Some Policy Issues in National Health Insurance Finance

Abstract

With its reserves totaling KRW20.8 trillion (2017), the National Health Insurance (NHI) is financially at its most stable since its introduction. However, the current government’s healthcare program—“MoonCare,” after President Moon Jae-in—is estimated to require by 2022 a 3.2-percent increase per annum in the contribution rate and an additional KRW10 trillion channeled from the NHI reserves, which, taken together, add up to KRW30.6 trillion. To make the NHI sustainable would involve increasing the efficiency of its reimbursement expenditure and stabilizing its revenue base. The revenues of the NHI come from contributions (87 percent), government subsidies (12 percent), and other sources (1 percent). The fact that the NHI is the only one among all Korean social insurance schemes whose financial operations are administered according to the non-fund accounting rules of its own remains a controversial issue. Proponents of “convert-reserve-into-fund” argue that if operated on a fund accounting basis, the NHI would be subject to the Framework Act on Fund Management and hence to National Assembly scrutiny, and therefore become more transparent in its financial operations. On the other hand, those against this idea point out that the NHI, short-term as it is in nature, should remain flexible in its management and maintain its expertise and special status, especially when making contracts with stakeholders. This study is focused on discussing the appropriate size of the NHI reserve and whether or not it should be converted into a fund. Before moving on to discussing the financing of the NHI, we need to understand how much Koreans are paying in taxes and social insurance contributions.