The effect of health payment reforms on cost containment in Taiwan hospitals: the agency theory perspective.

Abstract

This study aims to determine whether the Taiwanese government's implementation of new health care payment reforms (the National Health Insurance with fee-for-service (NHI-FFS) and global budget (NHI-GB)) has resulted in better cost containment. Also, the question arises under the agency theory whether the monitoring system is effective in reducing the risk of information asymmetry. This study uses panel data analysis with fixed effects model to investigate changes in cost containment at Taipei municipal hospitals before and after adopting reforms from 1989 to 2004. The results show that the monitoring system does not reduce information asymmetry to improve cost containment under the NHI-FFS. In addition, after adopting the NHI-GB system, health care costs are controlled based on an improved monitoring system in the policymaker's point of view. This may suggest that the NHI's fee-for-services system actually causes health care resource waste. The GB may solve the problems of controlling health care costs only on the macro side.