[Editorial] Health insurance deficit

South Korea’s public health system is still mired in a protracted dispute between the government and doctors over the medical school enrollment quota. On top of the current debacle, there is a potentially devastating problem that needs more attention from policymakers: the growth of the country’s health insurance deficit.

According to research submitted to the Korean Association of Health Economics and Policy, the accumulated deficit of Korea’s health insurance will top 563 trillion won ($408 billion) in 18 years, if the current bloated coverage for medical services continues without a drastic overhaul.

The report authored by a team led by Kim Youn-hee, a medical professor at Inha University, the country’s health insurance system is expected to record a deficit of around 1 trillion won this year, compared with a gain of 4.1 trillion won in 2023.

The report said that the shortfall is likely to accelerate in the coming years: 15 trillion won in 2030, 40 trillion won in 2036, and 81 trillion won in 2042. The cash reserve for the national health insurance, which is managed by the National Health Insurance Service, is projected to completely dry up by 2029, and the cumulative balance is forecast to come in at a whopping 563 trillion won in deficit in 2042.

The country’s health insurance balance was in the black for three years in a row until last year, as the government tightened medical coverage.

The national insurance balance had been in the red from 2018 to 2020, hurt largely by the expanded coverage during the previous Moon Jae-in administration. Under “Moon care,” ultrasound and magnetic resonance imaging checkups and the use of emergency rooms and intensive care units were supported by the public health care system.

Even though the Moon care treatments have been largely removed from National Health Insurance coverage and new restrictions for excessive outpatient treatments have been imposed from July 1, there are worrisome signs that the spending by the NHIS is on the rise.

The underlying reason is the mix of Korea’s low birth rate and the rapidly aging population. The working-age population aged 15-65, which pays into the national health insurance fund, is shrinking at an alarming pace. Statistics Korea forecasts that the working-age population will fall from 36.74 million people in 2022 to 29.03 million people in 2040.

Meanwhile, the demand for medical services is set to rise as the number of people aged 65 or older is expected to reach 17.25 million by 2040. The fast-paced increase in the number of older people, who tend to need more medical care and services, is one of the reasons that the Yoon administration cited as a reason to push ahead with the medical reform policy, including the controversial expansion of medical student quotas.

But to fix the inevitable health insurance deficit, the government will have to secure more money. One method is to raise the public health insurance premium rate, which is set at 7.09 percent of an individual worker’s monthly income. But the government cannot easily opt for a rate hike since the ceiling is fixed at 8 percent under the law.

Nor can the Yoon government, which focuses on fiscal discipline, fork out a huge amount of money from its budget each year to keep the national health insurance balance in the black.

Despite the challenges, however, the government must take steps to overhaul health insurance coverage in the long term, starting with tackling disputes over the fee-for-service system and removing nonessential coverage.