Single-payer Health Care Reform in South Korea:
Major actors behind the reforms
Chang-Bae Chun, Ph. D
Health Insurance Research Centre
National Health Insurance Corporation, South Korea
1. INTRODUCTION
During the 1990s many countries experienced rapid changes in health care. Particularly
following the economic crisis of the 1970s, most developed European countries
attempted to reduce health care expenditure by introducing competition mechanisms
into health systems and putting private market elements into their public health sectors.
However, the Republic of Korea (hereafter Korea) pursued a uniquely different path.
The restructuring of health care in the 1990s followed an altogether opposite trend
compared to other countries’ paths. Korea integrated multi-insurers into a single-insurer
in July 2000 and thus reinforced income redistribution by enlarging risk pooling.
This paper begins with the question of why Korea proceeded along this unique path. To
answer the question, it will first explore current fundamental reforms of health care that
have taken place since the late 1990s. Then it will analyze the background to these
reforms: that is, why these were possible in Korea at that time? In order to answer the
question, this paper will focus on two-key questions: firstly, what happened and
secondly why this was.
The methodology of this paper is based on a case study, because this method can be
convenient and relevant to analyze complex cases in greater depth than other research
methods. A case study makes it possible to study all variables with relation to studying
the content, and makes it possible to look at the internal relationships holistically.
Besides, in order to analyze the equity in financing and redistribution after the reform in
2000, statistical approaches were adopted. For this, several data sets were used, and
sample data was extracted from the total population data stored in the National Health
Insurance Corporation (NHIC) database.
This paper consists of six chapters. Chapter II will briefly mention the theoretical
background and analysis framework, covering hypothesis, and framework of this paper.
Chapter III will describe the key features of the health care reforms achieved since the
late 1990s to the present. This chapter will intensively discuss the major outcomes of
reforms such as integration and income redistribution. Chapter IV will identify the
underlying forces behind health care reform in Korea and thus this part will be a main
discussion section of this case study. Chapter V will find policy implications from the
outcomes of health care reform and analyze the main actors in the transformation of the
health care system in Korea since the 1990s. The final chapter summarizes the outcomes
associated with a single insurer and mentions the roles of major players in achieving
this health care reform.
2. HYPOTHESIS AND ANALYSIS FRAMEWORK
To grasp the causes of the transformation from multi to single-payer, and from
regressive to progressive in terms of income redistribution, this paper needs to set a
hypothesis that can elucidate the causes of changes to the health care system which have
occurred since the late 1990s. Especially in the midst of globalization and economic
recession, all reforms represent a significant and meaningful development. As
mentioned before, it was a very uncommon phenomenon, considering most countries
experienced reductions in spending on health care and more dependence on private
resources (Mishra 1999). Despite the difficult situation, the Korean health care system
achieved a single payer model after almost 20 years of ‘big debate’. To explore the
cause of these changes more thoroughly, it is meaningful to suggest an independent
variable to explain the cause of the changes in the late 1990s and early 2000s. For this,
this paper set hypothesis: the development of health care systems with a single insurer
and the reinforced income redistribution scheme became possible with the emergence of
power elites and the advent of civic groups.
Based on the above hypothesis the paper briefly features a framework of analysis to find
the causal actors behind the health care reforms. So the framework of analysis in this
paper starts with suggesting two independent variables: the emergence of new power
elites and the activities of civic groups. Figure 2-1 shows the analysis framework for the
causes of the Korean health care reform.
[Figure 2-1]
Analysis framework
Emergence of Civic
Group
Multi-payers
Single-payer
 Regressive income
redistribution
 Inefficiency
 Residual Model
Transformations
 Progressive income
redistribution
 Efficiency
 Social-democratic
Model
Emergence of SocialDemocratically
minded power elite
Pressure/Input
Support/ Alliance
3. FROM MULTI-PAYERS TO AN SNGLE-PAYER
This chapter in general belongs to ‘what happened?’ It thus naturally relates to the
discussion of integration of health care in 2000. Integration itself can be seen as beyond
just achieving a single-payer insurance system. Perhaps to many Koreans, the
integration of health care itself has great significance, both from political and social
perspectives.
3. 1. Risk pooling
Since the introduction of compulsory health insurance for corporate employees and
public servant/private school employees in 1977, many problems have been exposed.
One of them was the problem of a weak risk pooling mechanism. This drawback had
been derived from the structural weakness of the multi-fund systems, which resulted
from the existence of many small societies. The following data shows that in 1980,
when only 20 per cent of corporate employees were covered, the number of societies
amounted to 602. Worse, among these corporate societies, 229 funds (38%) of total
funds in 1980 would have less than 1000 people insured. Moreover, more than 75 % of
societies insured less than 3000. In these circumstances, income redistribution under
weak risk pooling structures was not possible.
[Table 3-1] The number of societies by size of the insured (1980, persons)
Less than
Less than
Less than
Less than
More than
1000
3000
5000
10000
10000
602
229
221
65
52
35
100
38
37
11
9
5
-
38
75
86
95
100
Total
No.of Societies
%
Accumulated %
Source: MOHW(1980) “Internal report by the insurer integration and dismantling
committee”
The problem derived from the weak risk-pooling structure, due to significant differences
in membership didn’t disappear but rather worsened with the coverage expansions for
the self-employed in 1988 and in 1989 for rural and for urban residents respectively.
