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
Government/Private School Employees
The Self-employed In Urban Areas
The Self-employed In Rural Areas
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)
Proportion
No. of Persons
The Insured
Insurer
48,901
Total population
96.9
47,371
Sub-total
National Health Insurance Program
53.1 43.7
25,978 21,392
Employee Insured Self-employed Insured
National Health Insurance Corporation (NHIC)
3.1
1,529
Low Income Households
Local Government
Medical Aid Program
8
Health Insurance Benefits
Health Insurance Benefits Health Insurance Benefits Recipients
Benefits in kind Health Care Benefits The Insured, Dependents
Benefits in kind Health Check up The Insured, Dependents
Benefits in cash Refunding Allowance for Health Care The Insured, Dependents
Benefits in cash Funeral Expenses Person who held a funeral ceremony
Benefits in cash Compensation for Excessive Co-Payment The Insured, Dependents
Benefits in cash Appliance Expenses for the Disabled The Insured and Dependents as the disabled registered in accordance with the Welfare Act for the Disabled
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
Health care service facility Co-payment
Inpatient 20 of total treatment cost
Outpatient Tertiary care hospital General hospital Hospital Clinic Pharmacy Per-visit consultation fee 50 of treatment cost 50 of (treatment cost Per-visit consultation fee) 40 of (treatment cost Per-visit consultation fee) 30 of treatment cost (3,000 won if total cost lt15,000 won) Prescription gt15,000 won 3,500 won lt15,000 won 3,000 won w/o prescription gt4,000 won 40 lt4,000 won 1,400 2,000 won
14
Third-party and Out-of-pocket Payment, 2002
(Unit )
Third-party payment Out-of-pocket Out-of-pocket Out-of-pocket
Third-party payment Total Co-payment Non-benefit
In-patient 54.9 45.1 16.4 28.8
Out-patient 56.9 43.1 26.0 17.1
Pharmacy 73.0 27.0 25.0 2.0
Source NHIC, 2004
15
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
(Unit Number/1 million) Korea Canada Germany USA Japan France
(2002) (2004) (2002) (2002) (2002) (2003)
CT 31.9 10.6 14.2 13.1 92.6 8.4
MRI 9.0 4.7 6.0 8.6 35.3 2.7
Source OECD Health Data 2005
18
Rate of Caesarean Sections
Country Rate
Korea 43.0
Australia 21.2
Belgium 15.3
Denmark 5.0
Finland 15.6
Hungary 21.4
Italy 31.9
Portugal 21.3
Sweden 1.9
Source OECD Reviews of Health Care Systems
Korea, 2003.
19
Contribution Rates
country Germany (2002) Japan (2002) France (2003) Belgium (2002) Taiwan (2002) Korea (2005)
Contribution rate 14.0 (6.75) 8.5 (4.25) 13.6 (0.75) 7.4 (3.55) 9.1 (4.55) 4.3 (2.16)
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 (US1,200) for a month
  period
• Co-payment ceiling system as a safety-net
• If an individual pays 3 million won (US3,000)
  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 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 publics trust
• Strengthen the mechanism of quality control
• Lower the institutional and geographical barriers
  
• Channel sufficient resources for outcomes
  research and health promotion.