Korea to push for ‘fundamental shifts’ in health insurance for sustainability

South Korea’s Ministry of Health and Welfare on Sunday rolled out a five-year plan to push for “fundamental shifts” in the national health insurance system to ensure sustainability in the face of a healthcare supply crisis and rapid population downsizing.

The 2024-28 comprehensive plan aims at better compensating essential but undervalued medical services to salvage the dire shortage of medical professionals as well as target the issues of overtreatment and overspending in the national healthcare system.

The ministry emphasized the urgent need for reforming the existing national health insurance system as it has further aggravated structural issues, including regional healthcare disparities, shortages in essential medical services, and unwarranted surges in national healthcare use.

“Through this plan, we must firmly guarantee the provision of essential medical services and normalize medical supply by adjusting prices reasonably,” Second Vice Minister of Health and Welfare Park Min-soo was quoted as saying in a statement.

Park underscored that the ministry will “inject more than 10 trillion won ($7.47 billion) in concentrated support over five years into areas crucial to the life and health of the people but are not adequately supplied.”

The necessary medical fields that were incompatible with the fee-for-service system, or FFS, will benefit from the public policy fee scheme. Under the measure, pediatrics, critical care, mental illnesses and infectious diseases sectors will receive payments depending on the urgency of medical procedures and the difficulties and risks of the services not reflected in the FFS system.

Currently, healthcare providers eligible for FFS are paid a fee by the National Health Insurance Service for each service rendered, often failing to align financial incentives with patient outcomes, the ministry explained.

Another initiative unveiled by the ministry to enhance essential services is the alternative payment model that gives added incentive payments to provide high-quality and cost-efficient care. It intends to remove pay disparities through several pilot projects.

For example, the ministry will pilot post-compensation of public specialized medical centers for children until 2025 for the pediatric sector, which will compensate for the operating loss of each institution based on the performance goals achieved. For the critical medical care sector, the ministry will reimburse institutions based on their performance evaluations, including reducing the number of outpatient visits and improving medical quality so that related institutions can put quality over quantity in treatment.

To bridge the health equity gap in non-metropolitan areas, the ministry aims to establish a robust healthcare delivery system that can provide necessary medical care when and where patients need it.

Under the plan, the ministry will designate each region’s national university hospitals as “responsible medical institutions” so that they can beef up cooperation between local medical institutes to remove the growing problem of shrinking access in underserved areas.

In addition, the ministry will expand the scope of out-of-pocket maximums, strengthen support for disaster-related medical expenses and improve the healthcare safety net for vulnerable populations. It added that it would continue alleviating the medication cost burden that cancer and rare diseases impose on patients and come up with measures to cut healthcare fees by expanding the integrated nursing and care service program.

However, to efficiently manage finances, the ministry will simultaneously take measures to prevent overtreatment and overspending in the national health insurance system.

To prevent unfavorable out-of-pocket choices for patients, the ministry will provide sufficient information on non-reimbursable medical treatments.

The ministry aims to implement a fair and equitable approach to incentivize responsible use of the national health insurance system. Notably, South Korea’s average annual outpatient visits per person stood at 15.7 in 2021, a figure three times higher than the OECD average of 5.9 visits.

In this initiative, individuals who have demonstrated a tendency to overuse the system will receive adjusted rates, while those who underutilize it will be eligible for reimbursements.

For example, individuals surpassing 365 outpatient visits annually will see the self-payment rate raised to 90 percent.

In cases of health insurance subscribers using few medical services, the ministry will pay 10 percent of the insurance premium paid in the previous year in vouchers.

The ministry will also launch a notification service that provides information on each individual’s healthcare use and medical expenditure spent every three months.