[Exclusive] Health Insurance Out-of-Pocket Cap Raised from 5.98 Million to 10.14 Million Won... Support Decreases as Income Increases

"Rationalization" Promotion... Setting Amounts According to Income Levels
"High-Income Groups Had Caps Lower Than Their Income"

Low-Income Burden Likely to Be Restrained
High-Income Groups Expected to Focus on Long-Term Hospitalization Increases

[Asia Economy Reporter Lee Chun-hee] This year, the maximum amount for the Health Insurance Out-of-Pocket Expense Cap System has been set at 10.14 million KRW, a 69.6% increase from last year's 5.98 million KRW. The Out-of-Pocket Expense Cap System is designed to reduce excessive medical expenses by setting a cap amount based on income levels, with the National Health Insurance Service covering any medical costs exceeding this cap. Over the past five years until last year, the maximum cap amounts were 5.23 million KRW → 5.8 million KRW → 5.82 million KRW → 5.84 million KRW → 5.98 million KRW, showing an increase rate of only 0.3% to 2.4%, except for 2019. This is because the increase rate is linked to the consumer price index and capped at a maximum of 5% to prevent sharp rises.

According to the Ministry of Health and Welfare and the National Health Insurance Service on the 11th, the government plans to significantly raise the cap for the top 30% income bracket through a comprehensive reform of the system rather than a general increase this year. Although only the maximum cap amount has been disclosed so far, it is highly likely that a differentiated and steep increase will be applied to the 8th to 10th income deciles. However, this reform is expected to focus on limiting the burden increase on low-income groups and targeting 'social hospitalization'?hospitalizations for living or nursing care rather than actual medical treatment?among high-income groups.

The government views the health insurance finances as having deteriorated due to the previous administration's expansion of coverage policies known as 'Moon Jae-in Care.' To overcome this, it has decided to significantly raise the support criteria for medical expenses borne by high-income earners. Recently, the amount paid through the Out-of-Pocket Expense Cap System has been rapidly increasing. The payment amount, which was 538.6 billion KRW in 2011, rose to 2.386 trillion KRW last year, a 4.4-fold increase over ten years. In particular, when Moon Jae-in Care, which significantly lowered the cap for low-income groups, was introduced in 2018, the amount jumped by 456.6 billion KRW to 1.7999 trillion KRW compared to the previous year and has continued to rise since then.

The government also identified rationalizing the Out-of-Pocket Expense Cap System as one of the key tasks in last month's 'Health Insurance Expenditure Efficiency Plan.' The government stated, "For the upper-income groups, the cap application standard amount was relatively low compared to their income levels," and announced plans to "adjust upward the cap amounts for the 5th to 7th brackets (8th to 10th deciles) corresponding to the top 30% income group." This is essentially a plan to reduce health insurance premium support for high-income earners to improve fiscal soundness.

The previous reform of the cap system conducted in 2018-2019 was also carried out in line with this policy of supporting low-income groups while reducing benefits for high-income groups. At that time, the government adjusted the cap amount to 10% of annual income to improve fairness in the cap system. As a result, the cap amount for low-income groups (1st to 5th deciles) decreased by 27-35% in 2018 compared to the previous year, while for high-income groups (6th to 10th deciles), the cap amount increased by up to 11.8% in 2019 compared to the previous year. Simultaneously, to prevent excessive social hospitalization among low-income groups, a measure was implemented to raise the cap by about 40-55% for patients hospitalized in nursing hospitals for more than 120 days.

In fact, looking at the health insurance coverage rates by income group last year, the Out-of-Pocket Expense Cap System appeared to alleviate medical expenses more for low-income groups than for high-income groups. Among workplace-insured individuals, the coverage rates before applying the cap were 59.6% for the 1st decile and 60.0% for the 10th decile, showing lower coverage for low-income groups. However, after applying the cap, the coverage rates reversed to 64.0% and 60.7%, respectively, showing a significant difference. On average, after applying the cap, workplace-insured individuals saw coverage rate increases of 3.1 percentage points for low-income groups and 1.1 percentage points for high-income groups, while regional-insured individuals showed average increases of 4.5 percentage points for low-income groups and 1.1 percentage points for high-income groups.

This reform is also expected to proceed along this policy line. A National Health Insurance Service official explained, "We will try to minimize increases in the cap for low-income groups," adding, "For high-income groups, a system to raise the cap for hospitalizations exceeding 120 days in nursing hospitals is being considered." Even if the maximum cap itself undergoes an unprecedented increase of up to 70%, by introducing a social hospitalization prevention system simultaneously, the plan is to maintain support for essential and appropriate medical care as much as possible.

Notice of the Maximum Limit for the 2023 Out-of-Pocket Expense Cap System Posted on the National Health Insurance Service Website [Image Source: National Health Insurance Service Website]

The Ministry of Health and Welfare plans to finalize and announce related measures soon. Although the cap amount is usually announced around mid-January each year, this year’s announcement has been delayed somewhat due to the concurrent reform process. Roh Jeong-hoon, head of the Essential Medical Care Division at the Ministry of Health and Welfare, stated, "We are discussing improvement measures because there was no differentiation in cap amounts between lower and upper income groups," but emphasized, "However, the level of increase and the actual implementation timing have not yet been finalized." He added, "The reform process is causing some delay, but we plan to finalize and disclose the details within this month."

However, the medical community criticizes that the Yoon Suk-yeol administration is weakening the already insufficient level of medical welfare. The Health and Medical Organizations Alliance for the Realization of Health Rights condemned, "The current health insurance cap system is insufficient compared to major countries' systems and lacks effectiveness because it does not include non-reimbursable expenses," adding, "Instead of strengthening it, there is an attempt to regress and reduce it." The Ministry of Health and Welfare is also expected to announce this month a 'Health Insurance Sustainability Plan' focusing on re-examining coverage enhancement items, revising eligibility for health insurance enrollment for foreigners, promoting rational medical use, cracking down on illegal activities, and managing non-reimbursable expenses. Additionally, a comprehensive plan called the 'Health Insurance Comprehensive Plan' is scheduled to be prepared and disclosed within the second half of this year.