Introduction

South Korea’s healthcare system is in crisis. A widespread strike by doctors and medical professionals has paralyzed the nation’s hospitals in response to the government’s plan to significantly increase medical school admissions. This conflict, which has been ongoing for months, has reached a critical point.

The government proposes increasing medical school admissions by 2,000 students per year, a more than 50% increase from current levels. President Yoon Suk Yeol’s administration announced this plan in February 2024, citing a need for more doctors, especially in rural areas and essential medical fields.

The medical community strongly opposes this plan. The strike began with medical students and residents but has expanded to include professors and private practice doctors. As of August 1, 2024, only 9.3% of medical residents were reporting to work across 211 training hospitals.

In this blogpost, I try to go beyond the surface-level disagreement between the government and doctors. I’ll discuss deep issues of Korea’s healthcare system, a system that has been sustained by doctors’ sacrifices and price controls rivaling those of North Korea.

What is happening with the healthcare system in Korea?

The core of the dispute centers around the government’s proposal to increase medical school admissions by 2,000 students per year, which represents more than a 50% increase from the current levels. This plan was announced by President Yoon Suk Yeol’s administration in February 2024, citing a need for more doctors, especially in rural areas and essential medical fields.

The medical community, however, has strongly opposed this plan. The strike action began with medical students and residents, but has now expanded to include professors and private practice doctors. As of June 2024, the situation has evolved into one of the largest medical strikes in South Korean history.

According to the data provided in the article, the impact of the strike has been significant. As of August 1, 2024, out of a total of 10,506 medical residents across 211 training hospitals, only 981 (9.3%) were reporting to work. The number of residents who had officially resigned stood at 51 (0.49%), although this figure may not fully represent the scale of the protest, as many more have effectively stopped working without formally resigning (source).

The government has taken a hard stance against the striking doctors. They have issued orders prohibiting the acceptance of resignations from medical residents and have threatened legal action against those participating in the strike. The government argues that the doctors’ actions are putting patients’ lives at risk and has characterized the strike as an abandonment of professional duty.

What exactly is the legislation?

The new legislation requires medical schools across South Korea to increase their admission quota. Across all schools, the number of students will go up by 2,000 students. This represents a significant 60% increase from the current 3,058 new medical school students admitted each year.

Key timeline:

February 6, 2024
Minister of Health and Welfare Cho Kyoo-hong announced the decision to increase medical school admissions by 2,000. 

February 22, 2024
The Ministry of Education sent out a demand survey to each medical school regarding the allocation of increased admissions. This was a follow-up to the first survey in October 2023, where medical schools initially requested 2,151-2,847 additional spots but then reversed to 350 in January 2024. 

March 4, 2024
Despite the atmosphere of collective action, universities actually increased their demand to 3,401 in the second survey.

March 20, 2024
Prime Minister Han Duck-soo and Deputy Prime Minister and Minister of Education Lee Ju-ho announced the results of the medical school admission increase allocation. 

The legislation aims to address perceived shortages in the healthcare system, particularly in rural areas and essential medical fields.

Arguments in favor of the legislation

Proponents of the legislation cite the critical situation of the healthcare system as the reason for the legislation.

1. Shortage of doctors in vital specialties

Certain medical fields are experiencing a lack of practitioners. Some examples of these avoided specialties in South Korea include:

1. Emergency Medicine
2. Obstetrics and Gynecology (especially for delivering babies)
3. General Surgery
4. Thoracic Surgery
5. Pediatrics (especially emergency pediatrics)

These specialties are crucial for healthcare but are often avoided due to work-life balance issues, legal risks, and inadequate compensation.

[1] 송수연. (2020, December 5). 갈수록 심해지는 전공의 지원 양극화…"환경 변화 반영". 청년의사 [2] 성서호. (2023, December 7). 내년 소청과 전공의 205명 뽑는데 53명만 손들어…지원율 꼴찌. 연합뉴스. [3] 이창진. (2012, November 29). 인턴들, 복지부 뒤통수…정원 감축후 양극화 심화. 메디칼타임즈.

In 2022 alone, there were 9,414 cases of “119 구급대 재이송” (i.e., 119 ambulance re-transport) because there weren’t specialist doctors to take care of the issue at the emergency hospital the patient initially went to (source).The assumption behind re-transport being important is the following: “people are dying when they could’ve lived if it weren’t for the re-transport - therefore, the quality of care in Korea is low.” We will refute this later.

2. There is a severe lack of doctors in rural areas of Korea

There’s a significant disparity in physician density between urban and rural regions. While the OECD average is 3.4 doctors per 1,000 people, Korea’s average is 2.3. Seoul has 3.1 doctors per 1,000 people, but rural areas like North Gyeongsang have only 1.4 (source).

3. Aging population

The government's core argument for increasing medical school admissions is based on the aging population. The elderly population (65 and over) is expected to surge from 9.94 million in 2023 to 15.21 million by 2035. As a result, it's predicted that by 2035, inpatient days of hospital stay will increase by 45% and outpatient by 13%. Calculated based on health insurance medical expenses, the demand for doctors quadruples from age 65. Considering this, there's no choice but to significantly increase medical school admissions.

https://www.mk.co.kr/news/editorial/10974827 

4. Comparatively low doctor-to-population ratio

Other developed countries have greatly increased their medical school admissions for the same reason. Germany, France, and the UK have 4.5, 3.4, and 3.2 doctors per 1,000 people respectively, far more than Korea (2.6). Despite this, Germany plans to increase its medical school admissions from 10,000 to 15,000. France increased its admissions from 3,850 in 2000 to 10,000 in 2020, and the UK increased from 5,700 in 2000 to 9,500 in 2023. Moreover, in France and Germany, even though they are increasing medical school admissions, top talents are choosing engineering over medical schools, which is beneficial for national development. Korea's plan to increase by 2,000 is actually modest compared to these advanced countries.

https://www.mk.co.kr/news/editorial/10974827 

5. Short consultation times

Primary care physician consultation time in Korea is on the lower end among OECD countries at 4.2 minutes per patient (source). US in contrast is around 22 minutes, and Japan at ~10 minutes (source).

6. High physician income

According to the OECD Health Statistics 2023, salaried Korean physicians earned an average annual income of $192,749 (about 255 million won) based on the PPP exchange rate in 2020, the highest among 28 countries that submitted related data. Those who opened their clinics earned an average of $298,800, second only to Belgium ($337,931).

https://www.koreabiomed.com/news/articleView.html?idxno=21966

Supporters argue that increasing the number of doctors will address these issues by improving healthcare access, particularly in underserved areas and specialties. They point to similar increases in medical school admissions in other developed countries as precedent for this approach.

As of June 2024, 66% of people are in favor of the increase (source). Many people in Korea see the strike as immature and reckless risking patients’ lives. The sentiment can be summed up in the following manner:

“Just look at the data. We clearly don’t have enough doctors compared to other countries. Your poor grandparents in rural areas have to *travel* to get medical help for God’s sake! They make the most amount of money in Korea. Clearly there’s too much demand but not enough supply. We need to increase the number of doctors because healthcare is a public good and everyone deserves the best healthcare. These doctors that are on strike are arrogant, selfish assholes.”

Here are some examples from various places on the internet:

• “If doctors had just stayed at their posts, people would still have respect for them, and public opinion wouldn’t have turned this bad, right? People would have cheered them on, thinking “Wow, doctors are really in a tough situation, but they’re not abandoning patients.” Since doctors deal with life, it’s a noble profession, so it’s okay for them to earn a lot. That’s what I thought, even if most people didn’t. But what did they do? “Oh, I’m not doing that.” “Patients? I don’t know.” “Without me, there are no patients.” That’s how they left. They treated non-doctors like animals. So how can patients, and people who could become patients at any time, take the doctors’ side?”

• “What doctors are protesting against… This is proof that the benefits given to doctors in our society are too great. The number of medical school students must be increased by more than two times.” (source)

Thesis: the legislation is dogshit

The proposed legislation is dogshit. It fails to address the root causes of Korea’s healthcare challenges. It overlooks critical factors that have led to the current situation. The arguments supporting the legislation are based on incomplete data and misinterpretations of the healthcare landscape.

Key issues ignored by the legislation:

1. Doctor avoidance of rural areas: This is not due to insufficient pay. Rural doctors are well-compensated.
2. Avoidance of certain specialties: Doctors in high-demand specialties are participating in the strike. They’re frustrated by the government’s lack of response to longstanding issues.
3. Supply and demand dynamics: Increasing medical school admissions won’t necessarily lead to more doctors in needed specialties. The government controls prices for all insured procedures. All Koreans have insurance coverage. Hospitals must provide care at government-set prices.

The reality of Korean healthcare is complex:

Korean healthcare began in 1989 with an incredibly affordable fee schedule aimed at providing quality healthcare to the population. Over the years, well-intentioned policy decisions that were created to “provide more for the poor” actually skewed the markets - they led to an extreme concentration of demand for tertiary care hospitals. Concurrently, prices for insured medical procedures increased at rates below inflation. This resulted in low prices for many operations, particularly affecting essential medical specialties.

