Korea's Medical Cost Growth Outpaces OECD... Increased Medical Burden for Elderly and Youth [Chosun Price Records]

⑨Medical Expenses as % of GDP: Korea 9.7%, US 16.6%
Issue: Accelerating Medical Cost Growth
Exceeded OECD Average for First Time in 2022
Elderly & Youth Say "Medical Costs Are Burdensome"

Since the introduction of health insurance in 1977, South Korea's gross domestic product (GDP) has increased 116 times, while national medical expenses have surged 511 times, raising concerns about the rapid growth of healthcare costs. Although South Korea's medical expenditure is not high compared to the average of the Organisation for Economic Co-operation and Development (OECD) countries, the relatively fast increase poses a burden on groups with limited spending capacity, such as the elderly and youth.

What is the level of medical expenditure in South Korea?

As of 2022, South Korea's current medical expenses (total medical expenses spent by the public) relative to GDP stand at 9.7%. Compared to the United States at 16.6%, the burden is not heavy. Per capita medical expenditure adjusted for inflation is also lower than the OECD average. South Korea's per capita current medical expenses amount to $4,189 based on purchasing power parity (PPP), while the OECD average is $4,715.

However, due to factors such as population aging, improved living standards, and advances in medical technology, South Korea's medical expenditure is rapidly increasing. The ratio of current medical expenses to GDP in South Korea grew at an average annual rate of 6.3% from 2016, whereas OECD member countries saw an average annual increase of 2.1%. Although South Korea's ratio remains lower than that of advanced countries like the United States, the United Kingdom, Germany, and Japan, the rapid growth led it to surpass the OECD average (9.3%) for the first time in 2022.

The rate of increase in medical consumption expenditure per household in South Korea is also fast. According to the Statistics Korea's "2023 Fourth Quarter Household Expenditure Survey," the average monthly health consumption expenditure per household was 253,000 KRW, a 9.2% increase compared to the same period last year. While spending on medical consumables decreased by 26.3%, outpatient medical services (15.3%) and inpatient services (16.1%) saw high growth rates. The proportion of health expenditure within total consumption also rose by 0.3 percentage points from a year earlier to 8.9%. In terms of consumption expenditure composition, health expenditure ranks fifth after food and accommodation (15.3%), food and non-alcoholic beverages (14.4%), transportation (12.6%), and housing, water, electricity, and fuel (11.4%).

On the 5th, at Chosun University Hospital in Dong-gu, Gwangju, a doctor is seen moving amid the ongoing medical vacancy caused by the departure of residents protesting the government's healthcare policy. The photo is unrelated to the specific content of the article. Photo by Yonhap News.

If medical expenses continue to rise every year, lower-income groups will inevitably suffer. In fact, a survey found that more than three out of ten young people do not visit hospitals due to cost burdens. According to last month's report by the Korea Youth Policy Institute titled "Research on Youth Poverty Status and Establishment of Self-Reliance Safety Net System," a survey of 4,000 youths aged 19 to 34 (1,984 males and 2,016 females) revealed that 33.7% cited "reluctance to spend on hospital fees (medical cost burden)" as the reason for not visiting hospitals. The proportion of respondents who felt that medical expenses were a burdensome part of their overall living costs reached 40.0%.

The elderly also find medical expenses burdensome. Many have no special income and require frequent hospital visits. According to the National Health Insurance Service's "2022 Health Insurance Major Statistics" published last year, medical expenses for those aged 65 and older increased by 8.6% from the previous year to 44.1187 trillion KRW, accounting for 43.1% of the total. Per capita medical expenses by age group in 2022 were ▲ 3,749,983 KRW for ages 65?69 ▲ 4,655,399 KRW for ages 70?74 ▲ 5,640,618 KRW for ages 75?79 ▲ 6,116,358 KRW for ages 80?84 ▲ 7,058,557 KRW for ages 85 and above, showing that the super-aged population spends over 5 million KRW more than the overall average of 2,003,055 KRW.

Government's plan to increase medical school quotas by 2,000 sparks heated debate on medical expenses

On the 20th, citizens in the Seoul Station waiting room watched President Yoon Seok-yeol's opening remarks at the Cabinet meeting regarding the collective action of doctors opposing the increase in medical school admissions. Photo by Kim Hyun-min kimhyun81@

Regarding the government's plan to expand medical school quotas, the Korean Medical Association (KMA) argued that increasing the number of doctors would lead to a surge in medical expenses, sparking a debate on healthcare costs. The logic is that an increase in doctors would lead to excessive medical treatments aimed at maintaining profits, ultimately raising medical expenses. This argument is based on the "physician-induced demand" theory. In situations where there is an information asymmetry between doctors and patients, even if doctors intentionally recommend unnecessary tests or treatments, patients have no choice but to comply, leading to increased medical spending.

The KMA also estimated that if the government proceeds with its plan to add 2,000 doctors annually, the cost of medical benefits would increase by about 35 trillion KRW, resulting in an additional monthly medical expense burden of 60,000 KRW per person.

However, the government maintains that the economic community has already disproven the physician-induced demand theory and that there is no correlation between the number of doctors and medical expenses. The main factors influencing medical costs are aging and rising income levels, unrelated to the number of doctors. The government believes that increasing the number of doctors could actually reduce both medical expenses and social costs, as patients would be able to access timely medical care locally, preventing severe conditions and avoiding the need for travel to metropolitan hospitals.