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[News Terms] Ministry of Health and Welfare Introduces 'Alternative Payment System'

Emphasizing Patient's Final Health Status for Rewards, Enabling Better Medical Services
Government to Allocate Separate Account within Health Insurance Budget, Investing Approximately 2 Trillion Won

'Alternative payment models' are healthcare insurance payment systems that provide differential compensation based on the quality and outcomes of medical care, rather than the volume of services performed.


The current medical insurance payment system in Korea is a mix of the bundled payment system and the fee-for-service system. The bundled payment system designates an insurance fee for the disease itself, limiting services beyond a set cost, which carries the risk of under-treatment. The fee-for-service system assigns insurance fees for each individual medical service, which can lead to overuse of unnecessary services and excessive medical expenses.

[News Terms] Ministry of Health and Welfare Introduces 'Alternative Payment System' On the 18th, a medical staff member is sitting on a lobby chair at a university hospital in Seoul.
[Photo by Yonhap News]

Alternative payment models diversify payment units by reflecting the characteristics of medical care and provide value-based compensation based on final health outcomes. It adds performance-based rewards to the existing basic compensation to determine the total annual compensation amount. How to divide the ratio between basic compensation and performance-based compensation will be a key issue in the future.


Because alternative payment models emphasize and reward patients' final health status and integrated health management, they can improve patients' overall health and encourage preventive care. Prioritizing medical outcomes and patient satisfaction means patients can receive better healthcare services.


However, since the system differs from the existing fee-for-service or bundled payment systems, implementation may be somewhat complex. Additionally, predicting patients' health status for compensation is difficult, which may lead to unfair payments.


On the 19th, the government announced plans to introduce 'alternative payment models' to strengthen essential medical services, setting up a separate account within the health insurance budget and investing about 2 trillion KRW, approximately 2% of the total medical care benefit costs.


The Ministry of Health and Welfare, chaired by Minister Cho Kyu-hong, held a meeting of the Central Accident Response Headquarters for the doctors' collective action and announced this plan. They decided to establish a 'community participation innovation account' for alternative payment models. More than 700 billion KRW will be invested to develop performance-based reward models linked to existing local government projects such as primary care and medical-nursing-care coordination.

[News Terms] Ministry of Health and Welfare Introduces 'Alternative Payment System'


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