Hospitals compensate for losses through uninsured treatments or by shifting to more profitable areas like dermatology and plastic surgery. The government’s control over prices for essential care ties funding directly to the national insurance program’s finances.

The core reason why prices based on the fee schedule are too low is because people do not pay enough in healthcare taxes especially near the median income range. The median Korean household contributes only 3.5% of their income to healthcare, which is 33% less than in Japan and two to three times lower than comparable OECD nations like Norway or the UK.

Despite these challenges, Korea maintains high healthcare quality and access. This is largely due to the country’s top students becoming doctors by default. Unlike other advanced economies, Korea lacks robust support for scientific research, entrepreneurship, and internationally competitive finance sectors.

These two factors - inadequate healthcare spending and concentration of top talent in medicine - are the real root causes of Korea’s current healthcare challenges. The proposed solution of increasing doctor numbers is far too reductionist - it disregards years of systemic problems sustained through the sacrifices of the country’s intellectual elite.

Background

The roots of South Korea’s healthcare system can be traced back to 1963, when the Medical Insurance Act was first enacted under Park Chung-hee’s military government. However, this initial law was largely ineffective, as it was based on voluntary participation and lacked government financial support.

Throughout the 1960s and early 1970s, healthcare access remained extremely limited. A 1972 survey showed that only 27% of Seoul residents, 17.9% of other urban residents, and a mere 2-3% of rural residents received medical care, with 90% of costs paid out-of-pocket. By 1974, about 40% of ill people nationwide did not use medical services at all, and in rural areas, 43.3% could not afford medical expenses.

The Park administration initially prioritized economic development and national defense over healthcare investment. In 1965, South Korea’s health budget was only 0.1% of total government spending, lower than countries like Vietnam (0.6%) and India (0.7%). Even by 1970, the combined budget for the Ministry of Health and Social Affairs, the Labor Office, and the Veterans Administration was only about 6% of the total government budget.

This lack of public investment led to a predominantly private healthcare sector. By 1974, 81.6% of doctors and 78.9% of hospital beds were in the private sector. It also contributed to rapidly rising healthcare costs, with per capita medical expenses increasing more than three times faster than living costs between 1965 and 1975.

The turning point came in the mid-1970s, driven by several factors:

1. Growing social unrest due to healthcare inaccessibility, including incidents where patients died after being refused treatment for financial reasons.
2. Concerns from intelligence agencies that healthcare inequality could become a security threat.
3. The rapid growth of the medical industry, particularly large hospitals, which needed a stable customer base.
4. Changing attitudes among major corporations, who began to see health insurance as part of their social responsibility.

The foundations of South Korea’s healthcare pricing system were laid in 1976 when the Ministry of Health and Social Affairs began formulating a national health insurance system. Initially, the government set prices for 413 medical items at approximately 20% lower than customary rates. This decision was part of a broader strategy to make healthcare accessible to all, but it immediately sparked controversy within the medical community.

The pricing system’s development involved a comprehensive study of 11 major medical institutions, including the National Medical Center, Seoul National University Hospital, and Yonsei Medical Center. This study revealed that at the time, medical income was composed of 47.31% technical fees, 1.49% consultation fees, 32.86% medication and injection fees, and 18.34% hospitalization fees. Armed with this data, the government aimed to set prices at 75% of customary rates, anticipating increased patient volumes due to insurance coverage.

However, the Korean Medical Association argued that the actual rates were only 55% of customary prices, particularly for Seoul’s general hospitals. This discrepancy set the stage for ongoing tensions between healthcare providers and policymakers. The government maintained that when considering additional factors like location-based pricing and medication costs, the rates were close to the intended 75% level.

The implementation of mandatory health insurance began in 1977, initially covering employees in workplaces with 500 or more workers. This coverage expanded incrementally over the following years:

• 1979: Extended to workplaces with 300 or more employees
• 1981: Included businesses with 100 or more workers
• 1988: Extended to rural areas and workplaces with as few as 5 employees
• 1989: Expanded to include urban self-employed individuals

In parallel, a separate system was developed for public sector workers:

• 1979: A distinct law was enacted to cover government employees and private school teachers
• 1980: The system was broadened to include military personnel

A crucial part of the mandatory health insurance was 당연지정제 (i.e. automatic designation system). Automatic Designation System is a policy that legally requires all medical institutions in South Korea to be designated as National Health Insurance (NHI) providers. Under this system, medical facilities are mandated to treat patients covered by the NHI and accept the government-set medical fees.

The policy was implemented to secure an adequate number of medical facilities for the public health insurance system, as there were very few public hospitals or health centers at the time. The government forced private medical institutions to participate in the system. This policy is described as something that “could never happen under a normal market economy,” drawing parallels to the interest rate freeze of August 3, 1972 (a significant economic intervention in South Korean history). South Korea is noted as the only country that mandates all medical institutions to participate in the national health insurance system by law. This is the legal basis for why Korean hospitals have no control over prices of operations.

Healthcare providers in South Korea only showed small opposition to the government’s health insurance policies for several reasons. Firstly, the coverage was not universal, with only a portion of the population insured, which meant that many patients were still paying out-of-pocket for services. Secondly, the 180-day annual limit on coverage meant that the financial impact on healthcare providers was somewhat mitigated. These factors, combined with the gradual implementation of the system, allowed doctors and hospitals to adapt over time without feeling an immediate, severe financial strain.

The 당연지정제 (Automatic Designation System) was established under the authoritarian regime of Park Chung-hee. Given the political climate of the time, there was little room for open opposition or rejection of government policies. The dictatorial nature of Park’s rule made it socially and politically risky for medical professionals to voice dissent against the system, even if they had concerns.

Aside: It’s important to note that there existed many doctors were also in support of providing quality healthcare for the wider population. The Blue Cross movement, inspired by the American Blue Cross Plan and initiated by Dr. Jang Ki-ryeo in Busan, demonstrated that many doctors recognized the potential benefits of a more inclusive healthcare system for the public good. This grassroots movement, which began in 1968 and spread to other cities, showed that there was a willingness among some medical professionals to participate in cooperative health insurance schemes. The success of these voluntary efforts likely made it easier for many doctors to accept the government-mandated system when it was implemented, as they could see the positive impact on public health and access to medical care. This combination of political pressure and recognition of societal benefits led many in the medical community to acquiesce to the new system, despite potential financial concerns.

By 1989, South Korea had achieved universal health coverage, with 94.2% of the population covered by health insurance. However, the system remained fragmented into numerous insurance societies, leading to financial imbalances and differences in coverage between regions and employment types.

The final step towards the current system came under President Kim Dae-jung. Despite opposition from workplace insurance societies with healthier finances, Kim’s administration pushed through a complete integration of the insurance system. In 2000, all insurance societies were merged into a single National Health Insurance Corporation, creating the unified system that exists today. In 2002, coverage increased to 365 days.

This gradual development of South Korea’s national health insurance system, starting from initially low prices set in 1976, eventually led to the establishment of universal healthcare with extremely wide coverage. For patients, this was a blessing, but for the providers, this turned out to be the beginning of the gradual disntegration of the system.

Accessibility and quality metrics

How good is Korea’s healthcare system (at least prior to the strike)? In this section, I try to provide a comprehensive overview of key metrics used to evaluate healthcare accessibility and quality, with a focus on South Korea’s performance compared to other developed nations. The metrics covered include:

• Mortality rates (cancer, infant, and maternal)
• Cancer survival rates
• 30-day hospital readmission rates
• Ratio of specialist to total physicians
• Appointment wait times
• Distribution of physicians in urban vs. rural areas
• Preventable mortality rates

Each metric is explained in terms of its significance in assessing healthcare quality, followed by comparative data from South Korea, the United States, the United Kingdom, Japan, and other relevant countries. South Korea’s healthcare system often outperforms or closely matches other developed nations across various metrics.

Mortality rates

Mortality rate is a useful indicator of healthcare quality in a nation. It’s objective since death is a clear, unambiguous outcome, and it reflects multiple aspects of healthcare like preventive care, treatment efficacy, and emergency services. It’s not a perfect metric since it does not capture quality of life or non-fatal conditions, and different mortality measures (infant, maternal, age-specific) can give varying pictures. With these in mind, here are some statistics:

• Cancer mortality rate
  • Korea: 159.1 per 100K (source)
  • US: 146.2 per 100K (source)
  • UK: 251.6 per 100K (source)
  • Japan: 316.1 per 100K (source)
• Infant mortality rate
  • Korea: 1.859 deaths per 1000 live births (source)
  • US: 5.6 deaths per 1000 live births (source)
  • UK: 3.9 deaths per 1000 live births (source)
  • Japan: 1.53 deaths per 1000 live births (source)
• Maternal mortality rate
  • Korea: 8.4 deaths per 100K (source)
  • US: 22.3 deaths per 100K (source)
  • UK: 13.41 deaths per 100K (source)
  • Japan: ~4.5 deaths per 100K (source)

Cancer survival rates

Korea is one of the best countries with the highest cancer five-year survival rates.

