[Op-Ed] Cheap Care vs. Costly Waits: Raise Out-of-Pocket Payments and Adopt Value-Based Payment...

Koreans’ annual number of outpatient visits is the highest in the world, exceeding the OECD average by more than twofold / Reckless overconsumption drains health insurance finances and deprives critically ill emergency patients of opportunities for care / The fee-for-service system, under which revenue rises in proportion to the number of treatments, encourages overtreatment / It is desirable to introduce a value-based payment system based on treatment outcomes and induce competition among hospitals

Outside university hospital examination rooms, it has now become routine in Korean healthcare to wait 3 hours just to receive a consultation lasting barely 3 minutes. Patients wait endlessly in cold waiting rooms for a single appointment. The actual consultation is absurdly short, yet no one questions this abnormal pattern of long waits and brief treatment. Why has our society produced such an inefficient structure?

This is a consequence of Koreans’ habit of “medical shopping.” Koreans’ annual number of outpatient visits is the highest in the world, exceeding the OECD average by more than twofold. Is it because the public is unusually unhealthy? No. Behind this lies the distorted behavior commonly referred to as “medical shopping.” Even for colds or mild illnesses, people frequently make a habit of visiting large hospitals, taking advantage of low out-of-pocket costs. This indiscriminate overconsumption eats away at health insurance finances and even robs critically ill patients, whose lives are in danger, of their chance for care.

What, then, drives this medical shopping? It can be described as a distortion of price signals. At present, out-of-pocket costs in Korea are less than the price of a cup of coffee. It is a system in which anyone can go whenever they feel even slightly unwell, without much financial burden. This has made access to hospitals far too easy. In reality, hospitals are often filled with patients with minor conditions, and it is common to see seriously ill patients miss their golden time. This can be seen as the result of a complete breakdown in the efficient allocation of resources.

From an economic perspective, this is a classic case of moral hazard. When insurance as a safety net lowers individuals’ financial burden, consumers tend to forget the scarcity of resources and overuse them. Low out-of-pocket costs plant the idea, “If I feel even a little sick, I should just go,” becoming the trigger for indiscriminate demand. The perception that not much money is coming directly out of one’s own wallet leads people to treat the nation’s precious medical resources as if they were unlimited goods.

This behavior does not simply stem from some moral failing on the part of individuals. Human beings are economic actors who respond to the incentive structure of rewards and costs. The current healthcare system is designed so that those who use more medical services receive greater benefits than those who consume rationally. This flawed design is merely pushing rational economic actors into becoming the main agents of moral hazard.

As serious as overconsumption on the demand side is, the reward structure of the healthcare delivery system on the supply side is equally problematic. Hospitals in Korea currently operate on a fee-for-service system, under which their revenue rises in proportion to the number of treatments provided. Under this structure, hospitals are placed in an environment where they have little choice but to focus on quantitative expansion—how many patients they see—rather than how precisely and effectively they treat disease. A uniform fee schedule in which each medical act provided by healthcare professionals is directly tied to income becomes another cause of unnecessary overtreatment.

As an alternative to this uniform compensation structure, it is now time to consider a value-based payment system that differentiates compensation according to the quality of medical outcomes. The idea is to encourage healthy competition among hospitals based not on the quantity of treatment but on treatment outcomes. When hospitals engage in quality-based competition to achieve better results, the benefits are passed directly on to patients. In other words, efficient performance competition among providers is the key to improving the quality of medical services and ultimately maximizing consumer welfare.

Ultimately, the starting point for correcting inefficiency in the healthcare field is to turn the “traffic lights of price” back on. Adjusting out-of-pocket costs does not mean increasing the public’s burden; rather, it is a sound choice that prevents indiscriminate overuse and ensures that medical benefits go to those who truly need them. As Milton Friedman warned, there is no such thing as a free lunch. If we are not to pass the bill for today’s “cheap medical care” on to future generations, then now is the time to firmly establish market principles and the principle of personal responsibility in medical services.

Hanmin Lee, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 싼 의료 vs 비싼 대기, '본인부담금' 높이고 '가치기반 지불제도...

Author: Han-min Lee

Date: 2026-04-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=28803