Technical briefing on the "Evolution of health policies and programmes in the Republic of Korea"

, WORLD HEALTH ORGANIZATION

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REGIONAL OFfiCE FOR THE WESTERN PACIFIC BUREAU REGIONAL DU PACIFIQUI! OCCIDENTAL REGIONAL COMMfITEE Forty-seventh session Seoul 9-13 September 1996 WPRlRC47Ifechnlcal brieflngl2 6 September 1996 ORIGINAL: ENGLISH

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ORGANISATION MONDIALE DE LA SANTE

.. "EVOLUTION OF HEALTH POLICIES AND PROGRAMMES IN THE REPUBLIC OF KOREA"

This document has been prepared by the members of the Technical Briefing panel as background information for the session. It describes the historical development of the health policies and programmes in the Republic of Korea and analyses the advantages and disadvantages of the measures adopted. in the context of the circumstances which

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influenced their development. .

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1. INTRODUCTION

The health care system is part of the social system. Health policies and programmes reflect changes in society and health conditions. The RepUblic of Korea is one of the most rapidly

industrialized economies in the world. It has experienced fast development with unprecedented socijll and cultural changes since the early 1960s. During the Korean war, its economy could not even sustain the basic needs of food and housing. Korea's Gross National Product per capita (only US$82 in 1961) was one of the lowest, even among less developed countries (see Table I). The aftermath of the Korean War was not confined to the economy but affected every area of society. After the establishment of the new Korean government in 1948, all administrative and legislative systems were not fully operational for more than 10 years after the war ended.

Table 1. Gross aational product per capita

Year

GNP per capita (USS)

1961 1971 1981 1991 1995 SOUrte: The Bank of korea

82 289 1734 6498 10076

Related to the social and economic conditions, health status and the health system infrastructure remained poor. During the immediate post-war period, the average life expectancy was no more than 59.7 years, and the infant mortality rate (IMR) was as high as 4!!.4 per 1000 population. About 30 years of rapid economic progress, Initiated and promoted by the Government's five-year economic development plans since 1962, profoundly transformed the country from an

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I agricultural to a highly urbanized and industrialized society. With the growth rate close to 10 per cent per year, the per capita GNP reached about S I0 000 in 1995, which was more than 100 times higher than in the early 19605. The accelerated rate of urbanization, which was due to economic growth, is also remarkable. The proportion of population residing in urban areas has risen from 43.7% in 1961 to 88.40/0 in 1995. This period shows comparable, if not identical, trends in the health indicators. In 1993, the life expectancy had extended to 68.9 years for males and 76.8 years for females (see Table 2), and the IMR had improved to 12.8 per 1000 population in 1990. As a result of longer life expectancy, the proportion of the elderly more than 65 years old has increased to 5.5% of the population. A more ."""\ distinct change can be found in the transition of mortality and morbidity patterns. Communicable diseases, which had been the main causes of death and illness until 1970, have mostly been replaced by lifestyle related diseases as in the more developed societies.

l

I

Table 2. Life expectancy

Life expectancy (yean) Year 1960 1970 1980 1990 1993 Source: National Statistical Office

Male 53.0 59.8 62.7 67.4 68.9

Female 57.8 66.7 69.1 75.4 76.8

No other country has developed economically and socially as fast as the Republic of Korea. The health profile of the country, as a consequence, shows a combination of social and cultural problems associated with poverty on the one hand and affluence on the other. In this respect, Korea has emerging issues and the need for a response for the future in common with many developing countries in the Western Pacific Region.

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2. EVOLUTION OF THE REPUBLIC OF KOREA'S HEALTH POLICY AND PROGRAMMES - AN OVERVIEW

Because Korea's economy has progressed so rapidly, health needs have also changed qualitatively and quantitatively. The Government has developed health policies and programmes which deal with continually emerging health needs. Such policies and programmes include creation of government and nongovernmental organizations, legislation, interventions, and development of research institutions. Based on the policy and programme content, major evolving issues can be classified into seven areas, which follow the sequence oftheir development. They are summarized as follows.

1.

Foundation of national public bealtb systems and control of communicable diseases from the 19~Os

The establishment of the Korean Government in 1948 could be regarded as a landmark for the development of a modem health care system infrastructure. In the Immediate postwar period, the Ministry of Health, founded in 1949 along with the Bureaus of Medical Affairs, Public Health, and Pharmaceuticals, played a key role in public health programmes which focused on the control of infectious diseases such as malaria, cholera, tuberculosis, leprosy, etc. The so-called "dispensaries" had been founded since 1953 as local public health facilities, and were developed into public health centres in the late fifties and early sixties. The function of the dispensaries was to control communicable diseases and provide basic medical services. The Public Health Centre Law was enacted in 1956 with only limited implementation until revision in 1962. Accordingly dispensaries were gradually transformed into public health centres between 1959 and 1962. Control of infectious diseases was the core of public health programmes because the main causes of death and illness were communicable diseases, such as typhoid fever, smallpox, diphtheria, dysentery, Japanese encephalitis, malaria, cholera, tuberculosis, etc. In 1951, as many as 11530 deaths were recorded due to smallpox; and in 1954, 2.2% of all military servicemen were Infected with malaria.

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Public health measures, including sanitation and vaccination, were developed and extended to deal with such problems. In 1952, production of the BCG vaccine started and was used for mass immunization. As a first-line administrative measure, the 19S4 Communicable Diseases Prevention Act was introduced. This mandated basic immunizations and reporting of major infectious diseases. Also in the same year, the Quarantine Act started implementation.

2.

Family planniDK and populatioD cODtrol; from early late 1960. to 19. Since the late 19505, family planning had been considered an essential component of public

...

health programmes at the national level, because the population was rapidly increasing at a rate of over 3.0% in the early 1960s, and also because explosive population growth might hinder economic and social development. In 1961, the Korean Association of Family Planning (KAFP), a representative It has been instrumental in successful

nongovernmental organization (NGO), was founded.

programme development and implementation, in cooperation with the Government and with research institutions, for more than 30 years. The KAFP recruited volunteers who were willing to actively participate in birth control measures and education programmes. The association also contacted the sexually active target population through its branches, disseminating contraceptive skills and sharing a positive attitude towards their practice. In the public sector, public health centres were a keystone in family planning and reproductive health. In 1962, family planning counsellors were placed with registered nurses or midwives in every centre in districts and communities. Also in 1964, a family planning section was introduced to the provincial government as an intermediary between the central and district governments. Backing up the family planning practice, the Maternal and Child Health Care Act was passed later in 1974. In particular, the promotion of family planning by the Government was closely related to diverse economic advantages and disadvantages. For example, medical insurance coverage for

...

delivery, and fringe benefits from insurance and the tax system were limited up to the second child. The medical insurance coverage attempted to correct legislative and administrative institutions which had been discriminating against having daughters for a long time.

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Research institutions also facilitated family planning programmes. The Korea Institute of Family Planning, founded in 1971, was the first national research institution actively involved in health services research and development. Its main activities included training of health personnel, technical assistance, planning and development of education material, etc. The success of family planning and population control programmes has been remarkable. Popu lation growth rate, as high as 3.1 % in the early 19605, has been dropped rapidly to I. 70/0 in 1975, and to 0.9% in 1995 (see Table 3). Accordingly, the significance of fertility regulation is decreasing. The new goal of family planning has shifted to improving the quality of family planning practice, through the introduction of safer and more effective contraceptive methods, and expanding family planning options through infertility prevention and management. Also the health of mother and baby is being given greater emphasis. Improvement of genetic health is pursued by enhancing antenatal care and prenatal screening for genetic diseases, along with more intensive 'well-baby care' after the birth. implementation of demonstration projects, evaluation,

Table 3. Annual population Irowth rate

Year 1961 1965 1975 1915 1995 Source: National Statistical Office

Annual population growth rate (%)

3.10 2.55 1.70 0.99 0.90

3.

Strengtbenlng of healtb Hrvlcel for undenerved anu from the 1970. In 1975, the Korea Health Development Institute (KHDI), a natIonal Institute supported by

special legislation, was founded to develop appropriate strategies and detailed methods to enhance the supply and improve the quality of health services to underserved areal.

