A Tale of Two Social Insurance Systems in South Korea and Taiwan: A Financial Risk Protection Perspective

ABSTRACT

Universal Health Coverage (UHC) is a widespread policy goal in the 21st century. The aim is to protect people from financial risk while promoting their access to good-quality care. This study examined the social insurance systems of South Korea and Taiwan to explore the critical challenges of achieving effective UHC. By assessing the impact of UHC on financial risk protection (measured by out-of-pocket payment share and catastrophic payment headcount), we found that when South Korea inaugurated its National Health Insurance (NHI) program with a limited benefits package and high cost sharing, it did not reduce the financial burden. Meanwhile, we observed a drop of 5 to 6 percentage points in the catastrophic payment headcount in Taiwan, which offered a universal and rather comprehensive benefits package with a modest cost-sharing design under its single-payer NHI system. The political-economic context of the UHC policy evolution was further explored through an in-depth discussion. We conclude that to provide sufficient financial risk protection against unexpected medical expenses, the design of the insurance scheme, in particular the risk-sharing mechanism, not only matters but is also the key to success.

KEYWORDS:

• Catastrophic payments
• financial protection
• South Korea
• Taiwan
• universal health coverage

Acknowledgments

The authors appreciate the editorial assistance provided by Asia Health Policy Program (Shorenstein Asia-Pacific Research Center, Stanford University) led by Karen Eggleston, and valuable comments by Adam Wagstaff and Kharis Templeman, however, the authors are solely responsible for the views presented in this paper.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

[a]. To mitigate potential moral hazard induced by insurance coverage, insurance schemes often impose cost-sharing mechanisms in the form of coinsurance and copayment at the point of service. Coinsurance (rate) is a proportion of a medical bill that the patient has to pay, and copayment means a fixed/lump sum monetary amount paid by the patient. However, a higher level of cost-sharing is more likely to expose the insured to a higher level of financial risk. The cost-sharing mechanisms in South Korea and Taiwan are detailed in the “Design of the insurance schemes” in the paper’s Discussion section.

Additional information

Funding

JR Lu and JT Sheu are grateful for the grant support of the Ministry of Science and Technology [NSC 99-2410-H-182-003-MY3, MOST107-2410-H-182-014-MY3, MOST 109-2410-H-182-006, and MOST 110-2410-H-182-011] in Taiwan, from which this paper is derived. TJ Lee is also grateful for the support of the National Research Foundation of Korea Grant, funded by the Korean Government (NRF-2013S1A2A1A01066691).