South Korea Healthcare

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South Korea Healthcare

Research Strategy:

In this research, we covered a high-level overview of the healthcare system in South Korea. To illustrate, we used the help of organograms and identified key components (players) involved in the mode of healthcare delivery. We outlined an overview of the Insurance infrastructure including the types of packages, benefits involved, co-payment options, and reimbursement procedures. Further, we covered existing challenges and solutions in place regarding access to high cost drugs in the market.

[I] - South Korean Healthcare Infrastructure

  • The health security system is based on two major components: mandatory social health insurance and medical aid.
  • Key Characteristics of the Health Insurance System in South Korea:
    • (i). Insurance Subscription: It is obligatory for everyone to subscribe to the health insurance plan and pay insurance premiums.
    • (ii). Insurance Premiums: The national health insurance is operated by the social insurance method, which aims to solve medical expenses problems based on social solidarity, and income level. Whereas, the private insurance premiums are calculated based on the scope of coverage and the disease risk.
    • (iii). Equal Guarantee: Private insurance is guaranteed based on premium level and contract details; whereas, national health insurance is a social insurance policy and is paid equally in accordance with laws and regulations regardless of the premium-level burden.
  • The MoHW ministry oversees the National Health Insurance System (NHIS) and its two fundamental institutions: (i) National Health Insurance Service (NHIS), and the (ii) Health Insurance Review & Assessment Service (HIRA).
  • With respect to the delivery of healthcare in South Korea, the Health Security System comprises of five components: (i) NHIS, (ii) Ministry of Health and Welfare, (iii) HIRA, (iv) Healthcare institutions, and the (v) insured. The complex relationship between the five components is represented in the figure below.
  • Role of government authorities in relation to National Health Insurance:
    • MOHW: Responsible for making policy decisions regarding the national health insurance system. Determines the insurance contribution rates, imposition of insurance contributions, the scope of healthcare benefits. Approves budget and regulations of the NHIS.
    • NHIS: Insurer of National Health Insurance System and responsibilities include the following (i) management of insurance benefits, (ii) implementation of national health check-ups, (iii) payment to medical institutions, (iv) determination of drug prices, (v) imposition/collection of insurance contributions.
    • HIRA: The responsibilities include the following (i) assessment of medical care costs and appropriateness of healthcare benefits, (ii) development of reviews and assessment criteria.
    • Health Insurance Policy Deliberative Committee: makes decisions on (i) long-term comprehensive planning for the National Health Insurance System, (ii) implementation, and the timing and method of these comprehensive plans.
  • Based on the end-users, South Korea’s healthcare security system has three arms: (i) the National Health Insurance Program, (ii) Medical Aid Program, and (iii) the Long-term Care Insurance Program

(i) National Health Insurance System :

(ii) Medical Aid Program:

  • The Medical Aid Program was established in 1979 for low-income households, where the government pays for all medical expenses for patients unable to pay for healthcare.
  • The program is jointly funded by central and local governments.

(iii) Long-term Care Insurance Program:

  • With the rising life expectancy rates, the government has introduced a long-term care insurance program in July 2008.
  • This program is a social insurance system that enrolls elderly individuals with serious limitations in performing daily activities. For example, individuals who are 65 years or above and suffering from disabilities such as Alzheimer's disease, Parkinson's disease, or Paralysis due to stroke are enrolled in the program.
  • The program is funded by the (i) long-term care insurance contributions by the insured individuals, (ii) co-payments by beneficiaries, and (iii) government subsidies. The government funds 20% of the insurance program.

[II] - Insurance Benefits:

IIa. Benefits in Kind :

  • Health Care Benefits : Provided by health care institutions in the case of diseases, and injuries. Benefits include diagnosis, tests, medical materials, treatments, surgeries, preventive care, rehabilitation, hospitalization, nursing, and transportation
  • Health checkups : There are no co-payment for General Health checkup expenses (including 22 items including blood test ). Individuals at risk/suspicion of chronic diseases such as high blood pressure or diabetes will receive free-of-cost investigations.
  • Cancer checkup : Cancer checkups/screening are covered for Stomach Cancer, Colorectal Cancer, Breast Cancer and Liver Cancer screening and pap-test. The cost is mostly covered by the NHIS (90%), and part by the beneficiary (10%) , however, there are no co-payments for colorectal and cervical cancer.