Cancer survival rate can be a useful indicator of healthcare quality in a nation. Higher survival rates often reflect better access to and quality of cancer treatments, and good survival rates may indicate effective screening programs and early diagnosis capabilities. It also reflects the overall accessibility of healthcare services to the population.

Bawden, A. (2024, January 10). UK has some of worst cancer survival rates in developed world, report says. The Guardian

• Korea(including remission rates): 72.1% (source)
• US: 69% (source)
• UK: 55.7% (source)
• Japan: 66.2% (source)

30-day readmission rate

The 30-day readmission rate is an important metric for understanding healthcare quality for several reasons:

1. Indicator of care quality: High readmission rates may suggest inadequate treatment, premature discharge, or poor care coordination during the initial hospital stay or after discharge.
2. Patient outcomes: Frequent readmissions can negatively impact patient health, quality of life, and confidence in the healthcare system.
3. Continuity of care: It reflects how well hospitals prepare patients for discharge and coordinate with outpatient care providers for follow-up.
4. Hospital performance measure: Many healthcare systems and government agencies use this metric to evaluate hospital performance and quality of care.

• Korea: 5.9% (source)
• US: 14.5% (source)
• UK: 11.6% (source)
• Japan: 3.4% (source)

High ratio of specialist to physicians

Ratio of specialist in Korea is unusually high compared to any nation in the world. Below, I lay out the ratio of active specialist physicians to active total physicians for several different countries in the OECD of varying healthcare systems.

• US: 56.8% (562,705 / 989,320) (source)
• UK: 28.9% (110,079 / 380,352) (source)
• Norway: 55.5% (15,502 / 27,924) (source)
• Belgium: 62.8% (23,552 / 37,504) (source, source)
• Korea: 80.5% (108,697 / 134,953)

Ministry of Health and Welfare (License Information System).

Low appointment wait times

In choosing the hospital to visit, a patient in Korea can see a specialist immediately without having to see a primary doctor. 51.3% of patients report that they walk into a tertiary hospital and get examined (source). For the “big 5 hospitals”, 16.3% of people saw their top specialist doctor of choice the day of, 20.7% within a week, 18.4% between one and two weeks, and 17.6% between two weeks and a month - in other words, 75% of people saw their specialist of choice in one of Korea’s top five hospitals within a month of scheduling. 90% of people can go to a “general hospital” (hospitals with 100~300 beds + requirements for supported specialties. source) and wait less than 2 weeks to see a doctor. Expat websites corroborate the fact that this is possible and comment that it is unimaginable anywhere else in the world (link1, link2).

Similar number of physicians between rural and urban areas

Contrary to popular belief, Korea actually has a low differential between urban and rural areas in terms of access to doctors. According to the dataset from OECD, the active physicians rate for Korea is 2.77 physicians out of 1000 in urban areas vs 2 in rural areas in 2021. Switzerland and Norway are the only two countries with better rates, and even those are not that much better.

OECD Regional social and environmental indicators, 2021.

Low preventable mortality

Preventable mortality refers to deaths that could have been avoided through timely and effective healthcare interventions, public health measures, or both. These are deaths from causes that are considered preventable given current medical knowledge and technology.

Key aspects of preventable mortality:

1. Scope: It includes deaths from conditions like certain cancers, cardiovascular diseases, infections, and injuries that could be prevented or treated effectively.
2. Age consideration: Often focuses on premature deaths, typically those occurring before age 75.
3. Time-sensitive: Reflects the healthcare system’s ability to intervene early and effectively.

In mortality rates from preventable causes in OECD countries in 2021 Korea (99 death per 100k population) ranks 8th among the OECD countries with Australia (97), Sweden (97), Switzerland (94), Iceland (93), Italy (91), Japan (85), and Israel (83) being the only countries better than Korea. France (109), Germany (129), Canada (113), the UK (151), and the US (238) are much worse.

Mortality rates from preventable causes in OECD countries in 2021.

This data refutes the sentiment portrayed through cases of 119 ambulance re-transport. People who end up dying because of the re-transport would count toward this figure. On an absolute scale, Korea’s metrics on preventable deaths are quite good. This is an incredible feat given all the problems that we will discuss in the upcoming sections that lead to avoided specialties (emergency medicine being one of them).

In conclusion, Korean doctors are highly-trained, and healthcare outcomes are, by any measure, top quality compared to countries with or without universal healthcare. The access that people have to healthcare in terms of proximity, speed, and price is simply unparalleled to anywhere else in the world.

Strain on the system: Prices

In fact, things are too cheap. Korea’s physician fee schedule has not kept pace with inflation.

The pricing structure imposed by the South Korean government on hospitals is remarkably low compared to international standards, particularly those in the United States. Korean hospital fees for various procedures and services range from 2~100 times less than their U.S. counterparts. A striking illustration of this pricing difference: in Korea, the entire surgical component of a C-section is priced at just $345.52, while the whole procedure is priced at $2487.50 for all hospitals in Korea, a fraction of what similar procedures cost in many other developed nations (UK at 3806 euros for just the surgical component, US at $987.77 for CPT code 59514 covered by medicare with average total payment amount of $18,570).

What is a fee schedule?

A fee schedule is a comprehensive list of preset prices that insurance agrees to pay the hospital for specific medical services or procedures. These rates are typically negotiated between the insurance company and healthcare providers.

In the context of South Korea’s healthcare system, the fee schedule is similar in concept to Medicare’s fee schedule, but it’s implemented within the framework of the National Health Insurance (NHI) system. It’s a list of standardized fees for medical services and procedures set by the government through the National Health Insurance Service (NHIS).

One thing to note is that we are not interested in the out-of-pocket rate, i.e. the amount that you as a patient typically has to pay. Most discourse in the public is around how much the people have to pay. However, the cost that we’re trying to judge is whether doctors are getting paid fairly for their labor + facility cost + materials from the insurance provider(s).

Just to drive this point home - in one country, a procedure may be billed $10,000, but because insurance covers $9,900, you may only need to pay $100. In another country, a procedure may be billed as $150, but because insurance covers $100, you may only need to pay $50. You as the payer may not feel like there’s much of a difference, but obviously there is a difference for the hospital, and by proxy the doctor as well.

Prices of procedures covered by the national insurance are unilaterally determined by the government and hospitals have no control over the total charge, and they are far too cheap.

For certain complicated but common procedures like cataract surgery or c-section, Korea uses diagnosis-related group, which is to a group of related procedures, tests, and diagnoses under a single product. Since the price is public, we can understand exactly how much the hospital / doctors get paid for all the costs involved for the surgery. This number is an interesting contrast to the average total payment amount because while average total payment amount does not include pre-operative testing (which might be billed separately), post-operative care (usually included in the global surgical package for cataract surgery), and other services or tests billed under different CPT codes, the DRG price does include everything as one. The best comparison for procedures covered under DRG would be to compare to the cash prices from the US that hospitals put out for certain operations which are quoted end-to-end prices.

I cannot emphasize more that DRG implies all procedures that are categorized to be under DRG can only cost as the price as the DRG price suggests.

I will then use the GDP per capita PPP to estimate the normalized price.

2022 GDP per capita (PPP) (source)

• Korea: $53,759.58
• US: $77,191.87

Ratio: Korea: US → 1: 1.43

We’ll use this number to derive a US-adjusted price for the procedures.

Note: We use medicare fee schedule for the US. This is much cheaper than out-of-pocket or private healthcare prices where the fee schedule is not publicly available. It is safe to assume that doctors in the US make a significant multiple on top of the prices that I have researched.

Concrete examples

Emergency room visit

Emergency room (ER) visit costs are important for a healthcare system for several reasons:

1. Access to care: High emergency room costs may deter people from seeking necessary medical attention, leading to worse health outcomes. Lower costs can improve access, especially for underserved populations.
2. Efficiency of the system: Excessive ER costs could indicate inefficiencies in the healthcare system, such as:

• Overreliance on emergency services for non-urgent care
• Lack of affordable primary care options
• Insufficient preventive care measures

US

• CPT code 99284
• Fee schedule amount: ~$130.61
• Cash price: $699.00

Korea

• Fee schedule amount: $29.96 (41540)

V2200,2024-01-01,응2가,응급**진료** 전문의 진찰료-권역응급의료센터,,1,0,0,41540

UK

• NHS tariff: $99.09 (91 euros)

VB11Z Emergency Medicine, No Investigation with No Significant Treatment 91 euros

Comparison

Normalized Korean fee schedule amount: $29.96 * 1.43 = $42.8428

US cost is ~3x.

Chest CT

Chest, abdomen, and pelvis are the most common types of CT imaging performed to diagnose and evaluate a variety of conditions. With or without contrast the prices are rather similar so you can run the exercise yourself as well.

