Blank Invoice — The Political Economy of the Collapse of South Korean Healthcare
Table of Contents
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Prologue: The Inconvenience You Experience is a 'Structure,' Not a 'Coincidence'
Introduction: The Empire of Accumulated Intentions — The East Asian Medical Control Model Originating from the Manchukuo Laboratory
Part 1. Original Sin: How the First Button Was 'Intentionally' Misbuttoned
Chapter 1. A Designed Crisis, a Shifted Responsibility
Chapter 2. The 1971 'Benevolent Art' Crisis: The Closed Path of Governance
Chapter 3. The Cornerstone of Compulsion, the 'Compulsory Designation System for Medical Institutions'
Chapter 4. An Indulgence in the Name of 'Public Welfare'
Chapter 5. The Gilded Cage, 'Low Reimbursement Rates'
Chapter 6. An Exception in the World
Part 2. Three Dominoes: How Well-Intentioned Policies 'Accelerated' the Crisis
Chapter 7. The First Domino: The Shock of the Separation of Prescribing and Dispensing
Chapter 8. Government-Led Industrial Restructuring: 'Go to Long-Term Care Hospitals'
Chapter 9. The Trap of the Per Diem Rate System
Chapter 10. The Second Domino: The Bait of National Health Checkups
Chapter 11. The Third Domino: The Pandora's Box of Private Indemnity Insurance
Chapter 12. The Economics of the Balloon Effect
Part 3. Distorted Market: Witness the 'Monsters' Born of Low Reimbursement Rates
Chapter 13. The Birth of the Pain Business
Chapter 14. Golden Goose 1: Manual Therapy and Extracorporeal Shock Wave Therapy
Chapter 15. Golden Goose 2: Nutritional Injections
Chapter 16. The Myth of the 'Last Stronghold' vs. the 'Greatest Beneficiary'
Chapter 17. Patient Shopping at University Hospitals
Chapter 18. The Real Culprit Behind the Psychiatric Hospitalization Crisis: When Alternatives are Erased in the Name of 'Human Rights,' Only Isolation Remains
Chapter 19. The Collapsed Medical Delivery System
Part 4. State Power and the Predator Cartel: Who Profits from the 'Collapse'?
Chapter 20. Symbiosis and Predation I: Hospitals and Universities
Chapter 21. Symbiosis and Predation II: The Legal Profession and the Government
Chapter 22. The Role of the State: An Executor, Not a System Solver
Chapter 23. Control as Ideology
Part 5. Structured Injustice: The People Who Became Scapegoats
Chapter 24. Professionals in a Golden Cage: Designed Helplessness and the Collapsing Relationship of Exchange
Chapter 25. Medical Residents as 'Disposable Pawns'
Chapter 26. The Paradox of the Special Act on Medical Residents
Chapter 27. Consumed Souls: The Truth Behind the 57% Nurse Turnover Rate
Chapter 28. The Collapse of Medical Education
Chapter 29. Isolated Victims
Chapter 30. Intergenerational War: How 'Invisible Debt' is Transferred to the Future
Part 6. The Betrayal of Reform: The Government’s 'Solutions' Full of Contradictions
Chapter 31. Increasing Medical School Quota by 2,000: A Time Bomb in the Name of a Solution
Chapter 32. The Weaponization of Knowledge: How National Research Institutes Concealed Failure
Chapter 33. The Failed Reform, 'Moon Jae-in Care'
Chapter 34. The Truth About the Restructuring of Long-Term Care Hospitals: The Policy Cycle of 'Abandonment After Destruction' Repeats Again
Chapter 35. The Illusion of the Physician-Scientist Discourse: Shifting Responsibility for Failed Policies and the Excuses of the Pharmaceutical Industry
Chapter 36. The Essence of the Essential Healthcare Package: A Blueprint for Salvation or a Deceptive Contract?
Chapter 37. Why 'Advanced Systems' Become Poison in Korea: The Political Economy of Failed Institutional Transplantation
Part 7. A Society Served with a Blank Invoice: What Will We Choose?
Chapter 39. Scientific Signs of Collapse: Dissecting the Death of the Medical System Through Critical Transition Theory
Chapter 40. Is There an Exit?: The Rise of the 'Leaving Korea' Discourse
Chapter 41. Toward Truth and Reconciliation
Chapter 42. The Value of Trust
Closing Remarks: Time to Hold the Candle
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Prologue
The Inconvenience You Experience is a 'Structure,' Not a 'Coincidence': The Empire of Accumulated Intentions and the Political Economy of a Designed Crisis
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A Question to the Reader First
Have you ever experienced "ER drifting"? Have you ever stood in line at four in the morning for a "pediatric open run"? Have you ever been told in a rural area that "there is no hospital available" when trying to give birth?
Can these inconveniences be explained by the individual virtue or vice of doctors?
This book answers that question resolutely. No. These inconveniences are created by the 'structure.' And that structure did not emerge overnight. The 'Empire of Accumulated Intentions,' built up over half a century—or even much longer—designed today's collapse. This book rejects easy conclusions like "it’s the doctors' fault" or "it’s the fault of an aging society." Instead, it demonstrates in the language of structure how policy-driven incentives led to today's breakdown.
1. Origins: The Manchukuo Laboratory and the Empire of Accumulated Intentions
In the spring of 2024, the South Korean medical system reached a state of functional paralysis. Empty operating rooms, indefinitely delayed cancer treatments, and the tragedies of patients dying during transport while searching for an emergency room. The government and the media diagnosed this as the 'collective egoism of doctors,' and public anger converged toward the medical provider group.
However, to understand this crisis, one must go back not to 2024, but to Manchuria in the 1930s.
In 1937, the Military Medical Bureau of the Kwantung Army and the Hygiene Department of the South Manchuria Railway (Mantetsu) designed a unique medical control model as a tool for continental domination. The core principle was simple: the state forcibly incorporates medical providers, controls reimbursement rates below cost, and utilizes medical accessibility as a source of political legitimacy, while transferring the financial burden to providers and colonized residents. This was the so-called political economy of 'low cost and high accessibility.'
This model was transplanted throughout East Asia after the war. Korean hygiene administration bureaucrats trained during the occupation period inherited the institutional logic they had acquired even after liberation, and the 1977 national health insurance system was designed upon this lineage. Taiwan and Japan also internalized the East Asian medical control model through similar paths. The tragedy of the Korean medical system is not a unique Korean failure. It is a legacy of an empire where intentions have accumulated over 90 years, and it is also a political choice of a post-colonial state that failed to liquidate that legacy.
While tracing this long lineage, this book simultaneously analyzes how the specificities of the Korean case—namely, the unique choices that reinforced and internalized that lineage—deepened the crisis.
2. Location of the Problem: Three Layers of Phenomena
According to the ontological framework of Critical Realism, social phenomena are divided into three layers: the 'empirical,' the 'actual,' and the 'real.' The medical collapse witnessed in 2024 corresponds to the empirical layer. The chain of policies spanning half a century constitutes the actual layer. What this book ultimately seeks to identify is the underlying layer of the real: the causal structure in which three structural mechanisms—price control, forced incorporation, and financial constraints—combine to generate long-term distortions of the system.
3. Theoretical Background: Five Analytical Lenses
To dissect this structure, this book adopts five textbook concepts as its theoretical framework.
First is policy design failure. According to policy scholars Anne Schneider and Helen Ingram, the success of a policy depends on the selection of appropriate policy tools to elicit compliance from the target group. In designing the 1977 national health insurance system, the Korean government relied unilaterally on coercive tools and effectively excluded hortatory or learning tools that could induce the voluntary participation of medical providers. This was a design flaw that structurally induced long-term resistance and evasive behavior from the target group.
Second is the accountability-responsibility gap. In public administration, the soundness of governance is guaranteed by the symmetrical distribution of authority and responsibility. However, Korea's medical system was built on a structure that directly violates this principle. While the state monopolized all authority, including the power to determine reimbursement rates, design the system, and issue medical practice commencement orders, it delegated the infinite responsibility for 'public health' to private medical institutions, which account for over 90% of the providers. A state that holds authority but bears no responsibility, and medical providers who are burdened with responsibility but granted no authority. This asymmetrical relationship has been the structural engine of exploitation and distortion for half a century.
Third is the economic consequence of a price ceiling. According to the basic principles of microeconomics, if artificial price controls are implemented below the equilibrium price, supply shortages and quality degradation inevitably occur. Korea's low-reimbursement system solidified a structure where the cost of medical services exceeds the rates set by the state. To survive, medical institutions were forced to adopt a malformed adaptation strategy of quantitative expansion through high-volume, low-margin sales—resulting in the so-called 'three-minute consultation'—and creating indirect profits through non-covered (uninsured) items.
Fourth is the issue of the market power of a monopsony. According to the concept of monopsony defined by Joan Robinson (1933), if a single buyer monopolizes pricing power, prices and transaction volumes are realized at levels lower than the social optimum. The compulsory designation system for medical institutions established the National Health Insurance Service as a de facto monopsony buyer, and all medical institutions were deprived of the freedom to refuse contracts with this single buyer. This was an institutional device that fundamentally neutralized the function of price discovery in a competitive market.
Fifth is the ethical issue of distributive justice. According to John Rawls' theory of justice, the basic structure of social institutions should be designed to provide the greatest benefit to the least advantaged (the difference principle). However, the Korean medical system operated in direct opposition to this principle. The risks and cost burdens of the system were shifted to the most vulnerable classes—medical residents, local small and medium-sized hospitals, and essential healthcare workers—while the benefits were concentrated among a few: the large hospital-private university complex, private insurance companies, and the bureaucratic group.
4. Core Thesis: Contradictory Equilibrium and Unintended Consequences
Synthesizing the above analytical framework, this book presents the following core thesis:
The collapse of the Korean medical system is not an accidental mishap, but an inevitable man-made disaster and a "policy disaster" resulting from decades of accumulated policy failures. This system, designed in 1977, was a 'Contradictory Equilibrium' intentionally constructed to achieve incompatible political goals: "increasing coverage while lowering the financial burden." The state acquired the political achievement of high medical accessibility at a low cost, and the price is now manifesting as the critical point of accumulated contradictions and long-term distortions within the system.
This can also be interpreted as a macroscopic experiment of 'unanticipated consequences of purposive social action,' as conceptualized by Robert K. Merton. However, this book questions whether the results in the Korean case were purely 'unintended.' From the perspective of the control model originating in the Manchukuo laboratory and transplanted throughout East Asia, the exploitative consequences of this structure may have been embedded in the design from the beginning. The accumulation of intention means that past intentions become sedimented within the current structure and continue to operate.
5. Comparative Institutional Context: An Exception in the World
The analysis in this book highlights the exceptional nature of the Korean case from a comparative institutional perspective. Medical systems in major OECD countries generally follow one of several consistent models. In the Beveridge model (UK, Sweden), the state directly provides medical services and is responsible for financing, so control and responsibility coincide in the public sector. In the Bismarck model (Germany, France), a social insurance method is used, but reimbursement rates are determined through negotiations between medical providers and insurers, and sufficient financing is secured. In the market model (USA), the private sector leads, and price and quality are determined according to market principles.
Korea alone adopted a malformed hybrid model of 'state control and private responsibility.' This was an institutional experiment for which no sustainable precedent can be found anywhere in the world. And the fact that the origin of this experiment lies in the Manchukuo laboratory explains why this model prioritized 'controllability' rather than sustainability as its design goal from the outset.
6. Composition and Method of the Book
This book consists of 42 chapters across 7 parts. Part 1, 'Original Sin,' dissects the structural flaws of the 1977 system design and its Manchukuo origins. Part 2, 'Three Dominoes,' traces the path through which three policy shocks—the separation of prescribing and dispensing, the inducement of conversion to long-term care hospitals, and the neglect of private indemnity insurance—deepened the crisis. Part 3, 'Distorted Market,' analyzes the expansion of the non-covered market and the destruction of the medical delivery system caused by the low-reimbursement regime. Part 4, 'State Power and the Predator Cartel,' identifies the beneficiaries of the system's collapse. Part 5, 'Structured Injustice,' denounces the reality of the groups that became victims of this system. Part 6, 'The Betrayal of Reform,' analyzes why the government’s 'solutions' exacerbate the problem. Part 7, 'A Society Served with a Blank Invoice,' explores the prediction of collapse and the possibility of reconstruction.
Methodologically, this book adopts the retroduction strategy of Critical Realism. Starting from observable phenomena, it infers the invisible structural mechanisms that made those phenomena possible and proves the operation of those mechanisms through empirical evidence such as institutional timelines, data on the gap between reimbursement rates and costs, institutional profit structure data, and patient flow network analysis. Counterfactual analysis is used to examine what path the system would have taken if reimbursement rates had been normalized and the state's public responsibility had been explicitly defined. Finally, through comparative historical analysis, it traces the East Asian lineage and Korean transformation of the Manchukuo model.
7. Opening Words: An Autopsy Report and an Indictment
The crisis of 2024 is not a 'bug' in the system, but a 'feature' of a system originally designed to operate that way, finally reaching its critical point. The origin of that design did not begin on this land half a century ago. It was cultured in a laboratory in Manchuria 90 years ago and quietly transplanted into the institutions of this land.
This book is an autopsy report on this process of collapse and an indictment seeking to hold those responsible accountable. Who designed this crisis, and who paid the price for that risk? How did intentions accumulate within institutions to eventually become a structure? We now stand at the time when we must face that truth.
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[Box] Map of This Book — One-Page Summary
The Essence of the Collapse of South Korean Healthcare
│
┌─────────────▼─────────────┐
│ Empire of Accumulated Intentions │
│ (Manchukuo 1930s → South Korea 1977) │
└─────────────┬─────────────┘
│
┌─────────────▼─────────────┐
│ Three Structural Mechanisms │
│ ① Forced Incorporation (Compulsory Designation) │
│ ② Low Reimbursement (Below Cost) │
│ ③ Responsibility Shifting (State Control, Private Liability) │
└─────────────┬─────────────┘
│
┌─────────────▼─────────────┐
│ Three Dominos │
│ ① Separation of Dispensing from Prescribing │
│ ② Inducement of Long-term Care Hospitals │
│ ③ Indemnity Insurance + National Checkups │
└─────────────┬─────────────┘
│
┌─────────────▼─────────────┐
│ Distorted Monsters │
│ 3-Minute Consultations · Non-benefit Explosion │
│ Chiro/Nutrient Injections · Doctor Shopping │
└─────────────┬─────────────┘
│
┌────────────────────┬────────────────────┐
│ Scapegoats │ Beneficiaries │
│ • Residents (Abandoned) │ • Large Hospitals/Academia │
│ • Nurses (57% Turnover) │ • Private Insurers │
│ • Regional/Essential Care │ • Bureaucrats/Legal Circles │
└────────────────────┴────────────────────┘
│
┌─────────────▼─────────────┐
│ Betrayal of Reform │
│ 2,000 Med School Quota · Moon Jae-in Care │
│ Essential Care Package (All Failures) │
└─────────────┬─────────────┘
│
┌─────────────▼─────────────┐
│ Where Are We Now? │
│ → A Blank Invoice │
│ (Nullification of Existing System) │
│ or Exiting Korea / Collapse │
└───────────────────────────┘
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[Box] One-Page Glossary of Terms
- Compulsory Designation System: A system where all medical institutions are automatically designated as National Health Insurance service providers.
- Low Reimbursement: A state where the prices of medical services determined by the state are below the actual cost of provision.
- Non-benefit: Medical items not covered by health insurance, for which the patient bears the full cost.
- Indemnity Insurance: Private insurance that compensates for actual medical expenses incurred.
- FFS (Fee-for-Service): A method of pricing each individual medical act or procedure.
- DRG (Diagnosis-Related Group): A method of assigning a single price to a bundle of services per disease group.
- P4P (Pay for Performance): A method of providing compensation based on performance results.
- Per Diem Rate System: A method of paying a fixed amount per day of hospitalization.
- Long-term Care Insurance vs. Health Insurance: Separate social insurances with different funding sources, targets, and institutions.
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Introduction: The Empire of Accumulated Intentions—The East Asian Medical Control Model Originating from the Manchukuo Laboratory
Ⅰ. Introduction: Return of the Ghost—Why East Asian Healthcare Conflicts with the State
Phenomenological Analysis of Modern East Asian Medical Conflicts
Today, the healthcare scenes in South Korea, Japan, and China are embroiled in a vortex of chronic conflict and systemic collapse. In South Korea, there are mass resignations of medical residents met with harsh administrative orders and judicial pressure from the state. Japan faces the bankruptcy of health insurance finances due to super-aging and endless conflicts over reimbursement negotiations among providers. In China, violent incidents between patients and doctors (Yinao) and corruption scandals frequently occur in large hospitals. At first glance, these appear to be isolated phenomena derived from different political and economic backgrounds. (1) Superficially, South Korea experiences a constitutional clash over licenses and freedom of occupational choice; Japan suffers from economic and demographic contradictions of depleted finances and regional medical gaps; and China experiences a severe crisis of trust at the intersection of medical marketization and state control. (2)
However, dissecting the deep structure of these phenomena from a historical and sociological perspective reveals a powerful and common genetic thread: the "State-led Extractive Medical Control Model." This report aims to demonstrate that the medical conflicts currently experienced by these three East Asian nations are not merely results of policy errors or temporary financial deficits, but the inevitable consequence of the "Accumulation of Intentions" that has dominated this region for the past 100 years. Individual nations have patched their systems to overcome immediate crises at historical turning points, but the fundamental structure—"the state directs governance and control, while shifting all derivative financial risks and moral responsibilities to the private sector (medical staff) on the ground"—has never been discarded.
Structural Isomorphism: From the USSR to Manchukuo to East Asia
This study proposes the hypothesis that the deep structure of the East Asian medical system originated from the Soviet Union's planned medical model (Semashko model) in the 1920s (5), was perfected through the massive controlled-economy laboratory of Manchukuo—a puppet state of Imperial Japan in the 1930s (7), and is a path-dependent product that evolved as it was transplanted into post-war Japan, South Korea, and China. This will be proven through "Structural Isomorphism," a core concept of institutional sociology.
Unlike the United States, which adopted a laissez-faire market model, or the United Kingdom's Beveridge model, which fully established a tax-based public medical supply chain (9), East Asian countries developed a "grotesque franchise structure." This system forcibly requisitions private capital and human resources under state goals while outwardly taking the form of social insurance or a market. How was this system born, and how has it defended itself for decades—a system where the state, as a giant headquarters, unilaterally monopolizes the brand (publicness), price (reimbursement), and treatment rules, while shifting infinite responsibility and extreme labor intensity to individual franchisees (medical institutions and doctors)? We must now face the reality of this old ghost that oppresses East Asian healthcare through its historical trajectory and seek the possibility of its deconstruction and reconfiguration.
Ⅱ. Origin: The Semashko Model and the Health Science of Total War
Soviet Planned Healthcare: Management of the Body as a Means of Production
The most fundamental prototype of the East Asian medical control model is found in the centralized healthcare system designed by Nikolai Semashko, the first People's Commissar for Health, immediately after the Bolshevik Revolution in 1918. (6) Leading the People's Commissariat for Health (Narkomzdrav) established in July 1918, Semashko built the first-ever single-payer system providing free medical care to all citizens through the state budget. (5) However, behind this system lay a thorough instrumental rationality that viewed public health not as simple humanitarian charity or welfare, but as the "maintenance and management of machinery" for national industrialization and labor force maintenance. (11)
Based on a Marxist worldview, Semashko redefined medical treatment as "the act of protecting the proletarian body as a means of production." (13) The state nationalized all private medical institutions and incorporated doctors as wage laborers and low-level bureaucrats executing the state's planned economy. (5) Since disease signified a fatal loss of national productivity rather than individual misfortune, the doctor functioned not as a healer of the patient's ailment but as a "maintenance manager of state assets (labor power)." The Soviet state held the obligation to manage the health of the proletariat while simultaneously monopolizing the power to control and requisition their bodies.
Nationalization of Healthcare and the Instrumentalization of "Publicness"
Russia in the 1920s, swept by World War I, civil war, and famine, suffered from an extreme lack of resources. (6) Accordingly, the Semashko model mobilized national capabilities toward prevention, quarantine, and social hygiene rather than post-illness treatment. (5) The most cost-effective method of control to minimize the massive economic and military labor loss caused by large-scale epidemics like cholera and typhus in 1918 and 1919 was the politicization of preventive medicine. (12) All budgets and resources were strictly allocated under top-down central government control, and neither doctors nor patients were granted autonomous choice in treatment or prescription. (14)
While this model was innovative in seeking the causes of disease in poor working environments and social contradictions rather than individual issues, it became the starting point for totalitarian medical control by placing healthcare under the absolute control of state power. (15) This centralized health network, where the state monopolized all means of healthcare, was optimized for raising impoverished people into industrial workers and soldiers without wasting resources. (5) At this very point, fascist states and imperialist elites worldwide in the 1930s—who were ideological opposites of the Soviet Union but similarly needed to prepare for the coming "Total War"—became fascinated by and drew powerful inspiration from this centralized and coercive medical control model. (17)
Ⅲ. The Proving Ground: Manchukuo, the Grotesque Union of Imperialism and National Socialism
South Manchuria Railway (Mantetsu) and Reform Bureaucrats: Defining Healthcare as "Functional Infrastructure"
Paradoxically, the control methods devised by the Soviet communist system were newly transplanted and transformed in Manchukuo (1932–1945), a massive laboratory for Japan, which was the most right-wing imperialist state in Asia during the 1930s. (8) Manchukuo, a puppet state established under the leadership of the Kwantung Army after the Manchurian Incident in 1931, was a blank canvas where radical state-controlled economic experiments—difficult to execute within Japan due to checks from the military and zaibatsu—could be conducted without restriction. (18)
The forces leading this experiment were the so-called "Reform Bureaucrats," spearheaded by Nobusuke Kishi, who later became the Prime Minister of post-war Japan. (2) Industrial and economic bureaucrats like Nobusuke Kishi loathed the inefficiency caused by existing laissez-faire capitalism and the corrupt zaibatsu system. They planned a "National Socialist controlled economy" on the vast stage of Manchuria to build a high-level national defense state. (2)
To them, healthcare was nothing more than "functional infrastructure" essential for imperial management, no different from railways, ports, electricity, or telecommunications. (18) In Manchukuo, where the state budget was severely lacking, the Japanese Empire mobilized the South Manchuria Railway Company (Mantetsu), a giant state-run enterprise whose foundation was laid by Gotō Shinpei. (18) Mantetsu did not merely operate railways; it built and operated a vast network of hospitals and hygiene research institutes (such as the Mantetsu Hospital in Dalian) along the railway lines. (18) Unlike the Soviet Semashko model, which directly managed healthcare with pure state finances, this became the historical origin of the "East Asian-style medical franchise," establishing a governance structure by mobilizing private capital or quasi-public corporate resources to achieve the state's geopolitical goals.
The 1940 System: Total War Mobilization and the National Capitalization of Medical Personnel
After the outbreak of the Second Sino-Japanese War in 1937, Manchukuo and the Japanese mainland entered the "1940 System," the perfect total war system they had yearned for. Reform bureaucrats realized that to increase the productivity of munitions and secure manpower, total and meticulous control over human beings as "human resources" was necessary, in addition to physical infrastructure. In Manchukuo, medical scientists and doctors from Japan and Korea were demoted from independent professionals representing patient rights to agents serving the interests of the Empire. (21)
An extreme and barbaric manifestation of this instrumental view of the body was the germ warfare units, such as Unit 731 led by Shirō Ishii. (21) The bodies of colonial subjects were called "Maruta" (logs), subjects of biological experimentation, representing the pinnacle of fascist health science where the human body could be completely objectified and consumed for state purposes. (21) Healthcare was perfectly subordinated from an independent and ethical sphere of practice saving lives into a "wartime resource management" system that guaranteed and weaponized the Empire's military and labor power. (21)
Through wartime mobilization decrees similar to a "Medical Control Act," the reform bureaucrats of Manchukuo brought all health resources and medical licenses under state planning and treated even private practitioners as "hygiene soldiers" who could be mobilized to the front lines or quarantine sites at any time. The ideological backbone of the Soviet Semashko model—that sovereignty over the body belongs to the state—was combined with high-growth dictatorship and fascism in Manchukuo, becoming much more violent and bureaucratically refined. (23) It was during this period that the prototype of East Asian healthcare was cultured: the state lays the control network and mobilizes medical personnel through administrative orders when necessary.
Ⅳ. Standardization: Nobusuke Kishi and the "Negotiated Franchise" of Post-war Japan
The Return of Manchukuo Elites and the 1958 Universal Health Insurance System
The Manchukuo laboratory collapsed with Japan's defeat in 1945, but the reform bureaucrats who planned the national total mobilization system there were not punished. Instead, they made a grand return to the center of post-war Japanese politics and bureaucracy. At the pinnacle was Nobusuke Kishi, who was imprisoned in Sugamo Prison as a Class-A war criminal suspect but was released due to the U.S. Cold War strategy, finally rising to the position of Prime Minister of Japan in 1957. (2)
Kishi Nobusuke, facing the period of high economic growth after the war, sophisticatedly reprocessed the national socialist control methods whose framework he had established in former Manchukuo by covering them with the outer shell of postwar democracy. (20) In 1958, the Kishi Cabinet carried out a historic wholesale revision of the National Health Insurance (NHI) Act, mandating all municipalities nationwide to forcibly enroll non-affiliated residents, such as farmers, fishermen, and the self-employed, into the insurance system. (27) This was the launch of the seafaring "Universal Health Insurance" system, which aimed for completion by 1961. (28)
In this process, the Japanese government makes a clever choice. It avoids the Semashko-style direct management method of building public hospitals with massive tax revenue and employing doctors as civil servants, as seen in communist countries. Instead, it adopts a strategy of binding numerous private practitioners and small-to-medium hospitals—who were already operating as profit-seeking self-employed individuals across the country—through powerful legal regulations and an insurance network, absorbing them as "franchisees of a giant franchise" known as the single national health insurance system. (28) While leaving ownership of medical institutions in private hands to transfer infrastructure investment costs and management risks, the state (Ministry of Health and Welfare) entirely monopolizes and controls the pricing of medical services (fees) as well as the standards for treatment and review. (29) This was the result of perfectly implementing the philosophy of Manchukuo's reformist bureaucrats—"recognizing private property while the state intervenes highly to allocate resources"—within the healthcare sector.
The Resistance of Taro Takemi and the Medical Association: The Grand Compromise of the "Golden Chain" Between State and Physician
The state's unilateral and harsh price control soon met violent resistance on the clinical front. In February and March 1961, ahead of the full-scale launch of universal health insurance, an unprecedented "Doctor Strike" occurred under the leadership of Taro Takemi, then president of the Japan Medical Association (JMA), where 70,000 doctors nationwide conducted collective office closures and demonstrations every Sunday. (29)
At the time, the frustration of Japanese doctors was at a breaking point. According to the insurance fees unilaterally set by the government, the fee for an appendectomy (appendicitis surgery) was a mere $8.80, a legal induced abortion was $2.62, the basic night emergency house call fee was 34 cents, and a general consultation fee was only 15 cents. This was a humiliating amount, even lower than the cost for an auto mechanic in Tokyo to repair a flat tire (22 cents) at the time. (29) More than 60% of Japanese doctors had to subsist on a monthly income of less than $85, which was less than that of an average elementary school teacher. (29) Furthermore, the Ministry of Health and Welfare’s treatment control codes thoroughly violated the medical judgment of physicians, such as paying the 88-cent examination fee only if the X-ray result for suspected tuberculosis came back "positive." (29) Resisting this, President Takemi declared, "Doctors are human too," and pressured the government by playing his final card: the "right to resign" (the right to terminate insurance contracts), where all doctors nationwide would simultaneously surrender their status as insurance-designated medical institutions. (29) Chaos ensued in downtown Tokyo as fire trucks, instead of ambulances, transported patients. (29)
Ultimately, the Japanese government following Kishi knelt and compromised. (30) While the state (Ministry of Health and Welfare) maintained its macro-level dominance and the framework of health insurance, it promised the Medical Association a guarantee of powerful political status and economic compensation in the form of continuous fee increases for medical acts. (27) Taro Takemi, who dominated the Japan Medical Association for 25 years, utilized his kinship ties with former Prime Minister Shigeru Yoshida to build a so-called "Iron Triangle" consisting of the ruling party (LDP), Ministry of Health and Welfare bureaucrats, and the Medical Association, exercising powerful veto rights and influence over the medical policy-making process. (30)
The structural consequence of this compromise was profound. Japanese doctors accepted a giant chain that bound them to the state's control network, but that chain was a shining "Golden Chain" guaranteed by high social respect, strong political power, and economic security. Thus, postwar Japan established the "Negotiated Franchise" model as the standard, where the state and medical providers constantly negotiate fees and systems amidst mutual respect and tension. It was the product of a fierce compromise where the state acquired control and the doctors preserved their survival and authority.
V. Evolution: The Korean-Style Mandatory Designation System — Design of the "Room with No Exit"
The Preventive Legislation of the Park Chung-hee Government: Learning from Japan’s "Right to Resign" Case
The Japanese medical control model had the most immediate and direct influence on Korea, both geographically and historically. Although advanced American medical knowledge and hospital systems were transplanted into the Korean medical community through the Minnesota Project in the 1950s (31), the ones who designed the framework of state governance and the health administration system were the developmentalist bureaucratic elites led by President Park Chung-hee. Many of them were graduates of the Manchukuo Military Academy or had accumulated administrative experience under Japanese rule, internalizing the efficiency of national socialist control methods. (19)
As they prepared to introduce universal health insurance in the late 1970s, they carefully benchmarked the Japanese system. (32) However, Korean bureaucrats did not stop at simply imitating the Japanese system. They clearly witnessed the "loss of control and surrender" the Japanese government experienced in 1961 before Taro Takemi’s strike, and they showed meticulousness by welding far more lethal "poison pill" clauses into the legal code to preemptively block the possibility of the Korean medical community instigating such a rebellion in the future.
In the early 1970s, the government quietly but violently modified the foundations of the Medical Service Act. (34) Through the 1973 revision of the Medical Service Act, they revived the "Order to Engage in Specific Duties," which had been abolished in 1965, after an eight-year hiatus (33). Subsequently, through the 1975 revision, they placed legal shackles on the entire professional class of doctors, allowing the state to mobilize them like an army in times of emergency. If the doctor's attitude toward national health policies had previously remained within the realm of legal "cooperation," the revised law replaced it with "orders" and "obligations." (33) The birth of the "Medical Treatment Commencement Order" clause, which lies at the heart of current conflicts in the Korean medical community, was not a simple health administration procedure but a historical displacement that perfectly resurrected the concept of "sanitary militarization" (military requisitioning of medical personnel)—conceived by Manchukuo’s reformist bureaucrats for imperialist war—under the guise of modern South Korean constitutionalism. (35)
The Mandatory Designation System and the Medical Treatment Commencement Order: Forced Socialization of Private Capital and "Franchisee-ism"
The crowning stroke in the evolution of the Korean medical system, and the peak that transformed Japan’s Golden Chain into an "Iron Chain," is the Mandatory Designation System for medical care institutions (Mandatory Designation System). This system was initiated in 1977 with the introduction of employee medical insurance and finalized into law with the enactment of the National Health Insurance Act in 2000. (31) Under the Mandatory Designation System, all medical institutions in the country (clinics, hospitals, and general hospitals, with very few exceptions) are automatically and forcibly incorporated as National Health Insurance medical care institutions upon opening. They cannot refuse to treat patients and must obligatorily accept the low fees unilaterally announced by the state. (31)
In importing the Japanese model, Korean developmentalist bureaucrats deleted one core word that existed within it: the constitutional right of "Option" (Contract/Choice). They fundamentally blocked the weapon Taro Takemi had wielded to make the state surrender—namely, the doctors' "right to resign from (or terminate) insurance designation contracts." (37) A Korean doctor obtains a license through arduous training and invests vast private assets to open a hospital, but as soon as they open, they are semi-forcibly co-opted into a giant franchise called the health insurance system, where the state perfectly controls prices, treatment guidelines, and patient intake. While patients can choose a hospital at any time, the hospital's right to choose or refuse a patient's insurance type has been erased. (37)
As a result, South Korea achieved a near-miraculous administrative convenience by instantly requisitioning massive private medical capital and personnel—which account for over 90% of the entire country—as "public assets" without investing a single penny in infrastructure (building public hospitals). This harsh structure was created where the state (the headquarters) thoroughly monopolizes the power of control, policy credit, and the right to collect insurance premiums, while the private doctor (the franchisee) solely shoulders the risk of management bankruptcy, compensation for losses caused by fees below cost, and civil and criminal liability for medical accidents occurring at the site of treatment.
Korean bureaucrats saw through the fact that the moment they opened an "Exit" for the group of technicians, the state's control would be lost. Using the weapons of administrative orders and criminal punishment, they completely welded that door shut. Thus, Korea’s unique oppressive medical system, known as the "Room with No Exit (the Closed Franchise Model)," was completed.
VI. Variation: China’s Party-State Direct Management Model — Market Exploitation in the Name of the Public
The Collapse of Maoist Medicine and the Paradox of "Subsistence of Medicine through Drugs (Yiyaoyangyi)"
Meanwhile, geographically adjacent China most directly and faithfully imported the Soviet Semashko model after the communist takeover in 1949. (5) During the Mao Zedong era, a universal and collective health network was established under the People's Communes, represented by state-managed hospitals and "Barefoot Doctors" in rural areas. (38) However, entering the era of Deng Xiaoping's reform and opening in the 1980s, the Chinese government played a variation of the "cost-shifting" magic used by Manchukuo fascists or the conservative regimes of Korea and Japan, turning it into the most bizarre capitalist form within a communist system.
To concentrate all resources on rapid economic growth, the government drastically cut state funding and financial support for public hospitals. Large hospitals remained 100% state-owned public institutions in name, but they were pushed into an extreme "self-responsible management system" where they had to earn more than 90% of their operating costs from patients themselves without government budgets. (3) However, to suppress the political dissatisfaction of the people, the basic medical fees for the intellectual labor of doctors, such as consultation and surgery fees, were kept at bargain prices below cost (sometimes just a few yuan). (3)
The method the Chinese government tacitly permitted and encouraged for a long time to solve this financial dilemma and structural contradiction was the policy of "Yiyaoyangyi" (subsistence of medicine through drugs; supporting doctors by selling medicine). (3) The state allowed hospitals to fill their deficits and pay doctors' salaries using margins (up to 40% or more) left by over-prescribing expensive drugs to patients, taking rebates, and indiscriminately performing unnecessary high-cost tests (MRI, CT, etc.) with high profitability. (4) Consequently, the state maintained political legitimacy by providing "affordable basic treatment" to the people while investing almost no healthcare budget. On the other hand, the resulting economic burden was shifted entirely to the pockets of patients hit by the bombshell of drug costs and examination fees, and criticism of moral corruption and over-treatment was concentrated on the doctors in the field. (1)
This was a method that formed an exact symmetric counterpart to Korea's forced socialization and exploitation of private capital—that is, the "accumulation of inverse intentions that exploits public capital (public hospitals) and state-employed doctors by throwing them into the most barbaric market jungle."
The Return of the Xi Jinping Era: Digital Manchukuo and the Dominance of Hospital Party Committees
When the people's anger and resentment over the Yiyaoyangyi system—saying "seeing a doctor is as hard as reaching the stars, and hospital bills ruin the family (Kanbingnan Kanbinggui)"—reached a level that threatened the regime, the administration of President Xi Jinping, who took power in 2012, began to tighten the state's reins again. (1) Recently, through a full-scale anti-corruption campaign in the medical and pharmaceutical sectors, China is abolishing the drug price margin system and strongly pushing medical reforms to resubmit public hospitals, which had been running wild due to marketization, back under the direct and powerful control of the Party. (3)
However, the manner of this return takes the form of a "Digital Panopticon" that implements the "perfect sanitary surveillance system" envisioned by Manchukuo's reformist bureaucrats in the 1930s using modern big data and artificial intelligence (AI) technology. In all large Chinese hospitals today, the "Party Committee" has established itself as the highest decision-making body within the hospital, substantially overriding the administrative and clinical authority of the hospital president (a medical expert). (43) The professional and clinical autonomy of physicians has been thoroughly subjugated under the Party's political guidelines and cost-control indicators. In a situation where the state's financial input remains limited compared to the population size, doctors are becoming fixed as "instrumentalized technocrats" who unconditionally execute state policies while simultaneously performing the contradictory tasks of profit generation and strict control of over-treatment through remote monitoring.
VII. Structural Analysis: "Control to the Headquarters, Responsibility to the Franchisee"
A Comparison of Structural Isomorphism Among the Three East Asian Countries
The essential mechanism penetrating this historical trajectory—where the Soviet (Semashko) preventive total mobilization system passed through the national socialist requisition experiments of 1930s Manchukuo and settled in Korea, China, and Japan today—is the "Extractive Franchise" model.
From an institutionalist perspective, the medical systems of the three countries appear different—mixed private insurance (Japan), single mandatory national health insurance (Korea), and state-managed public hospitals (China)—but they achieve perfect structural isomorphism in the way the state evades responsibility and squeezes the lower structures.
| Classification | Japan (Negotiated Franchise) | Korea (Blockaded Franchise) | China (State-Run Variant Franchise) |
| :--------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- |
| **Core Mechanism** | Universal health insurance system, major political compromise after the 1961 Takemi strike. | Compulsory designation of medical institutions and extra-legal administrative orders (Orders to Commence Work). | Return to absolute control by internal Party Committees after neglecting self-responsible management (Zidaiyangyi). |
| **Transfer of Cost & Risk** | Detailed benefit criteria, reduction audits, and forced efficiency of individual clinics through low fees. | Forced public requisition of private capital without a single penny of budget support, continuous sub-cost compensation. | Marketization of public hospitals without budget, extracting costs from patients' pockets and physicians' ethics. |
| **Status of Physician** | Partner of the state, a policy negotiation group with powerful authority (Political Elite). | Agent receiving unilateral orders from the state, franchise owner with infinite liability (Instrumentalized Technician). | Degraded from an oppressed merchant filling national fiscal deficits to an execution unit of the Party. |
| **Exit Route within System** | Partial existence of political bargaining power and rights to withdraw, such as resignation rights (right to refuse insurance contracts). | Virtually no exit route legally or structurally (Threats of criminal punishment and license revocation upon resignation). | Complete subordination within a massive national hospital network; departure is absolutely impossible due to Party control. |
**The Core of the Franchise Model to Reduce Complexity of Dominance-Control: The Physician’s Command over Medical Technicians**
The most hidden and ingenious mechanism that allowed the East Asian medical control model to be maintained for decades without bankruptcy lies in the legal establishment of the "physician’s exclusive right to practice and vertical command/control over medical technicians." (1) This provision is not merely for the protection of the physician’s professional domain; rather, from the perspective of the state bureaucracy, it operates as a "principle of complexity reduction" to control the entire healthcare ecosystem.
Modern medicine is a collaborative effort involving numerous healthcare professions, including nurses, radiographers, clinical laboratory technologists, and physical therapists. (1) If the state attempted to directly manage and control this vast multi-professional ecosystem, it would have to bear immense administrative costs and political burdens, such as intense wage negotiations with labor unions. However, East Asian governments, such as those of Korea and Japan, granted the right to practice only to a single professional group—the "physician"—through medical law and strongly legislated a vertical hierarchy where all other medical technicians must perform their duties only under the "guidance and supervision (command)" of a physician. (1)
This is the essence of franchise governance. The state does not need to individually control the numerous nurses or radiographers within a hospital. It only needs to firmly seize the leash of one person, the "physician (franchise owner)" who represents the hospital—through the power to suspend licenses, health insurance claim rights, HIRA (Health Insurance Review and Assessment Service) cuts, and orders to commence work. (34) The state constricts hospital income to the extreme with low fees. Then, the hospital director (physician) standing at a crossroads of survival takes on the role of the villain, exercising the legal authority granted to them to suppress the labor costs of subordinate staff, such as nurses and medical technicians, and squeeze their labor intensity (high-volume, low-margin treatment and testing) to generate a surplus.
Ultimately, after dangling the attractive bait of "physician monopoly," the state completely washes its hands of internal hospital exploitation, labor-management conflict, and the painful process of cost reduction, hiding behind the scenes. The physician is reduced to a middle manager and an unscrupulous employer responsible for staff wages by maximizing hospital profits in a low-fee environment, while simultaneously being the most dignified professional ensuring the quality of care, thus suffering from extreme ethical and economic fragmentation. (1)
**Inevitable Result: Perfect Outsourcing of Doctor-Patient Hostility**
The most wicked and destructive point born of this deceptive governance and system is the fact that the financial and ethical responsibilities and failures the state should bear are perfectly substituted (outsourced) into "personal hostility and conflict between patient and doctor" within the closed confines of the examination room. (1)
The state puts up a facade of "publicness" and "free medical care or low insurance premiums" to take credit with the people. (37) However, the primal anger of patients regarding "three-minute consultations," endless waiting times from dawn, the collapse of unprofitable essential medical infrastructure (critical, emergency, and pediatric care), and the decline in the quality of medical services—all inevitably resulting from maintaining that thin budget—is not directed toward the elite bureaucrats of the Ministry of Health and Welfare or the National Health Insurance Service. The arrows of anger are subtly designed to target the physician exhausted in front of the hospital bed.
The routine violence against medical staff in Korean emergency rooms, the social witch-hunts labeling doctors as "uisae" (a derogatory term for doctors) who only care about money, and the horrific "yinao" (hospital disturbances and murders of medical staff) incidents occurring at the level of stabbings in mainland China can never be reduced to the immaturity of patients or the personal lack of character of physicians. (1) These are the tragic outcomes of a survival game played within the narrow, suffocating room of "low cost, high control" designed by the headquarters known as the state.
Far from protecting the medical staff bleeding on the front lines, East Asian states capitalize on the boiling anger of patients, using it once again as a political justification for "strengthening license regulations for immoral vested-interest medical professionals" and "expanding control," thus completing a self-contained cycle that endlessly justifies their own power. "The medical systems of Korea and China are like mirrors facing each other. One has turned private individuals who invested their own property into uniformed civil servants effectively performing forced labor, while the other has turned physicians—low-level state bureaucrats—into merchants emptying patients' pockets. However, both groups are perfectly isomorphic in that they are fighting a suffocating survival game within a closed room designed by the 'Headquarters of the State'." (1)
**Ⅷ. Conclusion: The Path Beyond the Ghost — Breaking the Cycle of Accumulated Intent**
**The End and Threshold of the Developmental Medical Paradigm**
Thus far, we have traced how the planned medicine designed by the Soviet People's Commissariat for Health in the 1920s passed through the experimental laboratory of the violent wartime system of Manchuria (5) and was sequentially inherited and evolved by various post-war East Asian countries. This century-long empire of "state control and responsibility transfer," designed by Nobusuke Kishi, fortified with a perfect blockade by Park Chung-hee, and varied through the combination of market and ideology by Deng Xiaoping and Xi Jinping (25), once faithfully served as the engine of high growth in East Asia. The state tasted extreme macro-efficiency, preserving the workforce and raising life expectancy to the level of developed nations with minimal tax and insurance fiscal input. (37)
However, this oppressive system, which can be termed an extractive franchise model, has now hit three fundamental contradictions and reached an irreversible tipping point.
1. **Counterattack of Demographic Structure and Fiscal Ruin:** The Semashko model and East Asia's health insurance systems were designed strictly on the premise of insurance premiums paid thinly and broadly by a "vast industrial workforce that is young and has few illnesses." (5) In a super-aging society where the elderly population suffering from complex and chronic diseases explodes exponentially, the "three-minute consultation" and low-fee franchise structure, which must push patients out like a factory conveyor belt to remain profitable, can no longer be physically maintained.
2. **Depletion of Professional Autonomy and Sense of Mission:** More than 70 years of legal gaslighting in a "room with no exit," intimidation using administrative orders, and a distorted structure that drives physicians to be intermediate exploiters have thoroughly turned the sense of mission of essential medical staff into ashes. The moment a physician is treated not as a free professional dealing with human life but as a consumable part or a potential criminal for the state (33), applicants for essential medicine who must brave risks plummet, and qualitative innovation in medicine halts.
3. **Resistance to the Digital Panopticon:** Patients and doctors in an information society armed with data and information no longer blindly comply with the state's unilateral price control, information monopoly, and forced mobilization orders based on patriotism and sacrifice, as they did during the era of developmental dictatorship. Physicians have begun to resist the contradictions of the system in the most passive yet fatal way: resignation and departure.
**Redefining "Publicness": Not a Justification for Control, but the Sharing of Responsibility**
We must now pose fundamental and philosophical questions to the mask of deception called "Medical Publicness," which was first applied by the innovative bureaucrats of Manchuria and is now wielded like a family treasure by modern East Asian governments as a shield to evade responsibility. Until now, publicness in the East Asian medical paradigm has meant the "violent right of the state to arbitrarily force and mobilize private resources and the labor of physicians without any just compensation."
True publicness does not come from the unilateral dictatorship or commands of the state. Publicness in the new era of healthcare must start from a "transparent and democratic social contract" in which the state bears a financial responsibility clearly proportional to the construction of healthcare infrastructure and the fiscal soundness of health insurance, provides medical providers (physicians and technicians) with clinical autonomy and just compensation for high-level intellectual labor, and guarantees citizens (patients) quality care and choice commensurate with the cost.
**Toward a New Social Contract, Where the Ghost Has Departed**
This study dissects the chronicle of health control born in the barbaric laboratory of Manchuria along a 100-year timeline. This massive franchise has now reached the end of its lifespan for outward growth and is collapsing with a roar.
The only way to fully lay to rest this old ghost that has oppressed East Asian medicine is to fundamentally scrap the principle itself—the most convenient and coercive choice made by totalitarian bureaucrats and post-war elites 100 years ago—that "control is monopolized by the state headquarters, while management risks and moral responsibilities are transferred to private franchises."
Korea must shed the militaristic framework of the compulsory designation system and orders to commence work, which are stained with forced mobilization and administrative orders, and move toward a "social agreement-based collective contract" model where physicians, patients, and the state transparently share costs and responsibilities on an equal footing. China must stop the pendulum that swings between the extremes of irresponsible, laissez-faire marketization and the oppressive ideological control of Party Committees, and normalize the distorted doctor-patient relationship through substantial fiscal input befitting its GDP.
All the pains of the medical crisis we are painfully witnessing today—the departure of residents, bankruptcy of hospitals, and the screams of patients—are by no means a mere strike by an interest group or an expression of professional egoism. They are the sounds of the "Empire of Accumulated Intent" reaching its limit and collapsing, and a great labor pain desperately demanding the birth of a new ecosystem suitable for the changes of the era. Only when we painfully confront this history of structural paths subtly permeated between policies and systems can we finally descend from the old chessboard of control played by state bureaucracy and open a new era of healing and solidarity where the dignity of human life and the expertise of medicine truly coexist.
**Part 1. Original Sin: How Was the First Button "Intentionally" Misfastened?**
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**Chapter 1. Designed Crisis, Transferred Responsibility**
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**1. Three Levels of Collapse: Experience, Actuality, and Reality**
In the spring of 2024, the medical system of the Republic of Korea reached a state of functional paralysis. Empty operating rooms, chemotherapy indefinitely postponed, and the tragedies of patients dying during transport while searching for an emergency room (59) were events that visibly revealed that the medical delivery system, maintained for half a century, no longer functioned. The government and the media labeled this as the "collective egoism of doctors," and public anger converged toward the white coats.
However, this chapter intends to demonstrate that such a diagnosis is fundamentally erroneous. The truth hidden by the immediate confusion is much larger and more structural. This is not an accidental mishap, but an inevitable man-made disaster (policy disaster) resulting from policy failures accumulated over decades.
The medical catastrophe of 2024 is a single phenomenon, but to understand its essence, the problem must be dissected at three different levels. According to the ontological stratification model presented by Roy Bhaskar's (60) Critical Realism, social phenomena are divided into three domains: the "empirical," the "actual," and the "real." This analytical framework provides a valid methodological basis for identifying the causal structures situated behind surface phenomena.
The **Level of Experience (Empirical)** is the form of collapse we feel firsthand. Endless waiting times, the departure of doctors from essential local medicine (61), and the "concentration" phenomenon where all patients flock to large hospitals in Seoul fall into this category. What is observed at this level is the painful empirical fact that the system no longer works.
The **Level of Actuality (Actual)** is the sequence of institutional events that created this experience. The state put forward the public goal of "national health," but transferred the responsibility to private medical institutions, which account for over 90%. Conversely, the state monopolized all control, such as the right to determine fees. This asymmetrical structure, where responsibility is attributed to the private sector and control to the state, is the very sequence of facts that created the collapse.
The **Level of Reality (Real)** resides even deeper, making all of this possible. Here, there are invisible generative mechanisms that define the behavior of the system. The combination of the three principles—price control, mandatory inclusion, and fiscal constraints—constitutes the structural truth that is unobservable but causally real, which has been generating the long-term distortion of the system.
2. The Birth of Original Sin: The Choice of 1977
At the beginning of every tragedy lies an inescapable original sin. The original sin of the Korean healthcare system was conceived in 1977, when the Park Chung-hee administration raised the ambitious banner of National Medical Insurance (62). While the blueprint of a welfare state from "the cradle to the grave" was attractive, the design contained fatal flaws from the very start. These were the two poisonous clauses that supported each other: the "low-fee system" and the "compulsory designation system" (63).
2.1. Innate Contradictions: Forced Conscription and Half-Price Wages
The compulsory designation system forcibly incorporated all hospitals and clinics on South Korean soil into the health insurance system without exception. Doctors did not possess the freedom to refuse contracts with a single buyer, the National Health Insurance Service (NHIS). This was an institutional constraint equivalent to de facto "forced conscription." Furthermore, the government set the "medical fees"—the price of medical services paid in return—at an absurdly low level. At the time, it was approximately 55% of the market price (64) previously collected autonomously by the medical community.
This institutional arrangement represents a classic case of a monopsony (65) structure in economics. According to this concept defined by Joan Robinson (1933), when a single buyer monopolizes the power to determine the price of labor or services, the marginal cost curve is positioned above the supply curve, resulting in prices and transaction volumes lower than the socially optimal level. The compulsory designation system for medical institutions established the NHIS as a de facto monopsonistic buyer, and all medical institutions were deprived of the freedom to refuse contracts with this single buyer. This was an institutional mechanism that fundamentally neutralized the function of price discovery in a competitive market.
Why did the government design such an irrational structure? The motivation is clear from a political-economic perspective: to gain public support through "low premiums" and to operate the system with "minimal fiscal expenditure." The state easily achieved the political outcome of "universal health coverage" at the expense of the medical provider group. Consequently, Korean medical institutions began to evolve in abnormal forms to survive.
2.2. Deformed Evolution for Survival: Three-Minute Consultations and Non-Benefit items
Hospitals had to survive within the impossible equation of medical fees that did not even cover costs. The adaptation strategies they adopted gradually sickened the entire system.
First was the strategy of quantitative expansion. This is identical to the logic of "small margins and high turnover." Since the profit per patient was extremely marginal, they had to treat as many patients as possible in the shortest amount of time. According to basic principles of microeconomics, when an artificial price ceiling is implemented below the equilibrium price, supply shortages and quality degradation are inevitable. The "three-minute consultation" was not a result of physician insincerity, but an inevitable product of the low-fee structure. The phenomenon of average outpatient consultation times remaining at the bottom of the OECD (66) should be understood not as a behavioral defect of individual doctors, but as a consequence of volume maximization behavior structurally induced by the fee system.
Second was the strategy of indirect profit generation. Since it was impossible to generate profit from "benefit" items controlled by the government, hospitals had to compensate for losses in the gray zone of "drug price margins"—the profit generated when selling medicine—and "non-benefit" (67) items outside of state control. This was the starting point of a distorted revenue model that deviated from the essence of medicine.
Notably, the government not only condoned but effectively encouraged this deformed evolution. This distorted system was the only way the government could maintain the healthcare system with minimal financial input. While taking credit for the pretext of "coverage," the state reached a tacit agreement to shift the actual cost burden onto the "non-benefit treatments" of medical institutions and the "private insurance subscriptions" of the public.
This phenomenon can be interpreted as a classic case of "unanticipated consequences of purposive social action," conceptualized by sociologist Robert K. Merton (68). When well-intentioned policy goals—universal health coverage—are realized through a design with embedded structural flaws, the results converge in the opposite direction of the original intent. The state artificially injected an unbearable "policy-induced risk" into the entire system.
3. Mismatch of Accountability and Authority: The Core of Structural Flaws
The most fundamental flaw of the system designed in 1977 lies in the "accountability-responsibility gap," as termed in public administration. This mismatch was like a time bomb embedding structural risk within the entire system.
3.1. Responsibility to the Private Sector, Authority to the State
Delegation of Infinite Responsibility: The state shifted the infinite responsibility for "national health" onto private medical institutions, which account for over 90% of the sector. Even if medical accidents occurred or hospitals went bankrupt, the final responsibility had to be borne by the private sector. Even when gaps appeared in the medical delivery system, the accountability was reduced to the "management failure" of individual institutions or the "selfishness of doctors."
Monopoly of Authority: Conversely, the state monopolized all authority to determine fees, design the system, and issue mandatory orders such as "work start orders." Key decision-making power regarding the price, supply volume, and distribution methods of medical services belonged entirely to the state.
From the perspective of governance theory, this structure is inherently unsustainable. In organizational theory, the symmetrical distribution of authority and responsibility is a basic prerequisite for sound governance. The asymmetrical relationship between the state, which holds authority without responsibility, and medical providers, who are burdened with responsibility without authority, has been the structural engine of all exploitation and distortion for half a century.
3.2. Risks Created by Policy
This structure produced the same effect as the state artificially injecting an unbearable "policy-induced risk" into the entire system.
Inducement of Upcoding and High Volume: The unrealistic price tags of the low-fee system structurally forced hospitals to engage in fraudulent billing (upcoding) or high-volume practices (three-minute consultations) that threatened patient safety in order to survive. This was not the moral hazard of individual hospitals, but a rational survival strategy created by the system. From the perspective of neoclassical economics, actors respond rationally to the institutional incentive structure. When the incentive structure is designed so that abnormal behavior becomes the optimal strategy, the responsibility lies with the institutional designer, not the individual actor.
Inevitability of System Failure: A system that can only be maintained if all providers engage in abnormal behavior was destined to fail eventually. From the perspective of complexity theory, when all components of a system are placed under extreme adaptive pressure, a fragility is internalized where a minor external shock can push the entire system past a tipping point toward a non-linear collapse. The state recognized this obvious risk yet neglected it.
4. The Engine of Collapse: Interaction of Three Generative Mechanisms
The invisible engine that led Korean healthcare toward collapse was completed by three powerful mechanisms working in tandem. According to the analytical strategy of critical realism, a generative mechanism must exist behind observable phenomena. This section sequentially analyzes the three core mechanisms that drove the collapse of the Korean healthcare system.
4.1. Price Control Mechanism: Side Effects of Low Fees and Price Ceilings
Low fees are not a simple price issue. The situation where the actual cost of medical acts structurally exceeds the fees set by the state reproduced the side effects of a "price ceiling" as described in microeconomics. According to standard economic textbook explanations of price ceilings, if prices are artificially controlled below the equilibrium price, shortages and quality deterioration inevitably occur. To secure profit under controlled prices, providers face incentives to lower service quality or compensate for losses in uncontrolled markets.
In the Korean case, this mechanism operated exactly as predicted. To compensate for chronic deficits in the "benefit" sector, hospitals adopted a dual strategy of quantitative maximization through high volume (three-minute consultations) and indirect profit generation through non-benefit items. Although this was a deformed revenue model deviating from the essence of medicine, it was virtually the only survival strategy a rational economic actor could choose under the constraint of low fees.
4.2. Compulsory Incorporation Mechanism: Monopsony Power and Deprivation of Choice
The compulsory designation system for medical institutions deprived all institutions of their right to choose and established the state (NHIS) as a de facto monopsonist purchasing labor.
In labor economics, a monopsony refers to a market structure where there is only one or very few buyers of labor or services in a particular market, allowing the buyer to exercise monopolistic price-setting power. According to this concept defined by Joan Robinson in her 1933 work *The Economics of Imperfect Competition*, a buyer with monopsony power faces a situation where the marginal revenue product curve lies below the supply curve, realizing lower prices and transaction volumes than the social optimum. This results in deadweight loss and is accompanied by a distributional distortion where producer surplus is transferred to the buyer.
In Korea's case, the compulsory designation system legally forced all medical institutions into a situation where they could not refuse contracts with the single buyer, the NHIS. This meant that doctors lost all bargaining power regarding the value of their labor. In a normal market economy, the "exit option"—the ability of a seller to refuse a contract with disadvantageous terms—is the minimum safety device for price negotiation. The compulsory designation system institutionally removed this safety device. This was a structural flaw that bound the system to supply shortages and quality degradation.
4.3. Fiscal Transfer Mechanism: State Evasion of Responsibility and Intergenerational Burden Transfer
For political gains of low premiums and taxes, the state systematically evaded the fiscal responsibility necessary to maintain the system. From the perspective of public economics, the sustainability of a healthcare system presupposes sufficient fiscal input. However, the Korean government consistently pursued a strategy of maintaining public health expenditure as a percentage of GDP at a level significantly below the OECD average while transferring the shortfall to the private sector.
This shortfall was transferred entirely to the management difficulties of private hospitals and the debt to be borne by future generations. In public finance, this is called an "intergenerational externality." It is a structure where the potential costs of the low-cost medical care enjoyed by the current generation are transferred to future generations in the form of system collapse and reconstruction costs. This is a classic example of myopic decision-making that compromises long-term system sustainability for short-term political interests.
5. Designed Contradictory Equilibrium
Then, why could such an inefficient and contradictory system be maintained for half a century? The most plausible explanation can be derived through "retroduction," an inference strategy of critical realism.
The core hypothesis presented in this book is as follows: This system was a "Contradictory Equilibrium" intentionally designed to achieve incompatible political goals: "increasing coverage while lowering fiscal burden." The state obtained the political achievement of high medical accessibility at a low cost, and the price is appearing in a delayed form as the long-term distortion and collapse of the system.
This contradictory equilibrium could be maintained for half a century because buffer mechanisms such as the non-benefit market and private insurance temporarily absorbed the structural tension of the system. However, these buffers did not solve the problem but merely concealed it, and in the process, the distortion of the system further deepened.
5.1. Exclusion of Competing Hypotheses
This analysis shows why commonly raised competing hypotheses—such as "due to an aging population" or "due to the greed of doctors"—are insufficient.
Aging Population Hypothesis: Demographic changes are variables that put pressure on the system, but they are not the direct cause of the collapse. Demographic shifts are macro-conditions applicable to all OECD countries, yet system outcomes differ according to institutional design even under identical demographic pressures. Comparative institutional analysis confirms that an aging population is merely a precipitating factor, not a sufficient condition for the increase in medical costs.
Provider Greed Hypothesis: The provider moral hazard argument also overlooks that the structural environment of low fees acted as a necessary condition inducing unethical behavior for survival. Actors' behavior is a product of the institutional incentive structure, and it is a basic premise of behavioral and institutional economics that even the same actors change their patterns of behavior when the incentive structure is modified.
6. A Feature, Not a Bug: A System Reaching Its Tipping Point
The catastrophe of 2024 is not a "bug" of the system, but rather a "feature" of a system designed to work that way finally reaching its tipping point. A complex feedback loop leading from low fees to the non-benefit balloon effect, the brain drain of essential medical personnel, and the increased public burden has driven the system to evolve in a direction of self-destruction.
The causal chain of this feedback loop can be diagrammed as follows:
Low fees → Chronic deficit in the benefit sector → Expansion of the non-benefit market → Strengthened incentive for personnel to move to the non-benefit sector → Outflow of essential medical personnel → Hollowization of regional medical infrastructure → Intensified concentration in tertiary hospitals → Collapse of the medical delivery system → Increased public anxiety and rising public burden.
Each stage of this chain is an inevitable consequence of the preceding stage, and the entire path was structurally determined by the initial conditions: the low-fee system and compulsory designation. From the perspective of complex adaptive system theory, a system operating with such positive feedback loops deviates progressively from equilibrium along a self-reinforcing path and transitions into non-linear collapse once a certain tipping point is crossed.
6.1. Counterfactual Simulation: Was There No Other Way?
In the methodology of critical realism, counterfactual analysis is a key tool for verifying the validity of causal relationships. What would have happened if, in 1977, the government had normalized medical fees instead of implementing low fees and secured the necessary resources by expanding public financing (taxes and insurance premiums)?
In this case, hospitals would not have needed to rely on non-reimbursement services for survival (weakening the non-reimbursement balloon effect). The extreme income gap between essential and non-essential medical care would not have occurred (reducing the outflow of essential medical personnel). According to an analysis by the National Assembly Budget Office, it is estimated that if fee normalization and public financial expansion had been carried out in parallel, the outflow of essential medical personnel would have decreased by at least one-third in the long run. Through counterfactual reasoning, this simulation confirms that the current crisis is not caused by a single factor such as a "shortage of doctors," but is an inevitable result of structural problems: a "flawed compensation system" and the "state's evasion of responsibility."
