This research focused its efforts on probing the financial problems of the National Health Insurance (NHI) System. In accordance with the agency cost model proposed by agency theorists, this research investigated the agency relationship between the Bureau of National Health Insurance (BNHI) and the contracted medical care institutions. Moreover, this research analyzed the interactive effects among monitoring cost, bonding cost, and residual loss resulted from behavior-based contract and outcome-based contract, respectively. Based on the analyses of this research, four major findings and related strategies are stated as follows:
First, the incentive structure embedded in the financial system of NHI may be one of the major causes that result in financial deficits. The incentive structure tends to motivate overgrazing behaviors in the medical system that in turn, lead to the growth of medical care expenditures. Second, in light of current agency relationships, the more the incentive structure is aligned to the interest of BNHI, the less is the reliance of BNHI on its information system. Third, BNHI should provide correct and proper incentive links to encourage the agents’ bonding behaviors. Finally, before BNHI can correctly measure the behaviors of medical institutions by means of behavior-based contract, it may consider managing the agency relationships by using outcome-based contract instead, and replacing with behavior-based contract later when it has the ability to collect more information for monitoring the behaviors of the contracted medical care institutions.
Based on the research findings stated above, this research proposed the following three strategies for coping with the financial problems existed in the National Health Insurance System. First, BNHI may establish a set of “contravention standards”, and the budget for the medical institutions below those standards will include the negotiated amount plus the reserve. Second, BNHI may provide a certain proportion of service amount to reward those medical institutions which report fraudulent upcoding so as to encourage peer monitoring. Finally, BNHI may consider regulating the service outcome at present, and shift to behavior regulation after accumulating enough information for designing appropriate index that are able to accurately measure medical service behaviors.