In this blog post, we will examine the institutional flaws of the global budget system and explore potential solutions, based on the realities of South Korea’s healthcare system, to understand why it places a burden on both patients and doctors.
In South Korea, public dissatisfaction with the medical profession is no longer a new issue. People voice complaints about unfriendly doctors, short consultation times, and frequent medical errors. In fact, it is difficult to describe Korea’s healthcare system as rational. However, even though such dissatisfaction with the medical profession dominates public opinion, very few people actually understand the specific circumstances and root causes of these issues. Upon careful analysis of South Korea’s healthcare system, it becomes clear that patients are not the only victims of the country’s flawed medical policies. In this article, I will examine the reasons why South Korea’s healthcare system—particularly its global budget system—needs to be reformed, from the perspective of a medical student aspiring to become a doctor.
Before listing the reasons, let’s first examine what the global budget system is. According to the Doosan Encyclopedia, the global budget system is “a system in which a predetermined fixed amount is paid to medical institutions based on whether a patient was hospitalized for a specific disease, regardless of the type or quantity of medical services provided.” Simply put, under the global budget system, patients pay a predetermined amount for a specific disease covered by health insurance, regardless of the number of treatments, the type of medical supplies used, or the length of hospitalization. The global budget system is used in many countries because it has the advantage of preventing physicians from providing unnecessary treatments and reducing friction between hospitals and patients regarding medical costs. So why is Korea’s global budget system harmful to both patients and doctors?
Before proceeding further, let’s examine the distinctive characteristics of Korea’s global budget system when compared to other countries. First, the purpose and background of implementing the global budget system differ between Korea and other nations. In other countries, on average, more than two-thirds of healthcare institutions are publicly owned. Even in countries with a lower proportion of public institutions, the public function of healthcare facilities is recognized, ensuring a certain level of basic investment in medical resources. Therefore, in the healthcare systems of other countries, the primary challenge is to efficiently manage the medical resources that are already being invested. Consequently, even when a global budget system is implemented to prevent over-treatment and enable the efficient allocation of medical resources, the likelihood of a decline in the quality of care is low. Furthermore, in Europe and Australia, the global budget system is used as a benchmark for budget payments based on the level of public healthcare.
In contrast, South Korea has virtually no public investment in healthcare resources, and 93% of all medical institutions are private. Furthermore, compensation for medical services recognized as public healthcare services (those covered by health insurance) is lower than actual treatment costs, and the fee schedule itself is set far below that of other countries (in fact, the cost recovery rate is only 73.9%). Given these circumstances, it is a natural consequence that the implementation of the global budget system has led to a decline in the quality of care at private medical institutions, which are fundamentally profit-driven. Finally, while other countries discuss the cycles, principles, and procedures for adjusting medical fees to ensure appropriate adjustments, in Korea, the National Health Insurance Service (NHIS) uses only macroeconomic indicators when determining fees. Consequently, microeconomic indicators—such as the costs of materials and pharmaceuticals, employee benefits, staff salaries, physicians’ workloads, and the risk associated with medical procedures—are not reflected at all. Furthermore, while other countries have established national management systems and liability insurance frameworks for medical accidents and disputes, Korea lacks any social safety net for medical disputes. This fact, combined with the existing system, ultimately encourages physicians to avoid performing certain medical procedures. Below, we will examine the problems associated with Korea’s global budget system in greater detail.
First, Korea’s capitation fee system contributes to the lack of quality of life for physicians and contributes to an increase in medical accidents. The basis for this argument stems from the fact that the fees under Korea’s capitation system are set far too low. In 2014, the average hourly wage for resident physicians was 5,885 won. A resident is a doctor who has graduated from medical school and is in the final stage of training after completing an internship and residency. Surprisingly, contrary to the common perception that doctors earn high incomes, the hourly wage of a resident falls short of South Korea’s minimum wage of 6,030 won. Moreover, because the set fee rates are so low, doctors must see as many patients as possible within an hour through so-called “three-minute consultations” just to reach an hourly wage of 5,885 won. Even when seeing as many patients as possible within the allotted time, they are unable to meet the minimum wage requirement.
This phenomenon can be explained as follows. The government sets medical fees at unreasonably low levels to preserve the strained health insurance budget. However, since doctors’ minimum wages must be guaranteed, the government implements measures to strictly limit the number of doctors. In other words, by keeping the doctor-to-patient ratio very low, the government ensures that each doctor performs a certain number of medical procedures, thereby forcing them to see a large number of patients in order to meet the minimum wage requirement. According to the OECD, the number of doctors per 1,000 people is 2.4 in the UK and the US, and 3.4 in France, Denmark, and Sweden, whereas in South Korea, it is only 1.6. Furthermore, due to low healthcare costs, the average number of outpatient visits per person per year in South Korea is 11.8—nearly double the OECD average of 6.8. Similarly, the average length of hospital stay per inpatient is 13.5 days, far exceeding the OECD average of 9.9 days. To summarize, doctors in Korea are seeing more than four times as many patients per person compared to the average doctor in OECD member countries.
