The South Korean government is set to undertake the most significant overhaul of its health insurance reimbursement structure in 25 years, following the introduction of the current relative value system in 2001. The initiative aims to eliminate an annual excess of 2.6 trillion won ($2.3 billion) caused by over-reimbursement in areas such as blood tests and imaging services, which have seen profit margins exceeding 190% of costs. The funds saved will be redirected to support regional and essential medical services, which are facing a crisis, with 2.7 trillion won allocated starting in January.
On October 28, the Ministry of Health and Welfare held the 19th Health Insurance Policy Review Committee, chaired by Deputy Minister Lee Hyung-hoon. The committee approved plans for a structural innovation in health insurance reimbursement aimed at strengthening regional and essential medical care, adjusting the conversion index-relative value link, and implementing conditional reimbursement for specimen testing.
This move finalizes the execution timeline for the 3.6 trillion won investment plan for regional and essential medical care, confirmed during the 12th committee meeting in June. The first phase will see a 2.7 trillion won increase in reimbursement rates, which will be implemented sequentially in January and March following a revision announcement in November. The remaining 900 billion won will be discussed and finalized later this year.
Reducing Over-Reimbursement in Imaging and Testing
The core mechanism of this reimbursement structure innovation is reinvesting savings from reduced over-reimbursement into underfunded essential medical services. According to an analysis of medical costs for the 2023 fiscal year, there is a severe imbalance in the reimbursement levels compared to the actual costs of services.
While direct patient consultations (70.7%), hospitalizations (57.3%), rehabilitation (62.0%), and anesthesia (75.1%) remain significantly underfunded, specimen testing (190.0%) and specialized imaging (194.1%) have enjoyed excessive reimbursements. This has led to a distorted practice where medical institutions prioritize increasing the number of tests over providing adequate consultations.
Starting in January, the Ministry will significantly reduce reimbursement rates for over-reimbursed tests exceeding a 150% profit margin, aiming to cut excess spending by 2.6 trillion won annually. Specifically, reimbursement for blood tests and other specimen tests will be reduced by an average of 28%, saving 1.62 trillion won, while the 'management fee' for outsourced tests will be eliminated, saving an additional 240 billion won. Reimbursements for CT (96 items) and MRI (384 items) will also be reduced by an average of 25%, saving 700 billion won. However, essential areas such as diagnostic specialist fees and critical emergency care will remain unaffected to prevent disruption in essential medical services.
Additionally, the government will address opaque outsourcing practices in specimen testing. Currently, outsourcing medical institutions receive bulk payments from the health insurance agency and settle with testing facilities afterward, leading to excessive discounting of test fees, which has compromised test quality. Starting in January, the health insurance agency will implement a 'segregated payment' system, directly allocating payments to both outsourcing and testing institutions. Conditional differential reimbursements will also be introduced for two years to encourage quality management over price competition.
Prioritizing Non-Capital Regions and Vulnerable Areas
The financial resources secured from reducing over-reimbursement will be concentrated on regional and essential medical care, as well as high-level final treatments and maternal-child healthcare systems.
A notable aspect of this initiative is the establishment of a 'regional preferential rate' that provides higher reimbursements for non-capital regions and six medically underserved areas within the capital region, amounting to 400 billion won annually, with 300 billion won prioritized for immediate application.
Starting in March, hospitals in these areas will receive a 10% increase in reimbursement for 2,740 surgical and procedural services performed during nighttime, holidays, and emergencies. Additionally, hospitals in 86 designated areas experiencing population decline will receive a 5% increase in consultation and hospitalization fees. The additional costs from these preferential rates will not be passed on to patients, as amendments to health insurance regulations will accompany these changes.
For severe and emergency final treatment reimbursements, 900 billion won will be allocated annually. Reimbursements for 1,670 critical surgeries and procedures performed in hospitals will increase by 20%, while general anesthesia and specialized anesthesia reimbursements will rise by 10% to 50%. Notably, for emergency surgeries conducted at regional emergency medical centers during nighttime and holidays, the current maximum surcharge of 350% will be raised to 450%, potentially reaching a total of 470% when combined with the regional preferential rate.