Because insurers for the self-employed were founded solely on basic local
administrative units such as Gun and Gu, the gap in members, as table 3-2 shows,
between the largest and smallest societies was significant. While the smallest societies
are mostly located in rural areas and cover at best 3,912 households, the largest insurers
in the large city number more than 121,975 households – i.e. a 3,118 times difference
between the two insurers. Under these significance gaps between societies, risk pooling
in health insurance was intrinsically impossible. In addition, considering the social
demographic traits that two-thirds of the elderly live in the rural area (Anderson 1989),
risk pooling through health insurance seemed rather contradictory.
[Table 3-2] Comparison of societies’ size for self-employed (Jun. 2000)
The smallest (Yang-Gu)
No. of
household
3,912
No. of the insured
11,699
The largest (Goyang city)
Difference of
No. of
No. of the
No. of
household
insured
households
121,975
348,057
3,118 times
Source: Internal report from NHIC (2001).
However, with the reform of 2000, the problems of narrow and weak risk pooling
disappeared. This single payer system made the risk pool nationwide by integrating all
insurers into a single pool and by spreading individual risks across a pool of the entire
population. As a result, the establishment of the single insurer was a way of combining
risk pooling into one insurer and thus overcoming the previous weak risk pooling
mechanism under the multi-payer schemes.
3. 2. Equity
As mentioned before, multi-payer schemes brought about financial imbalances between
insurers. The fundamental gap in financing was caused by the deterioration of equity in
financing, such as unfair contribution systems and different social demographic
backgrounds. For example, small insurers located in rural areas consisting mainly of
elderly members would likely fall under the structures of fundamental financing
instability, partly because the old experience increased illness and are thus likely to
require more medical services. Moreover, since the elderly do not have regular incomes,
it was common for monthly contributions to be late. Consequently, the small insurers in
rural areas suffered chronic financial instability. However, so-called ‘rich insurers’,
which are mainly located in urban areas and largely consisted of the younger
generations, had better positions demographically and financially and therefore were
financially stable. Contrary to the smaller ‘poor societies’, the insured of the rich
societies were less likely to get treatment, because they were relatively young compared
to those of the poor societies. More than that, they were working and earned regular
incomes, so they could pay their monthly contributions on time. As the table 3-3 shows,
financial disparity between rich and poor payers inevitably incurred.
[Table 3-3] Number of deficit societies by years (1990-1997)
Years
1990
1991
1992
1993
1994
1995
1996
1997
No. of societies
254
266
266
266
266
227
227
227
No. of deficit
194
1
0
18
28
26
147
59
Percent (%)
76.4
0.4
0
6.8
10.5
11.5
64.8
30.0
Source: National Federation of Medical Insurance, “Balance Accounts Report by years”
Similarly, the financial status of corporate societies was also capricious. Although the
finances of corporate societies were not so serious as for the self-employed, there were
also significant disparities between rich and poor societies. In general, the societies who
largely consisted of young employees in smaller work-sites kept sound finances, while
societies with relatively older employees with more dependents in larger companies
tended to suffer financial deficits. As the table 3-4 shows, the degree of financial
disparity between insurers deteriorated to an easily distinguishable situation. That is,
while some insurers were in danger of insolvency, others accumulated huge reserves.
[Table 3-4]
No. of
societies
145
Numbers of deficit societies: corporate insurers (1995)
Size of the surplus
Less than
70 %
1
71-79%
80-89%
26
67
Size of the deficit
More than
More than
More than
90%
100%
110%
41
8
2
Source: NHIC (2001), Health Insurance White Paper, p 69.
Meanwhile, financial gaps between the self-employed and corporate society rapidly
increased as well. While most of corporate society had sound financial status, most selfemployed societies were in the crisis of insolvency during the 1980s - 1990s. Given this
significant disparity, the government was able to do almost nothing, but depend on
increase of contribution rate. As table 3-5 illustrates, the disparity between the two
occupation-based societies was distinct in 1996. The percent of accumulated reserves
was calculated by dividing the claimed amount for the current year against the total
accumulated reserve.
[Table 3-5] The disparity of reserve between the corporate and self-employed societies
(1996)
The corporate societies
Hwasung
Seoul 26 Unit
701 %
586%
The self-employed societies
Hanil Synthetic
536%
Jung-up City
Young-Dong Gun
0%
0%
Source: HIAIBE (2001), ibid., p. 217.
* Note: Per cent of the reserve = accumulated reserve/current year’ medical costs
The ultimate and best way to solve this fundamental problem is finding a way towards a
single-payer scheme and a fair contribution method under which “contribution ability to
payment” and, as a result, “better-off pays more and worse-off pays less” was
established. In the end, the new contribution methods were introduced in 1998 and 2000,
for self-employed and corporate insured respectively. This section looks at the result of
the reforms from various equity viewpoints.
Benefit Ratios
The Benefit Ratio is calculated from total amounts of payment to total benefit amounts
in order to see the extent or degree of benefit compared to payment of contribution. The
formula is as follows:
- Benefit Ratio = Benefit amounts/Contribution amounts
If the benefit ratio is more than 1, according to the above calculation, it means that the
amounts of benefit are larger than the amounts of contribution. By contrary, if less than
1, it means the insured pays more contribution than the eventual benefit. Thus, if the
benefit ratio of low-income classes is higher than that of higher income classes, or the
amount of benefit is more than those of the contributions, it suggests that income
redistribution effects exist from the rich insured to the poor insured.