7. Beneficiaries of Designed Chaos
Within this designed chaos, clear beneficiaries existed. In political economy, when explaining the persistence of institutional failure, the existence of a group of actors who benefit from that failure is a key analytical variable.
Large Hospitals and Private Universities: These institutions became the greatest beneficiaries of the system’s distortion by utilizing the low-wage labor of residents (69) and new nurses (70) while expanding the non-reimbursement market. As small and medium-sized hospitals collapsed under the low-fee system, patients concentrated in large hospitals, forming a self-reinforcing cycle that further strengthened the market dominance of large hospitals.
Private Insurers: Through products like indemnity health insurance, they reaped enormous profits by penetrating the coverage gaps left neglected by the state. Since the market for private insurance expands as the coverage of public insurance remains low, private insurers have a structural incentive to resist the expansion of public insurance coverage.
Bureaucratic Groups: They maximized organizational power through the authority to adjust insurance premiums and medical fees while successfully shifting the responsibility for system failure onto the private sector. In a variation of "budget-maximizing behavior" (Niskanen, 1971) in bureaucratic theory, Korea's health policy bureaucrats demonstrated a unique form of organizational interest-seeking—minimizing fiscal input while maximizing regulatory authority.
Responsibility for system failure was always disguised as individual failure. Doctors who engaged in high-volume, low-margin practice to endure low fees were labeled "greedy doctors," and patients who received non-reimbursed treatment through indemnity insurance were branded as unscrupulous individuals suffering from "moral hazard." This phenomenon of "individualization of blame" functioned to disperse political pressure for systemic reform by converting structural failures into the moral defects of actors.
8. Redefinition of the Problem and Tasks of Part I
8.1. Redefinition of the Problem
Synthesizing the above analysis, the diagnosis of the 2024 crisis must be fundamentally redefined. This is not caused by "collective action by doctors." It is an event where "government policy failures," accumulated over decades, finally pulled the system's trigger.
The true analytical question should not be "Why did doctors go on strike?" but "Why did this vast system become fragile enough to collapse instantly due to a single minor trigger?" While the former question remains at a superficial attribution centered on actors, the latter moves toward a causal analysis that identifies the structural vulnerabilities of the system.
The medical catastrophe of 2024 is not the result of a simple variable like "doctor shortage" or a moral failure like "doctor greed." It is a "designed crisis" meticulously planned and maintained by the state for the past half-century, and the historical consequence of "transferred responsibility" that has craftily shifted the blame for those failures onto the private sector.
8.2. Key Arguments and Evidence Structure of Part I
Part I, "The Original Sin," traces the origins of this designed crisis and proves the following key arguments.
Argument 1. The "Designed Crisis" is a structural product of the combination of low fees, compulsory designation, and fiscal constraints. The combination of these three institutional elements injected unsustainable policy-induced risks into the entire system, acting as the root cause of systemic distortion for half a century.
Argument 2. The initial collapse of trust (the 1971 medical ethics crisis) reinforced the path dependency (71) of "command-and-obedience." By blocking the possibility of governance between the state and the medical community at an early stage, the subsequent institutional path became locked into a coercive control model.
Argument 3. The judiciary's rulings on "public welfare" were institutional accomplices that amplified the lock-in effect of this structural contradiction. The Constitutional Court's rulings of constitutionality underestimated economic second-order effects, resulting in the legal sealing of the system's structural contradictions.
Argument 4. The low-fee equilibrium acted as a core necessary condition for the outflow of essential medical personnel. By widening the income gap between the reimbursed and non-reimbursed sectors, low fees in the reimbursed sector structurally incentivized the systematic movement of personnel from essential to non-essential medicine.
Argument 5. The "incoherence" of the Korean hybrid model is an obvious exceptional phenomenon in international comparison. While the healthcare systems of major OECD countries follow the consistent logic of the Beveridge model, the Bismarck model, or the market model, Korea alone adopted a deformed combination of "state control, private responsibility."
| Country | System Model | Private Provider Share | Mandatory Public Insurance Enrollment | Level of Fee and Treatment Control |
| ----------- | ------------------ | --------------------------- | --------------------------------------------------------- | ------------------------------------------------------------ |
| South Korea | NHI (Single Payer) | Over 90% | Absolute Compulsion (Compulsory Designation, No Opt-out) | Extreme (HIRA cuts, punishment and recovery for arbitrary non-reimbursement) |
| Japan | SHI (Multi-payer) | High | Designation System (Theoretically possible to opt-out) | Medium-High (Mixed treatment prohibited in principle, but exceptions exist) |
| Germany | SHI (Multi-payer) | Medium | Optional (Private treatment doctors exist) | Medium (Autonomous collective contracts between sickness funds and doctor associations) |
| UK | NHS (Tax-based) | Low (Hospitals state-owned) | Contract System (GPs contract with NHS, opt-out possible) | High (NICE guidelines, but individual clawbacks from doctors are rare) |
8.3. Transition to Part II
In conclusion, the design of 1977 was not a simple mistake. It was a highly calculated political-economic choice to minimize the state's fiscal burden while maximizing control, shifting all resulting risks and responsibilities onto the private sector.
Through this analysis, Part I clearly reveals that the 2024 crisis was never an unavoidable tragedy, but the final destination of a path our society consciously and unconsciously chose, even though other choices were possible. Now, it is time to trace the specific process of how this flawed blueprint triggered a chain reaction that collapsed the entire system in Part II, "The Three Dominoes."
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[Sidebar] 3 Things Readers Gain: ① Cause (Rules) ② Path (Dominoes) ③ Result (Blank Invoice)
This book dissects the Korean medical collapse through three lenses.
① Cause — Rules. The root of the crisis lies not in individual morality, but in the institutional rules that move people in specific directions. Compulsory designation, low fees, and fee-for-service—it reveals why and how these rules drove doctors, hospitals, and patients alike into a catastrophic equilibrium. (Part I)
② Path — Dominoes. A single wrong rule does not operate in isolation. The separation of prescribing and dispensing (72) eliminated drug price margins, health check-ups distorted clinics, and private indemnity insurance caused the non-reimbursement market to explode. It traces how well-intentioned policies fell in sequence, accelerating the crisis. (Part II–Part V)
③ Result — Blank Invoice. After all the dominoes fall, the invoice arrives at the weakest link. The murderous labor of residents, a 57% turnover rate among nurses, the disappearance of provincial hospitals, and the fiscal burden on future generations. It asks who received this invoice and what choices remain for us. (Part VI–Part VII)
By passing through these three lenses in order, instead of easy answers like "doctor's fault" or "aging population," the uncomfortable truth of the inevitability created by the structure begins to emerge.
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Chapter 2. The 1971 "Medical Ethics Crisis": The Closed Path of Governance
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1. Reconstruction of the Problem
While the landscape of today's South Korean medical crisis is filled with the "doctor surplus" controversy, the landscape half a century ago, when the roots of that distrust began to take hold, was the exact opposite. The crisis back then stemmed not from having too many doctors, but from a serious "brain drain" (73) where the best talents were turning their backs on their homeland. The government’s first choice to solve this problem was "control," which left a wound between the state and the medical community that would never heal.
The "medical ethics crisis" (insul padong) of 1971 is recorded as the first collective action in Korean medical history. To understand the essence of this event, one must delve into the structures and mechanisms hidden behind the surface conflict, just as in Chapter 1.
At the first dimension, what we witnessed was a collective friction: the mass resignation (74) of interns and residents protesting poor treatment and the infringement of professional autonomy. This was observed as a power struggle between the state and a nascent professional group.
At the second dimension, the state's response was not dialogue and compromise, but control-oriented coercion. Despite a temporary conciliatory gesture from Prime Minister Kim Jong-pil, the government’s basic stance ultimately did not change. This choice became a decisive moment that structurally collapsed the trust between the state and the medical community.
At the third dimension, beneath all this lurked the invisible danger that the state's infringement on professional autonomy would, in the long run, erode the foundation of governance for society as a whole. The choice made in 1971 was the moment that inscribed the DNA of distrust and confrontation into the system for the next half-century.
This chapter argues that the 1971 crisis is not a mere event of the past, but an "archetypal wound" essential to understanding the 2024 collapse. The task of this chapter is to trace the engine and path of that collapse—how this wound failed to heal and instead festered.
2. Brain Drain and the Choice of the State
The conflict of 1971 did not occur in a vacuum. It was the state's clumsy response to the serious crisis of "brain drain" (73) amidst the vast historical background of post-war national reconstruction and rapid industrialization.
2.1. The Exodus of the Elite: Doctors Leaving Korea
In the 1960s and 70s, Korea was a country that doctors were leaving. When analyzing international labor migration, the act of migration is determined by the interaction between push factors of the country of origin and pull factors of the destination country. (75)
The push factors on the Korean side at the time were overwhelming. Between 40% and 60% of Seoul National University College of Medicine graduates headed for the United States (76). In 1965, almost all interns at the National Medical Center found jobs in the U.S., forcing the center to recruit new personnel. (77) At that time, Korea was absolutely impoverished and could not provide doctors with fair compensation or a stable future. Training environments were poor, and compensation was extremely minimal compared to long working hours. These conditions acted as powerful structural factors pushing Korean doctors out of the country.
2.2. The Land of Opportunity, the United States
At the same time, the United States possessed powerful pull factors that sucked in overseas doctors like a black hole. This was the result of three historical events interlocking.
First, the creation of explosive medical demand. In 1965, with the introduction of Medicare and Medicaid (78), public insurance for the elderly and low-income groups, tens of millions of new patients entered the medical market. This sharply increased the demand for medical services.
Second, the deepening supply shortage within the U.S. The American Medical Association (79) strictly controlled medical school quotas to maintain high incomes for doctors, which led to an artificial shortage of doctors. This is a classic example of seeking monopoly profits by setting entry barriers for professional groups.
Third, revolutionary changes in immigration law. Decisively, the Immigration and Nationality Act of 1965 (80) abolished the previous discriminatory national quotas and opened the door wide to skilled professional personnel such as doctors.
In the late 1960s, a structure was formed in the U.S. where there were plenty of patients but too few domestic doctors, and legally, overseas professionals were welcomed. The combination of these pull factors and the strong push factors from the Korean side resulted in the large-scale overseas migration of Korean doctors.
2.3. The State's Response: Coercion Instead of Development
Facing these powerful factors, the state could have chosen one of two options. One was a "developmental" solution that improved the treatment of doctors and provided incentives for them to remain in the country. The other was a "controlling" solution that forcibly blocked their movement.
The state chose the latter. Through a revision of the Medical Service Act, the government introduced a desperate measure: imposing one year of mandatory service in doctorless villages on interns and residents, and allowing overseas travel only after they completed it. (81)
This shows that the government at the time relied on coercive means, such as restricting overseas travel, rather than a developmental approach to attract talent through improved treatment. A developmental state performs effective policies through a state that is closely connected to social actors yet maintains autonomous policy capabilities. However, the Korean government's medical policy in the 1970s was based on unilateral orders and coercion, not such a cooperative relationship.
This choice is clear evidence that the state defined the medical community not as an equal partner, but as a subordinate group to be mobilized and controlled to achieve national goals.
3. Explosion of Conflict: Violation of the State-Professional Social Contract
3.1. Unilateral Violation of the Social Contract
This case is a quintessential example of how the 'state-profession social contract' was breached. A profession is the product of an implicit social contract in which the state grants the privilege of self-regulation in exchange for a commitment to devotedly apply specialized knowledge for the public good. Under this contract, the state guarantees autonomy and social status to the medical profession, while the profession provides dedicated medical services to the citizens.
In the 1970s, however, when faced with the problem of a large-scale overseas brain drain of doctors, the government unilaterally breached this contract. Instead of fulfilling its contractual obligation to improve treatment and conditions, it mobilized coercive measures to restrict the freedom of movement.
3.2. "Even if a housemaid leaves the house..."
The government's high-handed measures ignited the anger of residents and interns who were already suffering from poor treatment and long working hours. In June 1971, the resistance began as trainees at the National Medical Center submitted collective resignations.
Yet, it was the government itself that poured fuel on these sparks. The remark made by then-Minister of Health and Social Affairs Lee Kyung-ho—"Even if a housemaid leaves the house, she does so at the right time; how can a doctor act like this?" (82)—trampled the pride of the entire medical community. This statement was not a mere slip of the tongue; it was a direct negation by the state of 'dignity' and 'autonomy,' the core attributes of a profession. It revealed a deep-seated perception within the government that viewed doctors not as equal experts, but as a lower class that should work silently while remaining grateful for the state's benevolence. This remark became the catalyst that spread the strike to university hospitals nationwide.
The government's coercive measures and the Minister’s insulting remarks destroyed the trust between the state and the medical community in a single stroke. While it takes decades to accumulate trust, a single betrayal is enough to destroy it. This applies precisely to the events of 1971.
4. The Moral Shackle of 'In-sul' (The Benevolent Art of Healing)
As the trainees' resistance against coercive state control and insulting remarks spread nationwide, the government and the media pulled out a powerful ideological weapon to suppress the conflict. This was the unique discourse of 'In-sul,' a combination of Confucian tradition and Western medical ethics.
4.1. Framing Moral Obligation
'In-sul' is not merely the art of medicine. It is a powerful framing of moral obligation that demands infinite sacrifice and devotion from doctors. Framing refers to the strategic act of assigning specific meanings to social events to organizedly shape public perception and response. (83) The 'In-sul' discourse of 1971 embodied all three functions: diagnosis, prognosis, and motivation.
Within this discourse, a doctor is portrayed not as a simple professional, but as a clergy-like figure who must sacrifice themselves for the patient. Consequently, when a doctor demands fair compensation for labor or improvement in treatment, they are easily stigmatized as an immoral and selfish actor who abandons the noble calling of 'In-sul' to look after their own 'rice bowl.'
It is by no means a coincidence that the media at the time labeled this strike the 'In-sul Crisis' (Insul Padong). This was an intentional framing aimed at defining the trainees' legitimate struggle for labor rights as a 'riot by immoral doctors who have forgotten the spirit of the benevolent art.'
4.2. Concealing the Issues of Compensation and Autonomy
The most powerful function of this 'In-sul' discourse was to conceal the true causes of the conflict: the issues of compensation and autonomy. The trainees were resisting specific problems: low wages, long working hours, and unilateral state control (restrictions on overseas travel). However, the 'In-sul' discourse replaced all of these with the fake problem of 'the doctors' lack of ethical consciousness.'
This is called 'agenda shifting.' It is a strategy to block policy discussions at their source by replacing core institutional issues—the adequacy of compensation, the rationality of working conditions, and the guarantee of professional autonomy—with an agenda of moral condemnation.
This frame shift was highly effective. Instead of complex institutional issues, the public became enraged by a simple and emotional narrative: 'the cold-hearted doctor who abandoned the patient.' Thus, the government succeeded in diverting all arrows of blame toward the medical community while hiding its own policy failures and responsibilities.
4.3. A Duet of Coercion and Morality: The Establishment of Governance Technology
In conclusion, the state in 1971 swung two whips simultaneously. One was the whip of physical coercion, such as restrictions on overseas travel, and the other was the whip of moral pressure known as 'In-sul.' This corresponds to a complex governance strategy where the state regulates the behavior of a specific group by combining direct coercive power with discursive power.
This duet of coercion and morality established itself as the most effective governance technology for the state to control the medical community over the following half-century. Whenever necessary, the state drew the sword of 'In-sul' to ethically disarm and socially isolate the medical community's resistance. This is structurally the same pattern as the phenomenon in the 2024 situation where the government repeatedly mobilized the framing of 'the collective egoism of doctors,' and it can be interpreted as the result of discursive path dependency spanning half a century.
5. Path Choice at the Critical Juncture
5.1. The Critical Juncture: Two Diverging Paths
As the situation grew out of control, the government finally stepped back. In September 1971, Prime Minister Kim Jong-pil personally visited Seoul National University College of Medicine and entered into dialogue, promising, "I will do my best to solve the fundamental problems, not just provide a stopgap measure."
This moment was the 'critical juncture' that determined the path of Korean healthcare governance. A critical juncture refers to a fluid phase before institutional paths have become locked in, a historical point where the subsequent path of institutional development can change fundamentally depending on the choices of actors.
At this juncture, the state could have chosen one of two paths.
Path A: The 'Negotiation-Contract' path. A path where the medical community is recognized as an equal partner, and a social contract is formed to codify compensation, responsibility, and autonomy. This path would likely have formed an institutionalized negotiation system between the state and the profession, similar to the structures observed in the Bismarckian model of Germany or the healthcare governance of Canada.
Path B: The 'Command-Obedience' path. A path where the medical community is regarded as a target for mobilization to achieve state goals, combining temporary appeasement with long-term control.
The competing hypothesis that the low economic level of the time made coercive mobilization inevitable carries some validity. However, this is not the essence of the problem. The core issue is that the state lacked the will or capacity to design collaborative governance from the beginning.
5.2. Path Choice and Lock-in
Ultimately, the state chose the second path: 'Command-Obedience.'
Short-term appeasement: Prime Minister Kim Jong-pil's promise was a conciliatory measure to stop the immediate strike.
Long-term control: However, this promise was not kept in the following year's budget, and the 1972 Yushin Constitution (84) suppressed the freedom of collective action itself. Then, in 1977, the state placed the entire medical community under its control by introducing the 'Compulsory Designation System.'
This choice became locked in as a path dependency defining all conflicts in the Korean healthcare system for the next half-century. Path dependency refers to a self-reinforcing process where a choice at the initial conditions traps subsequent institutional development within a specific path. Once the 'Command-Obedience' path is selected, the institutional infrastructure supporting this path (laws, bureaucratic organizations, discursive systems) is formed, and the cost of deviating from the path increases exponentially over time.
When combined with trust, this process is reconstructed into the following timeline:
Destruction of Trust (1971): The government's coercive measures and the Minister's insulting remarks destroyed the trust between the state and medical community in an instant.
Attempt to Restore Trust (Sept. 1971): Prime Minister Kim Jong-pil’s personal visit and promise to "solve fundamental problems" were short-term attempts to restore the destroyed trust.
Complete Collapse of Trust (1972–): However, as these promises were not reflected in the following year's budget and collective action was suppressed under the Yushin regime, trust collapsed to an irreparable level.
6. Asymmetry of Policy Learning: The Vicious Cycle of Distrust
6.1. Reciprocal but Opposing Learning
This process left irreversible policy learning on both sides. Policy learning refers to the process by which past policy experiences systematically shape subsequent policy preferences and strategic behaviors. The experience of 1971 internalized diametrically opposed lessons for the state and the medical community.
Learning of the Medical Community: "Government promises cannot be trusted, and dialogue is ultimately just time-buying for greater control." This learning became the origin of the behavioral pattern where the medical community reacts with instinctive distrust toward any policy proposal from the government.
Learning of the Government: "Short-term conflicts can be patched up through coercion and appeasement." This erroneous lesson became the origin of the institutional inertia where the government repeatedly adopts the same strategy—the parallel use of coercive control and temporary conciliation—in medical policy.
6.2. The Self-Reinforcing Cycle of Distrust
This asymmetrical policy learning formed a self-reinforcing cycle of distrust. From the perspective of game theory, this is identical to a structure where betrayal in the initial round of a repeated game leads both sides to choose non-cooperative strategies in subsequent rounds. Just as a single betrayal in the 'Prisoner's Dilemma' (85) structurally weakens the possibility of future cooperation, the experience of 1971 permanently shifted the equilibrium point of the cooperation game between the state and the medical community toward mutual non-cooperation.
A vicious cycle was structured: the more coercively the government acts, the deeper the medical community's distrust becomes; and the more the medical community resists based on that distrust, the more the government relies on coercive means. This cycle has been repeatedly reenacted through the 2000 drug prescribing/dispensing separation crisis, the 2014 telemedicine conflict, and the 2024 catastrophe.
7. Counterfactual Analysis: Was There No Other Way?
What if the state had chosen the 'Negotiation-Contract' path in 1971?
Formation of an Initial Social Contract: If the state had recognized the medical community as an equal partner and established an initial social contract codifying compensation, responsibility, and autonomy, it would have served as an unshakable institutional foundation for all subsequent policy discussions. As shown by Germany’s Federal Joint Committee (G-BA) or France’s medical convention system, an initial social contract between the state and medical professionals functions as a conflict management mechanism for decades.
Institutionalization of Conflict: Conflicts such as fee negotiations or workforce policies would not have disappeared, but they would have been managed in a predictable manner within an institutionalized negotiation table rather than through extreme forms like strikes.
Accumulation of Trust Capital: Through this process, social capital in the form of trust, rather than distrust, would have accumulated between the public and the medical community.
Of course, this may be an idealistic imagination. Given the authoritarian political environment, economic constraints, and limits of state capacity at the time, realizing a full collaborative governance model might have been realistically difficult. However, this counterfactual thinking clearly shows that the choice made in 1971 was not merely a single event, but a tragic decision that blocked off numerous possibilities for a better future.
8. Conclusion: Archetypal Wounds and Institutional Legacy
8.1. The Closed Path of Collaborative Governance
The conclusion of this chapter is clear. The 'In-sul Crisis' of 1971 was not a simple happening. It was an 'archetypal wound' that determined the fate of the Korean healthcare system and a 'critical juncture' that imprinted the DNA of all subsequent conflicts into the system for half a century.
In 1971, faced with the crisis of 'brain drain' (73), the state could have chosen the 'Negotiation-Contract' path—recognizing the medical community as an equal partner and entering into a social contract based on trust. However, the state relied on authoritarian governance and chose the 'Command-Obedience' path, viewing the medical community as a target for mobilization to achieve state goals.
This choice was justified through the moral framing of 'In-sul' and appeared to succeed in patching up short-term conflicts. However, the price was severe. Trust between the state and the medical community went bankrupt, and both sides learned to view each other as objects of distrust and forced submission. The initial coercive framing closed all paths that could have led toward collaborative governance.
8.2. Evidence Structure and Substantiation Strategy
To prove this analysis, this book will utilize the following evidence:
Legal and Administrative Documents (Evidence Strength: High): Direct analysis of medical law amendments aimed at restricting overseas travel, government promises announced after the strikes, and the subsequent year's budget proposals clearly reveals the intent of the state and its betrayal.
Media and Academic Records (Evidence Strength: Medium): Analysis of contemporary newspaper articles and the Journal of the Korean Medical Association reconstructs how the 'In-sul' discourse was formed and spread, and what the internal voices of the medical community were.
Workforce Statistics (Evidence Strength: Medium): Quantitative analysis of dentist/doctor outflow and inflow statistics from the 1960s to the 70s demonstrates how serious the 'brain drain' (73) crisis was and what actual effects the government's policies produced.
8.3. Future Predictions and Transition to Chapter 3
Unless this path of 'Command-Obedience' is liquidated, catastrophes like those in 2024 will continue to repeat in different forms. When a crisis strikes, the government will still succumb to the easy temptation of coercion and control rather than dialogue and compromise. The medical community will distrust any proposal from the government, believing there is no option other than extreme resistance. Society will feel fatigue from the endless fighting between these two groups and fall into cynicism, blaming both sides rather than seeing the essence of the problem.
In the end, the turmoil of 1971 was not a mere event of the past, but the beginning of an 'original sin' that conceived the current collapse. Unless this old wound is healed and the wrongly set path is corrected, there is no future for Korean healthcare. Now, it is time to trace the process in Chapter 3 of how the institutional shackles known as the 'Compulsory Designation System' were overlaid in 1977 upon the seeds of distrust sown in 1971.
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Chapter 3. The Foundation of Coercion, the ‘Compulsory Designation System for Medical Institutions’
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1. A System Built on Distrust
If the 1971 ‘Medical Ethics Turmoil’ was a river of distrust flowing between the state and the medical community, the ‘Compulsory Designation System for Medical Institutions (63)’ introduced in 1977 was like a massive dam built over that river, which no one could resist. This single system became the legal basis for structural exploitation—the 'foundation of coercion'—that has bound every actor in the Korean healthcare system and conceived every contradiction for the following half-century.
Let us once again apply the stratified model of critical realism. At the level of the empirical, what we encounter daily is the normalization of a comprehensive compulsory contract state where all clinics and hospitals, without exception, accept health insurance cards. From the patient’s perspective, this is convenience itself and a source of pride for Korean healthcare. From the provider’s perspective, however, this ‘convenience’ signifies a reality devoid of choice—a structure where the exit is sealed.
What is observed at the level of the actual is somewhat more complex. This system clearly succeeded in securing universal accessibility for subscribers. Korea achieved universal health insurance in 1989 (62), and the fact that one can receive medical treatment anywhere with a single insurance card is an achievement felt by the majority of the public. However, in exchange, the providers' right to free contractual choice and their price bargaining power were completely diminished. This was a zero-sum game.
What reveals itself at the level of the real is even more fundamental. Behind the compulsory designation system lies an invisible truth: a quasi-monopsony (65) structure has been formed, where the state (National Health Insurance Service) reigns as the virtually sole purchaser in the market. This monopolistic power is the most fundamental generative mechanism that distorts market price signals and quality competition. This chapter dissects the formation process of this mechanism and its destructive consequences.
2. The Moment Instrumental Rationality Overwhelmed Procedural Legitimacy
2.1. The Yushin Regime and the Politics of 'Universal Health Coverage'
The mid-1970s was the heart of the Yushin regime. The Park Chung-hee government needed a card to appease social discontent born from rapid industrialization and to secure political legitimacy. The 'expansion of the social security system' was a strong candidate, and among its components, 'universal health coverage' was an attractive policy goal promising visible political results.
The problem, however, was 'how.' At that time, over 90% of Korea's medical supply structure was private. In a situation where public healthcare infrastructure was overwhelmingly lacking, two paths lay before the government.
One was the path of the 'contractual designation system.' This involves inducing the voluntary participation of medical institutions while determining the conditions of participation and compensation levels through negotiation. This is a market-friendly approach that respects the autonomy of providers, corresponding to the path adopted by most OECD (66) countries. The agreements between Germany’s Sickness Funds (Krankenkassen) and physician groups, France’s medical conventions (conventions médicales), and Japan’s application system for insurance doctor designation all belong to this lineage.
The other was the path of the 'compulsory designation system.' This is a method that automatically and forcibly incorporates all medical institutions into the health insurance system by law. The consent of the provider is not required. The moment one acquires a license to practice, the obligation to provide insurance-covered treatment is automatically imposed.
2.2. Low Reimbursement Rates Give Birth to Coercion
To understand why the government chose the second path without hesitation, one must first examine another political decision: the policy of low reimbursement rates (low fees).
To minimize public resistance, the government had to maintain 'low insurance premiums,' and for that, 'low reimbursement rates' were a necessary prerequisite. It was inherently impossible to expect voluntary participation from private medical institutions after setting medical compensation at levels below cost. No rational private medical institution would voluntarily enter into a contract with the state while incurring losses.
The direction of causality is important here. The common explanation—that 'the compulsory designation system was inevitable for universal access'—draws the arrow of causality backward. The actual causal path is as follows: the government first decided on a low reimbursement policy, and since voluntary contracts could not be established under low rates, compulsory incorporation became inevitable. Low reimbursement rates gave birth to coercion; universal access did not demand coercion. Universal access was fully achievable through a selective contract system combined with appropriate reimbursement rates. The state simply chose the easiest, and simultaneously the most coercive, path.
Borrowing the terminology of Max Weber, this is a classic case where instrumental rationality (Zweckrationalität) overwhelmed procedural legitimacy (Verfahrenslegitimität). The state's goal was 'universal health coverage,' and the fastest and cheapest tool to achieve this was to forcibly mobilize over 90% of private medical institutions. The arduous procedure of reaching a consensus with stakeholders, sincere negotiation regarding appropriate compensation, and respect for the autonomy of providers—all of these were omitted in the name of efficiency.
3. The Formation of Quasi-Monopsony and Market Distortion
3.1. What is a Monopsony?
To accurately understand the structural transformation that the compulsory designation system brought to the Korean medical market, one must start from the microeconomic concept of monopsony. A monopsony refers to a market state where only a single purchaser exists. While a monopoly refers to the market power of a seller, a monopsony refers to the market power of a purchaser. Under a monopsony, the purchaser can suppress supply prices below the competitive equilibrium level, which leads to a reduction in supply volume and inefficiency in resource allocation.
The compulsory designation system made the state (National Health Insurance Service) the virtually sole legal purchaser of all medical services. Of course, because a private market for non-covered (67) treatments coexists in the Korean medical market, it is difficult to call it a 'pure' monopsony. Thus, this book refers to it as a 'quasi-monopsony.' The core fact is that in the covered sector—and since the covered sector accounts for the majority of medical acts, in the market as a whole—the state came to possess overwhelming bargaining power regarding price determination.
3.2. Total Loss of Price Bargaining Power
The effect this quasi-monopsony structure had on the market aligns exactly with textbook predictions.
Individual clinics and hospitals possess no power to negotiate prices (reimbursement rates) against this giant purchaser. The state unilaterally notifies the price, and the provider has no choice but to accept it or exit the market. Yet, under the compulsory designation system, even the option of 'exit' does not effectively exist. This is because it is legally impossible for a practicing physician to refuse insurance-covered treatment. In terms of Albert O. Hirschman's (91) 'Exit, Voice, and Loyalty' model, a structure was completed where the exit option was fundamentally blocked, and even voice (protest) was morally disarmed by the discourse of 'medical ethics.'
Quality competition also disappears. Since the purchaser controls the price and forcibly contracts with all providers, providers lose the incentive to compete through better quality. This is because they receive the same price anyway. In economics, this phenomenon is called adverse selection and a race to the bottom. Since providing high-quality care only increases costs while compensation remains identical, the system structurally converges toward a low-quality equilibrium.
4. The Trap of Incomplete Contracts: Investment Distortion and the Hollowing Out of Essential Healthcare
4.1. Concentration of Residual Control Rights
The economic consequences born from the political decision of 1977 are captured even more precisely by the incomplete contract theory developed by Oliver Hart and Sanford Grossman.
According to incomplete contract theory, when all future situations cannot be predicted and included in a contract, who holds 'residual control rights' over unexpected situations becomes the key variable determining investment incentives and resource allocation. Under the compulsory designation system, the distribution of these residual control rights is extremely asymmetrical.
Hospitals (asset owners) make massive investments in facilities and personnel. They construct buildings, purchase expensive equipment, and hire professional staff. However, the state (the insurer) monopolizes the control rights over all future uncertainties (92), such as the determination of reimbursement rates, changes in coverage standards, and approval of new medical technologies. The state can freeze or cut rates at any time, neutralize the profitability of existing investments by changing coverage standards, and unilaterally change the business environment by introducing new regulations.
4.2. Underinvestment Problems and the Hollowing Out of Essential Healthcare
What is the strategy that a hospital can rationally choose in such a structure? Hart's theory makes a clear prediction. The party that does not hold residual control rights undersupplies relationship-specific investment. In economics, this is called the 'hold-up problem.' In a structure where the other party can ex-post expropriate the fruits of investment, even socially desirable investments are bound to be deterred ex-ante.
Applying this theory to the reality of Korean healthcare, a clear pattern that has repeated for half a century emerges. Hospitals lose the reason to invest long-term in areas where the state can take away value at any time—namely, the qualitative improvement of essential healthcare (61) fields covered by health insurance (introduction of latest equipment, expansion of regular staff, extension of consultation hours, etc.). Even if they do invest, losses only accumulate unless the reimbursement rates reflect the costs.
Instead, hospitals adopt a strategy of focusing investment on the 'non-covered market,' the only area beyond the state's control, to compensate for losses there. This is not moral hazard, but an extremely rational adaptive behavior under a distorted incentive structure. The root of the problem lies not in the greed of individual medical professionals, but in the institutional design that structurally forces such behavior.
The consequence of this process is the hollowing out of essential healthcare. The phenomenon where personnel leave and investment shrinks in fields directly related to life—such as emergency medicine, trauma surgery, pediatrics, obstetrics and gynecology, and neurosurgery—and where medical capacity deteriorates is by no means an accident, as clearly revealed in the 2024 crisis. It is the inevitable result of the incentive structure designed in 1977 operating over half a century.
5. Judicial Validation: The Constitutional Court and the Circular Reasoning of ‘Public Welfare’
5.1. Why Coercion Survived for Half a Century
The 'foundation of coercion' established in 1977 could not have survived half a century on its own. Every coercion requires legal and moral authority to justify it. In the Korean healthcare system, it was the Constitutional Court that performed this role.
The medical community filed several constitutional petitions, arguing that the compulsory designation system violated the freedom of occupation and property rights. However, the Constitutional Court's response was consistent. Applying the principle of proportionality (Verhältnismäßigkeitsprinzip), the Court judged that the public interest of national health was more important than the private interest of a physician's freedom to choose an occupation, and that this coercion was a 'minimum necessary measure' in a reality where public medical institutions were lacking.
However, if one examines this argument closely, a fatal circular reasoning is hidden within it. The structure of the argument is as follows: since public medical institutions are insufficient, private ones must be forcibly mobilized → since private ones can be forcibly mobilized, there is no need to establish additional public medical institutions → public medical institutions remain insufficient → therefore, the forced mobilization continues to be justified. The state’s negligence—the failure to fulfill the obligation to expand public healthcare infrastructure—becomes the cause of coercion, while the Constitutional Court accepts that very negligence as the grounds for the coercion.
5.2. The Paradox of Non-Covered Treatment as a Safety Valve
What is particularly noteworthy in the Constitutional Court’s logic for constitutionality is that it used the existence of 'non-covered treatment' as an important basis for its decision. The logic was that because physicians could secure a certain level of economic autonomy through non-covered items to compensate for low health insurance rates, the unconstitutionality of the compulsory designation system was offset.
The implications of this ruling are truly astonishing. The Court effectively provided legal recognition for the fact that Korean healthcare is a dual system operating under two different sets of rules: public insurance (covered) and the private market (non-covered). Furthermore, it turned the flaw in the state policy of low reimbursement rates into a problem that physicians must solve individually through non-covered treatment. The responsibility for the state’s failure to fulfill its compensation obligation was shifted onto the self-rescue efforts of individual medical professionals.
This is not a mere matter of legal interpretation. This ruling became a constitutional indulgence for all the distortions that followed in Korean healthcare—the bloating of the non-covered market, three-minute consultations, over-testing, and defensive medicine. The judiciary sealed the structural contradictions of the system under the name of 'constitutionality.'
5.3. The Judicialization of Politics and Institutional Lock-in
These repeated rulings of constitutionality by the Court led to the serious consequence of the 'judicialization of politics (94).' This phenomenon, analyzed by Ran Hirschl, refers to a situation where policy issues that should originally be resolved through social consensus and political compromise are terminated by judicial rulings.
Medical reimbursement rates, supply systems, and personnel policies are issues that should originally be adjusted through complex negotiations and social consensus among stakeholders. However, with all these processes omitted, as the issues were handed over to the Court and received the stamp of 'constitutionality,' all political debate was terminated. The state no longer felt the need to seriously converse or compromise with the medical community. This was because the Court had already taken the state's side.
From the perspective of historical institutionalism, this produced a powerful institutional lock-in (95) effect. As long as the Court stamped it 'constitutional,' the executive branch completely lost the incentive to reflect on the fundamental problems of the system or to seek alternatives. A structure where a flawed system repeatedly reproduces itself, armed with judicial legitimacy—this is the real secret behind how the compulsory designation system was able to endure for half a century.
6. The "Paradox of Universal Access": The Most Plausible Explanation
Why was such a system designed, and why has it persisted for half a century? Following the method of retroduction in critical realism, the generative mechanism that best explains the observed phenomena is inferred as follows.
The means to achieve the sublime goal of "universal access" paradoxically destroyed market efficiency and led the entire system toward collapse.
To ensure that all citizens received medical services, the state weakened the mechanisms for free trade and information exchange among providers. As a result, incentives for quality competition or cost efficiency disappeared, and the system fell into a state of chronic inefficiency. The undiscriminating averaging of price and quality—where good hospitals and bad hospitals, and efficient treatments and inefficient treatments, all receive the same compensation—is the structural consequence produced by the compulsory designation system over half a century.
The competing hypothesis that this was "inevitable for improving accessibility" lacks persuasion. Universal access could have been sufficiently achieved through other institutional alternatives that distort market signals less, such as selective contracting or performance-based contracting. Indeed, most advanced nations, including Germany, France, and Japan, achieve universal access while designing their relationships with private medical institutions based on contracts rather than coercion. Korea's model of total compulsory incorporation is an exceptional system globally.
Ultimately, the compulsory designation system corresponds to a classic case of means-end inversion, where the means mobilized to achieve the legitimate goal of "universal access" eroded the goal itself. While the state promised to guarantee the right to medical access for all citizens, it designed a system that structurally degrades the quality of 그 medical care. Access was guaranteed, but the foundation of medical care worthy of access was eroded. This is the "paradox of universal access."
7. Counterfactual Analysis and Future Outlook
If the state had introduced a selective contracting system in 1977 instead of the compulsory designation system—for instance, selective contracts with medical institutions meeting certain quality standards, or a flexible contract system contingent on exit and performance—the subsequent path would have been fundamentally different.
Hospitals would have engaged in quality and efficiency competition to maintain insurance contracts, and at least some of the market's self-adjusting functions would have been preserved. The problem of low reimbursement rates could also have been corrected early through market pressure, namely the risk of provider withdrawal. It is also possible that negotiations during the contract renewal process could have functioned as a regular communication channel between the state and the medical community, potentially resolving at least part of the distrust accumulated since 1971.
Of course, this is a counterfactual inference, and the reality of economic constraints and the lack of public medical infrastructure at the time must not be underestimated. However, what this counterfactual thought experiment reveals is the fact that the choice of the compulsory designation system was not the "only alternative." It was a path chosen by the state to obtain the most visible political results with the least cost and effort, and the long-term costs of that choice were passed on to medical providers and, ultimately, the public.
If the current system is maintained, the downward equalization of the system will accelerate. The departure of personnel and the shrinking of investment in essential medical fields will intensify, and the expansion of the non-reimbursement market will bring about a polarization of the burden of medical expenses. The crisis of 2024 may not be the final consequence of this process, but merely an intermediate stop.
8. Conclusion: The Operating System of the System
8.1. The Triple Shackles
Synthesizing the analysis of this chapter, the compulsory designation system is an institutional structure composed of triple shackles.
The first is the political shackle. To maintain the low reimbursement policy, the government chose coercion instead of negotiation. This choice was the moment instrumental rationality overwhelmed procedural legitimacy, placing Korean healthcare on an irreversible path of "coercion" and "control."
The second is the economic shackle. This coercion turned the state into a quasi-monopsonistic buyer and distorted all incentives for providers. As predicted by incomplete contract theory, hospitals made the rational choice to turn away from essential medical care and move toward the non-reimbursement market.
The third is the judicial shackle. The Constitutional Court sealed the possibility of reform by ruling all these contradictions constitutional in the name of "public welfare." By using the existence of non-reimbursement treatment as a ground for constitutionality, it even produced the paradox of judicially certifying the duality of the system.
Combined, these triple shackles transformed the compulsory designation system into a massive trap from which no one can escape. It was not a simple institution, but the "operating system" of the system that distorted market rules, regulated the behavior of actors, and gave birth to all conflicts.
8.2. Evidence Strategy
To prove this analysis, this book will utilize the following evidence.
International Comparison of Contract Structures (Evidence Strength: High). By comparing the methods of contracting with medical institutions in OECD countries, it empirically demonstrates how exceptional Korea's model of total compulsory incorporation is. This comparison will be the strongest refutation of the competing hypothesis that it was "inevitable."
Analysis of the Absence of Refusal/Exit Cases (Evidence Strength: High). It empirically proves the coercive nature of this system through the fact that there have been virtually no cases of medical institutions refusing health insurance treatment or being expelled from the system in Korea over the past 50 years. The absence of an exit option is the most direct evidence of a quasi-monopsonistic structure.
Analysis of Constitutional Court Rulings (Evidence Strength: Medium). It reveals how the judiciary sealed the contradictions of the system by analyzing the logical structure of the rulings, especially the parts that recognized "non-reimbursement" as a safety valve.
8.3. Transition to Chapter 4
On this foundation of coercion, all the tragedies of Korean healthcare began. However, this foundation laid in 1977 alone would not have allowed the system to survive for half a century. Every coercion requires a legal and moral authority to justify it. In the next chapter, we will track in more detail how the Constitutional Court sealed this structural contradiction in the name of "public welfare" and how that judicial endorsement locked the system into an irreversible path.
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[Text Box] Characteristics of a System Without "Contracts": Fast Expansion / Low Cost / High Conflict
In most medical systems in the world, the relationship between insurers and medical institutions is formed by a contract. The insurer proposes an appropriate fee, and the medical institution signs the contract if the terms are acceptable. If they do not like it, they can refuse. This is the essence of a contract.
Korea's compulsory designation system replaced this contract with compulsory incorporation. As a result, three distinct characteristics appear.
Characteristic | Mechanism of Operation | Cost (Trade-off)
① Fast Expansion | Since all medical institutions are automatically incorporated into health insurance, the government immediately secures a nationwide medical network without separate negotiations. It took only 12 years from starting at workplaces with 500+ employees in 1977 to universal coverage in 1989—the shortest record in the world. | Since there is no need to seek the consent of medical institutions, flaws in the system design are not filtered out in advance.
② Low Cost | Since medical institutions cannot exit, supply is maintained even if the government unilaterally sets low fees. It is politically advantageous because health insurance premiums can be kept low. | Medical institutions endure fees below cost and fill that deficit with non-reimbursement and overtreatment. The cost does not disappear; it only changes form.
③ High Conflict | Since it is coercion rather than a contract, dissatisfaction erupts in the streets and courts rather than at the bargaining table. This is the structural cause of repeated clashes, such as the pharmaceutical reform strike (2000) and the collective resignation of residents (2024). | Trust between the state and the medical community is not accumulated, so any reform is suspected as "yet another control."
The core is this: A system without contracts is fast and cheap, but it is not sustainable. The short-term advantages of fast expansion and low cost return as long-term costs of high conflict and system instability. The half-century history of Korean healthcare is the empirical proof of this proposition.
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Chapter 4. An Indulgence in the Name of "Public Welfare"
All power requires legitimacy. A regime maintained only by physical coercion does not last long. In 1977, when the state activated the unprecedented compulsory incorporation device known as the compulsory designation system for medical institutions, it was not physical force that allowed this device to endure for half a century. Behind it was the judicial authority that recognized this coercion as "just." The Constitutional Court of the Republic of Korea performed exactly that role, and the tool they pulled out was the four-character phrase "public welfare" specified in Article 37, Paragraph 2 of the Constitution.
This chapter tracks how the Constitutional Court's rulings went beyond the realm of simple legal judgment and solidified a flawed system into something irreversible. The core question is this: Why did the highest judicial organ of the Republic of Korea repeatedly and consistently side with the state?
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1. Accumulation of Constitutional Rulings: A Recurring Pattern
First, let us check the facts. There was more than one or two constitutional petitions surrounding the compulsory designation system and low reimbursement rates. The medical community contested the unconstitutionality of this system several times. However, the Constitutional Court consistently issued constitutional rulings in key decisions in 2002, 2012, and 2014. Although there were slight differences in the detailed logic of the rulings, the conclusion was always the same: "The restriction of occupational freedom for the public welfare is constitutionally justified."
What should be noted here is not the ruling itself, but the structural effect it created. From the perspective of path dependence in economics, the first constitutional ruling functioned as a "critical juncture." Once the highest judicial organ confirms the constitutionality of a system, all subsequent legal challenges hit an ever-higher barrier. Even in constitutional trials where the principle of stare decisis is not directly applied, much stronger arguments than before are needed to overturn an existing ruling. Consequently, as constitutional rulings were repeated, the possibility of institutional change narrowed further. The "institutional lock-in" mentioned by Douglass North was completed by the hands of the judiciary.
The principle that the judiciary respects the policy judgments of the executive and legislative branches, the so-called "respect for legislative discretion," is in itself a healthy operating principle of democracy. The problem lies in the paradox that occurs when this principle is applied to a flawed policy. In a situation where the judiciary's decision of unconstitutionality was the only opportunity to correct the structural problems of the policy, the judiciary's restraint meant the perpetuation of the flaw. The virtue of respecting legislative discretion resulted in becoming the cause that made the path toward collapse irreversible.
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2. The Trap of Consequentialism: To Swallow the Means for the End
When the logical structure of the Constitutional Court's argument is dissected, its philosophical foundation is clearly revealed. In judging the constitutionality of the compulsory designation system, the Court essentially adopted the logic of consequentialism. Its judgment was that the result of "universal medical coverage" was sufficiently significant that restricting the occupational freedom and freedom of contract of medical professionals to achieve it was worth enduring. To put it simply: in the face of the massive public interest of medical accessibility for 50 million citizens, the restriction of the individual rights of tens of thousands of medical professionals is proportional.
This logic seems persuasive on the surface. However, a hidden premise is concealed here. It is the question that has long been pointed out within consequentialist ethics: "Whose consequence is it?" The "consequence" assumed by the Court was limited to short-term, visible results, namely securing medical accessibility for the public. The negative consequences that the policy would cause in the long term—the decline in medical quality, the departure of essential medical personnel, and the structural distortion of the system—did not go onto the Court's scale.
On the other hand, what the medical community implicitly put forward was a deontological perspective. This position holds that the state's act of conscripting private property without just compensation or forcing free contracts is inherently unjust, no matter how good the result may be. Borrowing Immanuel Kant's categorical imperative, a logic is possible that treating medical professionals only as a means for the end of "national health" is an infringement on human dignity. At the point where these two ethical frames collided, the Court unilaterally sided with one without a process of deliberation.
3. Systematic Distortion of the Principle of Proportionality
The technical core of the Court's argument lies in the application of the proportionality principle. Developed by the Federal Constitutional Court of Germany, this principle examines the legitimacy of restricting basic rights in four stages: legitimacy of the purpose, appropriateness of the means, least restrictive means (minimality of infringement), and balance of legal interests. The Korean Constitutional Court also officially adopts this framework. The problem is what happened in the actual application process.
First, in the examination of the least restrictive means, an examination of alternatives was virtually non-existent. The Court accepted almost without question the premise that the compulsory designation system was the only means for the universal application of health insurance. However, this premise can be empirically refuted. In the German Bismarck model, contracts are concluded through negotiations between medical providers and insurers, and universal accessibility based on voluntary participation is operational. In the British Beveridge model, the problem of compulsory incorporation does not arise because the state directly provides medical services. In countries that adopted hybrid models, compulsory designation is applied only to public hospitals, while a method of selective contracting with private medical institutions is operated.
All of these alternatives pursue the same goal of medical accessibility, yet the intensity of infringement on occupational freedom is lower than that of the compulsory designation system. If the principle of proportionality were applied faithfully, a concrete and empirical argument as to why these alternatives are impossible in Korea was needed. It is difficult to find such comparative analysis in the text of the Court's rulings.
Second, there was a lack of empirical evidence in the balancing test of legal interests. At this stage, the balance between the public interest achieved by restricting fundamental rights and the private interest being restricted is weighed. However, to judge this balance, empirical evidence regarding the actual results of the policy must be presupposed. Data should have been submitted to and reviewed by the court regarding the specific distortions that low medical fees and mandatory designation are creating in the medical field, the impact of shortened consultation times or the expansion of non-reimbursement (67) treatments on patient safety, and the extent of personnel attrition in essential healthcare sectors. However, the Constitutional Court finalized its judgment based solely on abstract legal principles and the proposition of "public welfare." A proportionality review without data is, metaphorically speaking, no different from measuring weight without a scale.
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4. The Power of the Frame: Institutionalization of Cognitive Bias
Why, then, did the finest legal minds in the Republic of Korea repeatedly make such biased judgments? The answer to this question must be found in the cognitive framework that governs the legal principles, rather than in the principles themselves.
Research in cognitive psychology and behavioral economics has repeatedly confirmed that the framing (83) effect exerts a powerful influence even on professional judgment. Even with the same information, judgment varies depending on the frame in which it is presented. In the constitutional debate surrounding the mandatory designation system, the dominant frame was set from the beginning as "the right to health of 50 million citizens versus the economic interests of a small group of doctors." Once this framework is established, the direction of the discussion is virtually determined. In the face of the immense value of the health rights of the majority of citizens, the medical professionals' demand for freedom of contract or appropriate compensation is positioned as "collective selfishness."
Within this frame, the secondary and tertiary effects of the policy disappear from view. The chain of causality—where low fees trigger three-minute consultations, three-minute consultations lead to over-testing, over-testing encourages the expansion of the non-reimbursement market, and the non-reimbursement market results in the outflow of essential healthcare personnel—is placed outside the frame of "public welfare." From the perspective of systems thinking (105), the Constitutional Court rendered its judgment by looking only at the linear primary effects of the system. As Peter Senge warned, in complex systems, the cause and effect of a problem are not close in time or space. It took decades for the secondary and tertiary ripple effects of the Constitutional Court's ruling to manifest in reality, by which time it was already too late to turn back.
Borrowing from the research of Amos Tversky and Daniel Kahneman, this is also a type of "availability heuristic." The achievement of "universal healthcare coverage" is visible and immediate. On the other hand, the long-term distortion and collapse of the system feel abstract and like a matter of the distant future. The human cognitive system tends to assign excessive weight to the former and underestimate the latter. Constitutional Court justices are not free from this cognitive bias.
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5. Non-reimbursement as a Safety Valve: Judicial Ratification of Contradiction
There is a particularly noteworthy part of the Constitutional Court's ruling. The existence of non-reimbursement treatment was mentioned as one of the primary grounds for the judgment of constitutionality. Reconstructing the Court's logic, it follows: Since medical institutions can partially compensate for economic losses caused by health insurance fees through non-reimbursed items, it is difficult to see the mandatory designation system as excessively infringing upon the freedom to practice an occupation.
The contradiction inherent in this logic is profound. The Constitutional Court effectively provided legal recognition of the fact that the Korean healthcare system operates as a dual structure of public insurance (reimbursement) and a private market (non-reimbursement). Furthermore, instead of the state resolving the problem of low fees it had set, it shifted the locus of responsibility, requiring individual medical professionals to "take care of" the deficit in the non-reimbursement market. Reading this politico-economically, it is nothing less than the judiciary ratifying the act of transferring the costs of state policy failure to the private domain of individual medical institutions.
And this judicial ratification became the starting point for subsequent system distortions. The moment the non-reimbursement market is officially recognized as a "legal means of loss compensation," it becomes a rational choice for medical institutions to maximize non-reimbursement profits as a survival strategy. Manual therapy, extracorporeal shock wave therapy, nutritional injections, and premium room charges—the seeds of the explosive expansion of the non-reimbursement market, which will be covered in the latter half of this book, were already sown within the text of the Constitutional Court's ruling. Borrowing the framework of economist Albert O. Hirschman (91), non-reimbursement was neither an "exit" from nor a "voice" against the system, but a malformed adaptation to survive quietly within the contradictions of the institution. And the Constitutional Court stamped this malformed adaptation with the seal of constitutionality.
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6. The Judicialization of Politics: The Terminator of Debate
Another structural consequence created by the Constitutional Court's repeated rulings of constitutionality is the phenomenon known in political science as the "judicialization of politics (94)." As Ran Hirschl analyzed, the judicialization of politics refers to the phenomenon where political issues that should originally be handled in the sphere of the legislature or the executive branch are transferred to the courts.
The appropriateness of medical fees, the scope of mandatory inclusion, and the design of the supply system are essentially political issues that should be resolved through negotiation and compromise among various stakeholders. This is why, in Germany, fees are determined through collective bargaining between doctors' associations and insurers. However, in Korea, this process of political deliberation was omitted, and the problem was immediately transferred to the Constitutional Court. And the moment the Court stamped "constitutional," the debate ended. Since the highest judicial body declared it constitutional, what more needed to be said?
This judicial termination granted the state an extremely advantageous position. The government lost the incentive to dialogue or compromise with the medical community. Since the Constitutional Court was backing them up anyway, there was no reason to engage in difficult negotiations. The grievances of the medical community became a "legally resolved issue," and all that remained was administrative coercion in the form of medical service commencement orders. By having the judiciary block the possibility of political dialogue, the path to a peaceful resolution of the conflict was sealed. The depth of anger that exploded in the 2024 trainee doctor (69) crisis is not unrelated to the absence of communication channels that had been blocked for decades.
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7. Review of Competing Hypotheses: Why the "Inevitability of Equity" is Insufficient
At this point, a competing hypothesis must be examined: the claim that "the Constitutional Court's decision was an inevitable choice that prioritized the constitutional value of equity." This argument has some merit. Ensuring healthcare accessibility for all citizens is clearly a significant constitutional value, and it is difficult to criticize the Court for prioritizing it.
However, this hypothesis misses the core point. The essence of the problem lies not in the pursuit of equity, but in the absence of reflection on the "method" of pursuing that equity. If the ruling had truly considered equity, it should have asked whether the mandatory designation system was resulting in the long-term erosion of equity itself. The reality where essential healthcare in regional areas collapses due to low fees, patients flock to large hospitals in Seoul, and mild cases receive excessive treatment while severe cases fail to receive timely care—is this truly equity? The reality of Korean healthcare today is a counter-proof showing that the "public welfare" upheld by the Constitutional Court is not being achieved in practice.
A deeper problem is that the judiciary lacked reflection on the lock-in effect created by its own rulings. A judgment of constitutionality is not a one-time decision but a path-creating act that binds all subsequent institutional trajectories. The Constitutional Court did not consider the dynamic effects its ruling would have on the entire system. The judiciary lacked sensitivity to what legal scholar Cass Sunstein (109) called the "paradox of regulation"—the phenomenon where regulation leads to results exactly opposite to the original intention.
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8. Implications: Sealed Contradictions and a Closed Future
The legacy left by the Constitutional Court’s "public welfare" rulings on the Korean healthcare system can be summarized into three points.
First is the institutionalization of consequentialist bias. By focusing only on the visible result of "universal healthcare coverage," a judicial practice has taken root that systematically underestimates the destructive side effects—market distortion, quality degradation, and the collapse of essential healthcare—caused by the means employed.
Second is the blocking of alternatives due to framing bias. As a result of being trapped in the binary frame of "public health versus doctors' interests," the possibility of exploring a third alternative that could harmonize the interests of both was cut off.
Third is the disappearance of the space for political deliberation. By having judicial judgments terminate political debate, the democratic path of problem-solving through dialogue and compromise among stakeholders was closed.
Let us engage in counterfactual thinking. What if the Constitutional Court, while reviewing past precedents, had introduced a proportionality review based on empirical data? The government would no longer have been able to hide behind the abstract rhetoric of "public welfare." It would have had to prove with numbers what kind of medical reality the low fees were actually creating and explain specifically why less intrusive alternatives were impossible. If the judiciary had taken on the role of verifying the empirical results of policies, the trajectory of the Korean healthcare system might have been significantly different from what it is now.
Conversely, if the Constitutional Court continues its current stance, all structural contradictions of the system will remain sealed under the name of "constitutionality." THE government will have no motivation for reform, and the resistance of the medical community will inevitably erupt outside of legal channels. The crisis of 2024 was merely the first such eruption, not the last.
Ultimately, "public welfare" started as a noble constitutional value, but in the process of operation, it degenerated into a tool of governance that exempts the state from responsibility and forces sacrifice upon the private sector. Without this legal immunity, the structural exploitation of the Korean healthcare system could never have lasted for half a century. The Constitutional Court went beyond being a bystander to the system's collapse; it was a conspirator that legally solidified that structure. This is another invisible cornerstone sitting atop the "cornerstone of coercion" examined in Chapter 3.
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[Text Box] The Contradiction of Recognizing Non-reimbursement as a "Safety Valve"
While arguing for the constitutionality of the mandatory designation system, the Constitutional Court utilized a decisive logical device: "Since medical institutions can earn additional profit through non-reimbursed treatments, the infringement on property rights due to low fees cannot be considered excessive." The depth of the contradiction contained in this single sentence is significant.
Contradiction ①: Shifting the solution for a problem imposed by the state to the private sector. Low fees are a price set by the state. If that price falls below cost and inflicts loss on medical institutions, the responsibility for the solution should lie with the state. However, by saying, "Can't you just make it up by earning from non-reimbursement?" the Court essentially demanded that the private sector resolve the deficit created by the state.
Contradiction ②: Once recognized, it becomes uncontrollable. Recognizing non-reimbursement as a safety valve grants legitimacy to the act of medical institutions expanding non-reimbursement. Yet, the government simultaneously criticizes and attempts to regulate the expansion of non-reimbursement as "medical commercialization." A self-contradictory structure is completed: the safety valve is opened, but using it is punished.
Contradiction ③: The non-reimbursement safety valve is not "universal." While departments such as dermatology, plastic surgery, and ophthalmology (LASIK), where transitioning to non-reimbursement is easy, can utilize this safety valve, essential healthcare fields such as emergency medicine, general surgery, and pediatrics—where most treatments are reimbursed—have no means to compensate for profits through non-reimbursement. The Court's logic resulted in structurally abandoning essential healthcare.
Ultimately, the Constitutional Court's "non-reimbursement safety valve" logic did not resolve the system's structural contradictions but rather sealed them judicially. And upon this seal, a series of catastrophes—the balloon effect (Chapter 12), the outflow of essential healthcare personnel (Part 5), and the collapse of the medical delivery system (Chapter 19)—proceeded.
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Chapter 5. The Gilded Cage, "Low Medical Fees"
1. Three Layers of Collapse: Experience, Fact, and Reality
If the "Mandatory Designation System for Medical Institutions (63)" was the wall that physically confined providers within the system, "low medical fees" contaminated the very air they breathed within those walls. Walls are visible. One can realize they are confined, and thus they become objects of resistance. But air is different. While it defines all actions and even the mindsets of those living within it, it is internalized as "just the way things are." Low fees were that kind of power. The state gifted the entire population a gilded cage called "healthcare coverage," but the fact that the air inside that cage was toxic remained concealed for a long time.
- Experience (E): Anyone who has received outpatient care in Korea experiences a common phenomenon. From the moment one opens the consultation room door and sits in the chair until one leaves with a prescription in hand, the second hand of the clock fails to complete a single rotation. This is the so-called "three-minute consultation." Patients leave the room without fully explaining their symptoms, while doctors repeat the process by flipping to the next patient’s chart. Waiting rooms are always overflowing, and composure is nowhere to be found on the doctors' faces. In contrast to the exceptionally long and kind consultations provided for non-covered items—such as manual therapy, extracorporeal shock wave therapy, and cosmetic procedures—patients receive the unpleasant impression of being treated as second-class citizens in their capacity as "covered patients."
- Act (A): Behind this experience lies a cold arithmetic. According to a cost study by the Health Insurance Review and Assessment Service (HIRA), the average fee for items covered by National Health Insurance is only about 80% of the actual cost. From the perspective of a medical institution, the structure is such that the more covered patients they see, the more their deficit accumulates. To offset this deficit, hospitals employ three survival strategies. First, cross-subsidization, which secures high margins from non-covered items that fall outside of state price controls. Second, upcoding, which increases billing units by upwardly adjusting medical procedure codes. Third, high-volume, thin-margin (薄利多賣) operations, which minimize the time invested per patient and maximize the number of consultations. These three strategies do not operate independently but reinforce each other, forming a "survival grammar" that defines the overall behavior of medical institutions.
- Reality (R): However, there is a more fundamental structure that pierces through the layers of experience and fact. It is the fact that the price of individual medical acts is systematically set lower than the marginal cost required for said acts. According to basic principles of microeconomics, in a market where prices are fixed below marginal cost, suppliers have only two options: reduce the quantity of supply or lower the quality. In the Korean healthcare system, the former option is blocked by the compulsory designation system; therefore, the latter—the degradation of the quality of care—becomes a necessity forced by the structure rather than a choice. This is the true identity of the "invisible air" known as low medical fees. It is an incentive system designed so that the more time a doctor spends on a patient, the more carefully they examine them, and the more accurate materials they use, the more loss they incur. This system has functioned as the generative mechanism for nearly all pathological phenomena in Korean healthcare—the three-minute consultation, the expansion of non-covered services, and the avoidance of essential medical care.
2. The Engine of Collapse: Political Pricing and the Rationality of Survival
The maintenance of medical fees below cost in Korea is not a natural consequence of the market. It is a product of political decision-making, with origins tracing back to 1977. This chapter seeks to dissect how this political pricing fundamentally transformed the behavior of healthcare providers. Two mechanisms operate in tandem like interlocking gears.
The First Mechanism: The Mechanism of Political Fee Determination. The process of determining medical fees in Korea is subordinated to the political principle of a "fiscal cap" rather than the economic principle of "cost recovery." The government first sets the expenditure limit for the health insurance budget and then back-calculates individual fees within that limit. The social value of medical acts or the actual input costs remain secondary considerations in this process.
