The national health insurance system, a social safety net to ease the burden of medical costs, was introduced in 1977. It then gradually expanded coverage to complete universal health insurance in 1989. Starting with hospital room fees, the scope of benefits steadily widened to MRI and ultrasound exams. But as coverage expanded, the fiscal burden ballooned like a snowball, and debates over fairness around benefit criteria have never ceased. Against this backdrop, President Lee Jae-myung recently said "hair loss is a matter of survival" and ordered a review of expanding health insurance coverage for hair loss treatment, reigniting the debate. We examine the major issues surrounding the national health insurance system and the pros and cons of strengthening coverage. [Editor's note]
As the pace of super-aging accelerates, warning bells are growing louder for the health insurance finances. Experts said, "If the expenditure structure is not fixed, national health insurance will soon become unsustainable."
On the ground, however, the picture is the opposite of the concern. MRI and CT scans of questionable necessity are repeated, and cases of recommending excessive care even to patients nearing death continue. Observers say that if this persists, it is doubtful whether health insurance finances can hold up.
According to the Korea Institute for Health and Social Affairs (KIHASA) report "Building an integrated model for long-term fiscal projections of social security" on the 5th, total expenditure of national health insurance in 2050 will be 296.4 trillion won and total revenue will be 251.8 trillion won, meaning a deficit of 44.6 trillion won is expected even if premiums are raised to the legal maximum of 8%.
Hong Seok-cheol, head of the Seoul National University Center for Finance and Economics, said, "This year's insurance contribution rate of 7.19% will rise to 8% by 2030," adding, "There is a way to amend the law to raise premiums, but backlash from younger generations is expected. The practical solution is expenditure efficiency."
◇ "Once a benefit is applied, you can't roll it back"... Necessity of care must be judged strictly
Amid this, the Lee Jae-myung administration is discussing applying insurance even to hair loss treatments. Korea's hair loss population alone is about 10 million. Even if only half become eligible for benefits, an estimated around 1 trillion won a year would leak out. With Moon Jae-in Care having already expanded unnecessary benefits such as MRI and ultrasound, health insurance expenditure is out of control.
Chung Hyung-sun, a professor in the Department of Health Administration at Yonsei University, said, "Benefits must be judged strictly based on medical necessity. If selective care like hair loss treatment is covered, use will surge and the fiscal burden will snowball."
Once something is included as a benefit, it is hard even to reverse it. An official at the Health Insurance Review & Assessment Service (HIRA) said, "Cases of canceling benefits are rare, and there is no separate procedure," speaking firmly. As for hair loss treatments, the official said, "If the Ministery of Food and Drug Safety revokes product approval, they can be removed from the benefit list."
◇ "Overhaul the fee-for-service system to stop overtreatment"
The fundamental problem in Korea's medical cost structure is fee-for-service. Because hospitals are paid more the more tests and treatments they provide, overtreatment is rampant.
Hong said, "Patients have low out-of-pocket costs, and physicians recommend additional tests, which creates the illusion of a 'win-win,' but in reality, health insurance finances are leaking like a ship with holes," proposing expansion of diagnosis-related group payments or introduction of a global budget as alternatives.
A global budget sets a fixed amount each year and spends within that limit. It has been introduced in Europe and elsewhere to manage health insurance finances.
Oh Joo-hwan, a professor at Seoul National University College of Medicine, said, "One reason physicians recommend excessive testing is litigation concerns and entrenched medical culture," adding, "Today's medical culture, where patients feel anxious if tests are not done, was created by a structure in which testing long served as the main revenue source."
Oh said, "Korea now needs to experiment with 'value-based healthcare,' which evaluates and rewards overall population health, medical cost management, patient experience, provider service quality, and improvements in regional and class disparities together."
Citing the U.S. Medicare Shared Savings Program (MSSP) as an example, he noted the need to test structures that can achieve care quality without expense waste. In the United States, since the program was introduced in 2011, national health care expenditure as a share of GDP has no longer increased from the 16% range.
The practice of recommending futile chemotherapy or MRI and CT scans to terminal cancer patients is a representative example of waste in health insurance finances.
Lee Sang-i, a professor at Jeju National University, said, "Overseas, half of cancer patients choose hospice. Expanding hospice helps both cost savings and a dignified life."
Yoo Shin-hye, a professor at Seoul National University Hospital, also said, "It is not justified to saddle public insurance with care that does not help patients. We should reduce life-prolonging treatment and invest resources in strengthening hospice."
◇ Reining in drug prices is essential… Set up a separate fund for high-priced rare drugs
Wider use of generics is also needed. Currently, health insurance covers about 70% of drug prices. According to the Korean Pharmaceutical Association's "Development of an international nonproprietary name prescribing model" study, switching originals to generics could save about 7.9 trillion won a year, including 5.53 trillion won for health insurance finances.
The government is reviewing INN prescribing, but if the practice of indiscriminately expanding benefits continues, a fiscal crisis will be unavoidable.
Like Australia or the United Kingdom, a plan is also being proposed to create a separate fund for high-priced rare drugs and manage it separately from health insurance.
Jung Ji-hyang, a neurologist at Ewha Womans University Seoul Hospital and a board member of the Korean Dementia Association, emphasized, "While providing benefits for new drugs is necessary for patients, it is hard to apply them indiscriminately."