In this blog post, we will look at why the capitation system is a burden for both patients and doctors based on the reality of Korean healthcare, and its institutional problems and ways to improve it.
In South Korea, people’s dissatisfaction with the medical industry is no longer a new issue. People complain about unfriendly doctors, short consultation hours, and frequent medical accidents. In fact, it is difficult to say that the Korean medical system is reasonable. However, even though dissatisfaction with the medical community forms the majority of public opinion, very few people are aware of the specific circumstances and underlying causes of this situation in the medical community. When we analyze the Korean healthcare system carefully, we find that the victims of the abnormal domestic healthcare policies are not just patients. I will look at the reasons why the Korean healthcare system, especially the Korean comprehensive fee-for-service system, needs to be improved from the perspective of a medical student who will become a doctor in the future.
Before listing the reasons, let’s first learn about the comprehensive fee system. According to Doosan Encyclopedia, the comprehensive fee system is “a system in which a certain amount of medical fees is paid to medical institutions in advance, regardless of the type or amount of medical services provided to patients, based on whether they were hospitalized for the treatment of a certain disease.” Simply put, under the comprehensive fee system, patients pay a predetermined amount for a specific disease covered by the health insurance regardless of the number of treatments, type of treatment materials, or number of days of hospitalization. The capitation system is used in many countries because it not only prevents doctors from over-treating patients, but also reduces friction between hospitals and patients over medical expenses. So why is the capitation system in South Korea a poison for both patients and doctors?
Before proceeding further, let’s take a look at the characteristics of the Korean comprehensive fee system that are distinctive when compared to other countries. First, the purpose and background of the comprehensive fee system in Korea and other countries are different. More than two-thirds of medical institutions in other countries are publicly owned, and even in countries with a low proportion of public institutions, the public function of medical institutions is recognized, and a certain level of basic medical resources is invested. Therefore, the main task of the healthcare system of other countries is to efficiently manage the healthcare resources that are basically allocated, and the possibility of lowering the quality of medical care is low even if a comprehensive fee-for-service system is implemented to prevent over-treatment and enable efficient allocation of healthcare resources. In addition, in Europe and Australia, the comprehensive fee-for-service system is used as an indicator of the budget payment standard for the degree of public healthcare.
On the other hand, it is safe to say that Korea has almost no investment in medical resources, and 93% of all medical institutions are private. In addition, the compensation for medical services recognized as public medical services (medical services covered by the health insurance) in other countries is lower than the actual medical fees, and the rates themselves are set much lower than in other countries (in fact, the cost coverage rate is only 73.9%), so it is a natural consequence that the quality of medical care has deteriorated in private medical institutions that basically pursue profit as a result of the implementation of the comprehensive fee-for-service system. Finally, in other countries, the medical fee adjustment cycle, principles, and procedures are discussed to ensure that medical fee adjustments are made appropriately, but in Korea, the National Health Insurance Service (NHIS) uses only macroeconomic indicators when determining medical fees, so the microeconomic indicators of material and drug costs, welfare benefits, employee salaries, doctor workload, and the risk of medical procedures are not reflected at all. In addition, while other countries have established a national management system and compensation insurance system for medical accidents and medical disputes, South Korea has no social safety net for medical disputes, which ultimately encourages doctors to avoid certain medical practices under the PPS. The following section will take a closer look at the problems associated with the PPS in South Korea.
First, South Korea’s comprehensive fee system contributes to the fact that doctors’ quality of life is not guaranteed, and it affects the frequent occurrence of medical accidents. The basis for this claim begins with the fact that the fees for services under South Korea’s comprehensive fee system are set at a ridiculously low level. In 2014, the average hourly wage for a resident doctor was 5,885 won. A resident doctor is a doctor who has completed medical school and is in the final stage of becoming a doctor through an internship and residency. Surprisingly, contrary to the common belief that doctors make a lot of money, the hourly wage of a resident doctor does not reach the minimum wage of 6,030 won in South Korea. Moreover, the set fee is so low that doctors see as many patients as possible in an hour, so-called “three-minute consultations,” to reach the hourly wage of 5,885 won. Even if they see as many patients as possible within the time limit, they are unable to meet the minimum wage.
This phenomenon can be explained as follows. The government sets ridiculously low prices to preserve insufficient insurance finances. However, since the minimum wage for doctors must be guaranteed, measures are taken to limit the number of doctors to a very small number. In other words, the minimum wage is being met by ensuring that the number of doctors is very small compared to the number of patients, so that each doctor can see many patients. According to the OECD, the number of doctors per 1,000 people in the population is 2.4 in the UK and the US, and 3.4 in France, Denmark, and Sweden, while in South Korea it is only 1.6. In addition, due to the low cost of medical care, the average number of outpatient visits per Korean is 11.8, which is nearly double the average of 6.8 among OECD member countries, and the average number of days spent in hospital per inpatient is 13.5, which is well above the average of 9.9 among member countries. In summary, Korean doctors provide more than four times as many medical services as the average doctor in an OECD member country.
