UHC of South Korea: Reforms Taken and Further Issues Faced

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1 *For IMF Forum UHC of South Korea: Reforms Taken and Further Issues Faced 2016 IMF Tokyo Fiscal Forum Bong-min YANG, PhD Professor, Seoul National University South Korea

2 UHC It is a promising means to achieving ultimate goals of any HCS: Better health outcome Financial protection (key to reduced poverty) Reaching the poor: equity (social development/stability) However, achieving UHC never the end of the road Additional challenges come after UHC: equity and efficiency issues, plus financial scarcity and system sustainability

3 Case of South Korea

4 Key aspects of K-NHI Whole population covered, compulsory participation 97% by NHI (National Health Insurance) 3% covered by tax financed MedicalCare Single payer system (2000), one risk pool Transition from the multiple fund system ( ) Solidarity principle agreed and pursued Uniform benefit package for all Private providers dominant in the supply sector FFS (Fee-for-service), with recent partial introduction of K-DRG(2013)

5 Achievements Coverage and Health Protection Improved access to health care by UHC Lowered financial barrier Accompanied by income growth Aided by enhanced awareness on better health Utilization (inpatient, outpatient, traditional medicine) per person increased significantly over the years After all, an average Korean now lives Longer, and In better health conditions

6 % Source: Yang BM & Lee TJ, 2010 Poverty impact of catastrophic health expenditure 8.00% Exp. population coverage Expansion of service coverage 7.00% 6.00% 5.00% 4.00% NHI 3.00% 2.00% 1.00% 0.00% year before health payment(%)(hb) after health payment(%)(ha) Difference(ha-hb)

7 Any issues? Korean UHC faced challenges in terms of efficiency and equity

8 Reforms taken for efficiency and equity Transition from multiple fund system to a single payer system Separation of dispensing from prescription To reduce over-prescription & overuse, misuse K-DRG (July 2013) For inpatients of 7 DRGs Its impact yet to be assessed (creeping and cost-shifting) HTA For NMTs (new medical technologies), CE (cost-effective) measures incorporated in reimbursement decisions EMP (equal maximum price) of all generics, April 2012 DPL (dual punishment legislation, 2011)

9 Issues remaining: PPM, Coverage and Service Delivery FFS as PPM (provide payment method), open ended in resource use Service delivery mostly by dominant private sector, under fragmented delivery system Continued adoption of non-covered high cost services by private providers (private sector, > 90% of hospitals, 100% clinics, except small numbered public health centers) Uniform benefit package, but non-comprehensive service coverage OOP (out-of-pocket) (around 38% on average) still high Equity concern with high OOP Growing private health insurance: estimate of 90% households (KIHASA, 2015)

10 Challenge: Health System Dynamics 1) FFS 2) Private providers (profit pursuing) go beyond NHI benefit package 3) Fragmented (& privatized) delivery system System dynamics: FFS and dominant private sector reinforces 1), 2) and 3), i.e., market economy in market-failed HC 4) PP (public policy) hardly seen The four( ) all together places heavy and increasing financial burden on HHs (households) over time

11 Escalating costs (incl. weakening gov t financing) Government financial subsidy for NHI: proportion declining over the years From about 40% in 1989 to 13.6% in 2014 Dynamics of FFS, private sector, fragmented delivery system High OOP (38%, 2015), balance billing allowed Annual NHI exp. growth rate (nominal)11.65% ( ) HH contribution rate increase from 3.63%(2002) to 6.04%(2014)

12 Source: OECD Health Data, 2009/2010

13 Source: Health at a Glance 2015, p.165

14 Future of Korean UHC?

15 A Tough Challenge Financial sustainability(by aging, fertility, and system design) under challenge Speed of expenditure growth, during the 20 years very high By the way HCS is designed (private sector, FFS, fragmented delivery system) Under rapid aging, expanded coverage of LCI (longterm care) (political commitment), greater consumer expectation on better quality of care (however, nonincreasing WTP (willingness to pay) (Possibly) weakened economic strength in the years coming

16 Source: Health at a Glance 2015, p.209 Aging

17 Low fertility rate Source: OECD Factbook 2014, p17

18 Health care residual expenditure growth by country ( ) Source: OECD Economic Policy Papers No:06 Public spending on health and long-term care: a new set of projections (2013)

19 Macro econ consequence of rising health costs How about 2030, if not now? On labor and employment Industry Global competitiveness of Korean products HH: catastrophic expenditure, linked possibly to poverty increase Econ recession (domestic and global)?

20 Any Solution? Not much can be done on aging, fertility size of private health sector But efforts to be made on changing PPM Delivery system Role of government as PP maker (regulator, system designer, monitoring and managing, leader for public s health)

21 To avoid heavy societal costs, Now is the time for Korean HCS to make changes for sustainable future!