Asia's bitter pill to swallow in hospital services

Updated: 2014-02-17 07:23

By Kristine Yang in Hong Kong (China Daily)

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Another problem is fiscal. Improper or overprescription of drugs leads to huge cost overruns. This may be most visible in Taiwan.

Taiwan's healthcare system operates through a national health insurance, which covers the entire population. Hospitals buy drugs directly from drug companies and sell them on to patients, although the National Health Insurance covers most of the cost.

The larger hospitals have the clout to negotiate steep discounts with the pharmaceutical companies and can make a tidy profit in the difference between what they pay for a drug and the fixed price that the government pays them.

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It benefits doctors to prescribe as much as possible. A spokesperson for the National Health Insurance Civic Surveillance Alliance said the system puts a cap on prices for medicines but not on the quantities that are prescribed or distributed.

This "black hole" costs around $340 million a year. In the last 15 years or so, Taiwan's healthcare system has racked up some $4.2 billion in deficits.

The problem is hardly unique to Taiwan.

Japan, which also has a well-established system of universal care under its national health insurance, has been under severe stress for several years, notes McKinsey & Co Ltd, a management consulting firm.

Part of the problem is that rising wealth across the country encourages people to seek more care that combines with a lack of centralized controls over the allocation of resources.

Japan's system of healthcare, known as kaihoken, was established in 1961. But in the past few years, a shortage of doctors has emerged. McKinsey's 2011 findings note that some doctors see as many as 100 patients in a single day. Under such high levels of turnover, they tend to overprescribe drugs. This also helps the clinics that own in-house pharmacies.

A strategy that Japan has adopted to contain costs is to limit services, such as magnetic resonance imaging equipment or expensive drugs, which are seen as inflating costs. The government has also put in place a cost-containment plan for healthcare that focuses on changing behavior and shortening hospital stays, said The Commonwealth Fund in a report.

Because the system is almost free to use, some procedures done in a day in the West may require several days stay in hospital. Hernia operations are a case in point.

In Indonesia, which has a new plan to fund more care around the country, healthcare expenditures is rising rapidly. One cause is overprescription. As many as 70 percent of all antibiotics are sold without prescriptions and 90 percent of injections are unnecessary, noted WHO.

Governments across Asia are working to extend healthcare to greater portions of their population but this is easier said than done as costs increase and funding models open the door to abuse.

The challenges are visible not only in Asia but in the United States as well, where President Barack Obama is still facing criticisms over a health insurance reform scheme many see as ill-advised.

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