US

• CPT code 71260

• Fee schedule amount: ~$177.08

  • Make sure to not use the ones with just 26 or TC (source). The Korean price comparison includes both because there’s almost never a time when you take a CT but do not get a radiologist to look at it. A famous Korean healthcare administration professor named Kim Yoon, now part of the democratic party, makes the mistake of not understanding this difference in his price calculation when looking at the CMS data (source).

• Average total payment amount: $175.06 or $228

• Cash price: ~$2000

Korea

Chest CTs are not always covered by insurance (refer to footnotes). so I also find a couple cash prices.

• Fee Schedule Amount: $74.95 (103,930 KRW)

HA464007,2024-01-01,다245라(2),일반전산화단층영상진단-흉부-조영제를사용하는경우,Chest CT-With Contrast Material,1,0,103930

• Cash price:
  • ~$141.75 (194,500 KRW) (source)
  • ~$189.72 (260,000 KRW) (source)

UK

• NHS tariff: $80.57 (74 euros)

RD20A Computerised Tomography Scan of One Area, without Contrast, 19 years and over 74

Comparison

Normalized Korean fee schedule amount: $74.95 * 1.43 = $107.17

US cost is 1.7x~2x

Stroke

Korea has a severe shortage of vascular neurologists who deal with stroke despite stroke being one of the most common reasons for hospitalization. Let’s take a look at how hospitals get paid. We’ll look at treatment options ischemic Strokes (caused by a blood clot) which accounts for 87% of strokes. The two main options are the following:

• Intravenous (IV) tPA (tissue plasminogen activator):
  • Given within 3 to 4.5 hours of symptom onset
  • Helps dissolve the clot and restore blood flow
• Mechanical thrombectomy:
  • Can be performed up to 24 hours after symptom onset in some cases
  • Involves physically removing the clot using a catheter

Why is it hard to administer iv-tPA?

1. Diagnostic accuracy: Accurately diagnosing an ischemic stroke and ruling out hemorrhagic stroke is crucial, as IV-tPA can be harmful if given for a hemorrhagic stroke.
2. Risk assessment: Clinicians must carefully weigh the potential benefits against the risks, particularly the risk of intracranial hemorrhage.
3. Patient selection: There are numerous contraindications and exclusion criteria for IV-tPA, including:
   • Recent surgery or trauma
   • History of intracranial hemorrhage
   • Uncontrolled hypertension
   • Use of anticoagulants
4. Dosing considerations: The dose must be accurately calculated based on the patient’s weight, and the infusion must be administered correctly.
5. Monitoring requirements: Patients receiving IV-tPA require close monitoring for potential complications, especially in the first 24 hours.
6. Specialist expertise: Ideally, the decision to administer IV-tPA should be made by or in consultation with a neurologist or stroke specialist.

IV tPA

US

• TPA cost: ~$4642 (source)
• Administering iv-TPA: $10,098 (source)

Korea

• TPA cost: $415.76 (625,071 KRW)

드러그인포. (2024, August 8). 액티라제주사50mg(알-티피에이) ACTILYSE INJ. 50MG[RH-tissue-type plasminogen activator]. Retrieved August 8, 2024

• Administering iv-TPA: $138.10 (source)

Not only is this what’s in the official database, $415 is actually the uninsured full cash cost of iv-TPA as shown from a post by a doctor (source). The post shows the doctor’s guilt for making the treatment too costly.

UK

• TPA cost: $326 (£300) (source)
• Administering iv-TPA: £1316

Result

Normalized cost of iv-TPA : $415.76 * 1.43 = $594.53

Normalized cost of administering: $138.10 * 1.43 = $197.48

US cost is 50~100x for the whole procedure. UK cost of iv-TPA is pretty low, but they pay a reasonable amount of price for administering tPA.

Mechanical Thrombectomy

US

• CPT Code 61645
• Fee Schedule Amount: CMS doesn’t provide the data for this.
• Average total payment amount: > $11500 (source)

Korea

• Fee Schedule Amount: $842.91 (1,160,620 KRW)

경피적혈전제거술-기계적혈전제거술[카테터법]-두개강내 혈관,Percutaneous Thrombus Removal-Mechanical thrombectomy(Intracranial vessel),1160620

UK

• Tariff: $12,793.75 (£11750) (source)

Result

US and UK cost is at least ~12x.

Cataract

Third most common surgery in Korea (source).

US

• CPT code 66984 - this is the code used for typical monofocal IOL cataract surgery.
• Average fee schedule amount: $602.37
• Average total payment amount: $2,220.35
• Cash price: ~$5000

Korea

• Fee Schedule Amount: $327.80 (453,980 KRW)

백내장및수정체수술-수정체낭외또는낭내적출술,Surgery for Cataract Or Lens-Extracapsular Or Intracapsular Extraction,2,9,453980

• DRG price for tertiary hospital (translated 상급병원: over 500 beds, over 20 medical departments, over 1 specialist for each medical department): $999.84 (1,374,880 KRW)

UK

• Fee Schedule Amount: $834.18 (£766)

BZ32B Intermediate, Cataract or Lens Procedures, with CC Score 0-1 - 766

If you naively search for 백내장 수술 가격 (translate: cost of cataract surgery) on Google, results will shows up much closer to 3,000,000 ~ 4,000,000 KRW ($2167~ $2890) (source). People don’t just do monofocal IOL and they choose better lens like Multifocal IOLs (다초점 인공수정체) or newer fancier ones which is not covered by insurance.

Note that in the US, just the single eye multifocal IOL without the surgery is $2000 in LCOL areas. UCSF quotes $4000 per eye for multifocal (source).

Comparison

Normalized Korean fee schedule amount: $327.80 * 1.43 = $468.75400.

This price is nowhere close the US fee schedule ($602.37) or the average total payment amount ($2,220.35) - there’s roughly a 5x difference. Even compared to UK, it is a 1.5x difference.

C-section

A typical C-section usually takes about 45 minutes to an hour from start to finish. However, this can vary based on several factors:

1. Preparation time: 15-20 minutes
2. Delivery of the baby: Usually within 5-15 minutes of incision
3. Removal of the placenta: 5-10 minutes
4. Closing the incision: 30-40 minutes

In emergency situations, the procedure can be performed more quickly, potentially in as little as 30 minutes.

A C-section typically involves a team of 5-7 healthcare professionals:

1. Obstetrician: Performs the surgery
2. Assisting surgeon: Often present, especially in teaching hospitals
3. Anesthesiologist or nurse anesthetist: Administers and monitors anesthesia
4. Scrub nurse: Assists the surgeon with instruments
5. Circulating nurse: Manages overall operating room activities
6. Pediatrician or neonatal nurse: Present to immediately assess and care for the newborn
7. Additional nursing staff: May be present to assist as needed

US

• CPT Code 59514
• Fee Schedule Amount: ~$987.77
• Average total payment amount: $18570 (source)
• Cash price: ~$35907 (source)

Korea

• Fee Schedule Amount: $345.52 (475,750 KRW)

제왕절개만출술(1태아임신의경우)-초회(초산),Cesarean Section Delivery-First Fetus-Initial-Primiparous,475750

• DRG price for tertiary hospital: $2,487.50 (3,420,559 KRW)

UK

• NHS tariff: $4,144.58 (3806 euros)

NZ50C Planned Caesarean Section with CC Score 0-1: payment level 3

Comparison

Normalized Korean fee schedule amount: $345.52 * 1.43 = $494

Normalized DRG price: $2,487.50 * 1.43 = $3557.125

US cost of the procedure is ~10x of Korea, and 1.8x in the fee schedule. The cost difference with UK’s tariff is also shocking.

What we find is that all of Korean prices are significantly cheaper than US prices, and often times close to or slightly cheaper than the UK. This is despite Korea’s healthcare outcomes far exceeding the UKs, and accessibility being incomparable.

