"Insurance fraud at long-term care hospitals is hard to prove because brokers quietly recruit patients by word of mouth, and the recruitment fees are often paid and received in cash or local gift certificates. On top of that, the local medical community has a tight human network, so the chances of internal whistleblowing are not high. As the scale and tactics of recruitment become increasingly sophisticated, the financial authorities and health authorities need to actively crack down, but there is a shortcoming in the response because they say it is outside their remit."
An employee, identified as A, at a major non-life insurer in Korea said this in an interview with ChosunBiz on the 17th. According to A, insurance fraud begins at the broker stage, which recruits patients to be admitted to long-term care hospitals. Brokers sometimes register and operate as staff of a specific long-term care hospital, but they also move independently without any affiliation.
They agree with the long-term care hospital to receive a recruitment fee for every patient they bring in. The fee varies depending on whether the recruited patient has indemnity health insurance: 700,000 won per case for those with indemnity policies, and 300,000 won for medical aid beneficiaries without indemnity coverage. That is because hospitals can secure relatively higher revenue when patients with indemnity insurance are admitted. Under fourth-generation indemnity plans, the typical coverage limit for non-reimbursable treatments is around 50 million won.
Afterward, the broker gets admitted to a multi-bed room at a long-term care hospital and quietly approaches nearby patients, urging them to transfer to a hospital that offers a higher payback. In some cases, they are known to promise a high payback rate of 30% to 40%. Payback is the act of returning a certain percentage of the treatment cost paid by the patient, which is illegal under the Medical Service Act. A broker who succeeds in recruitment also pockets a fee from the patient they brought in.
Long-term care hospitals tailor high-priced treatment programs to match inpatients' indemnity coverage limits. When the benefit cap for a given disease code is exhausted, they change the diagnosis to another condition, such as lower back pain, and file another claim.
There are also many reported cases of patients admitted for a specific illness receiving cosmetic procedures unrelated to treatment purposes, such as skin lifting. Long-term care hospitals are said to keep proposing measures such as raising the payback rate to prevent admitted patients from moving to other hospitals.
To boost revenue, long-term care hospitals recruit more brokers while offering patients higher levels of payback. As the embezzlement of insurance payouts becomes a key revenue source for local long-term care hospitals, competition to attract patients is intensifying.
A said, "In the past, one patient would introduce one or two acquaintances, but recently the scale of recruitment has grown rapidly. Among the cases uncovered last year, there was one recruiter who brought in more than 360 patients in a year."
The scale of fraud keeps growing, but it is not easy for insurers to detect it. That is because recruitment fees or paybacks often change hands in cash or local gift certificates, leaving no objective evidence. Activating internal tips is also realistically difficult. The local medical community has a tight human network and reputation matters, making it structurally hard for hospital staff to actively raise issues even if they recognize signs of insurance fraud.
Related agencies with oversight authority are fragmented by institution, making coordinated responses difficult. Under current law, the Ministry of Health and Welfare has the authority to investigate detailed data such as medical records and attending medical staff information held by long-term care hospitals. For this reason, even if an insurer reports a suspicious case to the Financial Supervisory Service, further investigation is hard to proceed smoothly without the ministry's help. It is said that even when the Financial Supervisory Service or insurers ask the ministry to investigate, the ministry often does not step in if the matter concerns indemnity insurance unrelated to improper National Health Insurance benefits.
A said, "If you report to the police without securing sufficient evidence through cooperation with related agencies, the investigation does not proceed properly. Without a properly functioning cooperative system between the financial authorities and health authorities, it will be difficult to uncover long-term care hospital insurance fraud." A added, "While interagency cooperation remains loose, the scale of long-term care hospital insurance fraud is gradually growing."