The Seoul Metropolitan Police Agency's Major Crime Unit's Financial Crime Investigation Division conducted raids on five locations on the 9th, including Jaseng Hospital of Korean Medicine in Gangnam District and the Jaseng Medical Foundation. The investigation aims to look into allegations that the hospital indiscriminately prescribed herbal medicine to patients to pocket insurance payouts worth tens of billions of won.
Some say Korean medicine hospitals may be in a blind spot for insurance fraud. President Lee Jae-myung was also said to have mentioned such issues involving Korean medicine hospitals during a Financial Services Commission work briefing on the 15th.
◇ Police launch compulsory investigation into Jaseng Hospital of Korean Medicine insurance fraud allegations
Jaseng Hospital of Korean Medicine faces allegations that it unjustly collected hundreds of billions of won in auto insurance by prescribing large quantities of pre-made herbal medicine to traffic accident patients. Earlier, four insurers—Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance—filed a complaint against Jaseng Hospital of Korean Medicine in April. Directors of 21 Jaseng Hospital of Korean Medicine branches nationwide and the chair of the Jaseng Medical Foundation were reportedly named as the accused.
According to a Ministry of Land, Infrastructure and Transport notice, hospitals must prescribe herbal medicine individually tailored to a patient's illness and symptoms to claim auto insurance. The complainants believe Jaseng Hospital of Korean Medicine did not follow this. A Jaseng Hospital of Korean Medicine official said, "We compound herbal medicine based on relevant laws and medical standards," adding, "There were similar complaints and accusations in the past, but the case ended with no suspicion or a decision not to refer it."
Experts say Korean medicine hospitals are structurally vulnerable to auto insurance fraud. According to financial authorities and the insurance industry, for indemnity insurance, patients pay the expense at the hospital and then claim from the insurer. For auto insurance, traffic accident patients do not need to pay expenses at the hospital. The hospital sends treatment details to the Health Insurance Review & Assessment Service (HIRA), HIRA sends the review results to the insurer, and the insurer pays the hospital. An official at the Financial Supervisory Service said, "More than half of typical auto insurance claims involve Korean medicine hospitals."
◇ Insurance fraud uncovered totals 1 trillion… "costs passed on to the public"
Korean medicine hospitals have been covered under the auto insurance fee schedule since 1999. Since then, treating traffic accident patients has become one of their main sources of income. The problem is that some exploit this by repeatedly issuing excessive prescriptions or treatments, adversely affecting insurance finances.
In December 2023, an oriental medicine doctor who examined a traffic accident patient for only five seconds and then provided physical therapy but collected insurance payouts worth hundreds of thousands of won was fined 1 million won by the Seoul Central District Court's Criminal Division 20 single-judge panel for violating the Special Act on the Prevention of Insurance Fraud. An insurance industry official said, "As competition within the oriental medicine community has intensified recently, there seem to be cases of excessive insurance claims to recoup startup and other investment funds," adding, "From the patient's perspective as well, there are times they let their guard down and follow the hospital's prescriptions."
According to the Financial Services Commission, the amount of private insurance fraud uncovered last year was 1.1571 trillion won. Taking into account undetected fraud, the total damage is estimated at about 9 trillion won. An official at the Financial Services Commission said, "Leakage of insurance benefits leads to higher premiums, and the burden is passed directly on to the public."