The total income of the National Health Insurance Service (NHIS) reached 79 trillion won ($66.8 billion) in 2021. About 60 percent of them are spent as reimbursements to compensate for medical services. The health insurance reimbursement system has been developed according to each country’s circumstances.

Lee Bo-hyoung, CEO of Macoll Consulting Group
Lee Bo-hyoung, CEO of Macoll Consulting Group

It is well-known that health insurance payment has various forms, including capitation system, salary, and fee-for-service.

Korea uses fee-for-service in which doctors and pharmacists are paid a fee for each particular medical service.

Introducing the national health insurance system in 1977, Korea benchmarked Japan’s fee-for-service (score system) to design it. Under this system, the level of difficulty, frequency, and time required for medical treatment are set as points. These points are converted to health insurance payments.

Under the fee-for-service system, reimbursements are set according to the contents of the treatment provided by medical institutions. It is desirable for treatment by specialists, and it induces short and frequent care.

However, this system is less efficient in saving medical costs and managing the government’s fiscal management.

In other words, the system encourages doctors and pharmacists to become more eager to provide healthcare services, but it could also generate excessive patient care and deteriorate government spending.

To tackle this problem, Korea introduced the resource-based relative value scale (RBRVS) in 2001. Under the RBRVS system, the government pays reimbursements by converting relative value scores of the workload, treatment cost, and risk into a unit price for each medical institution. As of February 2021, there were 8,933 individual medical practices to be paid by reimbursements.

In 2013, Korea also introduced bundled payment -- where the government pays healthcare providers predetermined reimbursements for patient care from hospitalization to discharge – in four departments (ophthalmology, otolaryngology, surgery, and obstetrics/gynecology) seven diagnosis-related groups.

Although the health insurance reimbursement system has improved continuously, Korean health providers have repeatedly complained that reimbursements were set unfairly lower than real medical costs and that relative values between treatment practices were disproportionate.

The government introduced a process in 2001 in which reimbursements were not decided by the NHIS but agreed with medical service providers on a conversion index. Still, the government and the medical community have difficulty reaching an agreement every year.

Despite the shortcomings, this system promotes doctors’ medical practices in Korea, where clinicians are in shortage.

As the number of patients and medical costs will spike due to the population aging, the government and the NHIS may expand bundled payment and roll out a radial policy such as global budgets where providers are paid a fixed amount of the total number of services during a certain period.



Lee Bo-hyoung designs effective communication models for policymakers and stakeholders moving in a non-market and provides all services necessary for social conflict management, including risk diagnosis and response strategy development in the public sector, crisis management consulting, and public affairs. He received a Bachelor of Geography from Seoul National University, a master’s degree in Art, Communication, and Media Studies from Yonsei University Graduate School of Journalism & Mass Communication, and a Ph.D. in Economics from Hansung University for his research on the effects of Covid-19 on the labor market.— Ed.

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