The original sin of this structure dates back to the introduction of medical insurance in 1977. At that time, to enforce the political goal of "low premiums and low fees," the government set insurance fees at only about 55% of the prevailing market rates. This initial misstep became the reference point—the "anchoring effect" in economic terms—for all fee discussions over the following half-century. Fee negotiations at the Health Insurance Policy Deliberation Committee (HPDC) merely became a wasteful annual struggle over what percentage to increase from this low baseline, and the fundamental question of whether the fees themselves reflected costs was never seriously raised. Historical evidence supports the fact that this process was not an equal negotiation. The incident where the president of the surgical society was physically detained by government officials during the 1977 insurance fee determination process is an extreme but symbolic example. While suppressing resistance from the medical community, the government enticed them by providing a tacit understanding to compensate for losses from low fees through "drug price margins." This unofficial promise was later broken during the separation of prescribing and dispensing drugs, serving as the starting point for another disaster, which is covered in detail in Chapter 7.
The Second Mechanism: The Survival Rationality of Medical Institutions. In an environment where fees are provided below cost, what is the most rational strategy for a medical institution? From a microeconomic perspective, the answer is simple. When the margin per unit act is extremely low, the only way to maintain total revenue is to maximize the total volume of acts. This is the thin-margin, high-volume equilibrium. The problem is that for this equilibrium to hold, the time invested per consultation must be drastically compressed. Ultimately, the "three-minute consultation" is not a matter of an individual doctor's insincerity but the best response imposed by the low-fee price environment on a rational actor. If a doctor allocates 15 minutes to one patient, their income drops to one-fifth compared to a colleague who can see five patients in the same amount of time. From a management perspective, this is tantamount to suicide.
Structural distortions on the demand side overlap with this. The low copayments of Korean health insurance effectively neutralize the signaling function of price in a patient's decision to use medical services. Moral hazard, as discussed in medical economics, occurs systematically on the demand side. Patients visit hospitals easily even for minor symptoms, and doctors are forced to further reduce the time spent per person to handle the influx of patients. As the providers' incentive to maximize volume and the consumers' incentive for over-utilization converge in one direction, the system falls into the trap of over-utilization. The statistic that the annual number of outpatient visits per Korean is more than double the OECD average is a product of this trap.
What links these two mechanisms is the cross-subsidization structure. The structural deficit occurring in the covered sector is filled by excess profits from the non-covered sector, which is beyond state price control. At a glance, this appears to be a safety valve preventing the collapse of the system, but the reality is the opposite. The existence of cross-subsidization leads to price signal distortion, where medical resources are allocated based on profitability rather than social need. The phenomenon of surgeons, obstetricians, and thoracic surgeons moving to the cosmetic and plastic surgery markets is a rational response to this distorted signal, not an individual moral hazard. Cross-subsidization was not the system's safety valve but rather a siphon sucking personnel and resources from essential medicine into non-essential areas.
3. The Most Plausible Explanation: The 'Low Price-High Volume' Model and the Medical and Ethical Bankruptcy of Three-Minute Consultations
Why, then, is essential healthcare the first and most severely to collapse? Several competing hypotheses exist. These include the oversupply theory, which claims there are too many doctors, and the demand-side moral hazard theory, which claims patient copayments are too low. While it is true that these hypotheses explain part of the phenomenon, they fail to sufficiently clarify why specific fields of essential medicine are hit so intensively.
The most plausible explanation (retroduction) for this is as follows. The "low price-high volume" model exerts the same pressure on all medical fields, but essential medicine is the most vulnerable to this pressure due to its structural characteristics, and as a result, it acts as the weakest link for resource outflow.
There are three reasons. First, essential medical fields such as surgery, obstetrics, and thoracic surgery are inherently labor-intensive. There are physical limits to shortening surgery times or increasing patient turnover, so the number of procedures cannot be increased as freely as in dermatology or ophthalmology. Second, these fields perform high-risk treatments. The risk of medical litigation is relatively high, and the subsequent psychological and economic costs are not reflected in the fees. Third, due to the nature of treating acute phase diseases, there is extremely limited room to develop non-covered products. Even the escape route of cross-subsidization is blocked. When these three conditions combine, essential medicine becomes a field where profitability structurally hits bottom under the low price-high volume model, and the departure of medical personnel—who are rational economic actors—from this field is close to a predicted outcome.
However, the problem caused by low fees does not end with the distortion of resource allocation. It erodes the scientific and ethical foundations of the medical act itself.
In medicine, there exists a robust research tradition known as the "time-to-care literature." The core finding is intuitive yet powerful. As the time a doctor allocates to a patient increases, misdiagnosis rates decrease, medication adherence rises, and outcomes in chronic disease management improve. In particular, for chronic diseases such as hypertension and diabetes, education and counseling on lifestyle modification are as essential as drug prescriptions, but these are not the types of acts that can be accomplished in three minutes. In short, the three-minute consultation structurally forced by the low-fee system is a direct violation of the evidence accumulated by modern medicine. Doctors are placed in a double bind situation where they have no choice but to repeat clinically inappropriate practices for economic survival, even while knowing they are scientifically inadequate.
The bankruptcy on the ethical level is even more fundamental. The principle of sufficientarianism in political philosophy demands that society guarantee its members a "sufficient" level of resources to lead a dignified life. In the medical field, this principle translates into the specific standard of a "minimum safety line." That is, the medical services guaranteed by the state to its citizens must be at least safe and effective. Does the three-minute consultation satisfy this minimum safety line? Three minutes is an absolutely insufficient amount of time to check a patient’s medical history, listen to current symptoms, perform a physical examination, interpret test results, explain the treatment plan, and answer patient questions. From the perspective of the sufficiency principle, Korea's low-fee system fails to fulfill even the minimum ethical requirements of the promise of "Universal Health Coverage" that the state itself established.
Here, a paradox is revealed. In regulatory economics, the Averch-Johnson effect describes a phenomenon where firms over-invest in capital in a regulated rate-of-return environment. A variation of this effect appears in Korean healthcare. In an environment where the fee-for-service is fixed low, medical institutions allocate resources in a direction that maximizes quantity (number of patients and procedures) rather than quality (time and precision per patient). This yields results exactly opposite to the "cost-effective, high-quality healthcare" that the regulation originally intended to achieve—results that only lower costs while systematically destroying quality. The state attempted to control medical costs through low fees, but what it actually controlled was the quality of care, not the cost.
4. The Path and Implications of Collapse
The analysis in this chapter converges into a single proposition. Low fees are not merely a pricing issue; they represent an economic failure that distorts the allocation of medical resources, a medical failure that structurally coerces clinical practices contrary to scientific evidence, and an ethical failure that prevents the state from upholding even its minimum promised guarantees. Because these three dimensions of failure operate simultaneously, it is difficult to expect fundamental change through any partial reform—whether it be increasing medical school quotas or paying essential medical allowances—without resolving the low-fee problem.
This analysis presents implications in two directions.
- Counterfactual reasoning: If the state had normalized insurance fees to levels above cost and introduced a differential compensation system reflecting the risk and labor intensity of medical specialties, the structural need for non-covered cross-subsidization would have been weakened. Medical institutions would have had the incentive to compete on quality rather than quantity, and it is highly likely that the flow of personnel leaving essential medical fields would have been at least partially reversed as profitability recovered. Of course, fee normalization entails the political cost of increasing insurance premiums. However, the price we are currently paying for having avoided that cost is the deconstruction of the healthcare system itself, which cannot be converted into money.
- Future path prediction: If the current low-fee structure is maintained, the system will split into two extremes. A de facto two-tier system will become entrenched, with a high-cost but high-quality private medical market centered on non-covered services on one side, and a low-cost but low-quality public medical system centered on covered services on the other. In this two-tier system, the gap in medical access based on income will deepen significantly more than at present, and the ideological promise of 1977—"universal healthcare for all citizens"—will remain in name only, while its substance vanishes.
Moving forward, this book will quantitatively prove how the gilded cage of low fees has suffocated Korean healthcare through evidence such as time-series data on the cost-fee gap, international comparisons of actual consultation time distributions by specialty, and correlation analysis between fee levels and medical error or readmission rates. In the next chapter, we shift our perspective from domestic to international to verify how extreme the anomaly of the Korean system is in the context of international comparison.
[Text Box] Basis for Medical Costs
Some question the figure of "55%," claiming a lack of accurate cost calculation basis in 1977. However, looking at the minutes of the 97th National Assembly Health and Social Affairs Committee meeting on June 21, 1977, the then Ministry of Health and Social Affairs officially reported that medical fees were determined at "the 55% level of prevailing market rates."
A more fundamental problem lies in how "cost" is defined in medical acts. According to the Resource-Based Relative Value Scale (RBRVS), used as an international standard such as in U.S. Medicare, more than half of medical costs are accounted for by "Physician Work" invested in the consultation—the so-called "professional fee" encompassing the doctor's time, judgment, high-level skill, and stress.
The violent cut of 55% in 1977 means that the state arbitrarily erased the value of the doctor's intellectual and technical labor, which accounts for the largest share of costs. The fact that a scientific cost calculation was absent itself serves as evidence that Korea's low-fee system was a thoroughly political product.
[Box] Monopsony ( (65)) / 5-Minute Explanation of Fiscal Cap
What is a Monopsony?
If a monopoly is a market where there is "only one seller," a monopsony is a market where there is "only one buyer." This concept, defined by Joan Robinson in 1933, is widely used in labor market analysis. When applied to Korean healthcare, the core structure of the system is revealed at once.
In South Korea, the National Health Insurance Service (NHIS) is effectively the sole entity that "buys" medical services. Under the compulsory designation system, medical institutions are forced to sell their services to this single buyer. There is only one buyer, and sellers cannot exit the market. These are the conditions of a monopsony. In this structure, the buyer (NHIS) can unilaterally set prices lower than the market equilibrium (low fee-for-service), and the sellers (medical institutions) have no choice but to accept those prices.
What is a Fiscal Cap?
A fiscal cap is a mechanism by which the government sets a total limit on healthcare expenditures. It draws a line, stating, "We will only spend up to this amount on total health insurance medical expenses this year." While this device is effective for financial control, the demand for medical care exceeding the limit does not disappear. Such demand is pushed into the non-benefit market or manifests in the form of increased waiting times and a decline in the quality of care.
What happens when the two combine?
Monopsony (sole buyer) + Fiscal Cap (total expenditure limit) = A structure where a ceiling exists on the total amount medical institutions can receive, no matter how good the services they provide are. In this structure, medical institutions have only two rational choices: ❶ Increase volume through small margins and high turnover (3-minute consultations), or ❷ Escape to the non-benefit market where no ceiling exists. All distortions in Korean healthcare—over-treatment, the expansion of non-benefit services, and the avoidance of essential medical care—are phenomena occurring between these two options.
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Chapter 6. An Exception in the World
The Korean healthcare system is often compared to Germany’s social insurance (Bismarck) or the UK’s National Health Service (Beveridge). This comparison is repeated like inertia in both academia and policy debates. However, stepping back to look closer, the essence of Korean healthcare is a strange hybrid rarely found anywhere else in the world, and a thoroughly solitary exception. Why do systems that work in other countries turn into poison when introduced to Korea? To answer this question, it is necessary to look directly at the roots of the exceptionalism inherent in the Korean system.
1. An Incoherent Hybrid: The Birth of Frankenstein
According to the theory of institutional fit in economics, a system functions properly only when it harmonizes with the unique context of its society. In a related vein, the concept of institutional complementarity explains that efficiency is maximized when each part of a system complements and reinforces the others. Consider the case of Germany. Numerous sickness funds (insurers) and private medical providers negotiate fiercely to balance price and quality. It is a structure where providers possess autonomy while multiple insurers keep them in check. The UK achieves complementarity in the opposite way. Since the state directly employs and owns hospitals and doctors, price control and supply management are handled by the same entity. The subject of control is also the subject of responsibility.
Korea belongs to neither model. More than 90% of medical institutions are privately owned, and doctors are also private-sector workers. Up to this point, these are Bismarckian characteristics. However, the financial resources are managed exclusively by the state through a single-payer structure, and the state virtually dominates all medical supply through the compulsory designation system (63) and price controls. This part reflects Beveridgean characteristics. The problem lies in the way these two elements are grafted together. This structure, where the state unilaterally forces prices upon private providers, is the height of "institutional misfit"—constantly clashing and creating friction rather than complementing one another.
The advantages of the Bismarck model—competition and autonomy among providers—were stifled by total state control. The advantages of the Beveridge model—complete state responsibility and planned resource allocation—could not function in the face of the reality of private supply. Korea became a Frankenstein with a "state head on a private body." The state wants control, and the private sector wants survival. This fundamental contradiction is the epicenter of all problems, including the expansion of non-benefit services (67), 3-minute consultations, and the collapse of essential medical care (61).
2. A System Without Safety Nets: The Absence of Selective Contracting and Gatekeeping
The incoherence of the Korean healthcare system is revealed even more starkly beyond macro-level institutional classification, in the absence of key micro-level mechanisms that ensure system efficiency and stability. Two "safety nets" that other developed nations take for granted—Selective Contracting and Gatekeeping—do not exist in Korea.
A Monopoly Market Without Competition: Absence of Selective Contracting
Selective contracting refers to a system where an insurer "selects" medical institutions to contract with based on certain criteria such as price, quality, and geographical accessibility. In Germany or the Netherlands, multiple sickness funds negotiate and sign contracts with hospital and physician groups. In this process, low-quality or inefficient medical institutions are naturally weeded out. Even in the United States, private insurers contract only with specific hospitals and doctors to build medical networks such as PPOs and HMOs, thereby controlling price and quality. This is a core mechanism that induces healthy competition among providers to improve the quality and efficiency of the entire system.
Korea’s "compulsory designation system for medical institutions" fundamentally blocks these principles of selection and competition. As a single payer, the state must contract with all medical institutions without exception, whether it wants to or not. This means the insurer possesses no means to remove low-quality medical institutions. Since survival is guaranteed for providers even without competition, the incentive to improve quality or reduce costs disappears.
A Highway Without Traffic Police: Absence of Gatekeeping
Gatekeeping is a system that requires patients to first receive consultation and a referral from a physician responsible for primary care (a family doctor or local clinic) before visiting a specialist or a high-level hospital. It serves as a "traffic cop," preventing unnecessary medical use and guiding patients to the most appropriate level of medical institution.
In the UK, every citizen is registered with a General Practitioner (GP), and one cannot see a specialist without a GP's referral. This is the key secret to how the National Health Service (NHS) is maintained with limited resources. Although to varying degrees, most OECD (66) countries perform gatekeeping functions through strong primary care systems.
In Korea, this traffic cop does not exist. Patients can head straight to the emergency room (59) of a university hospital in Seoul for even minor illnesses like a common cold without any restrictions. This accelerates the crowding of patients into high-level hospitals, leads to the tragedy of "3-hour waits for 3-minute consultations," and is the main culprit of system inefficiency that hinders the treatment of truly severe or emergency patients.
In conclusion, Korean healthcare is playing the world’s strangest game, entering every player onto the field without exception (compulsory designation) while leaving them to run and tangle with each other without any rules (absence of gatekeeping). The simultaneous absence of these two complementary mechanisms is the clearest evidence explaining why the Korean healthcare system has fallen into such inefficiency and lack of control.
3. The Co-evolution of Control and Evasion
When institutional incoherence and the absence of safety nets combine, the system enters a self-destructive dynamic. This is exactly what is observed in Korean healthcare.
Top-down control mechanisms operate first. Combining the norm of "universality" with the political goal of "low burden," the state chose powerful top-down controls such as the compulsory designation system and low fees. This is followed by bottom-up evasion mechanisms. Faced with this control, private providers developed bottom-up evasion strategies to survive, exploiting system loopholes through the expansion of non-benefit services and 3-minute consultations.
These two mechanisms are in a relationship of co-evolution, reinforcing each other. As the state strengthens control, the market creates more sophisticated evasion strategies, which in turn leads to even stronger controls, creating a vicious cycle. Suppressing prices causes non-benefit services to expand; blocking non-benefit services increases over-treatment; and regulating over-treatment leads to a loss of personnel. The system itself stands upon its own contradictions.
4. The Mirror of Performance Indicators: Heaven of Quantity, Hell of Quality
Institutional incoherence and the absence of safety nets are not merely theoretical problems. When standing before the mirror of OECD health statistics, the strange and contradictory portrait of Korean healthcare is revealed without filter.
The most prominent feature of Korean healthcare is that while "quantity" is abundant, "quality" is not guaranteed. The annual number of outpatient doctor visits per capita ranks overwhelmingly first among OECD countries. This could be interpreted as a positive signal indicating high accessibility to medical care. However, the reality of "3-minute consultations" lies on the flip side. Because the number of patients per doctor is too high, the time allocated to each patient is extremely short. Sufficient medical history taking and explanations do not occur, increasing the risk of misdiagnosis and making the formation of a trust-based relationship with the patient nearly impossible. This extreme combination of indicators vividly demonstrates how low fees force a "small margins, high turnover" model, and how the system focuses solely on quantitative expansion while completely losing sight of qualitative aspects.
The imbalance in performance across sectors is also severe. The 30-day mortality rate for acute conditions such as stroke or acute myocardial infarction is at the top level of the OECD. This is a product of the high technical standards and rapid initial response capabilities of large hospitals. On the other hand, the "Avoidable Hospitalization" rate—for conditions like diabetes or asthma that could be managed at local clinics to avoid hospitalization—is much higher than the OECD average. This signifies the complete collapse of primary care and chronic disease management systems. It is the result of medical resources being concentrated only on high-cost advanced procedures and large hospitals, while the primary care and preventive management that form the foundation of national health are thoroughly neglected.
The financial structure is also deformed. Despite the name "National Health Insurance," households actually bear a significant portion of medical expenses directly. While the proportion of healthcare expenditure from public sources relative to GDP does not reach the OECD average, the ratio of out-of-pocket costs paid directly by households out of total medical expenses is among the highest in the OECD. This is the result of the simultaneous operation of low health insurance coverage and the expansion of the uncontrolled non-benefit market.
Ultimately, the performance indicators of Korean healthcare show a flashy exterior of "world-class accessibility and acute care technology" alongside a shabby interior of "collapsed primary care, low coverage, and low-quality consultation experiences." This strange portrait is the clearest evidence showing how abnormal and unsustainable the path taken by the Korean healthcare system over the past half-century has been.
5. Conclusion: The Original Sin of Incoherent Combination
Thus far, we have confirmed the "exceptionalism" of the Korean healthcare system from various angles. At the macro level, we identified the self-contradictory combination of the Bismarck and Beveridge models; at the micro level, we proved the absence of core safety nets such as selective contracting and gatekeeping. We also saw that the result is the strange and polarized portrait appearing in OECD performance indicators.
All this evidence converges on one conclusion. The "original sin" of Part 1, which led to the healthcare collapse of 2024, lies not in a single specific institution, but in the "Incoherent Combination" of all these elements itself.
Between the noble goal of "universal access" and the political reality of a "low financial burden," the state chose the easiest path—the path of suppressing private autonomy and shifting responsibility. This choice created a system where "top-down control" and "bottom-up evasion" strangely co-evolve while reinforcing each other. Rather than each part of the system complementing and supporting one another, they constantly clash and create friction, driving the whole toward collapse.
This is also a classic example of failure as warned by policy transfer theory in political science. As pointed out by Dolowitz & Marsh, policy fails due to an incomplete understanding of the original policy, blind imitation regardless of context, and "incomplete transfer" in the absence of necessary complementary institutions. Attempting to introduce a family doctor system or capitation without resolving the fundamental problem of low fees is a typical case of policy transfer failure, akin to fitting high-end tires on a car with a broken engine.
South Korea's governance style remains stuck in "normative import governance" rather than "adaptive governance." Adaptive governance is a method of recognizing problems within a system and evolving through trial and error to find solutions suited to its own environment. Conversely, Korean policymakers have repeatedly taken the complacent attitude that problems will be solved if foreign systems are imported and transplanted without criticism, rather than solving the unique problems of our own system.
The conclusion is clear. Korea’s problem is not a "specific institution" but an "incoherent combination." A car assembled with an engine, wheels, and a steering wheel taken from different vehicles cannot possibly run properly. Unless we acknowledge this fundamental design flaw, we will continue to lose our way on wrong solutions. It is time to track the specific process of how this flaw-ridden blueprint triggered a chain reaction that brought down the entire system in Part 2, "The Three Dominoes."
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[Box] Counterfactual (The mechanisms that should have existed): Gatekeeping / Selective Contracting / Reference Pricing
One reason the Korean healthcare system became an "exception in the world" is that all three safety nets that other developed countries naturally possess are missing. What if these mechanisms had existed?
① Gatekeeping — The Gatekeeper
- What it is: A system where local clinics (primary care) treat patients first and refer them to higher-level hospitals only when necessary.
- Who does it: The UK (GP registration), the Netherlands (huisarts), Denmark, Australia, and most other advanced healthcare systems.
- What happens without it: Even cold patients go straight to university hospitals → 3-hour waits and 3-minute consultations → Meanwhile, patients with severe conditions miss the golden time.
- If it had existed: Minor patients would be handled at local clinics, and high-level hospitals could focus on severe patients, making it possible to simultaneously reduce waiting times and improve the quality of care.
② Selective Contracting — A Market with Exit Possible
Selective Contracting — A System of Selecting Medical Institutions
- What is it: A system where the insurer selects and contracts with medical institutions based on quality and cost. The contract is terminated if standards are not met.
- Who does it: Germany (collective contracts between sickness funds and physician associations), the Netherlands (selective contracts between insurers and hospitals), USA (PPO/HMO networks).
- What happens without it: Since all medical institutions are automatically incorporated into the insurance system, the market mechanism for quality control does not function. Substandard medical institutions are not forced out of the market.
- If it existed: Medical institutions would have incentives to improve quality, and insurers would secure price bargaining power, enabling a bilateral negotiation structure instead of a unilateral low-fee system.
③ Reference Pricing — Prices with a Baseline
- What is it: A system that sets a reference price that insurance pays for drugs and procedures with identical effects, requiring patients to bear any costs exceeding that amount.
- Who does it: Germany (Festbetrag), the Netherlands, Australia, New Zealand.
- What happens without it: The boundary between covered and non-covered services becomes blurred, and medical institutions face stronger incentives to induce patients toward non-covered services.
- If it existed: Patients could make rational choices based on price information, and the indiscriminate expansion of the non-covered services market would have been partially suppressed.
These three mechanisms are important individually, but they exert synergy when working together. Gatekeeping regulates patient flow, selective contracting manages the quality of medical institutions, and reference pricing makes price signals transparent. South Korean healthcare lacks all three. A gate without a gatekeeper, a market without exit, and prices without a standard—this is the core deficiency that has made South Korean healthcare an "exception in the world."
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Part 2. The Three Dominoes: How Well-Intentioned Policies Accelerated the Crisis
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Chapter 7. The First Domino: The Pharmaceutical Separation Shock
On July 1, 2000, the tectonic plates of the South Korean healthcare system were shaken. The pharmaceutical separation (72) was implemented. Introduced under the slogan "Diagnosis to the doctor, dispensing to the pharmacist," this policy appeared on the surface to be a rational public health reform aimed at suppressing the misuse and abuse of pharmaceuticals and promoting national health. In fact, international organizations including the World Health Organization (WHO) had recommended the separation of prescribing and dispensing as a basic requirement for an advanced pharmaceutical system, and South Korea was among the last of the OECD (66) countries to introduce it.
However, the way this policy actually functioned was entirely different from the expectations of its designers. Pharmaceutical separation was not a simple adjustment of work division; it was a shockwave that summarily dismantled the informal subsidy structure that had unstably supported the low-fee system for decades. This chapter traces how the policy event of pharmaceutical separation disrupted the system through economic mechanisms, how political trust went bankrupt in the process, and how it twisted the structure of South Korean healthcare in the long term.
1. The Collapse of Cross-Subsidization: The Informal Safety Net of Drug Margins
To understand the economic significance of pharmaceutical separation, one must first examine the existing equilibrium it destroyed. Before the separation, the profit structure of South Korean medical institutions was a classic example of cross-subsidization. While the medical fees set by the government did not reach the cost of service, doctors made up the difference by directly dispensing and selling drugs. A structure where deficits occurring in medical services were offset by profits from drug distribution—the drug margin—functioned as a de facto compensatory device.
This structure was clearly abnormal. The fact that the price of medical services did not reflect costs and that the survival of medical institutions was possible only through the detour of pharmaceutical distribution margins revealed the fundamental flaws of the system. At the same time, however, it is difficult to deny that this informal mechanism enabled the physical operation of the system for decades. It was a state that could be called a second-best equilibrium in economics. It was not optimal, but it possessed its own internal consistency.
Pharmaceutical separation broke this second-best equilibrium at once. To use economic terminology, it forced the unbundling of medical services and dispensing services that had been tied together as a single bundle. The problem was that when a bundle is dismantled, the price of each component must be reset independently. This policy, which removed the drug margins that covered the deficits while leaving the reality of sub-cost medical fees unaddressed, dealt a kind of cash flow shock to medical institutions. A core source of income evaporated overnight.
The key analytical framework here is the Double Shock Hypothesis. If medical fees had been at an appropriate level, medical institutions could have endured even if drug margins disappeared. Conversely, if drug margins had been maintained even with low fees, the existing equilibrium would have continued to function. However, as the two conditions of low fees and the removal of margins were combined simultaneously, a situation was created where the system had to absorb the shock in its entirety without any buffer.
2. Betrayal of Reform: Disappearance of Procedural Legitimacy and Bankruptcy of Trust
The shock caused by the pharmaceutical separation did not stop at the economic dimension. Perhaps more fatal was the destruction on the political level. This was because the entire process of pushing and implementing the policy exhausted the remaining trust between the state and the medical community to an irreparable level.
The political failure of pharmaceutical separation lay, above all, in the lack of procedural legitimacy. There is a principle repeatedly confirmed in policy studies: the success of a reform is not determined solely by the rationality of its content, but depends heavily on whether stakeholders perceive the policy-making process as fair. Pharmaceutical separation directly violated this principle. Doctors, the most central stakeholders of the reform, were treated as objects of reform rather than subjects of it. While the medical community partially participated in the early stages of the "Medical Reform (61) Committee," the voices of civic groups and the pharmacists' association dominated the "Pharmaceutical Separation Promotion Committee," where key decisions were subsequently made. Demands for fee compensation or phased implementation raised by the medical community were systematically ignored within the frame of "resistance from vested interests."
In response to the government's unilateral enforcement, the medical community entered collective action on an unprecedented scale throughout the year 2000. A total of five strikes occurred, joined not only by private practitioners but also by university hospital faculty, with residents (69) and medical students at the forefront of the struggle. These six months of intense confrontation left deep psychological trauma across the medical community. The state was branded not as a partner for dialogue but as an enemy to be subdued by force, marking a turning point where a passively conforming group of doctors transformed into an organized resistance force. In particular, the generation of young doctors who stood at the front lines of the struggle internalize a political sensitivity and awareness of rights different from previous generations, and this generational awakening was also the seed of the catastrophe that would occur 24 years later.
In December 2000, the medical, pharmaceutical, and governmental sectors reached an uneasy agreement, but this agreement only patched over the surface of the problem. Conflicts between doctors and pharmacists over alternative dispensing and International Nonproprietary Name (INN) prescribing remain unresolved to this day. Above all, the most lasting legacy left by this incident was not the institutional output but the collective memory. The medical community learned through experience that the state's promises could be deceptive and that only organized resistance could protect them. The catastrophe of 2024 lies precisely on the extension of this trust that went bankrupt in 2000.
3. The Great Transfer of Wealth: Chain Bankruptcies of Small-to-Medium Hospitals and Market Reorganization
To grasp the scale of the economic shock caused by pharmaceutical separation, one must track how the flow of money was reorganized. Although this policy wore the mantle of public health, its actual operation was a massive restructuring that violently reshaped the landscape of the healthcare economy.
The most prominent change was the transfer of income from hospitals to pharmacies. As prescribing and dispensing, which were previously tied as a single act, were separated, a double cost occurred for every prescription: the doctor's prescription fee and the pharmacist's dispensing fee. As a result, National Health Insurance expenditures increased explosively, and the insurance finances reached a state of de facto bankruptcy within just one year of implementation. Out of the 16.5 trillion won in health insurance medical expenses in 2001, the portion accounted for by pharmacies reached 22%, or 3.7 trillion won. It was a textbook phenomenon of wealth transfer, where the disappearance of drug margins converted directly into a decrease in hospital profits and a surge in pharmacy profits.
In this structural shift, the most fatal blow was dealt to small and medium-sized regional hospitals with fewer than 300 beds. Unlike large general hospitals, their income sources were not diversified, meaning the disappearance of drug margins meant an immediate management crisis. Statistics speak for themselves. From the perspective of Interrupted Time Series Analysis, July 2000 forms a distinct interruption point in the graph of closure rates for regional small and medium hospitals. The closure rate curve, which had remained gentle until then, took a sharp upward turn from this point, and the annual average insolvency rate of small and medium hospitals after the pharmaceutical separation exceeded 10%. This was a figure for which comparison with the 2.1% insolvency rate of general hospitals during the same period was meaningless.
The government did not ignore this shock. It promised to compensate for losses through fee increases. However, the compensation was mainly designed around consultation and prescription fees for clinics, failing to reflect the management structure of hospital-level medical institutions where hospitalization fees are the main source of income. Here, information asymmetry—a chronic problem in healthcare policy—was at work. The central government did not have precise data on the actual cost structures and profit models of front-line medical institutions, and as a result, the compensation design became detached from reality.
Pharmaceutical separation also shook the ecosystem of the pharmaceutical industry. As the economic link of drug margins was severed, the prescribing behavior of doctors shifted toward prioritizing quality, efficacy, and brand recognition over the price or margin rate of the drug. This was a huge opportunity for multinational pharmaceutical companies with high-priced original drugs and a direct hit for small and medium-sized domestic pharmaceutical companies focused on generics. The fact that the market share of foreign companies surged more than twofold after the pharmaceutical separation illustrates a facet of this structural change.
4. Field Adaptation: Survival Strategies of Front-line Actors and System Transformation
The way macroscopic policy design actually functions in the field is quite distant from the intentions of policy makers. The phenomenon referred to as street-level bureaucracy in public administration appeared exactly as it was in the medical field after the pharmaceutical separation. Instead of passively implementing the central government's policy, front-line doctors and hospital managers developed their own adaptation strategies to survive in the rapidly changed environment.
The most widely observed form of adaptation was the expansion of non-covered (67) medical services. With drug margins gone and covered fees remaining low, medical institutions shifted their profit focus to various tests, procedures, and premium hospital rooms that are not covered by health insurance. This corresponds to the typical balloon effect caused by price regulation in economics. If prices are suppressed on one side, a phenomenon occurs where new profit activities swell outside the boundaries of regulation. As the government controlled the fees for covered items, medical institutions actively developed spaces outside of regulation known as non-covered services.
The expansion of non-covered services produced serial follow-up effects. As the burden of medical expenses for patients moved into unpredictable territory, the private indemnity health insurance market grew rapidly to fill this gap. A dual financial structure was formed where private insurance took on the costs that public insurance could not guarantee. Pharmaceutical separation unintentionally solidified a system where public and private insurance coexist in a malformed way, and this became a structural barrier that repeatedly frustrated subsequent attempts to strengthen coverage and control medical costs.
Another survival strategy chosen by small and medium-sized hospitals on the brink of bankruptcy was the conversion into long-term care hospitals (128). While this will be covered in detail in Chapter 8, what should be noted here is that the origin of the proliferation of long-term care hospitals was a direct product of the pharmaceutical separation shock, rather than a preemptive preparation for aging. When drug margins disappeared, many small and medium-sized hospitals with weak profit structures fell into management difficulties, and the government opened an "escape hatch" for them in the form of long-term care hospitals. This emergency prescription later combined with the daily flat-rate fee system to create a distorted structure that provided incentives for long-term accommodation rather than treatment.
5. The Shadow Left Behind: Long-term Consequences of the First Domino
Pharmaceutical separation succeeded in achieving the narrow technical goal of "separating diagnosis and dispensing." As it became impossible to purchase ethical drugs directly from pharmacies, citizens became accustomed to a culture of seeking a doctor first when sick, and as a result, medical accessibility improved to the point that the annual number of outpatient visits per person in South Korea ranked as the undisputed number one among OECD countries. It is also hard to deny that the indiscriminate misuse and abuse of pharmaceuticals was suppressed to a certain level.
However, the price paid on the flip side of this technical success was immense. The structural legacy left by pharmaceutical separation on the South Korean healthcare system is summarized as follows:
First, without the fundamental problem of low fees being resolved, the informal subsidy of drug margins was merely replaced by another informal subsidy: the expansion of non-covered services. Only the form of the compensation mechanism that the system relies on changed, while the structural vulnerability remained.
Second, trust between the state and the medical community was damaged to an irreparable level. The experience of 2000 became a mechanism that triggered preemptive distrust and organized resistance from the medical community toward all medical reforms promoted by the government thereafter.
Third, as the path of mass bankruptcy of small and medium hospitals and their conversion to long-term care hospitals opened, a void in regional acute care infrastructure occurred. This void promoted another distortion: the concentration of patients into tertiary general hospitals.
Fourth, the malformed dual structure of public and private insurance became solidified. This structure serves as a shackle that structurally constrains the promotion of follow-up policy tasks such as medical cost control, strengthening coverage, and maintaining essential medical personnel.
The lesson permeating the analysis in this chapter converges on a single point: an attempt to eliminate only the symptoms while neglecting the fundamental disease of a system breeds larger and more complex pathologies. The paradox known in economics as the "cobra effect"—a phenomenon where a policy intended to solve a problem actually worsens it—was reproduced almost textbook-style in the separation of prescribing and dispensing drugs. While drug price margins disappeared, the root cause of low medical fees remained untouched. In the resulting vacuum, new monsters nested: the expansion of non-reimbursable services, the bloating of private health insurance, the indiscriminate proliferation of long-term care hospitals, and the pharmaceutical industry's dependence on foreign capital.
As the first domino of the separation of prescribing and dispensing fell, the trajectory of the ensuing chain reaction was already determined. Into the void opened by the collapse of small and medium-sized hospitals, it was time for the second domino pushed by the government—a disguised industrial restructuring labeled "go to long-term care hospitals"—to fall.
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[Text Box] How to Show "Shock" via Interrupted Time Series (ITS)
When proving a causal relationship such as "Did the separation of prescribing and dispensing truly destroy small and medium-sized hospitals?", Interrupted Time Series (ITS) analysis is one of the most powerful tools.
The basic idea is simple: compare the trend line "before" policy implementation with the trend line "after." If the policy had no effect, the pre-implementation trend would continue unchanged. However, if the trend suddenly breaks (level change) or the gradient alters (slope change) at the point of implementation, that constitutes the policy effect.
Applied to the separation of prescribing and dispensing:
- Time Axis (X-axis): 1998–2004 (monthly)
- Outcome Variables (Y-axis): Monthly profitability of small/medium hospitals, closure rates, proportion of non-reimbursable revenue, etc.
- Interruption Point: July 2000 (full implementation of the policy)
- Analysis: Based on July 2000, measure the difference between the actual observed values and the values predicted if the pre-implementation trend had continued. If this difference is statistically significant, one can state that "the separation of prescribing and dispensing shocked the management of small and medium-sized hospitals."
Advantages of ITS:
- It is particularly useful for evaluating policies where Randomized Controlled Trials (RCTs) are impossible (as national policies cannot be applied randomly).
- It is far more rigorous than simple before-and-after comparisons because it can control for seasonal fluctuations or long-term trends.
- When visualized as a graph, the "shock" inflicted by the policy is intuitively revealed.
This methodology can be applied to measure the effects of almost all policy interventions covered in this book, including Moon Jae-in Care (Chapter 33) and the expansion of MRI coverage (Chapter 12), not just the separation of prescribing and dispensing.
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Chapter 8. Government-Led Industrial Reorganization: "Go to Long-Term Care Hospitals"
When the separation of prescribing and dispensing began in 2000, local small and medium-sized hospitals in South Korea faced a wave of bankruptcies. For those who had supplemented a significant portion of hospital profits by operating pharmacies, the removal of drug price margins was a matter of survival. However, the government did not offer a fundamental solution to this crisis. Instead, it opened a different path: an "exit" strategy of abandoning acute care and converting into long-term care hospitals.
The method by which the government created this unfamiliar industry was quite direct. The "Long-term Care Bed Expansion Loan Project," which began in 2003, offered irresistible conditions to small and medium-sized hospitals. By converting existing hospitals into long-term care facilities, they could receive low-interest loans of up to 1 billion won. At a time when bank interest rates exceeded 10% per annum, the government loans were nearly half-price. This was coupled with relaxed personnel and facility standards compared to acute care hospitals. For the hospitals, the math was simple. There was no reason to continue risky and unprofitable acute care.
The result of this policy was dramatic. The number of long-term care hospitals nationwide, which stood at only 54 in 2002, swelled to 1,502 by 2017—a 28-fold increase in just 15 years. This explosion was not solely due to the massive trend of aging; it was because the government deliberately changed the market rules.
However, a question arises here: Did the government truly judge that so many long-term care hospitals were necessary? By late 2006, the Ministry of Health and Welfare already admitted that the supply of long-term care beds exceeded predicted demand. Nevertheless, they did not control the supply. This was because this oversupply was part of the process of achieving a hidden policy objective: the "soft landing" of small and medium-sized hospitals.
The easiest way to rescue small and medium-sized hospitals on the verge of bankruptcy due to the separation of prescribing and dispensing was to migrate them into a new market under the plausible pretext of "preparing for an aging society." Instead of solving the fundamental problem of low medical fees, the government chose to cover one policy failure with another.
The primary victim of this mass conversion was the regional medical ecosystem. The numerous small and medium-sized hospitals that converted to long-term care had previously played the role of "the backbone of healthcare," handling emergency care, sub-acute treatment, routine surgeries, and inpatient care in local communities. Their disappearance created a serious functional void in the regions. A dichotomous mindset prevailed—that light ailments should be treated at local clinics and severe diseases at large hospitals in Seoul—but the middle stage collapsed. Beds for patients in recovery after surgery or those with acute exacerbations of chronic diseases vanished from the regions.
By the time the government tried to apply the brakes, it was too late. Although they announced the cessation of the loan project in late 2006, market inertia did not stop. In just a few months leading up to August 2007, over 6,500 additional acute care beds were converted into long-term care beds. Market participants had already captured two powerful signals: "profitability" proven through the per diem payment system and expectations for the massive "marketability" of the Long-Term Care Insurance for the Elderly to be introduced in 2008.
Here, another stopgap measure called the per diem payment system appears. This system, which pays a fixed amount per day of hospitalization instead of paying per medical act, appeared on the surface to be a rational solution to prevent overtreatment. However, a trap that destroys the essence of medical care was hidden behind it.
Under the per diem system, a hospital's profit formula is simplified to: (Daily Fee - Daily Cost) x Number of Inpatient Days. Under this formula, there are only two ways for a hospital to maximize profit: selectively admitting only "profitable" patients who require low medical needs and thus low management costs, and intentionally reducing necessary tests and treatments for admitted patients. This system sent a distorted signal to hospitals: "Treat to the minimum and hospitalize for the maximum duration."
The reason these economic incentives could operate without much resistance lies in the vulnerability of the patients targeted by this system. Elderly patients in long-term care hospitals, especially those with dementia, lack the ability to assert their rights or evaluate the quality of treatment. They are "trapped consumers" who cannot speak out or easily move elsewhere. The per diem system operates precisely on this vulnerability.
Technically, such traps could have been prevented. This could have been achieved by designing a system where hospitals receive more compensation for treating severe patients through precise risk adjustment based on Case-Mix—reflecting age, comorbidity indices, and Activities of Daily Living (ADL). However, the Korean system attached uniform price tags to all patients grouped into a few categories without such sophisticated risk-adjustment mechanisms.
Ultimately, what the government left behind were physical ruins and invisible distrust. The void in regional acute care infrastructure led to the social problem of patients traveling to the capital for treatment, and the cynicism that "government policy creates a problem and patches it with the next policy" created a social soil that would breed deep resistance to any future reform proposals.
Furthermore, the most ingenious technique for transferring fiscal burden was perfected. When the Long-Term Care Insurance for the Elderly was introduced in 2008, it was an independent social insurance operated by funds separate from National Health Insurance. However, through a legal amendment quietly passed by the National Assembly in 2012, a legal basis was established to integrate the collection of premiums for Long-Term Care Insurance and National Health Insurance.
This was not merely administrative convenience. It was a massive accounting manipulation that blurred the boundary between money used for "care" and money used for "treatment." Through this fiscal integration, the government secured a legal channel to shift the cost of the policy failure—the oversupply of long-term care hospitals—onto the common wallet of the much larger National Health Insurance fund. Most citizens remain unaware of how the health insurance premiums they pay are being diverted to fill the deficits in welfare finances.
The grand transition to long-term care hospitals was not simply a stopgap measure to rescue small and medium-sized hospitals. It was an attempt to solve welfare problems using medical resources and a highly calculated political technique to invisibly transfer that cost to all citizens. The deepest wound left by this second domino is not the softened hospital buildings, but the dangerous precedent of the state breaking fiscal partitions and socializing responsibility without the consent of the people.
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[Text Box] Theory of Policy Instrument Choice (Hood): Treasure/Authority One-Page Summary
The tools a government can use to achieve policy goals are not infinite. British public administration scholar Christopher Hood classified government policy instruments into four categories, known as the NATO model after their initials.
| Tool | Meaning | Medical Policy Example |
| :------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- |
| **N**odality (Information) | Utilizing the centrality of information held by the government | Health checkup campaigns, disclosure of medical quality evaluations |
| **A**uthority | Exercise of legal power and coercion | Compulsory designation system, return-to-work orders, license suspensions |
| **T**reasure (Finance) | Ability to spend or collect money | Raising/freezing medical fees, adjusting premiums, financial support |
| **O**rganization | Direct input of government-owned organizations and personnel | Establishing public hospitals, operating the NHIS, HIRA audits |
The problem with Korean medical policy lies in the bias of instrument choice.
Consider the grand transition to long-term care hospitals. The government used T (Treasure)—loans, tax incentives, and fee designs—to induce small hospitals to convert, and simultaneously used A (Authority)—relaxed facility and personnel standards—to lower entry barriers. However, N (Nodality)—the pre-setting and disclosure of quality control standards—and O (Organization)—the direct expansion of public long-term care infrastructure—were virtually unused.
While the "pushing force" of finance and authority was powerful, the "guiding force" of information and organization was missing. The result? Long-term care hospitals increased explosively, but it became a quantitative expansion without quality control, resulting in the side effect of hospitals turning into "patient warehouses."
The insight offered by Hood's framework: Policy failure often occurs not because "there are no tools," but because "the wrong tools were chosen."
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Chapter 9. The Trap of the Per Diem Payment System
As soon as the new industry of long-term care hospitals was created by the government's hand, the very next problem emerged: cost control. The medical expenses of the rapidly multiplying long-term care hospitals began to pressure the National Health Insurance finances, and the government needed a mechanism to suppress this. Here, the per diem payment system, introduced in 2008, arrived. By paying a comprehensive fixed amount per day of hospitalization instead of paying per medical act, this method appeared on the surface to be a rational design to suppress overtreatment and make fiscal expenditures predictable.
However, the way this payment system actually operated on the ground was diametrically opposed to the designer's intent. The per diem system fundamentally reprogrammed the behavioral patterns of long-term care hospitals, making the act of actively treating patients and restoring their function economically irrational. This chapter dissects how the payment structure of the per diem system turned long-term care hospitals from treatment institutions into custodial facilities through various economic incentives, why the most vulnerable patients inevitably became structural victims in that process, and why this failure—which was technically preventable—was neglected.
1. The Logic of the Profit Formula: Signals Sent by the Payment System
Under the per diem system, the profit structure of a long-term care hospital is reduced to one simple equation: (Daily Fee - Daily Cost) x Number of Inpatient Days. The signal this equation sends to hospital managers is clear. To maximize profit, one must do two things: minimize the daily cost as much as possible and maximize the number of inpatient days as much as possible.
The implementation of this simple equation in the medical field manifests as two distortions long warned about in health economics. The first is "cream-skimming." Just as one skims only the most expensive layer of cream from milk, hospitals selectively admit only "profitable" patients with low medical needs and minimal management costs. Since the per diem fee is fixed within the same grade, mild patients with low risks of complications who require less attention become the optimal customers for the hospital. Conversely, patients who require high care costs—such as those with severe pressure sores, carriers of multidrug-resistant bacteria, or those with severe dementia—become targets for avoidance. A paradox arises where patients who most desperately need medical care are the first to be excluded by market logic.
The second is "underserving." This refers to the practice of intentionally reducing the quantity and quality of services provided to patients once they are admitted. In a structure where the fee is fixed on a daily basis, prescribing better medicine or providing additional tests and rehabilitation therapy directly correlates to increased costs for the hospital. Active medical intervention equates to deteriorating profitability. Conversely, even when a patient's condition improves to the point where discharge is possible, the hospital has an economic incentive to keep that patient hospitalized. There is no reward for successfully treating a patient and returning them to society; rather, it results in a loss of revenue due to an empty bed.
When these two distortions combine, the system effectively whispers to the hospital: "Select the easiest patients, use the minimum cost, and hold onto them for as long as possible." This is the moment when the logic of "cure" gives way to the logic of "custody."
2. The Voiceless: Transferring Risk to the Vulnerable
The distorted incentives of cream skimming and underserving were able to be implemented in the field with almost no friction due to the decisive role played by the specific characteristics of the patient group targeted by this system. The primary inpatients of long-term care hospitals are the elderly, particularly those with severe dementia or complications from strokes, along with chronic patients in psychiatric hospitals. These individuals share a common social condition: their ability to assert their rights, evaluate the quality of services provided, or move to another institution in the face of dissatisfaction is extremely limited.
In economics, this state is referred to as the "captive consumer." For a market to function normally, consumers must be able to make informed choices and leave unsatisfactory providers. Borrowing from the classic framework of Albert O. Hirschman, two mechanisms of check must operate: exit and voice. However, for the majority of patients in long-term care hospitals, both paths are blocked. The decline of cognitive abilities, the absence or indifference of family, the lack of alternative facilities, and the loss of physical mobility overlap, placing patients in a situation where they have no choice but to endure poor service quality.
The daily fixed-sum (per diem) payment system operates upon this foundation of vulnerability. The costs of the risks generated by the system—low-quality care, insufficient rehabilitation, and unnecessary long-term hospitalization—are transferred entirely to a class of people incapable of protecting themselves. This is not merely a dimension of market failure. It constitutes structured injustice, where the system institutionally assigns the poorest services to those whom society ought to care for most.
This aspect of structural injustice is revealed without filter in field indicators. The average length of stay in long-term care hospitals is significantly longer than in similar facilities in comparable OECD countries; the functional improvement rate of patients during hospitalization is low, while the incidence of patient safety accidents such as bedsores and falls is high. The actual treatment time per patient—the combined time of doctor examinations, nursing care, and physical therapy rehabilitation services—is surprisingly short. These figures demonstrate that the economic signals sent by the fixed-sum payment system are being faithfully executed in the field.
3. The Road Not Taken: Technical Failure and Design Alternatives
The distortions created by the daily fixed-sum payment system were not inevitable. The fixed payment method itself is not the original sin. The core of the problem lies in the fact that the technical devices that should have been included when the system was introduced were omitted either intentionally or through negligence. The knowledge accumulated in health economics had already suggested specific tools to offset the adverse incentives inherent in fixed payment systems.
The most fundamental flaw was the absence of risk adjustment. Every patient is different. The required medical resources and care costs vary greatly depending on age, the number and severity of comorbidities, activities of daily living (ADL) scores, and cognitive status. A sophisticated payment system precisely measures the severity of the patient's condition based on a case-mix classification system and applies differential fees in proportion. By designing the system so that treating more severe patients yields higher compensation, the incentive for cream skimming is structurally suppressed.
The Korean per diem payment system for long-term care failed to reflect this principle. The method of classifying patients into a few broad categories and assigning uniform price tags inevitably fell into the "average trap," ignoring cost variances within grades. Within the same grade, a patient requiring high care costs becomes a factor for deficit, while a patient requiring low costs becomes a factor for profit; a rational manager naturally prefers the latter. Cream skimming and underserving were the inevitable consequences of crude system design.
There were alternatives to this technical failure. First is the introduction of a mixed payment system. This method compensates the basic room and board as a fixed sum but applies a separate fee-for-service for actions that directly contribute to the patient’s functional recovery, such as rehabilitation or specific treatments. This mitigates the incentive for underserving because the hospital is reimbursed for the additional costs of providing active treatment.
Second is the introduction of pay-for-performance. This is a mechanism that provides incentives to hospitals that achieve positive clinical outcomes, such as a reduction in bedsore incidence, improvement in patient ADL rates, and appropriate discharge rates. Through this, a framework can be induced where hospitals compete over quality improvement rather than cost reduction.
Third is the implementation of a cap on the number of inpatient days and the transparent disclosure of quality indicators. Based on medical evidence, a maximum limit for appropriate hospitalization days for each disease could be set, and a structure could be created where the fee decreases for long-term hospitalizations exceeding this limit. Simultaneously, disclosing patient safety indicators for each hospital could partially resolve the information asymmetry for captive consumers, opening paths for exit and voice.
The government could not have been unaware of these alternatives. These were devices already proven in cases of countries operating similar payment systems, such as Australia, the United States, and Germany. Nevertheless, the Korean government opted for the simplest and crudest form of the per diem system, prioritizing short-term administrative convenience—specifically the predictability of fiscal expenditure—over long-term values such as medical quality and patient dignity. The per diem system is an exceptionally convenient tool for predicting and controlling total medical costs. However, as the price of that convenience, signals for quality and performance were removed from the system, and an environment was created where good hospitals cannot be distinguished from bad ones. In this environment, adverse selection, where hospitals that cut costs and provide low-quality services earn higher profits, was a predetermined outcome.
4. A Chain of Patchwork and the Final Legacy: From Treatment to Custody
Tracing the path to the introduction of the per diem payment system confirms that the history of Korean long-term care policy converges into a single, consistent pattern. The separation of prescribing and dispensing drugs caused a mass bankruptcy of small and medium-sized hospitals. To resolve this political burden, the government implemented the first "patch"—the conversion into long-term care hospitals. When the explosion of long-term care hospitals pressured finances, a second patch followed: the per diem payment system to control those costs. This second patch then produced new problems: a decline in medical quality, the institutionalization of social hospitalization, and the shifting of risk onto vulnerable groups. This vicious cycle, where one stopgap measure creates the need for the next, is the framework of the collapse process experienced by the Korean medical system over the past 20 years.
The final legacy left by this chain reaction is the regression of the paradigm of Korean long-term care from "cure" to "custody." The per diem system provides no reward for the act of actively treating a patient to restore function and return them to society. Rather, it results in the penalty of reduced profit. Conversely, stable profits are guaranteed for the act of long-term hospitalization of patients with low medical needs at minimal cost. Under this incentive structure, many long-term care hospitals lost their identity as therapeutic institutions and transformed into facilities that quietly isolate those whom society has given up on caring for.
The criticism that these are "modern-day Goryeojang" (the mythical practice of abandoning the elderly) is not a rhetorical exaggeration. In facilities where the de facto goal has become function maintenance—or slow decline—rather than functional improvement, the patient exists as an object of management rather than treatment, and as a component of the bed occupancy rate rather than a beneficiary of medical services. This is not merely a problem of medical resource inefficiency. it is a matter of institutional damage to human dignity.
Furthermore, the conditions that allowed this structure to operate in a closed manner—patients who cannot speak out, an information environment lacking transparency, and the absence of alternative services—remain unresolved. Although the per diem payment system has undergone partial adjustments since its introduction in 2008, risk adjustment systems or performance-linked payment mechanisms capable of structurally suppressing cream skimming and underserving have not been fully introduced to this day.
The lesson revealed by the per diem payment system is that the payment system is not merely a technical means of financial management but a rudder for medical practice. The payment system sends economic signals to hospitals regarding "which patients to accept, what level of service to provide, and when to discharge them." If the signal is poorly designed, hospitals act to optimize their own profits rather than the patient's health, and the cost is paid by those with the least power in the market.
Following the first domino knocked down by the separation of prescribing and dispensing, and the second domino of the conversion to long-term care hospitals, the third link—the per diem payment system—joined the chain reaction. However, this was not the end. Under the pressure of low-fee systems, how was the other pillar of the system, private practitioners, seeking survival? The story of the next domino pushed by the government—the bait of National Health Screenings—awaits.
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[Text Box] Fixed Payment vs. Fee-For-Service: Three Points Where Incentives Shift
Medical payment systems are largely divided into two prototypes: Fee-For-Service (FFS) and Fixed Payment systems (Per Diem / Capitation / Bundled Payment). These two systems send opposite incentives to medical institutions.
Comparison Item: Fee-For-Service (FFS) | Fixed Payment Systems
① Service Volume: More services = Higher profit ↑ → Incentive for over-treatment | Fewer services = Higher profit ↑ → Incentive for under-treatment
② Patient Selection: All patients are revenue sources → Weak motivation to avoid patients | Severe/high-cost patients cause losses → Incentive for cream skimming (preference for mild cases)
③ Length of Stay: Compensation for actions rather than stay → Neutral toward length of stay | If per diem, longer stays = More profit → Incentive for long-term hospitalization
Key Insight: No payment system is a "perfect answer." Fee-for-service encourages excess, while fixed payments encourage deficiency. Problems arise when one extreme is chosen. Korea applies fee-for-service (incentive for excess) to acute care hospitals and the per diem system (incentive for deficiency) to long-term care hospitals, thereby experiencing the side effects of both extremes simultaneously.
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[Text Box] "If It Had Been Designed Like This" (Mixed Payment, Caps, Quality Indicators, Patient Classification)
The evils of the per diem payment system are not the inherent "fate" of the payment system itself. If appropriate supplementary devices are combined, side effects can be significantly suppressed. Let us examine four supplementary devices actually used by other countries.
① Mixed Payment (Blended Payment)
A method where the fixed payment is basic, but separate fee-for-service compensation is added for specific actions (rehabilitation treatment, early discharge programs, etc.). This offsets the incentive for under-treatment.
→ Example: Australia’s long-term care facilities combine a basic fixed amount with an Activity-Based Supplement.
② Length-of-Stay Cap
A method of setting an appropriate upper limit for hospitalization periods by disease and reducing the fee if the limit is exceeded. This suppresses unnecessary long-term hospitalization.
→ Example: Japan’s DPC (Diagnosis Procedure Combination) system gradually reduces the daily fee in three stages according to the length of stay.
③ Quality-Linked Payment
A method of measuring quality indicators such as fall rates, bedsore rates, readmission rates, and patient satisfaction, and granting additional compensation to institutions with good results.
→ Example: The U.S. Medicare’s Skilled Nursing Facility Quality Reporting Program (SNF QRP) follows this model.
④ Sophisticated Case-Mix Adjustment
A method of applying differential fees according to the patient’s severity and nursing needs to remove the economic incentive for cream skimming.
→ Example: The U.S. RUG (Resource Utilization Groups) and Australia’s AN-ACC (Australian National Aged Care Classification).
None of these four supplementary devices have been fully introduced to the per diem payment system of Korean long-term care hospitals. The quality of treatment is not measured, there is no cap on the length of stay, and the differentiation of fees based on patient severity is negligible. The side effects of the payment system are a flaw in design, not destiny. Other choices were possible.
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Chapter 10. The Second Domino: The Bait of National Health Screenings
While the separation of prescribing and dispensing drugs brought down local small and medium-sized hospitals and their remains were reassembled into the new form of long-term care hospitals, how was the other pillar of the system, the private practitioners, enduring the pressure of low fees? The outpatient sector of primary and secondary care, consisting of neighborhood clinics and small specialized hospitals, did not undergo a dramatic transformation like the total replacement of an industry seen with long-term care hospitals. However, this sector was also not free from the chronic profitability pressure imposed by the low-fee system. To manage this discontent, the government pushed the second domino. This was the National Health Screening program, a massive policy product aimed at the entire citizenry.
On the surface, National Health Screenings put forward the noble public health goals of early disease detection and prevention. However, the function this program actually performed behind the scenes was different. It served to quiet discontent within the system by providing a stable source of income to private practitioners who were on the verge of collapse due to low fees, while simultaneously acting as an entrance to pull healthy citizens into the medical market. This chapter analyzes the economic and sociological mechanisms through which National Health Screenings deepened system distortions under the guise of "preventive medicine," how the statistical trap of overdiagnosis created new markets, and how exceptional this system is in an international context.
1. The Institutionalization of Medicalization: Making Healthy People into Potential Patients
To understand the operating principles of National Health Screenings, one must start with the sociological concept of medicalization. Medicalization refers to the social process by which problems of life that were not originally in the medical domain—aging, anxiety, personality traits, and everyday risks—are gradually redefined as diseases or objects of medical management. This concept, formalized by Peter Conrad, captures the phenomenon where the boundaries between "normal" and "abnormal" constantly shift as medical authority expands into increasingly broader areas of human experience.
National health screening was a project that institutionalized this medicalization on a national scale. Every year, tens of millions of healthy people are summoned as subjects for screening to have their bodies checked against medical standards. In this process, what is bestowed upon them is not a confirmation of being "healthy," but rather a new identity as a "potential patient." Fluctuations in blood pressure, blood sugar, and cholesterol levels that naturally occur during the aging process are labeled as "borderline diseases" (prehypertension, prediabetes, dyslipidemia), and microscopic tumors that would likely never have caused any symptoms throughout one's life are elevated to objects of fear known as "future cancers." Health is no longer a natural state but becomes an unstable condition that can only be maintained through constant testing and numerical management.
This process of medicalization is justified through sophisticated meaning management. Under the powerful narrative that "early detection saves lives," not undergoing screening is framed (83) as irrational and irresponsible behavior. As the state directly steps forward to encourage—effectively mobilize—screening, getting tested more often and more extensively becomes the attitude of a wise citizen. Within this frame, public health anxiety is reinterpreted not as pathological, but as a virtue of self-management, and that anxiety is converted into a market where medical institutions can sell endless additional tests and procedures.
From the perspective of private clinics, national health screening served as a dual source of income. One is the fee-for-service income for the screening act itself, and the other is the income from additional precision examinations—mostly non-reimbursable (67)—targeted at examinees who show "abnormal findings" in their screening results. Given that the latter is more profitable than the former, national health screening functioned not merely as a source of income but as a patient funnel leading patients into the non-reimbursable market. For clinics finding it difficult to survive solely on insured treatments under a low-fee system, screening was almost the only institutional pathway to legally generate demand for non-reimbursable services.
2. The Statistical Trap of Screening Tests: False Positives and Overdiagnosis
The point where the trap of medicalization produces its most clinically destructive results is where it intersects with the statistical characteristics of screening tests. All screening tests are imperfect. They structurally entail the risks of false positives, which tell people without a disease that they have one, and overdiagnosis, which diagnoses abnormalities as diseases that would not actually threaten life. These two risks exist in all screening tests, but their scale expands explosively when implemented on a large scale targeting healthy people.
In epidemiology, the key indicators for evaluating the utility of a screening test are sensitivity, specificity, and positive predictive value (PPV), which is the probability that a person who receives a positive result actually has the disease. As Bayes' theorem demonstrates, PPV depends critically not only on the accuracy of the test but also on the pre-test probability (prevalence) of the target population. In a healthy population with low prevalence, the PPV plummets regardless of how accurate the test is. The majority of positive results become false alarms rather than actual diseases.
This statistical reality directly clashes with the design of the national health screening. When extensive testing is conducted on a population with extremely low prevalence, such as the entire nation, the absolute number of false alarms overwhelms the number of actual disease detections. Examinees who receive false alarms undergo additional precision tests in a state of anxiety; while many are eventually declared normal again, they have already paid the price in psychological distress and economic costs. For some, this even leads to unnecessary procedures or surgeries.
The case of thyroid cancer in Korea has become a world-class case study clearly demonstrating how the dynamics of overdiagnosis are enforced. As thyroid ultrasound screening became universal, the incidence rate of thyroid cancer in Korea surged approximately 15-fold between 1999 and 2011. However, during the same period, there was almost no change in the thyroid cancer mortality rate. What this discrepancy means is clear: most of the surging diagnoses were for occult carcinoma—"lazy cancers" that do not cause clinical problems—which patients would have lived their whole lives without knowing about. Tens of thousands of people underwent thyroidectomies to remove these lazy cancers, and as a result, they were placed in a state of medical dependence called lifelong thyroid hormone replacement therapy. Screening intended to reduce the disease burden inversely created a new disease burden.
The thyroid cancer case is particularly instructive because the mechanism at work here is not limited to the thyroid. Lead-time bias—the phenomenon where early detection inflates "survival rate" statistics without actually extending the actual survival period—and length-time bias—the phenomenon where slow-growing tumors are overrepresented in screening—are structural biases inherent in all cancer screening programs. Nevertheless, the Korean government has expanded screening items without a systematic review of these biases.
