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13 Apr 2018

Impacts and Implications of President Health Care Initiative (“Moon Jae-In Care”) - Issues and Challenges Faced by Moon Jae-In Care

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Impacts and Implications of
President Health Care Initiative (“Moon Jae-In Care”)

This is Part 2 of a three-part report prepared by Yulchon LLC’s Healthcare Team on “Moon Jae-In Care”, the most talked-about industry topic in 2018. In Part 1 of our report we introduced the main purpose behind Moon Jae-In Care. In this Part 2, we will look more closely at some of the issues and challenges presented by Moon Jae-In Care.

Issues and Challenges Faced by Moon Jae-In Care

As we explained in Part 1 of this 3-part report, President Moon Jae-In introduced an aggressive healthcare reform plan that would allow “complete control of non-reimbursables” and provide “revolutionary relief of the burden of medical expenses for low-income households.” However, while Moon Jae-In Care seeks to drastically expand health insurance coverage, it has left a number of issues and challenges to further debate.

1. Conversion of Non-Reimbursable to Reimbursable Coverage.

Moon Jae-In Care seeks to provide coverage for nearly 3,800 medically necessary services and items under the National Health Insurance that are currently categorized as non-reimbursables. In order to achieve this, Moon Jae-In Care has introduced a provisional reimbursement plan that adopts a co-payment scheme where the patient’s responsibility would increase to a range between 50% and 90% for services and items that are deemed less cost-effective. Of these 3,800 services and items, however, what is to be re-categorized as reimbursement services and items or provisional reimbursement services and items is yet to be decided, and for those that are to be re-categorized as provisional reimbursement services and items, the amount of increase in co-pay is expected to be highly debated. Furthermore, in order to convert a non-reimbursable item to a reimbursable item, an evaluation of the medical technology and cost-effectiveness will be necessary. However, by whom and with what methodology such evaluation is to be conducted is unclear.

2. Price Determination and Loss Compensation.

For years, the medical community (medical doctors and medical institutions) has voiced its concerns over the financial hardship it is experiencing due to underpriced treatments and demanded that the government increase prices for treatments that are covered by the National Health Insurance. Because of this, the introduction of Moon Jae-In Care and its plan to expand health insurance coverage even more has been met by strong resistance from the medical community arguing that it is now only a matter of time before hospitals begin to shut down and file for bankruptcy. Therefore, it is imperative that appropriate policies are put in place that will not only help set reasonable and appropriate prices for treatments but will also address the financial concerns of the medical community. Furthermore, the extent of losses incurred by each type of hospital will vary and so the government will need to come up with a compensation method that takes into account such differences.

3. Financial Sustainability and Cost Control.

The government contends that Moon Jae-In Care can be financially sustained with the current National Health Insurance reserves and a 3% annual increase in National Health Insurance premiums. However, there is strong opinion that this alone will not be enough and a more concrete plan for financial stability of Moon Jae-In Care is necessary. The government has said that it would implement a number of plans to manage the finances, such as stronger management of the total amount of non-reimbursables through the Korean New Diagnosis-Related Groups (“KNDRG”) payment system1); better management of expenses by updating the treatment price evaluation system and drug price adjustment scale; and medical care delivery system reform and increase of primary care, however the government has already failed in its talks with the medical community on medical care delivery system reform. In this regard, the possibility of more pressure on the industry to lower prices for existing drugs and increased market entry barriers for innovative medical products cannot be dismissed.

4. Managing Conflicting Interests.

Another challenge that Moon Jae-In Care faces is how to manage conflicting interests between different healthcare facilities and the interests among the medical, dental and traditional medicine communities. Since the announcement of Moon Jae-In Care, clinics, small hospitals and general hospitals alike have argued that they will suffer significant losses as a result of the government’s health insurance reform. In addition, overcrowding of emergency rooms; more patient gravitation towards general hospitals; clinics, small and mid-size hospitals suffering operation loss university hospitals incurring losses as a result of abolishing optional treatments and converting non-reimbursable treatments to reimbursable treatments are just some of the issues being raised by the different types of healthcare facilities. Furthermore, while dental and traditional medicine practitioners are generally in favor of Moon Jae-In Care, the medical community is more against it and so balancing their conflicting interests is expected to be challenge.

5. Relationship and Division of Roles between Public and Private Insurance.

Despite continued discussions by consultative groups jointly established by the Ministry of Health and Welfare and the Financial Services Commission, the relationship and division of roles between the National Health Insurance and secondary private insurances is still unclear. Concerns have been voiced that if coverage of the National Health Insurance is expanded under these circumstances, some of the positive effects of extended coverage intended by Moon Jae-In Care could be hampered by aroused moral laxity by individual holders of secondary private insurance policies. Therefore, measures such as a clear division of roles between public and private insurances need to be put in place that will prevent unnecessary medical expenditures while reducing the financial burden placed on the people.

6. Changes to the Current Evaluation System.

If most of the non-reimbursable items are converted to reimbursable items as intended by Moon Jae-In Care, the current price evaluation system, which uses evaluation standards by service and category to determine price adjustments for treatments and drugs, will result in a significant decrease in such price adjustments. Therefore, under Moon Jae-In Care, the price evaluation system will need to be changed to employ a cost-effectiveness evaluation by type of healthcare facility.

7. Avoiding Negative Effects on the Healthcare Industry.

For medical device companies and the healthcare industry at large, there are concerns that the total conversion of non-reimbursable items to reimbursable items will reduce competition for technological advancements and implementation of new medical techniques, as well as lead to the control of prices. This would inevitably cause market contraction and weaken the foundation for the development of healthcare technology. Therefore, finding a way to balance the need to maintain and improve healthcare services and promote the healthcare industry while expanding coverage under the National Health Insurance will be needed.

  • 1) Under the KNDRG payment system, certain basic services of a particular treatment will be combined as a single comprehensive cost and certain specific services such as surgery necessary for such treatment will be compensated separately.
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Lee, Seuk Joon Kim, Ki Young
+82-2-528-5448 +82-2-528-5222
leesj@yulchon.com kykim@yulchon.com
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