IIb. Additional Benefits :

  • NHIS subsidizes medical service expenses for pregnancy, childbirth and infants treatment . Eligible individuals with verified pregnancy will recieve a subsidized expense of 600,000 KRW per one pregnancy & childbirth

IIc. Co-Payment :

  • The co-payment is the portion of the service cost that patients pay for medical service upon a visit to the hospital. The co-payment rate is determined based on the (i) cost of care received during inpatient or outpatient service, and also based on (ii) the type of facility.
  • Inpatient co-payment: 20% of total treatment cost
  • Outpatient co-payment:
    • Tertiary Hospital: 60% of total treatment cost + other expenses
    • General Hospital: 50% (for Dong administrative district) and 45% (for Eup and Myeon administrative districts) .
    • Pharmacy: 40% (for Dong administrative district) and 35% (for Eup and Myeon administrative districts) .
    • Hospital: 30% of total care benefit expenses
    • Clinic: 30% of total care benefit expenses

IId. Reimbursement:

  • In case if the care institution service in overcharged, HIRA investigates and the excess amount is reimbursed to a medical beneficiary.
  • For new approved drugs, companies may apply to HIRA for listing for reimbursement under the National Health Insurance (NHI). The process is based on the following steps:
    • (i) HIRA decides whether the product is eligible for NHI reimbursement - evaluating product's usefulness and cost-effectiveness.
    • (ii) NHIS and the drug company negotiate the maximum reimbursement price (MRP) based on product's price in other countries, local price of drugs, and the impact on NHI budget.
    • (iii) For certain oncology and orphan drugs, the pharmacoeconomic assessment is exempted
  • Drug companies accept maximum reimbursement price (MRP) between 90-100% of the weighted average price (WAP) of the substituted products.
  • For generics or combination drugs, the maximum reimbursement price (MRP) is based on formulas set forth in the regulations without pharmacoeconomic evaluation and without negotiating with NHIS.
  • Policies that affect reimbursement:
    • The increase in life expectancy, and the growth in elderly population has resulted in an increase in chronic diseases associated wih old age, and in medical expenditures.
    • According to the data by NHIS (in 2019), the health insurance expenditures budget doubled between 2009 and 2018, from KRW 39.33 trillion to KRW 77.65 trillion.
    • The total healthcare expenditure as a percentage of GDP was 8.1% (in 2018).
  • According to a research conducted in 2011, the discrepancy between reimbursement price and cost-effective price was about 12.33 +/- 11.44%. Factors influencing negotiations to determine the final price include (i) the total cost of substitutes, (ii) the foreign price, and (iii) the pharmaceutical budget impact.

[III] -New Drug Benefits versus Pricing under the National Health Insurance

The hierarchical system for assessing new drug benefit, cost-effectiveness, and pricing under the NHI has been shown in the figure below.

[IV] - Challenges around high-cost drugs & Potential Solutions:

  • Case Study on Regenerative Medicine (RM): RM can only be reimbursed by public health insurance when costeffectiveness can be proved by evaluating RM costeffectiveness as required by the government based on the pharmacoeconomic (PE) evaluation. However, many RM products failed to overcome the PE challenges and are, therefore, not reimbursed, while patients are required to pay the entire cost of these expensive medicines if reimbursement fails. According to a Korean research conclusion, "this process is bound to hinder patient access to RM, and their social benefit based on clinical value will be lost; moreover, product developers may get caught in a vicious cycle of being unable to continue RM research and development (R&D) if they are unable to generate the expected profit due to a decline in market demand."
  • Positive listing system for new drugs: allowed a more rational management of drug expenditure, by only allowing cost-effective drugs to be listed in the national drug formulary. Due to the agreement between pharmaceutical companies and the NHIS, the drug prices which were increased by 30–60% were later reduced by up to 10%.
  • The complex procedure for listing new drugs in the South Korean National Health Insurance has been outlined below.
  • Access to costly drugs: The national health insurance outlined three ways of improving patient access to costly drugs: (i) risk-sharing agreements, (ii) designation of essential drugs, and (iii) a waiver of cost-effectiveness analysis.
    • Risk-sharing agreements: both the government and pharmaceutical companies share the uncertainties regarding the clinical outcomes of new drugs and their influence on the budget. Eligible drugs include anti-cancer drugs, or drugs to treat life-threatening conditions. There are four types of risk-sharing agreements available including (i) refunds, (ii) expenditure caps, (iii) utilization caps per patient, and (iv) refund/expenditure caps.
    • Designation as Essential Drugs: Drugs that are designated essential drugs by the Drug Review Committee of HIRA should qualify for the following conditions: (i) no alternatives, (ii) treatment of serious life-threatening conditions, (iii) treat small group of patients or rare disorders, or (iv) demonstrate significant improvement in clinical efficacy/survival. In these cases, the MOHW reviews the case and list the drug as reimbursable.
    • Cost-Effectiveness Analysis Waiver System: In case of oncology drugs or drugs for orphan (rare) diseases are given exemptions for cost-effective analysis waivers,
    Further reading: regarding Health Systems in Transition can be accessed here.

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