An extract from The Healthcare Law Review, 4th Edition


The healthcare industry of South Korea is mainly governed by the Ministry of Health and Welfare (MOHW) and the Ministry of Food and Drug Safety (MFDS). These government authorities are concerned with the healthcare service at large, including the enforcement of healthcare-related laws and regulations, administrative review of healthcare professionals, certification of medical institutions, mediation of medical disputes, sanctions on illegal rebates involving pharmaceutical products and medical devices, national health insurance, pricing and reimbursement, safety management of pharmaceutical products and medical devices, and the overall management of clinical trials. The MOHW and the MFDS work together with related organisations, including the National Hospital, the National Health Insurance Service (NHIS), the National Medical Center, the Korea Institute of Drug Safety and Risk Management, and the Health Insurance Review and Assessment Service (HIRA).

Healthcare services can be provided by a variety of healthcare providers, including clinic-level medical institutions and hospital-level medical institutions, and citizens can choose the providers from which they wish to receive their healthcare services. The licensing, establishment and operation of healthcare providers are also governed by the MOHW pursuant to relevant laws and regulations.

National health insurance is the central component of the operation and funding of healthcare services in South Korea. Within the national health insurance system, insurance enrolment and payment of insurance contributions are mandatory, and the amount of the insurance contributions is determined based on the income level of the relevant insured.

The healthcare economy

i General

Healthcare related laws in South Korea include (1) the Pharmaceutical Affairs Act (PAA), (2) laws and regulations relating to medical devices, (3) the Medical Service Act (MSA), and (4) laws and regulations relating to health insurance.

There are various stakeholders involved in the healthcare industry in South Korea, including the following:

  1. medical institutions;
  2. healthcare professionals;
  3. patients;
  4. manufacturers, importers and sellers of medical devices and pharmaceutical or biotechnology products;
  5. insurance companies;
  6. government authorities, including the MOHW, the NHIS, the HIRA and the MFDS; and
  7. academic institutions for healthcare professionals.

The roles played by the various government authorities in relation to national health insurance are as follows.

  1. The MOHW: the MOHW is ultimately responsible for making policy decisions regarding the national health insurance system. For example, the MOHW determines the insurance contribution rate, the standards for the imposition of insurance contributions, and the scope of healthcare benefits subject to insurance. The MOHW also approves the budget and regulations of the NHIS, which is the authority managing and operating the national health insurance system.
  2. The NHIS: as the insurer of the national health insurance system, the responsibilities of the NHIS include:
    • the management of qualification criteria of health insurance subscribers and their dependants;
    • the imposition and collection of insurance contributions;
    • the management of insurance benefits;
    • the implementation of national health check-ups, disease prevention and health promotion related work;
    • payments to medical institutions;
    • the determination of drug prices through negotiations with pharmaceutical companies; and
    • the execution of pricing contracts with pharmaceutical companies.
  3. The HIRA: the responsibilities of the HIRA include (1) the assessment of medical care costs and the appropriateness of the healthcare benefits and (2) the development of these review and assessment criteria.
  4. The Health Insurance Policy Deliberative Committee: as a committee under the MOHW, the Health Insurance Policy Deliberative Committee makes decisions on long-term comprehensive planning for the national health insurance system, the implementation, timing and method of these comprehensive plans, and the various standards applicable to benefit qualifications and the level of insurance contributions and benefits.
ii The role of national health insuranceNational health insurance under the National Health Insurance Act

The national health insurance programme in South Korea is a public insurance system that spreads the burden of medical expenditure to all residents under the mandatory National Health Insurance coverage. The resources required to run the national health insurance programme are derived from insurance contributions paid by the insured and their employers (as applicable), government subsidies and other income (such as fees for delinquent payments and other penalties).

The national health insurance programme is governed by the National Health Insurance Act and the key features of this statute are as follows:

  1. the national health insurance programme is compulsory when certain legal requirements are met, and the payment of insurance contributions becomes mandatory;
  2. insurance contributions are imposed according to ability to pay (i.e., depending on income level); and
  3. regardless of the level of the insurance contributions paid, insurance benefits are paid equally with regard to the scope and level of insurance coverage.

Non-resident foreign patients are not eligible for national health insurance coverage under the National Health Insurance Act.

Medical benefits

The medical benefits system is a public assistance system that provides support with respect to medical problems of low-income citizens. It is a social security system that works together with the national health insurance system to support public health. Specifically, the MOHW has responsibility for the medical benefits system, and provides medical costs assistance to those on low incomes pursuant to the Medical Care Assistance Act.