The KHDI became a

cornerstone for a series of community-based model developments for the promotion of primary health care in rural areas. The first target was to develop appropriate human resources for

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underserved areas where most of the population were suffering the effects of a lack of medical personnel. As a result, Community Health Practitioners (CHPs) were trained and developed in the late 1970s. Recruited nurses were stationed in remote rural areas as CHPs, after six months' basic training, including diagnosis and management of simple and common diseases, to provide basic medical services to the residents of rural areas. Since 1911, more than 2000 CHPs have been developed and placed. All these programmes were supported by a spec:iallaw "Health Care in Rural Areas", eliacted in 1980. This law also provided a basis for strengthening of health centres and sub-centres with unprecedented allocation of medical doctors, particularly in rural areas. New medical school

graduates were deployed as so-called Public Doctors (POs) for as many as three years in rural health centres and subcentres, replacing their three years' compulsory military service. Their numbers dramatically increased, from about 1500 in 1983 to more than 3700 in 1994. The main functions of the POs extended beyond the basic curative services to prevention and community based health programmes such as health education. As a result of this approach, the access of the rural population to basic health care was dramatically improved up to the early 1990s. On the other hand, because the private sector is the dominant provider in the quality and quantity of health care, the demands or needs of the population could not be fully met only by the resources of the public sector. Consequently, supporting and facilitating the private sector became another critical programme for the Government. Provision of 'soft' loans at favourable interest rates to private hospitals, arranged and endorsed by the Government, has been one of the major incentives to strengthening and expanding health care facilities in underserved areas. 4.

Establi.hment and expansion of national health insurance from 1977 to 1989 As in most developed countries, the development of the National Health Insurance (NHl)

programme through its financing system, had a tremendous influence on other components of the national health system infrastructure. The Republic of Korea has successfully established the NHl system with universal coverage within a very short period. The NHI of Korea was initiated in 1977 and completed in 1989. It has profoundly changed all features of the Korean health care system

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within only 13 years. The NHI has expanded its coverage from large to small companies, and from the employee to the self-employed. Along with the introduction of the health insurance, a governmental programme was established providing Medical Aid for low-income eamers who could not afford the insurance contributions. Its beneficiaries were divided into two categories. The first Included those living in public facilities, and the second, the unemployed who relied on government support to their family for their living expenses.

..., With the establishment of the NHI and Medical Aid, the number and proportion of medical security beneficiaries has increased greatly. The completion of universal coverage depended on how the self-employed were included in the insurance scheme. In 1988, after more than six years of demonstration projects, the Government decided to extend the insurance to the self-employed through subsidizing 50% of expenditure on insurance. Owing to this subsidy, more than 40"/0 of the popUlation was newly included in the insurance programme. Several factors contributed to the successful expansion of the Korean NHI. Among them, the following are considered as the major ones. First of all, rapid economic development enabled employees and employers as well as the self-employed to afford expenditure to some extent. Even the Medical Aid and the governmental subsidy for the self-employed were brought about in part by economic development. The second contributing factor would be the so-called "low premium and limited benefits". For example, the premium of salary workers is about three per cent of their wages and the directly paid premium is only half of this rate while the other half is paid by the employers. Undoubtedly due to the low level of premium, employees and employers easily accepted the insurance, whereas the copayment rate is relatively high and certain services are excluded from the benefits. Also in accordance with the low premium, the payment schedule to providers has been kept under strict control by the Government to balance the premium and reimbursement. The final factor is a well organized governmental administrative system and hlghperforming bureaucrats. The government system has been keeping track of every instance of an individual changing residence. The bureaucrats have been working efficiently in membership

registration, contribution collection, and benefits management.

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The national health security programme of Korea now faces newly emerging problems and issues. The expectation of the population for high quality care is sharply increasing. The high copayment rate and limited benefits create discernible economic barriers to equitable access to health care, especially in poorer groups. Also the efficiency of insurance management, including financing and the operation of insurance societies, should be improved.

5.

Strengthening of the national health system Infrastructure froID early 1980s With the initiation and expansion of the health insurance programme, due to the removal of

the economic barrier to access, the demand for health care showed an enormous increase throughout the 1980s (see Table 4). Accordingly, the demand for health resources, including human resources and facilities, had to be met with a sharp increase in numbers.

Table 4. Increase of health eare utilization

Out-patient Year 1978 1981 1986 1991 1994 No. of visit days per capita 0.71 1.85 1.73 3.12 3.72

In-patient No. of admission per 100 people 3.70 4.95 4.08 6.47 7.11

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Source: National Federation of Medical Insurance

First of all, there has been a rapid increase in the number of medical doctors. The supply of medical doctors, mainly promoted by newly founded medical schools, has more than doubled from about 1400 new medical enrolees in 1976 to 3000 in 1994 (see Table 5). Simultaneously, the

increase of hospital facilities has been accomplished, through direct government investment or provision of 'soft' loans to the private sector. As a result the number of beds per 100 000 population rose from 104 to 248 in 1990 (Table 6).

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Table S. Increase in the number of mediealldoo"

Year 1971 1976 1981 1986 1991 1995 Source: Korean Ministry of Education

Number of medical schools 14 14 22

21 32 36

Such consolidation of health resources was influenced by a national planning programme undertaken in the early 1980s. In 1980 and 1984, a group of experts, in cooperation with the government, developed a nationwide health plan, known as the Korean Health Resources Allocation Model (KOHRAM), for optimal allocation of resources by localities.

Table 6. IDcrease iD the Dumber of doctOR and beds

Number of doctors Year 1971 1976 1981 1986 1991 1994 Number 16207 17848 23742 31616 45496 54406 Per 100000 population 49.2 49.7 61.3 76.7 105.1 122.4

Number of beds Number 17506 22792 40255 79935 107223 141 267 Per 100000 population 53.2 63.6 104.0 192.2 247.8 317.8

Source: Korean Ministry of Health and Welfare

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Although health resources have expanded rapidly for more than a decade, there is continual controversy over the appropriate numbers of medical schools, and hospital beds categorized by facilities and geographical distribution. To accomplish a well-organized health resources

infrastructure in terms of quantity, quality, and distribution, a policy decision that must be carefully considered is whether, and how much, to intervene in the health resource development process. However, the absolute dominance of the private sector, with more than 80% of hospitals privately owned, definitely limits policy options.

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6.

Health promotion; 19905 An improved socioeconomic environment represented by better sanitation and nutrition,

easier access to health care such as immunization and essential drugs, etc., have allowed increasing numbers of population to live much longer than previous generations. With longer lives, causes of illness and death have moved from infectious diseases to chronic and lifestyle related conditions. For example, the leading cause of death in the 1950s was tuberculosis, which ranks only eighth in the I990s. Instead, malignancies, cerebrovascular diseases, accidents, and hypertension, today rank

among the major causes of death. Health promotion, as a strategy as well as methodology to cope with rising unhealthy lifestyles, can be counted as one of the main programmes in the 1990s and the coming 21st century. From the start, the policy of health promotion has focused on "advocacy for health" and "social support for health". In 1995, the Government passed the Health Promotion Act, to regulate the duties of central and local governments related to health promotion programmes. Included are planning and evaluation of health promotion programmes at the provincial and district level, establishment of the health promotion advisory committee composed of local residents and public organizations at all levels, regulation of alcohol and tobacco consumption, etc. Additionally, a special fund for health promotion programmes was founded, to be supported by revenue from taxation on tobacco consumption .

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7.

Health care reform; 19905

· th "TUT'S universal coverAOe as previously mentioned, there has Even afie r guaranteemg e r'Ull .... , been an ever-increasing demand from the public for high quality and improvement in equity within the NHi scheme. Also it is necessary to improve the efficiency of health resources utilization and management in the health system. Such demands pushed the Government to take action towards

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reviewing major problems and issues through a newly organized "Health Care Reform Committee" in 1994. The Committee, active through 1995, recommended policy alternatives after review, discussion, and input from the public. Major recommendations were as follows: (I) expanding insurance benefit to cover hiBh-tech services such as computerized tomography (CT) and some preventive services; (2)

extending the risk adjustment fund among insurance societies for certain categories of diseases and changing the rule on government SUbsidy to insurance societies for the self-employed;

(3)

searching for an alternative payment system, such as Diagnosis Related Groups (DRG);

(4)

developing new modalities of health services and institutions such as long-term care facility, ambulatory care facility, group practice, home care service, etc.;

(5)

Implementing a new hospital accreditation programme to improve quality of hospital care.

As expected, these recommendations provoked a heated controversy which has continued for more than two years, especially among providers -- including hospitals and private practitioners. Some of the recommendations were immediately accepted by the Government and implementation announced. However, some of the reform programmes have not proceeded as smoothly as initially planned. As previously summarized into seven issues, major steps were taken in the progress of health policy and programmes in accordance with the health and social demands of the times. Among them, family planning, national health insurance, health promotion, and health care refonn are described in greater detail in the following sections.

