Advantages of the single-payer system

‘With integration, the multiple health insurance funds were transformed into a single-payer system’ (Chun et al. 2009: 24). The National Health Insurance Service (NHIS) is the single insurer responsible for operating and managing the NHI (National Health Insurance Service 2014). The NHI is a compulsory social insurance scheme primarily funded by contributions from employers, employees, and the self-employed. ‘NHI contributions are levied on the basis of ability to pay’ (Chun et al. 2009: 53). For employees, their premiums ‘are proportional to wage income and shared equally between the employee and employer’ (Kwon et al. 2015: 38). For the self-employed, their premiums are calculated based on income, the value of property (e.g. house, vehicle) and other factors (e.g. age, gender) (Kwon et al. 2015; Song 2009). The NHI is also funded by government subsidies. Government subsidies consist of general tax and tobacco surcharges (National Health Insurance Service 2015: 25). In 2014, 82 percent of the NHI revenues came from premium contributions, with the rest coming from government subsidies (National Health Insurance Service 2015: 25). In 2015, the NHI covered 97 percent of the population, with the rest being covered by the Medical Aid Program (National Health Insurance Service 2015: 24).

All of the insured have access to a uniform NHI benefit package. ‘The benefits are granted both in-kind or in cash’ (Song et al. 2014: 397). In-kind benefits include preventive care, dental care, diagnoses, treatments, drugs, medical materials, tests, surgery, hospitalization, rehabilitation, nursing, and transfer services (National Health Insurance Service 2015: 35). They also include health checkups such as the cancer screening program (National Health Insurance Service 2015: 35). Cash benefits arc only available for refunding medical expenses spent on home oxygen therapy, peritoneal dialysis, and childbirth at a place other than a medical institution; refunding copayments exceeding 1.2-5 million won per year; and equipment purchases (e.g. wheelchair, hearing aids, canes) for the registered disabled (National Health Insurance Service 2015: 36). ‘The pricing of services in the benefits package is negotiated annually between the NHIS and provider associations’ (Kwon et al. 2015: 40). ‘Health care providers in both inpatient and outpatient settings are mainly reimbursed on a fee-for-service basis’ (Kim and Cheng 2018: 1223). About 90 percent of them are in the private sector (Kwon et al. 2015: 35).

The copay is applied at providers where the insured individual receives outpatient and inpatient care in order to increase his/her cost-consciousness toward the use of medical services. A 30 percent to 60 percent copayment is required for outpatient care, depending on the level of healthcare provider. The copayment

The Republic of Korea 129 rate for outpatient services is lower at clinics than at hospitals. A 5 percent to 20 percent copayment is required for inpatient care, depending on the types of diseases. The copayment rate for inpatients with rare or serious diseases is lower than the copayment rate for inpatients with general diseases. Meanwhile, copayment ceilings are set by income levels to avoid excessive financial burden on the insured due to catastrophic illnesses (National Health Insurance Service 2 015: 38). Those covered by the Medical Aid Program are exempted from copayment at the point of service (Kwon et al. 2015: 42). Full payment is required for uncovered services on an out-of-pocket basis by those who can afford them (Kwon et al. 2015: 35).

Transforming a multiple payer system into a single-payer system has several advantages. First, it improves management efficiency and reduces administrative costs (National Health Insurance Service 2015: 20). Administrative costs decreased from 8.8 percent of total NHI expenditures in 1999 to 7.3 percent in 2000 and 4 percent in 2006 (Organization for Economic Co-operation and Development 2003: 73; National Health Insurance Service 2015: 20). Administrative integration led to heavy dismissals. By July 2000, the number of staff had been reduced by 4,320, which accounted for about 29 percent of the NHI staff (Organization for Economic Co-operation and Development 2003: 73). But laid-off staff were then absorbed into the National Pension Service (Organization for Economic Co-operation and Development 2003: 73). Second, it greatly improves the efficiency of risk pooling when risk is spread across a large number of individuals (Organization for Economic Co-operation and Development 2003: 73). Third, it improves equity in premium contributions. Horizontal equity is achieved for both employees and the self-employed because ‘a uniform method for levying contribution is now applied nation-wide’ (Organization for Economic Co-operation and Development 2003: 71 ). For employees, the contribution base is standardized on overall compensation (Organization for Economic Co-operation and Development 2003: 71). The contribution rate was first fixed at 3.63 percent (Organization for Economic Co-operation and Development 2003: 71) but has increased every year since 2005, except in 2009 and 2017 (Korea Herald 2017). It was set at 6.24 percent in 2018 (Yonhap News Agency 2018). For the self-employed, a single-payer system increases equity' in contributions to health insurance due to the adoption of a uniform nationwide contribution formula (Kwon 2015: 15). Fourth, it improves income transfer effects (Moon 2012: S4). Income redistribution is achieved because wealthier individuals experience an increase in premium contributions, while lower-wage individuals experience a decrease in premium contributions (Organization for Economic Co-operation and Development 2003: 71). Official statistics showed that about 62 percent of households nationwide experienced a decrease in monthly contributions by 4,574 won on average after the reform, while the rest of households experienced an increase in contributions by 6,749 won on average (Kwon 2015: 15). Fifth, a single insurer has greater bargaining power relative to healthcare providers due to its monopsony power (Kwon 2015: 14). For example, there is rapid improvement in the technical and bargaining capacity of the NHIS withrespect to pharmaceuticals after its introduction of the policy of positive listing of medicines based on economic evaluation in 2006 (Kwon 2015: 18).