The Korean Health Insurance System: Opportunities and Challenges

1. The Korean Health Insurance System:Opportunities and Challenges Minah Kang Kim, Ph.D. Ewha Womans University Republic of Korea

2. Overview of the Korean health system and the NHI scheme Major issues and challenges Recent reforms and new problems Remaining Issues and conclusion

3. Key Characteristics of Korean Health Care System • GDP share of health care expenditure: 5.6% in 2003 • 4 main sources of funding • Private sector dominance of medical care delivery • Payment/reimbursement methods – fee-for-service – DRG-based payment system on a voluntary basis • Almost free choice of providers

4. Health Status and Demographic Changes • Dramatic improvements in health outcomes • Life expectancy at birth: 76.9 years • Infant mortality rate: 6.2 in 1999 • Socio-demographic changes • Ageing society • Mortality and morbidity patterns have changed from communicable diseases to chronic and lifestyle-related diseases

5. Population Coverage Whole Population Employee Insured Self-Employed Insured Employees in Private Sector The Self-employed In Rural Areas The Self-employed In Urban Areas Government/Private School Employees

6. Brief History of NHI Jul 1977 • Compulsory Medical Insurance program was introduced for companies with more than 500 employees Jan 1981 • Companies with more than 100 employees was included in the NHI program. The 1st pilot program for self-employed medical insurance started in three rural areas. • The persons who were self-employed in rural area came to be covered. The employees from companies with 5 workers or more came to be covered compulsorily Jan 1988 Jul 1989 • The persons who were self-employed in urban area came to be covered. Medical Security for the whole population was accomplished. Oct 1998 • All self-employed insurance societies and KMIC were merged into the National Medical Insurance Corporation. Jul 2000 • All insurers were integrated into a single insurer, National Health Insurance Corporation. Jan 2002 • Special Act for Financial Stability of National Health Insurance was enacted. Jul 2003 • Separated health insurance funds between employee and self-employed insurance program was fully integrated in July 2003.

7. Population Coverage (Unit : 1,000 persons, 2004.12.31) Insurer The Insured No. of Persons Proportion Total population 48,901 Sub-total 47,371 96.9% National Health Insurance Program National Health Insurance Corporation (NHIC) Employee Insured Self-employed Insured 25,978 21,392 53.1% 43.7% Medical Aid Program Local Government Low Income Households 1,529 3.1%

8. Health Insurance Benefits

9. Overview of the Korean health system and the NHI scheme Major issues and challenges Recent reforms and new problems Remaining Issues and conclusion

10. Major Challenges and Issues • Strengthening health insurance protection • Addressing the increasing costs of the scheme • Ensuring the quality of health care services • Strengthening responsiveness of the system and ensuring the public trust

11. Strengthening Health Insurance Protection • Low contributions, low benefits, and high co-payments to ensure universal coverage at a low cost • With high user charges, protection of vulnerable populations, which is the primary reason for having mandatory SHI programs, can hardly be achieved

12. High Out-of-pocket Payment • High coinsurance rates for NHI services • Limited coverage of services • Most outpatient services and high probability inpatient services covered • Some low-probability high-cost services not covered by NHI • For some uncovered services, fees not controlled and patients pay totally OOP • Informal treatment charges

13. Co-payments on Services Covered by the NHI

14. Third-party and Out-of-pocket Payment, 2002 (Unit : %) Source: NHIC, 2004

15. 7.0 6.5 6.4 6.0 5.5 5.6 5.4 5.0 5.0 4.9 4.9 4.5 4.8 4.8 4.7 4.7 4.6 4.6 4.5 4.0 4.3 4.2 4.1 4.0 3.5 3.0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 National Health Expenditure as Percentage of GDP (1985 – 2001) Source: Korea Institute of Health and Social Affairs, 2003

16. Factors for Cost Increase • Common reasons • Unique reasons • Minimum regulation of supply-side provision • Fee-for-service payment methods • Low contribution rate  High utilization rates, both in- and out-patient sectors