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3. FAMILY PLANNING PROGRAMME

It would be generally agreed that the Republic of Korea's national family planning programme provides an example of successful experience in this field across the world. At the initial stage, it was planned as a means of coping with the high growth rate of population in the late 1950s. Since 1962, when the Korean Government officially launched the First Five-Year Economic Development Plan, the programme has been an integral part of a series of Five-Year Economic and Social Development Plans. Since the beginning, the programme has been mainly implemented by the Government. Political, financial and administrative support and directions have been provided through the public health centre network, which reaches the peripheral level of the country. The Government created a large corps of family planning field workers in order to motivate clients to practise contraception by door-ta-door home visits, and developed private physicians who provided free contraceptive services to users, with the charge being reimbursed by the Government through the health centre network. There had also been a semi-governmental research institute for family planning which backed up the programme through providing theories for implementing the family planning programme and training for family planning field workers. Its activities were firmly based on practical and empirical results acquired through various kinds of research. In formulating policies and conducting research, academic societies, including professors of universities, have been deeply involved in supporting the Government and acting on behalf of the research institute. In addition to the above-mentioned public sector, nongovernmental organizations such as the Planned Parenthood Federation of Korea also strongly participated in the programme and played a leading role in mobilizing untapped community resources and disseminating the innovations through their own channels, in particular, through the mother's club. With these well organized channels and creative efforts, Korea's national family planning programme increased the contraceptive practice rate of married women aged 15 to 44 from 24 per cent in 1970 to 79.4 per cent in 1991, and it reduced the total fertility rate from a high 6.0 per woman in 1960 to below the replacement fertility level of 1.6 per woman In 1990. During the period of 30 years, the programme dramatically contributed to the reduction of the natural growth rate of population, from 3.0 per cent in 1960 to 0.93 per cent in 1990.

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Table 7. Changes in major population Indleaton of Korea, 1960-1990

Items Total Population (l 000) CBR(lOOO) CDR (1000) NIR (100) Immigration Rate (I 000) Population Increase Rate (%) Population Density (sq. krn.) Total Fertility Rates (person) Family Planning Practice Rates (%) Life Expectancy at Birth (year) Source: National Statistical Office

1960 25012 41.2 12.1 3.00

1910 32241 29.9 9.4 2.04 0.4

1980 38124 23.4 6.7 1.67 \.0 1.57 385 2.7 55 65.8

1990 42869 15.6 5.8 0.98 0.5 0.93 432 ", /

3.00 254 6.0

2.00 328 4.5 24

f

I I

1.63 79.4('91 ) 71.3

"

55.3

63.2

Currently there is a great debate among planners and administrators about what should be the future direction of national population policy. One group Insists that the past population control policy should be maintained at all costs in consideration of the following unfavourable socioeconomic conditions of Korea: (I)

limited cultivable land and natural resources; relatively low level of health status; seriously unequal income distribution; poor segmentation of labour market.

(2) (3) (4)

Others assert that if the nation's population reaches the population growth level too soon, Korea will inevitably face a rapid ageing problem with a shortage of a young economically active population. According to this group, the realization of a zero population growth rate should be postponed as long as possible. This debate implies that even though Korea has been successful in reducinl the annual natural growth rate of population and fertility level, and thus in controlling the size and structure of

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the population, the country has been facing other problems in the population. These are: how to improve the quality of the population, and how to cope with the adverse effects of population control policy under the current and future various socioeconomic constraints. First of all, the Government should tackle the problems incurred by a strong traditional boypreference culture. Boy-preference, which has existed for a long time in Korean society, influences every aspect of the population policy negatively. Most couples want to have at least one or more boys at any cost. They therefore practise anything in order to have a male child, even by employing non-scientific means. Due to the persistent boy-preference culture, the sex ratio at birth in Korea was approximately 116 in 1995. If the trend of the ratio continues, Korea will face serious societal problems including marriage and social relationships in the near future. Rapid urbanization because of mass migration of the population from rural to urban areas and over-population of several large cities, in particular, Seoul and its surroundings, is the second problem met. In 1990, the urbanization rate was 74.4%. In the same year, Seoul, the capital city, containing 10613 000 persons, accounted for as much as 24.4% of the total population of Korea. Six other large cities contained 20 647 000 persons, or 47.6%. The high rate of induced abortion is the third problem which the Korean national family planning programme should resolve. The total abortion rate for married women increased from 0.7 abortion per woman in 1963 to 2.9 abortions in 1978. Fortunately, the rate fell gradually to 2.7 in 1981,2.1 in 1984 and 1.6 in 1987. The high abortion rate of Korean married women may be a sideeffect of the strong national fam i1y planning programme which overemphasizes the number of everborn children. Finally, the future programme should pay attention to problems resulting from the ageing of the population. The age group of 65 and over increased from 3.1 % in 1970 to 5.1% in 1990. It is projected to grow to 6.8% in 2000. The ageing of the population will eventually be accompanied by the ageing of the labour force and increased relative numbers of young and old dependants. Also it will result in a rapid growth in the number of episodes of illness, hospital stay for care, and financial resources required for welfare services including health services. To resolve problems related to the popUlation along with fertility transition, the Korean Government should shift its goal and objectives of population policy from a quantitative to a qualitative one. The major issues to be taken into consideration are the following:

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(I)

Maternal and child health services should be strengthened and integrated fully with the

family planning programme in order to improve the quality of the population. (2) Rural development should have a much higher priority and be further promoted to retain the

population as much as possible. (3) Information provision, education and communication activities should be strengthened with

emphasis on regular school education and mass media, to tackle the problem of boy-preference and to reduce induced abortions. (4) Research should be carried out to solve family and sex-related problems due to low fertility

and population transition. (5) Nongovernmental organizations should be strengthened to increase self-reliance and to

manage family planning services by themselves.

4. HEALTH INSURANCE

1.

An outline of history The role of the state has been marginal in caring for the sick for a long time. Traditionally,

the health service was the responsibility of the individual, not of the society in Korea. It was the person, the family, the clan, and the villagers and the community that took care of the sick in need of help. Health insurance changed the concept of caring. The Korean Health Insurance Act was passed in 1963, and the first voluntary health insurance programme was launched for workers of the Naju Fertilizer Company and their dependants in 1965 on a pilot basis (see Table 8). Since then, eleven more voluntary health insurance programmes were organized. reasons for adopting the voluntary health insurance approach were self-evident: ( I) At that time, the economy in general was poorly developed and many Koreans suffered from The

preventable diseases such as tuberculosis and various parasitic diseases. Thus, their ability to pay for medical care was extremely limited.

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...

(2)

Financial assistance from the Government obviously had to be limited. The health resources were unevenly distributed, and insufficient to meet the needs of medical

(3)

care under what was called 'social health insurance'. (4) The administrative capacity was Inadequate to carry the load of a compulsory health

insurance programme.

. 1963 1964 1965 1970 1977 1979 1979 1980 1981 1981 1982 1983 1984

Table 8. History of the Korean health insurance

1""\

The Health Insurance (HI) Act passed The Enforcement Decree passed The first voluntary employees HIS established (Naju Fertilizer Co.) The first voluntary self-employed HIS established (Pusan Blue Cross) Employees Health Insurance (EHI) implemented (companies with 500 workers and over) Public Officials & Private School Teachers HI Act implemented (KMIC established) Extension of EHI to companies with 300 workers and over Extension of KMIC to soldier's family & school workers and their dependants Extension of EHI with companies with 100 workers and over Pilot project on compulsory self-employed HIP started (Hongcheon, Okgu, Kunwi) Extension of pilot projects to Mokpo, Boeun, Kangwha Extension of EHI to companies with 16 workers and over Pilot project on division of prescribing and dispensing between doctor and pharmacist (Mokpo) 1984 Pilot project on HI for oriental medicine (Cheongju) 1985 The lifting of the ceiling for the monthly standard remuneration amount 1986 Introduction of a fixed amount of copayment for ambulatory care 1987 Nationwide extension of HI for oriental medicine 1988 The rural self-employed HIP implemented 1989 The urban self-employed HIP implemented (universal coverage achieved) 1989 The pharmacy health insurance implemented 1991 The HI Financial Stability Fund established • KMIC (Korea Medical Insurance Cooperative) HIS (Health Insurance Societies) HIP (Health Insurance programme) The history of voluntary health insurance has proved that it can hardly achieve the goal of universal population coverage. In fact, only 0.2% of Koreans were covered under the voluntary health insurance after twelve years' operation with a substantial amount of government subsidy. Thus, the Government decided to launch a compulsory programme In 1976.

