South Korean households see healthcare burden growing faster than income growth

South Korean households’ expenditure on healthcare rose faster than the income growth in the last 10 years, a trend that is very likely to accelerate as the country’s population is rapidly aging.

According to a survey by Statistics Korea on Sunday, the average monthly income of a household was 4,306,412 won ($3,857) in the second quarter in 2016, increasing by 45.2 percent from 2,965,551 won in the same period in 2006. Meanwhile, healthcare expenditure rose greater than the income growth, with each household spending 174,962 won for healthcare in the second quarter of 2016 or 50.1 percent up from the same period in 2006. 

Experts said the increase in healthcare spending is an inevitable result of the population aging.

In 2005, an average household spent 4.7 percent of its total consumption on healthcare. In 2015, the healthcare expenditures occupied 5.2 percent of the total household’s consumptions, the survey showed.

“This trend will only accelerate in the future as South Korea is aging the fastest among the 35 Organization for Economic Cooperation and Development member countries and the burden on the people would increase, unless tackled,” economist Sun Dae-in, who heads an economic research institute, told The Korea Herald on Monday.

Many economists have pointed out that the country would face “consumption cliff,” a phenomenon in which people refrain from spending money due to concerns over an uncertain future, partly due to the population aging. But the only exception is the healthcare expenditure, Sun said.

“It is estimated that South Korea would face a consumption cliff by 2030 in almost all sectors but the only exception is healthcare as it is unavoidable to spend money for medical costs when the population gets older,” Sun said.

While increasing healthcare costs is inescapable, the impact seems to be taking a toll on the low-income households more than mid- and high-income groups, a 2015 research paper by the Hyundai Research Institute showed. According to the research, while the high-and mid-income households saw a mild increase in the proportion of which healthcare spending occupies in the total spending, the proportion of healthcare expenditure for low-income households, which takes up the bottom 15 percent of the entire population, rose from 6.5 percent in 1990 to 10.5 percent in 2013.

Meanwhile, the South Korean government has drawn criticism for lacking in providing effective measures for the demographic change.

Lee Ju-yeol, Bank of Korea governor, mentioned that the government has not provided sufficient measures during a meeting on Aug. 29. “The country will start to see its working-age population decrease next year amid an aging society, which immediately calls for diverse measures,” Lee said.

Sun also pointed out that there is a lack of polices, saying that “there is almost no preparation. The best solution would be spending more on welfare but the government seems to be against any forms of welfare.”

As of 2015, a total of 13.1 percent of the country’s population was 65 years old and above, compared with a 9.1 percent in 2005, according to Statistics Korea. South Korea is the world’s most rapidly aging country with the world’s most rapidly declining fertility rate and is projected to enter the stage of “super-aged” country by 2026, where over 20 percent of the population is aged 65 or more.

By Park Ga-young (gypark@heraldcorp.com)