As table 3-6 show, the benefit ratio for the self-employed shows that there was a lot of
income redistribution between low and high-income groups. While the benefit ratio of
the insured that pay a contribution of more than 2 million Won a year was 0.59, that of
the insured who pay a contribution of less than 100,000 Won a year was 5.89.
Consequently, these figures support the fact that there was a significant income transfer
from higher payers of contributions to lower payers. Meanwhile, in terms of the use of
medical treatment, low-income groups visit medical institutions more often than highincome classes; the former group’s average frequency of medical treatments a year per
capita was 17.52 and the latter was 14.48.
[Table 3-6] Benefit ratio by income brackets: Self-employed (2001)
Frequency
Medical
Bene
Cont (in
Cont.*
Cont.*
Benefit
Benefit
use
(yearly)
(capita)
(yearly)
(Capita)
(Capita)
Ages
1000Won)
M
F
Total
fit
Ratio
**
<10
52
110
162
60.90
82822
71101
488193
406374
17.52
5.89
10-20
403
392
795
44.59
148353
116367
452717
276449
10.17
3.05
20-30
499
236
735
44.60
248501
135887
571708
242861
10.87
2.30
30-40
594
173
767
44.86
347435
145940
728301
246504
11.70
2.10
40-50
520
90
610
46.63
448953
165467
820316
271127
12.05
1.83
50-60
433
73
506
47.24
548187
187898
866599
258819
12.62
1.58
60-70
354
41
395
46.75
647158
205635
907365
267088
12.13
1.40
70-80
249
34
283
47.70
746816
238816
946814
258203
11.74
1.27
80-90
174
29
203
49.42
847732
284147
885801
243491
11.15
1.04
90-100
129
17
146
47.45
947992
301918
1188627
306007
11.45
1.25
100-150
262
32
294
49.82
1182229
378158
1119437
305589
12.87
0.95
150-200
67
4
71
51.27
1701431
507220
1428199
375172
14.05
0.84
>200
31
2
33
50.48
2371818
816991
1405764
409342
14.48
0.59
3767
1233
5000
46.75
491170
187316
762655
270439
11.79
1.55
Total
* Excluding government subsidy per household.
** Cases of treatment times a year per Capita.
Table 3-7 below shows the analysis results of 2002 for the self-employed. There are
almost identical trends and results both in medical use and benefit ratios; the lowest
bracket visited 17.02 a year per capita, while the highest income group used 15.25.
Undoubtedly, this result means income transference effects exist between high and low
income groups. The benefit ratio also shows almost the same results as that of the
previous year 2001, showing 7.69 of benefit ratio in the lowest earners and 0.37 in the
highest earners.
[Table 3-7] Benefit ratio by income brackets: Self-employed (2002)
Frequency
Medica
Cont’(in
Cont’
Cont’
Benefit
Benefit
Ages
1000Won)
M
F
(yearly)
Total
Benefi
l use
(capita)
(yearly)
(capita)
t Ratio
(capita)
<10
163
179
342
54.0
70,054
54,998
538,741
394,847
17.02
7.69
10-20
419
293
712
44.6
149,842
116,270
379,399
232,897
10.23
2.53
20-30
372
199
571
45.8
254,314
143,060
598,466
270,633
11.54
2.35
30-40
480
155
635
45.3
355,248
180,748
684,766
264,558
12.01
1.93
40-50
445
107
552
45.9
458,952
193,766
736,724
262,563
12.19
1.61
50-60
318
62
380
46.9
550,453
202,479
793,247
242,790
12.46
1.44
60-70
444
75
519
46.5
648,165
231,043
835,355
250,801
12.09
1.29
70-80
268
50
318
47.5
757,124
269,219
959,689
286,533
12.14
1.27
80-90
212
20
232
48.2
853,583
263,197
1000472
280,850
12.94
1.17
90-100
175
19
194
50.0
954,751
318,015
883,711
265,373
13.26
0.93
100-150
355
44
399
51.1
1,204,938
384,588
1231303
361,005
13.64
1.02
150-200
87
8
95
50.2
1,728,351
669,281
897,886
283,622
14.60
0.52
>200
48
3
51
54.3
2,451,798
928,975
910,808
311,158
15.25
0.37
Total
3786
1214
5000
47.3
538,875
214,929
740,872
277,072
12.42
1.37
Looking at the benefit ratio for the corporate insured, similarly to the self-employed’s
benefit ratio, there was a high level of income redistribution between high-income and
low-income groups. That is, the benefit ratio of low income groups who pay less than
100,000 Won a year was 5.96, while the benefit ratio of high income groups who pay
more than 2 million Won a year was at best 0.31 (Table 3-8). In terms of frequency of
medical use, however, low-earners use was less frequent compared to high earners (9.89
vs. 12.79 times). The result seemed to relate to the ages of employees and the size of
enterprises. These figures might result from a general hypothesis that the relatively
young and low earners enjoy better health and small-sized work sites mainly consist of
blue-collar workers, for whom frequent medical treatment for their employees can be
discouraged compared to larger companies with comparatively older white-collar
workers. Like 2001, the result from 2002 shows similar trend (Table 3-9).
