THE ARITHMETIC OF HEALTH CARE REFORM
Since 1977, when the Park government endorsed decentralized medical insurance societies, there has been a continual political and policy struggle between those favoring unification of the medical insurance societies under a national system and those opposed to unification, preferring decentralization without government regulation. This struggle has shaped the unique development of the Korean national health care system.
The battleground between those for medical insurance unification and those against it has encompassed 3 policy debates. The first debate focuses on the reduction of income inequality between rich and poor. Those for unification insist that unification will reduce the income disparities that exist between industrial employees and the self-employed. Those for decentralization argue that unification will result in transferring insurance premiums paid by industrial employers and their employees to the selfemployed, whose premiums are inadequate to cover their expenses. While those for unification argue that unification will help create a spirit of solidarity among all classes of workers, resembling the foundation of the Western welfare state, those for decentralization believe that unification scheme will result in a "Korean unique case," organizationally incompatible with the decentralized administrative model of NHI developed by the Japanese, French, and Germans.
The second policy debate centers around the issue of government financial assistance to the NHI system. Kim Dae-Jung, once a political prisoner and then a Nobel Peace Laureate, when he became Korea's president, used the issue of NHI administration to consolidate his power. President Kim chose unification not because he agreed with its policy objectives, but because he felt that it would more effectively empower the political base of his government. However, in spite of the Kim administration's initial promise to financially back 50% of the total expenditures of regional health insurance, ultimately the government decided to limit its contribution to $700 million.
The third policy debate involves how to equitably impose insurance premiums on the workforce throughout the nation. Korean workers are represented by 2 different labor organizations, which take opposite positions in this debate. The Korean Confederation of Trade Unions, representing the progressive wing of the labor movement, is strongly opposed to decentralization. The Federation of Korean Trade Unions endorses decentralization, declaring that the insurance premiums paid by employees should not be pooled (centralized) with the insurance premiums paid by the self-employed. The Federation of Korean Trade Unions argues that an equitable health insurance premium "tax" on all workers is impossible because 53% of the self-employed do not pay any income tax.
THE FINANCIAL CRISIS IN KOREAN HEALTH CARE
After 1996, Korean NHI began to develop significant deficits (Figure 1). From 1996 to the present, total health expenditures have exceeded total income. During the economic crisis of 1997, when the Korean economy was controlled by the IMF, NHI's financial deficit grew worse. In addition, the financial structure of Korean NHI was disrupted by the separation of reimbursement for medical care and reimbursement for pharmaceutical services in July 2000. Although government continually raised the mandatory insurance premiums to make up for the deficit, many health policy experts predicted that increased governmental funding would not solve the problem.