What are the consequences of the “consideration” of the medical policy to guarantee the minimum wage? The result is intensive medical care and long working hours. According to a survey of 1,745 Korean residents in the medical field, the average work week for residents in Korea is 93 hours. The notorious intern’s working hours are an average of 116 hours a week. This is three times the legal working hours set as reasonable working hours. As a result of the extremely low fees that are characteristic of the Korean comprehensive fee system, the number of doctors per patient is very limited, which results in doctors working long hours. The murderous working hours do not guarantee doctors’ sleep. Added to this is the pressure to remain kind to patients, which increases the frequency of depression among doctors by 13 times compared to non-medical workers of the same age. This is directly linked to patient safety. I often hear from my seniors that I sometimes enter the operating room in a daze, unable to tell whether I am awake or dreaming. At this point, it is considered strange that there are no medical accidents.
Second, there are areas that doctors avoid, resulting in a shortage of personnel in certain fields, which makes it difficult for patients to receive treatment on time. In Korea, the standards for setting medical fees do not fully reflect the opinions of doctors. Even if they go through the difficult process of performing a surgery that involves a great deal of effort and risk, they are not properly compensated for their efforts if the medical fees set by the government are low. Unless a doctor has a special sense of mission for the field, it is a no-win situation to be assigned to a surgery that requires a disproportionately low reward for the effort or a surgery with an extremely high risk of medical malpractice and the resulting medical dispute. This is especially true in South Korea, where there is no social safety net for medical malpractice.
When prospective doctors with a sense of mission in a particular field are excluded, even prospective doctors with the right values and a good cause cannot help but take this situation into account when choosing their field. Naturally, there is a division between popular and unpopular fields, and when this situation becomes extreme, there is an excessive shortage of personnel in unpopular fields. Access to medical care, which is the ability of patients to receive the medical care they need in a timely manner, is a very important issue in the medical community. The damage caused to patients who cannot receive treatment in a timely manner due to a shortage of residents is unimaginably great. However, preventing these problems depends entirely on the sense of duty of doctors without any other measures. Doctors also bear the brunt of public criticism when problems arise. This is because the majority of the public is unaware of this reality.
Third, the quality of medical services is poor. The cost-recovery rate of Korean doctors for the items for which the government has set medical fees is 73.9%. This means that the remaining 26.1% of the medical services provided under the health insurance benefits will still result in a loss for the doctor. Then, there are only two ways for doctors to make money: either by reducing their spending or by increasing the number of procedures not covered by health insurance (i.e. not covered by insurance). In any case, doctors also have to support their families and are private citizens who need to “make a living,” so it is natural for them to pursue profit. Do you think doctors are just complaining because they are full? Of the 1,145 people who filed for bankruptcy in the past five years, doctors ranked second, followed by Korean medicine doctors and dentists. In addition, 40% of those who filed for personal rehabilitation are doctors. Many doctors in Korea are committing suicide due to financial difficulties in running their hospitals. Doctors, who are in a tight spot, end up using cheap materials or choosing surgical methods that cost less, and try to reduce the number of days of hospitalization by reducing the treatment of patients. Inevitably, the quality of medical services deteriorates. As a result, the volume of medical services decreases, the public role of hospitals decreases, inappropriate discharge increases the number of readmissions, and the mortality rate increases. This is not an exaggeration. In fact, a study by the Health Care Financ Rev found that the number of patients dying after being discharged from the hospital increased by 3.7%, indicating that early discharge due to the unreasonable implementation of the comprehensive fee-for-service system could be a major problem.
In the same vein, people who do not live in densely populated areas have less access to hospitals. Doctors do not open clinics in densely populated areas because they know that if they open a clinic in an area with few people, the number of patients will not be enough to cover the cost of the clinic, which will lead to bankruptcy. This is unfortunate considering that access to hospitals is a critical factor in patient care that can be directly linked to life and death.
The problems listed above are not inherent to the PPS system itself, but rather to the “Korean PPS system.” This is becoming a poison for both patients and doctors. As a prospective medical professional, I see that there is a lot of room for improvement in Korea’s medical system. The capitation fee system is just one example. The numerous problems in Korea’s medical community cannot be solved by blaming doctors and forcing them to work excessively. The medical community will develop further when an environment is guaranteed in which doctors can work with a genuine sense of mission under a reasonable policy.