[Table 3-8] Benefit ratio by income level: Corporate insured (2001)
Frequency
Cont(1000
Cont
Cont
Benefit
Benefit
Medical
Benefit
(yearly)
(capita)
(yearly)
(capita)
Use(capita)
Ratio
Ages
Won)
M
F
Total
<10
76
70
146
39.31
89,103
52,549
531,129
196,408
9.89
5.96
10-20
537
557
1,094
36.76
158,341
102,351
550,132
229,883
10.84
3.47
20-30
866
355
1,221
34.32
257,531
143,396
691,304
229,250
11.27
2.68
30-40
659
120
779
36.15
358,215
162,046
975,914
299,238
12.43
2.72
40-50
529
76
605
37.51
453,693
168,747
1,113,440
285,098
13.05
2.45
50-60
397
46
443
38.53
560,558
189,301
1,319,048
314,098
14.52
2.35
60-70
213
9
222
39.87
657,817
180,524
1,253,605
280,518
15.16
1.91
70-80
155
7
162
41.25
738,896
210,770
1,296,792
298,109
14.10
1.76
80-90
137
6
143
44.50
845,502
228,304
1,364,159
284,701
13.90
1.61
90-100
55
3
58
44.55
970,301
287,668
1,134,799
263,647
13.66
1.17
100-150
89
1
90
47.43
1,191,496
350,014
1,294,581
315,156
13.29
1.09
150-200
21
0
21
47.90
1,696,697
607,922
1,060,293
297,823
11.50
0.62
>200
15
1
16
46.88
2,760,630
830,266
865,033
235,843
12.79
0.31
Total
3,749
1,251
5,000
37.26
386,499
157,604
888,714
261,957
12.23
2.30
[Table 3-9] Benefit ratio by income level: Corporate insured (2002)
Frequency
Cont(1000
Cont
Cont
Benefit
Benefit
Medical
Benefit
(yearly)
(capita)
(yearly)
(capita)
use(capita)
Ratio
Ages
Won)
M
F
Total
1
23
13
36
42.92
85,420
54,158
550,938
221,140
12.21
6.45
2
383
409
792
40.31
161,399
100,752
589,290
224,186
11.53
3.65
3
433
330
763
34.67
249,542
154,536
615,872
238,119
12.06
2.47
4
677
251
928
35.27
353,564
188,105
817,397
261,395
12.13
2.31
5
513
146
659
36.79
460,913
196,954
1,121,259
296,057
14.21
2.43
6
421
88
509
38.00
560,686
207,879
1,096,253
282,459
14.21
1.96
7
355
54
409
40.14
657,965
214,382
1,311,452
316,913
15.02
1.99
8
250
34
284
42.65
750,153
234,909
1,128,136
262,853
13.99
1.50
9
185
20
205
44.10
836,694
250,454
1,157,741
277,962
14.02
1.38
10
169
17
186
46.78
940,140
287,643
1,261,108
294,282
14.29
1.34
11
162
12
174
47.44
1,181,179
409,294
1,196,302
301,989
13.76
1.01
12
27
4
31
47.84
1,719,155
509,040
1,133,175
324,446
14.97
0.66
13
22
2
24
46.88
3,002,250
1,148,007
798,274
215,792
10.23
0.27
Total
3,620
1,380
5,000
38.68
479,591
196,722
920,606
266,484
13.07
1.92
Income transfer ratio (ITR)
This section tries to establish the income transfer ratio, using contribution and benefit
occupancy ratios. Occupancy ratio is the ratio of each group’s contribution and benefit
ratio to total amount of contributions and benefits. This indicator easily shows
contribution and benefit levels of each class to the total amount of contribution and
benefits. Thus, the formula for ITR is as follows:
-
Contribution occupancy ratio (COR) = Sum of contribution amount of each
-
group/total contribution amount × 100
Benefit occupancy ratio (BOR) = Sum of benefit amount of each group/ total
-
benefit amount × 100
Income transfer ratio (ITR) = Each class’s benefit occupancy ratio/each class’s
contribution occupancy ratio
Based on the above calculations, if the figure of the income transfer ratio is larger than 1,
it means positive income redistribution. Therefore, if the income transfer ratio of low
income classes is larger than 1, and if that of high-income class is less than 1, it shows
that there is income transfer between high and low income classes. The figures of Table
3-10 were calculated from the above tables and show the income transfer ratios. As the
following table shows, the figures were similar between the two compared years. That is,
the figures of income transference ratios of low-income classes, both in self-employed
and corporate insured, were less than 1, while those of benefit occupancy ratios of lowincome groups were more than 1. All the mentioned figures, therefore, suggest that
income redistribution effects were reinforced by the reforms of NHI integration.
[Table 3-10] Income transfer ratios
COR
BOR
ITR
Classifications
Selfemployed
Corporate
2001
2002
2001
2002
2001
2002
Lowest-income group
0.81
0.67
4.13
5.15
5.10
7.69
Highest-income group
23.10
23.49
11.90
8.72
0.52
0.37
Lowest-income group
0.82
0.78
3.95
4.31
4.82
5.53
Highest-income group
25.71
27.40
6.43
6.25
0.25
0.23
3. 3. Efficiency
Inefficiency issues didn’t abate at all before the integration due to the multi-fund
systems. Indeed inefficiency problems were so prevalent that almost all criticisms of
health insurance tended to relate to inefficiency: from inefficiency in management due
to the multi-payer structure to inefficiency in cost containment.
The integration of NHI promoted efficiency of organizational management by
establishing economies of scale. The introduction of standardization and unification in
various work-fields supported by the computerized information network will accelerate
the reduction of administrative costs. Table 3-11 shows the statistical data on reduction
of administrative costs over several years. Of total health expenditure, the
administrative costs were significantly reduced from 7.3% in 2000 to 4.5% in 2003 with
the emergence of the positive effects of health care reforms. Moreover, integration into
a single-insurer was accompanied by monopsonic power. This power can be attributed
to improved purchasing power and giving insurers suitable levers to control costs
efficiently (Carr-Hill 1994).