3. Politics, Not Science: Governance of Determining Screening Items
Despite the risks of overdiagnosis being academically well-known, the background behind why Korea's national health screening has expanded groundless items lies in the problem that the decision-making structure of screening policy itself is subordinate to politics rather than science. This point is most clearly revealed in comparison with the United States.
In the United States, a "national health screening program" like the one in Korea does not exist. Instead, the United States Preventive Services Task Force (USPSTF), an independent private expert committee from the government, presents graded recommendations based solely on scientific evidence for each screening item. Evaluations from Grade A (substantial net benefit) to Grade D (harms outweigh benefits) are strictly assigned according to the level of evidence. The federal government only mandates that insurers provide services with A and B grades without out-of-pocket costs, leaving the decision of what to test for individual patients to shared decision-making between doctors and patients. This structure institutionally blocks room for political interests to intervene in scientific judgment.
Korea's screening policy decision-making structure is the exact opposite. The authority to select screening items, target ages, and screening cycles is concentrated in the Ministry of Health and Welfare, and an independent scientific advisory body comparable to the USPSTF is absent. Consequently, the addition and expansion of screening items have been driven by political calculation rather than scientific evidence. The "Health Screening for Transitional Ages" introduced in 2007 is a typical product of this structure. This program, which provides intensive screening packages at specific ages of 40 and 66, had weak epidemiological evidence as to why those specific ages were chosen. It was designed as a visible welfare gesture for voters in specific age groups, not based on an analysis of disease burden.
A comparison with Japan is also suggestive. Japan's health screening system started from the tradition of occupational health, where companies manage the health of employees, and through the introduction of Specific Health Checkups in 2008, it set a clear public health goal of preventing metabolic syndrome. The focus is not on the screening itself, but on the mandate of Specific Health Guidance—individualized counseling and management for lifestyle improvement—based on the screening results. Emphasis was placed on intervention rather than discovery.
The Korean system lacks both the goal-orientation of the Japanese model and the scientific independence of the American model. While Japan asks "how to prevent chronic diseases most efficiently" and the U.S. asks "is there evidence that this test's benefits outweigh its harms," Korea's screening policy has been optimized for the question: "how can we look like we are providing the most visible benefits to the most people at the lowest cost?"
4. The Economics of the Conveyor Belt: A Regime of Quantity and the Absence of Follow-up Management
Defects in the governance of screening policy lead to a structural decline in service quality in the field. In a structure where the fees for each screening item are set low, the only way for medical institutions to secure profitability in the screening business is to maximize throughput per unit of time. As a result, screening sites are operated as conveyor-belt-style mass processing systems. The time allocated to a single examinee is extremely short, and sufficient explanation or counseling regarding test results is structurally impossible.
In this quantity-oriented system, what is most fatally sacrificed is follow-up management. The public health value of screening is realized only when appropriate "intervention" is made for identified risk factors, rather than the "discovery" of the disease itself. Only when an examinee with abnormal findings receives appropriate additional testing and is linked to lifestyle modification or treatment does the investment in screening return as an improvement in health outcomes. However, in the Korean system, this connection is effectively severed. A system to track and manage whether examinees who received screening results take follow-up actions is almost non-existent, and counseling services to help them understand the meaning of the results and translate them into action are not institutionally guaranteed.
This structure generates severe inefficiency from the perspective of resource allocation. The state is essentially funneling resources needed to treat truly sick people into testing healthy people and unnecessarily converting some of them into patients. The time and capacity of primary care to perform the gatekeeper function of comprehensively managing the health problems of community residents are exhausted in processing the volume of screenings commissioned by the state. The phenomenon of the identity of private clinics sliding from clinical medical professionals fighting on the front lines of disease to subcontracted executors of national screening projects is another aspect showing how the low-fee system encroaches upon the essence of primary care.
5. Tactical Deception: The Political Economy of the Illusion of Preventive Medicine
Synthesizing the analysis of this chapter reveals the actual function that national health screening has performed in the Korean medical system. It was not an evidence-based public health strategy, but a political buffer to manage the contradictions of the low-fee system.
The operational logic of this device is summarized as follows. Chronic profit pressure on private clinics due to low fees carried the risk of turning into political discontent. Instead of the fundamental but politically burdensome solution of raising fees, the government chose a detour of supplying a new source of income to private clinics through the screening business. This detour was packaged in a politically attractive narrative of "strengthening preventive medicine," thereby being perceived by the public as an expansion of welfare and functioning as a means of management stabilization for private clinics. The reason screening items with uncertain cost-effectiveness could be added without scientific verification was that this structure of political exchange lacked incentives to restrain the addition of items.
This can be called tactical deception because this arrangement works to conceal the actual problem—the unsustainability of the low-fee system—rather than solve it. While avoiding the politically expensive task of structural reform, the government produces the impression of investing in health through the expansion of visible "free screenings." Meanwhile, the fundamental financial unsustainability of the system remains intact, and new costs such as medicalization and overdiagnosis are added to it.
The tragedy of thyroid cancer overdiagnosis, the emptiness of mass screening without follow-up management, and the expansion of screening items by political logic without scientific evidence. All of these converge into a single cause. It is the choice to pass the symptoms onto a new market called "prevention" without facing the original sin of low fees. As this second domino fell, what was created was a structure where healthy citizens were mobilized as raw materials needed to maintain the system's inefficiency.
With the bait of screening given to private clinics and the trap of medicalization laid for the public, it was now time for the final detonator to appear that would explode all the contradictions of the system at once: private indemnity health insurance. As private insurance began to fill the gap created by the low coverage of public insurance, the non-reimbursable market entered an expansionary trajectory beyond any control.
Chapter 11. The Third Domino: The Pandora's Box of Indemnity Insurance
While the separation of prescribing and dispensing shook the financial foundation of small and medium-sized local hospitals, and national health screening turned healthy people into potential patients, a force of an entirely different nature was seeping into the cracks. It was private indemnity health insurance.
This was not a simple financial product. It was the final accelerator toward collapse—completing the contradictions of the low-fee system, paralyzing the non-reimbursable market, and triggering a mass exodus of essential medical personnel.
If the previous two dominoes made cracks in the system, the third domino of indemnity insurance pushed explosives into those cracks. The strange thing was that these explosives were not the result of spontaneous market forces, but the outcome of the state's acquiescence coinciding with the interests of financial capital.
1. A Product Born in the Womb of Crisis: The IMF and the Blue Ocean of Insurance Capital
To understand the emergence of indemnity insurance, one must go back to the 1997 foreign exchange crisis. The IMF bailout forced large-scale restructuring across the financial industry, and the insurance industry was also driven to a crisis of survival. The life insurance and auto insurance markets were already saturated, and insurance companies desperately needed to find new sources of profit.
At that very moment, what the insurance companies spotted was the largest hole in the medical system. The health insurance coverage rate hovered in the 60% range, and the non-reimbursable area of the remaining 40%, where insurance did not apply, was open without any regulation. (143) The non-reimbursable medical expense market, which tens of millions of people paid into every year, was nothing short of a gold mine for insurance companies.
This market did not arise spontaneously through pure market logic. The government neglected the expansion of the indemnity insurance market and, in some respects, actively encouraged it. It was the result of a strange alignment between the needs of the government and the desires of capital.
From the government's perspective, the growth of indemnity insurance was convenient. They could quell public dissatisfaction over medical expenses without investing massive financial resources to increase the health insurance coverage rate. They could shift the burden of medical expenses from the government to private insurers and households. The social security responsibility that the state should have borne was instead entrusted to the private market.
There is the strongest evidence showing that indemnity insurance is not a pure private product. It is the fact that all insurance companies use almost the same "standardized terms and conditions." (144) These standardized terms, designed by financial authorities, effectively eliminated competition among insurance companies. The very structure in which differentiation of premiums and coverage content is impossible tells us that this product is a semi-public product designed under government rules rather than the market.
2. A Malformation Found Nowhere Else in the World: The Truth Revealed by International Comparison
To properly understand the nature of Korean indemnity insurance, it is necessary to compare it with other countries. Looking into it, it is difficult to find a structure like Korea's anywhere in the world.
The core problem in the United States is the large number of uninsured individuals. However, even for those with insurance, coverage is limited to items pre-screened and approved by insurers based on medical necessity. Patients cannot receive any procedure simply because they want it. Even in the U.S., there is no structure where a massive non-covered (out-of-pocket) market exists separately despite the entire population being enrolled in public insurance, nor does private insurance reimburse such costs almost without limit.
Europe is even clearer. Most European countries, including Germany, France, and the UK, cover nearly all medically necessary health services through public insurance. Items not covered by public insurance are limited to cosmetic procedures or patient convenience services. A Korean-style structure, where medically necessary tests and procedures are classified as "non-covered" and private insurance fills that gap, is difficult to imagine in Europe.
The most meaningful countries for comparison are Taiwan and Japan, which, like Korea, have a single-payer public insurance system. The decisive difference lies in their principle of prohibiting the mixing of non-covered items with covered treatments. In Taiwan, if a patient chooses non-covered treatment, they must bear the full cost of all associated services, including consultation and examination fees. This structure fundamentally blocks the practice of "tie-in sales" where non-covered services are bundled with covered ones. Since Japan applies similar principles, the role of private insurance in covering non-covered items is extremely limited in both countries. (145)
What international comparison tells us is clear. Without resolving the problem of low medical fees, the Korean government has neglected and even encouraged private insurance to fill the holes in the system through the "gray zone" of non-covered services. Other countries prevented the birth of such a deformed market through control mechanisms such as realistic medical fees, the prohibition of mixed medical care, and prior authorization systems. Korea alone ignored all of these, and as a result, a "Republic of Indemnity Insurance" unlike any other in the world was born.
3. A Festival of Moral Hazard: A Market with Paralyzed Price Signals
The most fatal impact of indemnity insurance on Korean healthcare was the extreme amplification of all elements of market failure. At its core is the moral hazard that exploded simultaneously on the sides of both patients and doctors. (146)
Let us first examine the moral hazard on the patient side. The perception that "it will be covered by insurance anyway" completely eliminated price resistance toward non-covered procedures. Whether it is a 500,000 won manual therapy session or a 300,000 won extracorporeal shockwave therapy, the actual cost borne by the patient is negligible, so price disappears from the decision-making process. When price ceases to function, medical resources are allocated according to desires rather than needs.
Moral hazard on the doctor’s side is more structural. For medical institutions suffering from chronic deficits due to low fees, patients with indemnity insurance are effectively "customers who do not care about the price." Actively recommending highly profitable non-covered treatments is closer to a choice for survival than an ethical lapse. Because of the significant information asymmetry between doctor and patient, it is not difficult for a doctor to persuade a patient of the necessity of a specific procedure. Indemnity insurance created the perfect environment for this structure to run wild without any brakes.
When these two types of moral hazard combined, the worst-case scenario became reality. Private insurance did not function as a supplement to public insurance but acted as a predator that cherry-picked highly profitable non-covered treatments. Deficits in essential medical care, which are not profitable, were neglected within the public insurance system, while the costs of non-covered treatments developed to offset those losses were shifted to society as a whole through private insurance. This represents the most extreme implementation of a structure where private insurance parasitizes public insurance in Korea.
4. The Outflow of Essential Medical Personnel: An Irresistible Economic Signal
The massive non-covered market created by indemnity insurance became a powerful black hole sucking in medical personnel. The evidence is most starkly revealed in the changes in residency application rates.
Between 2010 and 2020, the residency application rate for dermatology soared from 250% to 400%, and for plastic surgery from 300% to 500%. During the same period, the rate for general surgery plummeted from 80% to 30%, and for thoracic surgery from 50% to 10%. These numbers show with brutal clarity what economic signals the Korean healthcare system is sending to future doctors. (147)
Why are doctors leaving essential healthcare? The answer is actually simple. A doctor performing non-covered manual therapy or cosmetic procedures can enjoy much higher income and a more stable working environment than a surgeon who operates all night and risks medical malpractice lawsuits. When indemnity insurance removed price resistance in the non-covered market, the profitability of non-covered treatments soared, and this gap created a mass migration of medical personnel.
When the income gained by leaving essential healthcare for the non-covered sector grows drastically, staying in essential healthcare becomes an economically irrational choice. Maintaining a system based solely on individual sense of duty cannot last long when structural incentives point in the opposite direction.
5. Regulatory Capture and Absence of Data Governance: Why Did the Government Remain Silent?
Why did the government, which should have prevented the collapse of the market, remain silent? This is the result of three complex failures: regulatory capture, ministerial sectionalism, and the absence of data management.
The first is regulatory capture. Although indemnity insurance is a product related to healthcare, the authority for supervision lies with the Financial Services Commission (FSC), not the Ministry of Health and Welfare (MOHW). The FSC’s primary goal is the growth of the financial industry, not public health. The insurance industry succeeded in defining indemnity insurance as a "financial product" through lobbying, cleverly evading the control of the MOHW. A structure was created where the regulatory body represents the interests of the industry it is supposed to regulate.
The second is ministerial sectionalism. The MOHW blamed the problem of non-covered services on the FSC's poor supervision, while the FSC countered that they could not control the loss ratios of insurers unless the MOHW managed the non-covered market. While they shifted responsibility to each other, the "golden time" to rectify the relationship between public and private insurance was wasted.
The third and most fatal failure was the absence of data management. The National Health Insurance Service has data on covered treatments, and private insurers have data on non-covered treatments. However, these two sets of data were not linked. There was no central control tower capable of identifying who received which non-covered treatments and to what extent.
Reasonable policy responses were impossible in a state where even the scale of the problem could not be grasped. The government ended up creating a "blind market" where it did not even know what it needed to control.
Ultimately, the triangular relationship between low fees, non-covered services, and indemnity insurance formed an inefficient but strangely stable symbiotic relationship. The government suppressed health insurance spending through low fees. Financial authorities grew the insurance industry by selling indemnity insurance products that filled that void. Hospitals compensated for losses from low fees with non-covered income. Each party secured short-term interests, but no one took responsibility for the cost of the distortion of the entire system. Rational individual choices gathered to create a collective catastrophe.
6. Socialization of Costs and Disappearance of Responsibility: Who Receives the Bill?
The most fatal legacy of indemnity insurance is that it successfully shifted the cost of system failure to the entire citizenry.
The cost of non-covered treatments, which surged due to moral hazard, caused insurers' loss ratios to skyrocket. To cover these losses, insurers significantly raised premiums for all policyholders every year. The costs generated by the overtreatment of a few were shifted to the majority of policyholders who rarely used medical services. In effect, redistribution operated in reverse—not toward protecting the weak, but toward subsidizing consumers of excessive medical care.
In this process, responsibility completely vanished. The government blamed insurers for its own policy failures. Insurers blamed hospitals for overtreatment. Hospitals pointed to the pressure of survival due to low fees as the cause. In a cycle where no one took responsibility, the final bill was returned only to the 40 million policyholders. (148)
This also explains why reform has been sluggish for decades. The groups that benefit from structural problems—insurers, non-covered clinics, and high-consumption patients—are small in number but well-organized. The majority of the 40 million policyholders who bear the costs have their individual burdens dispersed, making it difficult for them to speak out. In a structure where concentrated small-group interests overwhelm dispersed large-group costs, reform does not easily happen.
7. An Irreversible Path: After Pandora's Box is Opened
Once the Pandora's box of indemnity insurance was opened, Korean healthcare became trapped in an irreversible structure. When a structure where tens of millions are enrolled and tens of thousands of medical institutions depend on non-covered income becomes solidified, returning it to its original state becomes nearly impossible both politically and economically.
The lesson left by indemnity insurance is harsh. Attempts to solve fundamental flaws in public systems—such as low medical fees and low coverage—through the private market always give birth to a bigger monster. Passing public responsibility to the private sector is not a solution, but merely a concealment. Concealed problems inevitably return on a larger scale and in a more uncontrollable form.
In the end, indemnity insurance was a monster born from the aligned interests of financial capital seeking new sources of profit, a government trying to offload public insurance responsibilities to the private sector, and a medical community looking for an escape from low fees. As the third domino fell, Korean healthcare entered a path of collapse that cannot be restored through gradual reform. Price functions were paralyzed, resource allocation was distorted, and the hollowing out of essential healthcare accelerated.
Now, it is time to specifically dissect in Part 3, "The Distorted Market," what strange markets and predators were born upon the ruins created by these three dominoes—the reality of the monsters spawned by system distortion.
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Chapter 12. The Economics of the Balloon Effect
Where did the destructive energy accumulated in the system go after the first three dominoes—the separation of prescribing and dispensing (72), national health examinations (136), and indemnity insurance—fell in succession? Just as the first law of thermodynamics does not allow for the disappearance of energy, the pressure generated by institutional contradictions did not vanish. It moved toward the most vulnerable points of the system and bulged in strange forms. The most powerful metaphor explaining all distortions in the Korean healthcare system is the "balloon effect."
If the government forcefully presses down on one side of the balloon—the "covered" (67) sector where health insurance applies—the air inside does not disappear but moves to the other side, the unregulated "non-covered" sector, causing it to swell tight. This simple metaphor encapsulates the economic and political truth of why all "patchwork" prescriptions that ignore the fundamentals of the system are bound to fail. However, the balloon effect is more than a mere metaphor. Economically, it is an inevitable result predicted by the Theory of the Second Best; politically, it is a governing technique cleverly utilized through agenda-setting; and statistically, it is a clearly demonstrable causal relationship.
1. Three Layers of Truth: Empirical, Actual, and Real
To understand the balloon effect, it is necessary to distinguish the layers of the phenomenon. Borrowing the ontological distinctions from Critical Realism—the empirical, the actual, and the real—clarifies the structure of this phenomenon.
What we witness in daily life is the empirical layer. Patients are recommended expensive non-covered procedures such as manual therapy, nutritional injections, and extracorporeal shockwave therapy every time they go to a hospital. The explosive expansion of non-covered treatments and the normalization of "mixed medical care"—providing covered and non-covered services together—is the reality that tens of millions of patients feel firsthand.
Behind this experience lies the layer of the actual. As the government strongly controls the covered sector, there is a massive trend of hospitals shifting their profit models toward the non-covered sector for survival. Tracking data from the Health Insurance Review and Assessment Service reveals a repeated pattern where non-covered treatment sales increase reflexively whenever covered medical fees are frozen or lowered.
However, at the root of all this lies the layer of the real. It is the invisible structural force where extreme price asymmetry between covered and non-covered services fundamentally distorts the allocation of limited medical resources—doctors, equipment, and time. In a situation where the profit gained by a medical institution from one covered patient versus one non-covered procedure differs by several to dozens of times, money will always flow toward where more can be earned. This is not a question of morality, but a question of incentive structure.
The balloon effect is a single mechanism that penetrates these three layers. It was an inevitable economic consequence born from the original sin of low fees and the three dominoes, not a mere side effect.
2. The Theory of the Second Best: Economics of an Imperfect World
The theory that most accurately captures the economic foundation of the balloon effect is the "Theory of the Second Best," presented by Richard Lipsey and Kelvin Lancaster in 1956. The core proposition of this theory is clear to the point of being counter-intuitive: in a market where one or more distortions already exist, removing another single distortion does not necessarily increase the efficiency of the entire system and may, in fact, make the situation worse.
In an ideal world—the "First Best" condition in economics—removing one distortion always improves the efficiency of the entire system. However, real-world markets already have multiple overlapping distortions. As long as the first distortion of low fees exists in Korean healthcare, non-covered services are a "partial optimization" solution chosen by medical institutions for survival. For hospitals that must receive fees below cost for covered treatments, non-covered income is a means of "cross-subsidization" to cover deficits; without this, the continuation of covered treatment itself is impossible under this structure.
The problem is that these rational choices of individual hospitals combine to drive the entire system toward a state of "system-wide sub-optimization." Medical resources deviate from essential healthcare (61), total medical costs increase uncontrollably, and patient safety is threatened. It is an implementation of the "fallacy of composition" at an institutional level. The paradox that modern economics has long warned about—where the micro-rationality of individual actors leads to macro-irrationality—has appeared in its most extreme form in Korean healthcare.
The implications that the Theory of the Second Best casts upon Korean healthcare are grim. Attempting to eliminate only the derivative distortion of non-covered services while leaving the fundamental distortion of low reimbursement rates intact does not improve the efficiency of the overall system. Instead, it is no different from driving the system toward a state of mutual destruction by blocking the hospitals' last means of survival. Just as air does not disappear no matter how hard one side of a balloon is pressed, the expansion of non-covered services cannot be stopped unless the valve of low reimbursement is opened.
3. The Trap of Partial Optimization: Why Patchwork Prescriptions Repeat
The case of "Moon Jae-in Care" most clearly demonstrates the outcomes of the government's patchwork prescriptions that ignored the warnings of the Theory of the Second Best. Launched in 2017, the policy to strengthen National Health Insurance coverage—so-called Moon Jae-in Care—made it a core objective to convert specific non-covered items, most notably MRI and ultrasound, into covered services by investing massive financial resources. On the surface, the logic was to alleviate the medical cost burden on citizens by reducing expenditures on non-covered items.
What was the result? When the government pressed one side of the MRI balloon, hospitals inflated other areas—such as manual therapy, nutritional injections, and expensive specialized tests—to maintain their profit levels. The phenomenon where the manual therapy market grew explosively following the 2018 coverage of MRIs was an event that empirically proved the balloon effect is not a theoretical possibility but a realistic causal relationship. While the out-of-pocket costs for the covered items decreased, new non-covered items were created enough to more than offset that reduction. Total medical costs did not decrease; only the composition of non-covered services changed.
Translating this phenomenon into the language of business administration, it is "strategic adaptation." Healthcare institutions are not passive entities reacting to changes in the regulatory environment, but rational actors actively seeking strategies to maximize profits under new rules. In regulatory economics, this is called "regulatory arbitrage." The act of crossing regulatory boundaries and utilizing the profit gap between regulated and unregulated areas is a phenomenon that inevitably appears when regulation fails to change the fundamental structure of the market.
It is unlikely the government was unaware of this fact. Nevertheless, the reason patchwork prescriptions repeat lies not in economic rationality, but in political rationality. Normalizing reimbursement rates involves a large-scale increase in health insurance expenditures, thus carrying a high political cost. In contrast, expanding coverage for specific non-covered items is a strategy with high political effectiveness relative to cost, as it creates visible achievements like "we have done this much for the people." In public administration, this is called a "symbolic policy." It is a policy whose purpose is to give the impression that a problem is being solved rather than solving the root of the issue.
4. The Frame War: "Non-covered Services = Evil"
The balloon effect is not a simple economic phenomenon. It is also the most effective political weapon the government uses to shift the responsibility for system failure onto the medical community.
According to the theories of agenda-setting and framing in political science, power is determined by what is "defined" as a problem and who is "made" to be the cause of that problem. The agenda-setting theory, systemized by Maxwell McCombs and Donald Shaw, explains that the media determines what the public considers important by highlighting specific issues. Robert Entman’s framing theory goes one step further. It posits that depending on what framework an event is presented in, the diagnosis of the cause and the solution can change completely.
In the discourse on Korean healthcare, the frame constructed by the government is surprisingly simple and effective. The real problem of the system is the "low reimbursement rates" forced by the state. However, the government points to "non-covered services" as the cause of the problem. Within this frame, roles are redefined as follows: Non-covered services become a means for "immoral doctors" to make money off patients. Doctors are portrayed as greedy vested interests who prioritize their own profits over public health. The government assumes the role of the guardian of justice, correcting this evil and protecting the citizens.
The reason this frame is powerful is that the narrative of "greedy doctors vs. innocent citizens" is a structure that is cognitively easy to process. It is a classic framework that activates "System 1" thinking—as described by Daniel Kahneman—which is fast, intuitive, and based on emotion. Understanding structural concepts such as low reimbursement, coverage rates, and cross-subsidization requires "System 2" thinking—which is slow, analytical, and requires effort—but most citizens do not routinely exert that level of cognitive effort. The government is accurately exploiting this cognitive asymmetry.
At the forefront of this frame war is the controversy over "banning mixed billing." The government claims that banning mixed billing will reduce unnecessary non-covered services and alleviate the medical cost burden on citizens. The superficial justification seems plausible. However, banning mixed billing while low reimbursement remains unresolved blocks cross-subsidization, the last means of survival for hospitals. From the perspective of the Theory of the Second Best, this is a dangerous policy that can drive the entire system toward catastrophe, as it closes the escape hatch of the second distortion (non-covered services) while leaving the first distortion (low reimbursement) intact. In fact, it is closer to an extremely political pressure tactic aimed at withering healthcare institutions.
The government, pointing at the balloon it inflated by blowing air into it, is essentially shouting, "This is all the balloon's fault."
5. Statistical Proof: Beyond Analogy to Causality
To prove that the balloon effect is not a mere metaphor or political rhetoric, rigorous econometric methodology is required. Fortunately, the Korean healthcare system provides almost perfect conditions for a "natural experiment" to verify this: specifically, the policy changes where the government converts certain non-covered items into covered ones.
The most powerful analytical tool is the "Difference-in-Differences (DiD)" technique. For example, to measure the effect of the Moon Jae-in Care MRI coverage policy, a group of hospitals with a high proportion of radiology—directly affected by the policy change—is set as the treatment group, and a group of hospitals with a low proportion of radiology—minimally affected—is set as the control group. DiD analysis compares the difference in the change of "other non-covered items" (such as manual therapy or nutritional injections) prescribed by these two groups before and after the policy implementation. If the volume of other non-covered prescriptions increased significantly more in the treatment group than in the control group, it implies that a "substitution effect" occurred as hospitals tried to make up for the decrease in MRI income with other non-covered income.
For more sophisticated analysis, "Instrumental Variables (IV)" analysis can also be utilized. By using variables that affect only covered medical expenses but do not directly affect non-covered medical expenses—such as changes in public insurance policies in specific regions or the adjustment rates of health insurance reimbursement—as instrumental variables, it is possible to more strictly identify the causal relationship where low reimbursement induces the expansion of non-covered services. The IV estimator can prove that the correlation between covered and non-covered services is not a simple simultaneous fluctuation but a "causal transmission" by controlling for endogeneity issues.
The conclusion these analyses consistently show is one: the expansion of non-covered services is not a result of the individual greed of doctors, but a rational and predictable response to the structural pressure of low reimbursement. The balloon effect is science, not rhetoric, and the data does not lie.
6. The Paradox of Patchwork Prescriptions: The Conclusion of Part II
Part II, "The Three Dominoes," traced how a system built upon the original sin of low reimbursement has collapsed in a chain reaction. The separation of prescribing and dispensing undermined the management base of small and medium-sized hospitals. National health screenings drove clinics into a distorted market. Indemnity insurance paralyzed the price function of the non-covered market, accelerating the outflow of essential medical personnel. And the final phenomenon where all this destructive energy condensed is the balloon effect.
The conclusion of this chapter is uncomfortable but clear. Any patchwork prescription that attempts to treat only symptoms while ignoring the fundamental disease of the system—low reimbursement—inevitably produces a balloon effect and pushes the system deeper into a quagmire. Economically, this is the inevitable result predicted by the Theory of the Second Best. Politically, this is a technique of governance cleverly utilized through the frame of "non-covered services = evil." Statistically, this can be proven as a clear causal relationship known as the substitution effect.
Consider a counterfactual. What if the government had concentrated the financial resources and efforts poured into patchwork prescriptions over the past 20 years on solving just one fundamental problem: the normalization of reimbursement rates? The price asymmetry between covered and non-covered services would have been alleviated, and the concentration of resources into non-covered services would have been suppressed. If healthcare institutions could secure a reasonable profit through covered treatments alone, the structural basis for the balloon effect itself would have vanished. Much of the current extreme market distortion and the collapse of essential medicine could have been prevented.
However, reality flowed in the opposite direction. And if the government persists in policies that suppress one side of the balloon, such as "banning mixed billing," the healthcare system will bulge in another form we have yet to imagine and eventually burst. Pressing one side of an inflated balloon with a hand is meaningless. To deflate it, the valve injecting the air—the root cause of low reimbursement—must be addressed.
Now, upon the ruins created by these three dominoes and the balloon effect, it is time to dissect what strange markets and predators have been born—the reality of the monsters spawned by system distortion—in Part III, "The Distorted Market."
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[Text Box] A One-Page Map of the Korean Payment System (FFS·DRG·P4P)
The payment system for Korean healthcare is not uniform. Three methods coexist depending on the type of healthcare institution and the medical field, each sending incentives in different directions.
① Fee-For-Service (FFS) — The Mainstream
- Principle: Reimbursement is determined and paid for each individual act (consultation, test, procedure, prescription) performed by a doctor.
- Scope: Accounts for approximately 85% of Korean medical expenses. It is the basic framework for most outpatient care and acute inpatient stays.
- Incentive: Higher profit with more volume → Induction of over-provision.
- Korean Specificity: Since reimbursement rates are fixed below cost, a "low-margin, high-volume" strategy is the means of survival. This is the economic root of "three-minute consultations."
② Diagnosis Related Groups (DRG) — Limited Application
- Principle: A fixed amount is paid according to the patient’s primary diagnosis. If the actual cost is less, the hospital profits; if more, the hospital loses.
- Scope: Mandatory application only for seven disease groups (cataracts, tonsillectomy, appendectomy, hernia, C-section, hysterectomy, anal surgery). The scope of application is extremely narrow compared to developed countries.
- Incentive: Higher profit with lower cost → Induction of under-provision and pressure for early discharge.
- Korean Specificity: "Mixed billing," where hospitals charge additional non-covered items for DRG-applied disease groups, is rampant, weakening the cost-control effect of the system.
③ Pay-for-Performance (P4P) — Introductory Stage
- Principle: Measures the quality of care (readmission rates, complication rates, patient experience, etc.) and provides bonuses to high-performing institutions.
- Scope: Restricted operation through pilot projects such as Value-Based Purchasing (VBP). Its share of total medical expenses is negligible.
- Incentive: Economic reward for quality improvement → Theoretically desirable, but carries a risk of becoming perfunctory if measurement indicators are unreliable or reward sizes are insufficient.
- Korean Specificity: Limitations in effective operation due to a lack of quality measurement infrastructure and data disclosure.
| Payment System | Core Incentive | Pros | Risks | Korean Share |
| :------------- | :------------- | :----------------------- | :------------------- | :----------- |
| FFS | Volume ↑ | Securing accessibility | Over-provision | ~85% |
| DRG | Cost ↓ | Fiscal control | Under-provision | ~10% |
| P4P | Quality ↑ | Improved patient results | Indicator distortion | ~5% |
Key Point: Korea relies excessively on FFS, which encourages excess, while applying DRG, which monitors under-provision, to only seven disease groups, and P4P, which rewards quality, remains in a pilot stage. The extreme imbalance in the "mixing ratio" of these three systems is the economic foundation of the distortion in Korean healthcare.
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Part III. The Distorted Market: Witness the "Monsters" Sired by Low Reimbursement
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Chapter 13. The Birth of the Pain Business
Upon the ruins created by low reimbursement and regulation, the Korean healthcare system has created a strange market that feeds on its own contradictions. The "Pain Business" is exactly that.
This is something different from traditional medicine that "treats" diseases. It is a new service industry that manages and comforts chronic musculoskeletal pain that comes with aging—pain that, a generation ago, people simply had to endure as a "consequence of time." The fact that this market, which did not exist a generation ago, is expanding to a scale rarely found elsewhere in the world allows one to grasp the depth of the system's distortion.
1. A New Ecosystem Upon the Ruins
After the three dominoes traced in Part II fell, a massive void was created in the system. Just as nature abhors a vacuum, a new ecosystem began to grow in this empty space. However, it was not the medical needs of the patients that dominated this ecosystem.
Let us look at the surface of the phenomenon we witness in daily life. Pain and rehabilitation clinics specializing in manual therapy, extracorporeal shock wave therapy, and nutritional injections are appearing in every urban commercial district. Instead of a "three-minute consultation," patients experience interiors like hotel lobbies, long consultation times, and kind staff responses. Something qualitatively different from the hospitals of the past exists there.
Behind this experience lies a structural void created by the low-fee system. Under the current medical fee schedule, the time a physician can allot to a single patient is a mere three minutes. What a patient experiences during this brief window is not a sufficient explanation or empathy, but rather a sense of futility, stepping out of the consultation room with nothing but a prescription in hand. This "void of care" felt by tens of millions of chronic pain patients constitutes the true identity of the massive unmet demand into which pain clinics have tapped.
However, there is another truth at a deeper layer. Chronic pain and the anxieties of an aging society have combined with two mechanisms—low medical fees and private indemnity insurance—to become a "commodity." It is no exaggeration to say that the phenomenon Ivan Illich (140) warned of in *Medical Nemesis*—social iatrogenesis, where the medical system strips suffering of its meaning and fills that space with consumption—is being realized in South Korea in its most extreme form. Pain has shifted in character from an object of treatment to an object of transaction.
2. The Soil of Health Consumerism
To understand the pain business merely as a change on the supply side is to see only half the picture. Fundamental shifts were also occurring on the demand side. The phenomenon referred to in sociology as "Health Consumerism" prepared the soil for this market.
In the era when the "sick role" defined by Talcott Parsons (156) operated as a norm, patients were passive beings who complied with the instructions of experts. If the doctor said it was fine, it was fine; if surgery was needed, accepting it was considered a virtue. However, as the internet and media opened vast amounts of medical information to the general public, cracks appeared in this authority structure. Patients became entities who personally seek information, compare hospitals, search for reviews, and "choose" the services that suit them. Borrowing the expression of Anthony Giddens (157), "reflexive modernization"—the dissolution of unconditional trust in expert systems—has penetrated the medical field.
Yet, South Korea's public insurance system failed entirely to accommodate this transformed patient. Within a three-minute consultation, it was physically impossible to provide what the patient desired: a sufficient explanation of their symptoms, empathetic conversation, and a detailed comparison of treatment options. Pain clinics targeted precisely this gap. Strictly speaking, what they sold was not a "procedure," but an "experience." In effect, the logic of the "Experience Economy," conceptualized by B. Joseph Pine II (158) and James H. Gilmore, was transplanted into medicine. Providing procedures using the latest equipment while listening to the patient’s story over a long duration in a pleasant space—the satisfaction the patient feels in this process operates largely independent of the medical efficacy of the procedure.
At this juncture, a subtle but decisive shift occurred. Patients do not go to fix an ailing body, but rather to purchase a service that comforts a weary body and mind. The boundary between medicine and the wellness industry has blurred. The problem is that the dissolution of this boundary is not the result of spontaneous market evolution. Had the government guaranteed adequate medical fees, physicians might have been able to allot sufficient time to patients even within covered treatments, and it is highly probable that the demand base known as the "void of care" would not have formed on such a scale.
3. A Business Model of Never-Ending Pain
The intrinsic nature of "chronic pain" also contributed to the explosive growth of this market. Most musculoskeletal diseases associated with aging—degenerative arthritis, chronic back pain, frozen shoulder, spinal stenosis—are incurable. This pain, which in the past had to be endured as a consequence of age, has now become an object of lifelong "management."
The implications of this as a business model are self-evident. Without a cure, there is no end point to consumption. Once a patient enters pain management services, they continue to visit the hospital as long as the symptoms do not vanish. The characteristics of the disease itself structurally guarantee "repeat purchases." For a pain clinic, this signifies a stable and predictable revenue stream. It could be called the medical version of the recently rising "subscription economy," with one decisive difference: while a Netflix subscription can be canceled at any time, chronic pain cannot be "canceled" by the patient.
Superimposed on this is South Korea's changing demographic structure. With the entry into a super-aged society imminent, the pool of chronic pain patients expands by hundreds of thousands every year. In a situation where demand expands automatically due to the population structure, physicians leaving essential healthcare (61) due to low fees flow into the supply side. A rare condition has been met where both supply and demand expand simultaneously.
4. The Inverted Pyramid: The Gap Between Evidence and Price
At this point, an uncomfortable question must be raised. How solid is the scientific evidence for the most expensively sold products in this market?
Evidence-Based Medicine evaluates the validity of medical practices through a hierarchy known as the "Hierarchy of Evidence." At the apex lie systematic reviews and meta-analyses of randomized controlled trials (RCTs), while expert opinions or case reports are placed at the bottom. However, the mainstay products of the pain business—manual therapy, various injection therapies, prolotherapy, and the wide application of extracorporeal shockwave therapy—mostly lack RCT-level evidence, or even if evidence exists, the effect size often fails to reach a clinical level perceptible to the patient. Looking at the results of network meta-analyses, there are numerous studies that failed to secure evidence that expensive manual therapy is significantly superior to inexpensive self-exercise therapy.
Of course, this does not mean the efficacy of these procedures is zero. The core issue is not the presence or absence of evidence, but the disconnect between evidence and price. Procedures located at the lower tiers of the evidence pyramid are traded at top-tier prices in the market. The pyramid is inverted.
This paradox is possible because the medical market is what economics calls a "credence goods" market. It is difficult for a consumer to judge, even after the fact, whether a car repair was truly necessary or if a plumber’s work was appropriate. In medicine, this information asymmetry is even more severe. A patient has almost no ability to independently judge whether 20 sessions of manual therapy are more necessary than 10, or whether shockwave therapy is effective for their specific pain. They delegate that judgment to the physician, yet that physician is simultaneously the supplier selling the procedure. The fundamental peculiarity of the medical market—the structural duality where the physician is the patient's agent while simultaneously being a self-interested principal, as pointed out by Kenneth Arrow (92) in his 1963 paper "Uncertainty and the Welfare Economics of Medical Care"—is most starkly revealed in the pain business.
5. Autonomy or Deception
Medical uncertainty brings about deeper ethical issues. The point where the patient’s autonomy and the physician's principle of non-deception collide head-on lies at the heart of the pain business.
Patients have the right to decide for themselves what treatment to receive. Among the four principles of biomedical ethics, "respect for autonomy" makes this point clear. If a patient desires a specific procedure to gain psychological comfort, even if it is close to a placebo effect, should the physician respect that decision? Liberal medical ethics answers yes, in principle. However, this comes with a premise.
As Tom Beauchamp and James Childress clarified in *Principles of Biomedical Ethics*, for respect for autonomy to hold, three conditions must be met: the provision of sufficient information, verification of understanding, and voluntary decision-making. If a physician exaggerates effects without properly explaining the uncertain evidence of a procedure, the patient’s consent can hardly be called "informed consent." It is not respect for autonomy, but rather the inducement of a choice built upon shallow information.
In reality, this ethical tension is mostly buried by market inertia. Within a triangular structure where the patient wants it, the physician provides it, and insurance covers the cost, the duty of "sufficient explanation" is easily reduced to a single formal consent form. As competition between pain clinics intensifies, marketing becomes aggressive, and claims regarding procedural effects outpace the speed of scientific evidence. While the gap between what advertisements promise and what evidence supports widens, the bigger problem is the lack of institutional mechanisms to monitor or correct this disparity.
6. The Two Pillars
There is a structural reason why all these dilemmas could operate in the market without any brakes. The pain business is a structure built upon two pillars: low medical fees and private indemnity insurance.
Low medical fees constitute the supply-side pillar. In a structure where a hospital cannot be maintained through covered treatments alone, the pain business possessed almost ideal conditions as an exit strategy. In the case of manual therapy, it can be started with labor alone without expensive equipment, the unit price of the procedure is several times that of covered treatment, and the nature of chronic illness guarantees repeat visits from patients. Furthermore, unlike essential healthcare, there is no need to suffer through emergency or night shifts, and the risk of exposure to medical malpractice is relatively low. From the perspective of labor economics, this is an option with an extremely favorable risk-adjusted return. Whether a rational physician—and most physicians are rational—should be blamed for being drawn to this option is a matter worth considering.
Private indemnity insurance constitutes the demand-side pillar. As analyzed in Chapter 11, indemnity insurance has completely paralyzed price signals in the non-covered (uninsured) market. Whether a single session of manual therapy costs 50,000 won or 100,000 won, price drops out as a decision-making variable in a situation where the actual burden on the patient is negligible. In a normal market, consumer price resistance against high-priced procedures with uncertain evidence would have functioned as a natural braking mechanism. However, as a result of indemnity insurance removing this brake, an eerie market has been created where procedures—regardless of whether evidence is lacking or sufficient—are consumed without screening by price.
The result of the combination of these two pillars is confirmed in OECD (66) statistics. South Korea's number of visits per capita related to physical and rehabilitative therapy is overwhelmingly at the top among OECD nations. Since South Koreans do not suffer from musculoskeletal diseases uniquely more than citizens of other developed nations, this figure should be read not as an indicator of health, but as an indicator of system distortion. A massive yet precarious market has been born, recording an unprecedented volume of medical services for incurable chronic pain.
7. A Fundamental Question
The pain business is an inevitable bastard child born of the low-fee system. It is a case that succinctly demonstrates the process by which systemic failure gives birth to a new form of commercialism, prioritizes the subjective satisfaction of the patient over scientific evidence, and passes the cost onto society as a whole through the invisible path of rising insurance premiums.
The flourishing of this market leaves behind uncomfortable questions. Is medicine a science that eliminates pain, or an art that comforts it? When the system responds only to the "wants" of the patient rather than their "needs," who draws the line? And for how long must we collectively pay the cost of this bubble?
Now, it is time to dissect, one by one, the actual nature of the specific products—the "golden geese"—that constitute this empire of the pain business, starting from the next chapter.
Chapter 14. Golden Goose 1: Manual Therapy and Extracorporeal Shockwave Therapy
In Chapter 13, the birth structure of the pain business was dissected. From this chapter onward, it is time to look into the reality of the specific products that constitute that empire, which the author refers to as "golden geese." The first golden goose is two, yet one: the absolute powerhouse, manual therapy (67), which generates 120 billion won in monthly sales, and extracorporeal shockwave therapy, which eyes that throne.
What is interesting is that the business models of these two treatments are polar opposites. Manual therapy is a labor-intensive service where the therapist's hands and time are the entirety of the factors of production. Extracorporeal shockwave therapy is a capital-intensive technology that begins with equipment investments ranging from tens of millions to hundreds of millions of won. Yet, these two share the same market (musculoskeletal pain) and the same funding source (indemnity insurance), forming a relationship of symbiosis rather than competition. The fact that being recommended a package of manual therapy and shockwave therapy at orthopedic or rehabilitation clinics has now become a common experience for patients is evidence of this symbiosis.
The task of this chapter is to dissect each of the two products and then reveal how they complement each other's weaknesses to build a single ecosystem, as well as the conditions under which that ecosystem operates.
1. Dissecting the Commodity of Manual Therapy
The core commodity of manual therapy is the therapist's "time and hands." This alone explains a great deal. Recalling the "void of care" analyzed in Chapter 13, it becomes clear exactly what the three-minute consultation failed to provide to the patient: sufficient time, physical contact, and listening. Manual therapy provides all three at once in the form of one-on-one contact lasting 30 minutes to an hour. It has commodified a type of service that can never be compensated within the covered system through the channel of non-covered (uninsured) services.
Economically, manual therapy corresponds to a typical labor-intensive service. It requires almost no capital equipment, most factors of production are human resources, and the number of patients one therapist can see per hour is physically limited. The concept of "cost disease" proposed by William Baumol (163) in 1966 accurately captures the structure of this market. Much like Baumol's analogy that the performance time of a string quartet remains the same today as it was 200 years ago, the time a manual therapist invests in a single patient cannot be shortened by technological innovation. It is a market where a structure of stagnant productivity combined with continuously rising wages is inherently embedded.
However, in the Korean manual therapy market, this cost disease operated in a direction different from the usual path. In Baumol's original model, cost disease results in a relative price increase of the service and a contraction in consumption. Yet, in a market where indemnity insurance has paralyzed price signals, expansion occurred instead of contraction. Market expansion caused a surge in demand for therapists, the rise in labor costs led to an increase in the unit price of procedures, and as long as indemnity insurance absorbed those increases, the price continued to rise without resistance from patients. It is a self-reinforcing price spiral that appears when cost disease combines with market failure.
2. Three Questions Surrounding Effectiveness
The debate over the effectiveness of manual therapy cannot be framed by the simple dichotomy of "does it work or not." To organize this debate productively, one must distinguish between three different questions: effect size, duration, and functional outcome.
First, effect size. Numerous studies report statistically significant pain reduction after manual therapy. The issue lies in the gap between statistical significance and clinical significance. If the sample size is large enough, even a minute difference can achieve a p-value of 0.05 or less. Suppose a Visual Analogue Scale (VAS) score improves by 0.5 points out of 10. This is statistically significant. However, from the patient's perspective, does that 0.5 points reduce the pain of straightening one's back in the morning? To capture this gap, the concept of "Minimal Clinically Important Difference (MCID)" exists. When re-evaluated based on MCID, the clinical significance of many statistically significant research results is substantially diminished.
Second, duration. There is a lack of high-quality evidence regarding whether pain relief immediately following a procedure vanishes within a day or persists for several weeks. It must not be overlooked that this question is directly linked to the business model. The shorter the duration of the effect, the shorter the return visit cycle becomes, which paradoxically makes the profit model more stable. This uncomfortable duality—where the transience of the treatment effect is a medical limitation but a business strength—partially explains the rapid growth of the manual therapy market.
The third and most fundamental question is functional outcome. The ultimate goal of treatment is not a number on a pain scale, but the recovery of the patient's daily functions. Can they climb stairs? Can they sit and work for long periods? Has the quality of sleep improved? Long-term follow-up data on these functional indicators are remarkably sparse compared to studies on pain scores. Consequently, when sophisticated statistical techniques such as network meta-analysis are applied, the conclusion is often reached that it is difficult to secure evidence that expensive manual therapy is clearly superior to self-exercise therapy, which costs almost nothing.
Superimposed on this is a structural distortion called publication bias. The phenomenon where only studies reporting positive results are selectively published while negative results are buried in drawers is a chronic ailment of medical research in general. However, in areas such as non-reimbursable procedures where the economic interests of the practitioner are deeply involved, the risk of this bias is even greater. Ultimately, it is a situation where it is difficult to be certain how faithfully the totality of the manual therapy effectiveness research we encounter reflects reality.
3. The Real Address of Costs
The economics of the manual therapy market is built upon a structure that could never be formed in a normal market. To understand this structure, two behavioral economic concepts are required: Willingness to Pay (WTP) and Willingness to Accept (WTA).
Looking at the patient side first, in a situation where indemnity health insurance bears most of the cost, the amount the patient actually spends is close to zero won. Even if a procedure costs over 100,000 won per session, if the out-of-pocket expense is only a few thousand won, price effectively drops out as a decision-making variable. What is interesting is that under these conditions, the patient's willingness to pay expands abnormally. Sensitivity toward money coming out of one's own pocket is high, but there is no interest in the amount of money the insurance company pays on their behalf. This is a classic example of "mental accounting," as described by Richard Thaler. Even for the same 100,000 won, "my money" and "insurance money" are entered into completely different accounts in the patient's mind.
On the hospital side, the opposite logic operates. In a structure where the fees received from covered (reimbursable) treatments do not even meet the cost, the incentive to maximize margins on non-reimbursable procedures is inevitably strong. The medical institution's willingness to accept—that is, the minimum amount they feel they must receive to provide the service—is set very high.
Indemnity insurance fills this massive gap between the two amounts. The patient gains satisfaction while bearing almost no cost, and the hospital secures high profits. The real bill for this transaction, which appears rational to both parties, is directed toward the majority of policyholders who rarely use these services. The cost is dispersed throughout society in the form of increased insurance premiums. A textbook case of negative externality in welfare economics occurs here: when the party bearing the cost and the party enjoying the benefits are separated, resource allocation becomes inefficient.
4. Extracorporeal Shock Wave Therapy: A Different Kind of Product
While manual therapy is a product that relies on the therapist's hands—an analog factor of production—Extracorporeal Shock Wave Therapy (ESWT) operates on a completely different business logic. The starting point for this product is capital investment in "expensive equipment."
ESWT machines, which range from tens of millions to over a hundred million won, generate a fixed cost called depreciation every month from the moment the hospital introduces them. If it is a lease agreement, a fixed monthly expenditure is recorded; if it is a lump-sum purchase, an opportunity cost is recorded on the books every month. Time that the machine sits idle is an immediate loss. The incentive created by this structure is simple and powerful: the equipment must be operated as much as possible.
"Supply-Induced Demand," which medical economics has long warned about, is typically observed in ESWT. It is not the patient's medical necessity that determines the treatment; rather, the equipment's depreciation schedule and Return on Investment (ROI) operate behind the treatment recommendation. This can be called the equipment version of "Roemer's Law"—observed by Milton Roemer in 1961—which states that if hospital beds are supplied, those beds will be filled. Once a shock wave machine comes in, the patients to use that machine are created.
This does not mean that doctors intentionally perform unnecessary procedures. The core of the problem lies not in conscious intent but in structural incentives. If the equipment exists, the interpretation of indications naturally broadens, and the standards for the number of procedures easily become lax. The suggestion "Shall we try this once?" arises more frequently when the equipment is present than when it is not; this is a natural consequence of human behavior. One must understand the way structure defines action to avoid the error of reducing the problem to individual morality.
5. Limited Passes, Infinite Market
In the clinical expansion process of ESWT, a clever strategy utilizing the gray areas of the "Health Technology Assessment (HTA)" system is involved. Borrowing a term from the financial sector, this is a phenomenon corresponding to regulatory arbitrage.
The situation is as follows. ESWT was listed as a non-reimbursable item after being recognized for limited evidence regarding certain specific diseases such as plantar fasciitis. The Health Technology Assessment Committee issued a sort of "pass," but this pass carried the proviso "only for this disease." However, what happens in the field is that, using this limited pass as a foothold, it is extensively applied to all sorts of musculoskeletal pain where evidence is uncertain. In the pharmaceutical world, this is called "off-label use."
Off-label use of drugs has its own safeguards. There is monitoring by regulatory authorities, adverse reaction reporting systems, and guidelines at the academic society level. However, for the off-label application of non-reimbursable procedures, an equivalent monitoring system is effectively absent. The audit scope of the Health Insurance Review and Assessment Service is limited to covered items, and the non-reimbursable realm is a "no-man's land" left to the doctor's discretion. The process wherein the HTA's judgment that "this may be effective only for this disease" is transformed in the field into "you can do anything possible with this machine" occurs here.
6. Symbiosis of Twins
When manual therapy and ESWT are viewed not as individual products but as a single ecosystem, the relationship between the two becomes clear. Though they seem to compete, they are actually in a symbiotic relationship that grows the market together.
The mechanism of symbiosis is as follows. Hospitals sell the two procedures bundled as a package. This is a medical version of product bundling in marketing theory, but there is one decisive difference from general bundling. When a telecommunications company bundles internet and TV, the consumer can compare the market prices of the individual products. However, no patient exists who can independently judge the appropriate price for a package bundling 10 sessions of manual therapy and 5 sessions of ESWT. When the character of "credence goods" discussed in Chapter 13 is combined with bundling, the arbitrariness of pricing is further strengthened. Since the patient cannot judge anyway, bundling the two procedures is more advantageous for increasing the overall average revenue per user (ARPU) than selling them separately.
What makes this symbiosis economically interesting is that the two products precisely complement each other's structural weaknesses. Manual therapy is labor-intensive, so there are physical limits to scaling up. The number of therapists becomes a bottleneck. ESWT bypasses this bottleneck. The machine does not tire, the time per procedure is short, and multiple units can be operated simultaneously. Conversely, ESWT alone cannot provide the "time of care" that patients crave. The experience of sitting briefly in front of a machine does not fill the void left by a "three-minute consultation." Manual therapy fills this gap.
As a result, the combination of the two procedures becomes a formula that maximizes revenue per patient. The labor-intensive service raises the floor for ARPU, and the capital-intensive technology adds additional revenue on top of it. While manual therapy provides emotional satisfaction through "human care" and ESWT provides cognitive assurance through "advanced technology," the patient experiences a sense of psychological completion, believing they are receiving the best comprehensive treatment. As long as indemnity insurance absorbs all these costs, no entity exists within the market to put the brakes on this symbiosis.
7. Freedom Called Uncertainty
There is one paradox that runs through the two "golden geese" tracked in this chapter: the uncertainty of medical evidence (92) functions not as a market barrier but as a condition for growth.
To understand this paradox, one must first consider the fate of medical practices with clear evidence. Procedures with clearly proven effects are incorporated into the health insurance system as covered services. The appropriate number of procedures is defined by clinical practice guidelines. Prices go through a control mechanism called fee negotiation. Certainty of evidence equates to the density of regulation.
On the other hand, in areas where evidence is uncertain, all three of these controls are lifted. Because there is insufficient evidence for coverage, it remains non-reimbursable. Because evidence for the appropriate number of sessions is insufficient, the provider determines it autonomously. Price is left entirely to the market. Yet, in that market, even the consumer's price resistance—which would have been the only natural braking mechanism—has been removed by indemnity insurance.
Within this structure, uncertainty of evidence becomes, paradoxically, another name for freedom. Whether to set the number of procedures at 10 or increase it to 30, how far to expand the scope of application, and what unit price to charge. In this space where external constraints have vanished, the provider can simultaneously determine both price and quantity under the name of "professional discretion." The structural peculiarity of the medical market pointed out by Kenneth Arrow in 1963—the dual status of the doctor as both the patient's agent and an interested party—is manifested to its maximum in this state of absent control mechanisms.
Manual therapy and ESWT are like twins that succeeded by targeting gaps in the market created by a low-fee system in different ways. One commodified human labor, the other the technological power of capital. However, the essence of their growth is the same. It is a product of system failure, having expanded upon the uncertainty of scientific evidence and leaning on the price distortion created by indemnity insurance.
The next chapter deals with another axis of this pain business empire. It is an anatomy of the nutritional injection business created by a "fatigue society"—a market that commodified mental fatigue rather than physical pain.
Chapter 15. Golden Goose 2: Nutritional Injection
In the case of manual therapy (67) and ESWT discussed in Chapter 14, a medical logic existed, however controversial it might be. Few people deny the basic premise that physical intervention acts on musculoskeletal pain. The criticism was that the effect size is small, the duration is short, or the benefit-to-cost ratio is doubtful; the biological plausibility of the procedures themselves was not denied.
The situation is different for the second golden goose covered in this chapter. "Garlic injections," "Cinderella injections," "White jade injections." Nutritional injections, sold under sensational names, have formed a market worth trillions of won despite the effective absence of high-quality evidence that intravenous fluid infusion is superior to oral vitamin intake for purposes such as fatigue relief or skin aesthetics. To explain this extreme gap between scientific evidence and market size, an analytical framework outside of medicine is required. This is the most bizarre case among the golden geese born from the low-fee system and the instance that most clearly illustrates the argument of this book.
1. A Prescription Called Administrative Interpretation
One must begin by asking where this market came from.
In the early 2000s, the separation of prescribing and dispensing (72) was implemented. The drug price margin, which had accounted for a significant portion of the revenue structure of private practitioners until then, evaporated overnight. It became impossible to leave a margin by directly dispensing medicine. The problem was that no fee increase occurred to offset this reduction in revenue. Private practices faced a crisis of existence, and the state had to choose: increase the fees, or find another path.
The state chose the second path. Through the form of administrative interpretation, the Ministry of Health and Welfare issued an official interpretation that doctors could prescribe fluid injections as non-reimbursable items for subjective and ambiguous symptoms such as "lassitude, fatigue, and nutritional deficiency." The significance of this document should not be underestimated. Superficially, it was an administrative interpretation, but in reality, it was a device that implicitly allowed for the preservation of revenue for private practices while avoiding the political cost of raising fees. The author calls this the institutionalization of an "Informal Compensation System."
The message the state sends to private practitioners can be interpreted as follows: we acknowledge your losses caused by low medical fees. While we cannot officially compensate you, we will turn a blind eye to you making up profits through non-reimbursement services. The structural contradiction of the Korean healthcare system is compressed into this single sentence. It is a typical detour chosen by the state when a fundamental solution is politically impossible—the opening of the grey zone known as "non-reimbursement."
There are two major sociological effects triggered by this administrative interpretation.
One is the "medicalization of fatigue" (140). Peter Conrad defined medicalization as the process by which human conditions, previously outside the jurisdiction of medicine, are redefined as medical problems. The moment the state declared that an official medical prescription for "fatigue" was possible, the category of fatigue shifted: from a "condition that improves with rest" to a "symptom treatable at a hospital." The fact that people began to perceive their fatigue as a legitimate reason to visit a hospital is a direct consequence of this categorical shift.
The other is the "institutionalization of IV prescriptions." Even before the Ministry of Health and Welfare's interpretation, surely there were doctors who administered IV fluids to patients complaining of fatigue. However, it was merely an individual act within a legally ambiguous area. Once the administrative interpretation granted legal and medical immunity to this act, the pattern of expansion changed. The time it took for the practice of a few to transform into an industry-standard practice was remarkably short. The state itself hatched this golden goose.
2. IV Drips Become Cocktails
In the gap opened by the state, the market evolved in a direction that far exceeded the state's intentions.
Simple IV fluids—specifically, variations of the saline solution developed by Sydney Ringer in the 19th century—soon transformed into flashy combinations mixed with vitamins, antioxidants, and amino acids. The "Garlic Injection" (allicin), the "Cinderella Injection" (alpha-lipoic acid), and the "Jade Injection" (glutathione). Pharmacologically speaking, most of these components are nutrients that can be sufficiently consumed through oral intake. While it is true that intravenous injection has higher bioavailability than oral intake, there is weak evidence that this difference creates a clinically meaningful gap in "fatigue recovery" for healthy adults. Ultimately, the essence of this product is taking orally available nutrients, assigning them an invasive route via injection, and attaching sensory labels.
Nonetheless, why did this market grow explosively? We have already examined the conditions on the supply side. The state opened the door, and a profit motive existed for private practitioners. However, a market is not created by supply alone. One must understand the conditions on the demand side.
In *The Burnout Society (Müdigkeitsgesellschaft)*, Byung-Chul Han analyzed the structure in which the modern "achievement subject" is exploited not by external coercion but by themselves. In a Korean society suffering from endless competition and chronic overwork, fatigue is experienced not merely as a physical state but as a sign of individual failure. What is required in a society where rest is not permitted is not rest itself, but faster recovery. Nutritional injections were products that perfectly met this demand. Stopping by a hospital during lunch for a 30-minute "recharge" before returning to afternoon work—this is not rest, but the minimization of "downtime."
Taking a bottle of Vitamin C from a pharmacy versus receiving Vitamin C intravenously under a doctor's prescription in a white coat at a hospital: the pharmacological difference is marginal. However, what the patient experiences is entirely different. The latter includes the psychological comfort of professional care, the narrative of self-management by investing in one's body away from daily life, and the symbolic authority accompanying a medical act. This can be seen as a form of the "experience economy" logic described by Pine and Gilmore (158) penetrating the medical field; the consumers in this market are buying an experience, not vitamins.
3. The Placebo as a Commodity
Quite a few patients say they definitely feel refreshed after receiving a nutritional injection. This perceived effect cannot be entirely denied. The question is: what is the source of that "refreshed feeling"? Is it the biochemical action of vitamins, or the psychological effect triggered by the act of receiving an injection itself?
The author's judgment leans toward the latter. The core product of this market, to use the term accurately, is the "Commodification of the Placebo Effect."
Misunderstanding this market occurs if one views the placebo only as a "fake drug effect." A series of studies conducted by Ted Kaptchuk of Harvard showed that the placebo effect is a function of the elements constituting a "healing ritual." Dismantling the ritual of nutritional injections reveals the components identified by Kaptchuk in their entirety.
There is a doctor in a white coat. The asymmetrical authority structure of the doctor-patient relationship, as analyzed by Talcott Parsons (156), functions as the first device to elevate the patient's therapeutic expectations. Then there is the injection. The invasive act of a needle piercing the skin triggers a much stronger therapeutic expectation than swallowing a pill. This is a fact repeatedly confirmed in various placebo studies. A hierarchy exists where the effect of an injectable placebo is greater than an oral placebo, and the effect of sham surgery is greater than an injectable placebo. Finally, there is the entire process. Arriving at the hospital, checking in, consulting in the examination room, and lying on a treatment bed watching the fluid drip for 30 minutes. This process itself is a "Ritualization of Care" that creates a sense of being "cared for."
What the nutritional injection business sells is the non-specific effect produced by this ritual. Attached with price tags of tens of thousands of won under the packaging of "cocktail therapy," what the patient actually purchases is not the pharmacological effect of Vitamin C, but the sense of care and recovery provided by the medical ritual. Blurring this distinction is the core strategy of this market, and clarifying this distinction is the task of this chapter.
4. The Retailization of Medicine
The expansion of this market has quietly but fundamentally altered the nature of the medical profession.
A key attribute defining a "profession" in medical sociology is that the service provider can exercise professional judgment independently of consumer demand. When what the patient wants differs from what the patient needs, the doctor has both the authority and the duty to choose the latter. This is the boundary that distinguishes medicine from a hair salon or a massage parlor.
