In a Cabinet meeting on October 21, Premier Lien Chan (連戰) called for the government’s monthly allowance for low-income senior citizens, which had been instituted in July, to be doubled to NT$6,000 (US$230). He also extended coverage to “medium-low income” senior citizens, who will receive NT$3,000 (US$115) per month. The government defines low income as less than 1.5 times the minimum cost of living (US$220 per month in Taipei city, US$180 elsewhere), and medium-low in come as 1.5 to 2 times the minimum.
The KMT maintained a majority in the elections and this Senior Citizens Social Welfare Program is to take effect this July. When it does, the number of elderly recipients will increase from 30,000 to 220,000, and annual social welfare expenses spent on senior citizens are expected to total NT$8.8 billion (US$338 million).
In a second program for the elderly, the MOl has published a draft National Pension Program. The draft contains two versions, one of which the Executive Yuan must submit to the Legislature. The first covers all residents and incorporates the existing public insurance programs. The second covers only those currently excluded from the existing public programs, and would operate independently from them. Under either version, the insured would pay premiums into the program before being entitled to draw a pension upon reaching the age of 65.
Many sociologists stress that creating a social welfare system for the elderly is becoming critical as the island copes with its aging society. With reduced birth rates and increased life expectancies, senior citizens over 65 now make up 7.1 percent of the population, exceeding the 7 percent mark set by the United Nations for defining an “aged society.”
But neither the public nor the government is prepared for this change. Many of today’s senior citizens devoted much of their youth to caring for large families. Following tradition, they expected their offspring to care for them during their retirement years. But in Taiwan’s transformation from an agricultural to an industrial society, the traditional extended family has been replaced by the small nuclear family. This change has, in many cases, done away with the financial security and social status afforded to the elderly. As a result, many senior citizens are ill-prepared to fend for themselves, either financially or psychologically. Without a comprehensive insurance and pension program for senior citizens, analysts predict Taiwan will encounter major social problems as the percentage of the aged population increases.
An adequate social welfare system is considered by many sociologists to be critical to Taiwan’s modernization. “Social welfare is a key criterion for a developed country,” says Chan Hou-sheng (詹火生), professor of sociology at National Taiwan University. Yet despite a substantial increase in spending in recent years, social welfare still accounts for a comparatively low portion of the central government’s budget. In FY 1994, which began in July 1993, social welfare took up 9 percent of the budget. When veterans’ pensions are excluded, the figure drops to 6 percent, a level below that of many developed nations.
Social welfare will occupy an ever more prominent share of the government’s outlays in the coming years. Bai Hsiu-hsiung (白秀雄), director of the MOl’s Department of Social Affairs, predicts it will become the second largest, or perhaps the largest, expense in the central government’s budget within five years. Premier Lien Chan announced in the October 21 Cabinet meeting that social welfare will receive the highest priority in government policymaking. But Lien stressed that welfare programs should focus on those in real need and should take into account the burden on local taxpayers. Only in this way can society preserve its work ethic and ensure continued economic development.
President Lee Teng-hui (李登輝), in his message to the nation on Taiwan Retrocession Day (October 25), noted that the government has a responsibility to implement adequate social welfare policies that address the livelihood and health of the people. However, he cautioned that the experience of developed countries shows that welfare policies can have a serious impact on a nation’s economic development and that ill-planned policies can harm the public interest. Everyone agrees on the need for social welfare, he said, but such policies require comprehensive planning.
The remarks of the president and the premier underscore both the priority being given to social welfare policy and the widespread concerns about the financial strain that the proposed system would create. In addition to covering the administrative expenses of the national health insurance program, the central and municipal governments will have to pay 34 percent of the premiums annually. The total figure more than doubles the amount set aside for social insurance premiums in FY 1994.
Moreover, it remains to be seen whether the built-in safeguards of the national health insurance program—partial payment from patients, the hospital referral system, and the annual spending ceiling—can prevent the extensive waste that plagues Taiwan’s existing public insurance programs. Much of this is caused by doctors over-prescribing medicines, clinics forging prescriptions and billing the government for fraudulent medical expenses, and patients making unnecessary hospital visits, or going to large, expensive hospitals for minor medical problems.
