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Slow recovery from financial crisis brings some relief to Korean health care system

Despite South Korea’s gradual comeback from the economic crisis of the late ’90s, unemployment, health care and medical insurance issues remain.

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South Korea is slowly recovering from the Asian financial crisis of 1997. Two years have passed since Korea requested international help from the International Monetary Fund (IMF), and since the beginning of 1999 the economy has demonstrated positive growth. The vast trade deficit that was to blame for the financial crisis has turned into a trade surplus, reaching US$40 billion in 1998. Additionally, the fact that the emergency loan of US$57 billion from the IMF was paid back earlier than expected and the increase in foreign reserve, which came in at US$85 billion mid-April, are also indicators that the crisis is being subjugated.

President Kim Dae-Jung has gained popularity as the “reform president” and the one who overcame the financial crisis. However, the IMF program and the recovery of the nation’s economy came with hardships, including an increase in the national debt, layoffs, unstable unemployment and a deteriorating distribution of wealth. High ranking government officials and the upper class, the groups often blamed for the financial crisis, were comparatively unburdened by the events, whereas workers, wage-earners and the general public were most greatly affected. The opposite was true as to who garnered the benefits of the recovery.

Korea’s gross domestic product (GDP) in 1998 was US$321.3 billion, and its per capita GDP was US$6,920, a 33% decrease from the previous year, at the end of which the foreign exchange crisis began. In 1997, GDP totaled US$476.6 billion and the per capita GDP was US$10,363. At the time of the financial crunch, the GDP growth rate plunged to an all time low of –5.8%, when in years before on average the GDP experienced growth rates of 8%. However, the economy now seems to be returning to what it was like prior to the financial difficulties, with a reported GDP growth rate of 7% for the first half of 1999.

Economy’s effect on care

In December 1997, the Korean government agreed to join the “bail-out” program of the IMF in an effort to solve its foreign currency crisis. IMF recommended the devaluation of Korean currency and the restructuring of the economic system. Korean currency was devalued two to threefold, the stock market crashed and unemployment skyrocketed.

As jobless rates increased, physicians were faced with a reduced number of patients and/or patients with little income, and hospital revenues dropped, according to Hungwon Tchah, MD, an associate professor in the department of ophthalmology at the Asan Medical Center, University of Ulsan. “Many hospitals halted investments due to the drop in revenue and due to a doubling and tripling in costs of imported medical equipment,” Dr. Tchah told Ocular Surgery News. “The number of outpatients was certainly decreased.”

During the crisis, the unemployed could not afford to contribute to medical insurance. With the increasing number of unemployed, the reservoir of insurance finance dried up, resulting in postponed routine medical examinations, a reduction in elective surgery and, in turn, decreased incomes for physicians.

“At the time of the financial crisis, the number of outpatient visits in private clinics had declined almost 30%,” said Hyung-Joon Kim, PhD, MD, from the department of ophthalmology of Taegu Catholic University Hospital. “But university hospitals were only influenced slightly compared to small hospitals.”

Those rough days, however, lasted only a year, according to Dr. Tchah. Since 1999, the economy has improved, unemployment has decreased and the Korean currency is getting stronger. The growth rate of the nation’s GDP was 7% for the first half of 1999, and a growth rate near 10% is expected for the entire year when the numbers are calculated.

Health management system

---With the world’s 11th largest economy, South Korea is the most prosperous of countries receiving help from the IMF.

Although many say the Korean government has almost completely recovered, the government still has budgetary problems associated with the medical care industry that will not be resolved soon, according to Dr. Tchah. Annually about 6% of GDP is spent on health and social welfare. The government wants to decrease its expenditure on medical care, which could result in a sacrifice in the quality of medical care, he said.

According to Dr. Tchah, the medical insurance system is in danger and insurance company revenues will most likely be increased, via both an increase in premiums and a decrease in physician payouts. Medical insurance premiums in Korea are imposed similarly to a tax and are based upon personal income.

Dr. Tchah said that because an increase in these payments would reflect unfavorably on the Korean government, authorities have opted for a diagnosis-related group (DRG) system to keep costs down. This universal structure is scheduled to be implemented in July.

The DRG system reimburses health care providers with a fixed amount for all care given in connection with a standard disease category.

The potential problem with DRGs is that the amount of reimbursement for a specific diagnosis remains constant despite differences in the disease course or difficulties encountered in treating the disease. Cataract surgery and other ophthalmic procedures are included on the list. The implication is that a complicated cataract case would be reimbursed at the same rate as a routine one.

According to Dr. Kim, the government is strongly urging doctors to accept the DRG model as a universal structure.

Medical care in Korea is administered by the Ministry of Health and Welfare (MHW). This government department is the only medical insurance provider. Korean law prohibits private medical insurance. The MHW controls all medical fees.

Under the MHW, there are several programs that administer care to different populations. There is a medical insurance system for the self-employed, which insures only employees, not their dependents. A separate medical aid program provides medical care services for low-income people. Other medical insurance programs specifically cover people in certain occupations. The government wants to unite these various occupation-based groups into one system, but this effort has been met with protest from labor unions.

When Korea was hit with the recession, the nationwide application of these arrangements was difficult.

“The social security system has worsened since the economic crisis,” Tae-Won Hahn, MD, of Kangnam St. Mary’s Hospital in Seoul, told Ocular Surgery News.

“The health and welfare system is surviving due to the creation of a strict budget. However, the Korean government continues to broaden medical coverage for political reasons in spite of the restricted budget.”

“Who wants to pay for the future if he can not buy bread for today?” Dr. Tchah asked. “The government insists these systems will work, but many economists in Korea say that without major changes they won’t.”