[Table 3-11] Comparisons of annual administrative costs
(Unit: million Korean Won)
Before integration
After integration
Classification
1997
1998
1999
2000
2001
2002
Total Expen.(A)
76,787
87,157
95,614
Admi. Costs(B)
6,719
7,020
6,814
7,799
7,109
6,771
7,404
B/A
8.8%
8.1%
7.1%
7.3%
5.0%
4.6%
4.5%
106,736 141,075 147,984
2003
165,317
Source: NHIC (2002), Internal Report.
4. MAJOR ACTORS OF HEALTH CARE REFORMS
This chapter is a case analysis to understand independent variables that can explain why
and how the health reforms took place at that time. Simply put, this section is to find the
causes and key actors of the reforms and verify them through the case analysis. For this,
this chapter will presuppose two independent variables first, and then look at how these
independent variables can play a role in bringing about health care.
4. 1. Civic groups
4. 1. 1. The situational background of the emergence of civic groups in the 1990s
It is true that today’s health care achievement, especially considering globalization and
the economic crisis, was unthinkable without the emergence and role of civic groups,
most of them founded in the 1990s. It was a time that civil society emerged, taking up
the so-called social citizenship, a concept developed by T.H Marshall in 1939 just
before the Second World War. Like in Europe before and after World War II, Korean
people were beginning to understand the influence of the social rights movement in the
1980s, when the democracy movement erupted up against the tyrannical Chun Do-whan
regime. Once democratic governments were elected in the early 1990s, with a civilian
president-elect Kim Young-sam, the democratic movement rapidly shifted to a social
rights movement. So it was in auspicious circumstances in the 1990s that a few nongovernmental organizations (NGOs) were established in Korea.
Coincidently, citizens began to recognize that social rights were not spontaneously
given by government, but rather rights which were won by asking government to
provide social protection. As Table 4-1 shows, this thought was developed into a more
fundamental thought on the principle of social policy that the welfare provision by
government was not a grace from a King or an overwhelming authority, but the right
things they should be naturally entitled to posses. Interestingly, this people’s attitude
toward the role of the government was rooted in their consciousness on health (Table 42)
[Table 4-1] Korean attitudes to the State’s responsibility for individual welfare
May 1997
October 1998
Individual responsible
51%
17%
State responsible
49%
83%
Source: Shin and Rose, 1997, 1998
[Table 4-2] Korean’ consciousness on health and other social affairs
Health
44.9%
Wealth
24.5%
Education
Job
Child Edu..
Marriage
Others
7.4%
6.5%
4.6%
2.5%
9.6%
Source: Korea National Statistical Office (2004), “2003 Korean Social Indicators”
4.1. 2. Policy network between government and NGOs in health insurance
Before the achievement of the single insurer system and emergence of powerful NGOs
in Korea, most important decision making in health policy was decided by the so-called
symbiotic relationships between the Ministry of Health and Welfare and large industry
groups (Bidet 2004:Shin D.2000). Indeed the hegemony that large corporate business
groups played dated back to the first stage of Korean health insurance implementation
in 1977. In the early stage of health insurance programmes, when Park Jung-hee
government had to urgently expand coverage of health insurance without spending
government subsidies, the government had to rely on large business, because the latter
paid half of their employees’ contributions. In the circumstances, it seemed not
unnatural that the close relationship between the two key players was developed to
become policy-partners in the health policymaking process.
However, the symbiotic relationships had to face a new situation and were challenged
with the advent of the single payer system in 2000. This time, doubtless, civic groups
occupied the vacancy the big corporate business had left, as large portions of their roles
had to be passed to new upcoming occupants, NGOs. NGO played an important role
influencing health care polices in a variety of ways. In general, there were several ways
that civic groups utilized for the reform of health insurance. Firstly, civic groups
themselves first incorporated all pro-integration civil societies into the ‘Health Care
Alliance for Integration and Benefits Expansion’ (HCAIBE), founded in April 1994,
which consisted of 77 civic groups and labour unions, etc., in order to focus their ability
to achieve their ultimate goal of health care reform. The first stage of their main strategy
set out integration agenda. In order to spread the importance of health care reform to the
public, the next thing the HCAIBE had to do was to organize street demonstrations.
Secondly, both individual civic groups and the HCAIBE invited a group of progressive
academics to develop more articulated theories and philosophies. Most of the scholars
who had actively participated in civic groups were rather young and had studied social
welfare and public health. The progressively minded academics actively spread their
ideas and played important roles in expediting integration by participating in many
important television debates, seminars, and contributing to newspapers. Thirdly, the
representatives of NGOs officially participated in major policy-making bodies. As a
result of their broad participation at various levels, NGOs consistently proposed that
increased revenues from increased contribution rates should be spent on expanding
benefit coverage. This principle was successfully championed and so changes to
contribution rates became very difficult, unless government or provider associations
could provide sufficient evidence for the need for adjustment of contribution rates to
catch up with the increase of fee schedule (Table 4-3).
[Table 4-3] Changes of contribution and fee schedule rates
Increase of
Increase of fee
contribution rates*
schedule rates
Average (1990-2000)
- **
8.87%
Increased revenue
2001
4.6%
7.08%
from contribution
2002
6.7%
-2.90%
should be use to the
2003
8.5%
2.79%
expansion of benefit
2004
6.75%
2.65%
coverage
Years
Source: NHIC (2004), Internal Report.
