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Prospective Payment for Long-term Care

Country: 
South Korea
Partner Institute: 
Department of Health Policy and Management, School of Public Health, Seoul National University
Survey no: 
(5)2005
Author(s): 
Soonman Kwon
Health Policy Issues: 
Long term care, Funding / Pooling
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no

Abstract

Prospective payment system was recently developed for long-term care, based on daily rates for 17 disease groups. Each disease group is further classified into three functional status relying on the ADL(Activities of Daily Living)s, leading to 51 daily rates in total. The new payment system will be implemented as a pilot program for voluntarily participating long-term care hospitals.

Purpose of health policy or idea

Due to population aging, health care expenditure of long-term care has increased rapidly. There is no long-term care insurance system, and health insurance currently applies fee-for-service payment to both acute and long-term care. Fee-for-service payment is not adequate to take into account the unique characteristics of long-term care patients and provides perverse incentives for hospitals to increase the amount of services, contributing to cost inflation of the national health insurance.

Ministry of Health and Welfare and Health Insurance Review Agency recently developed prospective payment system for long-term care. It is based on daily rates for 17 disease groups. Each disease group is further classified into three functional status relying on the ADL (Activities of Daily Living)s, leading to 51 daily rates in total.

Main points

Main objectives

To reduce health care costs associated with long-term care.

Type of incentives

Financial: payment to long-term care hospitals.

Groups affected

Long-term care hospitals, Long-term care patients

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Characteristics of this policy

Degree of Innovation traditional innovative innovative
Degree of Controversy consensual rather 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

Degree of controversy and public visibility was low in the policy process associated with the development of the new payment system because it has been led by experts.

Political and economic background

Purpose and process analysis

Current Process Stages

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

Origins of health policy idea

The inefficiency of fee-for-service payment for long-term care has been well recognized. Daily rate is a more adequate method of paying for long-term care because health care needs of long-term care patients are more or less stable. Daily rate also needs to take into account the functional status of patients, which determines the utilization of resource and personnel.

It took a year for the Health Insurance Review Agency (HIRA), public agency for claim review and research under the national health insurance (NHI), with the support of the Ministry of Health and Welfare, to develop prospective payment system for long-term care.

The classification of disease types into 17 categories is similar to the RUG (Resource Utilization Group) system used in the Medicare and Medicaid in the U.S. There are 3 types of cases, depending on functional status of the patient, per each of 17 disease categories. Therefore the prospective payment for long-term care has 51 different daily rates.

But payment to long-term care hospitals is not entirely prospective. In order to avoid the potential negative effect of the prospective payment on the quality of care, fee-for-service is used for professional rehabilitation service and medicines for Alzheimer's disease.

Initiators of idea/main actors

  • Government

Approach of idea

The approach of the idea is described as:
new:

Stakeholder positions

Long-term care hospitals have not been supportive of the idea of prospective payment for them. However, there are only about 100 long-term care hospitals in Korea, most of them are small in size, and they are not yet strong stakeholders to have a strong influence on government policy.

The consensus on prospective payment for long-term care has been much stronger than that for acute care. (Due to strong oppositions by physicians, prospective payment for acute care has not been implemented in Korea.) A large proportion of long-term care has social care aspect, and the role of medical profession in long-term care settings is much smaller than in acute care.

Actors and positions

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

Actors and influence

Description of actors and their influence

Government
Ministry of Health and Welfarevery strongvery strong none
Health Insurance Review Agencyvery strongstrong none
Health Insurance Review AgencyMinistry 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

Pilot program for voluntarily participating long-term care hospitals will be implemented in May 2005.

Monitoring and evaluation

The pilot program will include an evaluation system that monitors the amount of services provided, number of inpatient days, potential change in coding, patient selection, patient and provider satisfaction, and the quality care.

Expected outcome

Prospective payment system for long-term care is expected to contribute to the containment of the costs of long-term care hospitals. However, providers may change their behavior to maximize reimbursement under the new payment system, such as increasing the number of inpatient days, coding change toward greater reimbursement, selection of patients who consume relatively smaller amount of resources per given case, sacrifice of quality by not providing necessary care, etc. Close monitoring and evaluation of the pilot program will be essential to the nation-wide implementation of the prospective payment system for long-term care.

Impact of this policy

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

The desired impact of the prospective payment system for long-term care is to improve cost-efficiency with the maintenance of quality of care in long-term care hospitals.

References

Author/s and/or contributors to this survey

Soonman Kwon

Suggested citation for this online article

Soonman Kwon. "Prospective Payment for Long-term Care". Health Policy Monitor, April 2005. Available at http://www.hpm.org/survey/kr/a5/2