17. Number of CT and MRI in Six Countries Source: OECD Health Data 2005

18. Rate of Caesarean Sections Source: OECD Reviews of Health Care Systems: Korea, 2003.

19. Contribution Rates

20. Ensuring the Quality of Health Care Services • Health Insurance Review Agency (HIRA) was established in 2000 • reviews claims, • evaluates the clinical appropriateness of health care services provided to patients, • conducts health care assessments to protect and improve patients' health and satisfaction • Minimal attention to patient safety issues • Nationwide Hospital Service Evaluation Program was launched in 2004

21. Strengthening Responsiveness of the System and Recovering Public Trust % saying strong agree, agree

22. Overview of the Korean health system and the NHI scheme Major issues and challenges Recent reforms and new problems Remaining Issues and conclusion

23. Recent Reforms • Integration reform for equity and efficiency • The Separation Reform for specialization and quality care • Expansion of insurance coverage • Efforts to strengthen the longer-term financial stability of the NHI • Preparation for a long-term care insurance scheme

24. Integration Reform for Equity and Efficiency • In July 2000, Korea merged all existing multiple autonomous insurance societies (employees and self-employed) into a single insurer • Goals • To increase equity in health financing • To improve the efficiency of the NHI administrative system • To expand risk pooling

25. The Separation Reform for Specialization and Quality Care • The functions of prescribing and dispensing drugs between doctors and pharmacists separated and specialized, (July 2000) • Goals • Appropriate use of drugs • Enhancement of patient rights for information and cross-checking system

26. Expansion of Benefit Coverage • Expansion of service coverage: CT Scan (1996), C-section, basic health screening, stent (2002), MRI (2005) , Meals (2006), private rooms (2007) • Expansion of covered days: 180 days to 365 days (2000) • Expansion plan for major illnesses (Sep, 2005) • Cancer, heart disease, cerebrovascular diseases • Patient co-payment 10% • Increased coverage of non-benefits • The number of diseases will reach 10 in 2008

27. Protection from High Co-payment • Purpose: To alleviate financial burden of people who pay high co-payments • Compensation for Excessive Co-Payment Program:Coverage of 50% of the co-payment for bills exceeding 1.2 million won (US$1,200) for a month period • Co-payment ceiling system as a safety-net • If an individual pays 3 million won (US$3,000) within 6 months, the insurer pays the rest • Effective from 2004.7.1

28. Efforts to Strengthen the Longer- Term Financial Stability of the NHI • a series of measures • Increase in government subsidy and co-payment, • more thorough detection mechanisms for providers’ frauds, • improvements in income assessment for the self-employed, • an annual increase in the current contribution rate until 2006

29. NHI Financial Status 20000 15000 (Unit: 1 Million $) Revenue 10000 Expenditure 5000 0 1990 1995 2000 2001 2002 2003 NHI Financial Status: 1990-2003 Source: National Health Insurance Corporation, 2005

30. DRG-based System • providers are paid a fixed amount based on the diagnosis regardless of the actual cost of treatment • Government launched a pilot program in 1997 • Covers seven diagnostic groups, currently implemented on a voluntary basis • effective in lowering medical expenses per patient • a concern for perverse incentives to engage in substitution of care (transfer services from inpatient to outpatient sector), under-provision of necessary services, or DRG creeping

31. Preparation for a Long-term Care Insurance Scheme • long-term care facilities with adequate and affordable care services are not yet sufficiently available • Government decided to introduce a new social insurance scheme for long-term care by 2008 and a pilot study is being implemented in several regions throughout the country • Issues • the adequacy and type of benefits • the establishment of a finance scheme • the relationship to the current NHI scheme • narrowing the gap between the future need for long-term care and the required personnel and facility capacity

32. Overview of the Korean health system and the NHI scheme Major issues and challenges Recent reforms and new problems Remaining Issues and conclusion

33. Remaining Issues • Attaining the public’s trust • Strengthen the mechanism of quality control • Lower the institutional and geographical barriers • Channel sufficient resources for outcomes research and health promotion.