* For the corporate insured
** Not available due to different contribution rate under the multi-funds systems.
4. 1. 3.
Case studies on activities of civic groups
In the previous section, we saw the ways NGOs were involved in the policy-making
process and how civic groups strengthened their influence in the process of health
insurance reform. This section will focus on several cases that show how NGOs really
affected on health insurance policies.
The Case of Medical Savings Account (MSA)
In January 2001, Choi Sun-Jung, Minister of Health and Welfare, reported to the
President that it was time to introduce the Medical Savings Account to reduce public
medical expenditure by curtailing frivolous treatment and to increase cost consciousness
at the point of treatment.
After this announcement, however, the Peoples’ Solidarity for Participatory Democracy
(PSPD) issued a statement regarding MSA. Needless to say, it strongly denounced not
only the lack of discussion, but also argued the MSA was not appropriate to the reality
in which coverage of public health insurance was insufficient. The following is part of
the statement on MSA:
“ … The announced MSA, however, is a system that introduces personal charges for
medical treatment based on income and ability to pay and it will restrict medical
access of the elderly and the poor…” (www.peoplepower21.org/setion, consulted on
10th June 2005).
Although it was not clear how much the role of the PSPD can be attributed to blocking
the policy implementation at that time, and whether the opposition of the PSPD stopped
the policy directly or indirectly, it is not difficult to guess that the role of the PSPD had a
significant impact on the withdrawal of the new policy. Coincidence or not, the PSPD’s
statement was reported by many newspapers over the following couple of days after new
policy initiative was launched by MOHW. For example, Munhwa-ilbo, one of the
broadsheets in Korea, criticized the MSA as the following:
“ …. However, the problem is that the MSA will likely bring about other problems
of inequity between the rich and the poor. Thus the new policy can’t avoid criticism
that government has put financial burdens on weaker social groups …” (Munwhailbo, 31st Jan. 2001).
Two days later, after the announcement of the new policy by the MOHW, on 2nd
February 2001, the ruling party officially announced that the introduction of MSA
would be postponed for a certain period. Also, it added that it was time to reassess how
current public health insurance could be improved. The chairman of the social policy
committee in the ruling party confirmed that the MSA system could be an option in the
long run and it thus couldn’t be considered an option at that time (ibid, 2nd February
2001). Consequently, with the widespread unpopularity of MSA, MOHW officially
withdrew from its first position and added that the final decision on implementation of
this policy should depend on national consensus (ibid, 7 February 2001).
The above pattern and process was repeated over several major policy initiatives during
the 1990s after many civic groups had been established in Korea. Any policy that was
likely to threaten equity in financing and access to medical care faced strong protests
from civic groups. Many influential newspapers then criticized the problematic policies,
quoting opinions of experts who were usually related to the activities of civic groups.
The Glivek case
The following is a vivid example of the Health Right Network’s (HRN) activity to
influence health care policy in Korea. Recently, a new innovative drug called ‘Glivek’
for the treatment of leukemia was added to coverage lists, but the price of the drug was
too expensive to be prescribed for the poor, even though the price of the drug was
determined on the basis of the Swiss estimated price to relieve the burden on patients.
So the price was determined at 17,862 Won per capsule, rather than 23,045 Won, which
is based on the price across of A7 countries. Faced with low prices, providers threatened
to stop providing the drug and this situation pushed the government to seek solutions.
Nevertheless HRN still raised questions about the irrationality of the drug pricing
decision method, which was entirely determined by the average price of A7 countries.
The NGO recognized that the price determined by the current method was inevitably
higher and HRN therefore argued that the government should also consider other
elements, such as different economic situations and consider different health care
system, such as low benefit and high user charges. (www.healthright.org. consulted on
10th June 2005).
As mentioned earlier, NGOs usually adopted a range of methods in order to achieve
their goals. For example, raising and diffusing social rights to citizens, checking
government policies, and organizing demonstrations. More than the others, the last
method demonstrating is interesting and unique in achieving their aims for the health of
ordinary people. In this case, the HRN planned a one person demonstration, chain
strikes, at several locations, asking the government to withdraw and reduce the price
that had been already determined. As a result, NGOs and patients made the government
listen. Indeed, the government reviewed the price of the drug and tried to find
reasonable ways to resolve the complaints from patients. In the end, an agreement
between government and the pharmaceutical company was reached that guaranteed
10 % free provision of the total purchase for patients and that, on the other hand,
increase drug price based on A7 countries (MOHW Notification, 25 Jan. 2003)
To sum up, two cases are enough to understand how civic groups influenced the health
policy area. In many ways it is not exaggerating to say that the roles of NGOs in health
care reforms since the late 1990s were a decisive force toward more redistribution and
greater equity. Briefly, there are several policy implications with regard to the role of
NGOs based on the above two cases. First, the major civic groups occupied new
positions in policy-making and decision processes as a key policy-partner. Second, their
energies come from ordinary people, not from NGOs themselves. All NGOs operate
with membership fees that are voluntarily paid by members themselves. It was natural
that under these structure leaders of NGOs should follow the intentions of their
members. Third, the involvement of NGOs in the policy process makes government
policy transparent as well as more beneficiary-oriented. Last but not least, center-left
minded NGOs represent supportive forces in reinforcing health care reform, a path
toward a social-democratic model. Therefore, all the above implications support the
hypothesis that civic groups armed with a social-democratic orientation will be an
independent variable in developing health insurance to redistribute income and provoke
an equitable system.
