Taiwan introduced National Health Insurance in 1995, providing comprehensive benefits to all of Taiwan's residents, with full access to providers and low co-payments. The programme quickly increased national health expenditure. To help contain these costs, Taiwan introduced global budgeting in 2000-02. Global budgeting may present incentives to hospitals to increase service volume to maximize revenue. We evaluated the response of hospitals to global budgeting by examining hospitalization for selected high-volume discretionary conditions, using National Health Insurance data from before and after the implementation of global budgeting. Hospitalization for these discretionary conditions increased significantly for children, adults of working age, and for some age groups of older adults. As there is no reason to believe that hospitalizations would have increased during the study period to fulfil unmet need, or as a function of either reduced outpatient access or notable increases in disease prevalence, results suggest that hospitals increased service volume to retain or expand their individual shares of the global budget. The increase in hospitalization for high-discretion conditions that we observed in this study may not be desirable, as hospitalization carries a substantial risk of iatrogenic morbidity, a risk that is particularly great for older people.
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