This blog post examines why the global budget system burdens both patients and doctors based on Korea’s healthcare reality, exploring its institutional flaws and potential improvements.
Public dissatisfaction with the medical field in South Korea is no longer a new issue. Citizens voice complaints about unfriendly doctors, short consultation times, and frequent medical accidents. Indeed, it’s difficult to call Korea’s healthcare system rational. Yet, despite this dissatisfaction dominating public opinion, very few citizens grasp the specific circumstances and root causes of this state of affairs in the medical field. Upon careful analysis of Korea’s healthcare system, it becomes clear that the victims of abnormal domestic healthcare policies are not just patients. I will examine why Korea’s healthcare system, particularly its Global Budget System, needs improvement from the perspective of a medical student who will become a doctor.
Before listing the reasons, let’s first understand what the global budget system is. According to the Doosan Encyclopedia, the global budget system is ‘a system where medical institutions are paid a predetermined fixed amount for treating a specific disease, based solely on the patient’s admission status for that disease, regardless of the type or quantity of medical services provided.’ Simply put, under the DRG system, patients pay a predetermined amount for a specific disease covered by national health insurance, regardless of the number of treatments, types of materials used, or length of hospitalization. This system is used in many countries because it prevents over-treatment by doctors and reduces friction between hospitals and patients over medical costs. So why is Korea’s DRG system poisonous to both patients and doctors?
Before proceeding further with the argument, let’s examine the distinctive characteristics of Korea’s DRG system compared to other countries. First, the very purpose and background for implementing the DRG system differ between other countries and Korea. In other countries, over two-thirds of medical institutions are publicly owned. Even in nations with lower public sector ratios, the public function of medical institutions is recognized, ensuring a certain level of basic medical resource investment. Therefore, in these healthcare systems, the primary challenge is efficiently managing the medical resources already fundamentally invested. Implementing a global budget system to prevent over-treatment and enable efficient resource allocation carries a low risk of compromising medical quality. Furthermore, in Europe and Australia, the global budget system is used as a benchmark indicator for budget payments based on the level of public healthcare.
In contrast, South Korea can be considered to have almost no medical resource investment, with 93% of all medical institutions being private. Furthermore, compensation for medical services recognized as public healthcare services (those covered by health insurance) is lower than actual treatment costs. The fees themselves are set at an unreasonably low level compared to other countries (with the actual cost recovery rate being only 73.9%). Under these circumstances, the implementation of a global budget system has naturally led to a decline in the quality of care at private medical institutions, which fundamentally pursue profit. Finally, while other countries discuss the cycle, principles, and procedures for adjusting medical fees to ensure appropriate adjustments, in Korea, fee decisions are made solely based on macroeconomic indicators by the National Health Insurance Service. This means microeconomic indicators—such as material and drug costs, employee benefits, staff salaries, physician workload, and the risk level of medical procedures—are completely unaccounted for. Compounding this, while other countries have established national management systems and compensation insurance systems for medical accidents and disputes, Korea lacks any social safety net for medical disputes. This ultimately encourages physicians to avoid performing certain medical procedures under the comprehensive fee-for-service system. Below, we examine the problems arising from the characteristics of Korea’s comprehensive fee-for-service system in greater detail.
First, Korea’s global budget system contributes to the lack of guaranteed quality of life for physicians and influences the increase in medical accidents. The basis for this claim starts with the fact that the fees under Korea’s global budget system are set at an unreasonably low level. In 2014, the average hourly wage for a resident was 5,885 won. Residents are physicians in the final stage of training after graduating from medical school and completing internship and residency. Surprisingly, contrary to the common perception that doctors earn high incomes, the hourly wage for residents falls below South Korea’s minimum wage of 6,030 won. Moreover, because the established fees are so low, doctors are forced to see as many patients as possible in an hour through so-called ‘three-minute consultations’ just to reach the 5,885 won hourly rate. Even seeing the maximum number of patients within the time allotted, they still fail to meet the minimum wage.
This phenomenon can be explained as follows. To preserve the insufficient insurance finances, the government sets medical fees at unreasonably low rates. However, since doctors’ minimum wages must be guaranteed, the government employs a strategy of strictly limiting the number of doctors. That is, by keeping the number of doctors per patient extremely low, it ensures each doctor’s medical service volume, forcing them to see many patients to meet the minimum wage. 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, compared to only 1.6 in Korea. Furthermore, influenced by low healthcare costs, the average number of outpatient visits per person in Korea is 11.8 per year, nearly double the OECD member average of 6.8. The average length of hospital stay per inpatient is also significantly higher at 13.5 days, far exceeding the member average of 9.9 days. In summary, South Korean doctors handle over four times the patient load per physician compared to the average OECD doctor.