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It was in 1977 that the classic Health Welfare State, in its modem sense, began in Korea when the Government put in place both the Medical Aid programme for the needy and the Social Health Insurance provisions. The Health Insurance Act obliged those industrial establishments with 500 workers and over to organize health insurance societies, which were guided by the National Federation of Health Insurance (NFHI). The rationale behind this policy was to expand the societies gradually, taking financial conditions of industries into account. This was followed by the

implementation of the Government and Private School Employees Health Insurance Act in 1979 administered by the Korea Medical Insurance Cooperative (KMIC). Thus, the employees' health insurance programme was divided into two different entities, which has led to vigorous competition between the two. KMIC expanded its coverage to include soldiers' families and primary school administrators and their dependants in 1980. In 1979, the Health Insurance Act was amended to require medium-size industries with 300 workers and over to provide health insurance. This was again expanded to cover small industries with 100 workers and over in 1981. In the same year, three regional health insurance societies were organized to test the viability of compulsory self-employed programme on a pilot basis. And three more pilot projects - Mokpo, Boeun and Kangwha - were added in the following years. In 1983 the health insurance programme was greatly expanded to cover workers employed by industrial establishments with 16 workers and over. Industries with as few as five workers could join the programme on a voluntary basis. In 1984, two demonstration programmes were implemented to test the possibility of dividing prescribing and dispensing between doctors and pharmacists, and of including oriental medicine in the insurance benefit package. In 1986, a special task force was formed to blueprint the universal health insurance coverage. The task force proposed to expand health insurance to the rural self-employed persons prior to the urban workers, and to use the modified formula for levying the contribution. This consisted of four factors - income, assets and properties, number of family and household. By January 1988, those 134 regional health insurance societies were organized to cover all rural residents at the county level. In July 1989, the coverage was extended nationwide even to the self-employed in urban areas. In addition, the compulsory coverage was extended to Industries with five workers and over, and to those who were voluntarily enrolled, together with the incorporation of occupational groups such as pharmacists, physicians, crop dealers, and taxi drivers into the compulsory regional health insurance.

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The Korean health I.anan Pl'8lnlBlIle today Population coverage Koreans can be divided into wage earners and non-wage earners for health insurance

purposes, excluding the Indigents under the Medical Aid programme and soldiers (see Figure I). Wage earners can be divided into workers in industrial establishments and government workers and private school employees. Industrial workers and their dependants are covered by the Employees' Health Insurance (or Workers' HI), and public officials and private school employees and their dependants by KMIC. Non-wage earners are divided into rural and urban health insurance societies. These are organized on the basis ofadministrative unit boundary.

Figure 1. Composition or the Koreaa Health IDlunace System

Korean population

I Wage earners

I

J Non-wage earners

1 Industrial workers

1

1 c ~is and PubR sc 00 ers

I Rural residents Rural H.1. societies

1 Urban residents

j Employees' H.1. societies

Korea Medical Insurance Corporation .

J

I I

Urban H.1. societies

l

1

National Federation of Medicallnsurancc

I

Table 9 shows that the Korean Health Security programme has expanded rapidly during the last 19 years. It consists of the health insurance programme covering 96.2% of the total population

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and the Medical Aid programme for needy persons and the rest 3.8%. The former consists of 21.6 million employees, 47.1 %, and 22.5 million self-employed persons, 49.1 %.

Table 9. Expansion or the healtb security programme (1977-1996)

1977 No. of Beneficiaries ('000) Health Insurance - Wage Earners Industrial Workers Government & Private School Teachers - Non-wage Earners Rural Self-employed Urban Self-employed Medical Aid Programme Total Population 2095 5235 5.7 14.4 3140 3 140 3 140 % B.6 8.6 8.6

1996 No. of Beneficiaries ('000) 440BO 21560 16750 4810 22520 3910 18610 1740 45820 % 96.2 47.1 36.6 10.5 49.1 8.5 40.6 3.8 100.0

(2)

Administration of the programme Currently, there are three types of insurers controlling the administration of health insurance:

145 employees' societies, KMIC and 227 regional self-employed societies. The National Federation of Medical Insurance (NFMI) has a membership of373 societies in 1996. The societies and KMIC are in charge of identifying the membership qualifications, collecting contributions, paying the bills for health services rendered to the insured, and carrying out benefit-related matters. The NFMI is a special public corporation established in accordance with Article 27 of the Health Insurance Act for the purpose of efficient management of health insurance programme. The Federation aims at contributing to the enhancement of national health through research and programme development and advancing social welfare through efforts to bring societies together.

WPRlRC47ffeebnicai briefing/l page 21

Each of these employees' societies has its steering committee, which makes decisions by majority rule. The composition of the committee varies, but all should have half the committee members selected by employees and the other half by the employer. The chairman of the committee becomes the representing director of the society. The missions of the committee are making policies, promulgating and amending Articles of the society, approving the budget and settlements of accounts, setting the contribution rate and electing board members and the representative director. There are three types of area jurisdiction; city, county and ku (district of a large city). The members of the steering committee for a regional health insurance society are nominated by both the local medical society and the head of the administrative jurisdiction. The number of insurers have declined from 409 in 1989 to 373 in 1996. The economy of scale effect has vigorously been pursued by the management. The KMIC has 15 branch offices throughout the nation, and a single managerial network, which serves as the single largest insurer. The Corporation has a board of directors, consisting of the Insurance Bureau Chief of the Ministry of Health and Welfare, the Welfare Bureau Chief of the Ministry of General Administration, two executive directors and a chairman. The Board oversees the programme, budget and contribution, etc. The chairman is appointed by the Minister of Health and Welfare. (3) Insurance benefits Benefits are provided to the insured for sickness, injuries, child delivery and death, and are granted both in-cash and in-kind. Cash benefits are payable to the insured as part of the compulsory reimbursement in case of service proviSions at the health facilities not designated by the scheme. A fixed amount of funeral expenses is also available. Benefits in-kind are the main part of the benefit package, including statutory benefits like ambulatory and hospitalization services, maternity, surgery, pharmaceutical benefits, nursing care, transportation, and medical and maternity benefits after disqualification within three months of retirement. Benefits are fairly broad in the sense that the scheme covers the cost of CT scanning. However, the list of exclusions is still lengthy. The period of benefit is limited to 240 days and it will take four more years to provide a year-round benefit. The insured are required to share a part of their medical expenses at the point of service. They pay 20% of total costs in the case of hospitalization and a specific amount of money for

WPRlRC47treebaicai briefiag/l page 11

outpatient care, if the total cost falls below 10 000 won for medical care or 12 000 won for dental care. But if the total cost goes over 10 000 won for medical care or 12 000 won for dental, 40% to 55% of the coinsurance rate is applied according to regions and kinds of medical facilities (see Table 10). The exclusion items are as follows: cosmetic surgery, unauthorized treatment by the medical profession, special consultations, room charges beyond the fee schedules, bodily harm caused by criminal acts or intentional accidents, expenses compensated by benefits from other sources, direct visits to tertiary care hospitals, dental prostheses and preventive scaling, aid devices such as artificial arms, hearing aids, and high medical technologies such as MRI and Laser treatment. The benefits are suspended while in military service, during travel abroad, or when in the care of correctional institutions. The insured persons under the national health insurance seem to be burdened with the copayment and heavy exclusions. .-.

Table 10. Cost sharing formulae where the expense is below 10000 won (Unit; Korean Won) A Fixed Copayment Medical Facility General Hospital Hospital Clinic Dental Clinic Herb Clinic Health' Centre Area Rural· Rural· Both Both Both Age Under 70 Age Over 70

4000 4500 3000 3500 3000 1·3 days' prescription 4-6 days' prescription over 6 days' prescription rehabilitation therapy/day

4000 4500 2000 2000 1000 1200 I ~OO SIlO

Health Subcentre

1-3 days' prescription 4-6 days' prescription over 6 days' prescription all inclusive per visit

Health Post

1100 1000 1300 800 ~I

• A fixed copayment system is not working at the urban hospital and general hospital.

(4)

Financial support The financial resources of the insurance system are varying: contributions payable by the

insured and the employers, the governmental subsidy, and others.

Contributions are levied in

proportion to the level of income, but benefits are given independently of contributions.