In the nutritional injection market, this boundary has blurred. Faced with a patient who comes in saying they want an injection because they are tired, the doctor has two options. Advising them to get enough rest and exercise regularly might be medically appropriate advice. However, that advice generates no medical fee. Suggesting "Would you like to try a cocktail injection?" generates tens of thousands of won in sales. In this tension where the former is medically correct and the latter is managerially rational, the side toward which a doctor under the management pressure of a low-fee structure leans is not determined by individual morality alone. The same logic pointed out in Chapter 14 regarding extracorporeal shock wave therapy operates here. Structure defines action.
In this process, the doctor transforms from an expert judging the patient's best interest into a "Retail Provider" satisfying the customer's desire for fatigue relief. This phenomenon, where customer satisfaction is prioritized over medical judgment, can be called the "Retailization of Medicine." As retailization progresses, the "knowledge-based self-regulation" presented by Eliot Freidson as the core of a profession retreats. Scientific evidence does not determine the feasibility of a procedure; rather, customer demand determines the supply of the procedure.
5. The Fire Extinguished by Insurers
The era of this goose that seemed likely to lay golden eggs forever saw a crack around 2010. Insurance companies, who were bearing the costs, began to move.
The first tool of the insurers was the revision of standard terms and conditions. Facing soaring loss ratios, indemnity insurers amended their terms under the supervision of financial authorities. "Non-reimbursable medical expenses not directly related to the treatment of a disease shall not be compensated." This single clause changed the landscape of the market. The question of whether nutritional injections for the purpose of fatigue relief were indeed "disease treatment" suddenly emerged as a legal issue.
The second tool was more subtle. Insurers began requiring patients claiming nutritional injection costs to submit a doctor's opinion stating that the procedure was related to disease treatment rather than simple fatigue relief. Consider the position this put the doctor in. For the patient to receive insurance money, the doctor's certification is needed. The patient asks for the certification. However, the actual reason for the prescription was "fatigue." If the doctor writes the truth, the relationship with the patient breaks; if they exaggerate, they risk creating a false document. The insurer transferred the burden of claim review, which it should have borne, to the doctor through this device of the medical opinion.
The third and most destructive tool was lawsuits for the restitution of medical fees. Insurers filed a series of lawsuits against doctors who prescribed nutritional injections for "malaise" or "fatigue," demanding the return of previously paid insurance benefits. Most ended in settlements, but the message conveyed to the market was clear: a business model predicated on the safety net of indemnity insurance was no longer sustainable.
The result of this counterattack revealed something poignant. Once excluded from the scope of indemnity insurance compensation, the price of non-reimbursable IV fluids, which once commanded over a hundred thousand won, plummeted to the tens of thousands in an instant. What this collapse proves is simple and cruel: the price in this market never reflected pharmacological value from the beginning. It was merely a number set to match the "maximum amount the insurance would cover." In a market where indemnity insurance rendered the patient's price elasticity of demand effectively zero, the price ceiling was determined not by the consumer's willingness to pay, but by the insurer's compensation limit. When the support was removed, the entire building collapsed, and only after the collapse was it revealed that the building had no foundation.
6. What Was Demolished and What Remains
The legacy of this market trajectory—from Ringer to cocktail, then to the bursting of the bubble—lies deeper than the price crash itself.
The most serious legacy is the erosion of the boundary between medicine and commodity. Injections, which were medical acts to treat disease, were diverted into consumer goods for relieving fatigue and managing skin. This diversion is dangerous not only because of the damage to symbolism. When the invasive act of injection becomes routine, the social awareness regarding the risk of infection or the possibility of allergic reactions accompanying venipuncture becomes dull. The routinization of medical acts entails the routinization of medical risks.
The alteration of the doctor-patient relationship also remains. The transition from an exerciser of professional judgment to a service provider of desire fulfillment was accelerated in the nutritional injection market. Reading this as the corruption of individual doctors is a "misdiagnosis." The structural pressure of low fees pushed doctors in that direction, and the state's administrative interpretation provided the legal safety net. If a doctor resisted this temptation, it was because they endured despite the power of the structure, not because the structure made resistance easy.
Patients have also changed. A shift occurred from a relationship where a sick person seeks healing to a consumer relationship where one purchases satisfaction. The moment a patient chooses to receive this injection themselves, the gatekeeper function performed by the doctor in the traditional doctor-patient relationship analyzed by Parsons is weakened. It might look like an expansion of "patient autonomy," but as discussed in Chapter 13, the "autonomous choice" exercised by a consumer under an asymmetric information structure is far from substantive self-determination.
Taking a birds-eye view of the entire rise and fall of this market reveals a microcosm of the failure of the Korean healthcare system. The state did not solve the low-fee problem head-on but opened a detour through non-reimbursement. It may have prevented the collapse of private practices in the short term, but in the long term, it fostered a market soil lacking scientific evidence. The medical community, instead of structurally resisting low fees, settled into the easy non-reimbursement market, thereby weakening the scientific foundation of the profession. Had the "knowledge-based self-regulation" mentioned by Freidson been functioning, there would have been a force within the medical community to check this market, but the door to self-regulation did not open in the face of structural incentives.
And then there is society. Rather than facing the problem of structural overwork, it was this society's choice to willingly pay for the fantasy of resolving everything with a single injection. The "achievement subject" of the burnout society diagnosed by Byung-Chul Han responded to the problem not by changing the structure of exploitation, but by consuming medical products that would help them endure exploitation better. Of course, that was not a solution.
The bubble has largely burst. However, in the place where the boundary between medicine and commodity has once collapsed, rebuilding that boundary is several times harder than tearing it down. The wounds and distorted perceptions left by the nutritional injection market on Korean medicine remain deep within the system even after the bubble has burst.
In the next chapter, the gaze shifts upward from private practices. We begin the task of clearing the mist from the ledgers of university hospitals, which stand at the very pinnacle of the Korean healthcare system, to see what face they truly wear.
Chapter 16. The Myth of the "Last Bastion" vs. the Truth of the "Greatest Beneficiary"
The Myth of the "Last Bastion," the Truth of the "Greatest Beneficiary"
At the very top of the Korean healthcare system stands the sacrosanct entity of the university hospital. They have been armed with a narrative as the last hope for critically ill patients and the cradle of cutting-edge medicine, a narrative etched without question into the consciousness of the majority of the public. When diagnosed with cancer or a rare disease, it has long been a natural choice to head for the so-called "Big 5" hospitals in Seoul. This phenomenon of collective crowding itself speaks to the position university hospitals occupy in Korean society.
However, stripping away a layer of this sacred mantle called the "last bastion" reveals a significantly different landscape behind it. While university hospitals are institutions that perform the triple public mission of education, research, and patient care, they are simultaneously massive business entities generating trillions of won in annual revenue. The problem is that the tension between these two identities has barely been addressed in South Korean healthcare policy discussions until now. University hospitals have only been characterized as victims of a low-fee system, while questions regarding who is reaping the greatest profits from the structural contradictions of that system have never been systematically raised.
The analysis in this chapter is an attempt to fill that very void. It examines how university hospitals have functioned as the primary beneficiaries of the system crisis through opaque accounting structures, loopholes in the mixed payment system, the strategic exploitation of regulations, and marketing strategies that convert healthy individuals into potential patients. Furthermore, it reviews why this growth model inevitably serves as a trigger for the collapse of the entire system.
1. The Fog of Accounting Ledgers: The Absence of Mission Separation
The most effective device obscuring the essence of university hospitals is, paradoxically, the accounting ledger itself. According to basic principles of public administration, a university hospital is a complex organization performing three unique missions: education, research, and clinical care. In the management of university hospitals in the United States or Europe, "mission-based accounting"—which clearly separates the income and expenditures of these three missions—is accepted as a prerequisite for ensuring transparency. This is because one can evaluate whether each mission is being properly performed only by separately tracking how much is spent on education, how much is invested in research, and how much is earned from clinical care.
Such separation does not exist in South Korean university hospitals. Revenues and costs from education, research, and care are intermingled within a single accounting system. This structure provides the hospitals with two strategic advantages.
First is the strengthening of bargaining power. By reporting deficits occurring in essential high-risk medical fields (61) as more inflated than they actually are, hospitals create a basis for demanding higher medical fees and more financial support from the government. Even if portions of education and research expenses are classified as clinical deficits, there is no way to verify this, making their claims difficult to refute.
Second is the concealment of profits. Immense surpluses earned from non-covered (uninsured) (67) treatments, the operation of premium hospital rooms, and premium health screenings are mixed with investment costs for education and research, preventing them from being revealed externally. In effect, exactly how much the hospital is actually making and where those profits originate are hidden in a fog.
Ultimately, the absence of mission separation functions as a structural device that enables dual management: upholding the banner of public interest outwardly while pursuing profitability inwardly. The claim that university hospitals are "victims" of the low-fee system stands upon these very opaque ledgers. The moment the books become transparent, much of that claim is likely to lose its persuasiveness.
2. The Art of Cherry-Picking: Distortions of the Mixed Payment System
The core mechanism by which university hospitals maximize profit lies in strategically utilizing the inherent contradictions of the "Mixed Payment System" designed by the government. Currently, the medical payment system in South Korea is a complex entanglement of Fee-for-Service (FFS), Diagnosis-Related Group (DRG), and Pay-for-Performance (P4P) systems. These three payment methods provide conflicting economic incentives to medical providers, and university hospitals employ a "cherry-picking" strategy to maximize profits within this conflicting structure.
For patients in essential medical fields covered by DRG—meaning those for whom hospitalization and surgery fees are bundled and fixed—hospitals ensure profitability by minimizing costs as much as possible and reducing the length of stay. In the realm of essential medicine, they operate like efficient "factories." Conversely, in the non-covered sector where no price controls exist—such as robotic surgery, premium health screenings, and cutting-edge genomic analysis—they maximize profits by performing as many procedures as possible and setting high prices. In the non-covered market, they transform into "department stores" selling high-priced services.
This dual mode of operation stems from the design flaws inherent in the mixed payment system itself. DRG provides incentives for cost reduction, while FFS provides incentives for increasing the volume of procedures; when two such systems coexist within the same institution, the institution can selectively decide which incentive to apply to which patient. University hospitals are the actors who exercise this choice most sophisticatedly. This strategy of reducing costs for insured patients and increasing revenue for non-covered patients may appear as rational management on the surface, but it deepens structural distortions where the quality of essential medicine declines and the non-covered market expands.
3. Winners of the Regulatory Game: The Political Economy of Premium Hospital Rooms
A representative example showing how university hospitals neutralize the government's regulatory intent and even pivot it to their advantage is the political economy of premium hospital room regulations.
In 2018, the government implemented a policy to apply health insurance to 2- and 3-person rooms, which were previously non-covered, to reduce the burden of hospitalization costs on patients. The intent of the policy was clear: lower the patient's out-of-pocket expenses and increase accessibility to general beds. However, the response from university hospitals was the exact opposite of what policy designers anticipated.
Hospitals converted a large number of existing 4- to 6-person general beds into 2- and 3-person rooms. Because the out-of-pocket cost for 2- and 3-person rooms remained higher than that of the old 4- to 6-person rooms even with insurance, this conversion immediately led to an increase in the patient's burden. As the number of general beds decreased, a structure was created where patients were forced into more expensive premium rooms, and the hospital's hospitalization revenue actually increased. A policy aimed at alleviating the patient's burden was, as a result, diverted into a tool for expanding hospital revenue.
This case demonstrates a classic aspect of "Regulatory Capture" as discussed in regulatory economics. University hospitals are not merely passive recipients of policy. Based on the political capital provided by the social myth of being the "last bastion" and their powerful lobbying capabilities, they function as active agents that reshape the direction of regulation to their advantage. Whenever the government strengthens the appearance of regulation without possessing substantial enforcement power, university hospitals have always demonstrated the ability to reinterpret those regulations as "new business opportunities."
4. Patient Shopping and the Business of Risk
The revenue model of university hospitals has evolved beyond the stage of treating sick patients to the stage of converting healthy people into potential patients. The core bases for this are the premium health screening centers. These centers are the junction where the public trust held by university hospitals as the "last bastion" is converted into a marketing tool to attract highly profitable customers.
4-1. The Commodification of Anxiety: Appropriation of Risk Communication
In sociology, "Risk Communication" refers to the process of conveying and sharing information about risks among stakeholders. Originally, this concept was developed in the context of public health to provide citizens with accurate risk information. However, in the premium screening centers of university hospitals, this risk communication is appropriated for an entirely different purpose.
Consider advertising slogans such as, "In the age of 100-year lifespans, are your cerebral blood vessels safe?" This is not mere health information. A psychological mechanism is at work that redefines health as something that must be constantly managed and monitored, making the failure to undergo tests feel like a form of irresponsible behavior. As sociologist Ulrich Beck pointed out in *Risk Society*, the definition and distribution of risk in modern society is an exercise of power in itself, and university hospitals are utilizing this power of risk definition for marketing.
Full-body screenings utilizing state-of-the-art imaging equipment—CT, MRI, PET, and others—discover a massive amount of minute abnormal findings that might never have caused a problem throughout a person's life. This is the starting point of what medicine calls "overdiagnosis." Overdiagnosis is problematic because it leads to unnecessary additional testing, anxiety, and sometimes procedures that are not required.
4-2. The Trap of Bayes' Theorem and Statistical Illiteracy
Examinees caught in this anxiety marketing inevitably fall into the statistical trap warned of by "Bayes' Theorem," a basic principle of probability. Bayes' Theorem is the principle of updating the posterior probability (the probability of actually having a disease) based on the prior probability (prevalence) once new information (test results) is given.
Let's take a specific example. Suppose a healthy adult in their 40s undergoes an MRA during a premium health screening and is found to have an "unruptured cerebral aneurysm." At this point, the prior probability—the chance that a healthy person actually has a cerebral aneurysm at risk of rupturing—is extremely low. The annual rupture rate of unruptured cerebral aneurysms is reported in most studies to be less than 0.5–1%. However, the hospital packages the fact of "discovering a cerebral aneurysm" as if it were a time bomb, maximizing the patient's fear. Because the prior probability is very low, the posterior probability of it being a "real risk" that will cause problems during one's lifetime is also low in most cases. In fact, the risk of complications accompanying the preventive procedure itself may be greater.
University hospitals exploit the patient's "statistical illiteracy" at this very point. Few laypeople intuitively understand the relationship between prior and posterior probabilities. Upon the mere fact that "an aneurysm was found," most people panic and agree to the preventive procedure recommended by the hospital—a high-priced, non-covered product. This pattern is not limited to cerebral aneurysms. It is a structure that repeats in so-called "borderline diseases" such as robotic surgery, colon polyps, uterine myomas, and thyroid cancer.
4-3. Violation of Fair Advertising Principles
These actions clearly violate the criteria for "Fair and Honest Advertising" required by medical ethics. The core principle of fair advertising is the balance of information. Focusing only on the benefits of a procedure while failing to provide balanced information regarding the "risk of doing nothing" and the "risks of the procedure itself" does not assist the patient in rational decision-making but rather induces a decision based on fear.
According to the principle of Patient Autonomy, a patient must be able to decide for themselves based on sufficient information. However, as Bayes' Theorem shows, providing information that emphasizes test results while omitting prior probability cannot be considered "sufficient information." The premium screening marketing of university hospitals fails to satisfy the requirements of "Informed Consent" in a strictly medical sense.
In conclusion, the "patient shopping" of university hospitals no longer remains within the category of medical practice. It is a "business of risk" that systematically exploits the most primal human fears—the fear of death and disease.
5. Conclusion: The Primary Beneficiary and the Trigger
Synthesizing the analysis in this chapter requires a fundamental revision of the conventional narrative regarding university hospitals. University hospitals are not the primary victims of the low-fee system, but rather the primary beneficiaries who have grown by most cleverly utilizing the structural contradictions of that system.
They exaggerated deficits in essential medicine and concealed surpluses in non-covered services through opaque accounting structures. They maximized revenue through cherry-picking that took advantage of loopholes in the mixed payment system. They even pivoted government regulations to their advantage. They sophisticated the marketing model that turns healthy people into potential patients through the medium of anxiety and fear. And at the foundation of all this lay the low-wage labor of medical residents (69) exploited under the name of "training."
This final point is the key that makes university hospitals both the beneficiaries and the trigger. The mass resignation of residents in 2024 proved this empirically. As surgeries and hospitalizations at the "Big 5" hospitals plummeted and bed occupancy rates crashed to half, the hospitals recorded management losses in the hundreds of billions of won. It did not take long for the fortress called the "last bastion" to crumble under the single shock of a resident walkout.
From the perspective of systems theory, this incident shows that university hospitals were not safety devices ensuring the resilience of the system, but rather the most vulnerable "Achilles' heel" capable of collapsing the entire system. If they were truly irreplaceable public assets, they should have possessed an inherent resilience to maintain functionality despite external shocks. However, university hospitals collapsed helplessly in the face of the shock of losing their core labor force. This proves that they lacked both the will and the ability to take true responsibility for the crisis of the system.
The myth of the "last bastion" provided university hospitals with immense social and political capital. However, that capital was invested in maximizing profitability rather than strengthening public interest, and the growth model constructed as a result was built upon the most precarious foundation—cheap resident labor. When that foundation began to shake, the collapse of the bastion came to mean the collapse of the entire South Korean healthcare system. This is indeed the most uncomfortable truth that the myth of the "last bastion" has concealed.
Chapter 17. The Patient Shopping of University Hospitals
A Business Model for Converting Healthy People into Potential Patients
In the previous chapter, it was examined how university hospitals have functioned as the primary beneficiaries of the system crisis through opaque accounting, cherry-picking in the mixed payment system, and the strategic exploitation of regulations behind the myth of the "last bastion." In this chapter, we review another axis of that revenue model, perhaps the most ingenious one: a mechanism that goes beyond treating the sick to convert healthy people into potential patients.
The target of this hunt is not the severely ill patient. The targets are so-called "the worried well"—people who are healthy by objective indicators but harbor a vague anxiety about their health status. University hospitals have built a sophisticated business model that lures these individuals into premium health screening centers and uses "abnormal findings" captured by advanced imaging equipment as a medium to secure agreement for high-priced, non-covered (67) procedures.
To understand how this model operates, it is necessary to intersect concepts from three distinct fields: the sociology of risk communication theory, the mathematical principles of Bayes' Theorem, and the ethical principles of fair advertising in healthcare. At the intersection of these three concepts, it becomes clear that "patient shopping" by university hospitals is not merely a case of overtreatment, but rather a systematically designed structure for profit generation.
1. The Commodification of Risk: The Structure of Anxiety Marketing
The first weapon in this hunt is the misappropriation of "Risk Communication" as defined in sociology. Risk communication originally refers to the process of accurately conveying and sharing information about risks among stakeholders, a concept developed in the context of public health to support rational decision-making by citizens. In the premium health screening centers of university hospitals, however, this concept is repurposed for an entirely different end.
1.1. The Institutionalization of Anxiety
Through positive framing such as "early screening" and "prevention," university hospitals sell the "risk" of potential future diseases to healthy individuals. A quintessential example of this is the advertising used by premium health screening centers.
Consider the phrase: "In the age of 100-year lifespans, are your cerebral blood vessels safe?" On the surface, this sentence appears to provide health information. However, the psychological mechanism operating beneath it is quite complex. First, it redefines health as an object that must be constantly managed and monitored. Second, it frames the act of not undergoing a screening as a form of negligence or irresponsibility. As sociologist Ulrich Beck pointed out in *Risk Society*, the definition and distribution of risk in modern society is itself a mode of exercising power. University hospitals are essentially exercising power by defining disease risks and selling "responses" to them.
The core of this marketing aligns with the "self-fulfilling logic of risk" warned of by Ulrich Beck. A cycle is formed where higher perceived risk increases the demand for screenings; more screenings lead to the discovery of more "abnormal findings"; and these discoveries, in turn, amplify social anxiety regarding the risk. At the peak of this cycle, the university hospital's premium screening center serves as a profit engine fueled by anxiety.
1.2. The Inevitability of Overdiagnosis
Full-body screenings utilizing state-of-the-art imaging equipment—such as CT, MRI, and PET—capture a vast amount of medically insignificant findings due to their technical precision. Minute nodules, cysts, and variations that would never have caused symptoms during a lifetime appear clearly on the screen. This is the starting point of what is known in medicine as "overdiagnosis."
Overdiagnosis is problematic because it leads to unnecessary follow-up tests, psychological anxiety, and sometimes unnecessary procedures or surgeries. It is now supported by significant epidemiological evidence that the refinement of diagnostic technology in the history of medicine has not necessarily led to improvements in patient health. Nevertheless, premium screenings at university hospitals operate on the simple narrative that "more precise is better." What this narrative obscures is the inconvenient fact that most of what is discovered by precise screenings are not diseases requiring treatment, but rather "incidentalomas"—abnormal findings discovered by chance.
2. The Trap of Bayes' Theorem: Fear Designed by Ignoring Probability
Examinees drawn to screening centers by anxiety marketing inevitably fall into the statistical trap warned of by Bayes' Theorem, a fundamental principle of probability. It is necessary to examine specifically how this trap operates.
2.1. The Discrepancy Between Prior and Posterior Probability
Bayes' Theorem is the principle of updating the posterior probability (the probability of actually having a disease) based on the prior probability (the prevalence of Northern disease) when new information (a test result) is given. The implications of this principle in the context of premium health screenings are profound.
Let us take a specific example. Suppose a healthy adult in their 40s is diagnosed with an "unruptured cerebral aneurysm" during a premium MRA. Here, the prior probability is crucial. While the probability of detecting an unruptured cerebral aneurysm in a healthy adult is reported to be around 2–5%, most studies show that the actual probability of these rupturing and causing a cerebral hemorrhage is less than 0.5–1% per year. In other words, the overwhelming majority of detected aneurysms will never cause a problem during a person's lifetime.
However, the reality in hospitals is the opposite. The moment the fact of the "aneurysm discovery" is conveyed to the patient, the low prior probability vanishes from the conversation, and the extreme consequence of "cerebral hemorrhage" is pushed to the forefront. The hospital packages this discovery as if a time bomb has been found and recommends expensive, non-reimbursable procedures such as preventive coil embolization or clipping surgery. The fact that the posterior probability—the actual chance of this aneurysm causing a lifelong problem—remains low, and the fact that the risks of complications from the preventive procedure itself may outweigh the risks of observation, are not sufficiently communicated.
2.2. Exploiting Statistical Illiteracy
At this juncture, university hospitals exploit the "statistical illiteracy" of patients. Few laypeople intuitively grasp the relationship between prior and posterior probabilities. Studies have confirmed that even physicians often fail to accurately convey the implications of Bayes' Theorem to patients.
Faced with the fact that a "brain aneurysm has been found," most patients are overwhelmed by fear. In that state of fear, they agree to the "solution" presented by the hospital—expensive preventive procedures. This is not a rational decision but one based on fear, a fear intentionally cultivated by the hospital.
This pattern is not limited to cerebral aneurysms. Nearly identical structures are repeated in so-called "borderline diseases" such as robotic surgeries, colon polyps, uterine fibroids, and thyroid cancer. The commonality is singular: in situations where the prior probability is low, "abnormal findings" discovered through screenings are framed as excessively threatening and then linked to expensive non-covered procedures.
3. Diseases on the Borderline: Anatomy of Specific Profit Models
The "risk business" of university hospitals is not an abstract concept. Specific profit models are built around particular disease groups, all of which utilize "diseases on the borderline"—those that are not clearly severe—as their primary cash cows.
3.1. Robotic Surgery: Minimal Invasion or Maximal Cost?
Da Vinci robotic surgery is one of the non-covered products most aggressively marketed by university hospitals. The narrative of "more sophisticated, smaller scars, and faster recovery" is attractive to patients. It is true that the utility of robotic surgery has been proven in certain surgeries, such as prostate cancer.
However, for numerous other surgeries such as uterine fibroids or gallbladder removals, accumulated research shows no significant difference in treatment outcomes compared to conventional laparoscopic surgery, despite costs being millions of won higher. When a hospital introduces expensive capital goods like surgical robots, management pressure arises to recover that investment. This pressure acts in the direction of expanding the indications for robotic surgery and actively recommending it to patients. The logic of capital recovery, rather than medical necessity, dictates the decision for the procedure.
3.2. Cerebral Aneurysms: The Fiction of the Unruptured Time Bomb
The case of cerebral aneurysms, discussed earlier in the context of Bayes' Theorem, needs further elaboration. Most small cerebral aneurysms discovered by chance in health screenings have a much higher probability of never rupturing. Nevertheless, hospitals use the extreme fear of "brain hemorrhage" as a weapon to justify preventive coil embolization, which is statistically likely to be unnecessary. The fact that the risks of the procedure itself—such as stroke or vascular damage—could be greater than the risk of choosing observation is not sufficiently communicated.
3.3. Thyroid Cancer, Colon Polyps, and Uterine Fibroids: Excess in the Name of Prevention
These three conditions are the areas where the "borderline profit model" of university hospitals operates most typically.
Thyroid cancer is often called a "kind cancer" because it typically progresses slowly and has a good prognosis. However, with the universalization of ultrasound screening, the rate of overdiagnosis in Korea has reached levels unprecedented in the world. Epidemiological studies consistently conclude that the sharp spike in thyroid cancer incidence in Korea at one point was due to increased screening frequency, not an actual increase in the disease. Many patients underwent surgery for thyroid nodules that could have been managed through observation alone, driven by the fear associated with the word "cancer."
In the case of colon polyps, not all polyps develop into cancer, and very small polyps are often sufficient to be followed up with observation. In reality, however, removing almost every discovered polyp is treated as the standard. Similarly, uterine fibroids are mostly asymptomatic benign tumors, yet unnecessary surgeries are sometimes performed due to anxieties about "future infertility" or "the possibility of cancer conversion" (which is actually extremely low).
The pattern observed across these three diseases is the same: a structure that frames the uncertainty of "it could become cancer" as a definitive threat and links it to expensive procedures. It is rare for patients to be provided with sufficient information regarding the existence and rationality of the "observation" option.
4. Structural Violation of Fair Advertising Principles
The actions described above structurally violate the standards of "fair and honest advertising" required by medical ethics. The core principle of fair advertising is the balance of information. It dictates that balanced information regarding the benefits and risks of a procedure, as well as the prognosis if the procedure is not performed, must be provided.
However, in the process of marketing premium screenings and subsequent procedure recommendations at university hospitals, this balance is systematically dismantled. While the success rates and advantages of procedures are highlighted, information regarding the "risk of doing nothing" and the "risk of the procedure itself" is either insufficiently communicated or omitted entirely. This does not assist in the patient's rational choice but rather induces decisions based on fear.
Patient autonomy—a core principle of medical ethics—presupposes that a patient can provide "informed consent." As Bayes' Theorem teaches, providing information that emphasizes test results while omitting prior probability cannot be considered "sufficient information." There is a need for a serious review of whether the premium screenings and subsequent procedure recommendations of university hospitals meet the requirements of informed consent in a medically rigorous sense.
5. Conclusion: The Erosion of Trust and Systemic Failure
5.1. The Inversion of Priorities
The most lethal legacy left by this "risk business" is the "inversion of priorities" in the allocation of medical resources. Hospitals prioritize limited space and personnel for highly profitable non-covered procedures—such as the operation of screening centers and preventive procedures for borderline diseases—while investment in low-profit areas—such as severe pain management, palliative care for terminal patients, and essential pediatric care—is pushed to the back. A market failure is becoming structured where medical resources are allocated not according to the magnitude of patient suffering or medical urgency, but purely based on ability to pay and profitability.
5.2. Damage to the Doctor-Patient Relationship
A more fundamental problem is the erosion of trust, which is the core asset of the doctor-patient relationship. The moment the question "Is this test, this surgery, truly necessary for me, or is it for the hospital's profit?" sprouts in the patient's consciousness, the relationship of trust between the doctor and the patient suffers irreparable damage. In a medical system where trust has collapsed, patients become more defensive, compliance with doctor recommendations decreases, and unnecessary "doctor shopping" increases. Paradoxically, the "patient shopping" by university hospitals encourages "doctor shopping" by patients.
5.3. A Triple Failure
The "patient shopping" of university hospitals is the product of a triple failure.
There is the failure of the state. Instead of fundamentally resolving the issue of low reimbursement rates, the state abandoned university hospitals to survive on their own in the non-reimbursable market, effectively condoning overtreatment and the commercialization of medicine. Maintaining the appearance of regulation without securing substantive enforcement power, the state has acquiesced to the expansion of non-covered services by university hospitals.
There is also the failure of the university hospitals themselves. Instead of fulfilling their social responsibility as the "last bastion" of healthcare, they chose the path of maximizing profit by exploiting public trust. In the tension between public mission and private interest, they have repeatedly sided with the latter.
Finally, the failure of society as a whole cannot be ignored. Amidst a vague anxiety about health, a social climate that willingly opens its wallet to the fantasy of "the latest procedures at the best hospitals" rather than rational judgment based on scientific evidence supports this structure.
The combination of these three failures has turned university hospitals into the cleverest of predators, feeding on the anxiety of healthy people rather than acting as bastions protecting the critically ill. The true cost of this hunt—physical harm from unnecessary tests and procedures, the collapse of trust between doctors and patients, and the stagnation of investment in essential medical care—is returning to us all as a final bill. This is the total balance sheet of the business model known as "patient shopping."
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[Sidebar] Why University Hospitals Have the Two Faces of a Factory and a Department Store (Signal Clash of Mixed Payments)
Looking into the profit structure of university hospitals, one discovers that two entirely different business models coexist within a single building.
Face ①: Factory — Covered Medical Care (National Insurance)
- A model that processes a high volume of patients according to set procedures at prices (reimbursement rates) determined by the state.
- Profits are extremely low or in the red. The hospital must survive on high volume with low margins.
- Core workforce: Residents (low-cost labor). Key strategy: Maximizing turnover.
- Analogy: A "public factory" where the government controls the price.
Face ②: Department Store — Non-Covered Medical Care (Non-Reimbursable)
- A model where hospitals autonomously set prices and sell premium services.
- High margins. Includes premium health checkups, robotic surgery, manual therapy, and VIP hospital rooms.
- Key Personnel: Professors (brand value). Key Strategy: Maximizing revenue per patient.
- Analogy: A "premium store" operating at market prices.
Why do the signals conflict?
The problem is that these two business models compete for the same medical staff, the same equipment, and the same time.
- If a professor spends time on a severe surgery for a covered patient, the time available for non-covered premium checkups decreases.
- If a robotic surgery room is allocated to a covered patient, the profit opportunity from non-covered robotic surgery diminishes.
- If a hospital focuses on covered treatment, its deficit grows; if it focuses on non-covered services, it faces criticism for a "public interest crisis."
In economics, this is called the "Multiple Principal Problem." When a single agent (university hospital) must simultaneously serve two conflicting principals (the state's public mission vs. the hospital's managerial survival), the agent engages in dysfunctional behavior that is optimized for neither side.
The signal conflict of this mixed payment structure is the fundamental reason why university hospitals have come to possess the contradictory identity of being both the "last bastion" and the "greatest predator."
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Chapter 18. The Real Culprit Behind the Psychiatric Inpatient Crisis: When Alternatives are Erased in the Name of "Human Rights," Only Isolation Remains
A catastrophe created by the absence of alternatives, and the side effects of a fixed-sum (per diem) fee system that rewards "custody instead of treatment"
If the long-term care hospital was a warehouse to confine the bodies of the elderly, the psychiatric hospital was a prison to exile alienated souls. The two systems are strikingly similar. Built upon the same payment structure of a per diem flat rate, incentives operate to maximize profit through isolation rather than treatment, costs are transferred to the collective wallet of health insurance, and the voices of the most vulnerable parties are thoroughly excluded from the decision-making process.
It is well known that South Korea has long maintained the dishonorable rank of being number one among OECD countries in the number of psychiatric beds relative to the population. Reading this figure as an indicator of the severity of the public's mental health is a misinterpretation. What it actually shows is a record of how the system has "processed" the problem of mental illness. It is a record of processing it in the cheapest and easiest way—through isolation and long-term confinement—rather than through treatment and social reintegration.
However, this powerhouse of psychiatric beds, ranked first in the OECD, came to experience a "psychiatric inpatient crisis" in just a few years. This paradox, where a country overflowing with beds suddenly faced a shortage, is a sudden surface eruption of the structural contradictions lying at the base of the system. This chapter dissects the mechanism of that paradox across three dimensions: law, administration, and economics.
1. Progress in Law, Regression in Reality: The Paradox of the Mental Health and Welfare Act
The prelude to this tragedy, ironically, opened under the banner of the well-intentioned "protection of human rights."
1-1. The Past: The Collapse of the Principle of Least Restrictive Alternative
"Involuntary admission," which deprives one of the physical liberty guaranteed by the Constitution, should be a last resort allowed only in extremely exceptional circumstances, following the principle of least restrictive alternative and strict legal procedures according to legal theory. The reality in Korea was far from this principle. The old Mental Health Act opened the door to involuntary admission with only the consent of two guardians and the diagnosis of one physician. The requirement of guardian consent created a structure where an individual's freedom could effectively be deprived indefinitely based on the family’s judgment, and admission suitability reviews were often operated as a mere formality. The law failed to serve as the last bastion protecting individual liberty.
1-2. 2017: The Emergence of the Justification of Human Rights
The Mental Health and Welfare Act, implemented in 2017, sought to address this problem head-on. It significantly strengthened the requirements for involuntary admission, making it mandatory to have the diagnosis of two or more specialists from different medical institutions in addition to the consent of two persons under duty to protect. It also limited the duration of admission and established a post-audit procedure through the Admission Suitability Review Committee. Looking only at the legal text, this was undoubtedly a progressive step toward protecting patients' human rights.
However, a fatal flaw was embedded in this law. While raising the threshold for admission, the law failed to provide a place for patients who were not admitted to go. This is the core thesis of this chapter. The revision of the law and the construction of alternative infrastructure should have occurred simultaneously, but only the former was executed while the latter was abandoned.
2. Deinstitutionalization Without Alternatives: Structural Absence of Community Care
The core philosophy of the Mental Health and Welfare Act is "deinstitutionalization." This means helping patients live in the community rather than in hospitals. This philosophy itself aligns with international trends in psychiatry. Since Italy's Basaglia Law (Legge Basaglia, 1978), advanced mental health systems have pursued the direction of dismantling large-scale residential facilities and transitioning to community-based care.
For deinstitutionalization to succeed, community infrastructure that replaces the functions previously held by facilities must be built beforehand—or at least in parallel. This includes a dense community mental health network, such as counseling centers, day rehabilitation facilities, vocational rehabilitation programs, group homes, and crisis intervention teams—infrastructure referred to internationally as "alternative services." The Community Mental Health Teams (CMHT) in the UK and Community Mental Health Services in Australia are representative examples of this model.
Korea effectively turned a blind eye to building this infrastructure. Instead of investing sufficient financial resources into the community mental health system, the state shifted that responsibility onto individual families and private psychiatric hospitals. The number of mental health welfare centers was absolutely insufficient, crisis intervention functions were almost non-existent, and community residential facilities handled only a tiny fraction of the demand.
Consequently, families were left with only two extreme options: "in-home care"—which effectively means sacrificing a family member's life to care for the patient—or the extreme dichotomy of "attempting forced hospital admission." A middle ground, a path where the patient could live while receiving appropriate support in the community, did not exist within the system. The law narrowed the door to admission without opening another door to the community. As a result, patients were pushed onto a "treatment cliff" where they could pass through neither door.
3. Side Effects of the Per Diem Fee System in Psychiatric Hospitals: More Loss with More Treatment, More Profit with Longer Stays
The economic engine that drove all of this on top of the legal and institutional vacuum is the per diem flat rate fee structure. Most psychiatric hospital inpatient costs are covered by the National Health Insurance budget, and only a fixed amount is paid for one day of hospitalization. The implication of this simple rule is profound. This is because it creates an incentive structure where "treatment is a loss and custody is a reward"—where the hospital's balance sheet worsens as costs invested in active treatment increase, while stable profits are guaranteed the longer a patient is hospitalized.
3-1. The Structure of Rational Choice by Stakeholders
Within this structure, each stakeholder acts according to the logic of individual rationality.
From the family's perspective: Caring for a mentally ill patient at home entails enormous private costs. These include career breaks for caregivers, physical and psychological exhaustion, and the breakdown of family relationships. Hospitalization is the only channel to transfer these private costs to the public budget of health insurance. A family choosing admission is not a heartless decision but a rational response within a system where alternatives are absent.
The same applies to the hospital's perspective. Under the same per diem system as long-term care hospitals, one patient represents a stable source of income for a psychiatric hospital. Rather than discharging a patient early through active treatment, it is managerially rational to maintain long-term hospitalization after stabilizing symptoms. Treatment is a cost, but custody is profit. This distorted incentive structure is a carbon copy of that in long-term care hospitals.
3-2. Negative Externalities and Market Failure
While families and hospitals make rational choices from their respective positions, the collective result of those choices is a "negative externality" that the entire system must bear. Patients are deprived of their right to receive treatment and their right to return to society. The "institutionalization" effect caused by long-term admission—the regression of social functions and loss of self-reliance—incurs even greater social costs in the long run. Health insurance funds are wasted on custody rather than treatment.
This structure, where the rational choices of individual actors lead to irrational results for the system as a whole, is a textbook case of "market failure" in economics. And given that the state, which should correct this market failure, was instead the designer and a bystander of this structure, this is not merely a market failure but also a "government failure."
4. The Inpatient Crisis: A Perfect Storm of Policy Failure
Following the implementation of the Mental Health and Welfare Act, coupled with the tightening of involuntary admission requirements, psychiatric beds decreased rapidly. Within a few years, approximately 9,000 psychiatric beds disappeared. This reduction in beds could be interpreted positively in the context of deinstitutionalization. The problem was that there was no community infrastructure to replace the function of the vanished beds.
4-1. The Normalization of "Hospital Wandering"
It became commonplace for patients in urgent need of admission due to acute symptoms to be refused admission because of the bed shortage. The refusal rate for police requests for emergency admission nearly tripled from 2.8% to 7.9% in just three years. Guardians, police, and paramedics had to make dozens or hundreds of phone calls to find a hospital that would accept a patient, wandering the streets for over 10 hours—a phenomenon known as "hospital wandering."
This phenomenon implies systemic problems beyond individual patient suffering. A situation where essential social safety net resources, such as the police and fire departments, are tied up for over 10 hours for a single psychiatric emergency admission poses a direct threat to the safety of other citizens. While personnel who should be deployed for policing and disaster response are wandering in search of a hospital, responses to incidents and accidents occurring elsewhere are delayed. The failure of the mental health system is transferred to the entire public safety system.
4-2. Who Pays the Cost?
The costs of the inpatient crisis were dispersed and transferred to society as a whole. Families had to bear the enormous private costs of using expensive private ambulances to get a patient admitted or giving up on admission to care for the patient at home. Surviving hospitals gained powerful market power to select (cream-skim) inpatients amid overflowing demand. Adverse selection occurred, where severe patients who are difficult to treat and have high management costs were shunned, and patients who are relatively easy to manage were admitted preferentially.
Ultimately, all these costs were invisibly transferred to all citizens in the form of wasted health insurance funds and social anxiety regarding the increase in "random crimes." The consistent conclusion of international research is that the social costs caused by untreated patients—emergency room visits, homelessness, and falling into the roles of crime victims or perpetrators—are far greater than the costs of hospitalization. The cheapest solution ended up being the most expensive one.
5. Conclusion: The Walls of the Invisible Asylum
5-1. The Triangular Axis of System Failure
The true culprit behind the psychiatric inpatient crisis is not individual families or hospitals. It is the system itself, which structured failure through three interlocking axes.
There is the failure of law. Under the pretext of protecting human rights, the state previously abandoned the principle of least restrictive alternative and opened an easy path for forced admission, only to later push patients out of the system by transitioning to deinstitutionalization without alternatives. While the direction of the law itself was progressive, the legal revision, unaccompanied by real-world infrastructure, remained a mere declaration.
There is the failure of administration. The state neglected its responsibility to build the alternative infrastructure of community care. Without a minimum safety net of mental health welfare centers, crisis intervention teams, housing support, and vocational rehabilitation, the deinstitutionalization forced by the law was no different from pushing patients off a cliff.
There is the failure of economics. Through the payment structure of the per diem flat rate, the state designed an economic structure that rewards isolation and punishes treatment. While no reward was given for the act of actively treating a patient and returning them to society, stable profits were guaranteed for the act of housing a patient long-term. This distorted incentive structure repeated in psychiatric care in the exact same pattern as in long-term care hospitals.
5-2. The Entrenchment of Isolation and Exclusion
The deepest wound left by this system is that it entrenched society's attitude toward mental illness as "isolation and exclusion" rather than "treatment and integration." The system does not reward the active treatment and social reintegration of patients. Conversely, it guarantees profit for the act of isolating patients from society and keeping them tied to hospitals for long periods. This distorted incentive structure resulted in further reinforcing the social stigma against the mentally ill.
Patients who are pushed onto the streets without treatment are regarded as potential risks, and that perception justifies the logic of a vicious cycle that they must be isolated. A self-reinforcing cycle of isolation → lack of treatment → worsening of symptoms → increase in social anxiety → strengthening of isolation is established.
5-3. Another Trap
Within this system, the mentally ill were isolated not as subjects of treatment, but as a "burden" to families, a "source of income" to hospitals, and an invisible "source of cost" to society as a whole. What happened to the elderly in long-term care hospitals was repeated for the mentally ill in psychiatric hospitals with the exact same structure. Only the subjects changed; the mechanism is identical. The per diem rate rewards custody, the absence of community alternatives forces isolation, and health insurance funds socialize the costs.
Unless the walls of this invisible asylum are torn down, a solution to mental health problems remains far off. And tearing down those walls is impossible simply by fixing legal texts. It must be accompanied by a process of building substantive alternatives in community care, redesigning economic incentives to reward treatment rather than isolation, and revealing rather than hiding costs to derive a social consensus. The lesson left by the failure of the 2017 Mental Health and Welfare Act is clear: human rights without infrastructure are nothing more than empty declarations, and deinstitutionalization without alternatives is another name for abandonment.
[Text Box] What is Community Mental Health Infrastructure? (An 'Alternative' Checklist)
Minimum infrastructure possessed by countries where deinstitutionalization has succeeded:
1. Crisis Intervention Team — Mental health professionals, rather than police or firefighters, respond to the scene.
2. Community Mental Health Center (CMHC) — A hub for outpatient treatment, counseling, and medication management.
3. Day Care Facilities — Provision of social activities and vocational training during the day.
4. Group Homes/Supported Housing — Residential spaces for patients who have difficulty living independently.
5. Vocational Rehabilitation Programs — The economic foundation for reintegration into society.
6. Peer Support — Individuals with recovery experience support fellow patients.
→ In Korea, almost every item on this list is "absolutely insufficient or virtually non-existent."
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[Text Box] Understanding Negative Externalities/Market Failure in "One Sentence"
Families and hospitals each act rationally, but the combined result leads to outcomes no one desires: human rights violations, worsening finances, and exploding social costs — this is a Negative Externality. Furthermore, since the state, which should correct this, has remained a bystander, it is also a Government Failure.
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[Reference] Fixed-Sum Payment System for Long-Term Care Hospitals (Chapter 9) vs. Psychiatric Hospitals (Chapter 18): Similar Mechanisms, Different Resources and Systems
Chapter 9 (Long-term care hospitals) and Chapter 18 (Psychiatric hospitals) share the same core mechanism: "The daily fixed-sum payment system rewards confinement instead of treatment." However, the two areas are distinguished as follows:
| Classification | Long-Term Care Hospital (Ch. 9) | Psychiatric Hospital (Ch. 18) |
| ------------------------------ | -------------------------------------------------------- | -------------------------------------------------------- |
| Primary Target | Elderly with chronic diseases | Patients with severe mental illness |
| Applicable Insurance | Long-term Care Insurance + Health Insurance | Health Insurance (Psychiatry) |
| Entry Route | Government-induced transition (Ch. 8) | Forced/Protective hospitalization by family |
| Nature of Lack of Alternatives | Conversion of acute care beds to long-term care | Absence of community care infrastructure |
| Fiscal Transfer Mechanism | 2012 Integrated Collection (Separate analysis in Ch. 30) | Socialization of costs through Health Insurance finances |
→ While the core remains the same, the contexts differ; therefore, they are analyzed independently in their respective chapters. The "fiscal/accounting transfer mechanism" known as integrated collection is addressed separately in Chapter 30 (The Intergenerational War).
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Chapter 19. The Collapsed Healthcare Delivery System
An unstructured market, a main gate without a gatekeeper, and an order replaced by fear.
While previous chapters dealt with the "causes" of system collapse, this chapter surveys the "results" where all those failures converge. The reality is that one must visit a university hospital emergency room (59) even for minor illnesses like a cold, obstetricians for delivery cannot be found in rural areas, and one must wait months for cancer surgery. The procession of rural patients boarding the KTX bound for Seoul is the most direct evidence that this system is no longer a "system," but a "disorderly market" where everyone fends for themselves.
Behind this experience lies the complete functional failure of the healthcare delivery system, in which primary (neighborhood clinics), secondary (regional hospitals), and tertiary (advanced general hospitals) medical institutions should perform their respective roles and be organically connected. Specifically, the downfall of secondary hospitals, which should serve as the backbone of regional healthcare, was decisive. At the root of it all, however, lies the invisible truth that all incentives in the system are designed to concentrate patients into giant advanced general hospitals in the capital area. This is not a natural market failure. It is a failure created by policy, even if unintended.
This chapter dissects how that collapse was constructed across three levels. First, the absence of design principles that an efficient medical system must possess—gatekeeping and care coordination. Second, the informal mechanisms that have replaced those formal design principles—a deformed delivery system based on legal risk—and its collapse. Third, the maximization of congestion and danger resulting from all this, and the final transfer of risk to the weakest link.
1. Absence of Design Principles: A Main Gate Without a Gatekeeper, Broken Links
An efficient medical system operates on two axes: Gatekeeping and Care Coordination. Both are absent in Korean healthcare.
1-1. The Disappearance of Gatekeeping
Gatekeeping is a system in which neighborhood clinics (primary care), acting as "gatekeepers," examine patients first and refer them to higher-level hospitals only when necessary to prevent the waste of medical resources. The core secret to the UK's NHS maintaining itself with limited finances is this strong gatekeeping, and most advanced medical systems, such as those in the Netherlands, Denmark, and Australia, have similar mechanisms. This corresponds to a "traffic cop" that prevents unnecessary medical utilization and guides patients to the most appropriate level of medical institution.
There is no such traffic cop in Korean healthcare. Three reasons act in combination. First, there is an absence of economic incentives. Due to low reimbursement rates, neighborhood clinics are not properly compensated for the act of diagnosing complex patients and referring them to higher institutions. Rather, it is managerially rational to see simple, mild patients quickly and in high volume. Second, there is patient distrust. Patients exhausted by "three-minute consultations" distrust the diagnostic capabilities of neighborhood clinics and attempt to head straight to university hospitals where the "top experts" are located. Finally, there is an absence of institutional enforcement. The current system, where one can use outpatient services at higher-level hospitals without any restrictions if they have a single referral slip, essentially amounts to abandoning gatekeeping. While the referral mechanism exists, it is closer to a formal ritual rather than a threshold.
1-2. Absence of Care Coordination
Care coordination is the function of managing and adjusting information so that it is not interrupted and treatment remains continuous when a patient moves between various hospitals and departments. This is essential for preventing redundant tests, avoiding adverse drug reactions, and effectively managing chronic diseases. Accountable Care Organizations (ACOs) in the US and the Integrated Care System in the UK perform this function.
Korean healthcare is extremely fragmented, so the foundation for this function to operate is non-existent. Medical records are not seamlessly shared between hospitals, forcing patients to undergo all tests from scratch every time they move. Acute care hospitals are more interested in discharging patients as quickly as possible rather than taking responsibility for connecting them to regional hospitals after surgery. Patients become "medical refugees" the moment they are discharged. Furthermore, the state provides no compensation for the complex act of linking and coordinating patients with other hospitals. Acts that are not compensated are not provided—this is the most basic principle of economics.
Korean healthcare is like an archipelago of islands where everyone fends for themselves, with no gatekeepers and no bridges connecting the hospitals. This absence of design is the fundamental cause of the "congestion" and "danger" that will be discussed later.
2. Order Replaced by Fear: A Deformed Delivery System Based on Legal Risk
In the Korean healthcare system, where formal gatekeeping and care coordination were absent, there was an invisible hand that performed this role for a long time: "Legal Risk." In effect, the fear of legal liability for medical accidents filled the space the state failed to design. In a fragmented market, this fear maintained the medical delivery system, albeit in a deformed manner.
2-1. Transfer of Risk and Deformed Equilibrium
Until the 2000s, neighborhood clinics and small-to-medium hospitals avoided treating patients who carried even a slight risk. This was because if they treated patients who were not merely mild cases and the outcome turned bad, the legal responsibility they had to bear was immense. They referred all such patients to university hospitals. This was a medical judgment for the patient, but at the same time, it was a rational survival strategy to offload legal risk to university hospitals in the event of medical accidents.
University hospitals served as the final "dam" absorbing all these risks. At the time, the criminal prosecution rate for medical accidents was low, and the liability of hospitals was limited in civil lawsuits, making this risk manageable. As a result, the uneven distribution of legal risk functioned as a deformed medical delivery system that moved patients from primary and secondary institutions to tertiary ones even without official systems. It was a system operating on fear and risk avoidance rather than trust and cooperation, but it worked nonetheless.
2-2. Collapse of Equilibrium: Escalating Penalties and an Explosion in Criminal Prosecutions
Through the 2010s, this precarious balance completely broke down. Two changes were decisive.
First, there was an escalation in court-ordered settlements. Courts began to "realize" compensation amounts in medical lawsuits to levels equal to other forms of professional negligence. High-value compensation rulings in the hundreds of millions of won were no longer rare. For most small-to-medium hospitals struggling with low reimbursement rates, this was a shock that threatened their management's existence.
More fatal was the explosion in criminal prosecution rates. The criminal prosecution rate for occupational negligence resulting in death or injury increased explosively. The number of criminal prosecutions per physician in Korea reached a level unprecedented globally, hundreds of times higher per population compared to the UK, Japan, and the US. The reality that a bad medical outcome could lead not just to civil compensation but to being prosecuted as a criminal fundamentally changed behavior at the medical frontlines.
These two changes made it so that even university hospitals could no longer withstand legal risk. The final dam of the delivery system that had been functioning, however deformedly, collapsed.
3. The Final Transfer of Risk: Responsibility Falling on the Weakest Link
Unmanageable risk flows to and accumulates at the very bottom of the system. In university hospitals, high-risk patients gathered there are cared for during nights and weekends—in the absence of professor supervision—by the weakest and least experienced individuals: the residents (69).
If the outcome is bad—if the patient dies or worsens—the responsibility goes not to the state that designed the system, the hospital that failed to hire enough staff, or the professor who neglected supervision, but to the individual resident. The final responsibility for all the risks created by the system is offloaded onto the individuals at the lowest tier who have the least ability to prevent those risks.
This structural violence is the most fundamental reason why young doctors avoid high-risk essential healthcare (61) such as surgery, thoracic surgery, and obstetrics. This is not a matter of individual preference or generational characteristics. For any rational economic agent and any individual seeking survival, it is a natural choice to avoid a field where the triple hardships of high risk, low reward, and high possibility of punishment await. The avoidance of essential healthcare is a product designed by the system, not the moral failure of individual doctors.
4. The Economics of Congestion and the Medicine of Risk
4-1. Disaster Predicted by Queueing and Congestion Models
In a system where design principles are absent and even legal risk has become unmanageable, patients flock to the only remaining option: university hospitals. The worst-case scenario predicted by economics' "Queueing and Congestion Model" becomes reality.
The paradox of accessibility occurs. If everyone flocks to university hospitals to receive the best service, paradoxically, the accessibility of the entire system is destroyed. "Three-hour waits for a three-minute consultation" become a daily routine, and critical patients who truly need prompt treatment lose their "golden hour" in infinite competition with mild cases. A door open to everyone eventually becomes a door truly open to no one.
There are no winners in this game. Mild patients waste enormous time and money to receive simple treatments. Severe patients fail to receive necessary treatment in time during life-threatening moments. Medical staff are exhausted by the endless line of patients and fail to concentrate on the patients who truly need it. The state wastes limited health insurance finances on the utilization of tertiary hospitals for minor illnesses. It is a negative equilibrium of a typical non-zero-sum game.
4-2. Deaths That Could Have Been Avoided
The collapse of the delivery system brings about medically measurable risks. Representative indicators include "Avoidable Emergency Department Visits" and "Avoidable Hospitalization Rates."
The former refers to the rate of visiting university hospital emergency rooms for mild illnesses—such as simple colds or indigestion—that could have been sufficiently managed at neighborhood clinics. A high value in this metric signifies that primary care has collapsed and represents a direct threat to patient safety. While limited emergency room resources are occupied by mild patients, true emergency patients with conditions like myocardial infarction or stroke get stuck in life-threatening queues.
The latter refers to high hospitalization rates for chronic disease patients with conditions like diabetes or asthma, which might not have required hospitalization if managed consistently by neighborhood clinics. This is also an indicator showing the complete collapse of primary care and chronic disease management systems. Korea's figures for these two indicators significantly exceed the OECD (66) average, proving that structural flaws in the system are affecting the actual lives of patients.
5. Conclusion: The Ruins of a Disorderly Market
5-1. The Final Product of a Distorted Market
Part 3, "The Distorted Market," showed what strange monsters were born atop the ruins created by low reimbursement and the three dominoes. The pain business commodified suffering and anxiety; university hospitals hunted healthy people while hiding behind the myth of being the "last bastion"; and psychiatric hospitals became invisible concentration camps isolating the most vulnerable. And the final result of all these distortions is the collapsed medical delivery system dissected in this chapter.
This collapse was a tragedy composed of three acts: the absence of design principles, deformed operation based on risk, and the resulting maximization of congestion and danger.
5-2. Counterfactual Reasoning and the Future
This collapse offers us clear implications. If the state had resolved the low reimbursement issue, strengthened gatekeeping functions through fair compensation for primary care, and established a rational legal safety net for medical accidents—such as a no-fault compensation system or the substantive strengthening of medical mediation services—then the current extreme concentration in tertiary hospitals and the collapse of essential healthcare could have been prevented.
The reason this counterfactual reasoning is meaningful is that it suggests the path forward. If the current disorderly market is left neglected, the medical gap between the capital and non-capital regions, and between the wealthy and the poor, will deepen further, and the system will eventually reach a state where it cannot take responsibility for anyone's health.
**5-3. The Anatomy of a Collapsing System in Motion**
The KTX heading to Seoul is not merely a means of transportation. It is the very image of a collapsing system in motion. It is a system where patients flood in because there are no gatekeepers, where patients drift because the bridges between hospitals are severed, where legal fear drives doctors away, and where the most vulnerable left behind shoulder all responsibility. There are invisible powers that dominate this chaotic market, profit from it, and sometimes even instigate its collapse.
Now, it is time to open the door to Part 4 to uncover the reality of that power.
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**[Text Box] Why the Delivery System (Primary, Secondary, Tertiary) and 'Gatekeeping' Lead to Ruin if Absent**
**What is a Healthcare Delivery System?**
It is a system design that determines the order and level of medical institutions patients use. It is commonly divided into 'Primary, Secondary, and Tertiary' levels.
| Level | Role | Institutions | Core Functions |
| :------------ | :------------------------------------------ | :----------------------------------- | :----------------------------------------------------------- |
| **Primary** | Initial contact & mild case management | Local clinics, public health centers | Resolving daily health issues like colds, high blood pressure, diabetes; chronic disease management |
| **Secondary** | Specialized care & moderate hospitalization | Regional hospitals | Surgery, specialized testing, acute phase inpatient treatment |
| **Tertiary** | Severe & rare diseases | Tertiary general hospitals | Areas requiring high expertise such as cancer surgery, organ transplants, severe trauma |
**In a well-functioning system:** It forms a 'pyramid structure' ascending from Primary → Secondary → Tertiary, with each level focusing on its specific role.
**What is Gatekeeping?**
It is a system where primary medical institutions (local clinics) act as 'gatekeepers,' treating patients first and referring them to higher-level institutions only when necessary.
**What happens if there is no gatekeeping?**
**[Normal Delivery System]** **[Korean-style Disorder]**
△ Tertiary (Severe) ████ Tertiary (Everyone goes here)
╱ ╲ ▐ ▐
╱ 2nd ╲ (Specialized) ░░ Secondary (Empty)
╱\_\_\_\_\_\_╲ ░ ░
1st (Mild) ← Most solved here ░ Primary (Loss of trust)
* **Tertiary Hospitals:** Flooded even with mild cases → 3-hour wait for a 3-minute consultation → Loss of the 'golden hour' for severe patients.
* **Secondary Hospitals:** Financial hardship due to loss of patients → Closure → Rapid deepening of medical voids in regions.
* **Primary Clinics:** No incentive to treat complex patients due to low fees → Patient distrust → A vicious cycle.
**Conclusion:** Gatekeeping is not merely an 'inconvenient procedure'; it is a 'traffic light' that allocates limited medical resources to where they are most needed. Just as accidents occur at intersections without signals, congestion, waste, and danger inevitably arise in a medical system without gatekeeping.
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**Part 4. State Power and the Predator Cartel: Who Profits Atop the Collapse?**
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**Chapter 20. Symbiosis and Predation I: Hospitals and Universities**
A symbiotic engine of labor exploitation operating under the guise of education and training.
**[Text Box] Summary of the 'Divide and Rule' Mechanism**
The core keyword permeating Part 4 is *Divide et Impera* (Divide and Rule).
Divide and Rule is a classic technique of power that internally divides a subject group to make unified resistance impossible. It is a strategy commonly used by the Roman Empire to rule provinces, by colonial powers to control the colonized, and by corporations to weaken labor unions.
In Korean healthcare, this mechanism operates on three dimensions:
| Axis of Division | Divided Groups | Tools of Division | Who Profits? |
| :----------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- | :------------------------------------------ |
| **Between Institutions** | University hospitals vs. Small/mid hospitals vs. Clinics | Differential fees, tertiary hospital exceptions, referral systems | Government (Easier individual engagement) |
| **Between Personnel** | Professors vs. Residents vs. Salaried doctors; Doctors vs. Nurses | Hierarchical caste structure, disparities in treatment | Hospital management (Ease of labor control) |
| **Between Departments** | Essential (Surgery/OB-GYN) vs. Non-essential (Dermatology/Plastic Surgery) | Fee gaps, differential legal risks, possibility of conversion to non-reimbursable services | Government (Blocking unified resistance) |
**Why Divide and Rule is effective:** If the medical community demands with one voice to "resolve low medical fees," the government becomes politically vulnerable. However, when university hospitals compensate through non-reimbursable services, clinics survive on health screening income, and residents are tied to the justification of 'training,' the interests of each group diverge, making solidarity impossible. The government becomes able to deal with divided individual groups through 'individual engagement,' and the pressure for structural reform of the entire system vanishes.
Part 4 dissects how this Divide and Rule operates in hospitals-universities (Chapter 20), the legal profession-government (Chapter 21), the entire state system (Chapter 22), and ideology (Chapter 23).
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Tracking the epicenter of the collapse of Korean healthcare leads us to the bizarre symbiotic relationship between the ivory tower—private universities—and their affiliated hospitals, places regarded as most sacred. The ivory tower of the university and the clinical field of the hospital are not two separate worlds. A massive 'Symbiotic Engine' runs between them, bartering tuition fees and medical profits for education and labor exploitation.
University hospitals grow, yet the people within them break down. This paradox is no coincidence. Behind this paradox lies a perfect structure of division of labor, where universities mass-produce cheap labor and hospitals consume them at low wages to control labor costs. Universities run a tuition business, and hospitals engage in labor exploitation. These two axes form a predatory structure where they prey on each other under the single interest of a foundation. Education has degenerated into a means of supplying labor for medical treatment, and medical treatment into a profit-making business to cover the costs of education. This chapter dissects the mechanisms of this exploitation and how this symbiotic engine became the darkest yet firmest pillar supporting the Korean medical system.
**1. Principles of the Symbiotic Engine: Two Cogwheels**
The symbiotic engine of the university and the hospital is completed as two massive cogwheels mesh and turn. One is the university as a 'mass-production factory for labor,' and the other is the hospital as a 'place of consumption for low-cost labor.'
**1-1. University: The Labor Mass-Production Factory**
The expansion of quotas in private universities, especially in health and medical departments, has been driven by the management logic of maximizing tuition revenue. The continuous increase in admission quotas for nursing and other health-related departments was not a result of responding to the social need for educational demand in those fields. The core motivation was the managerial advantage: the high employment rate after graduation makes it easy to attract new students, and students can be sent to hospitals under the pretext of clinical practice without additional investment in educational infrastructure.
