Medical Device Reimbursement in Taiwan

Pacific Bridge Medical - Taiwan Medical Publications

Medical Device Reimbursement in Taiwan

Published by Pacific Bridge Medical	Print Article
By Ames Gross and Rachel Weintraub	May 2005

Overview
Taiwan’s National Health Insurance (NHI) Program was established in 1995 in order to provide affordable, good quality health coverage to all citizens. Previously, three different insurance systems were in effect, offering nearly a dozen different insurance programs. These programs were only available to labor, government, and agricultural workers and in total, only about 60 percent of the country’s total population was covered by health insurance. Today, the NHI, which is overseen by Taiwan’s Department of Health (DOH), is a mandatory insurance system. All Taiwanese citizens are required to join the program; foreigners with Taiwan resident permits and their dependents are also eligible for enrollment. The NHI is comprised of three main divisions: insured citizens, contracted healthcare providers, and the Bureau of National Health Insurance (BNHI). Premiums are based on an employee’s income and paid on a monthly basis to the BNHI.

Reimbursement Systems
The BNHI has two reimbursement approval systems in place: a fee-for-service schedule and a case-payment system. Under the fee-for-service system, the insured are responsible for a co-payment to the medical service provider; the provider makes a claim to the BNHI for reimbursement of the remainder of the medical expenses. The BNHI will review the total number of points of services reported by the medical facility, calculate the amount due for each point, and pay in full. The fee-for-service fee schedule is frequently reviewed by professional medical societies and BNHI-related committees, and approved by the NHI Committee for the Arbitration of Medical Costs.

In July 2002, the BNHI implemented a Global Budget Payment System in order to deal with the financial deficit as a result of the high growth rates of medical costs. It requires the BNHI to consult with medical organizations in order to determine the total payment and distribution plan of a hospital’s medical expenses for each fiscal year. In turn, hospitals will provide medical services within the scope of their fixed budget.

The Global Budget System uses a case-payment scheme (similar to the Diagnosis-Related Group (DRG) reimbursement system in the U.S.) for specified medical and surgical procedures as classified by the BNHI. Once a surgical procedure is selected for case-payment, the procedure is reimbursed at a fixed number of points, and no itemized medical fee, ward care fee, medication, or material will be allowed for additional claims by the medical organization.

Currently, there are approximately 50 types of medical procedures that are reimbursed under the case-payment scheme, including C-section, gynecological surgery, appendectomy, hernia repair, kidney transplant, cataract removal, and orthopedic surgery procedures. In the future, the BNHI may adopt a case payment system for all in-patient services in Taiwan and discontinue the fee-for-service system entirely.

Applying for Reimbursement
When assigning a reimbursement price for a new product, the BNHI will compare the new product with similar products currently on the market. Generally, the BNHI will request that an applicant provide a list of published reimbursement prices from ten specific countries: U.S., Canada, Japan, Australia, the UK, Germany, France, Switzerland, Belgium, and Sweden. If reimbursement prices are not available, then the actual market prices for these countries should instead be provided. Typically, the BNHI will grant a reimbursement price that is in the low-to-middle range of the ten reference prices. If only a limited amount of data (only a few of the ten countries) can be provided by the applicant, the BNHI may refuse the reimbursement application altogether, or offer a very low reimbursement price. If a low reimbursement price is granted, the applicant may have difficulty promoting the product, since medical facilities and patients could opt for a similar product with a higher reimbursement price. However, the applicant also has the option to refuse the reimbursement price via an appeal. A maximum of two appeals is permitted, each taking three to four months to complete.

Three Possible Outcomes
(1) Applicant receives the desired reimbursement price for their product

In this case, the medical device company will most likely meet their desired profitability in their product’s market. However, hospitals could discourage the usage of the product in order to stay within their fixed budget. Furthermore, in the future, the BNHI could reduce their reimbursement price, which could potentially limit the usage of their product. Once a product is listed for reimbursement, it cannot switch to the self-paid (non-reimbursed) market.

(2) Applicant does not receive the desired reimbursement price for their product

In this situation, the BNHI is unlikely to reduce the reimbursement price. Yet, the company could have trouble with their sales margins, since the Taiwanese distributor may have to pay the discount to the hospitals. In turn, this will affect the company’s overall profit margins. The additional expenses incurred by the distributor could also impact the distributor’s ability to effectively promote the product. It should also be noted that a request for a premium increase could be looked upon by the BNHI in a negative way, since the BNHI may convert to a case-payment-only system in the future.

(3) Applicant chooses to sell the product as self-paid
The self-paid market for higher quality products is becoming more popular in hospitals, as it does not affect the hospital’s Global Budget. In addition, the company should meet its expected profitability since it can set its own price, and will still have the option of accepting a reimbursement price from the BNHI in the future. Nevertheless, the company will still need to apply for reimbursement, as required by the BNHI and hospitals, even if a self-paid product is desired. Generally, it is more beneficial for the company to apply for and appeal reimbursement twice, since hospitals will usually purchase a product directly only if a company can prove that they could not attain a desirable reimbursement price from the BNHI.

Conclusion
As the BNHI continues to face increasing financial pressure, is it likely that there will be further restrictions on the Global Budgeting Payment System in the future. However, the total expenditure of the NHI is currently a mere five percent of Taiwan’s gross domestic product. Furthermore, as Taiwanese citizens continue to demand better quality lifestyles and healthcare, the self-paid market will most likely expand, as citizens become more willing to pay more for better healthcare services.