WPRlRC47rreehDieai briefiDg/Z

pagel3 On the average, 3.13% of wages and salaries are levied for industrial workers, 3.8% for civil servants and private school employees, and 3.0% for soldiers. Contributions are equally shared by the insured and the employers. However, as for private school employees, the government subsidizes 20% of the contribution and owners of private school teachers pay the rest (30010). contributions are set by each insurance society within the range of rates se\ by the Act. The self-employed health insurance programme is financed by contributions from the insured and by government subsidies. The contribution of the insured is composed of two principles: the ability-to-pay and the basic-benefit principle. The former refers to the gral,ling of 30 classes Presently,

according to both their income and assets and property. The latter refers to the calculation of a fixed amount of contribution per household and per the insured person. There are four factors involved in determining the level of contribution by the insured. Meanwhile, the government subsidizes a part of the whole contribution and ot the total administration cost. This is equivalent to about 40010 of the total revenue of regional health insurance I . The government subsidizes 1 880 won per the insured person per month which has amounted to 755 billion won in 1995. (5) Provision of health services -Health services are mainly provided by the private medical sector. Few insurance societies own their health facilities except KMIC 2• Instead, public health centres, health subcentres and posts provide health care for the needy and the weak. This is particularly the case for rural areas. In the beginning medical institutions provided health care on the basis of voluntary contracts with health insurance societies. Understandably, this has caused the insured persons a great deal of inconvenience. The Government changed the law in 1978, and empowered the NFMI to designate all medical facilities as 'insurance care providers". About fifty thousand medical facilities are

compulsorily designated for the efficient and equitable provision of services· .

• I Initially. the government subsidy amounted to almost 50";" of the total «:venue of regional health insurance societies. It keeps going down.

> KMIC will open a modem general hospital with 600 beds in llsan city by 1998. J Those medical institutions that «:fuse to be designated (or to provide health care with the insured persons) are fined up to one million won for a breach of the law.

• The KO«:aD Medical Association seems unhappy with this unilateral designation of insurance care providers.

WPRlRC47ffeebnlcai brlennglZ pageZ4

At the moment of universal population coverage in 1989, the nationwide patient referral system was implemented to ensure that patients see a primary care physician first and then, if necessary, be referred to specialists or secondary/tertiary hospitals. The purpose ofthis system is to prevent patients from direct visits to more expensive facilities and specialists when they have a common problem. In this delivery system the nation is divided into 140 Primary Health Service Districts and eight Health Service Regions. These districts and regions have been created on the basis of administrative jurisdiction and natural borderlines. The insured can make a visit to various kinds of health facilities without restriction, except if they try to visit the designated special and general hospitals in the Primary Health Service District or a trip to any health facilities outside the District and particularly the facilities in other Health Service Regions. In these cases they need a doctor's referral. The similar nationwide referral system has also been applied for dental and oriental medicine. In the case of childbirth and emergencies, the insured have the right to choose any

facilities without a referral request (see Figure 2).

Figure 2. The health insurance care delivery system in Korea

Oiside Health Senrioe Ostrict (Seooi dEl y Qre)

Heath Senrioe Ostird(14O) (Prirray Care)

WPRlRC47frechDleal brienDgIl pagelS

(6)

Payment and claim review system Providers are paid for their services on the basis of reimbursement fee schedules. They are

normally reimbursed within 30 days from the date of submission, if nothing is wrong. The fee schedules are updated periodically at the National Health Insurance Deliberation Committee. Claims are reviewed by the Medical Fee Review Committee at NFMI. The Committee consists of ten full-time reviewers and 500 part-time members who are medical specialists. It is divided into a central committee and a local committee. Local committees review the claims filed by clinics while the central committee deals with the claims filed by hospitals and general hospitals. The Central Review Committee is assisted by pharmacists, nurses, medical technicians, and administrative staff and 25 professional subcommittees. Initially, technical review is conducted against the standard fee guidelines by review assistants. The first review is performed by full-time reviewers, the second review by professional subcommittees and the third review by a Central Review and Adjustment Committee. If dissatisfied, the insured or their dependants can submit appeals to the Medical Insurance Appeals Committee of the NFMI and KMIC. The Appeals Committee consists of three

representatives from the insured, employers, providers, and the insurer and the president of NFMI, who chairs the committee. If still dissatisfied after the appeal process, they can submit appeals to the Medical Insurance Reappeals Committee of the Ministry of Health and Welfare. The Reappeals Committee consists of three representatives from the insured, employers, providers and the insurer, the public and vice minister, who chairs the committee. Beyond these processes, they can file suit to a high court.

3. ( I)

A success story Some evidence Despite the weaknesses and vulnerability, the Korean health insurance programme is counted

as a success story. There is much evidence why this is so: First, the level of contribution is only 3% to 4% of wages and salaries, which is ranked as the lowest among universal health insurance programmes in the world. Interestingly, the average level 0.

WPRlRC47rrechnicai briefing/l page 26

of industrial workers' contributions has declined since the inception of the universal health insurance' . Second, the process of expansion has been extremely rapid. For example, it has taken only 12 years from the beginning of social health insurance programme implementation in 1977 to the universal population coverage in 1989. No country- has achieved the goal of universal coverage as fast as the Republic of Korea. Third, the scheme covers a fairly broad range of health insurance benefits for both inpatient care and outpatient, including diagnostic and treatment services, surgery, drugs, appliances, maternity care, transportation and limited dental care. Despite the limit of benefit period to 240 days a year in 1996, the benefit package was extended to include high medical technology like CT scanners this year. Fourth, the access to care has greatly improved. Currently, the mean number of annual physician visits per person is over eight times. Various studies indicate that the number of individual physician visits has increased from 1.1 in 1977 to 6.4 in 1989, which is equivalent to an increase of 5.8 during the 12 years. Also, the physician-use statistics of health insurance have increased by as much as 2.9 times from 1979 through 1993. Health insurance can take credit for satisfying the rising demands of health services. Fifth, in spite of the rapid rise of hospital childbirth since the inception of health insurance, the incidence rate of puerperal complications arising from pregnancy and confinement has significantly been reduced6 • This tells us that health insurance is a meaningful contributor to the health of pregnant women. (2) Reasons for success The development of the Korean health insurance programme can be divided into three periods: (I) voluntary programme period (1965-1977), (2) compulsory programme period (19771989), (3) universal health insurance period (I 989-to date). The Health Insurance Act was passed in 1963. The voluntary programme period started when the first voluntary health insurance society was

S The

average level of contribution has declined from 3_S7 in t 986103.06 in 1993.

6

The incidence rate per J,000 Insurees has dropped from 32.3 In t 987 to 27.3 In J994.

"

WPRlRC4711'celiaicai briefiag/l pagel7

organized in 1965. Since then, eleven additional voluntary health insurance programmes have been organized on a pilot basis. The first stage succeeded in selling the idea of health insurance to the general population, but was limited in the expansion of population coverage'. The second stage began in about 1977 when an employees' health insurance programme was organized for industrial workers and their dependants. The compUlsory programme period continued to expand, covering the entire population in 1989. Various health insurance strategies have been tested during the period. The third stage, the universal health insurance period, started when the 1988 rural selfemployed programme was followed by the urban self-employed programme nationwide in July I, 1989. Already seven years have elapsed since universal coverage. It has taken 26 years to cover the entire population (44 million) since the legislation, and 12 years since the inception of the social health insurance programme. Why has this been possible within such a short period of time? The following provides some possible explanations for this question. (1 )

Political aspects Since Independence in 1945, Korea has been divided into North and South. The socialistic

North Korea has adopted the national health service approach as the main social policy. Meanwhile, the capitalistic South Korea has followed the ideology of a market approach to health care like the other sectors of the economy. Most health professionals acknowledge that South Korea had lagged far behind in providing health care to the general population for a long time. It was only in 1969 that the South Korean economy exceeded the North Korean's in terms of per capita GNP. Competition is still ongoing. In the 1970s, the South Korean Government made efforts to develop a social insurance policy as a measure of generating financial resources. This policy was well in accordance with the basic direction of the Fourth Economic Development Plan of South Korea (1977-1981), part of which was the strategy of promotion of social development and equity. It was natural that South Korea

..

chose the social insurance policy to recoup its weakness in the use of health services by people . There is another view of the social insurance programme in Korea. It is also acknowledged that the military regime in the early 1960s, lacking legitimacy in the process of gaining power, tried its best to compensate the evil with good. The compulsory health insurance was one such good. This

7

Only about 0.2% of total population was covered by the twelve VOluntary health insurance programs in 1977.

