Ministry of Economy and Finance to Revise Fraud Clawback and Penalty Rules... Establishing an Expenditure Efficiency System

Strengthened Inspections for Employment Insurance Amid Business Closures
Health Insurance: Analyzing Outpatient Service Usage

The government is set to overhaul its expenditure structure to enhance fiscal sustainability. Plans are underway to prevent fraudulent claims in public pensions and social insurance, and to strengthen the management of national subsidy projects, as part of broader fiscal management innovation measures.

According to the Ministry of Economy and Finance, the second meeting of the 'Fiscal Structure Innovation Task Force (TF)' was held at the Government Complex Seoul on January 22, 2026, to review the progress of each working group's tasks. The Fiscal Structure Innovation Task Force was launched in September last year with the aim of establishing performance-oriented and strategic fiscal management and creating a virtuous cycle between fiscal policy and the economy. The Task Force consists of five working groups: Expenditure Innovation, Pension and Insurance Innovation, Fiscal Management Innovation, National Treasury Innovation, and Tax System Innovation. Relevant government ministries and private sector experts are participating to develop fiscal innovation measures.

The Expenditure Innovation and Pension and Insurance Innovation working groups are focusing on establishing a system for ongoing expenditure efficiency, moving beyond one-time restructuring. Instead of the previous approach, which centered on single-year (one fiscal year) expenditure adjustments during the budget formulation period (June to August), the new plan is to identify and implement fundamental, medium-term reforms. These include streamlining similar and overlapping projects across ministries, restructuring mandatory and rigid expenditures, reforming project structures and systems, and strengthening the roles of local governments and the private sector.

At this meeting, the government decided to overhaul the management system for preventing fraudulent claims in public pensions and social insurance, given that the expansion of the social safety net has increased incentives for such fraud. Although the management of subsidies and compensation payments has been strengthened since the enactment of the Public Finance Recovery Act, concerns about fairness have arisen because the rules for clawback and penalties differ by system for public pensions and social insurance.

Accordingly, the government plans to revise the regulations on clawback and penalties for fraudulent claims, establish a system to prevent such claims through information sharing and linkage between institutions, and strengthen detection and joint training by sharing similar cases.

Im Gi-geun, Second Vice Minister of the Ministry of Economy and Finance, is responding to lawmakers' questions at the plenary session of the Planning and Finance Committee held at the National Assembly on September 8, 2025. Photo by Kim Hyunmin

For employment insurance, workplace inspections will be intensified and information from related agencies such as health insurance will be actively utilized to address fraudulent claims arising from business closures. For industrial accident insurance, the government will strengthen preemptive detection using data such as application patterns and enhance the expertise of reviews to shift toward a prevention-focused structure. For long-term care insurance, monitoring will be strengthened using the appropriate claim management system (FDS), and both on-site investigations and voluntary inspections will be expanded to combine prevention and follow-up responses.

To stabilize the finances of the national health insurance, the government will analyze outpatient service usage and expand differentiated out-of-pocket payment criteria for high-volume users. It will also strengthen the management of non-covered services, improve the insurance premium assessment system, and develop measures to prevent the progression of serious illnesses through subscriber health management and disease prevention. For cash support programs for children, which have been expanded in response to low birth rates, the government will restructure the support methods and criteria to address inefficiencies caused by parallel operation of different programs.

Management of national subsidy projects will also be strengthened. To enhance budget transparency and efficiency and prevent fiscal leakage, the government will tighten carryover requirements starting this year and revise related guidelines to make it mandatory to register subsidy carryovers and re-carryovers in the subsidy management system.

The Fiscal Management Innovation working group discussed reforms to the performance evaluation of fiscal projects, improvements to preliminary feasibility studies, and measures to promote private investment. The performance evaluation system will be comprehensively reformed to enhance objectivity, systematically feed evaluation results back into the budget, and ensure transparency to the public. The National Treasury Innovation working group reviewed follow-up actions to strengthen the management of state-owned assets and non-tax revenues. The Tax System Innovation working group will focus on strengthening the management of tax expenditures by specifying exemption requirements for preliminary feasibility studies on tax incentives and reinforcing the feedback of in-depth tax incentive evaluation results into the budget.

Im Gigeun, Acting Minister of Economy and Finance, stated, "Active fiscal policy alone cannot guarantee fiscal sustainability," adding, "We must enhance the efficiency of government spending and boldly eliminate wasteful elements to restructure toward a more productive fiscal system."