Challenges to the current single-payer system

However, a single-payer system has yet to address the problems of high out-of-pocket expenses, high spending per capita, and a deterioration of the quality of care in the country. Out-of-pocket expenses remain high in the ROK. According to OECD Health Statistics 2015, the share of out-of-pocket expenses accounted for 37 percent of health spending in the ROK, which was second only to Mexico (45 percent) among OECD countries and was twice the overall OECD average (19.5 percent) (Organization for Economic Co-operation and Development 2015: 2). A major reason for high out-of-pocket expenses is that ‘providers are inclined to substitute services that are not covered for those that are, in order to increase their revenue’ (Jeong 2011: 143). High out-of-pocket medical expenses can weaken an individual’s purchasing power and cut his/her expenses on basic household items. It can even contribute to the impoverishment of households (Kwon et al. 2015: 41). A study showed that unemployed households in the ROK were 2.8 times more likely to experience catastrophic health expenditure (CHE) (Choi et al. 2016), which is defined as ‘out-of-pocket spending for health care that exceeds a certain proportion of a household’s income’ (Li et al. 2012: 664). The inability to pay medical expenses ‘results in poor health if treatment for diseases is not received at appropriate times’ (Choi et al. 2016).

Since 2002, health spending per capita in the ROK has already been growing at about 8 percent a year, which is the fastest among OECD countries and more than double the OECD average of 3.6 percent a year over the same period (Organization for Economic Co-operation and Development 2012: 9). But more health spending does not necessarily lead to a higher quality of care (Organization for Economic Co-operation and Development 2012: 6-7). In the ROK, quality of care deteriorates due to ‘a weak primary care system and gatekeeping mechanism’ (Kim and Cheng 2018: 1223), an over-continuing expansion of acute services and the incentives for over-provision of hospital services (Organization for Economic Co-operation and Development 2012). Since the government sets the service fees below market prices, many healthcare providers running on a profit motive are not interested in providing services that are most appropriate for patients’ long-term health (Organization for Economic Co-operation and Development 2012: 10). Instead, they are keen on increasing the volume and intensity of services provided and choosing medical treatments with a greater profit (Kwon 2007: 166). In 2013, the ROK had the longest average length of inpatient stays across OECD countries (Organization for Economic Co-operation and Development 2016). The average length of inpatient stays was 16.5 days in the ROK, which was more than double the OECD average of 8.1 days (Organization for Economic Co-operation and Development 2016). From 2004 to 2015, the average annual growth rate of health expenditures among the total

The Republic of Korea 131 population for inpatient care was higher (12.4 percent) than that for outpatient care (8.2 percent) (Jeon and Kwon 2017: 216). High avoidable hospital admissions for chronic conditions (e.g. asthma, diabetes) in the ROK indicate that unnecessary use of expensive hospital care is a serious problem (Organization for Economic Co-operation and Development 2016). For example, hospital admission rates for asthma in the ROK were over twice the OECD average in 2015 (Organization for Economic Co-operation and Development 2017: 104).

How to reduce the over-utilization of hospital services and build better incentives for appropriate care are important tasks for the government, especially when the country is facing a rapidly ageing population and growing chronic disease burden (Organization for Economic Co-operation and Development 2012). Elderly people often require more medical services than younger adults due to ‘additional functional decline, physical illness, and psychosocial needs’ (Kim et al. 2018: 98). According to Korea Centers for Disease Control and Prevention (2017), medical expenses for the elderly topped 1.8 billion won, accounting for 35.5 percent of total medical expenses. Medical expenses for chronic diseases were 3.8 billion won, accounting for 80 percent of total medical expenses (Korea Centers for Disease Control and Prevention 2017). ‘Burden of chronic diseases is expected to grow due to an aging population’ (Korea Centers for Disease Control and Prevention 2017), posing a threat to the financial sustainability of the NHI in the long run. In 2018, the NHI had a shortfall of 177.8 billion won (US$158 million) (Yonhap News Agency 2019). It is expected to ‘remain in the red due to increased expenditures, with the cumulative surplus likely to shrink to about 11 trillion won after 2022’ (Yonhap News Agency 2019).

In August 2017, President Moon Jae-in announced a new ‘Mooncare’ plan, which had an objective of reducing the financial burden for citizens in need of medical care (Chu 2018) and focused on three major changes. First, the NHI will cover all forms of medical treatment except plastic surgery and cosmetic procedures (Yoon and Lee 2017). Coverage will be provided for an additional 3,800 medical services, raising the share of coverage from 63 percent to 70 percent (Chu 2018). Such coverage will require the government to spend 30.6 trillion won (USS28.1 billion) over the next five years (Chu 2018). Second, the cap for out-of-pocket expenses will be lowered so that low-income individuals would only have to pay a maximum of 1 million won per year for their medical care (Yoon and Lee 2017). Third, there will be an increase in emergency financial support for those in the lower 50 percent of the income bracket, providing them with medical coverage of a maximum of 20 million won in case of a major health crisis (Yoon and Lee 2017; Gibson n.d.). But the Mooncare plan is not welcomed by doctors and healthcare providers. More than 10,000 doctors protested in the streets and called for an overhaul of the new plan (Chu 2018). Doctors think that they will have fewer medical services to earn profit when Mooncare will cover all forms of medical treatment (Chu 2018) and face heavy financial losses unless the reform plan comes with a raise in medical service fees (Chu 2018; Lee, K. 2018). Healthcare providers argue that the reform plan would lead to overcrowding inemergency rooms (Lee, C. 2018). The reform plan will accelerate the transfer of patients to general hospitals (Lee et al. 2019: 50) so that shutdowns of smaller clinics and hospitals will be inevitable (Lee, K. 2018).

At present, many people raise concerns over the financial sustainability of the NHL Including uninsured services into insurance benefit packages and reducing the financial burden of the low-income population ‘may lead to moral hazards and increase instability and inefficiency in the system’ (Lee et al. 2019: 52). Financial sustainability of the NHI is also undermined by low economic growth and a shrinking workforce (Kang et al. 2012: S22). Low economic growth ‘threatens funding to NHI as the contribution rate is tied to the income of the beneficiaries’ (Kang et al. 2012: S22). A shrinking workforce will reduce the revenue of the NHI because the number of employees or the self-employed contributing to the NHI decreases. The proportion of the working-age population was 73.1 percent in 2015 and is projected to drop to 63.1 percent in 2030 (Eck 2018). To increase the NHI revenue, an increase in the premium rate becomes inevitable. It is estimated that the premium rate will have to increase by 3.2 percent by 2025 or the NHI system will be in deficit (Lee, K. 2018). But another way to ensure the financial sustainability of the NHI is to ensure the delivery of appropriate care to patients through an effective primary care system. Driving more appropriate care requires the government to make primary care the core financing priority and investments to scale up primary care a distinct component of NHI expenditures (Organization for Economic Co-operation and Development 2012: 21). The development of a stronger community-based primary care system can provide care at a lower cost and deliver better value for the money (Organization for Economic Co-operation and Development 2012: 21-2).

Conclusion

The ROK is an aged society and will become a super-aged society by 2026 (Kim and Jang 2017). The government needs to strengthen the primary care system and gatekeeping mechanism so that healthcare costs and hospitalizations can be reduced and the quality of care can be improved. It also needs to promote healthy ageing to reduce the burden of chronic illnesses, which can lower the financial pressure placed on the NHI system.