A dispute is brewing over the medical benefits fixed-rate system. Medical benefits are a program where the government guarantees medical expenses for low-income individuals. Beneficiaries of medical benefits have previously paid between 1,000 and 2,000 won for outpatient treatment at hospitals and 500 won for medication at pharmacies. The Ministry of Health and Welfare is pushing for a plan starting in October where beneficiaries will pay 4 to 8% of their medical costs and 2% of their medication costs on a fixed-rate basis.
The government asserts that some beneficiaries of medical benefits are overusing hospital services, necessitating the shift to a fixed-rate system. However, public health advocacy groups express concerns that low-income beneficiaries may forgo treatment due to the burden of medical expenses. They argue that receiving physical therapy may require more than double the current out-of-pocket costs.
The medical benefits system was introduced in 1977 to enhance medical access for low-income individuals. Beneficiaries were able to utilize hospitals and pharmacies for free until they began to bear a fixed fee in 2007. The Ministry plans to implement the fixed-rate system for medical benefits in October. This marks the first introduction of personal expenses in 18 years, following 48 years since the system began.
◇Medical benefits type 1 beneficiaries' medical cost 1,000 won → pay up to 8%
Medical benefits provide support for medical expenses to low-income individuals whose income is below 40% of the median income. Based on 2025 criteria, a single-person household can receive medical benefits if their income is 956,805 won or less, while a three-person household must have an income of 2,010,141 won or less, and a four-person household 2,291,965 won or less.
Beneficiaries of medical benefits are categorized into type 1, who are unable to work, and type 2. Type 1 beneficiaries pay 1,000 won at local clinics, 1,500 won at hospitals and general hospitals, and 2,000 won at tertiary hospitals for outpatient treatment. They only pay 500 won at pharmacies. Type 2 beneficiaries pay 1,000 won at local clinics and 500 won at pharmacies. They contribute 15% of their medical costs at hospitals and general hospitals, as well as at tertiary hospitals.
The Ministry plans to have type 1 medical benefits beneficiaries pay 4% of their medical costs at local clinics. This increases to 6% at hospitals and general hospitals, and 8% at tertiary hospitals, while they will pay 2% of their medication costs at pharmacies. Type 2 beneficiaries are also required to pay 4% of their medical expenses and 2% of their medication costs at local clinics and pharmacies, respectively. The 15% medical costs at hospitals and general hospitals will remain unchanged. The Ministry will compensate 100% of any amount over 50,000 won in total medical costs and medication fees if beneficiaries frequently visit hospitals.
Even if the fixed-rate system is implemented, the cost differences are negligible for treatments like a cold. For instance, if a type 1 medical benefits beneficiary visits a local clinic for a cold, resulting in medical costs of 13,000 won and 5,000 won for medication, the total out-of-pocket expense would remain at 1,500 won, which includes the medical expense (1,000 won) and medication fee (500 won).
Implementing the fixed-rate system could actually reduce medical expenses to 520 won (4%) and medication costs to 100 won (2%). The Ministry has designed the system to ensure that at least 1,000 won in medical fees and 500 won in medication fees are to be paid. Under this system, type 1 beneficiaries would similarly pay 1,500 won.
If medical expenses increase, the burden under the fixed-rate system escalates. For example, if a type 1 beneficiary receives physical therapy at a local clinic with costs of 70,000 won in medical expenses and 40,000 won in medication costs, they would still pay 1,500 won for a cold treatment. However, under the fixed-rate system, they would need to pay a total of 3,600 won, which includes 2,800 won (4%) for medical expenses and 800 won (2%) for medication.
According to the Ministry, 97% of health insurance beneficiaries typically pay 30% of their medical expenses and medication fees. If medical costs amount to 13,000 won and medication costs 5,000 won at a local clinic, they would individually pay 3,900 won and 1,500 won, respectively. If receiving physical therapy costs 70,000 won in medical expenses and 40,000 won in medication, they would pay 21,000 won and 12,000 won, respectively.
◇"Policy retraction of the fixed-rate system" vs "necessary for maintaining the system"
Public health advocacy groups are protesting the fixed-rate system. The Health Care Organizations Federation and the People's Health Research Institute, along with Democratic Party of Korea lawmaker Kim Yoon from the National Assembly Health and Welfare Committee, and the People's Solidarity for Participatory Democracy stated on the 15th, "The fixed-rate system for medical benefits must be suspended." Kim noted, "Beneficiaries of medical benefits include a high percentage of the elderly, disabled, and chronically ill individuals," emphasizing that "Medical benefits are the minimum safety net that our society must uphold."
The Ministry plans to apply a 30% out-of-pocket expense for beneficiaries who exceed 365 outpatient visits a year under the fixed-rate system. In response, Kim stated, "Those utilizing outpatient services more than 365 times annually constitute less than 1% of all beneficiaries," and added, "We must understand the vulnerability of the weak and protect their dignity through welfare."
Jung Seong-sik, a researcher at the People's Health Research Institute, stated, "The reason for the existence of medical benefits to protect the health of the poor is collapsing." Jung emphasized, "Instead of considering that higher medical costs incur more burden from an economic perspective, we must recognize the realities from the beneficiaries' standpoint," arguing, "We need to abolish the fixed-rate system to break the vicious cycle of poverty and ill health."
In contrast, the Ministry insists on the need to reform the system to maintain medical benefits sustainably. According to the Ministry, there were 1.56 million beneficiaries of medical benefits last year, comprising 3% of the population, but total expenditure reached 11.6 trillion won. Meanwhile, the 97% of health insurance beneficiaries spent 97.4 trillion won last year. Among health insurance subscribers in 2023, the income bottom 5% used an average of 2.27 million won in medical expenses, while medical benefits beneficiaries used 6.95 million won.
The Ministry plans to increase the health maintenance allowance for beneficiaries from 6,000 won to 12,000 won a month instead of implementing the fixed-rate system. A Ministry official mentioned, "The maintenance allowance can be used for medical expenses when visiting hospitals," and added, "If there is a surplus, it can be carried over to the next month or refunded."