In this process, students pay expensive tuition only to be incorporated into exploitation starting from the practice stage, where they provide effectively unpaid labor under the name of education. In this segment, where the boundary between education and labor is intentionally blurred, the university collects tuition while transferring actual education costs to the hospital, and the hospital secures free labor in the form of unpaid trainees. This is the first cogwheel of the symbiotic engine. The university serves as a factory that oversupplies the cheap labor the hospital requires every year.
**1-2. Hospital: The Consumer of Low-Cost Labor**
Private university hospitals utilize this abundantly supplied new workforce to systematically control labor costs—the largest expenditure item in hospital management, accounting for about 44% of medical revenue. The core mechanism is the so-called 'Burn and Churn' model.
The case of new nurses clearly demonstrates this model. Hospitals exhaust new nurses with extreme labor intensity in a short period and then replace them with new graduates pouring out every year when they resign. The reality that the turnover rate for new nurses within one year reaches 57.4% proves the operation of this model. This figure is not a flaw in the system, but an indicator that the system is working exactly as designed. A high turnover rate is an advantage, not a cost, for the hospital. By replacing nurses who voluntarily resign at the point when their experience leads to wage increases with new graduates at lower starting salaries, it becomes possible to structurally suppress average labor costs.
The same logic applies to the physician workforce. To maintain a low-fee, high-volume system, hospitals rely excessively on residents who suffer from low wages and long working hours under the name of 'training,' instead of hiring enough expensive specialists. Residents' labor is justified as training, but in reality, a significant portion of the tasks they perform consists of menial work and repetitive procedures with minimal or no educational value. This is the second cogwheel of the symbiotic engine. Hospitals consume the cheap labor supplied by universities to secure profitability under the low-fee system.
**2. Governance of Conflict of Interest: Symbiosis Without Checks**
The reason this engine continues to run without stopping is that the system design itself promotes, rather than manages, conflicts of interest.
In advanced academic medical systems, the separation of governance and command structures is clarified so that the university's educational mission and the hospital's clinical mission do not infringe upon each other. In major Academic Medical Centers in the United States, it is an institutional realization of this principle that the Dean of the Medical School and the Hospital CEO maintain separate reporting lines, and the Graduate Medical Education Committee has independent authority from hospital management.
In Korean private university hospitals, the chairman of the foundation, the university president, and the hospital director are virtually a community of shared destiny bound by a single interest. In a structure where the foundation's board of directors simultaneously seizes personnel and budget rights for both the university and the hospital, it is difficult for an independent body to monitor the quality of education and the appropriateness of training. The university secures stable practice sites and revenue sources through the hospital, and the hospital receives an infinite supply of cheap labor through the university. In this solid symbiotic relationship, the independent check function to question the quality of education or the medical appropriateness of training goes missing.
**3. The Caste System of the Medical Field: Chaebol-style Dual Labor Structure**
The symbiotic engine of universities and hospitals has completed a dual labor structure in the medical field that is strikingly similar to the regular/non-regular and subcontracting model operated by Korean chaebol conglomerates. What sociology calls 'Internal Stratification' within the profession has created a rigid caste system, akin to a status system, within the medical community.
**3-1. A Few Brahmins and Many Shudras**
The premise that the upper castes cannot be a majority in a caste system is the most accurate metaphor for describing the personnel structure of Korean university hospitals. Hospitals intentionally maintain the number of upper-class members—professors and specialists—at a minimum and fill the void with the sacrifices of the lower class.
Statistics reveal this reality starkly. In major Korean university hospitals, the proportion of residents among all doctors ranges from 30% to as high as 46%. Compared to 10.2% at the University of Tokyo Hospital in Japan or 10.9% at the Mayo Clinic in the United States, these are historically unprecedented figures, 3 to 4 times higher. While hospitals in developed countries treat patients by filling 90 out of 100 doctors with specialists, Korean university hospitals endure with only 60 specialists, filling the gap with the excessive labor of cheap residents. Analyses also show that the number of specialists employed relative to the number of beds is only about one-fifth that of developed countries.
This structure is not accidental but intentionally designed. Only by keeping the number of the upper caste (professors) to a minimum can their scarcity and authority be guaranteed, and control and exploitation of the lower caste (residents, fellows) be facilitated.
**3-2. Layers of the Caste**
This caste system consists of three distinct layers. At the apex are the faculty members, a small number of core regular employees who manage the system and maintain brand value. They are the beneficiaries and maintainers of the exploitative structure. In the middle are the residents, the core subcontracted labor force supporting the system. Under the name of 'trainees,' they are effectively subcontracted workers enduring long working hours that would be illegal in any other occupation. On the periphery are the fellows and salaried doctors—'fixed-term contract' specialists—who survive on short-term contracts without any guarantee of transition to regular positions.
Just as the dual structure of prime-subcontractors in chaebols simultaneously operates employment stability for core personnel and employment instability for peripheral personnel, only a small number who pass through the narrow door of professorship enjoy stable status in university hospitals, while the rest shoulder the costs of the system in structurally unstable positions. It is a structure that matches exactly what Segmented Labor Market Theory in labor economics predicts.
**4. Justification of Exploitation: Collision Between the Right to Learn and Labor Utilization**
At the very bottom of this hierarchy, all contradictions of the system explode. The core is the conflict between two values: the resident's 'Right to Learn' and the hospital's 'Use of Labor.'
Ethically, the primary duty of a training hospital is to guarantee the education and growth of the resident. The social legitimacy of the training system is established on the premise that residents can systematically accumulate clinical competence under sufficient guidance and ultimately grow into independent healthcare providers. Economic reality systematically undermines this premise. Within an economic structure distorted by low fees, the hospital's primary goal becomes maximizing the use of cheap resident labor to maintain profit.
The fact that the system is designed to always choose the latter when the two values collide is confirmed in the daily lives of residents. Menial tasks with no educational value, repetitive procedures, and murderous on-call shifts are all evidence of this structural exploitation. The noble name of 'training' becomes the most convenient alibi to justify all this exploitation. The language of feudal apprenticeship—'devotion to the master,' 'one grows only by enduring pain'—is mobilized as rhetoric to conceal modern labor exploitation.
**5. Conclusion: An Artificial Void Called 'Doctor Shortage'**
**5-1. Artificially Designed Job Shortage**
This chaebol-style dual labor structure explicitly explains the essence of the "shortage of essential medical care doctors" phenomenon. From the perspective of hospitals, there is absolutely no economic incentive to employ a sufficient number of expensive, full-time faculty specialists in essential medical fields—such as surgery, obstetrics and gynecology, pediatrics, and emergency medicine—where low insurance reimbursement rates prevent profitability. Rather, their rational choice is to minimize full-time hiring in those fields and fill the operational vacuum with the excessive labor of low-cost residents and contract-based employed physicians.
Therefore, the current crisis is not a shortage of licensed doctors. It is an "artificial shortage" arising because hospitals refuse to pay the legitimate costs for essential medical care and fail to create stable, full-time positions where doctors can work sustainably. Even if the medical school quota is increased to produce more doctors, as long as this structure remains unchanged, the additional workforce will simply be absorbed into profitable non-reimbursement sectors or consumed once again as low-wage subcontracted labor. Even if one turns the faucet on harder, the water will leak elsewhere if the pipe is riddled with holes.
**5-2. The Role of the State: The Enforcer for the "Medical Chaebols"**
When this malformed system nears collapse, the state does not reform the low-reimbursement policy or the labor structure that lies at the root of the problem. Instead, it steps forward as an "enforcer" to maintain the system. If residents at the bottom of the exploitative structure engage in resistance, such as collective resignation, the state defines this as illegal and forces their return through extreme punishments, including "work start orders" and "license revocations."
What is revealed here is the state’s dual position. On one hand, the state is the architect that gave birth to this distorted labor structure through low-reimbursement policies; on the other hand, it performs the role of an executioner that forcibly patches the system by scapegoating the physician group whenever the contradictions born of that structure threaten to explode. A repetitive pattern is observed in which the state effectively shields the labor exploitation structure of the "medical chaebols"—which was created by policy failure—and shifts the cost of that contradiction onto the physician group, particularly the residents.
**5-3. The Legacy of the Symbiotic Engine**
The symbiotic relationship between universities and hospitals is not a beautiful collaboration but a predatory structure where one class preys upon another. Universities supply labor in the name of education, and hospitals exploit that labor under the pretext of training. This perfectly interlocking symbiotic engine is the darkest and most solid pillar supporting the Korean medical system.
In conclusion, the crisis in Korean healthcare did not arise from doctors' selfishness or an absolute shortage of numbers. It is an inevitable consequence of the government's structural policy failures and the chaebol-style labor exploitation system built by private hospitals to survive within those failures. Another predator that profits in a different way outside this system and maintains a bizarre symbiotic relationship with the state—the cartel of the legal profession and the government—is discussed in the next chapter.
**Chapter 21. Symbiosis and Predation II: The Legal Profession and the Government**
In an era of 40,000 lawyers, the legal profession has turned medical disputes into a new source of revenue, while the government seeks to strengthen its control through measures such as the Special Judicial Police of the National Health Insurance Service (NHIS).
In 2019, the number of mediation applications received by the Korea Medical Dispute Mediation and Arbitration Agency was 2,824. Counseling cases alone reached approximately 63,000. In the same year, the number of doctors indicted for professional negligence resulting in death or injury reached an average of three per day. The criminal indictment rate relative to the number of active doctors was 0.5%, which is more than 25 times that of Japan and 50 times that of the United Kingdom.
To accurately understand what these figures mean, one must reject superficial interpretations suggesting that medical accidents are simply frequent. The reason the frequency of Korean doctors standing in criminal court shows such an extreme difference from other developed countries is not that Korean doctors are uniquely careless. It is because the structural conditions for medical disputes to grow into an "industry" are uniquely established only in Korea.
In the previous chapter, we dissected the "symbiotic engine" through which private universities and affiliated hospitals exploit cheap labor. While that was predation within the system, what this chapter addresses is another predatory cartel growing by feeding on the cracks from outside the system. Without understanding this bizarre symbiotic structure in which the legal profession and the government are colluding, it is impossible to explain why Korean healthcare is collapsing so rapidly.
**1. Supply Shock: Structural Changes in the Attorney Market**
In May 2025, the number of registered attorneys in the Republic of Korea surpassed 40,000 for the first time in history. This is a nearly fourfold increase in just 19 years since reaching the 10,000 mark in 2006. The starting point of this surge is clear: since the introduction of the law school system in 2009, approximately 1,700 new lawyers have poured out every year, a trend that has not ceased for a single year. It was a classic "supply shock" as defined in economics.
Economics textbooks explain that when a supply shock disturbs market equilibrium, two paths open: one is the expansion of demand through price decreases, and the other is the inflow of oversupplied resources into adjacent markets. In the Korean legal market, the latter path operated strongly. The traditional litigation market was already saturated. To survive, it was necessary to "develop" new markets that were previously ignored.
From the perspective of Industrial Organization, what occurred in the legal profession at that time was a typical act of "market creation." A series of processes—identifying new markets with sufficient profit potential, organizing demand, and lowering entry barriers—was carried out systematically. The first successful example of this was the divorce litigation market.
In the past, divorce lawsuits remained on the periphery of the legal market because the size of alimony was not large. However, the explosion in real estate prices, especially apartment prices, changed the game. Divorce was no longer just about emotional closure but became a matter of distributing assets worth billions of won. As the "stakes" of the litigation grew, divorce was transformed into a product with a high return on investment from a lawyer’s perspective. The core principle of this business model was simple: once the economic scale of a dispute exceeds a certain threshold, the dispute itself invites specialized legal services.
**2. Mass Supply of Raw Materials: The New Market of Medical Disputes**
The medical dispute market replicated the formula proven in divorce litigation almost exactly. However, there was one decisive difference. While the "raw materials" for divorce litigation were private matters of marital conflict, the raw materials for medical disputes were supplied in bulk by government policy failures.
As repeatedly confirmed in previous chapters, structural conditions such as low reimbursement rates and three-minute consultations planted inherent risks in medical settings. Forced into high-volume, low-margin medical practice under reimbursement rates that do not even cover costs, it was a statistical certainty that the probability of medical accidents would increase. Explaining this through James Reason’s "Swiss Cheese Model," the government’s low-reimbursement policy was akin to punching holes in every defensive layer of the system. While individual accidents may seem like coincidences, from a system level, it was a miracle that accidents did not occur more often.
Another factor overlapped here: the fact that compensation awards issued by judges in the Korean medical dispute market gradually increased. According to statistics from the Korea Medical Dispute Mediation and Arbitration Agency, the average mediation application amount in internal medicine jumped from 61.02 million won in 2012 to 98.79 million won in 2018, and the number of high-value claims in the 500 million to 1 billion won range increased by an annual average of 24.2%. Just as apartment prices boosted the economic attractiveness of lawsuits in the divorce market, the rise in judgment compensation amounts performed the same role in medical disputes.
There is a concept in economics that explains this phenomenon: "induced demand," as pointed out by Kenneth Arrow. When the supply of legal service providers increases, even disputes that would not have occurred without a lawsuit are converted into litigation. An environment has been created where every dissatisfaction in the medical field can be converted into a potential lawsuit.
**3. State Neglect: The Disappearance of Alternative Dispute Resolution**
There is one more decisive condition that allowed this dispute industry to grow explosively: the state’s virtual abandonment of the institutional infrastructure to resolve medical disputes efficiently.
In terms of comparative law, most developed countries handle medical accidents primarily through civil compensation while elaborately designing "Alternative Dispute Resolution (ADR)" systems so that rapid agreement and mediation occur at the pre-litigation stage. Representative examples include Sweden's No-fault Compensation system, New Zealand’s Accident Compensation Corporation (ACC), and France’s state compensation system for medical accidents. In these countries, a medical accident is a tragedy, but it does not become an industry. This is because paths are open for victims to receive compensation quickly.
In Korea, the Medical Dispute Mediation Act was implemented in 2012, and the Korea Medical Dispute Mediation and Arbitration Agency was established. However, this system possessed fundamental limitations from the design stage. Since mandatory mediation prior to litigation was not enforced, patients could proceed directly to criminal complaints and civil lawsuits without going through mediation procedures. Unlike civil lawsuits, criminal complaints cost nothing, the burden of proof is delegated to the prosecution, and they are effective in exerting psychological pressure on doctors. From the perspective of Rational Choice Theory, criminal complaints were a strategy with overwhelmingly high expected benefits compared to costs for patients. The statistic that the number of criminal cases is ten times that of civil cases is a result of this incentive structure.
Consequently, the state's failure in ADR design created a market environment that directs all disputes toward exhaustive and expensive litigation. In the language of Institutional Economics, by failing to provide a system to lower "transaction costs," the state gifted a massive opportunity for rent-seeking to the legal profession.
**4. The Judicialization of Policy: The Gap Between Surface Pretext and Actual Purpose**
Up to this point, the legal profession's entry into the medical dispute market might appear to be a natural expansion of the market. However, there is a darker layer to the story. It is the fact that the government did not merely neglect the expansion of this dispute industry but actively utilized it.
Political scientist Martin Shapiro warned early on that the judiciary is not a pure dispute resolution mechanism but can be diverted into a tool for state governance. What he called "The Judicialization of Politics" has been accurately reproduced in the Korean medical sector. The government learned that the threat of medical disputes is an extremely effective means of controlling the medical community and began to utilize it systematically.
This strategy always operates in the same pattern: putting an ethical pretext that no one can easily refute at the forefront, while the actual blade of the bill is aimed at a completely different target.
*The Doctor License Revocation Act: Packaging as "Sex Crime Prevention"*
The most representative case is the so-called "Doctor License Revocation Act." The pretext put forward by the government and the legislature was "to protect patients from doctors who commit sex crimes." Virtually no one can oppose this justification.
However, the actual content of the bill was to "revoke the license if an individual receives a sentence of imprisonment or heavier for any crime." A brief look at the criminal law system reveals what this law truly targets. The penalty imposed on a doctor who violates a "work start order" under the Medical Service Act is precisely imprisonment. While it carries the name of preventing sex crimes, it has effectively secured a legal basis to deprive the licenses of doctors who collectively resist government policy. It can only be interpreted as a device intended to fundamentally block collective action by using a professional death sentence as a weapon.
This is a clear violation of the "principle of proportionality" in administrative law. For any regulation, a rational proportional relationship must exist between the purpose to be achieved and the means used. Imposing the extreme sanction of license revocation on doctors protesting structural problems is a state where the balance between purpose and means has fundamentally collapsed.
**5. The NHIS Special Judicial Police: A Disaster Born of Conflict of Interest**
The final evolutionary form reached by the judicialization of policy is most blatantly revealed in the attempt to introduce the Special Judicial Police (SJP) for the National Health Insurance Service (NHIS).
In December 2025, the President directly instructed the appointment of 40 to 50 Special Judicial Police officers within the NHIS during a briefing by the Ministry of Health and Welfare. In 2026, the position was even expressed that they should be able to initiate investigations without prosecutor approval. The surface pretext is the crackdown on "non-physician-owned hospitals" (samujang hospitals) that drain health insurance finances. Figures were presented as evidence, showing that the amount decided for the redemption of unjust enrichment from illegally established institutions caught over 14 years reached approximately 3.4 trillion won, yet the actual redemption rate is less than 8%. It is difficult to object to the purpose of eradicating non-physician-owned hospitals itself.
However, looking coldly at the structure of this system, a completely different picture emerges. The National Health Insurance Service is a contracting party that pays reimbursement rates to medical institutions, as well as an interested party that reviews and cuts medical expenses. Granting judicial police power to such an institution is equivalent to placing a knife in the same hand that holds the purse strings. In front of an institution that controls both the livelihood and the power of investigation, medical institutions are relegated from contracting parties to subjects of surveillance.
*The Warning Left by the British Post Office Scandal*
The United Kingdom has painfully demonstrated what kind of disaster such a structure leads to in reality. This is exactly what happened in the "Post Office Scandal," the worst judicial scandal that shook British society in 2024.
The essence of the case was as follows: the British Post Office used a flaw in its newly introduced accounting system, "Horizon," to frame more than 900 innocent sub-postmasters for embezzlement, criminally prosecuting and ruining them. What made this tragedy possible was a structural conflict of interest. This was because the Post Office was placed in a position to simultaneously perform three roles: victim, investigator, and de facto prosecutor. In a situation where admitting a system error would result in massive liability for compensation, the Post Office chose the path of shifting the responsibility onto individuals. The truth remained buried for over 20 years, and the lives of hundreds were destroyed.
The Special Judicial Police (SJP) of the National Health Insurance Service (NHIS) replicates this structure almost exactly. The NHIS is a direct victim of financial losses caused by "office-head hospitals" (non-medical person-owned hospitals), yet it selects investigation targets using its own big data system and performs the investigations directly through its SJP authority. An institution that acts as the victim, the investigator, and the provider of the basis for prosecution—the United Kingdom has already shown, in the most disastrous form, what happens when this triple role is concentrated within a single entity.
One of the fundamental principles of Public Law, "natural justice," and specifically the legal maxim *nemo judex in causa sua* ("no one should be a judge in their own cause"), was refined over centuries precisely to warn against such situations. The NHIS SJP system stands in direct opposition to this principle.
6. Defensive Medicine: The Economics of Bankrupt Trust
The most lethal byproduct created by the expansion of the dispute industry and the state’s weaponization of justice is gnawing away at the entire system from invisible corners. This is the normalization of "defensive medicine."
Defensive medicine refers to the practice where a physician makes clinical decisions prioritizing their own legal safety over the best interests of the patient. Typical patterns include orders for medically unnecessary tests, the transfer of even slightly risky patients to tertiary hospitals, and the avoidance of invasive procedures. These two types, categorized by American health economists as "positive defensive medicine" and "negative defensive medicine," are manifesting simultaneously and in extreme forms in South Korea.
The fact that the conviction rate for professional negligence resulting in death or injury reaches 21.7% in Korea is decisive in this context. Compared to Japan's conviction rate of 1.8% and the UK's 0.8%, it reveals the extreme level of criminal punishment risk to which Korean doctors are exposed. A rational physician has no choice but to adjust their behavior to evade this risk. Avoiding high-risk procedures with a high probability of litigation and leaving the field of essential healthcare (61) becomes a rational individual choice. The phenomenon of medical residents (69) avoiding departments with frequent lawsuits, such as surgery, obstetrics and gynecology, and thoracic surgery, is a direct product of this incentive structure.
In the language of game theory, the government has transformed the repeated game between doctor and patient from trust-based cooperation into a one-shot prisoner's dilemma. In a repeated game, mutual cooperation can be maintained as an equilibrium strategy. However, once the fear of criminal punishment is introduced, the nature of the game changes. Patients perceive doctors as potential perpetrators, and doctors perceive patients as potential litigants, leading both sides to adopt non-cooperative strategies. The consultation room is no longer a space for healing but a battlefield where legal risks lurk.
7. The Completion of Symbiosis: When the Arsonist Claims to be the Firefighter
By this point, the overall picture begins to take shape. The legal profession and the government have established a symbiotic relationship, exactly supplying what each other needs.
The government’s low-reimbursement policy planted structural risks in the medical field. Accidents arising from these risks became raw materials for the legal profession. The legal profession processed these raw materials and sold them as a product called "litigation." And the terror created by those lawsuits—the threat of criminal punishment—was handed back to the government to be used as a weapon to control the medical community.
In political economy, such a structure is analyzed as a variation of "regulatory capture." This refers to a phenomenon where a regulatory body, which should exist for the public interest, is captured by a specific interest group; however, the Korean case goes one step further. This is because the government itself is misappropriating system failures as a foundation for its governance. It is a situation where an arsonist claims to be a firefighter, using the flames to expand their power instead of extinguishing them.
The final puzzle piece that completes this symbiotic structure is the NHIS SJP. If the SJP is introduced, the government achieves a perfect control cycle: creating risk in the medical field through low reimbursements (policy failure), shifting the responsibility for accidents arising from that risk onto individual doctors (criminal punishment), and simultaneously monitoring and investigating medical billing (SJP). Doctors find themselves under the fear of punishment while treating patients and under investigative surveillance while billing for services.
Who wins in this structure? The legal profession secured an inexhaustible litigation market. The government gained leverage to control the medical community without paying the costs. And the losers in this game are always the same people: the patients driven into exhaustive litigation, the doctors trapped in defensive medicine, and all citizens who must live upon a steadily collapsing system.
If the private university-hospital complex dissected in the previous chapter was an internal predator of the system, the legal-government cartel revealed in this chapter is an external predator. And above these two predators exists an entity that orchestrates everything and evades all responsibility. The next chapter thoroughly dissects the role of this final predator: the state power itself. Was the state the problem-solver of this system, or its most cunning executioner?
Chapter 22. The Role of the State: An Executioner, Not a Problem-Solver
In the previous chapters, the symbiotic structure of university-hospitals and the dispute industry of the legal-government sectors were examined. What role, then, did the state presiding over this chaos play? Was it a "solver" that diagnosed and fixed the system's problems, or an "executioner" that used those contradictions as governance resources to crush resistance?
To state the conclusion first, the state gave up on being a solver. More accurately, it lacked the capacity to be a solver from the beginning. The method chosen to hide that absence was command and punishment. This chapter examines why and how the state took the path of an executioner, starting from the medical field and expanding into the general governance logic of Korean society.
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1. The Total Failure of Three Roles
The state must perform at least three functions in the medical field: setting norms, mediating conflicts, and providing direct services when necessary. In Korean healthcare, the state failed in all three. This was not accidental but a structural failure.
First is the failure as a norm-setter. The mandatory designation system and low reimbursement forced disadvantageous conditions upon private medical institutions without giving them a choice. It is a structure that imposes obligations on one side without properly paying the price. Instead of being a fair referee, the state started the game after shackling one of the players.
Second is the failure as a mediator. Fee negotiations were "negotiations" in name only. The logic of the financial authorities always took precedence, and the demands of the medical community were labeled as "collective egoism." The state acted not as a fair mediator but as the most powerful stakeholder, unilaterally enforcing its own financial goals.
Third is the failure as a service provider. Major OECD countries maintain the foundation of their medical delivery systems through public hospitals. In Korea, the proportion of public hospital beds is less than 10% (193). While shifting the responsibility for providing essential healthcare to the private sector, the state failed to create the economic conditions for the private sector to fulfill that duty. It is an irresponsible structure that offloads responsibility while monopolizing authority.
As all three pillars collapsed, the system entered a state of freefall with nowhere to lean.
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2. Lack of Administrative Capacity and Regress into Governance by Command
What is the fundamental cause of the total failure of these three roles? A wide gap exists between policy design and implementation, and it is the state's administrative capacity that bridges that gap. Sophisticated incentive design, trust-based cooperation with stakeholders, and data-driven policy adjustment—this is how a capable state solves problems.
The Korean government failed to develop such capabilities. To be precise, it felt no need to develop them because a simpler path existed: command and coercion. A government lacking capacity chooses one of two paths: humbly building its capacity or relying on coercive force. The Korean government consistently chose the latter.
The method of "governing by command" accurately reveals the nature of this choice. Orders are issued by high-ranking commanders, subordinates obey, and punishment follows disobedience. The way the Korean government handles the medical community bears a striking resemblance to this military model.
The "Order to Commmence Work" in 2024 was the pinnacle of this regression (194). Faced with the unprecedented situation of a mass walkout by residents, the tools chosen by the government were not dialogue, negotiation, or incentive redesign, but the command to "show up for work." The prohibition on accepting resignations follows the same context. The state chose the most primitive way to hold onto people who wanted to leave—locking the door and throwing away the key. This is the most violent form of command-based rule chosen by a state lacking the capacity to persuade and incentivize the system.
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3. The Politicization of Crisis Proclamations: When Exceptions Become the Norm
The reason the state's governance by command cannot be reduced to simple administrative immaturity is that it functions as a type of political strategy.
The proclamation of a "national health crisis" is a declaration of a state of exception. Through this proclamation, extra-legal powers that could not be applied in normal times—work start orders, prohibitions on accepting resignations, and threats of license suspension—are justified. The key point is that this state of crisis is never lifted. Since the Korean medical system is in a chronic state of crisis, the state always stands in a position to exercise exceptional powers. The moment exceptions become the norm, the foundation of the rule of law is eroded.
In this framework, the state elevates itself not as an administrative entity subject to the rule of law, but as a sovereign subject that makes decisions transcending the law. It always appears wearing the rhetorical cloak of "public welfare" or "public health and safety." However, what actually occurs beneath that cloak is not reflection on policy failure, but the suppression of resistance.
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4. Instrumentalization of the Law: The Gap Between Surface Justification and Actual Purpose
To govern by command, laws are required to back up coercive force. In this process, the state uses the law not as fair social rules but as a means to achieve policy goals.
A representative example is the so-called "Medical License Cancellation Act" (195). The surface justification was to protect patients from doctors who commit sex crimes. However, the actual content of the bill was "canceling the license if a person receives a sentence of imprisonment or heavier for any crime." The punishment imposed on a doctor who violates the government's work start order is precisely imprisonment. The blade of the "law to prevent sex-offender doctors" was actually aimed at the necks of doctors resisting government policy.
The attempt to introduce the NHIS SJP is even more blatant. The surface justification is the eradication of "office-head hospitals" that drain health insurance finances. However, the substance of this bill was to grant judicial police powers—the right to directly investigate and punish medical institutions receiving payments—to the National Health Insurance Service, which pays those fees. It is akin to putting a knife into the hand that already holds one's livelihood.
There is a precedent that clearly shows why this structure is dangerous: the UK Post Office scandal (196). The UK Post Office blamed the financial losses caused by a flawed accounting system on the embezzlement of over 900 innocent sub-postmasters. This tragedy was possible because the Post Office was in a state of structural conflict of interest, simultaneously playing the roles of victim, investigator, and prosecutor. The NHIS SJP bill was an attempt to summon this monster into the Korean medical system.
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5. Completion of Disciplinary Power: The Invisible Prison
The governance of a modern state relies more on "disciplinary power" than on direct violence. It involves making people monitor and control themselves through the mere "possibility" of punishment.
Within the Korean medical system, this disciplinary power has already reached the completion stage. Even if they are not actually punished, doctors self-censor in the face of the possibility of punishment. They transfer even slightly risky patients to tertiary hospitals, prioritize safe choices over active treatment, and conform in silence rather than making the system's problems a matter of public debate. This is the normalization of "defensive medicine." This is not the cowardice of individual doctors, but a rational response created by the system.
The work start order, the License Cancellation Act, and the NHIS SJP (197)—what this triple mechanism constructs is not an actual prison, but a psychological prison built within the minds of doctors. Inside this prison, doctors adjust themselves in the direction the state desires, even without explicit orders.
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6. Collapse of Administrative Ethics: Destruction of Predictability and Proportionality
The most serious harm of the command-rule system is that it destroys the foundation of administrative ethics. There are two minimal principles that administrative power must observe in a constitutional state: the predictability of laws and policies, and the proportionality of response measures.
Let us first examine the destruction of predictability. A law made under the pretext of "preventing sex-offender doctors" is used to "punish striking doctors." When the experience of a single law being misappropriated for a purpose entirely different from its original intended context is repeated, trust in the law collapses. Doctors become unable to predict which law will target them for what purpose tomorrow, which breeds terror regarding the entire legal environment.
The violation of proportionality is even more obvious. The response chosen by the state regarding the collective action of doctors was the "professional death sentence" of license revocation. It is no different from sentencing someone to life imprisonment for a traffic violation.
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7. Moral Hazard of the Government: A Structure of Failure Without Cost
There is one core structure permeating all these discussions: the moral hazard of the government. In the Korean medical system, the government is positioned in a structure where it pays almost no cost for its policy failures.
A dangerous environment is created in the medical field due to low-reimbursement policies. Three-minute consultations, insufficient personnel, and overworked residents. Medical accidents occur in this environment. Yet, it is not the government that bears the cost of the accident. Individual doctors shoulder the risks of litigation and criminal punishment. The party that created the dangerous environment is exempt from its costs.
What is more bizarre is that this policy failure functions as a paradoxical mechanism that actually strengthens state power. It is a circular structure where low reimbursements create structural risks, structural risks lead to medical accidents, medical accidents trigger public outrage, and that outrage is recycled as a justification for "strengthening control over the medical community." The government transforms the problems it created into opportunities to expand its power. As long as this cycle remains uninterrupted, the government has no incentive to solve the problems.
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8. Omnidirectional Governability: Systemic Exploitation in the Name of "Public Welfare"
This governance grammar found in the medical field is not limited to the healthcare sector alone. The South Korean state has repeatedly applied the same structure to all areas of society, wielding the "treasured sword" of Public Interest. It never relinquishes control even in domains where state involvement is unnecessary, while cunningly shifting the resulting risks and costs onto the private sector.
Article 37, Paragraph 2 of the Constitution states: "The freedoms and rights of citizens may be restricted by law only when necessary for public welfare, and even in such cases, the essential aspects of freedom and rights shall not be infringed." In reality, however, "public welfare" has functioned as a magical phrase that justifies anything. The following cases demonstrate that the medical community is not the only victim.
**Agriculture: Farmers Enslaved by Price Control**
Korean farmers have been reduced from market subjects to the state’s "government-controlled serfs." When rice prices fall, the state purchases stock; when they rise, it releases stock to manipulate market prices. While ostensibly protecting farmers, the state has systematically neutered the self-sustainability of agriculture for the administrative convenience of managing price levels for urban workers. It created a structure where survival is impossible without state subsidies and, in return, neglected the devastation and aging of rural communities. This design of a dependency structure in the name of "support" is the agricultural version of the Mandatory Designation System.
**Electricity, Water/Sewage, and Railways: The Comfort of Monopoly and Evasion of Responsibility**
Under the slogan "Energy is Security," public institutions such as Korea Electric Power Corporation (KEPCO) and Korea Railroad Corporation maintain massive monopolies. Absent market competition, efficiency hits rock bottom while debt accumulates astronomically. Rate increases are deferred every time due to the political burden of elections. This structural deficit is eventually pawned off as taxes on future generations or resolved through subcontracting exploitation—mercilessly slashing the contract prices of private partners. This is the power industry’s version of the "low reimbursement rate" system.
**Early Childhood Education: Public "Credit-Taking" by Squeezing the Private Sector**
A significant number of kindergartens and daycare centers in South Korea were established with purely private capital. However, the state unilaterally introduced the "Nuri Curriculum," controlling prices and infringing on private property rights. While shifting the infrastructure costs of public facilities—which the state should have built itself—onto private directors, the state brands those who resist for survival as "corrupt groups" and subjects them to public shaming. This is exactly the same grammar of violence applied to the medical field. Truck owners are also trapped in shackles where they must operate only within the framework set by the state, despite working with their own significant capital (trucks).
**Land Expropriation: Legal Extortion in the Name of "Public Interest"**
For New Town developments or road construction, the state forcibly expropriates private land at bargain prices. Although Article 23, Paragraph 3 of the Constitution mandates "just compensation" for property rights taken for public necessity, actual compensation often falls far short of market value. The Korea Land and Housing Corporation (LH) public housing development structure is the pinnacle of this contradiction. After forcibly expropriating the land of original residents at appraised values, the state sells it to construction companies at tens of times that price, and the companies then sell it to the public for several times more. Standing upon the tears of landowners, the state uses massive "development profits" to fatten public enterprises. Just as the Mandatory Designation System conscripts a doctor's professional assets into the public sphere at a low price, land expropriation conscripts farmland and residential areas at bargain rates.
The 2009 Yongsan Tragedy was an extreme event revealing how violent this structure can be. Tenants who lost their livelihoods to redevelopment resisted, saying they were "kicked out without compensation," while the government maintained that "premium (goodwill) is not a legal right and thus not subject to compensation." The value of business foundations, regulars, and commercial districts built over decades became non-existent before the language of the law. When a fire broke out at the watchtower, the government’s response was not negotiation, but forced suppression.
The common structure among these cases is summarized in the table below:
| Domain | Infringed Fundamental Rights | Pretext of Public Welfare | Actual Operational Method |
| :------------------------------- | :---------------------------------------------------------- | :------------------------------- | :----------------------------------------------------------- |
| Medicine (Mandatory Designation) | Freedom of Occupation, Freedom of Contract, Property Rights | Citizens' Right to Health | Non-withdrawal + Forced Low Reimbursement |
| Agriculture (Purchase System) | Freedom of Contract, Management Rights | Price Stability | Design of Dependency followed by Neglect |
| Electricity/Railways | Consumer Choice, Freedom of Business | Stability of Public Services | Monopoly Deficit → Transfer of Subcontracting Exploitation |
| Early Childhood Education | Property Rights, Management Rights | Educational Equality | Free Riding on Private Infrastructure |
| Land Expropriation | Property Rights, Right to Life | Urban Planning, Housing Welfare | Low-price Expropriation → High-price Sale |
| Redevelopment/Reconstruction | Right of Residence, Property Rights | Improvement of Urban Environment | Ousting of Original Residents + Privatization of Development Profit |
The core pattern revealed by this table is singular: responsibilities and costs are concentrated on individuals and the private sector, while benefits and control belong to the state and a minority. The "public welfare" pretext consistently functions as the justification mechanism for this structure.
It is not that South Korea lacks money. The claim that a country managing a national budget of approximately 700 trillion KRW as of 2025 lacks the resources to pay just compensation and fair reimbursement rates is unconvincing. This is not a matter of resources, but a choice of priorities. Whose rights will be protected, and whose losses will be ignored—this accumulation of political choices created the current structure.
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**9. Division Among Victims: Why Can't Doctors Unite?**
One uncomfortable question arises here. Doctors are clear victims in this structure. Why, then, are they unable to unite with other victims exploited by the same structure—evicted residents, farmers, private educators, and small business owners?
First, the government’s framing strategy has succeeded. Doctors' grievances are easily framed as "greed," "aristocratic unions," or "resistance by the privileged." The divide-and-rule method, where the government shifts public dissatisfaction onto doctors rather than taking responsibility, works effectively. While the medical community remains trapped in the language of "reimbursement hikes" and "strikes," evicted residents use "right to life," farmers use "rural collapse," and workers use "labor rights." Victims of the same structure use different languages and fail to recognize each other's struggles.
Second, internal division prevents external solidarity. Professors vs. practitioners, large hospitals vs. small/medium hospitals, residents vs. fellows—the hierarchical division within the medical community hinders the formation of a collective voice. This, too, is a result produced by the structure. The Mandatory Designation System and low reimbursement are designed to intensify competition within the medical field, causing members to exhaust their energy against one another rather than the state.
Third, the gap in perception with patients is a decisive barrier. While patients feel the burden of high out-of-pocket costs, they receive messages from the media and the government that they enjoy "world-class affordable healthcare." In this cognitive dissonance, anger is directed not at the structural flaws of the system, but at the doctor recommending non-covered treatments right in front of them. Even though doctors and patients are common victims, a framework where they perceive each other as enemies has taken root.
This division benefits the state. As long as victims are divided, common resistance against the common structure is impossible. As long as the confrontational structure of "doctor vs. patient" or "medical field vs. public" is maintained, the state continues to play the role of the bailiff while remaining exempt from responsibility.
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**10. Completion of the Control System: Who Holds the Bailiff Accountable?**
Synthesizing the analysis so far, a systematic picture emerges. The state designed a structurally tilted playing field through low reimbursement and mandatory designation (Failure of Norm Setting). It unilaterally enforced its own fiscal logic in reimbursement negotiations (Failure of Mediation). It effectively abandoned the direct provision of public healthcare and shifted responsibility to the private sector (Failure of Service Provision). Lacking the execution capability to make up for these triple failures, it regressed into command-based rule through work-start orders and the prohibition of accepting resignations. This governance grammar was repeatedly applied across Korean society, from medicine to agriculture, energy, education, and land expropriation.
In this framework, the state is not a system solver. The state is a bailiff that manages the non-functioning state of the system without removing the causes of that dysfunction. The more the system collapses, the stronger the pretext for declaring a state of exception; the stronger the state of exception, the more the legitimacy of command-rule is secured. Collapse is not a crisis for the state, but an opportunity.
Then, one final question remains: who holds this bailiff accountable? In a structure where the state monopolizes the roles of norm-setter, mediator, service provider, and enforcer, there is effectively no subject to monitor and check the state’s failures. The medical community has lost its means of resistance, with its vital asset—the license—held hostage by the state. The judiciary stamps its approval of constitutionality on the state’s coercive power behind the abstract legal doctrine of public welfare.
And civil society—the last bastion that should have monitored the bailiff—has devolved into a megaphone that welcomes and justifies state control. Looking at the structure provides the answer. In Korea, a significant portion of the operating funds for organizations claiming to be "medical civic groups" is covered by government subsidies and commission fees from the National Health Insurance Service. It is structurally impossible for a watchdog financially dependent on the state to actually monitor the state.
This is the reality we face. A world where the designer who created all the structural contradictions of the system is simultaneously the bailiff who punishes those resisting those contradictions. A world where the arsonist wears a firefighter's uniform. The strongest force sustaining this bizarre system is not physical coercion. It is the "ideology" to be discussed in the next chapter—the single sentence no one questions: "Medicine is a public good."
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**[Text Box] Constitutional Criteria for Restricting Fundamental Rights Based on "Public Welfare"**
The Constitutional Court applies the "Principle of Proportionality" (Prohibition of Excess) regarding the restriction of fundamental rights for public welfare. The four criteria are: legitimacy of purpose, suitability of means, minimality of infringement, and balance of legal interests. However, the Constitutional Court's ruling on the constitutionality of the Mandatory Designation System satisfied these criteria only formally. While acknowledging the infringement on doctors' freedom of occupation, it concluded with an abstract weighing of interests, stating "public welfare is greater."
This ruling reveals three core problems. First, the concept of "public welfare" is too abstract, risking the unlimited expansion of the legislator's discretion. Second, the review of whether the state sufficiently considered alternative means, such as expanding public hospitals, was merely formal. Third, there was insufficient review of the claim that the total denial of providers' right to negotiate infringes on the essential content of the constitutional freedom of contract. "Public welfare" should not be an automatic stamp used when depriving someone of their rights; it must be the subject of rigorous scrutiny asking whether that deprivation is truly unavoidable.
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**Chapter 23. Control as Ideology**
The state's most powerful tool of control is not a police baton or a law book. It is a thought planted in people's minds: "ideology." When the hardware of law encounters resistance, it creates friction, but the software of ideology makes resistance itself unnecessary. In previous chapters, we examined the mechanisms of physical control, such as the Mandatory Designation System, low reimbursement, work-start orders, and the License Revocation Act. However, the reason all these physical compulsions were socially tolerated is that a strong notion—"medicine is a public good"—had already taken hold in the public consciousness long ago.
This notion is not a simple factual statement. In economics, a "public good" is a rigorous concept referring to goods that simultaneously satisfy two conditions: non-rivalry and non-excludability. National defense or public safety fall into this category. However, South Korean medical services—more than 90% of which are established and operated by private capital, and where rivalry and exclusion occur according to individual patient demand—do not fit this definition. Just because medicine has a public interest nature, such as externalities or equity issues, it does not automatically become a public good in the economic sense. The state intentionally blurred this conceptual difference. By borrowing only the positive image evoked by the term "public good," it established a logical foundation to force public responsibility on the private sector while refusing corresponding compensation.
This chapter dissects how the proposition "medicine is a public good" was constructed as an ideology, through what mechanisms it was fixed as social common sense, and how this ideology has justified state control.
**1. The Construction of Hegemony: Until the Logic of Dominance Becomes Common Sense**
Antonio Gramsci observed that the rule of a dominant class is not maintained by physical coercion alone. The core of his concept of "Hegemony" lies in the process by which the ruling class packages its specific interests as the universal interests of society as a whole, causing the ruled class to accept that dominance as legitimate and natural. The key here is "consent." When the ruled voluntarily consent, dominance is most stable and least costly.
The proposition "medicine is a public good" is a typical example of this hegemony construction. The state set the frame by placing the universal value of "public health" at the forefront. Since no one can deny the importance of public health, state intervention naturally gains legitimacy within this frame. The problem is that this frame pushes the structural contradictions of the medical system—such as three-minute consultations due to low reimbursement, public responsibility shifted to the private sector, and the avoidance of essential healthcare—outside the scope of discussion. Within the "public good" frame, low reimbursement and mandatory designation are disguised not as state exploitation, but as the "noble sacrifice" of the medical community for public health. Any structural protest from the medical field is easily dismissed along with the stigma of a "turf war (fight for one's rice bowl)."
The path through which this hegemony permeates the entire society can be explained by Louis Althusser's concept of 'Ideological State Apparatuses.' According to Althusser, the state governs not only through 'Repressive State Apparatuses' such as the military or the police but also through ideological apparatuses such as the media, education, and the legal system. The latter is far more efficient than the former. While physical coercion breeds resistance, ideological control converts obedience into voluntary consent.
In the Korean healthcare system, the manifestation of this mechanism is distinct. The media constantly repeats the premise that 'healthcare is a public good' and reports medical strikes within the frame of 'collective selfishness' whenever they occur. Politicians deliver speeches taking this proposition as a natural given, and courts use it as the basis for their rulings. The Constitutional Court's decision on the constitutionality of the compulsory designation system is a representative case. Through this process of repetitive reproduction, a single political claim solidifies into social common sense and a moral conviction that no one can doubt. The public becomes the monitors of this dominant ideology themselves, criticizing the medical community's structural appeals as 'selfish resistance.'
2. Symbolic Politics: Political Effects Created by Substanteless Policies
The constructed hegemony is continuously reinforced through Symbolic Politics. Murray Edelman analyzed the mechanism by which political actions mobilize the masses through symbolic meanings rather than practical effects. The Korean government's healthcare policy corresponds to a textbook case of this symbolic politics.
Consider the 'Strengthening National Health Insurance Coverage' policy that the government periodically announces. Regardless of the practical effects of this policy—such as the worsening concentration of patients in tertiary hospitals or the continuous insufficiency of compensation for essential care—the announcement itself functions as a powerful policy signal sent to the public. The content of that signal is as follows: 'The state is taking responsibility for your health, and the doctors resisting this are public enemies.' Before this concise and emotional message, the complex structural arguments raised by the medical community, such as the distortion of the fee structure or the collapse of the delivery system, lose their standing.
The reason symbolic politics is effective is that it is difficult for the public to evaluate the practical results of a policy. The name 'Strengthening Coverage' sounds intuitively good, and considerable expertise is required to grasp the underlying structural deterioration—the concentration of mild cases in tertiary hospitals, increased waiting times for severe patients, and the worsening management of small and medium-sized regional hospitals. In this asymmetric information structure, the symbol overwhelms the reality.
3. Moral Panic: Mobilizing Public Opinion by Creating 'Devils'
'Moral Panic,' analyzed by sociologist Stanley Cohen, refers to a social phenomenon that mobilizes public fear and anger by defining a specific group as 'folk devils' that threaten the whole of society. As Cohen observed, the key roles in this process are played by media over-reporting and the decontextualization of events. A few cases of deviance are interpreted expansively as if they were the essential attributes of the entire group, and the public shows an excessive reaction disproportionate to the threat.
In the Korean healthcare system, this mechanism is activated periodically. The government and the media focus the spotlight on a few extreme cases, such as 'sex offender doctors,' 'shadow hospitals run by non-medics,' and 'striking doctors.' These cases may deserve criticism in themselves. However, the essence of the problem lies in the way these individual cases are expansively interpreted as the moral defects of the entire physician group. The existence of 'sex offender doctors' becomes the basis for the 'Medical License Cancellation Act,' and the actual blade of that law targets doctors who violate the government's back-to-work order. The fear created by a few 'devils' is transformed into the legitimacy of a control device that suffocates the entire medical community.
In a state of moral panic, the public demands strong laws and regulations to punish the devils rather than calmly analyzing the essence of the problem. The government appears as a 'troubleshooter' responding to these public demands and legally secures the means to control the entire medical community. This is the political function of moral panic. The state pretends to solve the crisis while converting that crisis into an opportunity to expand its control.
4. Biopolitics: Governing the 'Life' of the People
The ultimate legitimacy of all this control is derived from 'Biopolitics' as conceptualized by Michel Foucault. According to Foucault, the power of the modern state shifted from governance over territory or sovereignty to the management of 'life' itself for the population. The state statistically manages birth rates, death rates, disease rates, and public hygiene, making the health and well-being of the entire population an object of governance. Here, the 'protection of life' becomes the most powerful justification for state power.
The slogan 'healthcare is a public good' is the most effective rhetoric of this biopolitics. Under this slogan, the state acquires the absolute justification of 'protecting the health and safety of the people.' And before this justification, claims for individual professional autonomy or basic rights are easily branded as selfish resistance threatening the lives of the people. When doctors demand an increase in medical fees, it becomes 'blackmail holding lives hostage'; when doctors protest against overwork, it becomes a 'dereliction of duty ignoring public health.' Within the frame of biopolitics, it is difficult for any claim of rights by medical workers to secure moral legitimacy.
The paradox of biopolitics pointed out by Foucault is observed here as well: the power justified by the name of protecting life is, paradoxically, used to destroy the lives of those who care for that life. The Special Act on Residents, which legalized an 88-hour work week, or policies that structurally fixed 'three-minute consultations' while forcing fees below cost, were justified under the biopolitical pretext of 'public health.' Suffocating the life-care system itself while claiming the 'protection of life'—this is the self-contradictory power possessed by biopolitical ideology.
5. The Prison of Ideology
Thus far, we examined various tools used by the state to stifle the medical community. From the 'compulsory medical institution designation system' that served as the foundation for coercion, the 'low fee' structure as the engine of structural exploitation, the 'License Cancellation Act' that blocks collective action, to the 'back-to-work order' as a symbol of sovereign power. However, the most fundamental force that made all this physical control possible was precisely the ideology named 'Healthcare is a public good.'
This ideology was established as a Gramscian hegemony, circulated and reproduced throughout society via Althusserian ideological state apparatuses, and continuously reinforced through symbolic politics. The mechanism of moral panic analyzed by Cohen periodically activated this ideology, and the biopolitics conceptualized by Foucault provided its ultimate legitimacy. As all these mechanisms intertwined, the single proposition that 'reporting healthcare as a public good' became a perfect camouflage covering all the state’s policy failures and structural contradictions.
As long as this ideology dominates, policies such as increasing the medical school quota can never be a solution to improve the quality of healthcare. This is because it merely amounts to increasing the number of 'parts' that can be kept under state control. A policy that only increases manpower without touching the low-fee structure only turns three-minute consultations into two-minute consultations and fails to change the essence of the system.
The ideology that 'healthcare is a public good' trapped the medical community in an invisible prison. Inside this prison, the medical community slowly suffocates, having lost even the justification for resistance. And the greatest tragedy of this prison is that doctors are not the only ones trapped inside. The possibility of rational discussion for a better healthcare system, the opportunity for calm diagnosis and prescription for structural problems, and the future of our entire society are also trapped within it.
Conclusion of Part 4: Completion of the Predator Cartel
Part 4, 'State Power and the Predator Cartel,' showed how various seemingly individual phenomena complete one giant picture. Universities and hospitals exploited the labor of future generations through a 'symbiotic engine' (Chapter 20), and the legal profession grew by feeding on 'disputes' born from system failures (Chapter 21). Instead of solving all this chaos, the state used it as a tool to strengthen its own control (Chapter 22) and justified all that governance through the ideology of 'public good' (Chapter 23).
In conclusion, what the state pursued over the past half-century was not the pure goal of promoting public health. It was a process of establishing state control over the core social domain of healthcare and enforcing a strong political will that would not tolerate any collective resistance. And the most tragic results of this process were passed on entirely to those in the most vulnerable positions within the system—residents, nurses, medical staff at small and medium regional hospitals, and patients who do not receive appropriate medical care in time.
Now, it is time to hear the stories of those sacrificed within this massive structural injustice. Part 5 will record the specific chronicles of sacrifice, showing how this system destroyed individual lives and erased their voices.
Part 5. Structured Injustice: The People Who Became Scapegoats
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Chapter 24. Professionals in a Golden Cage: Designed Helplessness and the Collapsing Exchange Relationship
Instead of being guaranteed a degree of economic stability within the state-controlled system, Korean doctors completely lost their autonomy as professionals.
1. Analytical Framework: Why Now and How It Collapsed
The medical crisis of 2024 was not a sudden event. It was the result of structural tensions accumulated over half a century finally surpassing the threshold. This chapter argues that the essence of that collapse lies in the breakdown of the massive trade-off formed between the Korean physician group, the state, and hospitals.
The core of that exchange is as follows: The state and hospitals created a sophisticated 'golden cage' through the fourfold structures of law, institution, organization, and discourse. Doctors were guaranteed social status and economic stability in exchange for giving up their autonomy as professionals. As long as this exchange functioned, the system remained unstable but maintained. The problem is that while one side of the exchange—compensation and stability—was systematically eroded, the other side—control and obligation—was instead strengthened. When exchange becomes not a transaction but an expropriation, the system collapses.
To dissect this complex phenomenon, this chapter uses the analytical framework of Critical Realism. This methodology, proposed by Roy Bhaskar, distinguishes social phenomena into three layers: the 'empirical' layer of what is visible, the 'actual' layer of events that create the experience, and the 'real' layer of deep structures and mechanisms that make the events possible. The empirical event of the failure of collective action in 2024 is an inevitable result produced by the invisible structures (the design of the cage) and mechanisms (collapse of rewards, strengthening of control) operating behind it. This chapter first analyzes the 'structure' of the cage that systematically deprived doctors of their autonomy, uncovers the 'mechanisms' of compensation and control that operated within it, and finally traces the process leading to the 'result' where the exchange equilibrium collapses.
2. Act 1—Design: Blocking Economic Independence and Organizational Subordination
The design of the golden cage began with making the doctor not an independent professional but a wage laborer subordinate to an organization. This was completed through three core structural devices that tied the doctor's economic foundation to a single capital source: the hospital.
First, the Closed Hospital System is the most fundamental set of bars. In the United States, an 'open hospital system' is common, where doctors maintain private clinics and use only the hospital's facilities—operating rooms and beds. In this system, the doctor is an independent professional in an equal contractual relationship with the hospital. However, in Korea, the open hospital system is absent, and a doctor must necessarily become an employee of a hospital. From the perspective of labor economics, this means that the hospital enjoys the status of a de facto monopsony that purchases the doctor's labor. In a monopsony market, the labor provider loses fair bargaining power over the value of their labor and is forced to be subordinate to the conditions presented by the purchaser. A significant portion of the value created by the doctor is absorbed into the hospital's accounting, and the share returned to the doctor is determined by the internal logic of the organization rather than the equilibrium price of the market.
Second, the system of 'non-separation of fees' evaporated the independent value of 'medical skill,' the doctor's most core asset. In many developed countries, such as the US or Australia, the professional fee, which is the reward for the doctor's intellectual labor, and the facility fee, which corresponds to the hospital's facility and management costs, are set separately. This separation is an institutional device recognizing that the doctor's professional judgment and skill have independent economic value. Korea's fee-for-service system lumps these two elements into a single medical fee without separating them. As Oliver Hart's Incomplete Contract Theory predicts, to control intangible values such as 'high-quality care' or 'sincerity' that are difficult to include in a contract, the system chose a design that attributes all residual property rights and control to the hospital (capital) side. The doctor's expertise is not recognized as an independent value but is reduced to a replaceable part of the massive machine called the hospital, and autonomy is institutionally encroached upon.
Third, this economic subordination was completed by densely deployed contractual and legal barriers. Restrictions on secondary employment and concurrent positions for hospital-affiliated doctors, the principle of attributing all research and clinical revenue to the hospital, and restrictions on duplicate opening of medical institutions and ownership of shares fundamentally blocked all paths for doctors to conduct independent economic activities outside the hospital system. All these restrictions were justified under the pretext of 'public welfare' without deep review of the principle of proportionality. With the three axes of employment, fees, and law combined, a structure was completed in which the doctor is systematically deprived of control over key variables: their time, place, patients, and remuneration.
3. Act 2—Invisible Rewards: The Institutionalization and Dissolution of the Gray Zone
If the design of the "Golden Cage" was a process of depriving doctors of their autonomy, why have doctors conformed within it for decades? The answer lies in the invisible "second contract" that existed behind the official compensation system. This can be termed the "Gray Zone."
In the past, university hospital professors possessed various informal compensation channels beyond their official salaries. Practices were rampant where they secured external research projects and diverted portions of those funds for personnel costs, hiring researchers, or even personal living expenses. Advisory fees from pharmaceutical companies, lecture fees from academic societies, and participation fees for Post-Market Surveillance (PMS) also served as significant income sources to supplement official wages. It was a case where "unintended consequences," as described by sociologist Robert Merton, were institutionally tolerated for the sake of system stability. This gray zone functioned as a "quiet agreement" of the system—a kind of informal risk premium—where low official wages were offset by informal rewards. It was an implicit compensation for relinquishing autonomy and enduring low medical fees.
However, since the 2000s, the balance of exchange maintained by this unwritten rule began to collapse. The introduction of electronic accounting systems for research funds, the implementation of the dual punishment system for rebates, and the strengthening of various auditing and ethical regulations systematically destroyed this gray zone under the pretext of "transparency" and "ethics." The justification for these reforms was valid in itself. Misappropriation of research funds was corruption, and rebates were unethical. The problem was that the official compensation system failed to fill the vacuum created by the disappearance of these informal rewards. The moment the official salary reflected on the payroll became a professor's "real income," the sense of relative deprivation reached its peak, particularly in national university hospitals where salaries are fixed.
The market responded to this vacuum in its own way. PMS for pharmaceuticals or medical devices and advisory fees paid by pharmaceutical companies began to function as de facto price adjustments through legal compensation channels. Yet, even this was insufficient. Especially in national university hospitals, the wage growth rate for professors was significantly lower than that of administrative or nursing staff. Over time, the wage gap narrowed, leading to the inevitable outcome predicted by Equity Theory in organizational psychology. When individuals perceive that their outcomes (rewards) are unfair relative to their inputs (years of education, responsibility, risk) compared to reference groups, relative deprivation, disengagement, and burnout become unavoidable. The "gold" of the golden cage lost its luster, leaving behind only the cold touch of iron bars.
4. Act 3—Legalized Exploitation and Rigidity: The Cost of Exchange
Inside the golden cage where rewards vanished, the cost of exchange—the "duties" doctors had to pay—became even heavier. The state systematically restricted doctors' labor rights through laws and systems, and hospitals shackled them with rigid employment structures. This was a sophisticated system of exploitation disguised in the mantle of legality.
First is the institutional exceptionalism regarding labor rights. Citing the critical public interest of life and safety, doctors have been systematically excluded from the universal rights enjoyed by other workers. The Medical Resident Act legalized murderous labor of 88 hours per week. Special provisions in the Labor Standards Act pushed specialists outside the shield of the 52-hour work week. Exception clauses for professionals in the Fixed-term Act allowed hospitals to keep staff physicians as permanent non-regular workers. For restrictions on freedom to be legally permissible, the principles of proportionality, least restrictive means, and supplementarity must be met. However, the government chose the easy path of restricting individual rights without making efforts to provide alternatives, such as securing sufficient personnel or improving working environments.
Second is the extreme rigidity of personnel and employment structures. The linear promotion structure of "professor or nothing" established by private school foundations fundamentally blocked flexible labor forms such as part-time work, concurrent positions, or open tracks. This prevented the utilization of diverse talent and created systemic inefficiencies, such as deepening career breaks for female doctors. Within the rigid hierarchy, the attribution of performance responsibility became unclear, and the authority-responsibility gap degraded the quality of decision-making.
Third is emotional labor and structural burnout in an environment deprived of autonomy. The concept of emotional labor, analyzed by Arlie Russell Hochschild to explain the work of flight attendants, applies precisely to the labor of doctors in modern medical environments. The constant emotional dissonance—empathizing with a patient’s pain while practicing within system constraints such as three-minute consultations, insufficient personnel, and excessive administrative tasks—leads to extreme exhaustion. This is not personal weakness but structural professional burnout caused by the loss of autonomy and excessive control. As Christina Maslach’s burnout model points out, the core cause of burnout is not the workload itself but the lack of control and insufficient rewards. The situation of Korean doctors satisfies both conditions simultaneously.
Fourth, for doctors who attempt to reject all this and leave the cage, the final shackle of direct state intervention is applied: the medical service commencement order and the license revocation law. As analyzed in Chapter 22, these two mechanisms are compulsory means by which state power unilaterally reshapes all bargaining power. Doctors are exploited within the system, and if they try to move outside it, their vital asset—their license—is taken hostage. Exchange under conditions where the exit is blocked is not exchange, but coercion.
5. Act 4—Collapse of the Exchange Equilibrium: Why Now?
For the past several decades, this precarious exchange was somehow maintained. In exchange for reduced autonomy, doctors conformed within a triangular equilibrium of stable social status, social respect, and economic rewards including the gray zone. The discourse of a "professional calling" justified this exchange and provided doctors with a reward of identity. Why, then, did this balance collapse in 2024?
It is because five shocks reached a critical point simultaneously.
First is the collapse of economic compensation. With the disappearance of the gray zone, informal cash correction mechanisms vanished, and official compensation drifted further from actual costs due to the rigidity of medical fees. The perception that economic returns for a doctor's labor are significantly lacking relative to input is no longer an exaggeration by a few disgruntled groups, but a structural fact across the entire system.
Second is the surge in risk. With the introduction of special judicial police for the National Health Insurance Service, the expanded application of the medical license revocation law, and the strengthening of criminal punishment for medical accidents, the expected value of punishment associated with being a doctor—audit, compliance, criminal, and administrative risks—has soared to unsustainable levels. From the perspective of Expected Utility Theory, a profession where rewards decrease and risks increase loses its appeal to rational actors.
Third is the explosion of labor burden. Due to a lack of personnel pools and a lack of workplace flexibility, the marginal burden on remaining doctors has surged. A vicious cycle began where one person leaving increased the workload for those remaining, causing more people to leave. The system reached its physical limit.
Fourth is political isolation. The ideology that "healthcare is a public good" and the hostile framing of a "turf war" (analyzed in Chapter 23) isolated doctors socially, causing the cost of negotiation with the government to skyrocket. Solidarity with civil society was structurally blocked, and the appeals of doctors hit a wall of public opinion and bounced back.
Fifth is internal division. All these shocks deepened the collective action dilemma within the medical community. Interests became fragmented according to sub-specialties, employment types, and regions, making an internal coalition to speak with a single voice nearly impossible. From a game theory perspective, the short-term loss aversion strategies of each subgroup formed a prisoner’s dilemma structure that weakened the long-term bargaining power of the whole. Practitioners were uninterested in improving the treatment of staff physicians, university hospitals were indifferent to the problems of regional hospitals, and essential medical departments viewed the profit structures of non-essential departments competitively. In a structure where a "survival of the fittest" strategy becomes the rational choice, collective resistance was structurally impossible.
Sociologist of professions Eliot Freidson analyzed that the social position of the medical profession stands on a balance of three axes: autonomy, market, and bureaucracy. In 2024 Korea, this triangular balance has tilted completely toward bureaucratic dominance. Counter-responses (rewards, stability) have weakened, while obligations (control, responsibility) have been strengthened. The failure of collective action in 2024 was a predicted defeat occurring atop this collapsed balance.