4. 2. Emergence of new center-left power elite
The influence of the new power elite should not be underestimated in the change of
policy in the health care reforms. Most of the new political elite, who occupied many
major posts in the Presidential Office and ruling party just after power shifted to the
opposition party after 50 years, were armed with a social-democratic philosophy,
emphasizing more state involvement and responsibility for health policy. Especially, the
president-elect’s view on health care reform critically contributed to reshaping it in an
equity orientation. Moreover, in consideration of power structures, it was expected that
the political philosophy and will of the President would play a critical role in
policymaking in Korea (Kwon, S. 2003).
This section deals with three cases that provide evidence to support the fact that
presidential power played a great role in changing policies and integrating health
insurance societies. Of the three cases, two are related to roles of the power elite in
deterring policy changes and the remaining one is in a supporting role. As mentioned
before, reforming the single-payer system from multi-insurers took almost twenty years
and the final result was achieved after numerous conflictions. As the following cases
will show, the Korean health care would not have accomplished the single-payer system,
had the power elites not emerged.
First case: presidential power against integration (October 1980)
Soon after the introduction of social health insurance in 1977, a clear voice against the
multi-insurer system was first born, mainly within the MOHW, partly because most
people didn’t recognized the problems due to the small number of beneficiaries under
the initial system where only corporate employees working in firms with more than 300
workers could be insured. However, there were two opposing voices: one for integration
and one against integration. The beginning of the debate surrounding health policy
started in the early1980’s and continued for the last 20 years.
At first, in May 1980, integration of health societies began with the inauguration of new
minister Chen Myong-ki who then recognized the problem aroused due to small-size
insurers in the early stages of multi-fund systems and so he ordered a special committee
to review health insurance problems with the multi-payer scheme. Integrationists within
MOHW then mainly consisted of officials who had studied social welfare and sociology,
and they actively led discussion about integration, because most officials in MOHW
already knew and had experienced the fact that multiple, small societies unavoidably
lead to serious financial imbalances depending on the characteristics of their employees
and the size of the insured. So they might think that they should establish the singlepayer plan before implementation of the pilot programme for the coverage extension to
the self-employed, which was started in July 1981 at several regions. On the other hand,
some officers in MOHW clearly opposed integration. In the meantime, after six months,
members of the advisory organization under the MOHW submitted the final paper,
called “The Plan for Integration of Health Insurance”, under which the so-called ‘Health
Insurance Management Corporation’ was to be established as a single-insurer, to
Minister Chen in October 1980.
In October 1980, the plan was finally reported to President Chun Do-Hwan, a former
military man. In November 1980, however, the President killed the integration plan by
adding the so-called ‘study review’ instead. The authoritarian President Chun then
accepted his staffs’ opinion that a unified health care system inevitably incurs serious
financial instability and this would contribute to the burden on central government
(HCAIBE 2001). Thus, the first chance at integration was blocked even though both
ruling and opposition parties in parliament agreed to support the single payer scheme
and a special committee suggested unified health insurance system was a more
appropriate system than the multi-fund system.
Second case: Presidential Veto to integration law (March 1989)
With coverage expansion to rural residents in 1988, the issue of integration faced
different stages. The pro-integration movement exploded almost spontaneously and
voluntarily nationwide. This stage was quite different, compared to the first case, from
various viewpoints. This time, the first huge opposition to the multi insurers system
came from farmers across all regions and this protest developed further into a
systematic social movement, organizing branches and demanding more government
subsidies for rural residents (NHIC 2001). This movement from rural residents was an
uncommon case in Korean tradition because rural people were accustomed to accepting
government policy. There is no doubt that the farmer-led request for a single insurer
was ignited based on their experiences: high contributions and low benefits compared to
their expected high benefit coverage and low contributions. They clearly understood
that the problems they faced were due to the structural problems of the multi-insurer
system and therefore they believed that there was no alternative but a single-payer
scheme
As a result of an integrationist’s great efforts, in March 1989 the Parliament
unanimously passed a law commanding a single-payer scheme. This time destiny was
not on the integrationist’s side either. President Roh Tae-Woo vetoed the law after
accepting the opinion from the Minister of Health and Welfare and therefore the law
was returned to Parliament. According to the constitution, any law vetoed by the
President should be aborted unless it gains votes from three quarters of the parliament
members within the same assembly period. Otherwise the law will be automatically
abrogated. Thus, once more integration failed to transform social insurance into a single
payer system. However, the reasons of the veto were not acceptable to many prointegrationists. As a result, just after the Presidential veto, many civic groups, farmer’s
organizations and labour unions were critical and reorganized to mobilize their power
in achieving their unified goal of integration. Paradoxically, the veto by the President
reinforced the movement towards integration and more civic groups and organizations
got opportunities to raise their voices for the integration of health insurance.
The Third Case (July 2000)
After two critical chances at integration had been aborted, another opportunity was
given for the integrationists after almost exactly 20 years since they first proposed
integration in 1980. This time was quite different and there was great potential for
integration after the peaceful power transition from the ruling to opposition party after
almost 50 years of Korean democracy.