To address the challenges posed by low birth rates, a compensation plan for high-risk mothers and newborns will be implemented starting in January, with an annual budget of 400 billion won. Under this plan, severe maternal centers will receive a new functional fee of 2.64 million won for accepting emergency transfers of high-risk mothers with preterm births under 34 weeks, with an additional 330,000 won for non-capital regions. The daily hospitalization fee for neonatal intensive care units (NICUs) will also increase by up to 150% for a maximum of seven days, with additional rates for specific gestational ages and weights.
With these changes, a severe maternal center in a non-capital region could see total reimbursements for treating a preterm infant born via cesarean section increase from 31 million won to 62.01 million won.
Pediatric care will also be strengthened from primary to emergency services. Starting in January, the age threshold for pediatric consultation fee increases will rise from under six years to under eight years, aligning with hospitalization criteria. The hospitalization surcharge will also increase by 10 percentage points to 40-60%. For children under six undergoing critical surgeries, an additional 50% surcharge will be applied on top of the basic increase of 20%. New surcharges for pediatric intensive care unit treatments will also be introduced.
In November, nighttime pediatric care at designated children's hospitals will receive new nighttime management fees and a 30% surcharge for areas experiencing a decline in pediatric populations. Emergency medical management fees for pediatric emergency medical centers will be doubled compared to regional emergency centers.
Updating Consultation and Hospitalization Fees
To enhance basic medical care reimbursements that patients regularly experience, an annual budget of 1.5 trillion won will be allocated.
The government aims to prevent the deepening of imbalances among services caused by uniform increases in the conversion index by linking part of the 2027 conversion index increase budget (1.413 trillion won for clinics, 345 billion won for hospitals, and 99 billion won for dental clinics) to the increase in relative value scores for undervalued items.
As a result, starting in January, the initial consultation fee for clinics will rise by 12.6% (2,370 won), from 18,840 won to 21,210 won, while initial dental consultation fees will increase from 16,840 won to 17,590 won. Hospital fees for injections and general meals will also see increases.
Additionally, the previously pilot program for in-depth consultations at advanced general hospitals will transition to a full program, expanding the number of consultations per patient per year and removing time and day restrictions. Chronic disease management fees for clinics will also be expanded to include rheumatism and chronic respiratory diseases, with a 20% surcharge (30-50% for patients with multiple conditions).
Basic hospitalization fees, which have been frozen for over ten years, will increase by 7% for general wards and 10% for intensive care units starting in January. The criteria for hospitalization fees based on nursing staff levels will also be raised, and the nursing differential surcharge rates will be increased. For example, the hospitalization fee for intensive care units in advanced general hospitals will rise from 668,000 won to 798,000 won.
New support initiatives for recovery care and vulnerable populations will also be launched. Starting in January, specialized rehabilitation treatment fees will increase by 10%, and the pilot program for designating and operating children's rehabilitation medical institutions will be extended for three years until December 2029.
The results from the second phase of the program showed a 13.2 percentage point increase in medical utilization rates among participating patients, although significant regional disparities remain. The third phase will expand the number of designated institutions from 47 to a maximum of 68, broaden the age range for intensive rehabilitation from under six to under nine, and introduce new surcharges for children under three.
To support the treatment of drug addiction, which has been a challenging area, a new pilot program for drug addiction treatment support will be launched in January for 11 regional treatment and protection institutions across the country. This program will provide tailored reimbursement rates for various stages of treatment, from initial detoxification to outpatient recovery, with separate budget support for patient co-payments to aid in relapse prevention and social reintegration.
A Ministry of Health and Welfare official stated, “The innovation in health insurance reimbursement is a necessary step to strengthen regional and essential medical care. We will ensure its smooth implementation moving forward.”
* This article has been translated by AI.
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