What is the result of the healthcare policy’s ‘consideration’ to guarantee a minimum wage? The outcome is intensive patient care and enormous working hours. According to a survey of 1,745 resident doctors in South Korea, their average weekly working hours reach 93 hours. The notoriously long working hours for interns average a staggering 116 hours per week. This figure is three times the statutory working hours set as a reasonable limit. Ultimately, the characteristically low fees under Korea’s fee-for-service system result in a severely limited number of doctors relative to patients, forcing doctors to work intensively for long hours. These murderous working hours fail to guarantee doctors adequate sleep. Compounded by the pressure to maintain kindness toward patients in such conditions, the incidence of depression among doctors is 13 times higher than among non-medical professionals of the same age. 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 seems almost strange that medical accidents don’t occur more frequently.
Second, certain medical fields become unpopular among doctors, leading to a shortage of personnel in those areas. This makes it difficult for patients to receive timely treatment. In Korea, the perspective of doctors is not sufficiently reflected in the criteria for setting medical fees. Even if a doctor performs a difficult surgery requiring immense effort and carrying significant risk, if the government-set fee is low, that effort is not properly compensated. Unless a doctor has a special sense of mission for that field, taking on surgeries 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 accidents and the resulting disputes, is like eating bitter herbs with tears. This is especially true in Korea, where there is absolutely no social safety net for medical accidents.
Excluding the rare case of a prospective doctor driven by a special sense of mission to a specific field, even those with the most upright values and noble intentions cannot ignore this reality when choosing their specialty. Naturally, this creates popular and unpopular fields, and when this situation becomes extreme, it leads to severe manpower shortages in the unpopular fields. Ensuring patients receive necessary treatment in a timely manner—access to medical care—is a critically important issue within the medical community. The harm suffered by patients who cannot receive timely treatment due to a shortage of resident physicians is immense, beyond imagination. Yet preventing these problems relies entirely on the sense of mission of doctors, without any concrete countermeasures. When problems occur, the resulting public criticism is also borne entirely by the doctors. This is because the majority of the public remains unaware of this reality.
Third, the quality of medical services declines. The cost recovery rate for Korean doctors on items covered by government-set medical fees is 73.9%. This means that when performing treatments covered by the National Health Insurance, the remaining 26.1% results in a direct loss for the doctor, creating a deficit. Thus, doctors have only two ways to generate income: reduce expenses or increase procedures not covered by health insurance (non-covered procedures). After all, doctors are private citizens who must support their families and ‘make a living,’ so pursuing profit is natural. Do doctors appear to be complaining out of sheer luxury? Among the 1,145 individuals who filed for bankruptcy over the past five years, doctors ranked second, Korean medicine practitioners fourth, and dentists fifth. Furthermore, doctors constitute 40% of those applying for personal rehabilitation. Many Korean doctors are committing suicide due to hospital management difficulties. Cornered doctors ultimately resort to using cheaper materials, opting for less costly surgical methods, and reducing patient treatment to shorten 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 increased readmission rates and mortality. This is no exaggeration. In fact, a study in Health Care Finance Review found that the mortality rate among discharged patients increased by 3.7%, highlighting that premature discharges due to the forced implementation of the global budget system can become a major problem.
Furthermore, in the same vein, people living outside densely populated areas face reduced access to hospitals. Doctors are reluctant to open practices outside population centers because establishing a hospital in a sparsely populated area often leads to bankruptcy, as the number of patients seen is insufficient to break even. Considering that access to hospitals is a critical factor that can be life-or-death for patients receiving medical services, this is a regrettable situation.
The problems listed above are not inherent to the global budget system itself, but rather specific to the ‘Korean global budget system’. It is proving toxic for both patients and doctors. As a pre-medical professional, observing Korea’s healthcare system reveals significant room for improvement. The global budget system is merely one example. The myriad problems within Korea’s medical community cannot be solved by blaming doctors and demanding excessive dedication from them. The medical field will progress further when an environment is guaranteed where doctors can work with a genuine sense of mission under rational policies.