According to Byung-Heon Ahn, MD, of the department of ophthalmology at Samsung Medical Center, Sungkyunkwan University School of Medicine, all global indices of the Korean economy show that activity and growth rates continue as they would have prior to the economic depression. However, because of the economic crisis and the rapid rebound that followed, the financial gap between the country’s poor and wealthy has widened.

In other words there has been a deepening in the imbalance of wealth distribution, so the rich get richer and the poor get poorer. To cope with the income inequality, Dr. Ahn believes the government will pay more attention to the distribution of social wealth, and more restrictions will be applied to physicians’ income.

“The government curtailed the subsidy of medical insurance and converted the financial resources to establish a national pension scheme, which was implemented in 1999 and affects Koreans age 18 to 59,” Dr. Ahn told Ocular Surgery News.

“Therefore, the financial status of Korean medical insurance has been threatened since the economic crisis, and in turn, cannot allow increases in physician’s fees or the expansion of covered medical services.”

“The people have come to realize that the nation has an extremely poor social security and welfare program, especially when Korea was battered by the Asian financial crisis,” said Nam Ho Baek, PhD, MD, chairman and professor at the Catholic University of Korea, St. Mary’s Hospital.

“In this situation, the government is developing measures to expand the social safety net and increase support for the underprivileged.”

The national health insurance system is being reformed and a national pension plan has been implemented. Additionally the government intends to increase their support of the nation’s poor and to create more jobs, Dr. Baek told Ocular Surgery News.

Separation of roles

Part of medical care reform in Korea includes the separation of the professional role of the physician from that of the pharmacist. In Korea, pharmacists at their own drugstores usually consult customers with minor illnesses and sell prescription medicines, including anti-biotics. According to Dr. Ahn, this practice has led to abuse and misuse of medicines in Korea.

“On the other hand, physicians purchase medicines to treat patients and request reimbursement from medical insurance organizations by reporting the cost of the medicines that are used at higher levels than the purchase prices,” Dr. Ahn said. “The profit from this process has been an approved portion of a physician’s income by the Medical Insurance Act and ironically has contributed more to physicians’ incomes than their fee for diagnosis and treatment.”

It has been common in Korea, Dr. Ahn said, for doctors and pharmacists to write excessive prescriptions and dispense drugs to increase their profits. The government has long been pushing for separation of these roles as part of its health reform aimed at improving the public health and preventing the abuse of drugs. But this reform has been met by physician protest nationwide because the new law would sharply reduce incomes.

Health professionals and procedures

“Health professionals in Korea have high clinical standards,” Dr. Kim said. “The quality of medical services in ophthalmology are almost the same when compared with those of the United States.”

The rate of cataract surgeries continues to grow. With increasing average age among Koreans, the rate of cataract surgery has increased to about 80,000 procedures per year.

Most cataract procedures are done with small incision phacoemulsification and foldable IOL implantation, according to Dr. Kim, and the cost is about US$1,000 per procedure. A recent survey conducted by Professor Kyung-Hwan Shin at Chungang University Hospital in Seoul revealed that more than 90% of cataract surgery is done as phacoemulsification and IOL implantation.

According to Dr. Ahn, there were 70,000 medical doctors in Korea last year. More than 3,000 are expected to graduate from 41 medical schools this year. When medical insurance was first introduced back in 1977, there were only 20,000 doctors and 800 yearly graduates from 14 medical schools.

There are between 1,700 and 2,500 ophthalmologists in Korea and about half of them work in their own offices. About 110 to 150 new ophthalmologists enter the medical arena per year.

Refractive surgery was widely introduced to this area of the world about 5 or 6 years ago and has grown rapidly. The number of excimer lasers in this nation currently exceeds 200, and more than 10,000 myopes underwent LASIK or PRK last year. Dr. Ahn said he expects the number of refractive surgeries to increase rapidly over the next several years to offset the loss of money to physicians caused by current medical insurance reforms.

In Korea, managed care has long been developed and provided by the Ministry of Health and Welfare. Primary health care posts (PHPs), located mainly in rural areas, total 2,034, according to Dr. Ahn. These PHPs are organized under 1,327 health subcenters, which are organized under 244 health centers. The main mission of the community health practitioner is to provide primary health care, including preventive health care and patient education.

For Your Information:

• Byung-Heon Ahn, MD, can be reached at Samsung Medical Center, Sungkyunkwan University School of Medicine, Department of Ophthalmology, 50, Ilwon-Dong, Kangnam-ku, Seoul, 135-710, Korea; +(82) 2-3410-3560; fax: +(82) 2-3410-0074.
• Nam Ho Baek, PhD, MD, can be reached at #62, Yoido-Dong, Youngdungpo-gu, Seoul, 150-713, Korea; +(82) 2-3779-1143; fax: +(82) 2-783-7546.
• Tae-Won Hahn, MD, can be reached at 505, Banpo-Dong, Seocho-Ku, Seoul, 137-040, Korea; +(82) 2-590-1745; fax: +(82) 2-533-1750.
• Hyung-Joon Kim, PhD, MD, can be reached at Taegu Catholic University Hospital, Department of Ophthalmology, Taegu, 705-030 Korea; +(82) 53-650-4736; fax: +(82) 53-627-0133; e-mail: hjkim@cuth.cataegu.ac.kr.
• Hungwon Tchah, MD, can be reached at Asan Medical Center, University of Ulsan, Department of Ophthalmology, 388-1 Pungnab-dong, Songpa-gu, Seoul, 138-763, Korea; +(82) 2-2224-3680; fax: +(82) 2-470-6440; e-mail: hwtchah@www.amc.seoul.kr.