Kim Jong-dae, the president of the National Health Insurance Service (NHIS), is now charged 

with the task of innovating the National Health Insurance Program. (photos: NHIS)

 Thirty-six years have passed since the National Health Insurance (NHI) system was introduced in 1977. The system, expanded with universal coverage 12 years later, has now earned a reputation for its remarkable achievements — the nation’s higher life expectancy and lower infant mortality rate than the average of the OECD countries as well Koreans’ higher accessibility to healthcare service and the delivery of quality medical services, closer to those of advanced countries, at a lower cost.

Kim Jong-dae, the president of the National Health Insurance Service (NHIS), is dubbed “Mr. Health Insurance” or “the living witness of national health insurance,” as he has been with the NHI field for almost of his career in public service. Kim has been credited with leading roles in contributions to the development of the NHI, ranging from the implementation of a pilot program to its introduction, while holding such key positions as the director of insurance, the director general of medical insurance and the director general of national pension at the Welfare Ministry, the predecessor of the Ministry of Health and Welfare. He continued to become an outspoken voice calling for health insurance reforms after quitting public service.

This time, when coming back to the health insurance field, taking the helm at the NHIS in 2011, Kim is now charged with the task of innovating the National Health Insurance Program. 

He recalled that the national healthcare system once suffered a kind of default in which the nation used up a reserve fund and rested on bank borrowings to keep things going under a deficit balance. Learning from the past, the NHIS president is now advocating for changing the mold of the national healthcare system. NHIS has worked out and submitted to the government a practical plan for health welfare to call for a shift in the national health insurance paradigm, focusing on the revamping of the way the insured’s health insurance premiums are imposed. 

Kim stressed that now is the last chance for ensuring the sustainability of the NHI system, given the current situation in which it is logging a short-term profit and the working aged population (aged between 15 and less than 65) is on the rise. He warned, “If the NHI system collapses and people are given no health insurance benefits, our society will be faced with tremendous chaos, and such a worst case might come upon us.”

KHIS's corporate identity.

The problem is that the population in working ages, tallied at 36.71 million people in 2013, is projected to peak at 37.04 million people in 2016 before plunging to 21 million people in 2060.

“Given this demographic structure, we now have to reform the national health insurance system, and if the low-birth rate and aging population trends continue, the portion of the medical costs for the elderly is forecast to soar from the current 34.4 percent to 46 percent in 2020.”

Kim asked, “When it comes to medical costs for treating chronic diseases, which are on the surge at a time when insurance premiums cannot be raised, how can the woes be unraveled?”

It is the first time that the NHIS has come out to reform the health insurance system. After reviewing the NHIS’s reform version, the Ministry of Health and Welfare plans to come up with a package of final health insurance reform plans by the end of this year. 

Strengths of the NHI

Korea’s NHI is closer to a social health insurance system, which is generated by the insurer with contributions from the insured as the source of financing, rather than a national health service system, directly operated by the government with taxes. The Korean system has achieved remarkable achievements — it took only 12 years to achieve universal coverage, seen as an unprecedentedly short period of time to do so. 

The NHI can be viewed as a tool for “redistributing” health as well as income in which the health insurer offers a helping hand to the sick and the more people earn, the higher the premiums they pay, Kim said. 

Among the Korean system’s major strengths are maximizing the range of the risk pool at the national level by achieving universal coverage, which eliminates any boundaries of geographical area or occupation as well as the top level of cost-effectiveness. In 2012, the contribution rate of the Korean system was only 5.8 percent, lower than Japan’s 9.48 percent, Germany 15.5 percent, and France’s 13.85 percent.

Even though Koreans pay a lower level of contributions than other countries, the Korean system offers a relatively higher level of health care compared to other OECD countries. Koreans’ life expectancy has risen to 80.7 years, higher than the OECD average of 79.8 years, and their infant mortality rate declined to 3.2 deaths per 1,000 births, lower than the OECD average of 4.3 deaths. 

Koreans also enjoy a higher level of accessibility to healthcare services. The frequency of outpatients’ medical services was 12.9 times per year, almost twice the average of the OECD countries.

The Korean healthcare system, however, has exposed some loopholes: the insured’s benefit rate is some 62 percent, low when compared to the 80 percent guarantee level.

Another problem plaguing the Korean system is the outdated, unequal system of imposing health insurance premiums based on the existence of properties and automobiles, age and sex being kept intact as it was at the early stage of its introduction, rather than solely on people’s incomes.

The NHI has an inefficient medical service delivery system. The Big Five hospitals in Seoul, including the Seoul National University Hospital, are flooded with patients, whereas their counterparts in rural areas are marginalized with fewer patients. The Big Five hospitals saw their revenues surge 3.3 times between 2001 and 2011, signaling the big gap between the rich and the poor. Other hospitals witnessed a two-fold growth and clinic-level ones saw a 1.3-fold jump. 

It is plagued with the worsening of the leakage of health insurance finances due to a lack of means to prevent loopholes. Korean medical institutions tend not to check a patient’s identity.

A major cause of exacerbating the financial soundness of the NHI is Korea’s trend toward a low-birth rate and an aging population, he said. The Korean society’s aging population index stood at a mere 10 percent in 1978 when the NHI was introduced, but the figure soared to 50 percent in 2006 and 73 percent in 2011. The type of diseases inflicting the insured elderly has been changing into a chronic disease-oriented pattern. With the rising life expectancy, the elderly suffer from costly chronic diseases such as hypertension, diabetes, and obesity, which require lifetime treatment. The medical costs for covering patients aged 65 or more are 4.5 times higher than those of the people aged less than 65.

NHIS President Kim Jong-dae

Financial sustainability of the NHIS

Kim said he diagnosed the current situation of the national healthcare system as a crisis from the moment when he took office in November 2011. 

The NHIS was deluged with 77.6 million petitions from the insured, of which 82 percent were related to the levying of health insurance premiums. 

Kim said the NHIS came up with ways to revamp the imposing health insurance premiums based on income levels in August 2012. The rationale behind the income-based premium collection system is the fact that the National Tax Service and other related authorities have data on some 95 percent of people’s real incomes, a far cry from the mere 10 percent level at the time of the introduction of the NHIS. 

Kim noted that the NHIS should make a shift in its insurance benefit paradigm, given the chronic disease-oriented treatment structure combined with the rising medical costs for the elderly. 

One of the national policy agendas in the health and medical field is the establishment of a health and medical service system designed to enhance the quality of healthcare services. In this regard, he said, the NHIS has begun to work on a plan to offer personalized lifetime healthcare services, using the Health Information Database of the whole population — which was constructed based on the NHIS’s big data — to help prevent diseases. This move will not only enhance people’s health, but also greatly contribute to saving the medical expenditures of the NHIS, he said.