In principle, the medical benefits system provides support for medical expenses for items specified in the National Health Insurance Medical Benefits Criteria published by the MOHW. Certain co-payment requirements may apply, as well as restrictions on the number of days during which medical benefits or treatment procedures can be received.

Private insurance

Citizens may also enrol into private insurance in addition to the national health insurance system. Private insurance differs from public insurance in that (1) enrolment is optional, (2) insurance contributions are imposed by the private insurance provider based on the provider's risk analysis, (3) the insurance benefits paid out vary according to the level of insurance contributions made by the insured, and (4) the collection of insurance contributions is governed by private contracts rather than by laws and regulatory requirements. In South Korea, insurance companies offer a variety of insurance products, such as cancer insurance, death insurance and co-pay medical expenses insurance.

iii Funding and payment for specific services

Under the national health insurance system of South Korea, the insured usually pays a part of the healthcare expense as co-payments, and the insurance proceeds are reimbursed directly to the medical institutions and pharmacies that provide healthcare services to insured patients. The co-payment rate of the insured is affected by multiple factors, such as the type of treatment (for example, inpatient services or outpatient services) and the nature of the medical facility providing the treatment.

Certain treatments are non-benefit items, which are not covered by the national health insurance programme. These include medicines, medical materials, or medical services that are provided or used for a disease that does not seriously affect a patient's daily life, and residents must pay for the cost of such non-benefit items, either personally or through enrolment in private insurance. Medicines, medical materials or medical services that do not improve essential bodily functions such as cosmetic surgery, freckle treatment and snoring treatment are examples of non-benefit items that are not covered by the national health insurance programme.

Primary/family medicine, hospitals and social care

i Classification of medical institutions

Medical institutions are classified as follows:

  1. Clinic-level medical institution:
    • outpatient care for simple and common diseases;
    • patient care for those who do not need to be hospitalised for a chronic disease requiring long-term treatment;
    • simple outpatient surgical operation or treatment; and
    • treatment of patients who have returned after treatment of general care at a general hospital or tertiary hospital (advanced-care general hospital).
  2. Hospital or general hospital:
    • general hospitalisation and surgical treatment;
    • patient care that requires more specialised management by area;
    • patients with chronic disease requiring long-term care and hospitalisation;
    • patients who have been hospitalised at the medical institution concerned and need direct observation of progress at the medical institution after discharge; and
    • medical treatment for patients requiring long-term hospitalisation.
  3. Tertiary hospital (advanced-care general hospital):
    • treatment of serious diseases that require highly specialised treatment techniques;
    • treatment of patients with a condition carrying a high risk of mortality and complications;
    • treatment for patients involving multiple areas of medical speciality and the use of special facilities and equipment;
    • treatment of patients with a rare or incurable disease;
    • operation of specialised medical treatment centres for specialised medical services for severe diseases;
    • treatment of patients who have been hospitalised at the medical institution concerned and need direct observation of progress at the medical institution after discharge; and
    • performance of medical training of healthcare professionals and research and development of medical services.

Although, in principle, a patient should be transferred to a general hospital or a tertiary hospital following a referral from a physician at a clinic, there are no direct restrictions preventing a patient from initially visiting a general hospital or tertiary hospital without such a referral from a clinic. That said, if the subject treatment is covered by the national health insurance system, the patient's co-payment may increase following such a direct visit to a general or tertiary hospital.

ii Primary/family medicine

In Korea, a family doctor or individual doctor system is not prevalent. The proportion of specialists is very high, and doctors who open clinics are either specialists or those who practise medicine for only certain diseases. Therefore, patients choose their doctor according to their symptoms and receive primary care from the clinic with the relevant specialisation.

On the other hand, Korean medicines are classified as either over-the-counter drugs, which do not require the prescription of a doctor, or ethical drugs that require prescription by a physician. Additionally, medicines can be sold only by pharmacists in principle; however, certain over-the-counter drugs designated as home emergency drugs under relevant regulations can be sold in 24-hour convenience stores.

iii Social care

According to the Regional Public Health Act, public health centres are established in municipal units and form a part of government agencies. Doctors and nurses at these public health centres are in charge of vaccination, treatment and patient education in the local community. A patient must pay a prescribed fee to visit a public health centre, but this fee is less than the cost of visiting a private clinic or hospital.

Medical assistance is provided to the low-income class pursuant to the Medical Care Assistance Act. If you are covered by the Medical Care Assistance Act, this fee for visits to public health centres may be exempted or discounted under the National Health Insurance Act.