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Health Care Delivery and Health Policy in South Korea

Health Care Delivery and Health Policy in South Korea. for presentation at Canada-Korea Social Policy Symposium January, 2005 by Bong-min YANG, PhD Dean School of Public Health/Seoul National University. Content. Health care system Recent health care reforms

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Health Care Delivery and Health Policy in South Korea

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  1. Health Care Delivery and Health Policy in South Korea for presentation at Canada-Korea Social Policy Symposium January, 2005 by Bong-min YANG, PhD Dean School of Public Health/Seoul National University

  2. Content • Health care system • Recent health care reforms • Issue of health-industry policy • Remaining issues with health care delivery

  3. Health Care System • Social health insurance (SHI) • covers 96% of population-premium financed • rest 4% by Medicaid –tax financed • some expensive services not-covered • Dominant method of payment/reimbursement • fee-for-service • DRG under experimentation • Almost free choice of providers • weak referral channel

  4. NHI Service • First social security program of Korea introduced to benefit the whole population • Peoples’ access to health care significantly improved by NHI • Medical service utilization substantially increased • May have contributed to improved health status of the general population • It took only 13 years (1977-1989) from the first SHI program to universal coverage

  5. NHI Service Coverage • Limited: high user charges, about 44% of total treatment costs (OECD on Korea, 2003) • Due to limited insurance budget • low premium rate of about 4% of wage • Politically not easy to raise it • Consumers complain lack of transparency and financial leakages at the provider side • Government cannot expand service coverage with low rate

  6. Service Delivery: Dominant Private Sector • Private sector dominates • has been growing rapidly for the last 40 years • is the major provider • has much impact on performance of health care system • Service provision by private sector • share of private hospitals: >90% of all hospitals • share of private beds: 77% of all beds • clinics: all private • public health center: provide public health services and basic ambulatory services

  7. Characteristics of Korean System • Within the social health insurance framework • While some important services are not covered • Dominant profit-seeking private sector is • Reimbursed by FFS • Under the environment of weak referral channel

  8. Korean Health Care System • The current picture of HCS is not much by choice, but rather by chance • The government let the system go as it goes • Unlike other industrialized countries, there has not been much planning of public health and health care system at the government side • The only exception is the evolution of NHI

  9. Korean HCS • HCS is shaping up through the experience of NHI • The public are better aware of the health issues now • However, due to the fact that government manages public health insurance system along with the predominantly private delivery system, conflicts are being generated • b/n providers and consumers • b/n government and providers • b/n government and consumers

  10. In terms of resource requirement, Korean system can be viewed as an open-ended system

  11. Rising Health Care Costs • Health care costs are rising rapidly in Korea, due to • Characteristics of the system • Other factors common to many countries, such as • population aging • Innovative technologies • increasing health consciousness/patient expectation

  12. Percentage of NHE out of GDP : 1985-2001 Source: KIHASA, 2003

  13. Health Care Financing • NHE(national health exp)/GDP is over 6%, and keep rising • Households are major source of financing (i.e., weak public financing) • insurance exp./NHE is about 34% • government exp./NHE is 12% • direct HH payments/NHE is 54% • High user charge: in clinical services, rate of OOP expenditure is 43.8% • Raise the issue of equity in health care

  14. Two Major Recent Health Policy Reforms • Separation of prescribing and dispensing of drugs (SP: Separation Policy) • Consolidation of insurance funds • These two reforms can be viewed as continuum of efforts of shaping up Korean HCS

  15. Separation Policy • Separation of prescription and dispensing of drugs • Law passed in 1994 • Planned to be implemented in July 1999 • Actually implemented in July 2000

  16. Problems • Both physicians and pharmacists dispense any drug without prescription • misuse and excessive use of drugs • lack of safety monitoring in dispensing, no cross checking • unproductive competition strategy for the industry-spend a lot for product promotion, not for R&D

  17. Reform: Single Prescribing-dispensing System (Separation Policy: SP) • physicians prescribe • pharmacists dispense • separation is mandatory for all outpatient services (including hospitals)

  18. Interesting Features of SP • Driven by consumer organizations • Providers, pharmaceutical companies, government, and the parliament not sure if it would happen • Unprecedented physician strikes • Although further refinements required, physicians came back & consumers go along with the new rule • Separation policy is in place

  19. Implication of SP • Road to reduced overuse/misuse of drugs • DUR strengthened after the SP • Improved transparency in pharmaceutical transactions • Clearly defined role of physicians and pharmacists

  20. Consolidation of Insurance Funds • After a long political battle, all funds were merged into a single fund • Organizational merger took place in two phases; partial merger in 1998 and full merger in 2000 • Financial merger complete in 2004

  21. Problems • Up to 1998, low economies of scale with large number of small funds (374 funds, each fund covering less than 200,000 beneficiaries) • Inequity with different premium levels among funds was another reason for consolidation of funds

  22. Oct. 1998 – June 2000 (stage one) Before Oct. 1998 July 2000 (stage two) Regional HI (227 funds) NMIC (National Medical Insurance Corporation) NHIC (National Health Insurance Corporation) CS/SE HI (1 fund) Corporate HI (145 funds) Corporate HI (145 funds) Consolidation of Insurance Funds:Two Stages

  23. Features of Consolidation Process • Driven by labor unions & consumer organizations • Government bureaucrats were reluctant in the beginning • The FKI(Federation of Korean Industry) was against • The parliament were persuaded by the labor unions, passed the consolidation bill unanimously • However, the opposition party and one major labor union changed their position and became against the consolidation bill, in 1998

  24. Consolidation Process 2 • The opposition party agreed with the organizational merger, but not the financial merger, in 2001 • NGOs and labor unions kept pressing the opposition party • The opposition party finally agreed with the financial merger • The process of consolidation is complete, July 2004 • Political leadership in favor of the reform and NGO support were the two key factors in the reform process

  25. Change in Annual Administrative Costs before and after Consolidation (unit: one hundred million Korean Won) Source: NHIC internal report, 2004 Note: Administrative costs consist of personnel wages and general expenditures.

  26. Implication • Equity and efficiency gain • Monopsony power to be in balance with the provider monopoly – bilateral monopoly - room for negotiation • Witness the role of NHIC (& HIRA) enhanced in fee schedule and in benefit package negotiation

  27. A Recent Issue of Health-Industry Policy • Inviting profit-pursuing private foreign hospitals in the free-trade-zone for treatment of foreigners working in the zone • The bill prepared by MOFE • Issue is whether to allow Koreans seek treatment in those hospitals • MOFE argue that it should be allowed

  28. Health-Industry Policy • Civic societies (including labor unions) and DLP (Democratic Labor Party) oppose • argue that only foreigners can get treatment, not the Korean nationals • worry that • health care costs will rise further • stratification in health care utilization will be deepened among Koreans • the rich will ask for opting out of the NHI scheme • as the financial sustainability of NHI threatened, the social health insurance system could be in danger in the long-run

  29. Health-Industry Policy • It could trigger an opportunity of nationwide debate on the underlying philosophy of Korean health care system. • The result of the conflict may have a profound impact on future direction of Korean health policy in general

  30. Remaining Health Care Financing and Delivery Issues: Equity and Efficiency • Macro level • Weak referral channel • Strengthening public provider capacity • Inequity in insurance financing between the self-employed and the employment sector • Micro level • High level of OOP: weak income protection by NHI • Provision of unnecessary services: high-tech related services

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