The new co-payment policy under Taiwan's National Health Insurance: welfare gain or welfare loss?

This paper provides a welfare assessment of the new Taiwan National Health Insurance (NHI) co-payment policy, enacted July 15, 2005. This policy creates a pricing mechanism designed to entice patients to first seek outpatient care at local clinics rather than hospitals. Our empirical findings suggest that while the new policy results in a net welfare gain, it is far less than the expected annual growth in NHI medical expenditure. Thus, additional policy changes will be required to deal with Taiwan's NHI future financial shortfalls.