[Editorial] Health insurance reform

The nation’s health insurance will not be sustainable if nothing is done to improve its finances. Losses are destined to snowball. As the losses are covered by government subsidies, they will put an enormous strain on the nation’s budget.

That is why the government needs to take drastic action before it is too late. Last year alone, it had to make up for a deficit of 1.3 trillion won. Compulsory social insurance, which benefits the entire population, must be made to support the system on its own or with minimal government support.

The insurance rate has frequently been raised in the past, it was again this year, up to 5.64 percent of earned income. But this is not likely to reduce the deficits to a tolerable level ― not just this year but in the years to come. According to one estimate, this year’s deficit could still be as large as 500 billion won.

Expenses covered by national health insurance, which were at 34.9 trillion won last year, are projected to increase nearly 18-fold to 623.4 trillion won by 2050, or 21.7 percent of gross domestic product.

These estimates are conservative, as they are based on an assumption that the demand for medical services will grow at the pace of the past 10 years. But the actual pace of growth will undoubtedly be much faster, given that the average age of the population is accelerating and that the demand for free medical service as part of social welfare is on the rise.

Against this backdrop, the Ministry of Health and Welfare has come up with a plan to revamp the health insurance system. A key point is to require an employee with income on top of their monthly pay to make an additional payment as a separate health insurance premium. The ministry is considering two sums as candidates for the threshold ― 72 million won in annual additional income (an amount equal to 150 percent of the average annual income of wage-earning households) and 88 million won (an amount equal to the threshold for the highest income tax rate).

At present, a wage earner receiving 1.5 million won in monthly pay is charged 42,000 won in monthly premiums, regardless of additional income in rent, interest or dividend payments. It has often been pointed out in the past that the uniform insurance rate goes against the principle of people contributing in accordance with their income.

Exploiting this loophole, some people with huge unearned income falsely put themselves on a corporate payroll. They would otherwise pay much more in their capacity as the self-employed persons.

Another key point is to keep free rides to the minimum. At present, the parent of an employee, registered as his dependent, pays no health insurance premium, no matter how much he takes in pension payments and other types of income. The ministry has now decided to require those with 40 million won or more in annual income to pay their own premiums, instead of piggybacking on their children. It is also considering lowering the threshold in the longer term.

The reform program should proceed as planned, though it will certainly face strong resistance from wealthy people. Even so, the additional proceeds will not be large enough to cover the deficits. According to an estimate by the ministry, the health insurance is expected to take 200 billion won in additional annual premiums, not enough to cover half the deficit expected for this year.

The government will have to cut the cost of medical services while developing new revenue sources. It also needs to put medical diagnoses and treatment under scrutiny and, by doing so, prevent hospitals and clinics from falsifying medical records to overcharge the health insurance and engaging in other fraudulent practices.

One case in point is a recent scam that involved as many as 410 residents in a provincial town. Hospitals and clinics in the town colluded with the policyholders and insurance agents to falsify their medical records and swindled 15.7 billion won from the health insurance and other insurers. Never can such a rip-off be permitted again.