Additional extra sources

• US Fee schedule
  • https://www.cms.gov/medicare/payment/fee-schedules/physician
• US average total payment amount
  • https://docs.google.com/spreadsheets/d/1af96qmsq98NzywHDgKcq7PQZHgzLHIVB8C07lLADQ7k/edit?gid=901341628#gid=901341628
  • https://www.medicare.gov/procedure-price-lookup/cost/71260
• US Cash price
  • https://turquoise.health/service_offerings
• UK Tariff workbook
  • https://www.england.nhs.uk/wp-content/uploads/2023/03/23-25NHSPS_Annex-A_2024-25.xlsx
• Korea Fee schedule
  • https://docs.google.com/spreadsheets/d/1118dPFU_M7P-0MVXcJyMO9iShIjfbXPB_QzWdkZDV5A/edit?usp=sharing - for a given procedure, you can get the exact billed amount for the code. I suggest you download this as a csv and use grep to search through the content to explore for yourself.
  • 2019 급여기준 및 심의사례집 https://www.hira.or.kr/ebooksc/ebook_560/ebook_560_201912300924568680.pdf
• Korea Average total payment amount
  • For conditions under diagnosis-related groups (DRG) which are 7 different “treatments” that the government fix the absolute price on for the entire procedure including the facility fee, doctor fee, etc, we use https://www.hira.or.kr/rb/drg/drgAmtsList.do?pgmid=HIRAA030066050000 as a source.
• 2024 Korea DRG cost
  • https://www.hira.or.kr/bbsDummy.do?pgmid=HIRAA020002000100&brdScnBltNo=4&brdBltNo=10987&pageIndex=1&pageIndex2=1#none

Strain on the system: Structure

The low prices are part of a larger structural vicious cycle that Korea’s healthcare system has been facing. Some of these factors include an exceptionally high patient volume, with doctors pressured to maximize quantity over quality of care; a centralization of demand in large urban hospitals, particularly tertiary care facilities; a heavy reliance on procedures not covered by national health insurance for financial viability; a high rate of criminal prosecution for medical errors compared to other developed countries; and paradoxically low healthcare tax rates, with the median Korean paying only about 7% of their income towards healthcare. These elements combine to create a system that, while accessible and affordable on the surface, grapples with substantial challenges in delivering sustainable, high-quality care across all medical specialties.

High patient volume

The healthcare system’s undervaluation of medical professionals’ time has led to a “shrinkflation” effect in patient care. Doctors are pressured to see more patients in less time, as hospitals seek to maximize revenue through quantity rather than quality of care. The fee schedule incentivizes increasing the number of patient encounters rather than the time spent with each patient.

OECD (2023). "Consultations with doctors". In Health at a Glance 2023: OECD Indicators. Paris: OECD Publishing.

South Korea exemplifies this trend, with alarming statistics:

1. 190,000 outpatients have seen a doctor more than 150 times in a year.
2. One 40-year-old patient visited 24 different hospitals 2,050 times in 2021. (source)
3. The average annual in-person doctor consultations per person in Korea is 15.7, significantly higher than:
   • Japan: 11.1 (second highest)
   • OECD average: 6.0
   • United States: 3.4

These figures highlight a phenomenon known in Korea as “과다 의료” (excessive healthcare), which reflects systemic issues in healthcare delivery and utilization.

This phenomenon addresses the reason for the observation that “patients in Korea do not get to see doctors for long enough”. Number of in-person consultations and time per patient are the same metrics expressed differently. On the supply side, hospitals have doctors consult as many patients as possible because prices are depressed as we saw from the previous section. Doctors can only fulfill that quota if they spend as little time as possible with patients. On the demand side, since consultations are so cheap anyways (~$15), patients go see doctors haphazardly.

A survey in 2020 to 6507 doctors also confirm this phenomenon (source):

1. Korean doctors see an average of 37.8 patients per day (34.2 outpatients + 3.6 surgeries).
2. Doctors in their 50s see the highest number of patients (40.6 per day).
3. Clinics (primary care) handle the highest number of patients (43.0 per day) among medical institutions.
4. The most common consultation time is 6-10 minutes (36.7% of cases).
5. For follow-up patients, 65.5% of consultations last 5 minutes or less.
6. There’s a “significant” difference in patient numbers between metropolitan areas (36.1 patients per day) and rural areas (30.6 patients per day, excluding Gyeonggi-do).

Centralization of demand to tertiary care

The patient volume issue is more pronounced in the case of tertiary care.

The medical delivery system, implemented in 1989, was designed to prevent overcrowding at large hospitals and provide more rational medical services following the international examples. It consists of three main levels: primary, secondary, and tertiary care.

• Primary Care: Local clinics, health centers, and small hospitals with less than 30 beds.
• Secondary Care: Hospitals with 30-99 beds and general hospitals with 100-299 beds.
• Tertiary Care (Superior General Hospitals): University hospitals and specialized hospitals with 500+ beds (700+ for non-university hospitals).

Patients are generally expected to visit primary care facilities first and then be referred to higher levels of care if necessary.

Medical service areas

When the system was first created, there was a concept called “medical service areas” (i.e. 권역 진료의뢰제도). It was designed to promote balanced medical development across regions and prevent patient concentration in urban areas. Initially, there were 138 medium-sized medical service areas and 8 large medical service areas. Patients were required to receive care within their designated area, with some exceptions.

In 1998, the democratic party led by the then president Kim Dae-Jung abolished the strict adherence to these areas, allowing more freedom in choosing medical institutions (source). People from rural areas could freely come to hospitals in Seoul.

Special consultation fee

The special consultation fee system, known as “선택진료” (selective treatment) in South Korea, has a long and complex history that spans over five decades. This system was initially introduced in 1967 at the National Medical Center (now the National Central Medical Center) with the intention of providing patients with the opportunity to choose and receive treatment from experienced doctors, thereby expanding patient choice in healthcare. The system evolved over time, and by 1991, the Ministry of Health and Welfare formalized and unified the regulations for this system across hospitals. Under this system, patients could choose to pay additional fees (15% ~ 50% of the basic consultation and examination fees) to be treated by specially designated doctors known for their expertise and experience (source).

The 50% may seem much to some, but in reality it is insignificant. there was practically maximum 50% difference in consultation and examination fees between the most junior doctor and the best doctor in Korea. It was a difference of $10~$15. The fact that this was a complaint in itself shows how broken people’s perception can be, but also how poisonous populist policies and propaganda can do to people.

As part of efforts to reduce the financial burden on patients and improve access to healthcare, the democratic party led by Moon Jae-In (previous president of Korea) decided to completely abolish the special consultation fee system. This change took effect on January 1, 2018, marking the end of a system that had been in place for 28 years since its formalization in 1991.

In summary, all the legal and economic incentives that maintained the medical delivery system got repealed by the democratic party in the name of better coverage for the people. There no longer was any real reason for people to go to primary care or secondary care.

The removal of barriers to tertiary care put undue strain on a small number of hospitals while decreasing market share of primary or secondary care.

The concentration of patients in large hospitals and the polarization of hospitals has been confirmed by statistics:

2018: According to the ‘Major Health Insurance Statistics for 2018’ by the National Health Insurance Service on the 28th, medical expenses for large hospitals such as general hospitals and tertiary hospitals increased by 19.8% from the previous year to 26.6160 trillion won last year. This is the largest increase since 2003 (21.1%). Large hospitals’ market share increased from 32.0% in 2017 to 34.3% in 2018.Local clinics’ market share decreased from 28.3% to 27.5% in the same period. About 1,200-1,300 local clinics are closing every year due to financial difficulties (source).

2023: According to the Health Insurance Review and Assessment Service, the proportion of tertiary hospitals in the medical care benefit costs paid by patients increased from 16.8% in 2022 to 19.8% in the third quarter of last year, a 3 percentage point increase, reaching an all-time high. Out of the total 45 tertiary hospitals, 28 are concentrated in the Seoul metropolitan area, including Seoul National University Hospital, Samsung Medical Center, Asan Medical Center, and Severance Hospital (source).

Given that the distribution of physicians in rural areas of Korea is relatively comparable to urban areas, and considering that people tend to be reluctant to visit rural hospitals, it becomes evident that the root cause of the scarcity of hospitals in rural regions is insufficient demand rather than a lack of available physicians. This also refutes the claim that the disparity of healthcare between urban and rural areas can be solved by simply adding more physicians to the system.

It is true that there are job offerings in rural areas for doctors for incredible compensation. You actually see this phenomenon replicated even in the US where on average, doctors are better compensated outside of major cities. However, this is a second / third order effect in the case of Korea: decreased demand because of shit legislation -> hospitals cannot operate and pay good doctors, pay for facilities, and good equipments -> quaulity of care goes down -> even more decreased demand from patients.

This is corroborated on real doctors who are in rural areas. Here is an article published based on a video made by an actual doctor in a rural town in Korea: link. Dr. Hwang has been practicing in a rural area (Miryang, South Gyeongsang Province) for about 5 years. He reports a significant decline in patient numbers and revenue:

1. 8% decrease from 2022 to 2023
2. 20% decrease in patient numbers and 28% decrease in revenue in early 2024 compared to the previous year An estimated 10% annual decline over the past 5 years The doctor argues that the problem in rural areas is not a lack of doctors, but a lack of people, as the population is declining and many houses are empty.

After all, who’s going to pay for building the hospitals, getting expensive equipment, and hiring medical professionals if everyone just goes to a big hospital in Seoul?

Procedures uninsured by healthcare

Despite an extremely robust universal healthcare, Korea also has a huge market for private indemnity health insurance. This insurance is designed to cover out-of-pocket medical expenses as well as cover procedures uninsured by universal healthcare (i.e. 비급여, hereinafter referred to as non-covered item).

Examples of non-covered items include vision correction surgery (LASIK, LASEK), dental prosthetics (gold crowns), manual therapy, and general medical certificates. Additionally, there are items that are covered by health insurance but are applied as non-covered items according to specific criteria, such as ultrasound examination fees, MRI diagnostic fees, and assisted reproductive technology. These non-covered items have prices set independently by medical institutions, resulting in price differences between hospitals. The full cost of these items is borne by the patient.