Persons covered by the labor insurance program, for instance, make an average of fifteen hospital visits a year, compared with the national average of six. Medical spending now accounts for a disproportional 60 percent of all spending in the laborers’ insurance program. Controlling costs is crucial to the financial stability of a national health insurance program, especially since it will encompass the elderly, children, and other groups who have a greater need for medical care and are excluded from existing insurance programs.
Observers also worry that the health insurance program will be plagued by political meddling. Chang Po-ya (張博雅), director-general of the Department of Health, has voiced concern that legislators might reduce the premium rates. This would threaten the financial soundness of the program.
Economists stress that social welfare programs must complement private organizations such as the Tzu Chi Buddhist General Hospital. Without such help, public health insurance could soon run into debt.
Legislators have demanded repeatedly that premium rates for the existing programs be held to artificially low levels. Current programs already suffer from serious financial shortfalls due to waste and low premiums. The insurance program for civil servants, for instance, has accumulated a debt of more than NT$30 billion (US$1.15 billion), while the deficit for farmers’ insurance, launched in 1990, now exceeds NT$35 billion (US$1.35 billion).
The laborers’ insurance plan, which covers a large percentage of Taiwan’s blue and white-collar workers, appears on the surface to be in good shape because premium income exceeds compensation payments. But this picture is misleading because half-a-million workers have stayed on the job past retirement age in order to retain their medical insurance coverage.
Once the national health insurance program is in place, most of these workers will likely retire and demand the lump sum compensation promised in their policies. Payments will total a gigantic NT$177.7 billion (US$6.8 billion)—more than twice the NT$71.9 billion (US$2.7 billion) now held in the insurance fund.
Should the health insurance program sink into a financial quagmire, Taiwan will face a major crisis. Already, the island is in financial straits caused mainly by the huge outlays connected with the Six-Year National Development Plan. For FY 1994, the central government is relying on new bonds to cover 29 percent of its expenses, up from 26 percent in FY 1993. In addition, 13 percent of the central government’s budget for this fiscal year is ear-marked for interest and principal payments on government bonds, compared with the 9.5 percent set aside last year. The central and municipal government’s outstanding debts now top NT$1.9 trillion (US$73 billion), 32 percent of the gross national product.
Analysts and politicians warn that runaway social welfare expenses will drain the nation of the resources necessary for infrastructure projects that support economic development. They urge the government to avoid the mistakes made by countries with comprehensive social welfare programs that have ended up wasting social resources and causing large government deficits and chronic inflation. In Canada, for example, the social welfare system has contributed substantially to a national debt of US$600 billion, or US$23,000 per Canadian citizen.
Hospital care at what price? The new health insurance program would cost the government more than NT$100 billion annually, twice the amount set aside for social insurance premiums in FY1994.
Minister of the Interior Wu Poh-hsiung (吳伯雄) and other politicians have warned that an all-encompassing program would lead to high taxes. Not only would the government need money to cover the insured, but additional funds would be necessary to establish and operate an expensive bureaucratic network to manage the program. “The taxation burden of people in Taiwan amounts to only 17 percent of the national income, compared with 50 percent in Sweden and 30 percent in other industrially developed nations,” Wu told local reporters. “In many of these countries, the unemployment rate exceeds 10 percent, while in Taiwan it is only 1 to 2 percent. Taiwan is known for its high employment, high savings, and constantly rising national income. Full employment is the most fundamental form of social welfare.”
Analysts also worry that if the public were to become overly dependent on an extensive social welfare program, the local work ethic would be compromised. “In developing a social welfare system, there exists a so-called ‘moral crisis,’” says sociologist Chan Hou-sheng. “Inevitably, many people would think of it as taking a free ride on the subway.”
Instead, politicians and sociologists are urging the government to strive for an economical and efficient social welfare system that focuses the financial resources available on areas of actual need. They stress that the program can succeed only if it complements those of private organizations and only if individuals continue to take responsibility for their own well-being. Ultimately, the well-being of Taiwan’s people will depend on a continuing high rate of economic development and an equitable distribution of the fruits of that development.—Philip Liu (劉柏登) is editor-in-chief of Business Taiwan, a weekly newspaper published in Taipei.