6. Counterarguments and Responses
Three familiar counterarguments may be raised against this analysis.
First is the claim that "control is inevitable for the public interest." However, any restriction of freedom for the public interest must undergo strict verification of substitutability and proportionality. If the same public interest goals can be achieved through means that infringe less on autonomy—such as risk-adjusted payment systems, care coordination incentives, or open hospital pilot projects—it is a constitutional priority. Unconditional control is merely an excuse to justify state incompetence.
Second is the counterargument that "the gray zone was corruption, and its purification is justice." This claim is half right. Misappropriation of research funds was corruption, and rebates were unethical. However, purification must be accompanied by the redesign of legitimate compensation for a balance to be struck. Purification lacking legal and transparent compensation lines—such as separate professional fees or additions for education and research—only results in moral bankruptcy by breaking the informal contracts that sustained the system. Defining informal compensation as corruption while ignoring official compensation is a normative betrayal of the professional group.
Third is the claim that "social responsibility of the expert comes first." This is correct. Doctors have a social responsibility. However, the Ethics of Responsibility, as spoken of by Max Weber, presupposes that the actor can predict the consequences of their actions and possesses the capacity to handle those results. Excessive control and the shifting of risk undermine a doctor’s predictability and capacity, ultimately leading to the irresponsible result of harming the public interest of patient safety. To demand responsibility, the conditions to fulfill that responsibility must first be guaranteed.
7. Alternatives: Redesign, Not Escape from the Cage
If the transaction has collapsed, what is needed is not to break the cage and escape, but to redesign the cage through a new contract. The reason reconstruction, rather than dismantling, is the solution is that the field of healthcare inherently requires collaborative governance between the state, providers, and consumers. The problem is not the existence of the cage, but the design of the cage.
The core of this renegotiation is to simultaneously redraw the "autonomy floor" and the "compensation floor" along three axes: law, payment, and organization.
On the legal and institutional axis, coercive measures such as medical service commencement orders must be strictly limited to being activated only under clear thresholds and the principles of proportionality and supplementarity. The grounds for the Health Insurance Policy Deliberation Committee and medical fee negotiations must be transparently disclosed to create a structure where evidence-based negotiation, rather than unilateral decision-making, is possible.
On the payment and organizational axis, the separation of "Professional Fees," which independently evaluate the value of a doctor's labor, must be introduced. Standard additions for education, research, and high-risk work should be institutionalized so that invisible labor is converted into visible compensation. Open hospitals should be introduced on a pilot basis at regional base hospitals, and the rigid employment structure should be broken by institutionalizing flexible employment tracks such as part-time and concurrent positions.
On the risk management axis, "Safe Harbor" clauses should be introduced to reduce criminal and administrative risks when clear guidelines are followed, and Alternative Dispute Resolution (ADR) bodies should be established as permanent fixtures to reduce exhaustive litigation.
The ultimate goal of all these reforms is to shift the old frame of "privilege" and "sacrifice" into a new frame of "fair exchange." This is a process of designing "duties with compensation" rather than "depriving regulation." By transparently linking patient-centered performance indicators with compensation for doctors, it will be possible to rebuild collapsed trust capital and find a path where the public interest and professional autonomy go hand in hand.
8. Toward the Next Chapter
This chapter analyzed the design and collapse of the macro-exchange relationship that has dominated the entire collective of Korean doctors. However, those who pay the harshest price within this golden cage are those at the very bottom. The next chapter will look into the lives of those at the bottom—the doctors in training known as "residents." Their story, titled "Disposable Pawns," will most starkly reveal what this system can do to human beings.
Chapter 25. "The Disposable Pawn": Medical Residents
A medical resident is not a trainee, but the lowest-level labor force sacrificed by professors to evade responsibility and by hospitals to reduce costs.
1. Reframing the Problem: The System’s Human Shield
All contradictions and risks of a system flow toward and accumulate at the weakest point. Just as stress in physics concentrates on the most vulnerable point of a structure, the final load of the structural flaws accumulated by the Korean medical system over half a century—low medical fees, excessive control, and collapsed exchange relationships—is borne by the bottom layer of the system. That reservoir at the bottom is the "resident."
Interns and residents are peculiar dual beings. They are professionals with medical licenses, yet at the same time, they are a subjugated class deprived of all rights under the name of trainees. While professional duties—legal and ethical responsibilities toward patients—are fully imposed upon them, professional rights—appropriate compensation, the right to education, and a safe working environment—are systematically denied. This asymmetry is the essence of the trainee doctor problem. On this structural contradiction, where duties are imposed at the specialist level while rights are stripped to the trainee level, the most tragic exploitation of the Korean healthcare system operates.
Part 5, "Structured Injustice," asks to whom the cost of this massive system failure is ultimately billed. The first victims are the interns and residents. Approached through the analytical framework of critical realism, three layers of reality are revealed. The layer of "experience" we witness is the despair of young doctors who suffer from a murderous 88-hour work week, yet must stand alone in court when medical accidents occur. At the layer of "events" behind this experience, a structural mechanism operates that utilizes trainees as cheap labor to maintain a low-fee system and allows professors and hospitals to evade responsibility when accidents happen. However, at the layer of "reality" underlying all of this, there exists a cold-hearted "scapegoat system" that shifts the final responsibility for all risks created by the system onto the individuals at the lowest stratum who are least capable of preventing those risks.
This chapter indicts the dual reality where trainees live as a subjugated class deprived of all rights under the name of trainees, despite being professionals with medical licenses. It dissects the cruel process of how they have become "disposable pieces" on a chessboard, readily discarded for the stability of the system.
**2. Collapsed Ethics: Violation of the Right to Learn**
At the core of the structural injustice surrounding trainees lies the systematic deprivation of two basic ethical rights they deserve: the right to learn and the right to safety. These two rights are the very raison d’être of the training system; training where these are not guaranteed is not education, but exploitation.
First, let us examine the violation of the right to learn. Ethically, the primary duty of a teaching hospital is to guarantee the education and growth of its trainees. The essence of an apprenticeship lies in the skilled professional systematically transferring knowledge and skills to the unskilled while gradually granting independence. In medical education, this is called "graduated autonomy" or "Entrustable Professional Activities (EPAs)." Under supervision, trainees should perform increasingly high levels of clinical judgment and procedures, growing into specialists capable of independent practice by the end of their training.
However, within the low-fee economic structure, the primary goal of teaching hospitals has become maintaining profits by maximizing the use of cheap labor. A significant portion of the work imposed on trainees consists of chores with no educational value—paperwork, collecting consent forms, checking test results, and answering phones. The same applies to repetitive simple procedures and murderous on-call shifts. These are packaged under the name of "training," but in substance, they are cheap labor to reduce the hospital's operating costs. Exploitation carried out in the name of training—this is the bare face of Korean trainee education.
The result is disastrous. Despite completing four years of training, "specialists in name only" are mass-produced, unable to independently perform even basic surgeries in their respective departments. If a surgical resident cannot perform a single appendectomy alone after four years of training, what were those four years for? The fact that they flock to "fellowship" programs to stay in hospitals for another one to-two years to learn skills after becoming specialists is clear evidence that this educational system has completely failed. Because the training period was consumed by labor exploitation rather than education, the paradox of graduating without learning what one ought to have learned repeats itself. The fellowship process is a post-hoc correction of failed education, not an extension of advanced training.
**3. Collapsed Ethics: Deprivation of the Right to Safety**
The deprivation of the right to safety is even more serious. Overwork reaching 88 hours a week not only destroys the physical and mental health of individual trainees but also threatens patient safety. This is an issue of labor human rights and, simultaneously, an issue of patient safety.
The correlation between patient safety and working hours is a scientific fact clearly proven through numerous medical studies. Trainees suffering from sleep deprivation experience declines in cognitive and motor skills, placing them in a hazardous state similar to a drunk driver with a blood alcohol concentration of 0.05% or higher. A large-scale prospective study conducted by Charles Czeisler’s research team at Harvard Medical School reported that when a trainee’s continuous working hours exceed 24 hours, attention-related medical errors increase by more than 36%. There is a surplus of research showing that as continuous working hours for trainees increase, medication prescription errors and patient mortality rates also rise. This is an indisputable scientific consensus.
The state and hospitals ignore this clear scientific evidence. Neglecting the overwork of trainees to maintain the low-fee system is essentially the same as forcing a bus driver to drive all night to save costs. The difference is that the passengers on that bus are ourselves and our families. In the transport industry, a driver’s continuous operating hours are strictly regulated, and strong administrative measures are taken against operators in case of violations. This is because a driver’s exhaustion directly threatens the safety of passengers and citizens. The evidence that trainee overwork threatens patient safety is far more abundant and powerful than that in the transport industry. Nevertheless, in the medical field, these regulations effectively do not function.
The system holds future medical quality hostage by depriving trainees of their right to learn and threatens current patient safety by depriving them of their right to safety. The violations of these two rights are not separate issues but are linked through a single mechanism of sequential destruction. Labor without education leads to a lack of competence, overwork in a state of incompetence leads to medical accidents, and the responsibility for those accidents is shifted back onto the individual trainee.
**4. Paper Tiger Regulation: Structural Limitations of the Medical Residents Act**
To prevent this ethical collapse, the "Act on the Improvement of Training Environment and Status of Medical Residents," commonly known as the Medical Residents Act, was enacted. This law, which limits weekly working hours to 88 hours, superficially appeared to be a progressive measure to protect trainees. However, this law was merely a "paper tiger" wearing the mask of a protective law.
In public administration, the effectiveness of a law is guaranteed by enforcement and audit mechanisms. No matter how strict the legal provisions are, they become scraps of paper without an organization to enforce them and a monitoring system to detect violations. In legal studies, this is called the "norm-practice gap" or the "enforcement gap," and the Medical Residents Act is a perfect textbook example of this discrepancy.
Let us first look at the absence of enforcement. Even if a hospital violates the law, there is no independent body to monitor it constantly and issue immediate corrective orders. The Training Environment Evaluation Committee exists, but its authority is limited, the evaluation cycle is long, and its practical means of sanction are weak. A regulatory body without substantive monitoring capabilities is merely a decoration. Compared to the ACGME (Accreditation Council for Graduate Medical Education) in the United States, which exercises strong sanctions such as revoking training accreditation for hospitals that violate working hour limits, Korea’s Training Environment Evaluation Committee possesses only the authority to make recommendations.
The same applies to the absence of auditing. There is no system to objectively record and audit how many hours a trainee actually works. Under the guise of "voluntary" overtime, overwork that evades the law is openly practiced. Within a hierarchical hospital culture, it is virtually impossible for a trainee to raise an issue directly. The moment they do, that trainee’s training life ends. According to Albert Hirschman’s theory, the ways members respond to organizational problems are exit, voice, and loyalty. For a trainee, exit is not an option as it means giving up specialist certification, and voice carries a high risk of retaliation. What remains is loyalty—essentially submission—while enduring in silence.
Consequently, the Medical Residents Act was a sleeping lion. The law exists, but since it lacks teeth and claws—enforcement power—it had no power to change the field. Rather, this law degenerated into an alibi providing the state and hospitals with the pretext that "we have taken protective measures." An irrational working time of 88 hours per week, unimaginable in any other industry, gained the status of a "legal limit," which had the effect of pulling an abnormality into the realm of "legality" and entrenching it.
**5. Economic Trap: Irreplaceable Cheap Labor**
A more fundamental reason the Medical Residents Act failed is that it completely ignored the economic principles of the market. Economically, the labor supply elasticity of trainees is close to zero. Since trainees can only become specialists after completing their training, they are "captive labor" who cannot leave the market regardless of how poor the working conditions are. In this regard, the labor market for trainees is not a competitive market but a monopsony market where hospitals exercise monopolistic purchasing power. If the closed hospital employment structure analyzed in Chapter 24 is a general shackle applied to specialists, for trainees, that shackle is one layer heavier.
The Medical Residents Act was an attempt to raise the "price" of trainee labor—by limiting hours. In a normal market, if trainee labor becomes expensive, hospitals should switch to a substitute: employing specialists. This is what economics calls the substitution effect. However, under the low-fee system, hospitals do not have the capacity to hire additional specialists. The labor cost of one specialist is equivalent to that of three or four trainees, and in a structure where fees do not cover costs, this transition is economically impossible. If one attempts to regulate quantity under price control, the market will inevitably find a path to bypass the regulation—this is a basic principle of economics.
Ultimately, the most rational choice for hospitals was not to find substitutes but to bypass the law and continue utilizing existing cheap labor to the maximum extent. "Voluntary" overtime, unrecorded on-call shifts, and unpaid labor under the guise of education—the paths for bypassing were diverse. Because the Medical Residents Act ignored the fundamental problem of low fees, it was economically destined to fail.
This failure can also be verified quantitatively. The implementation of the Medical Residents Act in 2016 provides a perfect "natural experiment" to evaluate its effects. Using the econometric "Difference-in-Differences" technique, one can compare changes in actual working hours and patient safety indicators—mortality rates, readmission rates, and medical accident rates—between hospitals with high dependence on trainees (the treatment group) and those without (the control group) before and after the law’s implementation. Such an analysis is likely to reveal the uncomfortable truth that the Medical Residents Act neither significantly improved patient safety nor meaningfully reduced actual working hours. The fact that the law did not work in reality is because its design ignored economic reality.
**6. Scapegoat Mechanism: How the System Shifts Responsibility**
All risks created by the system erupt in the form of medical accidents. From the system’s perspective, it is a statistical necessity for an overworked trainee to commit a clinical error. The problem is that when this inevitable failure occurs, the system, instead of reflecting on its own flaws, goes in search of a scapegoat. The perfect scapegoat is the trainee.
French philosopher René Girard analyzed the universal human social pattern of "the scapegoat mechanism," where a community shifts guilt onto its weakest members to resolve internal crises and tensions. According to Girard, there are three conditions for becoming a scapegoat. First, one must be located within the community but on its periphery. Second, one must be unable to defend oneself. Third, one must be easily replaceable. Trainees perfectly satisfy these three conditions. They are members of the hospital community yet positioned at the bottom, they are unable to defend themselves within the hierarchical structure, and they are easy to replace as new trainees are recruited every year.
This scapegoat mechanism is completed through the systematic collapse of legal principles. Legally, the final responsibility for accidents occurring during the training process should be borne by the supervising professor and the employing hospital. This is the principle of vicarious liability. This principle, that an employer is liable for damages occurring during an employee's performance of duties, is the legal embodiment of the authority to command and supervise inherent in the employment relationship and the corresponding responsibility. Since a trainee is a supervisee training under a professor’s command, the ultimate responsibility for accidents occurring during that training process must lie with the supervising professor and the hospital that employs them.
In reality, however, this principle becomes a scrap of paper. When an accident erupts, instead of becoming a shield for the trainee, the professor turns into a witness claiming "the trainee's sole negligence" to evade their own responsibility. The professor hides behind the student, and the student stands alone in court. The hospital dilutes organizational responsibility with the frame of "inevitable accidents in the training process" and highlights the individual trainee's lack of proficiency. An apprenticeship where the master does not protect the student is not an apprenticeship. It is a relationship of exploitation.
As James Reason’s Swiss Cheese Model emphasizes, medical accidents occur almost without exception when multi-layered flaws in the system align simultaneously. Each defensive barrier (slice of cheese) has holes, but if multiple layers of barriers overlap, an error does not lead to a final accident. The occurrence of an accident means that the holes in all defensive barriers were aligned in a straight line at once. The hole of insufficient manpower, the hole of overwork, the hole of a poor supervision system, and the hole of insufficient education—if all these system failures had not preceded, the individual mistake of a trainee would not have led to an accident. While an individual’s negligence may be the final triggering factor, it is the system that allowed that negligence to lead to an accident.
This shifting of responsibility is also extremely inefficient from an economic perspective. According to the "least cost avoider principle" in law and economics, the liability for an accident should be imposed on the party who could have prevented it at the lowest cost. The most effective ways to reduce the risk of medical accidents are to hire sufficient personnel, guarantee adequate rest, and establish a systematic supervision system. The entities capable of doing all these things are the hospitals and the state, not individual residents. However, the system ignores the fundamental solutions, which are the most costly, and passes all responsibility onto the individuals least capable of preventing the accidents. This structure of shifting blame distorts incentives for accident prevention, creating a vicious cycle where the same types of accidents repeat. By sacrificing a single resident, professors, hospitals, and the system as a whole evade responsibility and regain a false sense of peace; however, the holes in the cheese remain, making the next accident already inevitable.
7. The True Culprit Behind the Collapse of Essential Medical Care
Synthesizing the analysis so far reveals a multi-layered reality of structural injustice surrounding residents. Ethically, they are deprived of the rights to learning and safety that they deserve. Legally, they become scapegoats for the system when medical accidents occur, burdened with unfair liability. Economically, they are consumed as cheap labor to maintain a low-fee system. Furthermore, the law intended to regulate these three dimensions of exploitation—the Medical Resident Act—is nothing more than a paper tiger without enforcement power.
This analysis converges on one decisive question: Why do young doctors turn away from high-risk essential medical fields (61) such as general surgery, thoracic surgery, obstetrics and gynecology, and pediatrics?
The answer is clear. These fields carry high risks of medical accidents. Due to low medical fees, they do not receive just compensation. And when an accident occurs, there is a high probability they will have to shoulder all the responsibility alone. High risk, low reward, and harsh punishment—in the face of this triple equation, choosing essential medicine has become a decision difficult for a rational human being to make. From the perspective of expected utility theory, it is not rational to choose a profession where the risk-adjusted expected reward is negative (-). The decline in application rates for essential medical departments is not a result of doctors' selfishness, but a rational response to the incentive structure created by the system.
Therefore, the true culprit behind the collapse of essential medical care is not the selfishness of doctors, but this structured injustice itself. Increasing the medical school quota while leaving this structure neglected is akin to increasing the variables without changing the constants of the equation. No matter how many doctors are trained, as long as this murderous equation remains unchanged, the number of doctors choosing high-risk essential medicine is structurally bound to be insufficient. One cannot fill a leaking bucket by simply pouring more water into it. The hole must be plugged first.
In a system that treats residents as "expendable pawns," it will become increasingly difficult to find riders willing to mount those horses. The message the system sends to residents is clear—you are a consumable. For young doctors who receive this message, avoiding high-risk fields is the most rational response to the system's failure.
8. Toward the Next Chapter
The paper tiger known as the Medical Resident Act failed to solve this problem. Instead, it produced the paradox of legalizing exploitation. In the next chapter, this study delves deeper into the paradox of the Medical Resident Act and analyzes how the law ignores reality and perpetuates system contradictions—specifically, what the legalized exploitation of 88 hours per week signifies. How does a protective law degenerate into a tool for exploitation? The answer to this question will reveal the essence of the legal deception within the Korean healthcare system.
Chapter 26. The Paradox of the Special Act on Medical Residents
The Medical Resident (69) Act (209), which legalized an 88-hour work week, became a shackle that institutionally sanctioned their labor exploitation.
1. Analytical Framework: The Mechanism by Which Protective Law Becomes Betrayal
As the murderous overwork of residents emerged as a social issue, the state finally presented a solution: the "Act on the Improvement of Training Environment and Status of Medical Residents"—hereafter referred to as the Medical Resident Act. This law, which limits weekly working hours to 88, appeared on the surface to be a progressive measure to protect residents. However, did this law resolve the structural injustice analyzed in Chapter 25—the deprivation of the rights to learning and safety, the scapegoat mechanism, and exploitation as cheap labor? The answer is clear. Far from solving the problem, the Medical Resident Act became a bitter paradox that legalized exploitation and perpetuated the system's contradictions.
Applying the stratified analysis of critical realism reveals the structure of this paradox. At the level of "experience," what is witnessed is the reality of residents' overwork, which remains unimproved despite the enactment of the law. The law exists, but the field has not changed. At the level of "events," a massive divergence between the legal text (norms) and the actual enforcement of the law (the field) operates. The law contains punitive provisions, but effective mechanisms to monitor and enforce them are absent. Yet, at the underlying level of "reality," lies the invisible truth: while the Medical Resident Act wears the cloak of a protective law, it functions as a "legal ghetto" that legalizes abnormal labor of 88 hours per week and separates residents from the universal safety net of the Labor Standards Act.
This chapter dissects the reasons for this legal, economic, and statistical failure, exploring how this protective law resulted in betrayal.
2. The First Paradox: An Unenforced Law
The first paradox of the Medical Resident Act is that it failed in enforcement, the most basic function of a law. In jurisprudence, a "norm-practice gap" or "enforcement gap" refers to a phenomenon where legal provisions exist but do not function in reality. The Medical Resident Act is a perfect textbook example of this gap.
The three elements that ensure the effectiveness of a law—monitoring, detection, and sanction—are all absent. First, consider the absence of monitoring. There is no independent external body to monitor and audit whether hospitals comply with the law. While the Training Environment Evaluation Committee exists, its authority is limited, and it is effectively under the influence of the hospital industry. The phenomenon where a regulatory agency is captured by the entities it regulates is called "regulatory capture" in economics. According to this theory formulated by George Stigler, regulatory agencies become co-opted over time by the interests of the regulated parties, causing regulations designed for the public interest to instead serve the interests of the regulated. The composition and operation of the Training Environment Evaluation Committee align strikingly with the predictions of this theory.
The absence of detection is also serious. There is no system to objectively record and audit exactly how many hours a resident works. Under the guise of "voluntary" overtime, overwork that evades the legal net is practiced openly. Attendance records are frequently manipulated, or in many cases, the records do not exist at all. To detect a violation of the law, evidence is required, but since the system for producing that evidence is non-existent, detection is inherently impossible.
The absence of sanctions is decisive. Even if a violation is detected, punishment amounts to a mere slap on the wrist. Within a hierarchical hospital culture, it is practically impossible for a resident to directly raise an issue, as doing so carries the risk of being branded a "whistleblower." Secure, anonymous channels for reporting legal violations are also inadequate. Compared to the ACGME (Accreditation Council for Graduate Medical Education) in the United States, which can issue what is effectively a death sentence by revoking training accreditation for hospitals that violate work hour limits, Korea's means of sanction remain at the level of warning letters. When the expected cost of violation is lower than the expected cost of compliance, a rational actor chooses to violate—this is exactly what Gary Becker's economics of crime predicts.
Ultimately, the Medical Resident Act was a sleeping lion. The law exists, but without teeth and claws—enforcement power—it lacked the strength to change the field. Instead, this law devolved into an alibi providing the state and hospitals with the pretext that "we have taken protective measures." In legisprudence, a law that does not aim for substantive effects but only for the delivery of a political message is called "symbolic legislation." The Medical Resident Act only "symbolized" the state's will to protect residents; it did not actually protect them.
3. The Second Paradox: A Failure Predicted by Economics
The second paradox of the Medical Resident Act lies in its complete disregard for the economic principles of the market. This law attempted to regulate the "quantity" of resident labor—working hours—while leaving the "price"—medical fees—fixed. If only quantity is regulated while price is fixed, the market inevitably finds a path to bypass the regulation. This is a basic principle of economics, and the failure of the Medical Resident Act is a precise empirical demonstration of this principle.
Economically, the labor supply elasticity of residents is nearly zero. Because one can only become a specialist after completing residency, residents are "captive labor" who cannot leave the market regardless of how poor the working conditions are. Under these inelastic supply conditions, the demander—the hospital—enjoys the status of a virtual monopsony (65). If the closed employment structure for general doctors analyzed in Chapter 24 is a loose shackle, this shackle is unbreakable for residents. General doctors at least have the exit strategy of opening a private practice, but for a resident, giving up training means forfeiting the specialist qualification itself.
The Medical Resident Act was an attempt to raise the price of resident labor—by limiting hours to increase the labor cost per hour. In a normal market, if resident labor becomes more expensive, hospitals should switch to substitutes, such as hiring specialists. This is the substitution effect in economics. However, under a low-fee system, this transition is economically impossible. The labor cost for one specialist is equivalent to that of three or four residents, but in a structure where fees do not cover costs, hospitals lack the financial capacity to hire additional specialists. In a market where substitutes do not exist, price regulation is powerless.
Ultimately, the most rational choice for hospitals was not to find substitutes but to bypass the law and continue utilizing existing cheap labor to the maximum extent. "Voluntary" overtime, unrecorded night shifts, unpaid labor under the name of "education," and manipulation of attendance records—the paths for bypassing were diverse and creative. As Goodhart's Law states, "When a measure becomes a target, it ceases to be a good measure." When the Medical Resident Act adopted "paper-based working hours" as a regulatory metric, hospitals responded by manipulating the paperwork, while actual working hours remained unchanged.
The economic logic of this failure can be summarized as follows: the low-fee structure constrains the financial capacity of hospitals; the constraint on financial capacity blocks the transition to substitutes (hiring specialists); the absence of substitutes makes bypassing the law a rational choice; and the inelasticity of the resident labor supply makes resistance to this bypassing impossible. The Medical Resident Act failed to touch any single link in this chain of causal structure. By attempting to regulate symptoms while ignoring the root cause of low fees, it was economically destined for failure.
4. Statistical Proof: Quantifying the Failure
The failure of the Medical Resident Act is not a mere assertion; it can be proven statistically. The implementation of the Medical Resident Act in 2016 provides a perfect opportunity for a "natural experiment" to rigorously evaluate its effects. A natural experiment methodology utilizes experimental conditions created by policy changes or natural events, rather than artificial designs in a lab, to estimate causal relationships.
The "Difference-in-Differences (DiD)" technique from econometrics can be applied. Before and after the law's implementation, hospitals with a high dependence on residents (experimental group) are compared with those that are not (control group). If the Medical Resident Act functioned effectively, patient safety indicators—mortality rates, readmission rates, and medical accident rates—at the experimental group hospitals should have improved relative to the control group after implementation, and the actual working hours of the experimental group should have significantly decreased. This is the "treatment effect."
However, data reported to date suggest that such treatment effects have not appeared. Even after the implementation of the law, the actual working hours of residents did not change significantly, and no meaningful improvement in patient safety indicators was confirmed. This quantitatively demonstrates that the Medical Resident Act remained a paper existence and failed to lead to substantive changes in the field. Of course, to perform this analysis more rigorously, objective measurement data on resident working hours, data on resident dependence by hospital, and sufficient pre- and post-observation periods are required. Paradoxically, however, the previously discussed absence of monitoring and recording systems makes this rigorous analysis itself difficult. The fact that there is no data to measure the effect of the law eloquently speaks to the law's failure.
Experience in the United States provides a meaningful comparative case. Since the ACGME introduced resident work hour limits in 2003, large-scale studies on their effects have been actively conducted. Randomized controlled trials (such as the FIRST Trial) and large-scale observational studies converge on the conclusion that simple time limits alone do not improve patient safety. The effectiveness of work hour limits is only achieved when accompanied by a comprehensive approach, including sufficient staffing, improved handoff systems, and quality control of training. Since Korea's Medical Resident Act introduced only the time limit provisions without such a comprehensive approach, its failure was already foretold.
5. The Third Paradox: The Shackle of a Special Act
The most fatal legacy left by the Medical Resident Act is that it legalized exploitation. This legacy operates through two mechanisms.
First, it is the normalization of deviance. This concept, established by sociologist Diane Vaughan in her analysis of the Challenger space shuttle disaster, explains the process by which deviant practices within an organization are gradually accepted as "normal" when they repeatedly succeed—meaning, when they do not lead to an immediate catastrophe. The Medical Service Technologists Act (the Resident Act) granted the status of a "legal upper limit" to an irrational 88-hour work week, which would be illegal in any other profession. Under the Labor Standards Act, the statutory working hours for general workers are 40 hours per week, and even with overtime, they cannot exceed 52 hours. However, for residents, 88 hours is "legal." A work duration nearly double the legal limit for general workers has been declared "within the allowable range" by the authority of the law. This produced the effect of pulling the abnormal into the realm of the legal and entrenching it there. The moment 88 hours becomes the "limit," any overwork below that—for instance, 70 or 80 hours a week—is perceived as if it were normal.
Second, it is the formation of a legal ghetto. In jurisprudence, there is a principle that "special law takes precedence over general law" (*lex specialis derogat legi generali*). With the enactment of the Resident Act as a special law, residents were separated from the universal protection net of the Labor Standards Act. There is no issue if a special law provides stronger protection than a general law, but the Resident Act provides weaker protection. While the Labor Standards Act guarantees a 52-hour cap, additional pay for night work, and annual paid leave, the Resident Act allows for 88 hours and excludes many of these protective provisions from application. Consequently, the Resident Act has essentially created a "legal ghetto," isolating residents from the universal labor rights protection net enjoyed by the majority of South Korean workers and confining them to inferior conditions.
When these two mechanisms combine, their toxicity multiplies. Abnormal labor is normalized by law, and escape from that normalized exploitation is blocked by the special law. While failing to receive the protection of the Labor Standards Act, residents are instead bound to harsher conditions by the "protective law" known as the Resident Act. This paradox, where a protective law becomes a shackle, is the most cruel legacy of the Resident Act.
6. Counterarguments and Responses
Three expected counterarguments to this analysis are examined.
First, there may be an argument that "the situation would have been worse without the Resident Act." While this claim requires empirical verification, it lacks persuasiveness. Given that the reality of overwork has not significantly improved since the implementation of the law, there is a lack of evidence that the existence of the law itself had a deterrent effect. Rather, it is highly probable that the law produced the adverse effect of justifying overwork below that level as "legal" by setting a high cap of 88 hours. Having a high ceiling is not necessarily better than having no ceiling at all, because a high ceiling sends the message that it is acceptable to reach that height.
Second is the argument that "88 hours a week reflects the unique nature of professional medical training." The specificity of medical training must be acknowledged. However, specificity should be a grounds for better protection, not an excuse for weaker protection. If continuity of training is important, it should be achieved through sufficient personnel and proper shift scheduling, not by relying on the overwork of a single individual. The EU Working Time Directive applies a 48-hour limit even to trainee doctors, reflecting the specificity of training through the design of shift systems. This is empirical proof that it is possible to recognize specificity without lowering the level of protection.
Third, there is the claim that "ultimately, a solution is impossible without an increase in medical fees." This argument is largely valid. However, the reality that increasing fees is difficult right now does not justify neglecting the structural flaws of the current Resident Act. There are clearly areas where improvements can be made even within the current legal system, such as strengthening enforcement, establishing independent monitoring bodies, creating anonymous reporting channels, and revoking training certification upon violations. Until a fundamental solution like a fee increase is achieved, it is the state's duty to ensure the law performs at least a minimum protective function.
7. A Shackle in the Guise of a Protective Law
The Resident Act was a shackle wearing the guise of a protective law. The greatest sin of this law lies in pretending to resolve exploitation while actually making that structure of exploitation more sophisticated and legal. Regulation without enforcement is merely symbolic legislation; quantitative regulation that ignores economic reality leads to market circumvention; and the format of a special law institutionalizes separation from the universal protection net.
What is the final result created by these three layers of paradox? The Resident Act provided the state with an alibi of having "taken protective measures," the hospitals with immunity for "operating within the legal limit," and society with the illusion that "the problem has been solved." The only party that gained nothing is the residents themselves, the very targets of the law's protection. This is the most tragic example of how the state, in the name of good intentions, can produce the most cold-hearted results.
The failure of the Resident Act symbolically illustrates the failure of regulation in the Korean healthcare system. An approach that attempts to regulate only symptoms while ignoring structural causes (low medical fees), a strategy of securing political alibis by enacting laws without enforcement power, and regulatory bodies captured by the interests of those they regulate—this pattern is not unique to the Resident Act but is repeated across the state's entire control system as analyzed in Part 4.
8. Toward the Next Chapter
I have analyzed the tragedy of residents as "disposable pawns" and the paradox of the Resident Act as a paper tiger. However, residents are not the only ones at the bottom of the system. Beside them, and across an even broader field, are other souls being consumed and discarded every day: the nurses. The shocking statistic that the turnover rate for new nurses within one year reaches 57% is not a problem of individual weakness or maladaptation. It is the clearest indicator of systemic failure, showing how the organization of the hospital systematically destroys its members and shifts that cost onto patient safety. In the next chapter, I analyze the operating principles of this "burn and churn" model and its fatal impact on patient lives.
Chapter 27. Consumed Souls: The Truth Behind the 57% Nurse Turnover Rate
Under the "Burn and Churn" model, more than half of new nurses leave within a year after suffering from extreme labor intensity.
1. Reconstructing the Problem: The Resignation Letter as a Warning
Residents are not the only ones at the very bottom of the system. Beside them, and in a much wider area, are other souls being consumed and discarded every day. These are the nurses.
Statistics showing that the turnover rate for new nurses within one year reaches 57% did not appear out of nowhere. This is the clearest indicator of systemic failure, demonstrating how the hospital organization systematically destroys its members and passes that cost on to patient safety. From the perspective of Human Resource Management (HRM), if the first-year turnover rate for new employees exceeds 50% in any industry, it is an organizational problem, not an individual one. The figure of 57% is a product of structural violence that cannot be explained by individual weakness or lack of adaptation.
Applying the analytical framework of critical realism reveals three levels of reality. At the level of "experience," we witness the mass turnover of new nurses, chronic understaffing, and the violent organizational culture represented by "Tae-um" (workplace bullying). At the level of "events" behind this experience, the "burn and churn" model operates, where universities oversupply nursing labor and hospitals consume them at low wages to control labor costs. However, at the level of "reality" underlying all of this, there is the invisible truth: the low-fee system forces hospitals to treat nursing staff as the primary target for cost reduction, and as a result, the core value of patient safety is being systematically undermined.
This chapter argues that the resignation letters of nurses are not mere pieces of paper, but warnings written in blood, signaling that the system is gambling dangerously with patients' lives.
2. Violation of the Psychological Contract: Why They Leave
Nurses do not leave hospitals simply because the work is hard. Nursing is inherently a physically and mentally demanding profession, and those who choose this career enter it knowing that fact. The problem is not "hard work" but "unjust work." At its root lies the perception that the psychological contract between the organization and the individual has been unilaterally violated.
The psychological contract is a concept established by Denise Rousseau, referring to the totality of implicit expectations and obligations existing between employer and employee beyond the explicit contract. The implicit expectations a nurse holds when entering a hospital are roughly as follows: "I will work with dedication. In return, the organization will recognize my contribution, show concern for my well-being, and provide opportunities for professional growth." When these expectations are met, members commit to the organization; when they feel betrayed, they leave. In Rousseau's theory, a psychological contract breach is qualitatively different from simple dissatisfaction. It is a sense of betrayal and a fundamental collapse of trust in the organization.
The reality of Korean hospitals systematically destroys this psychological contract from the early stages of employment. The mechanisms of that destruction are classified into three types.
First is the organizational violence known as "Tae-um." Meaning "one's soul is burned to ashes," it is nursing slang for the systematic bullying inflicted by senior nurses on new recruits. It is disguised as education, but in substance, it is workplace bullying involving verbal insults, exclusion from tasks, excessive reprimands, and sometimes physical threats. In organizational behavior, workplace bullying is understood as a product of organizational culture rather than individual personality issues. The fact that Tae-um appears universally across Korean hospitals, not just in one or two, proves that this is not an individual deviation but structural violence condoned and reproduced by the system. Chronic understaffing creates excessive workloads, which accumulate stress and frustration, and that frustration is projected onto the weakest beings in the organization—the new nurses. This is structurally isomorphic to the resident scapegoat mechanism analyzed in Chapter 25.
Second, the inhumane three-shift work system destroys the lives and health of nurses. Shift work that irregularly rotates through day-evening-night disrupts the body's circadian rhythm, increasing the risk of sleep disorders, chronic fatigue, depression, digestive diseases, and cardiovascular diseases. In industrial medicine, the negative impact of shift work on health is an established scientific fact. The problem is not shift work itself—since 24-hour operation is inevitable due to the nature of medical care—but an environment where sufficient rest between shifts is not guaranteed due to understaffing, overtime becomes routine, and the use of annual leave is virtually impossible. Even with the same shift work, if sufficient personnel are provided, recovery time between shifts can be secured and paid leave can be guaranteed. Understaffing exponentially amplifies the negative effects of shift work.
Third, the "burn and churn" model crushes all expectations for the organization. This model is a hospital's human resource management strategy that treats new nurses as "consumables" that can be replaced at any time. Nursing colleges in Korea produce a mass of graduates every year, and this oversupply instills in hospitals the perception that "if they leave, we can just hire new ones." In labor economics, this is called the "reserve army of labor." According to this concept established by Marx, when a sufficiently large reserve army of labor exists, employers lose the incentive to improve the working conditions of existing workers because replacement is easy anyway. The Korean nursing labor market is a near-perfect realization of this model.
Robert Eisenberger’s theory of Perceived Organizational Support (POS) explains the effects of these three mechanisms in an integrated way. POS refers to the degree to which members perceive that "the organization values my contribution and cares about my well-being." High POS is a key psychological resource that promotes organizational commitment, job satisfaction, and organizational citizenship behavior. Tae-um sends the message that "this organization does not protect me," inhumane shift work sends the message that "this organization does not care about my health," and the burn-and-churn model sends the message that "I am a replaceable part in this organization." When these three messages operate simultaneously, POS hits rock bottom and turnover becomes inevitable. As J. Stacy Adams' equity theory predicts, when members perceive that outputs (recognition, compensation, safety) are significantly lacking compared to inputs (dedication, health, time), they terminate the relationship. Turnover is not a sign of weakness; it is the most rational survival strategy in a place where organizational justice is absent.
3. Medical Catastrophe: When Nurses Leave, Patients Die
Nurse turnover is more than a hospital's personnel issue; it is a medical catastrophe directly linked to patient lives. This proposition is not rhetorical exaggeration but a scientific fact repeatedly confirmed by rigorous epidemiological research.
In nursing and public health, the relationship between "nurse staffing and patient outcomes" is one of the most firmly established research areas. A large-scale cross-sectional study by the University of Pennsylvania nursing research team, led by Linda Aiken, reported that for every one-patient increase in the patient-to-nurse ratio, patient mortality rises by approximately 7%. This relationship remained robust even after controlling for other variables such as patient severity, hospital size, and physician staffing. Subsequent studies have consistently confirmed that an increase in the number of patients per nurse has a significant correlation with virtually all negative patient safety indicators, including hospital-acquired infections, pressure ulcers, falls, medication errors, cardiopulmonary resuscitation failure rates, and readmission rates.
What is crucially important here is not just quantity, but quality. The problem of high turnover rates does not stop at a simple decrease in the number of nurses. When experienced nurses leave and inexperienced new nurses fill their places, the average competency of the entire ward is leveled downward. According to Patricia Benner’s model of nursing proficiency, nurses grow through five stages from novice to expert, and the clinical judgment and risk detection abilities of each stage are qualitatively different. An expert-level nurse can intuitively detect minute changes in a patient's condition to prevent crises in advance, whereas a novice can only provide reactive responses dependent on protocols. When a ward is filled with novices due to high turnover, the organizational ability to detect crises in advance is lost. This is the fatal effect that the "downward leveling of competency" has on patient safety.
The experience of California demonstrates that a solution to this problem exists. In 1999, California became the first in the United States to introduce a mandated nurse-to-patient ratio. It enforced minimum staffing standards by law for each type of unit, such as 1:2 for intensive care units and 1:5 for general wards. Subsequent studies report that after the implementation of this legislation, patient mortality and complication rates in California hospitals decreased significantly compared to other states. Legally mandated staffing standards work—as long as they are actually enforced.
The reality in Korea is the exact opposite. While legal standards for nursing staffing exist, the standards themselves fall significantly short of international levels, and monitoring and sanctions regarding compliance are insufficient. Although the Nursing Fee Differentiation System provides economic incentives for nursing staff allocation, the size of those incentives is not enough to change the practice of hospitals maintaining staffing at a minimum. The same pattern of enforcement failure seen in the Medical Residents Act (209) analyzed in Chapter 26 repeats here. The law exists but has no teeth; incentives exist but are insufficient.
**4. False Economic Logic: The Illusion of Reducing Personnel Costs**
Why, then, do hospitals make such irrational and self-destructive choices? To answer this question, the decision-making structure of hospital management must be analyzed economically.
Hospital management judges that reducing nursing staff to save on personnel costs is profitable in the short term. Under a low-fee system, hospital profit margins are under extreme pressure, and personnel costs are the largest cost item, accounting for 40–50% of total hospital expenses. From the management's perspective, reducing the largest controllable cost item seems rational. However, this is a classic example of what economics calls a "false economy." It refers to a decision where short-term savings lead to much larger costs in the long run.
The hidden costs resulting from nursing staff reductions are multi-layered. First, let us look at direct costs. High turnover rates incur massive costs for recruiting and training new personnel. According to estimates by the American Nurses Association, the cost of turnover for a single nurse amounts to 1.2 to 1.5 times that nurse's annual salary. This cost is substantial when including recruitment advertisements, interviews, new employee orientation, preceptor assignments, and the decline in productivity until the new nurse can perform tasks independently. A turnover rate of 57% means that a hospital is repeatedly spending this cost for more than half of its nursing staff every year.
Indirect costs are even larger. These include the increased risk of medical accidents due to the decline in quality of care, patient dissatisfaction, damage to hospital reputation, and the resulting decrease in patient return rates. The litigation costs and compensation for a single medical accident can reach hundreds of millions of won, and the long-term cost of patient attrition caused by a tarnished reputation is difficult even to calculate. Behavioral economics explains this as a bias of "temporal discounting." Individuals and organizations possess a cognitive bias to overvalue small current gains over large future losses, and the decision-making of hospital management regarding personnel cost reduction is a quintessential case of this bias.
However, it is inaccurate to attribute this irrational decision-making solely to the incompetence of individual management. The financial pressure imposed on hospitals by the low-fee system is real, and it is a structurally predetermined outcome that personnel costs become the easiest target for cost reduction under that pressure. The chain of destructive power from low fees analyzed in Part 4 operates here as well. Low fees pressure hospital finances; financial pressure forces personnel cost reductions; personnel cost reductions cause the exhaustion and departure of nursing staff; and staff departure threatens patient safety. This is not a failure of individual hospital management, but a path of destruction designed by the system.
**5. The Paradox of Over-Supply: Nurses Are Abundant but Absent from Hospitals**
A unique paradox exists in Korea’s nursing workforce problem. While the total number of licensed nurses is overflowing, there is a chronic shortage of nurses actually standing by patient bedsides in hospitals. In OECD (66) statistics, the number of licensed nurses relative to the population in Korea exceeds the OECD average, but the number of practicing nurses falls far below the average. What does this discrepancy mean?
This is not a problem of supply, but a problem of retention. Nursing colleges produce a large number of graduates every year, but a significant portion of them fail to settle into clinical settings and leave. You cannot fill a bucket by pouring more water into it if the bucket is leaking—the metaphor used in Chapter 25 to criticize the fiction of increasing medical school quotas applies accurately here as well. Increasing the number of trained nurses is pouring more water into the bucket; improving the working environment to reduce turnover is plugging the holes. Korean policy has focused on the former and ignored the latter.
This over-supply paradoxically worsens the problem. From the perspective of labor economics, over-supply weakens the bargaining power of workers. The perception that "there is plenty of replaceable personnel" removes the incentive for hospitals to improve working conditions. The proliferation of nursing colleges and the expansion of quotas—whether intentional or not—had the effect of expanding the pool of reserve labor, thereby structurally weakening the bargaining power of existing nurses. This contradiction of excessive training but failed retention reflects a fundamental imbalance between supply-side and demand-side policies.
**6. Residents and Nurses: Structural Isomorphism**
Taking a step back and comparing the issues of residents (Chapters 25–26) and nurses (this chapter) reveals a surprisingly similar structural pattern. Both groups sit at the bottom of the system, bearing the burden of low fees, being exploited as cheap labor, and ultimately taking terminal responsibility for the risks created by the system, while the laws and institutions meant to protect them fail to operate properly.
However, a significant difference also exists. Residents have an "exit" called becoming a specialist once their training ends, but nurses have no such structural exit. While the labor supply elasticity of residents is close to "zero" only during the training period, the departure of nurses from clinical settings is often permanent. When a nurse who has left turns to non-clinical fields—insurance companies, pharmaceutical companies, health teachers, or civil service—that clinical experience and competency are permanently lost to the medical system. From a social perspective, this is a massive waste of human capital. The four years of educational costs and social resources invested in training one nurse are lost without even being utilized for a single year in a clinical setting.
This structural isomorphism carries important implications. The resident problem and the nurse problem are not separate personnel issues; they are similar patterns manifesting in different occupational groups from the same structural cause—the compression of personnel costs forced by the low-fee system. Therefore, the solution should not be a patchwork for individual occupations, but a systematic approach toward the common structural cause.
**7. The Final Result of System Failure**
Synthesizing the analysis so far, the causal structure surrounding high nurse turnover rates becomes clear. The pressure of low fees assigns the highest priority of personnel cost reduction to hospitals, and hospitals choose the easiest way to solve this task—the path of consuming nurses. Organizational violence such as "Tae-um," inhuman shift work, and the "consume-and-replace" model destroy the psychological contract of nurses, and the destroyed psychological contract results in large-scale turnover. Large-scale turnover levels the ward's competency downward, and the downward leveling of competency leads to the collapse of patient safety, as scientifically proven.
This chain is self-reinforcing. A vicious cycle is formed where the labor shortage caused by turnover increases the workload of the remaining nurses, and the increased workload triggers turnover again. In system dynamics, this is called a "positive feedback loop." Without external intervention, this loop does not return to a stable state on its own. The vicious cycle only accelerates.
The resignation letters of nurses are not mere pieces of paper. They are warning signs written in blood, stating that the system is taking a dangerous gamble with patients' lives. And this warning sound foretells that the cracks starting from the very bottom of the system will finally bring down the entire structure.
**8. Toward the Next Chapter**
The tragedy of the lowest layers of the system—residents and nurses—has been analyzed. However, the most tragic victims of this collapsing system are not today's patients, but tomorrow's patients. The two millstones of low fees and labor exploitation are systematically grinding away the competencies of young doctors who should be responsible for future medical care. Training hospitals are no longer educational institutions, and as a result, we are facing a tragic generation of "surgeons who cannot perform surgery" and "lost fellows." The next chapter analyzes how this collapse of medical education structurally threatens the safety of future patients.
**Chapter 28. The Collapse of Medical Education**
The proliferation of substandard medical schools and distorted training environments are producing specialists without surgical experience and lost fellows.
**1. Reconstructing the Problem: The Price Tomorrow’s Patients Will Pay**
The most tragic victims of this collapsing system are not today's patients, but tomorrow's patients. Chapter 25 analyzed the labor exploitation of medical residents (69), Chapter 26 the paradox of the Medical Residents Act (209), and Chapter 27 the large-scale exodus of nurses. These three chapters dealt with the ongoing crisis. However, what this chapter intends to address is a crisis that has not yet fully arrived and is therefore more dangerous: the fact that the two millstones of low fees and labor exploitation are systematically grinding away the competencies of young doctors who must take responsibility for future medical care.
Let us apply the stratified analysis of critical realism. At the level of "experience," what we witness are young doctors who, despite having earned specialist qualifications, wander through unpaid or low-paid "fellowship" programs for one or two years to learn even basic surgeries. At the level of "events," a reality operates where the residency training process is focused on "providing labor" rather than "education," failing to systematically teach core clinical competencies. At the level of "reality," there exists a structural contradiction where the low-fee system robs hospitals of the capacity to invest in education and forces them to operate using only cheap resident labor.
This chapter dissects how this bankruptcy of education has occurred multi-dimensionally at the ethical, philosophical, and technical levels, and what kind of time bomb this places on future patient safety.
**2. The Collapse of Ethics: A Destroyed Social Contract**
The existence of training hospitals stands upon an implicit social contract. Patients accept the minor risk of being treated by a trainee in exchange for the benefits of cutting-edge medicine. The sole condition under which this contract holds is that every medical act by the trainee is performed under the thorough guidance and supervision of an experienced professor, balancing patient protection and education. This is not merely a custom, but an ethical obligation based on the core principle of medical ethics: "Do no harm" (*primum non nocere*).
In the reality of Korea, this balance has been completely destroyed. Amid chronic personnel shortages caused by low fees, residents have been reduced to components filling labor gaps rather than students. They are pushed into dangerous procedures without the guidance or supervision of professors, and when an accident occurs, they become "expendable pawns," as analyzed in Chapter 25, bearing all the responsibility.
From the perspective of medical ethics, the social contract between the training hospital and the patient is already rescinded. Social contracts are based on reciprocity. Quality of education must be guaranteed as the price for the patient accepting risk, but in a training hospital where education has vanished, the patient accepts the risk without receiving the compensation. From the perspective of the "fiduciary relationship based on vulnerability" proposed by Edmund Pellegrino as the moral foundation of the doctor-patient relationship, training hospitals have degenerated into institutions that exploit rather than protect the vulnerability of patients. In most cases, patients do not even know they are being treated by an unsupervised trainee. Information asymmetry is neutralizing informed consent.
The ethical problem of unsupervised treatment is two-fold. It becomes a threat to safety for the patient and a deprivation of education for the resident. A resident performing a procedure without a professor’s feedback cannot know what they did well or what they did wrong. In pedagogy, feedback is the most basic condition for learning. Repetition without feedback is not learning but the fixation of habits, and if wrong habits become fixed, they become a systematic danger to patients.
**3. Absence of Educational Philosophy: Production of "Specialists in Name Only"**
The global paradigm of modern medical education is "Competency-Based Medical Education (CBME)." This paradigm was adopted by major advanced medical nations such as the US, Canada, the UK, and Australia starting in the late 1990s and has now established itself as the international standard for Graduate Medical Education. The core of CBME is simple. It focuses not on whether one has filled the training period, but on ensuring the core competencies—"what the graduating doctor can actually do."
The Core Competencies framework defined by the ACGME in the United States or the CanMEDS model in Canada systematizes the competencies required of physicians into categories such as patient care, medical knowledge, practice-based learning, interpersonal and communication skills, professionalism, and systems-based practice. Each competency is then decomposed into specific, measurable units called "Entrustable Professional Activities (EPAs)" for evaluation. Training is considered complete only when one can answer "yes" to questions such as: "Can this resident perform an appendectomy independently?" or "Can this resident independently manage the ventilator settings for a critically ill patient?"
The training process in Korea is fundamentally alienated from this paradigm. Korean residency is not based on performance, but on "time and endurance." Once the four-year training period is completed—regardless of what or how much was learned during that time—one is granted eligibility to take the specialist certification exam. The specialist exam is centered on written tests and fails to properly evaluate practical clinical competencies. Furthermore, there is a lack of systematic portfolio evaluation regarding which procedures were actually performed and to what extent during the residency.
The severity of this problem is revealed by looking at where residents' time is consumed. Most of their time is taken up by administrative tasks with no educational value—such as administrative processing, simple record-keeping, specimen transport, and writing referral forms—as well as repetitive routine duties. Opportunities to systematically learn and master core clinical skills in their respective specialties are extremely limited. Taking surgical residents as an example, during the four-year training period, the time spent on pre- and post-operative chores overwhelmingly exceeds the time spent directly participating in surgery. Even when in the operating room, they often remain in assistant roles rather than performing tasks under supervision accompanied by educational feedback.
As a result, "specialists in name only" are produced—individuals who, despite completing four years of residency, cannot independently perform even basic surgeries in their field. This is not a lack of individual effort. The very structure of the education does not support competency formation.
4. "Lost Fellows": Evidence of Educational Failure
The phenomenon that most clearly demonstrates the failure of this educational system is the bloating of fellowship programs. In a normal training system, a fellowship is an advanced course to hone high-level competencies in a sub-specialty after obtaining specialist certification. A fellowship is originally intended for a cardiac surgeon to further develop aortic surgery skills, or a gastroenterologist to enhance skills in endoscopic retrograde cholangiopancreatography (ERCP).
However, in the Korean reality, fellowships perform a completely different function. In many cases, fellowships have degenerated into a process for belatedly compensating for basic competencies that were not learned during the residency period. Doctors who have obtained specialist certification but are unable to provide independent care remain in university hospitals for an additional one to two years to finally learn practical skills. The fellowship has become a remedial course rather than an advanced one. This is the clearest evidence that the training system has completely failed. If a training program that invests four years of time and resources cannot guarantee independent practice and requires an additional one to two years of supplementary training, that system is flawed from its design.
The treatment of fellows is another issue. Most are unpaid or extremely low-paid, and their legal status is ambiguous. In many cases, they are not even covered by the Medical Resident Act. While Chapter 26 analyzed that the Medical Resident Act formed a "legal ghetto," fellows exist in a legal no man's land outside that ghetto. They possess specialist qualifications but are neither residents nor formal staff physicians, existing as entities without any legal protection. This is the reality of the "lost fellows" produced by the Korean medical education system.
From an economic perspective, the bloating of fellowships corresponds to a de facto extension of the training period. Training that is nominally four years is essentially extended to five or six years, yet for the additional one to two years, even the minimum compensation provided during the training period is not guaranteed. From the perspective of human capital theory, this means that the educational investment costs—including opportunity costs—borne by trainees are exceeding rational levels. Particularly, as the fellowship period in essential medical fields (61) becomes longer and treatment remains poor, young doctors face strong economic incentives to avoid essential medicine and move toward "light medicine" centered on non-reimbursable services (67). The predictions of expected utility theory analyzed in Chapter 25 operate accurately here as well.
5. The Formalization of Technical Safeguards
Technical safeguards that could prevent this ethical and philosophical collapse already exist. These are the two core tools of modern medical education: simulation-based medical education and the Objective Structured Clinical Examination (OSCE).
The principles of simulation education were borrowed from the aviation industry. Just as a pilot trains for hundreds of hours in a flight simulator to acquire the ability to handle crisis situations before an actual flight, a doctor repeatedly practices core skills through simulated patients or simulators before facing real patients. According to K. Anders Ericsson’s theory of "deliberate practice," expert-level performance is achieved not through simple repetition, but only through intentional and structured practice accompanied by feedback. Simulation education is the most effective tool for satisfying the conditions of this deliberate practice.
The OSCE is a system for objectively evaluating competency. Utilizing standardized patients, it directly observes and evaluates competencies required in actual clinical situations, such as history taking, physical examination, procedure performance, and patient communication. It can evaluate practical competencies that cannot be measured by written exams and is almost the only evaluation tool capable of measuring the "Does" level—the highest stage in George Miller’s pyramid of competence.
However, in Korean teaching hospitals, these tools often amount to nothing more than a formal display. Simulation centers exist, but residents are not guaranteed time to participate in education; OSCEs are conducted, but the results do not substantially affect the completion of training. The cause is the same as previously analyzed. The hospital's top priority is not "education" but "labor utilization." Sending a resident to the education room means one less pair of hands on the ward immediately. In the face of economic logic forced by a low-reimbursement system, investment in education for the future is always pushed aside by current labor exploitation.
The same applies to Workplace-Based Assessment (WBA), established by John Norcini. WBA is an assessment method that directly observes the care provided by a trainee in an actual clinical environment and provides immediate feedback, including tools such as mini-CEX (Clinical Evaluation Exercise) and DOPS (Direct Observation of Procedural Skills). Since these assessments take place in actual clinical settings rather than simulations, they have high ecological validity. However, in Korean training sites, time for professors to observe and provide feedback on residents' clinical care is not structurally guaranteed. This is because professors themselves are suffering from excessive clinical volume under the low-reimbursement system.
6. The Dangerous Gamble of Expanding Medical School Quotas
In a reality where medical education has collapsed, the government's policy to increase medical school quotas by 2,000 students carries the risk of exacerbating the problem rather than solving it. The premise of this policy is that "since the number of doctors is insufficient, we just need to train more." However, this premise contains two critical errors.
First, quantitative expansion and qualitative assurance are separate issues. In a situation where the current training infrastructure—faculty, educational capacity of teaching hospitals, simulation equipment, and clinical practice opportunities—cannot properly educate even the existing quota, increasing the quota will inevitably dilute the quality of education. The metaphor of the "leaky bucket" analyzed in Chapter 27 applies accurately. If more water (number of students) is poured without plugging the holes in the bucket (defects in the education system), only the amount of leaking water increases. Pushing more students into a poor educational system will result in the mass production of incompetent doctors, putting future patient safety at even more serious risk.
Second, quota expansion does not solve the regional concentration of doctors and the crowding into specific specialties. The essence of the doctor shortage problem is not a shortage of the total number, but a distortion of distribution. There is a surplus of doctors in large cities and a shortage in rural areas and small to medium-sized cities. Essential medical fields are avoided, while manpower is concentrated in light medicine centered on non-reimbursable services. No matter how much the quota is increased, the distortion of distribution will not improve unless there are structural incentives to ensure that the additional doctors are deployed to the areas and fields in need. It is a basic principle in economics that an increase in aggregate supply does not solve a supply shortage in a specific sector.
International comparisons also reveal the vulnerability of this policy. The UK's NHS introduced distribution correction mechanisms—such as mandatory rural service, quota adjustments by specialty, and regional supplementary fees—as a package along with medical school quota expansion. Japan induces the regional placement of doctors through regional special quotas and scholarships contingent on mandatory regional service. It is difficult to find cases in developed countries that solved the doctor shortage problem through simple quota expansion alone. The Korean government's quota expansion policy increases only the total volume without such distribution correction mechanisms, an approach destined for failure based on international experience.
7. Patient Safety Held Hostage to the Future
The final result of the collapse of medical education is clear. It is a future where we must entrust our own lives and those of our families to incompetent professionals.
This risk is not abstract. When a surgical specialist lacking surgical experience performs emergency surgery, when an internal medicine specialist lacking critical care experience manages an intensive care unit, or when an obstetrician lacking delivery experience handles an emergency birth—those at risk are not abstract "future patients," but the specific families of someone. The collapse of medical education is systematically producing these specific risks.
Intertemporal choice theory in economics captures the essence of this problem. Between current cost reduction (utilizing residents as labor) and future losses (production of incompetent specialists), the system consistently chooses the present and sacrifices the future. In behavioral economics, this is called "present bias." Because future damage is dispersed, non-visible, and difficult to attribute to a specific actor, current economic pressure always takes precedence. However, the future inevitably becomes the present. The resident who did not receive education today becomes the specialist of tomorrow, and that specialist will be entrusted with our lives.
The low-reimbursement system has driven the noble value of education out of teaching hospitals, leaving only the economic logic of labor exploitation. As a result, we are raising incompetent experts within an educational system that is bankrupt both ethically and philosophically. The system has abandoned education to maintain cheap labor, and in return, we have all come to shoulder the risks we must pay as future patients.
8. Toward the Next Chapter
From Chapter 25 to this chapter, I analyzed how human resources at the lowest level of the system—residents, nurses, and future doctors in training—are being systematically destroyed. This analysis converges toward one common conclusion: the structural injustice of the system produces numerous victims. From residents and nurses suffering from overwork to patients exposed to danger and regional hospitals on the verge of bankruptcy—they are all victims of the same system. Then, why have they been unable to solidarity with each other to create a massive wave of resistance? In particular, why have doctors remained as thoroughly isolated victims in this desperate struggle? In the next chapter, I dissect the mechanism of this isolation.
Chapter 29. Isolated Victims
The structural injustice of the system produces numerous victims. From residents (69) and nurses suffering from overwork to patients exposed to danger and regional hospitals on the verge of bankruptcy. They are all victims of the same system. Then, why have they been unable to solidarity with each other to create a massive wave of resistance? In particular, why have doctors remained as thoroughly isolated victims in this desperate struggle?
The 2024 medical school quota increase crisis showed the most dramatic answer to this question. At the moment residents submitted their collective resignations, neither nursing organizations, patient groups, nor regional hospital associations stood by their side. When the government and the media framed it as a "battle for the doctors' own interests," doctors fell into a state of total isolation without a single ally. They were one of the most powerful victims of the system, but simultaneously became the loneliest victims.
This isolation is not accidental. It is the result of a complex interplay of structural divisions within the medical community, the absence of experience in solidarity with other social groups, the failure of coalition politics, and a philosophical defeat in failing to persuade why their struggle was just. This chapter dissects the mechanisms of this isolation through sociological, political, and philosophical lenses and analyzes why they became the most powerful yet loneliest victims of the system.
1. Internal Cracks: The Dilemma of Collective Action
To understand the isolation of doctors, one must first look inside the medical community. From the outside, "doctors" appear to be a single homogeneous group, but the reality is quite different. The medical community is a group whose interests are dramatically differentiated and is deeply divided internally.
In sociology, the "Dilemma of Collective Action" explains phenomena where members fail to cooperate despite having common interests at stake. As Mancur Olson (230) revealed in *The Logic of Collective Action*, the larger the group and the more heterogeneous the interests among members, the more structurally difficult voluntary cooperation for public goods becomes. This is because each member has an incentive to free ride, expecting others to bear the costs.
