The Organisation for Economic Co-operation and Development (OECD) said South Korea’s national health insurance is highly unique after a discussion with the Ministry of Economy and Finance last month. The OECD pointed out that the items and increasing rates of health insurance-related items, which require tax money, are controlled by governments and national assemblies in most of OECD’s advanced member countries. In contrast, South Korea’s health insurance is not subject to such external control.
In particular, the OECD viewed it problematic that the government budget is ‘automatically’ input when the South Korean government cannot monitor health insurance-related expenses and set their increase rates. Up to 20 percent of annual revenues made by health insurance, which is managed as the accounting of the National Health Insurance Service, has been coming from taxes since 2007. It was initially a provisional clause but continued to get extended until the end of last year when its supporting base disappeared due to differences in opinions between the ruling and opposition parties. However, 11 trillion won of the national budget is set to be provided for health insurance this year.
Despite such a large amount of tax support, the national health insurance’s size of expenses and insurance premium rates are decided by the Health Insurance Policy Deliberation Committee, an advisory organization for the Minister of Health and Welfare of South Korea. The share of those with a background in the medical and pharmaceutical industries or political background is dominant out of 25 members of the committee. It is a structure where politicians’ populist requests for medical welfare expansion and the interests of the medical and pharmaceutical industries can lead to increased expenses without filtering.
As health insurance-related expenses grow, it is becoming more likely to put a financial burden on the national budget. Its expenses last year amounted to 86.6 trillion won, which is eight times more than 22 years ago when the health insurance system was united. Introducing the ‘Moon Jae-in care’ in 2018 reduced patients’ out-of-pocket expenses for ultrasound and MRI exams. While the Health Insurance Policy Deliberation Committee keeps raising health insurance premium rates, it is not enough. The monthly health insurance premium paid by office workers rose 2,000 won this year, but a 1.4 trillion won deficit is still expected. With the current trend, the money accumulated for health insurance will run out in 2029, and the voice demanding the government’s budget will become stronger.
Out of eight social insurance in South Korea, national health insurance and long-term care insurance are the only ones that are managed under separate accounting. The national pension, public officials pension, military pension, private school pension, unemployment insurance, and industrial accident compensation insurance are subject to the review of budget authorities and the National Assembly through public finance forecasting, etc. South Korea will become a super-aged society, with over 20 percent of its population aged over 65 in 2026. The expenses of health insurance will quickly expand without control. An external control system should be implemented before it’s too late to ensure that the insurance premiums and taxes paid by people are not unnecessarily wasted.