As of 2022, 72.6% of the population is enrolled in some private insurance (source). In 2022, the total medical care costs amounted to 111.1 trillion won ($80.23 B). Of this amount:

1. The insurer’s (government’s) share is estimated at 71.6 trillion won ($51.71 B) ~= 64.4%
2. The legal out-of-pocket expenses for patients are estimated at 22.1 trillion won ($15.23 B) ~= 19%
3. The non-covered medical expenses (those not covered by national health insurance) are estimated at 17.3 trillion won ($12.49 B) ~= 15.5%

이정환. (2023, January 10). 작년 보장률 64.5%...0.8%p 하락 "비급여 관리". 데일리팜

Politicians from the democratic party who align with the legislation use the high percentage of these uninsured practices as one of the data points that Korean healthcare system is broken. The keyword to search their perspective is 건강보험 보장률 (i.e. universal healthcare coverage rate). They claim that because the coverage rate is lower than the OECD rate of 76.3%, we need to increase coverage (source). We’ll discuss the merits of this argument in the next section.

Regarding this, Nam In-soon emphasized, "According to the NHIS, while 46.64 million people benefited from Moon Jae-in Care by the end of last year, with medical expense reductions amounting to 26.4912 trillion won, the coverage rate decreased by 0.8 percentage points to 64.5% in 2021 compared to the previous year. However, this is judged to be due to an increase in non-covered services at clinics. The coverage rate for hospitals above the general hospital level in 2021 was 69.1%, and for the four major severe diseases, it continuously increased to 84.0% in 2021." She stressed, "We must continue to promote the strengthening of health insurance coverage while further enhancing the management of non-covered services to alleviate the medical expense burden on the public."

Source: https://www.akomnews.com/bbs/board.php?bo_table=news&wr_id=55286

15% of total healthcare spending being non-covered items is rather high compared to international healthcare systems. In 2023, private healthcare spending in the UK accounted for 13.8% of the country’s total healthcare spending, or £40 billion. This includes out-of-pocket spending by consumers on hospital treatments, medical goods, and other health services and products. Voluntary health insurance made up 2.5% of total healthcare spending in 2023, or around £7 billion (source).

Hospitals rely on high patient volume + non-covered items to survive

Up until this point, you will likely still have the following questions.

1. How do hospitals make money if things are priced so low?
2. How do hospitals operate?

This section answers those questions. We’ll do a top-down look on insurance spend and hospital profits which will show that hospitals cannot operate without “non-covered items”.

Above is a chart about the financials of major Korean hospitals over 2017~2019 before covid (source). The data was collected in the context of an investigation by congressman Go Young-in from the democratic party into the financial practices of university hospitals. The chart and associated analysis were made public as part of a broader review of the fiscal behaviors and tax practices of these institutions during a government audit.

The purpose of creating and disclosing such a chart was to highlight how significant amounts of pre-tax profits were being reserved under the guise of funds for inherent business purposes, effectively exempting these hospitals from paying corporate taxes. The lawmaker pointed out that this accounting maneuver allowed many hospitals to avoid taxation despite “substantial” pre-tax profits.

I find that to be hilarious and ironic. First, these so-called ‘substantial’ profits? They’re paper-thin margins that would make any business owner wince. We’re talking single-digit percentages. Second, this accounting practice isn’t some nefarious scheme. It’s standard procedure for non-profits. Painting these hospitals as greedy villains is not just misguided - it’s laughably shortsighted. It’s like accusing a squirrel of gathering nuts for winter.

On paper-thin margins

Anyone who’s thought of financials for a second will see that the margins are ridiculously low disregarding the reserve.

• Samsung hospital was not profitable on average.
• Severance had 6% profit margins
• Asan had 3% profit margins
• Bundang SNU Hospital had 4% profit margins
• SNU Hospital had 1% profit margins

There is an article that discusses the results of a hospital management survey conducted on 3,200 hospital-level medical institutions across South Korea in 2015 (source).

1. Overall average for hospital-level institutions (excluding psychiatric, oriental medicine, and dental hospitals): 1.9%
2. Tertiary hospitals (상급종합병원): -0.3% (operating at a loss)
3. General hospitals with 300 or more beds: 1.4%
4. General hospitals with 160-299 beds: 4.2% (highest among general hospitals)
5. General hospitals with less than 160 beds: 3.5%
6. Hospital-level medical institutions: 2%
7. Psychiatric hospitals: 8.8%

The argument that these hospitals are “being greedy capitalists and they are evading taxes” is a wild interpretation that is incredibly ideologically driven. Te reported margins are similar to comparable hospitals across the world. Stanford Health operates at 5.3% margin. Rochester Mayo Clinic is at 6%. Average margins for the US is ~3% (source).

Jeurissen, P. P. T., Kruse, F., Busse, R., Himmelstein, D. U., Mossialos, E., & Woolhandler, S. (2020). For-Profit Hospitals Have Thrived Because of Generous Public Reimbursement Schemes, Not Greater Efficiency: A Multi-Country Case Study. International Journal of Health Policy and Management, 10(10), 635-645.

Jeurissen, P. P. T., Kruse, F., Busse, R., Himmelstein, D. U., Mossialos, E., & Woolhandler, S. (2020). For-Profit Hospitals Have Thrived Because of Generous Public Reimbursement Schemes, Not Greater Efficiency: A Multi-Country Case Study. International Journal of Health Policy and Management, 9(10), 452-458.

“Typically, hospitals need margins of at least 3% to be able to meet their obligations” according to one of the big three US credit rating agencies Fitch Ratings (source).

On reserved funds

‘Reserved Funds for Specific Purposes’ (고유목적사업준비금) are emergency operational funds to help these institutions manage their financial crises. This reserve allows hospitals to deduct these amounts as expenses beforehand, lowering taxable income under corporate and special tax laws. It is intended to support hospitals in maintaining competitiveness through necessary investments in facilities, equipment, education, and research.

There are clear guardrails for misuse of the funds. The reserves, while tax-deductible, are meant to be used within five years for their specific purposes. If not, they cannot be written off, and additional taxes may apply. Hospital management costs like payroll cannot be covered by these funds under current regulations, making their use for general operations legally and practically challenging without temporary permissions from tax authorities (source, source).

Using these reserves for immediate financial relief could jeopardize future investments in hospital development and research, potentially leading to a decline in the quality of medical education and research if the financial situation doesn’t improve.

Despite similar profit margins in the single digits, Korean hospitals do not operate remotely similar to other countries.

We covered the first one: seeing an inordinate amount of patients.

Below are some additional top-down figures for the big-5 Korean hospitals:

이지현. (2020, October 6). 외래수익으로 확연히 드러난 빅5 쏠림...."정부 정책 패착". 메디칼타임즈.

In the US, “the industry standard benchmark for Inpatient vs. Outpatient Revenue Percentage is typically around 60:40. This means that 60% of a healthcare organization’s revenue comes from inpatient services, while the remaining 40% comes from outpatient services" (source).

Korean hospitals get this ratio by supporting a population that visits ~4.5x more than the US. This provides another perspective on how cheap visits are and how hospitals need to squeeze doctors to maintain operations.

The other part is reliance on procedures uninsured by healthcare.

This shouldn’t be a surprise as we’ve established that prices based on the fee schedule of the universal healthcare are too low. The side-effects manifest in the following ways:

Many specialists opt to start a hospital that’s not in their specialty, or they support non-covered items.

1. Approximately 50% of clinics performing plastic surgery in Gangnam are estimated to be run by non-plastic surgery specialists. About 1,000 out of 6,000 general surgeons operate clinics without specifying their specialty (source).
2. According to an analysis of data received from the Health Insurance Review and Assessment Service, as announced by Shin Hyun-young, a Democratic Party member of the National Assembly’s Health and Welfare Committee, a total of 979 new clinics were opened by general practitioners between 2018 and 2022. Among these, 843 clinics, accounting for 86% of the total, reported that they ‘provide dermatology services’. (source)

Local clinics are very profitable compared to tertiary care since they do not need to support “avoided specialties” like secondary / tertiary care.

1. Local clinics generate 25% of outpatient revenue from non-covered items (8.6T won / ~$ 6.2B). General and tertiary hospitals combined generate 8.2% of outpatient revenue from non-covered items (4.2T won / $3.03B).
2. Local clinics are profitable.

전영선. (2023, January 16). [1000호 특집] 연도별 전국 의원급 의료기관의 경영상황 분석. 치과신문.

3. There exists discrepancy between doctors who work at tertiary care vs primary care
   • A fellow (전임의) at a top 5 hospital earns about 4 million won monthly (approximately $3,000 USD) (source)
   • A resident at tertiary care earns 3.88 million won monthly ($2871 USD) (source)
   • None of the professors and doctors in 10 university hospitals earn more than the average income ($192,749 in 2023) for specialist physicians. Following is a figure from 2023 (source):

The point of this is to emphasize that not all doctors are the same - those who work in primary care are different from tertiary care, and those who practice avoided specialties are different from those who practice dermatology and plastic surgery. The latter are not necessarily bad people, but it is trivial to derive from the profit margins that without the non-covered items, hospitals just won’t be able to operate.

