Senior Staff Director Park Jong-hee with the National Assembly Health & Welfare Committee. (Photo: Health & Welfare Committee)

The following are excerpts of an interview between NewsWorld and Senior Staff Director Park Jong-hee with the National Assembly Health & Welfare Committee, who spoke of the need for national health insurance and national pension reforms.

Question: Will you tell our readers about the reform of the national health insurance service and the national pension system?

Answer: Steps to expand healthcare insurance coverage went into force in August 2017. The steps are designed to determine continuity of healthcare insurance coverage after a comprehensive review is conducted of all insurance coverage for essential healthcare that is not covered by health insurance.

That includes disease diagnosis, treatment effects and payment expenditures. In accordance with the implementation of the steps, healthcare provided by designated doctors has been scrapped, and major non-coverage categories such as hospital rooms for one to three persons, cerebrovascular MRI scans have been covered.

Expensive non-coverage care, such as spine MRI scans, are expected to be added to the insurance coverage list down the road.

Q: Are there any problems related to health insurance finances, caused by the strengthening of healthcare insurance coverage?

A: According to steps to expand healthcare insurance coverage, 10 trillion won out of 20.773.3 trillion won, is supposed to be used up by 2022 and to preserve the remaining 10 trillion won as a reserve fund.

But if there are no efforts to secure incomes in national health insurance finances in a stable fashion, financial soundness may not be maintained to the levels as originally planned.

The government should fix the problem of providing insufficient annual support to national health insurance finances. From the perspective of expenditures, phenomena such as patients rushing to bigger hospitals need to be eliminated to ease the burden of medical costs.

Q: Will you elaborate on how we can solve the aforementioned problems?

A: First, in terms of income, the government has to stick to its obligations of providing support to healthcare insurance as stipulated by the law. But the guideline on the government support under the current law is 20 percent of expected health insurance premiums of a given year.

It should be a priority to set the government’s rational support guideline through comprehensive and integrated research considering the state’s support obligations for social security insurance and the government’s securing fiscal soundness.

In terms of expenditures, an option to differentiate medical reimbursements non-essential medical services deemed would preempt overtreatment. For instance, a higher coinsurance rate might reduce payments to medical institutions.

In order to prevent patients’ rushing to larger hospitals, there needs to be reinforced procedures requiring patients who want to visit large medical institutions to receive medical requests from neighborhood clinics and hospitals they frequent.

As a more fundamental step, health management and medical checkup services need to be strengthened so people can have health management habits to prevent disease and reduce hospital visits.

To this end, the nation could consider policies of lowering health insurance premiums for insured persons.

Q: Will you specify major points of reforming the national pension regime in accordance with the 4th National Pension Integrated Management Plan?

A: The government came up with four options of the ratio of national pension’s income substation of average lifetime income, premium rates and basic pension amounts to guarantee old age life income and national pension finances.

The first option is about maintaining the status quo,; the second is on raising the basic pension amount from current 300,000 won to 400,000 won,; the third one is to increase the national fund’s income substation ratio from current 40 percent to 45 percent and raise the premium rate from current 9 percent to 12 percent,; and the last one is about raising the national fund’s income substation ratio to 50 percent and the premium rate to 13 percent.

 
Q: What do you think of the problems of the options and solutions?

A: The current national pension income substitution ratio of 40 percent and a premium of 9 percent are planned san rational foundations, and the four options suggested by the government are also considered short-term, stop-gap steps since it seems to be not desirable that the outcomes of future national pension fiscal calculations would entail additional institutional overhaul.

In-depth research needs to be made on how much income substitution rate, premium rate, and statue burden should be determined in consideration of the purpose of introducing the national pension to guarantee people’s income and achieve social redistribution.

First of all, targets need to be set on substitution rate, premium rate, and statue burden on the basis of a time of converting into a long-term imposition method, and a raise needs to be made for the even sharing of the premium rate and state burden between current and future generations.

Specifically, the income substation ratio needs to be redesigned to reset to the minimum living costs (1.02 million as of 2019) insured subscribers’ pension amounts with an average subscription period among all subscribers’ average income in the recent three years (2.35 million won as of 2019).

The premium rate subscribers will have to shoulder can be explored by counting backward consumer price change rate and interest rate on top of pension amounts calculated according to the income substation ratio set by the above method.

Subscribers with less than average income would be guaranteed with amounts equivalent to the minimum living costs by the national pension to assure their income, and they would be given a pension equivalent to a certain reduction from the minimum living costs to consider equity among subscribers.

The step, which would guarantee subscribers with less than average income incomes similar to the minimum living costs, so an old-age life income security regime would be unified through the national pension, and in that case, it would seem to be desirable to abolish the basic pension system.

As for the state burden, the state would need to provide support to the national pension, related to additional pension payments required to subscribers with less-than-average incomes.

This is based on the state’s responsibility to provide public aid for vulnerable people. If the annual average premium revenue per head will surpass the annual average pension payment per person, the state would be required to shoulder the difference and operation costs of the National Pension Service (NPS).

Q: According to the four options proposed by the government, national pension finances are to be depleted in about 40 years between 2057 and 2063. What steps are needed to cope with the depletion?

A: If the status quo in which subscribers with average income receive more pension payments is maintained, chances are high that national pension finances will be depleted with the next 50 years, and the future generation’s cost burden will be getting bigger.

As suggested earlier, if the premium rate and fiscal state burden will be raised gradually so that subscribers with average incomes can receive pension payments similar to the minimum wage, the time of depleting national pension finances would be delayed a few decades than the government’s four options.

In the case the depletion time approaches, it would be deemed to be natural for the nation to shift contribution paradigm into pension finances management methods of advanced countries.

This would be an effective alternative since it would contribute to stabilizing pension finances and achieve a fairly splitting of costs among current and future generations.