Before the Presidential election was scheduled in December 1997, the three major
parties, the ruling and the two in opposition, put forward integrationist proposals. First
of all, the conservative ruling New Korean Party didn’t oppose integration of health
insurance and another conservative Free Democratic Coalition was also ready to accept
integration. The causation of change, of course, was largely due to the activities of
HCAIBE and civic groups. And relatively closer to those groups was the progressive
party of New Politics and People’s Coalition (NPPC) which had been actively
supporting integration for a long time. In the meantime, the presidential candidate of the
opposition party was elected in December 1997. President-elect Kim Dae-Jung has a
belief in social solidarity and emphasized several times before the election that he
would integrate health insurance if his party won power in the presidential election.
Soon after the election and before the inauguration of his Presidency, the ‘committee for
government transference’ selected the integration of health insurance as one of one
hundred reform agendas. Also the Tripartite Committee, a newly established body,
established soon after President Election in order to get social consensus in economic
and social sectors with representatives of labour, employers and government, and
confirmed that health care integration should go ahead with the single-payer system.
With the emergence of social democratically minded power-elites in both the
Presidential Office and Parliament, the process of integration progressed rapidly. Of
course, there was anti-integration activity. Like in the previous two cases, strong
opposition and rallies against integration erupted before and after the passage of the law
in Parliament. Among pro-multi-insurers, the union workers of the corporate societies
strongly opposed integration and they, as a result, led the opposition groups. However,
unlike the previous two cases, the likelihood of success in aborting integration by
supporters of multi-funds was thinner in the new environment. In the end, with the
establishment of the single-payer scheme in July 2000, the long way to achieving health
integration ended and faced a new stage.
5. PLOICY IMPLICATIONS
Through the three cases in the previous chapter with regard to presidential power, we
can find important policy implications. Among the three cases, two cases failed to
achieve their goals since the highest power holders refused integration. But the third
case showed the other way, accepting it and to a certain degree accelerating it. Thus, the
result was ultimately different, although pre-existing conditions and parallel opinions
over the pros-and-cons of integration had not changed. Then a question is raised here:
why a different result was possible in third case.
The answer can be attributed to the influence of presidential power and, on a broader
level, power elites who were executing their powers by putting their ideas to the
President. Importantly, the philosophy of the leader is an important element and thus
can be an independent variable. That is, the influence of power elites comes from their
ideas and philosophy. Indeed, of the three cases regarding health insurance integration
in Korea over the last twenty years, the assumption that the philosophy of the President
can play a critical role in health care reform is a persuasive variable with strong
evidence. Conservative-minded Presidents refused integration two times because they
weren’t armed with a social democratic philosophy but were pro business. However,
President Kim meanwhile supported it, because he was filled with strong will and
philosophy toward integration. As Kwon, S. (2003: 86) said, without the strong will of
the President, the political resources to implement the structural reform in health care
integration would not have been mobilized. Despite both the World Bank’s demand for
Medical Savings Account (Kim C.Y et al.1998; World Bank 1998), and political
pressures from supporters of the market-friendly social welfare schemes –such as big
business and a segment of the labour unions – the Kim government took the opposite
path with the help of his will and political ideology (Moon, et al. 2003). Needless to say,
it was the social democratic mind that a new power group can refuse to accept MSA
scheme forcedly suggested by World Bank, a powerful international creditor, under the
economic crisis in the late 1990s. So the third case supported the second hypothesis that
socially democratic minded power elites can influence the direction of policy to a more
equitable and redistribution-reinforcing orientation.
6. CONCLUSIONS.
As the first step to the further development towards a sustainable Korean model in
health care was implemented in 2000, social health insurance of Korea faced a new
situation. As a result of integration, first of all, significant outcomes in terms of
efficiency and equity took place. Due to the single-payer system, as we’ve seen in
previous chapters, administrative costs reduced gradually after the first year after
integration. This was achieved with efficient management under the single insurer
system in various fields, such as collection of contribution and reduction of
underwriting affairs, etc. In addition, monopsony power of the single insurer after
integration can help in increasing macro-efficiency, because the insurer can take
efficient and flexible cost-containment measures. Second, in terms of equity in
financing, there were significant changes. Achievements in this are undoubtedly due to
reform to the single-payer system. Under the single-payer scheme, with implementation
of a new, fair contribution method based on ability to pay with real income, income
redistribution effects have been reinforced since 1998. As a result of integration, the
pattern and level of income redistribution has been transformed from regressive to
progressive under the single insurer.
This paper has discussed what the underlying causal forces behind health care
integration were. At first it presupposed two actors as independent variables and next, in
order to support this hypothesis, this paper adopted a case study approach. The
emergence of civic groups and new power elites with social democratic-mind sets were
introduced as major actors in achieving their goal which had been aborted for the twenty
years. As the civic groups increased their influence through their transparent and fresh
policy approaches, they can occupy the position previously held by big business and
enlarged their policy influence. The area of health policy was no exception in the late
1990s. The emergence of civil societies played a critical role in cracking the long held
balance between proponents and opponents and thus finally giving more weight to the
pro-integration side. Meanwhile, the advent of new power elites armed with social
democratic ideas also played an important role in unblocking almost twenty years’
deadlock. As pointed out in previous case studies, two cases failed to achieve the singlepayer system mainly because two presidents did not have social democratic ideas and so
they depended on their staff in making the decision. On the other hand, president Kim,
in the third case, played a critical role in fulfilling integration, mainly because he is a
committed social democrat especially in the area of health policy especially. In the end,
as Kuhnle (2002) mentioned, the Korean health care system will ultimately move closer
to those of the Scandinavian countries – the social democratic model described by
Esping-Anderson (1990).
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http//www.healthright.org
http//www. munwha.co.kr
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