WPRlRC47rreehDicai brietiDg/l

pagelS

view has been widely supported by the citizen movement group. The introduction of the social insurance programme was a politically sensitive issue and it has been very difficult to deny the role of the state in the provision of a compulsory health insurance. Both views have a realistic logic and theoretical background. (2) Economic aspects The rapid economic growth, which was based on labour-intensive export industries, expanded both job opportunities and employment. Average annual rates of economic growth have been fluctuating around 10% per each Five-year Economic Development Plan period. Moreover, a strong leadership commitment to economic development was built into the Government's decisionmaking process which was indispensable for social welfare development. Providing health care presents mounting problems for resource allocation. Simply providing more resources for health care development is not enough. Substantial changes would have to take place in the organization, delivery and financing of health care. In Korea, where claims on resources have been extremely competitive under the pressure of North/South confrontation, it has been particularly important that additional health resources should be mobilized and that a new financing and payment mechanism be developed through an organized social effort like a compulsory health insurance scheme. It is not too much to say that the rapid expansion of social health insurance has been possible due to the rapid economic development during the past three decades. (3) Social aspects Two things are noteworthy in the social aspects of health insurance development: the manpower factor and the effect of price discrimination. The presence of trained human resources is one of the key factors in producing and financing health services. The fact that Korea has had an enormous pool of such resources, including devoted elite bureaucrats as well as middle management workers, has helped Korea to develop social health insurance. It might have been impossible to launch the national health insurance programme without establishing basic management units for membership registration, contribution collection and benefit management, etc. The trained

-

manpower pool in the RepUblic of Korea enabled such administrative capacities to be set up easily. A negative aspect of price discrimination against the uninsured should not be forgotten. At the outset, the insurance fee schedules were set at approximately half the price of customary charges. The Government believed that increased demand for medical services after the inception of health

WPRlRC47fl'echnical brlefing/l

pagel9

insurance would compensate medical providers for the loss incurred from the reduced fees. However, on the contrary, the price difference became bigger between the insured and non-insured as the population coverage increased. For example, the average customary charges for outpatient care for non-insured patients doubled that for the insured in mid I980s'. Many called the medical care price discrimination "social injustice". The policy of low fee schedules has helped to expand the health insurance rapidly, however, it has brought about some undesirable effects. There would be no

•

option but to expand the health insurance rapidly to universal coverage, if the inequality were to be eliminated. (4) Technical aspects -- Health insurance strategies The social sickness-maternity insurance was first provided exclusively for the benefit of wage-earners. Unlike in most countries, both manual workers and white collar employees, and their dependants were insured alike. Applying health insurance on the basis of employment and by

categories of protected persons has helped policy makers to expand it rapidly. As mentioned above, the expansion was greatly facilitated by the compulsory designation of all medical facilities as the source of insurance medical care9• This is very important from the viewpoint of available resources. It would hardly be possible to have universal coverage without providing for the proper care of all

sectors of the population nationwide. Another feature was limitation of the scope of insurance benefits. High cost-sharing by the insured at the point of service became fashionable. Rather lengthy exclusion items were adopted. The period of benefits has been extended gradually, starting from 180 days a year. These measures contributed to making it possible to finance the universal health

insurance programme with such low contributions. It must not be forgotten that universal health insurance was an innovation, in so far as it

granted a right to everybody to demand health care benefits. One of the most difficult tasks in realizing this right is to devise a working instrument for levying the contribution of the selfemployed. Korea has modified the Japanese model of contribution determination by adding the element of car ownership-related contribution. Accordingly, the insured person's contribution is

I

The average insuranee fee schedules amounted to 49.0% of average customary charges in 1984.

• Medical practitioners are quite discontented with this compulsory designation. But it is not known how many of them actually wish to avoid participating in health insuranee now.

WPRlRC47rreebDieal briefiDg/l page 30

composed of amounts based on his income, property and car-ownership, plus fixed amounts per household and per family member insured. This model has been working fairly well until now.

4.

Problems abead aDd directioDS for tbe future ]n order to further the existing programme, the following points should be reconsidered:

financial destabilization of regional health insurance programmes, financial inequities, poor access to care, cost containment, managerial inefficiency and an inadequate reimbursement system. (I) Securing the financial stabilization of regional insurance Despite the surplus financing of employees' health insurance, some regional health insurance societies are in danger of financial deficit. The gaps in financial solvency have been widened

.

between the two programmes and among insurance societies. Without narrowing the gaps, financial stabilization will be endangered under the present system. Therefore, the current financial adjustment scheme should be redesigned to strengthen the social solidarity function of health insurance programmes. More rigorous claim reviewing is another possibility. It is essential to suppress the demand for unnecessary care and to encourage preventive care and health education in the long run. (2) Pursuing financial equity Social insurance programmes must seek financial equity for members of society who are required to make contributions in accordance with their ability to pay. Inequitable financing can be traced to the regressive structure of contribution schemes for regional insurance. For example, the proportion of contributions from the ability-to-pay base is still only 63.8% in rural areas and 64.2% in urban areas. The high copayment structure and a long list of exclusion items are the main sources of inequity in financing of health care. More support is needed for low-income people, the disabled and the aged by lowering their contribution levels. In partiCUlar, the aged and the disabled should benefit from the reduced burden of copayment and from the provision of basic necessities like glasses, artificial limbs and hearingaids, etc. The income-related cost sharing formula is another possibility in the future.

WPR/RC47rrechaical brienagll pagel1

•

(3)

Enhancing the access to care Rural residents are disadvantaged, particularly those in the medically vulnerable areas. They

often complain of inconveniences owing to strict enforcement of the insurance health care delivery system. The poor are discouraged to use high cost technologies like CT and MRI because of high copayment costs. Distribution equity should be sought among different members of the population. In order to do this, resources ought to be rationally distributed among areas and different sectors of economy. It is recommended that, to satisfy the needs of primary health care, the investment for public health centre facilities in urban as well as rural areas is reinforced. Special provision of a cross subsidy for the use of high-cost technologies is a possibility to relieve inequities in access. (4) Containing national health expenditures There is a danger that if the current rate of increase in national health expenditures continues at approximately 19.0% per year, Korea might face massively increasing health expenditures in the early years of the next century like the United States. Since the expansion of national health

insurance to rural residents in 1988, national health expenditures have grown fast. The percentage growth during the period 1987-1992 was at an annual rate of2I.8% (see Table II). With the national health expenditure growing faster than the Korean economy, the future of health insurance is not at all bright. So far, various cost containment measures appear to have failed in cutting the rapid rise of national expenditure. Therefore,both price control through the policy on low fee schedules and various utilization control measures have to be vigorously tried. However, it seems to be difficult to contain the costs without fundamental changes in the current fee-for-service payment.

WPRlRC47ffechnicai briefing/l page 31

Table ll. National health expenditure (current) and annual percentage growth (1985 -1992)

Year 1985 1986 1987 1988 1989 1990 1991 1992

Proportion of National Health Expenditures to GNP(%) 4.8 4.6 4.4 4.5 5.0 5. I 5.0 5.4

Percentage Growth of the Total National Health Expenditure

I,

" 11.6 13.0 23.4 24.0 23.7 17.1 21.2

Source: Korean Institute of Health Services Management

(5)

Promoting managerial efficiency The operating costs of running the national health insurance programme in Korea are fairly

high; about 9% of the total expenditures in 1995. This still is very high compared to international standards of, say 5%-6%. Production efficiency should be pursued to save resources for expanding the achievable health-impacting services and programmes. Information on managerial efficiency can assist in designing the organizational structure of health insurance. It is recommended that the size of insurance societies be enlarged so as to take advantage of

the economy of scale. To merge small regional insurance societies into a bigger one is a strong possibility. One of the more advanced approaches is to integrate all the regional societies within a province into a single provincial society. Also, competition in provision of services as well as in financing among insurance societies ought to be promoted in the future. (6) Improving the reimbursement system Public debates are going on concerning the optimum payment mode for health services in Korea. The general consensus is that Korea needs a change in the fee-for-service reimbursement

WPRlRC47f1'echaicai brieftagll pqe33

system. The Korean Medical Association and the Korean Hospital Association are unhappy with the trial ofa new payment scheme like the Korean version ofDRG. Refonn measures should gradually be introduced, particularly in the case of changing the payment system. Small-scale pilot projects are highly recommended. It is a truism to say that changes in the reimbursement system will succeed only when they will not intervene too much in the proprietary interests of providers. In this sense, it is not likely that a real prospective payment system will be implemented in the near future.

5. HEALTH PROMOTION PROGRAMME

Since the first International Conference on Health Promotion organized by WHO in 1986 in Ottawa, which was followed by similar conferences in Adelaide and Sundsvall, many countries around the world have tried to translate this new concept of health promotion into their country health programme. The Republic of Korea is no exception to this worldwide trend. In the last 30 years, Korea's economy has developed very rapidly, and living conditions including housing, food, education, transportation, etc. have been very much improved. The toll of mortality as well as morbidity of the people has decreased, and the average life span has been prolonged from 55.3 years in 1960 to 71.3 years in 1990. Communicable diseases which were prevalent until the 1960s have been controlled and significantly reduced, and chronic or degenerative diseases such as cancer, diabetes, cardiovascular diseases, etc., occupied the top causes of Korean death as shown in Table 12. Facing this disease pattern, people wish to live an affluent lifestyle and concern themselves more with the quality of life rather than the mere absence of diseases or infinnity.

