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Ceiling on Cumulative Out-of-pocket Payments

Country: 
South Korea
Partner Institute: 
Department of Health Policy and Management, School of Public Health, Seoul National University
Survey no: 
(4)2004
Author(s): 
Soonman Kwon
Health Policy Issues: 
Benefit Basket
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no yes no no

Abstract

To provide adequate protection against the catastrophic expense due to illness, government introduced the ceiling on the cumulative out-of-pocket payment for a given period. But the ceiling is applied only to the copayment for insured services, not the payment for uninsured services, leading patients still to face the financial burden of out-of-pocket payment associated with uninsured services.

Purpose of health policy or idea

National health insurance in Korea does not have an extensive benefit coverage, which results in high out-of-pocket payment for both cost sharing for insured services and full cost of uninsured services.

Due to high out-of-pocket payment, health insurance often fails to provide adequate protection against catastrophic expenses due to illness. Financial burden on the poor and the ill in particular is very high. Ceiling on the cumulative out-of-pocket payment aims to solve the above problem and to provide better protection for catastrophic medical care expense.

The ceiling on cumulative out-of-pocket payments will benefit the poor and those who should pay high medical care costs due to illness. However, the impact of the new policy may not as big as expected because the ceiling is applied only to the copayment for insured services, not the payment for uninsured services.

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Characteristics of this policy

Degree of Innovation traditional neutral innovative
Degree of Controversy consensual consensual highly controversial
Structural or Systemic Impact marginal rather fundamental fundamental
Public Visibility very low low very high
Transferability strongly system-dependent system-neutral system-neutral

The idea of introducing the ceiling on cumulative out-of-pocket payments has been well discussed and understood. Since there has been a consensus on the need for the new policy, it followed a consensual process of adoption. The new policy will be fundamental in strengthening the role of health insurance in the sharing of social risks associated with illness in Korea.

Political and economic background

Because of the limited benefit coverage and high out-of-pocket payment, there has been a consensus on the need for the ceiling on out-of-pocket payment. But the fiscal crisis of the national health insurance (serious deficit and depletion of accumulated surplus) since 2001 has been a major barrier of adopting the policy. Recent improvement of the fiscal health of the national health insurance makes it possible to introduce the ceiling.

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no yes no no

Origins of health policy idea

Due to limited benefit coverage, patients pay copayment for insured services and full price for uninsured services. Uninsured services include meals in a hospital, sonogram, CT, MRI, etc. Total out-of-pocket payment (for both insured and uninsured services) amounts to 45% of the total national health expenditure in Korea. Therefore social health insurance has limited capacity to provide adequate protection for financial risks of illness. 

When social health insurance was introduced, government was interested in the rapid extension of population coverage, and out-of-pocket payment was high as a result of low contribution level and low benefit coverage. The major barrier to the implementation of the ceiling on out-of-pocket payment was the concern on financial consequences -the effect of the ceiling on the financial status (increased outlay) of the national health insurance system.

Initiators of idea/main actors

  • Government

Approach of idea

The approach of the idea is described as:
renewed:

Stakeholder positions

Ministry of Health and Welfare, Payer (social health insurer), and civic groups and patients initiated and strongly supported the policy. There no explicit oppositions to the new policy.

Actors and positions

Description of actors and their positions
Government
Ministry of Health and Welfarevery supportivevery supportive strongly opposed

Actors and influence

Description of actors and their influence

Government
Ministry of Health and Welfarevery strongvery strong none
Ministry of Health and Welfare

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

Since there were no explicit oppositions to the new policy, policy adoption and implementation followed the generation of policy idea smoothly. Recent improvement of the fiscal status of the national health insurance system was a major facilitating factor.

Expected outcome

Ceiling on out-of-pocket payment is an important step toward easing the financial burden of patients and improving equity. The ceiling is set $2,500 for six months. However the ceiling is applied only to the out-of-pocket payment for insured services.

Since the full cost paid for uninsured services is not taken into account for the ceiling and many services are not covered by health insurance, a patient may have to pay much more than $2,500 in total (i.e., both copayment for insured services and full payment for uninsured services) before reaching the ceiling. To maximize the impact of the policy, the ceiling needs to take into account the out-of-pocket payment for uninsured services or the ceiling needs to be set lower. 

Impact of this policy

Quality of Health Care Services marginal rather marginal fundamental
Level of Equity system less equitable four system more equitable
Cost Efficiency very low low very high

The impact of the new policy will be mainly on the equity and access to care, but its impact may not be very high because the ceiling is applied only to the copayment for insured services and patients still have to pay full costs of uninsured services.

References

Sources of Information

Various documents from the Ministry of Health and Welfare (www.mohw.go.kr).

Soonman Kwon, Achieving Health Insurance for All: Lessons from the Republic of Korea, ESS (Extension of Social Security) Paper 1, ILO (International Labor Office), Geneva, 2002 (for background information on health insurance and cost sharing of Korea).

Author/s and/or contributors to this survey

Soonman Kwon

Suggested citation for this online article

Soonman Kwon. "Ceiling on Cumulative Out-of-pocket Payments". Health Policy Monitor, October 2004. Available at http://www.hpm.org/survey/kr/a4/3