[Fact Check] Is the Claim of Health Insurance Financial Collapse Groundless?

Warning Signs of Health Insurance Finance Collapse
Record Surplus in Health Insurance in 2022

Kim Seong-ju, Senior Deputy Chairman of the Policy Committee of the Democratic Party of Korea, stated on the 4th of this month, "The theory of health insurance financial collapse claimed by President Yoon Seok-yeol and the People Power Party has been revealed to be completely unfounded when looking at the data released by the National Health Insurance Corporation." Is the theory of health insurance financial collapse really baseless?

The surplus in the current balance of health insurance last year, which Kim cited as evidence against the financial collapse theory, has been confirmed as a 'fact.' However, considering factors such as low birth rates, aging population, and various issues related to health insurance finances, it is analyzed that neither the 'financial collapse theory' nor the claim that the 'financial collapse theory is baseless' can be definitively asserted.

At the National Assembly, Senior Deputy Chairman Kim said, "Health insurance finances recorded consecutive surpluses of 2.8 trillion won in 2021 and 3 trillion won in 2022, and the reserves also increased from 20.6 trillion won in 2018, the year after the Moon Jae-in administration took office, to 23.9 trillion won in 2022," adding, "The claim that Moon Jae-in Care caused the financial collapse of health insurance is a false claim and a typical fake news."

What Senior Deputy Chairman Kim refuted was President Yoon Seok-yeol's remarks on health insurance last year. On December 13th last year, President Yoon criticized at a Cabinet meeting, "Normalization of health insurance, the last bastion protecting the health of the people, is urgent. Over the past five years, more than 20 trillion won has been poured into strengthening coverage, but the government has neglected medical overuse and free-riding on health insurance, transferring the burden to the majority of the people," and added, "Populist policies that waste taxpayers' money ruin finances, undermine the foundation of the health insurance system, and ultimately force great sacrifices on the people."

In response, Senior Deputy Chairman Kim cited the current balance of health insurance, stating that a surplus was recorded in the actual operation of health insurance and that accumulated reserves also increased, thus refuting the financial collapse theory as fake news. He claimed that the financial deficits in 2018 and 2020 were planned deficits. According to additional explanatory materials released by Kim's office, health insurance recorded deficits of 177.8 billion won in 2018, 2.8243 trillion won in 2019, and 353.1 billion won in 2020. However, surpluses of 2.8229 trillion won in 2021 and 3.6291 trillion won in 2022 were recorded. Although deficits occurred after former President Moon Jae-in's health insurance coverage expansion in 2017, the financial situation has recently stabilized rapidly.

According to confirmation from the National Health Insurance Corporation, the surplus of 3.6291 trillion won recorded this time is the third largest in history, following 2014 and 2015. A health insurance official also explained, "The accumulated reserves of 23.8701 trillion won are the largest ever." At least considering the financial flow of the National Health Insurance Corporation last year, the theory of health insurance financial collapse does not currently appear imminent.

So, can we be optimistic about health insurance finances?

On the 4th, Choi Hyun-ryong, Planning Executive Director of the National Health Insurance Corporation, said at a press briefing, "Despite two consecutive years of current balance surpluses, there are concerns that the revenue base from insurance premiums may weaken due to the global economic recession, continuous decline in the working-age population caused by low birth rates and aging, and the impact of the second phase of the contribution system reform," adding, "With the stabilization of the COVID-19 situation, medical demand is expected to recover, making it difficult to be optimistic about a stable financial environment."

Although surpluses were recorded in 2021 and 2022, the future financial situation cannot be assured. The circumstances last year and this year may differ.

In fact, the National Health Insurance Corporation announced last month a record-breaking current balance performance, stating, "The increase in revenue exceeded the increase in expenditure, improving the financial balance," and added, "Health insurance has recorded a current balance surplus for two consecutive years, but due to the global economic recession, decline in the working-age population caused by low birth rates and aging, reaching a super-aged society (by 2025), and recovery of medical utilization, financial uncertainties are expected to increase."

Choi Hyun-soo, a research fellow at the Korea Institute for Health and Social Affairs, told this publication in a phone interview, "Health insurance operates on a short-term basis, judging income and expenditure annually," and explained, "Unlike the National Pension, which does not raise premiums for decades, health insurance premiums are adjusted as needed by bodies like the Health Insurance Policy Deliberation Committee."

Researcher Choi added, "Health insurance is not structured in a way that finances can easily collapse. While there is increasing demand for elderly medical care and effects from low birth rates and aging, expenditure structures can be managed. For example, changing from a fee-for-service system to a bundled payment system, adjusting medical utilization realistically, or managing medical demand to prevent overuse and seeking efficiency improvements."

Because health insurance premiums are determined annually, unlike the National Pension, finances can be flexibly adjusted through premiums or management methods depending on the financial situation. In particular, health insurance revenue is determined not only by subscribers' premiums but also by employment conditions, economic conditions, and collection rates of overdue premiums. If the number of regular jobs increases, leading to more workplace subscribers, and economic growth and wages rise, premiums increase, thus increasing revenue.

Despite a significant increase in expenditures last year, revenue increased even more, resulting in a surplus. Therefore, the financial situation must be reviewed not only in terms of expenditure increases but also from the revenue perspective. If the economy is good, health insurance finances improve; conversely, if the economic situation worsens, the financial burden on health insurance also increases.

On the expenditure side, the costs related to COVID-19 and the reduced use of medical services due to COVID-19 interact. It is not a simple issue where health insurance finances are driven to the brink of collapse solely because of expanded coverage.

There is another pillar of health insurance finances: the government's role. The government was legally required to support 20% of the expected health insurance premium revenue (approximately 14% from the national treasury and 6% from the Health Promotion Fund). However, since the related law was not revised last year, this provision expired, but the National Assembly's Welfare Committee, the relevant standing committee, has already passed a revision bill.

The reason for focusing on government subsidies is that government support for health insurance has been less than the legal standard. Last year, it was 14.4% (10.5 trillion won), and in 2021, about 13.8% (9.6 trillion won) was paid. Underpayment of government subsidies has been a continuous phenomenon. This indicates that even if the government does not fully provide the legally mandated 20%, health insurance functions properly. Also, meeting just the legal standard means that health insurance has a financial capacity to bear a certain level of expenditure burden.

There is a consensus in the political sphere that government support for health insurance should be increased. Recently, the National Assembly's Welfare Committee prepared a revision bill to restore the law that was abolished last year in a five-year sunset form, and the bill's supplementary opinion included a statement that "the government will strive to strengthen national responsibility for health insurance finances, including expanding national treasury support."

This content was produced with the assistance of AI translation services.