The Willingness to Pay for the Health Care Under Taiwan's National Health Insurance

Abstract

1. Rationale The earmarked tax of Taiwan's National Health Insurance (NHI) had only been adjusted once since the NHI was launched in 1995. Recently, a new tax rate proposed by the Taiwan's government is 2.5%-4% of monthly household income. Measuring the willingness to pay (WTP) of health care services becomes an important policy concern for both consumers and policy makers to evaluate the new tax policy in Taiwan's NHI. 2. Objectives The objective of this study is to estimate the WTP value of health care services under Taiwan's NHI. To this end, we first estimate the discrete choice demand for health care services, and then simulate the consumer's WTP value of health care services with respect to different NHI coverage plans. 3. Methodology The discrete choice demand for health care services is estimated by the nested multinomial logit model. This estimation allows us to simulate different WTP values of health care services (measured by the Compensating Variations, CVs) for different NHI coverage plans. Data were collected in the central Taiwan through clusters sampling. Face-to-face interviews were conducted from February 1st to March 31st in 2004. A total sample of 1,500 individuals was selected. The effective sample size is 1063 individuals, among whom 265 observations reported illness during the survey period. The completed questionnaire included answers to questions about a wide range of individual-level information. 4. Results The WTP value for the NHI that covers health care from clinics only is approximately NT$43 (US$1.34) per month/per person.The WTP value for the NHI that covers health care from hospitals only is approximately NT$1,102 (US$34.44) per month/per person. The WTP value for the NHI with a comprehensive coverage (health care from both hospitals and clinics are included) is approximately NT$1,157 (US$36.15) per month/per person. 5. Conclusions: The estimate of WTP value for the NHI with a comprehensive coverage is equivalent to a 6.59% of average monthly household income in 2004. The figure 6.59% is much higher than the new tax rate (2.5%-4% of monthly household income) proposed by theTaiwan's government. Our results suggest that the Taiwan's government can increase the new tax rate further in order to make Taiwan's NHI financially more sustainable.