Prevalence and ease of criminal lawsuits

Doctors argue that there exists an extreme nonchalance from the justice system on medical malpractice criminal lawsuits that end up with doctors avoiding essential specialties.

Liberal Koreans that you may speak with will detract the conversation by citing the cases of doctors doing weird things. There was a pediatrics doctor who had a hidden camera and was found guilty in 2024 (source). There was a OB/GYN doctor who molested a patient after they were sedated in 2021 (source). I agree - these are heinous crimes that obviously should be prosecuted. There also are existing legal guardrails to put them in jail. However, we’re talking about criminal trials for death by occupational negligence (i.e. 업무상 과실치사).

In Korea, about 0.5% of doctors face ****charges for death by occupational negligence annually. Japan is at 0.01%. This translates to 754.8 out of 140,000 doctors in Korea compared to just 51.5 out of 407,000 in Japan. The contrast in criminal trial outcomes is equally stark (source):

• Korea: 354 criminal trials in 11 years, resulting in 239 guilty verdicts
• Japan: 202 criminal trials in 18 years, with only 32 guilty verdicts

The international context further emphasizes Korea’s outlier status. In Germany, only 4.2% of 4,450 forensic medical reports submitted to prosecutors nationwide were recognized as medical negligence causing death (source).

Hamilton, L. (2019). Independent review of gross negligence manslaughter and culpable homicide. General Medical Council.

In the UK, there were only 192 cases in a span of 9 years, and only ten who were prosecuted.

Japan’s trend is particularly noteworthy, showing a substantial decrease in the prosecution rate for professional negligence causing death or injury:

• 1999-2010: 22.6% prosecution rate
• 2011-2015: 6.5% prosecution rate

How should we define medical negligence?

According to a law firm based in the UK, medical negligence can become criminal in several circumstances (source):

1. When a doctor’s actions go far beyond what is considered acceptable and are deemed to be deliberate attacks on patients. Examples include cases like Beverley Allitt and Harold Shipman who were convicted of murdering patients.
2. When healthcare providers fail to provide safe care and treatment, violating regulations like the Health and Social Care Act 2008.
3. When a medical procedure is performed without informed consent from the patient, which could lead to criminal charges of battery or assault.
4. In cases of gross negligence manslaughter, where death occurs as a result of “truly, exceptionally bad” healthcare. This requires proving:
   • A duty of care existed
   • The defendant breached that duty
   • The breach caused the death of the victim
   • The breach was so serious it should be judged criminal
5. In cases of corporate manslaughter, where healthcare organizations (like NHS Trusts) can be held criminally responsible for deaths resulting from gross negligence.

According to a law firm based in the US, “in nearly all circumstances, medical malpractice results in a civil claim but not a criminal case”. Medical malpractice becomes a criminal offense when a healthcare provider’s actions significantly deviate from accepted standards (source). Examples include:

1. Healthcare Fraud: Making medical decisions for financial gain rather than patient benefit, such as prescribing unnecessary treatments for kickbacks or billing for services not provided.
2. Intentional Harm: Deliberately causing injury to a patient, though this is uncommon. Assisted suicide is one example.
3. Practicing Without a License: Performing medical procedures without proper qualifications or authorization.
4. Gross Negligence: Providing care while impaired by alcohol or drugs, or failing to provide obviously necessary life-saving treatment.

Fuchsberg, Alan. "Is Medical Malpractice a Criminal Act?" Jacob D. Fuchsberg Law Firm, 20 July 2016.

What are examples of cases in Korea?

You can judge for yourself whether these are egregious acts of recklessness.

Case 1 (source)

In 2019, a mother died during childbirth. The obstetrician-gynecologist was prosecuted.

The incident occurred at a private OB/GYN clinic in Andong, where a pregnant woman died due to excessive bleeding during the induced labor of a stillborn baby. The attending physician, referred to as Dr. A, was found guilty of professional negligence resulting in death and sentenced to 8 months in prison. The nurse assisting in the delivery, Nurse C, received an 8-month suspended sentence.

The case was tried at the Daegu District Court, with the second trial concluding on June 27th. The court determined that the medical staff failed to detect the excessive bleeding in time due to negligence, leading to the mother’s death. The judge argued that if vital signs had been measured at 6 PM, placental abruption could have been diagnosed, potentially preventing the rapid massive bleeding and the patient’s death.

The prosecution argued that if the medical team had measured the patient’s vital signs at 6 PM, they could have diagnosed placental abruption early, potentially preventing the rapid massive bleeding and the mother’s subsequent death. The court agreed with this assessment, stating that the medical staff violated their duty of care.

However, the Direct Election Obstetrics and Gynecology Association has strongly criticized this verdict, calling it a “judgment lacking understanding of medicine and armchair criticism.” They argue that hidden placental abruption with excessive bleeding is difficult to predict or diagnose and can happen to anyone. The association questions the medical evidence used to reach this conclusion and points out that ultrasound examinations are rarely performed during the delivery of stillborn babies.

Case 2 (source)

In 2017, four newborns died at Ewha Womans University Mokdong Hospital (i.e. 이대 목동 병원 신생아 사건). The case took five years to be resolved as non-guilty. The newborns were in the neonatal intensive care unit (NICU). They experienced cardiac arrest within an 80-minute span and subsequently died. This unprecedented event led to a criminal investigation and charges against the medical staff, including nurses, a resident, and attending physicians, for professional negligence resulting in death.

The case went through three levels of the South Korean judicial system - trial court, appellate court, and supreme court. At each level, the courts maintained a not guilty verdict for the medical staff involved. The primary reason for the acquittal was the lack of conclusive evidence linking the deaths to contaminated SMOFlipid, a nutritional supplement administered to the newborns on December 15, 2017. The courts found that the prosecution failed to prove beyond reasonable doubt that the SMOFlipid was contaminated with Citrobacter freundii bacteria and that this contamination directly caused the infants’ deaths.

Several factors contributed to the overturning of the initial charges. First, the syringe containing traces of Citrobacter freundii bacteria was found in a medical waste bin, raising the possibility of external contamination after disposal. Second, not all victims showed signs of the same bacterial infection, and notably, one twin survived without any traces of the bacteria. The court also considered alternative sources of infection, including the possibility that the bacteria originated from the patients’ own intestinal flora. Additionally, while the practice of dividing medications was not recommended, the court determined it was not inherently illegal if proper infection control measures were in place.

Case 3 (source)

The case involves a 54-year-old female patient (referred to as A) and a surgeon (referred to as B) who treated her for small bowel obstruction.

The incident occurred in November 2017 when patient A was admitted to the hospital with abdominal pain. She had a history of a large ovarian cyst removal. After initial examinations and CT scans, she was diagnosed with closed loop obstruction and transferred to the surgical department. Due to economic reasons and personal preference, the patient opted for conservative treatment, which the medical team agreed to considering her medical history. During her hospital stay, patient A experienced intermittent headaches, low-grade fever, and passed bright red stools. Dr. B continued with conservative treatment, including antibiotics and hemorrhoid medication, without ordering additional CT scans. On the eighth day of hospitalization, the patient’s condition deteriorated, showing signs of hypotension, tachycardia, and increased inflammation markers. Dr. B then performed emergency surgery, removing 80cm of necrotic small intestine.

The patient experienced complications post-surgery, including sepsis and acute renal failure. Although she eventually recovered and was discharged, she was left with slightly reduced kidney function. Dissatisfied with the treatment process, the patient and her family filed both civil and criminal lawsuits against Dr. B.

The key issue in this case was whether Dr. B’s decision to continue conservative treatment, instead of suspecting small bowel necrosis due to strangulated obstruction and intervening surgically earlier, was directly related to the patient’s injuries. The court relied heavily on the opinion of medical experts who criticized Dr. B’s approach, stating that closed loop obstruction can progress rapidly and requires close observation. The experts argued that signs such as changes in abdominal pain, tachycardia, fever, and blood test results should have prompted immediate surgical intervention.

The court ultimately found Dr. B guilty of professional negligence resulting in injury. They concluded that his misjudgment led to a delay in performing bowel resection, which expanded the extent of bowel necrosis and subsequent damage to the patient. Dr. B was sentenced to 6 months in prison, suspended for 2 years.

Does your opinion matter?

Not really. The reality is: there are too many lawsuits against doctors + doctors subjectively perceive that there are too many lawsuits → doctors do not feel comfortable practicing essential specialties because they are the most difficult specialties.

Root causes of the strains

Low Tax Rates

A big reason why Korean healthcare is the way that it is is because people with median income pay nothing close to what other countries with universal healthcare pay.

Top-down perspective

We can look at the total health expenditure of all countries.