Table 12. Changes in rates ofthe top five causes of death of Koreans (1983-1993)

Causes of Death Circulatory Systems Diseases

1983 (%) 27.9

1993

(%) 30.2

WPRlRC47lfeebnicai brieftngll

page 34 Cancers Accidents Digestive Systems Diseases Respiratory Systems Diseases Subtotal Other Diseases Sources: National Statistical Office

12.3 9.5 8.5 4.7 62.9 37.1

21.4 14.8 8.2 4.9 79.5 20.5

It is well documented that the above-listed diseases are primarily affected by people's lifestyle factors such as cigarette smoking, over-consumption of alcohol, lack of physical exercise, over weight, insufficient sleeping hours, skipping breakfast, taking snacks between meals. Table 13 shows the percentage distribution of several health-related practices among Korean adults aged 20-59, found through the National Health Interview Survey conducted in 1989. The proportion of women who smoked cigarettes (5.2%) and drank alcohol frequently (3.3%) were approximately less than one-tenth those of males. The majority of adult Korean men were cigarette smokers and alcohol drinkers, but most of women were not.

WPRlRC47rrechaicai brienagll

page3S

Table 13. Percentage distribution of major health-related practices among adults aged 20-59 by sex, 1989

Health related practices Cigarette smoking Never Current/Ex Alcohol consumption <4 times/month >4 times/month Weight Average Under or over Sleeping pattern Adequate Inadequate Physical activity >4 times/month <4 times/month Skipping breakfast Never Sometimes/Often Snacking between meals No Yes

Men ('Yo)

Women ('Yo)

28.3 71.7

94.8 5.2

59.4 40.6

96.7 3.3

61.2 38.8

54.3 45.7

72.1 27.9

75.1 24.9

21.5 78.5

11.1 66.9

76.4 23.6

72.2 27.8

55.9 44.1

53.7 46.3

Source: Kim KH et al. Health-related Practices and Chronic Illness in Korea. Asia-Pacific J of Public Health 1991 ;S( 4):313-32 I.

To meet the health needs of people in this context, the Korean Government must place a higher priority on health policy and health systems research related to lifestyles affecting health, and encourage lifestyle changes more conducive to health.

WPRlRC47rreehaical briefiagll page 36

The Government as well as the people who are concerned with the health of the public have been seriously thinking how to develop practical programmes to improve the health of the people. The Health Promotion Act and Community Health Act were recently promUlgated by the Government, to support and strengthen national health activities which have been carried out by various health agencies, voluntary groups and the general public. These new initiatives are expected to give a new impetus to improvement of the health situation of the population. Major points stated in the Health Promotion Act can be abstracted as follows: (I)

The Ministry of Health and Welfare is requested to develop and implement basic policies

regarding health promotion of the people, and the heads of Local Administrative Units accordingly have to develop detailed plans and implement health promotion programmes for their own community. (2) As an advisory body to the Minister of Health and Welfare on health promotion activities, an

Advisory Commission for Health Policy will be established with 30 or less members. (3) Heads of the county and local governments are requested to undertake active educational

campaigns for anti-smoking and reduced alcohol use, and put in place warning messages stating the ill effects from both, appearing on both sides of the cigarette packaging and liquor containers. (4) In order to promote non-smoking behaviour, provisions were made to prohibit or limit

cigarette advertisements through mass media. Broadcasting for sales of cigarettes and alcoholic beverages during the regular public broadcasting hours will be prohibited by the Ministry of Health and Welfare. Cigarette vending machines are permitted only to those places where adults only are permitted. Selling cigarettes is not allowed to those who are less than 19 years old. The owners of the public facilities which are used by the general public are requested to designate the non-smoking area and the smoking area. (5) In order to encourage healthy living, a council for healthy community life consisting of

community leaders and representatives of various agencies, both official and voluntary, will be established to lead an active healthy life movement in their community. (6) Health education shall be given to various target individuals and groups in accordance with

their characteristic health status and their knowledge levels; and companies employing more than 500

WPRlRC47frechDleal briefiDg/l page 37

regular workers, government-invested institutions employing more than 300 staff, general hospitals, and health insurance societies are required to conduct health education activities. (7) National as well as local governments are requested to conduct a national nutrition survey,

and various programmes including nutrition education for the improvement of the nutritional status of the people should be carried out accordingly. For preventing oral health problems and promoting oral health status, the programme for fluoridation of drinking water will be encouraged. (8) City mayors, county chiefs and district chiefs are requested to encourage health centre

directors to develop programmes for health education, nutritional improvement, health examination and health promotion of the people. (9) In order to acquire necessary funds for health promotion activities, the fund for health

promotion will be established with the contributions from the Cigarettes Products Cooperation of Korea and medical insurance societies. Based on the above mentioned legal provisions, the Korean Government has been trying to develop detailed strategies and programmes which are suitable for implementation at local level and to raise necessary funds for the operation of programmes. In translating the Health Promotion Act into action, major issues can be identified as follows: (I) To reorganize or strengthen the government and nongovernmental agencies which are to

involve health promotion activities at central, provincial and county levels; (2) To obtain, train, and deploy qualified human resources for health promotion activities at the

various levels; (3) To raise sufficient funds for health promotion activities to cover newly developed health

promotion activities and to suitably finance these activities for implementing agencies; (4) (5) To develop detailed plans ofaction to be implemented at the local level; To strengthen health promotion skills of the individual and the community as a whole, and to

promote community participation in planning, implementing and evaluating programmes; (6) To coordinate and cooperate with various agencies involved in formulating healthy public

policies, implementing and evaluating programmes;

j

WPRlRC47rreebnicai brieting/l page3S

(7)

To reorient health services including private hospitals and medical and paramedical

education in order for them to give higher priority to health promotion; (8) To supplement equipment and renovate facilities necessary for health promotion activities at

the local level; and (9) To integrate health promotion activities with other health and social welfare services.

6. HEALTH CARE REFORM

1.

Background In 1977, Korea initiated a programme to assure universal health insurance coverage for the

whole population. Twelve years later, all Koreans have universal health coverage. Korea has moved from insuring less than 10% of the people in 1977 to 100% coverage today. The health insurance scheme enhanced social security by facilitating access to medical care and eliminated the financial hardship of large medical care bills. The health insurance scheme has played an important role in promoting health care to meet more effectively the health needs of the growing population. With the enactment of the social security health insurance programme, the Government of Korea has taken a major step towards enhancing social welfare and national health. After guaranteeing the universal access to health care for the whole population in 1989, the efficient utilization of health resources, the equitable distribution of health services, and good quality health care has remained the Korean Government's primary objectives. In 1994, to reform the current health care system, the ministerially appointed "Health Care Reform Committee" reviewed the problems and issues related to the health care system and recommended several tasks for the government. In order to accomplish health care reform, the Government must develop new policies to redirect or change the present course of the system. The overall objective of health care reform is for each person to have appropriate health insurance coverage for the 'right' quality services produced in the most efficient way, and for each person's net payment for that coverage to be fair.

WPRlRC47f1'eebnieal briefing/l page 39

The central premise of health care refonn is that all the population need health security. Suggested health care refonns by the Health Care Refonn Committee are related to strengthening social solidarity (equity), developing cost consciousness in health care (efficiency), and emphasizing quality of care (quality).

2. (I)

Issues and policy alternatives Strengthening social solidarity The Korean health care system is equitable in the sense that everybody has health insurance.

However, there are several issues which are related with distributional equity.

The delivery of

medical care and its financing are the major issues for distributional equity. In the case of delivery of medical care, this concept can be used to analyse differences in utilization among groups. In the case of financing, it can be used to analyse differences in payments. The Government is considering improving the equity of the health care system so as to strengthen solidarity by extending the range of benefits that are reimbursed by national health insurance, and reducing the financial imbalance and premium differences among the insurance societies. ( I) Extending the range of benefits With minor exceptions, the same benefits package applies to all medical insurance societies. However, the benefit package is limited; a certain proportion of health care services and goods is not paid for by medical insurance. The limited benefits package brought inequality to the delivery of medical care. Especially, low income earners have a relatively high financial barrier to have the services which are .not included in the benefits package. Also a high level copayment limits the access of low income group consumers to medical care. To strengthen social solidarity among the population, one of the

suggested refonns is to extend the range of benefits. It will reduce the burden on out-of-pocket payments of patients.