What are the consequences of the “consideration” in healthcare policies aimed at guaranteeing a minimum wage? The result is intensive patient care and grueling working hours. According to a survey of 1,745 resident physicians in Korea, the average weekly working hours for resident physicians in the country reach 93 hours. The working hours of the notoriously overworked interns average a staggering 116 hours per week. This figure is three times the statutory working hours established as reasonable. Ultimately, the exorbitantly low reimbursement rates characteristic of Korea’s global budget system severely limit the number of doctors relative to the patient population, forcing doctors to work intensely long hours. These grueling working hours leave no time for doctors to get proper sleep. Compounded by the pressure to remain courteous to patients under such conditions, the incidence of depression among doctors is 13 times higher than among non-medical professionals of the same age group. This directly impacts patient safety. I often hear senior doctors say they drag themselves into the operating room in a dazed state, unable to tell whether they are awake or dreaming. At this point, it’s almost surprising that medical errors don’t occur more frequently.
Second, certain specialties become unpopular among doctors, leading to a shortage of personnel in those fields, which in turn makes it difficult for patients to receive timely treatment. In Korea, the criteria for setting medical fees do not sufficiently reflect doctors’ perspectives. Even if a doctor performs a difficult surgery that requires immense effort and carries significant risk, they are not properly compensated if the government-set medical fee is too low. Unless a doctor has a special sense of mission toward that field, taking on a surgery where the compensation is absurdly low compared to the effort, or where the risk is so high that they must accept the possibility of medical malpractice and the resulting legal disputes, is essentially a case of having no choice but to swallow a bitter pill. This is especially true in Korea, where there is absolutely no social safety net in place for medical malpractice.
Excluding the rare cases of prospective doctors who have a sense of mission toward a specific field, even those with the most upright values and noble intentions cannot help but consider this reality when choosing their specialty. Naturally, this leads to a division between popular and unpopular fields, and when this situation becomes extreme, it results in a severe shortage of personnel in the unpopular fields. Ensuring patients receive necessary care in a timely manner—that is, access to medical care—is an issue treated with the utmost importance in the medical community. The harm suffered by patients who cannot receive timely treatment due to a shortage of residents is immense, beyond imagination. However, preventing these problems relies entirely on the sense of mission of doctors, with no concrete measures in place. Doctors also bear the full brunt of public criticism that erupts when problems occur. This is because the majority of the public is unaware of this reality.
Third, the quality of medical services declines. The cost recovery rate for Korean doctors on items for which the government sets medical fees is 73.9%. This means that when performing treatments covered by health insurance, the remaining 26.1% results in a loss for the doctor. This leaves doctors with only two options to generate income: either cut expenses or increase procedures not covered by health insurance. After all, doctors are private citizens who must support their families and “make a living,” so it is only natural for them to seek profit. Do you think doctors are just complaining because they are well-fed? Among the 1,145 people who filed for bankruptcy over the past five years, doctors ranked second, Korean medicine practitioners fourth, and dentists fifth. Furthermore, 40% of those who filed for personal rehabilitation are doctors. Many doctors in Korea are committing suicide due to hospital management crises. Doctors driven into a corner eventually resort to using cheaper materials, choosing less expensive surgical methods, and scaling back patient care in an effort to reduce the length of hospital stays. Inevitably, the quality of medical services declines. Consequently, the volume of medical services decreases, the public role of hospitals diminishes, and inappropriate discharges lead to an increase in readmissions and mortality rates. This is no exaggeration. In fact, a study in the *Health Care Finance Review* revealed that the mortality rate among discharged patients increased by 3.7%, indicating that early discharges resulting from the forced implementation of the global budget system could become a major problem.
Furthermore, in the same vein, people who do not live in densely populated areas face reduced access to hospitals. This is because doctors are reluctant to open practices outside of densely populated areas, as opening a hospital in a sparsely populated area often leads to bankruptcy due to insufficient patient volume to break even. This is regrettable, considering that access to hospitals is a critical factor that can be a matter of life and death for patients.
The issues listed above are not inherent to the global budget system itself, but rather specific to the “Korean global budget system.” This system is proving detrimental to both patients and doctors. As a future healthcare professional, I see that Korea’s healthcare system still has much room for improvement. The global budget system is merely one example. The numerous problems plaguing the Korean medical community cannot be solved by blaming doctors or forcing them to make excessive sacrifices. The medical field will advance further when an environment is guaranteed where doctors can work with a genuine sense of mission under reasonable policies.