Korea spends a fraction of the cost of any other countries.

Bottoms-up perspective

We can look at how much people pay in taxes.

Korea: 7%

The median Korean pays a measly 7**%** of their income as healthcare tax. 기준중위소득 means “basis median income”. 120% refers to basically people who are above median, making 120% of the median income. For single family household, they pay 95,712 won assuming 2,675,000 won in monthly salary. This is roughly 3.5% - similar to Japan, the employer pays the other half.

2024 Health Insurance Premium Income Assessment Table - Median Income Standard Verified by Health Insurance Premiums.

Koreans, without fully realizing it, benefit from significantly reduced medical costs thanks to the wealthy. The basic monthly health insurance premium is 7.09% of income, but there's a backdoor that's wide open. For average wage earners, after excluding the company's 50% contribution, it amounts to about 100,000 to 300,000 won per month. However, it's different for the rich. The monthly maximum insurance premium cap is 8.48 million won, meaning 7.09% is deducted until reaching this amount. This applies to people earning 120 million won per month. They pay nearly 100 million won annually in health insurance premiums.

박재일. (2024, March 18). [박재일 칼럼] 부자들이 내는 의료보험. 영남일보. https://www.yeongnam.com/web/view.php?key=20240317010002206

UK: 20%

For National Insurance category letter A which is where most employees fall into, they pay 8% of their earnings above primary threshold up to and including upper earnings limit (annual income of £12584 ~ £50284), and employer pays 13.8% if the employee earns above £9,100. Given median average salary of the UK is £34,963, it is safe to say that 20% of an employee’s income is paid as national insurance contributions (source).

Japan: 9.98%

Health Insurance tax is calculated for each employee by multiplying their standard monthly salary by the Social Insurance tax rate which varies depending on the region in which you are located. For the Tokyo area, this rate is currently 9.98% (as of March 2024) but it may be lower depending on the area where you operate. This tax rate is updated every six months. Half of the Health Insurance tax is paid by the employee; the other half by the employer (source).

Norway: 21.9%

All employees pay 7.8% from their income (source) and employers pay an additional 14.1% (source).

The scheme is financed by the individual's and employer's social security contributions in addition to grants from the state and the municipalities. The individual's contribution is charged at a higher rate for self-employed persons (11%) than for employees (7.8%). The employer's contribution (14.1%) must be paid with respect to salaries, etc. The rates are determined by the Parliament in the annual decrees on contributions to the National Insurance Scheme.

https://taxsummaries.pwc.com/norway/individual/other-taxes

Canada: 10%

Canada doesn’t exactly have a direct healthcare tax. Instead, the federal government transfers funds to the provinces and territories for healthcare. The Fraser Institute is a libertarian-conservative Canadian public policy think tank and registered charity. The following is from their 2020 report (source):

No perceived alternative career paths

This year’s College Scholastic Ability Test (CSAT) in South Korea saw an unusually high number of repeat test-takers. Only 65% of test-takers were current high school students. This is the highest proportion of repeat test-takers in 28 years, largely due to increased competition and recent policy changes.

A concerning trend is the intense focus on medical school admissions. Many students are changing their career paths to pursue medical degrees, even if they originally had different interests. This “medical school fever” is driven by the belief that becoming a doctor guarantees high income and job security. Out of 1121 students who got admitted to a public university in Korea, 911 (81.3%) were repeat CSAT takers.

Unlike in the U.S., in Korea, there exists medical and dental undergraduate schools. After 6 years of medical undergraduate school, students go through internship, residency, and fellowship similar to how U.S. students do. What is shocking is how stack-ranked the university-major combinations are.

Above is an image of the rankings for the university and the major. You may notice the same major that looks like 의예과 being repeated over and over. 의예과 is medicine. 치의예과 is dental. Basically, a random state school’s medical degree is equivalent to Seoul National University’s Computer Science major. All the nation’s top talents flock to be a doctor.

There are many root causes to this that I will not discuss in this already lengthy post, but a brief take: finance, entrepreneurship, and fundamental scientific research are the three areas that propel the economy forward through leverage (other than discovering natural resources). Korea has none of these:

1. No finance: MITI-style economic development that led to policies that do not support foreign investment (look up “Korea discount”. Example source)
2. No entrepreneurship: Lack of liquidity (source) + bad public perception about equating founding a company to starting a fried chicken restaurant
3. No research: Lack of competitive graduate programs and labs due to little public and private funding
4. No natural resources: no oil, no rare metals, no coal, bad lumbar, bad clay, you name it.

Potential solutions

There are a couple meta observations that are worth drilling down before discussing potential solutions.

1. Not all medical specialties are the same: specialties can be divided based on how much of their average workload is covered by universal healthcare or not.
2. Not all hospitals are the same: primary, secondary, tertiary can be divided based on who they are best fit to serve.
3. Raising prices on the fee schedule is a zero-sum game unless the healthcare budget itself increases.
4. Disincentivizing dermatology and plastic surgery will not produce more doctors who study avoided specialties unless fundamental parts of the broken system are fixed.

Based on this, we have pretty clear improvements that can improve the system:

Increase consultation fees to allow doctors to spend more time with patients

Currently, doctors in Korea, especially in tertiary hospitals, are seeing an excessive number of patients in a very short time. As mentioned in the transcript, some doctors see up to 120 patients in just 3 hours, allowing only about 1.5 minutes per patient. By increasing consultation fees, doctors would be able to spend more time with each patient, improving the quality of care. This change would also help reduce the phenomenon of “과다 의료” (excessive healthcare visits) where patients visit hospitals frequently for minor ailments. The increased fees should be coupled with a policy to discourage unnecessary visits, thereby reducing overall healthcare system strain.

Increase fees by 2-5x for difficult operations performed by avoided specialties

The current fee structure in Korea significantly undervalues complex procedures, especially those performed by specialties facing shortages (like emergency medicine, obstetrics, and surgery). By substantially increasing the fees for these procedures, it would create stronger incentives for doctors to pursue these essential but currently undervalued specialties. This increase should be targeted specifically at procedures that require high levels of skill and carry significant risk, ensuring that the most critical medical services are appropriately valued and compensated.

Restore honor and provide support for doctors in avoided specialties

There’s a need to address the systemic issues that have led to the decline in certain medical specialties. This includes: a) Reforming the legal system to reduce the risk of criminal prosecution for medical errors, bringing Korea more in line with international norms. The current high rate of criminal charges against doctors (0.5% annually compared to 0.01% in Japan) creates a hostile environment, especially in high-risk specialties. b) Providing additional compensation or benefits to doctors in these specialties to acknowledge the challenges and importance of their work. This could include bonuses, improved working conditions, or other incentives to make these specialties more attractive.

Implement a strong primary care system with family doctors or general practitioners as gatekeepers

Korea needs to strengthen its primary care system to reduce the burden on tertiary hospitals. This could involve: a) Establishing a system where patients must first consult with a primary care physician before being referred to specialists or tertiary hospitals, except in emergencies. b) Improving the status and compensation of primary care physicians to make this career path more attractive. c) Educating the public about the benefits of primary care and the appropriate use of different levels of the healthcare system.

Implement guardrails to direct tertiary care access and incentives for primary care

The current system allows too easy access to tertiary hospitals, leading to overcrowding and inefficient use of resources. To address this: a) Implement a strict referral system where patients can only access tertiary hospitals with a referral from a primary or secondary care provider, except in true emergencies. b) Create financial incentives for patients to use primary and secondary care facilities for non-emergency and routine care. This could involve higher co-pays for tertiary hospital visits without referrals. c) Limit the ability of tertiary hospitals to treat minor ailments, encouraging them to focus on complex cases and research. This could involve reducing reimbursement rates for simple procedures at tertiary hospitals. d) Invest in improving the capabilities and reputation of regional hospitals to reduce the perceived need to travel to Seoul for all medical care.

Predictions

However, given the current state of affairs, I believe none of the above will be implemented. What will happen will roughly look like the following:

1. Hospitals and doctors will continue their protest like they had been doing for the past 30 years.
2. People are too dumb to understand the reality of the situation.
3. Politicians have no incentive to fix the problem.
4. Hospitals eventually go bankrupt.
5. Insurance becomes privatized.
6. Healthcare disparity worsens similar to the US.
7. People demand better care.
8. Hospitals and doctors are completely nationalized - they become government jobs.
9. Brain drain accelerates as top talent leaves the country.
10. Quality of care declines significantly.
11. Increase in medical tourism outflows: Koreans who can afford it opt for medical tourism.

This paints an extremely grim picture of the future of Korea. However, I think this is just one of the many things that are collapsing ever since Moon Jae In’s presidency. The real estate bubble bursting will kill the middle class. Legislative barriers and hyper-policitized labor unions are killing innovation. The only thing sustaining Korea is Samsung and content (BTS, webtoons, most importantly, the gaming industry) - without these, Korea will become a satellite state of China. I will discuss all of these on a separate post.