WPRlRC47ffeehnicai brieftngll page 40

Suggested plans for extending the range of benefits covered by insurance are as follows: (a) From 1995 reimbursement will be gradually extended to cover treatment days per year per patient from 180 days to 365 days within five years. (b) Extending the lists of reimbursable services; the health insurance will cover the expensive technological services such as CT and MRI. (c) (d) (e) (f)

Extending insurance benefits for preventive and promotive services. Extending insurance benefits for dental and traditional medical services. Improving the level and quality of benefits for the Medical Aid programme. Compensating copayment worth over KW 500 000 by insurance societies.

(2)

Financing The Korean health insurance system relies on a series of self-contained medical insurance

societies which are administratively and financially independent and decide by themselves the premiums they charge. Currently, financial imbalances and premium differences among the Some societies have accumulated significant reserves over the

insurance societies are growing.

years, but some have had negative balances. The financial differentiation across insurance societies creates variation in the premium rate across insurance societies and damage to social solidarity. The financial imbalance and premium differences depend upon the variation in the risk characteristics such as income levels, the proportion of age-gender groups, and pattern of diseases across regions, and the differences in the utilization rates. The Health Care Reform Committee suggested changing the government subsidizing rule for the self-employed including farmers. Under the new subsidizing formula, many of the insurance societies in the rural area with a high percentage of members with high expected health care costs would receive more government subsidies. The Committee also recommended that the portion of risk adjustment funds among insurance societies, which is currently approximately 7%, will be extended to 19% by 1997. The fund will be used for compensating benefits for elderly patients over 65 years and benefits for preventing and promoting services.

WPRlRC4711'ecbnicai briefing/l page 41

(2)

Improvement of efficiency Attempting to promote efficiency of the health care system will be focused on developing the

providers' cost consciousness, prompting the consumers' rational utilization, and improving the insurers' administration efficiency. (I) New reimbursement system Physicians and hospitals are paid through a fee-for-service schedule which is determined by the Government. A fee-for-service reimbursement system is providing inappropriate incentives for providers. Providers have no economic incentive to control costs. Under the reimbursement system based on a fee-for-service arrangement, physicians could have a financial incentive to provide more medical care (and/or encourage many unnecessary practices), since more medical care generates more revenue. Korean hospitals' behaviour, according to studies, tends to expand the volume of services, duplicating services, and lengthening patient stay in hospitals. The Health Care Reform Committee recommended that the Korean Government gradually replace the current fee-for-service schedule with a prospective payment system (PPS) using DRGs for inpatient services and a resource based relative value system (RBRVS) for ambulatory care services. The new payment system wiII alleviate the distorted and abused nature of health care services. The PPS has been started, with extensive preparation work having been undertaken since 1995; revising Korean DRGs and costing of each K-DRGs, strengthening the nationwide health information system, development of nationwide peer review organization and quality improvement programmes. The new reimbursement system will be adopted only if a series of carefully designed pilot projects have been found to be successful. Development of RBRVS in Korea is already in the final stage. (2) Developing new types of health services programmes and facilities There is a lack of dynamic adjustment towards changing the health care environment. The current health care system is not sufficient to meet the rapidly increasing needs of health services. The development of a national strategy to address the need for long-term care is one of the most necessary and challenging areas in health policy because of the rapid growth of the elderly population and the increasing financial burden of long-term care. Other types of care such as ambulatory

WPRJRC47rreehDicai briefiDg/l page 41

surgery, group practices, home care services, nursing homes for the elderly, or facilities for the mentally disabled are clearly needed but not yet well developed. Developing new types of health services programmes and facilities in response to the changes in demand was suggested. The suggested reforms are as follows: (a) to adjust and/or develop fee schedules which generate an incentive for the providers to be more engaged in providing new services. (b) to provide grants or soft loans for promoting investment in new types of health care facilities. (3) Improving efficiency in the management of insurance There is a lack of information on the management system within and across the insurance societies. Also no mechanism of competition among insurance societies has developed. These brought inefficiency in administration, and thus high administrative costs. The Health Care Reform Committee suggested the following to improve the efficiency in the management of insurance societies; (a) (b)

set the optimal size of an insurance society, implement a management evaluation system for insurance societies, improve the management of the information system within and across insurance societies, ji

(c)

(d) (3)

introduce competition among insurance societies in the long run.

Improvement of quality The Hospital Standardization Programme has been in practice ever since it was organized by •

the Korean Hospital Association in 1981.

The Committee recommended the Government to

strengthen the system of monitoring and assuring the quality of hospital services. The Government has a plan to implement a new 'Hospital Service Evaluation Programme' which is initially applied to the tertiary care hospitals and gradually will cover all types of hospitals. It is expected to improve the quality of hospital service by announcing the results of the evaluation so that consumers will have

WPRlRC47rreebDicai brieODgIl pale 43 the infonnation they need to choose appropriate quality hospitals. Under this programme, hospitals have an incentive to keep on improving their quality so as to attract more consumers. The Health Care Refonn Committee recommended that the Government promote quality improvement activities initiated either by voluntary organizations or by academic societies. The Government may also consider having a national law for quality activities if necessary.

7. DISCUSSION

Major health indicators of Korea have strikingly improved since the 19505 when economic, social, and health conditions were some of the poorest in the world. For more than 40 years, health care and the health care system have developed remarkably. Starting from the foundation of a basic public health system, at each point health programmes and policies have evolved according to the demands of the public and society. Transition in the focus of policies and programmes has mirrored changing circumstances. In accordance with demands for policies and programmes the major issues and programmes can be categorized as follows: (I) (2) (3) (4) (5) (6) (7) foundation ofa basic health system and control of communicable diseases (from 1950s) family planning and population control (from early 1960s to 1980s) strengthening of health services for rural and underserved areas (from 1970s) establishment and expansion of National Health Insurance (from 1977 to 1989) strengthening ofoational health system infrastructure (from early 1980s) health promotion (l990s) health care refonn (1990s) Currently, in spite of its partially successful completion of major health programmes, the Republic of Korea faces extremely diverse challenges. For example, with respect to health

conditions, some infectious diseases such as tuberculosis are still significant problems, and most

WPRlRC47rrecbnicai briefing/l page 44 urban dwellers have unhealthy lifestyles because of an unbalanced diet, lack of exercise, high risk of traffic accidents, etc. It is not easy to develop health policies and programmes to meet complicated needs and demands, partly because of the complexity of the problems, but mostly because of the Government's inherently weak position to implement a policy, which is due to the absolute dominance ofthe private sector. The health care infrastructure at the national level does not seem to be capable of reorienting the national health system towards a more equitable and efficient one. For instance, human resources are distributed seriously unequally among geographic locations and specialties. In particular, the distribution of specialties is biased towards highly sophisticated technology-oriented practice, which does not appropriately match the needs of the population. Most facilities are not well enough

prepared in their organizational and functional training to be responsive to the rapidly changing needs of the public, such as long-term care, home care, health promotion and rehabilitation, etc. The reorientation of the national health care system infrastructure has to progress in three ways: development of human resources, appropriate in quantity, quality, and distribution of types; development of health facilities focused on quality, distribution of types, and new modalities to meet demands; and new health programmes to encompass comprehensive needs of preventive, promotive, and rehabilitative care. The 'lag' between economic and health development, as seen in many rapidly developing countries, can be explained by the relatively low priority accorded to health inside and outside the Government. From the Government's viewpoint, economic development has been regarded as being of the utmost importance and the highest priority in resource allocation. Until recently, the

importance of health, and other aspects of quality of life were overlooked at least at the government level. Health and health care have been regarded as a 'secondary' issue or as a 'means' rather than a 'primary' issue or an 'end'. So, for instance, the size of the government budget for health and welfare always has been, and still is, far behind those of defense, economic development, administration, etc. Social and economic development, however, cannot go too far without human development issues being taken into account such as health and welfare. For the first time in 1995, the

Government noticed the importance of the quality of life and announced the direction of related policies to encourage improving the quality of life. The Government recognized that improving the quality of life is, and will be, as important as the construction of infrastructure for social and

WPRlRC47ffecianicai briefing/l page 45

economic development. Although it will take much time for policies and programmes based on the philosophy of quality of life to be developed in their full scope, more etTort will be put in to improve the area of health and welfare. Despite the diversity of challenges in the future, the unchangeable basic principles to be applied to the development of health policy and programme are clear. To accomplish a more

equitable, more efficient, and better quality of health care still has to be main area of concern. In particular, high prioritization of health in the arena of politics and policy needs to be emphasized. Without strong social support and advocacy, the health care policy and programme will not be able to improve the health of population. This responsibility lies ultimately with the Government.