The National Health Insurance system, a social safety net to ease the public's medical expenses, was introduced in 1977. It then gradually expanded eligibility and completed a universal health insurance framework in 1989. Starting with hospital room charges, the scope of coverage has continued to expand to MRI and ultrasound exams. However, as coverage expanded, the fiscal burden ballooned, and debates over fairness surrounding benefit criteria have persisted. In this context, President Lee Jae-myung recently said, "Hair loss is a matter of survival," ordering a review to expand insurance coverage for hair-loss treatment, reigniting the debate. We examine the main issues around the National Health Insurance and the pros and cons of expanding coverage. [Editor's note]
As the super-aging trend accelerates, warning signs are growing for the finances of the National Health Insurance. Experts say in unison, "If the expenditure structure is not fixed, the National Health Insurance will soon become unsustainable."
On the ground, however, the situation is the opposite of these concerns. MRI and CT scans of questionable necessity are repeated, and cases of recommending excessive treatment even to patients nearing death continue. Observers question whether the insurance finances can hold if this continues.
According to the Korea Institute for Health and Social Affairs (KIHASA) report on the 5th, "Building an integrated model for long-term fiscal projections of social security," by 2050 total expenditure of the National Health Insurance will be 296.4 trillion won and total revenue will be 251.8 trillion won, projecting a 44.6 trillion won deficit even if premiums are raised to the legal maximum of 8%.
Hong Seok-cheol, head of the Seoul National University Center for Economic and Financial Research, said, "This year's insurance premium rate of 7.19% will rise to 8% by 2030," adding, "You could amend the law to raise premiums, but backlash from younger generations is expected. A realistic solution is expenditure efficiency."
◇ "Once benefits apply, you can't go back"... must judge strictly based on medical necessity
In this situation, the Lee Jae-myung administration is discussing applying coverage even to hair-loss treatments. Korea has about 10 million people with hair loss. Even if only half become eligible for benefits, it is estimated that around 1 trillion won a year would leak out. Under Moon Jae-in's care initiative, unnecessary benefits such as for MRI and ultrasound have already expanded, putting insurance expenditure out of control.
Jung Hyeong-seon, a professor in the Department of Health Administration at Yonsei University, said, "Benefits must be judged strictly based on medical necessity. If you make selective care like hair loss eligible for benefits, use will surge and the fiscal burden will snowball."
Once something is incorporated as a benefit, it is hard to reverse. An official at the Health Insurance Review & Assessment Service (HIRA) said flatly, "Cases of canceling benefits are rare, and there is no separate procedure." For hair-loss treatments, the official said, "If the Ministery of Food and Drug Safety cancels a product's approval, it can be deleted from the benefits list."
◇ "Overhaul the fee-for-service scheme to stop overtreatment"
The fundamental problem in Korea's medical cost structure is the fee-for-service system. Because hospitals get paid more the more tests and treatments they perform, overtreatment is rampant.
Hong said, "Patients' out-of-pocket burden is small, and physicians recommend additional tests, creating the illusion of a 'win-win,' but in reality the insurance finances are leaking like a ship with a hole," proposing expansion of diagnosis-related group payments or adoption of a global budget as alternatives.
A global budget is a system that sets a fixed amount each year and spends within that limit. It has been adopted in Europe and elsewhere to manage health insurance finances.
Oh Ju-hwan, a professor at Seoul National University College of Medicine, said, "One reason physicians recommend excessive testing is fear of lawsuits and an entrenched medical culture," adding, "Today's medical culture, in which patients feel anxious if tests are not done, was formed by a structure in which tests were a primary revenue source for a long time."
Oh said, "Korea now needs to experiment with 'value-based healthcare,' which evaluates and rewards overall health outcomes, cost management, patient experience, provider service quality, and improvements in regional and class disparities together."
Citing the United States' Medicare Shared Savings Program (MSSP), he noted that Korea needs structural experiments that can achieve care quality without expense waste. Since the U.S. introduced the program in 2011, national health care expenditure as a share of GDP has remained in the 16% range without further increase.
The practice of recommending futile chemotherapy or MRI and CT scans for terminal cancer patients is a representative case of waste in 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 have public insurance pay for care that does not help patients. We should reduce life-prolonging treatment and invest resources in strengthening hospice."
◇ Curbing drug prices is essential… set up a separate fund for high-priced rare medicines
Expanding the use of generics is also necessary. Currently, the insurance covers about 70% of drug prices. According to the Korean Pharmaceutical Association's "Research on developing a model for prescribing by ingredient name," switching originals to generics could save about 7.9 trillion won annually, including 5.53 trillion won for the insurance finances.
The government is reviewing prescribing by ingredient name, but if the practice of indiscriminately expanding benefits continues, a fiscal crisis will be unavoidable.
Like Australia and the United Kingdom, a plan is being proposed to create a separate fund for high-priced rare medicines and manage it separately from the insurance.
Jung Ji-hyang, a neurologist at Ewha Womans University Seoul Hospital and a director of the Korean Dementia Association, emphasized, "Making new drugs eligible for benefits is necessary for patients, but it is hard to apply indiscriminately."