The Korean medical community is a textbook case of this dilemma. Professors, employed physicians, residents, and private practitioners hold vastly different employment structures and interests. University hospital professors enjoy stable status and academic authority but are not direct beneficiaries of medical fee increases. Employed physicians are subordinate to hospital management decisions, making it difficult to voice independent opinions. Residents suffer the most extreme exploitation under the hostage of "training," yet struggle to become subjects of long-term struggle because their tenure is temporary. For private practitioners, low medical fees are a direct matter of survival, yet participating in a strike results in the immediate loss of patients and income.
This fragmentation does not stop there. The economic foundations of doctors in essential healthcare (61) and those centered on non-reimbursable services (67) are also entirely different. As a result of the balloon effect analyzed in Chapter 12, the issue of low medical fees is "someone else's business" to dermatologists and plastic surgeons earning high profits in the non-reimbursable market. In contrast, for surgeons, obstetricians, and emergency medicine physicians, low fees are a matter of survival. This extreme divergence of economic interests fundamentally hinders the creation of what Olson calls the "Structure of Solidarity." Since the costs and benefits of a strike are distributed extremely unequally among sub-groups, the formation of a united front where everyone acts together is nearly impossible.
From a game theory perspective, this is a classic "Asymmetric Prisoner's Dilemma." If all doctors unite and participate in a strike, they can obtain the public good of structural reform of the entire system. However, the costs of striking faced by each sub-group differ dramatically. The cost for private practitioners is immediate, visible, and irreversible. Conversely, the cost for university hospital professors is relatively low. Under this asymmetric cost structure, the high-cost group chooses defection, and that defection destroys the motivation for cooperation in the remaining groups. Ultimately, each group repeatedly suffers strategic defeat, losing the entire group's long-term bargaining power while trying to avoid its own short-term losses.
2. Organizational Isolation: A Group Without Experience in Solidarity
Internal division alone cannot fully explain the isolation of doctors. A more fundamental problem is the fact that the medical community has historically had almost zero experience in conducting solidarity struggles with other social groups. This "organizational isolation" acts as a double shackle, further deepening internal divisions while simultaneously blocking any possibility of external solidarity.
In social movement theory, Charles Tilly (233) argued that the success of a social movement depends on its "Mobilization Structure." This refers to the mechanism by which everyday social networks and organizational foundations—labor unions, civic groups, local communities—are converted into resources for collective action during a crisis. Groups that possess a robust organizational foundation and social network during normal times can mobilize and unite quickly when a crisis strikes. In contrast, groups lacking such a foundation in normal times are inevitably isolated during a crisis.
The mobilization structure of Korean doctors is extremely fragile. The most fundamental problem is the absence of a labor union. While the Health and Medical Workers' Union exists, its mainstay consists of nurses and medical technicians, with minimal participation from doctors. The Korean Medical Association is a professional interest group, not a labor union; it has long faced criticism that its organizational culture and decision-making structure are unsuitable for effectively representing members' interests. Even at the individual hospital level, physician labor unions virtually do not exist. Most doctors lack a standing struggle organization to collectively represent their rights and interests.
This organizational vacuum has accumulated historically. Paradoxically, the "professional" identity of being a doctor has functioned as a psychological barrier preventing solidarity with other worker groups or civil society. This is the phenomenon sociologist Ivan Illich (140) called the "depoliticized self-perception" of professionals. Doctors tend to perceive themselves as "professionals" rather than "workers" and refuse to identify themselves with labor or civic movements. This elitist distancing may serve as a device to maintain social prestige in normal times, but it becomes a trap that isolates them during crises.
The issue is that this isolation is self-reinforcing. Having no established relationships in normal times means having no allies to turn to during a crisis. The lack of allies leads to defeat, and the experience of defeat reinforces "learned helplessness," the belief that "solidarity is useless." This helplessness makes solidarity attempts in the next crisis even more difficult. From the 2000 medical reform (72) to the 2014 telemedicine conflict and the 2024 medical school enrollment quota crisis, doctors have repeated a vicious cycle of isolation—fighting alone and losing every time.
3. Failure of Coalition Politics: Losing Potential Allies
Internally divided and organizationally isolated, doctors also failed miserably in external solidarity, namely Coalition Politics. Paradoxically, doctors never lacked potential allies.
In political science, coalition politics refers to the process by which groups with different interests form strategic alliances centered on common agendas. Successful social movements build larger coalitions by linking their agendas with those of other groups. A representative example is the U.S. Civil Rights Movement, which led massive social transformation by combining with labor, women's, and anti-war movements.
Potential allies for Korean doctors clearly existed. Nurses were another set of victims of the system due to murderous labor intensity and personnel shortages. As analyzed in Chapter 27, the "Burn and Churn" structure—where 57% of new nurses (70) leave their jobs within one year—stems from the same root of low medical fees. Patient advocacy groups were concerned with patient safety and quality of care, and were also victims of "three-minute consultations." Local hospitals were on the verge of serial bankruptcy due to management difficulties caused by low fees, which directly linked to the issue of medical accessibility for local residents.
All these groups were different victims of the same structural cause: "low medical fees." If doctors had expanded their struggle from the narrow agenda of "fee increases" to the universal agenda of "structural reform of the entire system," legalizing an alliance with these potential allies would not have been impossible. "Proper compensation for doctors" was merely another variable in the same equation as "proper staffing for nurses," "sufficient consultation time for patients," and "survival of regional hospitals."
However, doctors failed to create this connection. Their language remained confined to the problems of the doctor group rather than structural reform of the entire system. Demands to "raise fees" or "withdraw medical school expansion" essentially pointed to systemic problems, but their mode of expression sounded as if they only represented the interests of doctors. This allowed the government and the media to easily frame (83) their resistance as a "turf war for doctors' own pockets," resulting in self-inflicted social isolation.
From the perspective of social movement theory, this is a failure of "Frame Alignment." According to David Snow and Robert Benford, successful social movements must perform "Frame Bridging," connecting their frames to the values and concerns of potential supporters. The doctors' frame failed to build such a bridge. The frame of "improving doctors' treatment" did not feel like a personal issue to nurses, patients, or local residents. Had it been translated into frames such as "respect for the labor of all healthcare workers," "guaranteeing sufficient consultation time for all patients," or "securing medical access for all regions," the outcome might have been different.
4. Philosophical Defeat: Frustration of the Struggle for Recognition
The analysis thus far has explained the isolation of doctors on organizational and strategic levels. However, at the deepest root of all these failures lies a more fundamental philosophical defeat. Doctors failed to convince society why their fight was just.
Political philosopher Nancy Fraser argues that the struggle for social justice has two dimensions. One is the dimension of "Redistribution," a struggle demanding the fair distribution of economic resources. The other is the dimension of "Recognition," a struggle demanding equal respect and value as members of society. Fraser emphasizes that many injustices in modern society involve both dimensions intertwined, and the essence of the problem cannot be captured by one side alone.
The doctors' struggle was inherently a manifestation of these two intertwined dimensions. They were not simply making a redistributive demand to "raise fees." Underlying this was a deep resentment toward having their autonomy stripped by the state, being driven into the position of scapegoats, and having their value as professionals denied. Being bound by the mandatory designation system (63) and deprived of contractual freedom, being forced to accept fees below cost while being demanded to make infinite sacrifices as "public servants," and being labeled as "collective egoists holding national health hostage" when striking—all these were resistances against the failure to be recognized for their professional dignity and social value, or the "Struggle for Recognition" as described by Axel Honneth, before they were ever issues of redistribution.
However, the government and the media strictly framed the doctors' struggle as an issue of "redistribution"—that is, a matter of "money." The ideology that "healthcare is a public good," analyzed in Chapter 23, was a tool that perfectly supported this framing. Within the "public good" frame, any demand from doctors is substituted with "pursuit of private interest against the public interest." Within the logic of Biopolitics (203), the claims of rights by those who care for life become evidence of moral deficiency in themselves. Before this powerful ideological frame, the doctors' demand for recognition was dismissed with a single word: "greed."
The reasons why doctors failed to break this frame and convince others that their struggle was an issue of "recognition" are complex. First, they failed to translate their experiences into the language of universal justice. There was an absence of discursive work linking "physician autonomy" to "respect for the labor of all professionals," "proper fees" to a "sustainable medical system," and the "refusal of overwork" to the "guarantee of patient safety." Second, the social position of doctors itself made this translation difficult. In Korean society, the perception that doctors are high-income professionals remains dominant, and under this perception, doctors' "demand for recognition" is read only as the complaints of the privileged.
Borrowing from Fraser's theory, because doctors lost the battle of "recognition" first, they could not win the battle of "redistribution" either. As long as society does not recognize the pain and grievances of doctors as legitimate, their economic demands are destined to be branded from the start as "resistance from the greedy privileged." A demand for redistribution without recognition is inherently unable to gain legitimacy.
5. A Paradoxical Position Designed by the System
To fully understand the isolation of doctors, one must grasp the structural mechanism that places them in the paradoxical position of being both "victims" and "the privileged." This contradictory position is the system's most ingenious design, effectively ensuring the social isolation of doctors.
On one hand, doctors are clear victims of structural exploitation characterized by low fees and forced incorporation. They are forced into fees below cost, deprived of contractual freedom, and effectively denied the right to collective action. Residents are legally forced into 88-hour work weeks, and essential healthcare doctors must perform the most dangerous procedures without economic incentives. By any standard, this is structural injustice.
On the other hand, doctors are also a group guaranteed a certain level of economic stability within this distorted system. The mandatory designation system strips them of contractual freedom but simultaneously guarantees a stable supply of patients. The non-reimbursable market serves as a compensatory mechanism for low fees, providing opportunities for high income to some doctors. This dual position—being exploited while enjoying certain benefits—precisely fits the "Contradictory Class Location" described in sociology. As Erik Olin Wright analyzed, groups in contradictory class locations cannot fully identify with either side and thus find it extremely difficult to form stable class alliances.
The political significance of this paradoxical position is profound. When doctors resist as "victims," the government and the media undermine their legitimacy by highlighting their "privileged" aspect. Conversely, if doctors settle as "the privileged," the structural exploitation of the system is perpetuated. This structure, where one loses regardless of the choice made, is the most effective device the system uses to isolate doctors socially. Resisting leads to being condemned for the greed of high-income elites; remaining silent leads to being seen as having implicitly consented to structural exploitation. Doctors have yet to find a way out of this catch-22.
6. Conclusion: The Loneliest Victims
In conclusion, the isolation of doctors is self-inflicted. However, the process of that "self-infliction" was densely laid with structural traps designed by the system.
Internally, they fragmented, falling into the dilemma of collective action. The extreme divergence of interests among professors, employed physicians, residents, private practitioners, and those in essential versus non-reimbursable healthcare made the formation of a united front fundamentally impossible. Each sub-group repeatedly suffered strategic defeat, losing long-term bargaining power while attempting to avoid short-term losses.
Organizationally, they were isolated due to a lack of experience in solidarity. There is an absence of labor unions as standing struggle organizations, and the elite identity of being a professional acted as a psychological barrier to solidarity with other social groups. Because they had no established relationships in normal times, they had no allies to call upon in times of crisis.
Externally, they failed in coalition politics and did not gain allies. Potential allies such as nurses, patients, and regional hospitals clearly existed, but doctors failed to build a "frame bridge" connecting their struggle with the struggles of these groups. As a result, the government and the media were easily able to isolate the doctors' resistance by framing it as a "clash of self-interests."
Philosophically, they lost the struggle for recognition. While the doctors' fight was essentially a complex struggle intertwined with issues of redistribution and recognition, they failed to persuade the public in universal language as to why their struggle was just. Having lost the battle for "recognition" first, the battle for "redistribution" was forced to bear the stigma of "vested interest greed" from the very beginning.
The most fundamental structural factor penetrating all these failures was the way the system placed doctors in the contradictory position of being both "victims" and "the establishment." This dual positioning was the most sophisticated control mechanism designed by the system, making it difficult for any resistance from doctors to acquire social legitimacy.
Doctors were among the most significant victims of the system. However, they failed to connect their suffering to the suffering of the rest of society and failed to translate their justice into social justice. As a result, they became the loneliest of victims. This history of isolation also serves as a tragic prelude to a larger war—the intergenerational war—between the older and future generations, which will be discussed in the next chapter. The fact that doctors, who failed to achieve solidarity, lacked the strength to fight against intergenerational injustice was an inevitable consequence of the isolation analyzed in this chapter.
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Chapter 30. Intergenerational War: How "Invisible Debt" Is Shifted to the Future
The final victims of this collapsing system are the youth generation—those not yet born or those who have just stepped into society. They have been forced to shoulder the bill for problems they did not create, without their consent. In previous chapters, we traced the process by which residents (69) and nurses are consumed for the sake of the system's present, and how doctors are socially isolated while being stripped of their professional autonomy. However, at the deepest level of structured injustice, there exists an entity that is ultimately charged for the cost of all these failures: the future generation.
The crisis in Korean healthcare is not merely a conflict between professional groups. It is an explicit "Intergenerational War" in which the older generation has drawn upon the resources of the future generation. This chapter analyzes how this invisible war has been ethically justified, institutionally concealed, and economically executed. Furthermore, it argues that the healthcare collapse of 2024 was the first major front of this war.
1. The Bankruptcy of Ethics: The Betrayal of Intergenerational Justice
The essence of this war is the complete bankruptcy of "Intergenerational Justice" in philosophical terms. Intergenerational justice is the ethical principle that the current generation must not deprive future generations of the minimum resources and opportunities they deserve to enjoy. In *A Theory of Justice*, John Rawls proposed the "Just Savings Principle," arguing that each generation has an obligation to pass on to the next generation an institutional and material foundation at least equal to what they inherited. Rawls's argument is based on the "Veil of Ignorance" thought experiment. Parties in the original position, unaware of which generation they would be born into, would never agree to a social contract that exhausts future resources for the sake of current benefits. The core of this principle is that the act of depleting future resources for present convenience contradicts justice.
The older generation, represented by the "586 generation," has directly violated this principle. To solve the burden of support and healthcare costs "right now," they planted "fiscal time bombs" throughout the social insurance system, endlessly postponing the payment of those costs to the future.
The list of these time bombs is long. First, there is the National Health Insurance finance. The structure, which has continuously expanded coverage while suppressing medical fees below cost, maintained the illusion of "low cost-high accessibility" in the short term, but its long-term cost has been transferred to the next generation in the form of rapid insurance premium hikes. Next is the Long-Term Care Insurance. Introduced in 2008, this insurance was a device to transfer the responsibility of supporting the older generation's parents to society as a whole. While it was a necessary social policy in itself, coupled with policy failures such as the oversupply of nursing hospitals (128) and structural misuse known as "social hospitalization," its financial burden became entirely the responsibility of the future generation. Finally, there is the National Pension. In exchange for the older generation enjoying a structure where they pay little and receive much, the responsibility for the depletion of the fund is transferred to the youth generation in the form of skyrocketing premiums.
A single principle runs through all these systems. In economics, this is called "Intertemporal Cost Shifting." It is a structural device used to defer costs to the future to maximize current political benefits. This is exactly the same structure as the "discount rate" problem analyzed by William Nordhaus in the economics of climate change. The current generation excessively discounts future costs and overvalues current benefits. Just as the cost of carbon emissions in climate change is transferred to future generations, the cost of fiscal deficits in the Korean healthcare system has been systematically transferred to future generations.
2. The Illusion of Integrated Collection: Bypassing Tax Resistance and Fiscal Illusion
The institutional device that most covertly completed this intergenerational cost shifting is the "integrated collection" designed simultaneously with the introduction of Long-Term Care Insurance in 2008. Long-term care insurance was an essential system to solve the care problem in an aging society. The problem was money. To raise massive funds by introducing a new social insurance, the public had to be persuaded to pay new taxes, requiring intense social consensus. However, policymakers avoided this direct approach.
Instead, based on Article 8 of the Act on Long-Term Care Insurance for the Aged, they adopted an integrated collection method from the design stage, inserting the long-term care insurance premium at the bottom of the health insurance bill, which citizens were already familiar with. The justification was the reduction of administrative costs and enhancement of payment convenience by utilizing the extensive collection network of the National Health Insurance Service (NHIS). However, applying the analytical framework of economist James Buchanan, a pioneer of public choice theory, reveals its true function.
The "Fiscal Illusion" (242) named by Buchanan refers to a phenomenon where taxpayers significantly underestimate their actual burden when the revenue structure is complexly intertwined or collected in a concealed form parasitic to other tax items. Korea’s integrated collection is a textbook case where this fiscal illusion theory operates perfectly in reality.
An important factual point must be noted here. According to Article 73 of the National Health Insurance Act, the finances of health insurance and long-term care insurance are managed separately under a strict independent accounting principle. It is legally impossible to divert health insurance reserves to cover long-term care insurance deficits or vice versa. Integrated collection is not a chemical combination of the two finances, but merely an administrative convenience measure that lists two items on a single bill.
However, the political effect born of this "administrative convenience" is destructive. Citizens, looking at the monthly bills, merely perceive vaguely that "health insurance premiums have gone up slightly," without sensing how steeply the independent quasi-tax of the long-term care insurance premium is skyrocketing. Expenditure on long-term care insurance for the aged, which was only several hundred billion won at the time of its introduction in 2008, expanded to an astronomical scale approaching 10 trillion won in the 2020s. The long-term care insurance premium rate for 2026 was determined to be 0.9448% of income, a harsh figure calculated by multiplying the health insurance premium payment by an additional 13.14%. The average monthly long-term care insurance premium per subscriber household is 18,362 won, rising sharply every year from 16,860 won in 2024 and 17,845 won in 2025.
Furthermore, integrated collection went beyond simply combining bills; it became a detonator that broke down the boundary between "medical care" and "caregiving" in the public's cognitive system. Although independent accounting is maintained on the books, a "mental accounting" is formed from the subscriber's perspective that it is "money paid on a single bill anyway." This perception encouraged "social hospitalization," where elderly patients or their guardians flock to nursing hospitals—which have lower thresholds and better accessibility than nursing homes—to consume medical resources for caregiving purposes. In the darkness where cost visibility completely disappeared, the older generation's misuse was structured into a massive practice, and a highway for transferring costs to the future generation was opened.
3. "Social Hospitalization": Structural Exploitation Squandering Health Insurance Finances
While the sense of cost became dulled due to integrated collection, a more terrible distortion grew on the ground. This is the structural exploitation known as "Social Hospitalization."
According to the principles of the system, elderly people requiring disease treatment should go to nursing hospitals (covered by health insurance), which are "medical institutions," while those requiring daily care rather than treatment should go to nursing homes (covered by long-term care insurance), which are "care facilities." A key factual point is emphasized here: the cost of the oversupply of nursing hospitals is a problem where money leaks from health insurance finances from the start; it does not occur because of integrated collection with long-term care insurance. Since nursing hospitals are medical institutions, they use health insurance; since nursing homes are care facilities, they use long-term care insurance. Confusing this distinction leads to missing the essence of the problem.
The problem lies in the fact that the older generation blurred the boundaries of these two systems and misused the system in the way most advantageous to themselves. In economics, this is called "Arbitrage." It is a rational yet destructive choice to bypass the more expensive route by taking advantage of the differences in entry thresholds and out-of-pocket cost structures between the two systems.
To admit a parent to a nursing home, one must undergo a strict rating evaluation by the NHIS. Conversely, admission to a nursing hospital is possible based solely on a doctor's judgment, and the threshold is much lower. Furthermore, the "Out-of-pocket Maximum System" of health insurance acts as a decisive incentive. As of 2025, for long-term hospitalization exceeding 120 days in a nursing hospital, the maximum annual out-of-pocket amount for the top 8th income decile is limited to approximately 10.74 million won. In other words, if one pays only about 10 million won a year, the NHIS pays the entirety of the massive medical costs incurred thereafter. From the perspective of children, this is an excellent financial means to fix the cost of supporting parents predictably, but those excess costs are covered by the insurance premiums of young workers currently in the labor market.
The NHIS's 2024 analysis report, "Current Status and Characteristics of Patients in the Optional Admission Group of Nursing Hospitals," empirically proves that the scale of this social hospitalization has reached a level that could collapse the system.
| Category | Detailed Status |
| ------------------------------------------------------------ | ------------------------------------------------------------ |
| Total nursing hospital inpatients | 557,678 (July 2022 – June 2023) |
| Optional admission group (history of social hospitalization) | 149,899 (26.9% of total) |
| Non-varying group (pure social hospitalization) | 87,145 (15.6% of total) — Long-term stay solely for care purposes throughout the hospitalization period |
| Sociodemographic characteristics of optional admission group | Female, under 65, many in the 5th health insurance quintile (high-income) — Admission by bypass without a "long-term care grade" |
| Characteristics of hospitals concentrating on social hospitalization | Average proportion of non-varying group 70.9% — Concentrated in private hospitals with fewer than 100 beds and established for less than 5 years |
Source: National Health Insurance Service, "Current Status and Characteristics of Patients in the Optional Admission Group of Nursing Hospitals" (2024)
15.6% of all patients occupied hospital beds purely for care purposes throughout their entire stay. More serious is that the main characteristics of this optional admission group are concentrated in the "5th health insurance quintile (high-income)," those who have accumulated relative wealth. This means that the older generation, who have the financial means, are passing off their support obligations at a bargain price by using the public pool of health insurance finances instead of paying for private nursing or home care with their own funds.
As analyzed in Chapters 8 and 9, the oversupply created as the government induced small and medium-sized hospitals on the verge of bankruptcy to convert into nursing hospitals combined with the distorted incentive structure of the daily per diem rate system to structure this social hospitalization. Small-scale private hospitals with fewer beds and shorter histories tended to generate profit by focusing on attracting the optional admission group. Fearing the shock to the regional economy and political backlash that the collapse of small hospitals would bring, the government failed to control the oversupply of beds and long condoned their moral hazard. As a result, the health insurance finance has been reduced to a massive sponsor for "modern-day Goryeojang" (abandoning the elderly), providing room and board and care unrelated to medical treatment.
4. Economic Exploitation: Unrecorded "Implicit Debt"
The scale of this massive cost shifting can be clearly calculated through "Generational Accounting" in economics. Generational accounting is an analytical tool developed by Laurence Kotlikoff to calculate the net present value of the taxes a specific generation pays to the government over their lifetime versus the benefits (pension, healthcare costs, etc.) they receive from the government. What is revealed through this analysis is the massive "Fiscal Gap" that exists between the older generation and the future generation.
### Generational Accounting Standards
| Category | Established Generation (Born in the 1960s) | Future Generations (Born after the 1990s) |
| :-------------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- |
| **Net Fiscal Burden** | Net beneficiaries receiving overwhelmingly more benefits than they paid. | Net burden generation whose payments are overwhelmingly higher than receipts. |
| **Benefit-to-Contribution Ratio** | Received 1.5 to 2+ times more benefits compared to lifetime contributions. | Ratio below 1.0; social insurance acts as an investment loss. |
| **Institutional Position** | Enjoyed low premium rates in the early stages; monopolized benefits of expanded coverage. | Direct targets of skyrocketing premium rates due to fund exhaustion in the 2050s. |
| **Transfer of Debt** | Deferred excess benefits to the future by converting them into "implicit debt." | Forced to bear a murderous burden to repay the implicit debt of established generations. |
*Source: Comprehensive results of generational accounting research by the National Assembly Budget Office and the Korea Institute of Public Finance.*
The structure of the National Pension Service (NPS) demonstrates this most clearly. Under the current system, the cohort born in the 1960s is estimated to receive more than twice the pension amount compared to the premiums they paid. Conversely, the prevailing outlook for the cohort born after the 1990s is that it will be difficult for them to even fully recover the premiums they have paid. This is not a gift; it is plunder.
The fiscal structures of Health Insurance and Long-Term Care Insurance follow the same pattern. In the case of the NPS, there is at least some level of public awareness regarding the timing of fund exhaustion because it adopts a partial reserve system. However, Health Insurance and Long-Term Care Insurance, which rely heavily on a pay-as-you-go system, cover the current year's expenditures with the current year's income. Consequently, the threat of implicit debt manifests as immediate increases in premium rates. While long-term care income increased by approximately 2 trillion won over the two years from 2023 to 2024, expenditures increased by 2.7 trillion won, far exceeding the income growth. This pattern, where the rate of expenditure growth structurally exceeds the rate of income growth, warns that the system has already breached its fiscal threshold.
When estimating the intergenerational fiscal flow of Korean social insurance using Kotlikoff's analytical framework, the net burden (lifetime taxes paid minus lifetime benefits received) of future generations significantly exceeds that of established generations. This gap is the "implicit debt" that established generations have borrowed from future generations, yet it remains unrecorded on official books. Because the government's official national debt (D1) statistics do not include this implicit debt, public perception of fiscal sustainability is distorted to be far more optimistic than reality.
### 5. The Dual Role of the 586 Generation: Beneficiaries and Architects
The role of the 586 generation (those born in the 1960s, attended university in the 1980s) does not stop at being mere beneficiaries. They were the beneficiaries and, at the same time, the architects of this unsustainable system.
Let us first examine the 586 generation as beneficiaries. They were the immediate beneficiaries of Long-Term Care Insurance for their parents' generation. This is because the economic and emotional burden of personally supporting their parents was dispersed across society. Concurrently, they are the generation that enjoyed the benefits of low-premium health insurance for the longest period and to the greatest extent. The data on "social hospitalization" analyzed earlier proves this. The fact that the characteristics of the "optional hospitalization group" are concentrated in the high-income bracket implies that the established generation, despite having financial capacity, socialized the responsibility of support at a bargain price by using the public pool of health insurance finances instead of directly bearing the costs of home care or private nursing.
We must also look at the 586 generation as architects. Having emerged as the primary policymakers of Korean society after democratization, the 586 generation pushed for a progressive agenda of "welfare expansion" but failed to honestly distribute the accompanying fiscal burdens. Strengthening coverage wins votes in elections, but raising premiums loses them. Under this political incentive structure, they repeatedly chose the easiest path: "benefits now, costs later." The very act of funding long-term care through "integrated collection"—a political anesthetic—rather than a separate new tax was the original sin of a design that prioritized political convenience over fiscal honesty.
The purpose of this analysis is not to morally condemn the 586 generation. They, too, made choices within their own historical conditions, and those choices had their own rationality. Their desire to expand the social safety net while witnessing the poverty and illness of their parents' generation may have been sincere. However, the core of the problem is that this sincerity was not coupled with fiscal honesty. Good intentions cannot justify bad design. And the cost of bad design is always passed on to the most vulnerable—the future generations who cannot yet speak out.
### 6. Intergenerational Exploitation in the Medical System
This intergenerational war is observed with particular intensity within the medical system. Almost all the structural problems analyzed in previous chapters converge into a single principle: the intergenerational transfer of costs.
Let us examine the low-fee structure first. The established generation enjoyed inexpensive medical care through medical fees set below cost. To utilize hospitals freely while collecting low premiums, the system's unit cost had to be lowered by squeezing someone’s sacrifice. In return, the costs of the structural distortions accumulated in the medical system—three-minute consultations, avoidance of essential medical care, and the expansion of non-covered items—explode at the point when the system collapses, which is when future generations inherit it. The medical collapse of 2024 was the first flare signaling that explosion.
The policy to increase the medical school quota should also be read within this frame. The 2024 decision to increase the quota used the resolution of the doctor shortage as a nominal justification. However, a policy that only increases manpower without touching the low-fee structure analyzed in Chapter 5 does not resolve the structural contradictions of the existing system; it merely redistributes them among more personnel. The environment that newly trained doctors will face—low fees, overwork, and avoidance of essential care—was created by the established generation. Injecting more young people into that environment without improving it is nothing less than a declaration to consume future generations as parts for an already broken system.
Ultimately, intergenerational exploitation within the medical system occurred at two levels simultaneously. The first is fiscal exploitation. An unsustainable deficit in Health Insurance and Long-Term Care Insurance was handed down to the youth, who are the future taxpayers. The second is the exploitation of labor. The blood and sweat of residents (young doctors), who worked 80 hours a week for near-minimum wage, were ground down to prop up a malformed system of medical fees set below cost. The process by which the costs of structural distortions created by the "original sins" analyzed in Part 1—the compulsory designation system, low fees, and forced enrollment—are systematically transferred to future generations is completed here.
### 7. Political Indifference: The Future That Does Not Vote
How was such blatant intergenerational injustice possible? It is because the institutional voice for future generations is completely absent from the political system.
Democracy is a system of government by and for current voters. This is both the strength and the most fundamental weakness of democracy. Political scientist Dennis Thompson termed this problem "Democratic Myopia." He argued that the electoral cycle of democracy limits the vision of politicians to the next election, structurally making policy decisions from a long-term perspective difficult.
The Korean political system is an extreme case of this democratic myopia. The short electoral cycles—a single five-year presidential term and four-year terms for National Assembly members—maximize incentives for politicians to ignore long-term fiscal issues and lean toward short-term populism. Due to the demographic structure, the largest voter groups swaying Korean elections are the established generation, centered on those born in the 1960s, and the super-aged population. For the political sphere, proposing stricter reviews for nursing hospital admissions that may cause inconvenience, reducing the ceiling on out-of-pocket payments which means a direct increase in support costs, or implementing progressive tax hikes would mean "electoral suicide."
On the other hand, the voices of the youth, who are not yet born or do not have the right to vote, are systematically ignored in the policymaking process. This is because there is no institutional mechanism to represent their interests, such as a "Committee for Future Generations" or "Intergenerational Equity Impact Assessments" within the National Assembly. In economics, this can be called a modern variation of "Taxation without Representation." Future generations bear a massive burden due to the fiscal decisions of the current generation, yet they possess no institutional channel to participate in those decisions.
The Ministry of Health and Welfare's 2026 improvement plan for the Long-Term Care Insurance system is a typical example showing that this democratic myopia has penetrated deep into the bureaucratic organization. Even as serious warning bells rang regarding fiscal soundness with the growth of expenditures exceeding income by over 700 billion won, policymakers pushed for an increase in the home-care benefit limit by more than 200,000 won, a full waiver of out-of-pocket costs for the first three visits of home nursing, and a significant expansion of long-term service incentives. While the direction of improving the treatment of care workers may be correct, they thoroughly excluded the "bitter medicine"—such as painful expenditure restructuring or significant increases in contributions from the established generation—and only added numbers to the debt ledger of future generations.
### 8. Conclusion: The End of "Taking from the Bottom to Prop up the Top"
The final conclusion reached by Part 5, "Structural Injustice," is this: The collapse of the Korean medical system is not simply a conflict between doctors and the government, but the result of an intergenerational war in which the established generation systematically plundered the resources of future generations.
Residents and nurses were consumed for the sake of the system's present (Chapters 25–28). Doctors were deprived of their professional autonomy and became socially isolated (Chapters 24, 29). And future generations became the final scapegoats, billed for the costs of all these failures (Chapter 30).
These three layers of injustice are not independent. They reinforce each other within a single system. The structure that consumes residents collapses medical education (Chapter 28), and collapsed education threatens the quality of future medical care. The isolation of doctors exhausts the momentum for system reform, and the absence of reform accelerates the transfer of costs to future generations. Everything is connected, and all costs flow downward.
The medical collapse of 2024 is a warning bell that this precarious practice of "taking from the bottom to prop up the top" has finally reached its limit. The time that the established generation borrowed from the future for their own comfort has almost run out. If the truth of implicit debt continues to be concealed and only immediate political interests are pursued, the youth will make an irreversible choice to reject and exit this unfair social insurance system itself, going beyond mere tax resistance. Whether we can stop this structural plunder and restore intergenerational justice before that time completely runs out will determine the future of Korean society.
Now, it is time to examine the deceptive solutions of the government, which cries for "reform" despite holding all these contradictions. Part 6 reveals why the "solutions" presented by the government were not solutions, but another betrayal.
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**[Box] Generational Accounting: A 10-Line Explanation**
Generational accounting is an analytical tool developed by Laurence Kotlikoff.
1. Calculate the total amount of taxes/premiums a specific generation pays to the government over their lifetime.
2. Calculate the net present value of the benefits (pensions, medical expenses, etc.) that the generation receives from the government over their lifetime.
3. Compare the difference (net burden) between the two values across generations.
4. If the net burden of the established generation < the net burden of future generations → A fiscal gap exists.
5. This gap is not captured in official national debt statistics → "Implicit Debt."
6. In Korea, this gap is widening in Health Insurance, Long-Term Care Insurance, and the National Pension.
→ A framework that allows readers to directly calculate "who pays and who receives."
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**[Box] Integrated Collection: What was hidden, and to whom was the bill passed?**
**Background and Facts:**
Upon the introduction of Long-Term Care Insurance for the Elderly in 2008, the government adopted the "integrated collection" method from the system design stage, which bills long-term care insurance premiums together with health insurance premiums in accordance with Article 8 of the Long-Term Care Insurance Act for the Elderly. This was a political choice to minimize tax resistance following the introduction of a new social insurance. However, according to Article 73 of the National Health Insurance Act, the finances of the two systems are operated under strictly independent accounting, and the cross-appropriation (dilution) of funds is legally impossible.
**What was hidden:**
Integrated collection did not mix the two funds; rather, it blindfolded the public. As the surge in the unique quasi-tax known as the long-term care insurance premium was hidden within health insurance bills, social monitoring and public discourse regarding the cost disappeared. This is a classic case of "Fiscal Illusion."
**The true location of the problem:**
The cost of the oversupply of nursing hospitals is a problem of funds leaking from health insurance finances, not a problem of fiscal dilution through integrated collection. The essence is "social hospitalization"—a structural abuse where elderly people in need of care are detour-hospitalized into low-threshold nursing hospitals (health insurance), eating away at health insurance finances.
**To whom was the bill passed?**
Behind the screen of integrated collection, the established generation used health insurance finances as a means to socialize the cost of support and transferred the resulting deficit to future generations in the form of skyrocketing premiums.
**→ Key Distinctions:**
Integrated collection is an issue of an "administrative device that removed cost visibility (fiscal illusion)"; the daily flat-rate fee system is an issue of "incentive design that rewards custody instead of treatment"; and social hospitalization is an issue of "arbitrage using the difference in entry thresholds between the two systems." Although the levels of the three problems differ, the destination where the costs are transferred is one—the future generations.
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**[Box] The Political Economy of Condoning "Social Hospitalization" in Nursing Hospitals: Reasonable Suspicion and Substantial Appropriation**
**Core Suspicion:** Was the loose hospitalization review of nursing hospitals a "de facto appropriation" by the government, which deliberately used health insurance (medical) finances to handle the explosive demand for long-term care (caregiving)?
Facts and Evaluation:
The government has never officially declared that it would mix Health Insurance finances for long-term care purposes, so it is not a legal 'misappropriation of funds.' However, experts commonly point out that in practical and political terms, it functioned as the government's 'intended neglect' and 'implicit cost-shifting.'
Three Politico-Economic Reasons for Neglect:
1. Evading Tax Resistance (Soft Landing of the System): At the time of introducing Long-Term Care Insurance in 2008, a massive tax (premium) hike was inevitable to accommodate all elderly people in need of care. To avoid tax resistance, the government used nursing hospitals—which have low admission thresholds—as a kind of 'breakwater,' absorbing a significant portion of care costs through the then-ample Health Insurance finances.
2. Bailout of Failing Small-to-Medium Hospitals and Political Compromise: The collapse of small-to-medium hospitals on the verge of bankruptcy posed a fatal political burden on local economies and jobs. The government lowered entry barriers to make it easy for them to convert into nursing hospitals and overlooked the moral hazard of these institutions surviving by filling beds with 'social hospitalization' patients who essentially did not require medical treatment.
3. Passing the Hot Potato (Intergenerational Cost Deferral): The government hid the immediate invoice for care behind the illusion of 'integrated collection' and the vast pool of 'Health Insurance.' While they bypassed the immediate political crisis (elections, tax resistance), the uncontrollably bloated Health Insurance expenditures have degenerated into an implicit debt that future generations must bear entirely.
Conclusion:
The loose screening of nursing hospitals and the neglect of 'social hospitalization' are not administrative errors. They are a massive, state-led mechanism of exploitation that allowed the abuse of Health Insurance as a 'care wallet' to avoid political burdens, and the final recipient of this bill is ultimately the future generation.
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Part 6. The Betrayal of Reform: The Government’s 'Solutions' Full of Contradictions
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Chapter 31. Increasing Medical School Quota by 2,000: A Time Bomb Named 'Solution'
When the illusion of aggregate quantity masks the reality of distribution, reform fails to cure the crisis and instead reproduces it.
1. The Door to Part 6: Why Should We Doubt the 'Solution'?
Part 5, 'Structured Injustice,' recorded whom this system has consumed, whom it has isolated, and to whom it has passed the bill. Residents (69) were exploited as labor (Chapters 25–26), nurses left in large numbers (Chapter 27), medical education collapsed (Chapter 28), and doctors became socially isolated (Chapter 29). And the cost of all these failures was shifted to the future generation (Chapter 30).
Now, it is time to turn our gaze and dissect the prescriptions presented by the government claiming to 'solve' this crisis. What Part 6, 'The Betrayal of Reform,' seeks to trace is the question of why policies wearing the mask of good intentions exacerbated problems rather than curing them. The core thesis is simple. As the Theory of the Second Best predicts, any reform attempted without addressing the fundamental distortion of low reimbursement rates only pushes the system deeper into the quagmire.
The first subject of dissection in this part is the 2024 policy to increase the medical school admission quota by 2,000. This policy, which became the direct fuse for the 2024 medical collapse, was built on the intuitive but fatally simplistic logic that 'since there is a shortage of doctors, we just need to recruit more.' This chapter intends to reveal the flaws in that logic multi-dimensionally at the intersection of economics, policy science, and education.
2. Three Layers: Empirical, Actual, and Real
Applying the ontological stratification of critical realism, let us peel back the three layers of reality in which this policy operates.
The Empirical Layer. In February 2024, when the government announced it would increase the medical school admission quota for the 2025 academic year from approximately 3,058 to 5,058—a sudden increase of 2,000—thousands of residents left their training hospitals. Emergency rooms (59) were paralyzed, surgeries were postponed, and local hospitals effectively lost their function. The public was enraged by the experience that 'doctors abandoned patients,' while doctors resisted the experience that 'the system treats them as disposable parts.' The experiences of both sides were true, yet both failed to see the structure beyond experience.
The Actual Layer. Tracing the chain of facts operating behind the experience reveals how fragile the logical foundation of the policy was. The core premise the government cited as grounds for the increase was the statistic that 'the number of doctors per 1,000 people in South Korea is below the OECD (66) average.' This figure itself is a fact. However, in the leap from this single indicator to the conclusion that 'more doctors must be recruited,' numerous contexts were omitted. The number of consultations per doctor in Korea is more than double the OECD average. It is not that the number of doctors is insufficient, but that the number of patients one doctor handles is abnormally high. What creates this difference is not the absolute number of doctors, but the thin-margin, high-volume equilibrium forced by low reimbursement rates. Furthermore, the regional maldistribution of doctors and the concentration in specific specialties—concentrating in major cities and personnel flocking to 'light medicine' centered on non-covered items (67)—is a problem of distribution, not aggregate quantity. Even if aggregate supply is increased, as long as there are no structural incentives to place personnel in specific regions and fields, additional personnel will only flow into areas that are already oversaturated.
The Real Layer. The more fundamental generative mechanism permeating through experience and fact is this. The medical school quota increase policy was an attempt to treat only the symptom—manpower shortage—created by the distortion, without touching the core distortion of the system, which is the low reimbursement rate. This is an exact reproduction of the logic of the balloon effect analyzed in Chapter 12 and the policy error warned by the Theory of the Second Best by Lipsey and Lancaster. In a system where multiple distortions already exist, adjusting only one variable does not move the system toward equilibrium but creates new distortions. To understand why the adjustment of the single variable of medical school quota increases makes the entire system more unstable, one must precisely trace the operation of this generative mechanism.
3. The Illusion of Aggregate Quantity: Policy Failure Bred by the Fallacy of Composition
The most fundamental error of the medical school quota increase policy lies in what economics calls the 'Fallacy of Composition.' The fallacy of composition is a logical error of inferring that what is true for a part must also be true for the whole. Deriving the global conclusion that 'increasing the total number of doctors will solve the problem' from the partial truth that 'there are regions and fields where doctors are lacking' is exactly the application of this fallacy.
This problem can be analyzed more sophistically from the perspective of labor economics. The medical labor market is not a single homogeneous market but a Segmented Labor Market divided by region, specialty, and type of employment. According to the Segmented Labor Market theory systematized by Peter Doeringer and Michael Piore in 1971, structural barriers exist between the primary labor market (high wage, high stability) and the secondary labor market (low wage, low stability), so increasing labor supply in one side does not automatically resolve the labor shortage in the other.
Applying this theory to the Korean medical labor market makes the structure clear. The primary market corresponds to dermatology, plastic surgery, ophthalmology (LASIK), psychiatry (180), etc., centered on non-covered items in major cities. High returns, low risk, and controllable working hours are the characteristics of this market. The secondary market corresponds to essential medical (61) fields such as surgery, obstetrics and gynecology, thoracic surgery, and pediatrics in rural areas. Its characteristics include low returns due to low reimbursement, high risk of medical accidents, inevitability of night and weekend work, and the fear of criminal prosecution.
If the medical school quota is increased by 2,000, into which market will the additionally produced doctors enter? When individuals as rational economic agents choose between two markets, it is the most basic prediction of economics that they will choose the side with a more favorable risk-adjusted return. If only the aggregate quantity is increased without a distribution correction mechanism, most of the additional personnel will be absorbed into the already saturated primary market, and the void in the secondary market, where personnel are desperately needed, will not be filled. To borrow the analogy analyzed in Chapter 20 again, it is like turning the faucet on harder when there is a hole in the pipe. More water flows, but it fails to reach the intended destination and leaks out in the wrong place.
4. The Deception of International Comparison: The Danger of Numbers Without Context
The most frequent weapon the government mobilized to justify the increase was OECD statistics. The figure showing that the number of doctors per 1,000 people is below the OECD average was repeatedly cited as if it were a necessary and sufficient condition for the increase. However, this simple comparison violates even the most basic principles of comparative policy analysis.
In comparative policy science, 'functional equivalence' is the principle that one must verify whether ostensibly identical indicators in different institutional contexts carry the same substantive meaning. Korea's 'number of consultations per doctor' is overwhelmingly ranked first among OECD countries. Considering this fact, the meaning of the single indicator of doctors per population changes fundamentally. If one doctor in the OECD average performs 2,000 outpatient consultations a year, one doctor in Korea performs more than 6,000 in the same period. When converted to the 'total volume of medical services' performed by a single doctor, Korea is by no means a country short of doctors. What is lacking is not the number of doctors, but the time a single doctor can allocate to a single patient. And it is the structural force of low reimbursement that compresses that time.
The type of failure warned by Dolowitz & Marsh's policy transfer theory is reproduced here. As analyzed in Chapter 6, one reason policies fail is 'incomplete transfer,' where indicators are blindly imitated while ignoring the context of the original policy. The reason the UK or Germany can maintain a certain level of doctors per population is because those doctors are guaranteed reimbursement above cost, a gatekeeping system regulates patient flow, and a quota adjustment mechanism by specialty corrects distribution distortions. Attempting to match only the aggregate indicators without these complementary institutions is no different from trying to put a roof on a building without first establishing its foundation and walls.
5. Physical Limits of Educational Infrastructure: Pouring Water into a 'Leaking Bucket'
The second fatal flaw of the increase policy is that it ignored the physical capacity of educational infrastructure. As analyzed in detail in Chapter 28, the Korean medical education system is already in a state where it cannot properly educate even the existing quota. The student-to-faculty ratio is several times that of developed nations, simulation education is perfunctory, and clinical practice opportunities are structurally insufficient. In this state, if the quota is increased by nearly 65% all at once, what happens to the quality of education?
In the economics of education, the 'education production function' models the relationship between educational inputs (faculty, facilities, curriculum) and educational outputs (competence of graduates). As decades of research accumulated by Eric Hanushek show, if an increase in the number of students occurs without a simultaneous expansion of educational resources, the quality of output drops non-linearly. When existing educational resources are already saturated, the additional input of students can lead beyond diminishing marginal returns to negative returns.
Let us think specifically. Suppose three surgery professors at a university hospital are training six residents per year. That is two trainees per professor. If the quota increases by 65% and the number of trainees becomes ten, the trainees per professor increase to 3.3. Does the professor, who is already suffering from excessive clinical volume under the low reimbursement system, have the physical time to provide meaningful education to the additional trainees? The answer is obvious. It only accelerates the mass production of 'specialists in name only' analyzed in Chapter 28.
From the perspective of Competency-Based Medical Education (CBME), the international standard of modern medical education, the gravity of this problem becomes even clearer. CBME focuses on confirming whether a trainee has actually acquired specific competencies, which requires direct observation by professors, immediate feedback, and systematic evaluation. All of these are resource-intensive activities that demand time and personnel. A policy that increases only the number of students without expanding educational resources makes the prerequisites of CBME structurally impossible. Education that only fills time instead of achieving performance, a system that only issues licenses instead of building competence—this is the destination where the increase policy will arrive.
6. Strengthening Monopsony: The Economics of Control
The third and most subtle effect of the increase policy is the strengthening of the monopsony (65) structure analyzed in Chapter 1. In a monopsony market defined by Joan Robinson, as the labor supply increases, the bargaining power of the monopoly buyer grows even stronger. As the number of suppliers increases, the negotiating position of individual suppliers weakens, and the buyer can purchase more labor at a lower price.
In the Korean healthcare system, the National Health Insurance Service is the de facto monopoly buyer, and doctors are forced suppliers who cannot refuse contracts with this buyer due to the mandatory designation system (63). If 2,000 additional doctors are produced annually in this structure, the bargaining power per doctor drops further. The economic foundation for resistance against low reimbursement rates is weakened.
Applying the analytical framework of public choice theory (242) reveals the political rationality of this policy. As analyzed by Buchanan and Tullock, politicians seek the maximization of political support rather than the maximization of the public interest. From this perspective, the expansion of medical school quotas is a nearly perfect political commodity. The benefits of the promise to "recruit more doctors" are immediate, visible, and emotionally appealing. The public forms an intuitive expectation that "if the number of doctors increases, medical accessibility will improve." Conversely, the costs are delayed, dispersed, and abstract. The deterioration of educational quality, the induction of overtreatment due to a surplus of doctors, and the continued vacuum in essential healthcare—all these side effects will manifest at least ten years after the announcement of the expansion policy. The political-economic structure of "concentrated benefits and dispersed costs" (230) analyzed by Mancur Olson operates precisely here.
What is more concerning is that an increase in the number of doctors strengthens the government's justification for maintaining low medical fees. Once there are "sufficiently" many doctors, the medical community's argument that "a shortage of doctors exacerbates the problem of low fees" loses its persuasiveness. The government becomes able to deploy the logic that "now that there is a surplus of doctors, there is no reason to raise fees." Instead of the expansion policy hindering the resolution of the low-fee problem, it functions in a direction that perpetuates the low-fee structure. This is the most subtle structural effect inherent in this policy.
7. Deconstructing the Narrative of a "Doctor Shortage"
Going one step further, it is necessary to deconstruct the narrative of a "doctor shortage" itself. As analyzed in Chapter 20, the shortage of essential healthcare personnel in Korea is not a shortage of total volume, but an "artificially constructed shortage."
According to the basic principles of microeconomics, a "shortage" of any good or service is not an absolute concept but signifies a gap between demand and supply at a specific price level. A shortage occurs when the price is fixed below the equilibrium price, and the shortage is resolved when the price rises. Applying this principle to the physician labor market, the "doctor shortage" in essential medical fields such as surgery and obstetrics/gynecology occurs because compensation in those fields is structurally low compared to risk and labor intensity, not because the absolute number of people with medical licenses is insufficient.
From this perspective, expanding medical school quotas is a prescription that head-on ignores the cause of the shortage. What happens if supply (the number of doctors) is increased while the price (medical fees) remains fixed? If supply is artificially increased under a price ceiling, the additional providers must either move to the non-reimbursement market where price controls do not reach or accept lower compensation within the controlled market. The former worsens the imbalance of essential healthcare personnel, and the latter further intensifies the "low-margin, high-volume" equilibrium through a decline in income per doctor. In either case, it reaches a result exactly opposite to the policy's original purpose—securing essential healthcare personnel.
8. Absence of Distribution Correction Mechanisms: What International Experience Tells Us
That expanding medical school quotas cannot be a solution to the problem of personnel distribution is not a lesson unique to Korea, but a policy fact repeatedly confirmed internationally.
The UK's NHS significantly expanded medical school quotas after the 2000s, but it did not pursue this as a standalone policy. It introduced a package of distribution correction mechanisms, such as rural placement requirements, specialty workforce planning, geographic pay premiums, and financial incentives for training General Practitioners (GPs). Japan created a pathway through the Chiiki (Regional) special quota system, providing scholarships conditional on mandatory rural service and imposing a period of service in underserved areas as a condition for medical school admission. Australia applies a Medicare fee premium for rural and remote medicine and provides additional career incentives to doctors who train in those regions.
The experiences of these countries tell one consistent thing. Volume expansion must be combined with distribution correction mechanisms, and volume expansion without mechanisms solidifies or worsens existing maldistribution. The Korean government’s policy to increase quotas by 2,000 lacked such distribution correction mechanisms entirely. There were no structural incentives to lead additional doctors to rural areas or essential healthcare, nor were there institutional devices to mandate it. The government relied on the logic of the "trickle-down effect"—that increasing the total volume naturally improves distribution—but it has already been sufficiently verified in various fields of economics that this logic does not work in reality.
9. Political Anatomy: Why Expansion was Chosen
When the economically optimal solution and the politically optimal solution do not coincide, public choice theory predicts that politicians in a democratic system choose the latter. To understand why the policy of expanding medical school quotas was chosen, one must compare the political cost-benefit structures between fee normalization and quota expansion.
The political cost of fee normalization is immediate and visible. To raise fees, one must increase insurance premiums or increase state subsidies. Increasing premiums is a burden immediately felt by all 40 million subscribers and leads directly to a loss of votes in elections. On the other hand, the benefits of fee normalization—the return of essential healthcare personnel, the alleviation of "3-minute consultations," and the suppression of non-reimbursement expansion—are long-term and gradual, making them difficult to visualize within an election cycle. This is a classic structure where "democratic myopia," as named by Dennis Thompson, operates.
In contrast, the political benefit of expanding medical school quotas is immediate and emotional. The message to "recruit more doctors" directly targets public anxiety regarding medical accessibility. Since the costs appear only after more than 10 years, it is effectively "free" for current politicians. Moreover, this policy meshes perfectly with the ideological structure analyzed in Chapter 23—the frame that "healthcare is a public good." Opposing the declaration to "increase doctors for the health of the people" appears to the public as nothing more than "protecting one's own rice bowl." The mechanism of "Moral Panic" (202) analyzed by Stanley Cohen is activated. Doctors who oppose the expansion are branded as "folk devils," and structural appeals are reduced to selfish resistance.
In short, the expansion of medical school quotas was not a serious solution for structural problems, but a product of symbolic politics designed to maximize the impression that "something is being done" while minimizing political costs. As analyzed by Murray Edelman, the core of symbolic politics lies not in the substantive effects of a policy, but in the "signals" the policy emits. What the signal of expansion delivered to the public was a sense of relief that "the government is solving the doctor shortage problem," but behind that relief, the structural distortions of the system were not resolved in the slightest.
10. Counterfactual Analysis: Were Other Choices Possible?
Through a counterfactual thought experiment, let us examine what path might have been possible if the government had invested the same political capital into fee normalization instead of medical school expansion.
If fees are raised to a level reflecting costs, the structural deficit in reimbursed medical care is resolved. This leads to three chain effects. First, the need for cross-subsidization weakens, reducing the motivation for personnel to leak into the non-reimbursement market. If the risk-adjusted return in essential healthcare fields improves, the structural incentive for young doctors to avoid surgery and obstetrics/gynecology weakens. Second, it becomes possible to move away from the "low-margin, high-volume" equilibrium, making it managerially sustainable to invest more time in a single patient. A structural alleviation of "3-minute consultations" becomes possible. Third, when medical institutions can secure reasonable profits through reimbursed care, the necessity to extremeley exploit the labor of residents for cross-subsidization decreases. Space opens up for the status of residents to be restored from "workers" to "trainees."
Of course, fee normalization entails the political cost of raising insurance premiums. However, what is being paid now in exchange for avoiding this cost? The total collapse of the system, the large-scale departure of residents, a crisis in public medical accessibility, and an increasing educational and financial burden on future generations. Between the visible cost of premium hikes and the invisible cost of system collapse, the government has consistently avoided the former and chosen the latter. The accumulation of these choices created the catastrophe of 2024.
11. Conclusion: Increasing Parts is Not Fixing the Design
The policy of increasing medical school quotas by 2,000 is an accumulation of half a century of policy failures in the Korean healthcare system. Every error inherent in this policy—the fallacy of composition, contextless international comparisons, disregard for educational infrastructure, absence of distribution correction mechanisms, and the strengthening of monopsony—stems from one fundamental avoidance. That is the political decision, or rather political avoidance, not to touch the core distortion of the system: low fees.
The essence of this policy can be expressed most simply as follows: putting more fuel into a car with a broken engine. No matter how much fuel there is, if the engine does not work, the car does not move. In a state where the engines of Korean medicine—the fee system, the delivery system, and the education system—are all broken, there is no way the system will function just because more "doctor fuel" is injected.
Within the ideological frame analyzed in Chapter 23, this policy was a perfect political commodity. It was packaged with the biopolitical (203) justification of "the health of the people," announced against the backdrop of a moral panic regarding "doctor selfishness," and settled upon an intuitive narrative that "increasing doctors improves healthcare." Thanks to this triple shield, criticism regarding the structural flaws of the policy has almost lost its place in the public forum.
However, political success and policy success are different. The earliest this policy will produce visible effects is after 2035. By then, the politicians who drafted the policy will have already left the stage, and those who bear the consequences will be—as always—the future generations. The logic of "intertemporal cost shifting" analyzed in Chapter 30 is being carried out here without change.
In the next chapter, we turn our gaze to 2017 to dissect how another well-intentioned policy called "strengthening benefit coverage"—the failed reform known as "Moon Jae-in Care"—deepened the system's distortions.
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[Text Box] Social Partnership vs. Mobilization (Bismarck's Misunderstanding)
There is a mistake the Korean government repeatedly makes when pursuing medical policies. While claiming to refer to the social insurance systems of Germany (the Bismarck model) or France, they imitate only the appearance while omitting the core operating principle of that system: Social Partnership (Sozialpartnerschaft).
Classification / Social Partnership (Original) / Mobilization (Korean Style)
Decision-making / Tripartite consultation among government, medical community, and insurers / Government decides and notifies; medical community executes
Fee determination / Collective bargaining and negotiation between medical associations and insurers / Government (HIRA, MOHW) makes virtually unilateral decisions
Conflict resolution / Mediation body (Schiedsstelle) upon negotiation failure / Government enforcement + work start orders upon negotiation failure
Status of professionals / Equal partners in system operation / Targets of mobilization to achieve policy goals
Nature of participation / Voluntary acceptance (cooperation by persuasion) / Forced compliance (obedience by legal sanctions)
What Bismarck actually did:
When designing the German Sickness Insurance Act of 1883, Bismarck involved medical professionals and workers as co-managers (Selbstverwaltung, self-administration). He allowed the parties who pay premiums and provide services to operate the system directly. This was not a simple democratic ornament but a design choice for the sustainability of the system. This is because only when parties participate in decision-making will they voluntarily comply with agreed rules and have a sense of ownership over the system.
What Korea is missing:
Korea borrowed the appearance of the Bismarck model (social insurance, premium imposition, designation of medical institutions) but did not introduce its spirit (tripartite consultation, collective bargaining, self-administration). As a result, a malformed system was born—wearing Bismarck's clothes but lacking Bismarck's heart. Medical professionals are mobilized but not consulted; obedience is demanded but respect is absent.
This is the tragic irony of the policy to increase medical school quotas by 2,000. While the government says it will "make more doctors," it has never properly consulted with the current doctors. Mobilization without partnership breeds resistance, resistance leads to further coercion, and coercion destroys trust. In this vicious cycle, the ultimate victims are always the patients.
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Chapter 32. The Weaponization of Knowledge: How National Research Institutes Concealed Failure
Political reports wearing the mantle of science blocked policy learning and structurally guaranteed the repetition of the same failures.
1. The Invisible Shield: Why Failure is Not Recognized as Failure
One of the strangest characteristics of the Korean healthcare system is that even though failures are repeated, they are not recognized as "failures." Up to Part V, we traced how this system consumes residents (69), exploits nurses, deprives doctors of autonomy, and plunders the resources of future generations. Yet, despite all this structural collapse, the government has never admitted that its policy design was fundamentally wrong. How is this possible?
The secret lies in an institution standing between the government and the people—more precisely, a knowledge production system. These are the government-funded research institutes, so-called "national research institutes." This knowledge production system, composed of the research functions of the Health Insurance Review and Assessment Service (HIRA), the Health Insurance Research Institute of the National Health Insurance Service, the Korea Institute for Health and Social Affairs (KIHASA), and the Korea Development Institute (KDI), ostensibly exists for "evidence-based policy." However, the role they have actually performed is closer to the exact opposite. They have devolved into tools for "policy-based evidence making," post-hoc constructing the legitimacy of government policies.
What this chapter intends to dissect is the problem of how this knowledge production system operates to systematically conceal policy failures and structurally guarantee the repetition of the same errors. Let us reveal the structure of this phenomenon through a layered analysis of critical realism.
**Level of the Empirical.** Most information the public encounters in the public square regarding healthcare policy is based on reports and data produced by government-funded research institutes. Whether it is the health insurance coverage rate, the shortage of doctors compared to the OECD average, or the growth rate of healthcare expenditures—all these figures originate from these institutes. The public and the media generally trust these numbers. The mere fact that the research results are produced by government-affiliated institutions serves as a seal of scientific authority.
**Level of the Actual.** However, looking into the process by which these numbers are produced reveals a reality far removed from scientific objectivity. The selection of research topics is subordinate to the government's policy agenda. Research funding comes from the government budget, and the government decides whether to utilize the research results. The personnel appointments and promotions of researchers are within the sphere of government influence. Under these structural conditions, the possibility of producing and announcing research results that directly contradict the government's policy direction is extremely low. While institute reports occasionally point out structural flaws in government policy, they mostly remain at the level of "details" that can be improved. Research that directly challenges the fundamental design of the system—such as the compulsory designation system, low medical fees, and mandatory enrollment—virtually does not exist.
**Level of the Real.** At the root of all these phenomena, a single structural mechanism is at work. This is the "institutionalized bias" analyzed by sociologist of science Robert K. Merton. Regardless of individual researchers' intentions, the knowledge production of government-funded institutes is systematically biased in specific directions by institutional conditions: the structure of research fund distribution, the personnel system, and the pathways for utilizing research results. This is not a matter of individual dishonesty, but a structural distortion created by the institution.
**2. The Political Economy of Knowledge: Who Studies What, and Why?**
To understand the bias of government-funded research institutes, one must dissect the political economy of knowledge production. There are three core questions: Who decides the research topic, who pays for the research, and to whom are the results reported?
First, there is the subordination of agenda setting. American political scientists Peter Bachrach and Morton Baratz presented the concept of the "second face of power." If the first face of power is influence in the decision-making process, the second face is the ability to block specific issues from even becoming subjects for decision-making. This is called "non-decision making." It is this second face of power that operates within government-funded research institutes.
The research question, "Are low medical fees the fundamental cause of the healthcare system’s collapse?" rarely appears on the research agenda of these institutes. The same applies to questions like "What are the structural limits of expanding medical school quotas?" or "Is an alternative design to the compulsory designation system possible?" These are not strictly forbidden; they are "naturally" excluded. This is because the government, which allocates research funds, does not budget for such questions. From the institute's perspective, there is no incentive to independently set and pursue research topics that the government does not want. Consequently, critical analysis of the system's fundamental design is systematically excluded from the research agenda, and only research that improves or justifies the details of policies already decided by the government is conducted.
Second, there is the structural effect of fiscal dependency. In economics, the principal-agent problem analyzes phenomena where an agent's incentives are designed to serve the principal's interests, but in the process, the agent's unique purpose—in this case, scientific objectivity—is sacrificed. The relationship between government-funded institutes and the government is a classic example of this problem. The research funds, personnel, and organizational size of the institute (the agent) are all dependent on the decisions of the government (the principal). In this structure, for an institute to point out fundamental flaws in government policy is equivalent to threatening its own basis of existence. No matter how much an individual researcher wishes to remain faithful to their academic conscience, the logic of organizational survival prescribes the direction of the research.
This is exactly the same structure as the behavior of medical institutions analyzed in Chapter 5. Just as a doctor choosing a three-minute consultation in a low-fee environment is the product of structural pressure rather than personal insincerity, biased research from government institutes is a "best response" created by the fiscal dependency structure rather than the academic dishonesty of individual researchers. From the perspective of game theory, this is a situation where producing research that aligns with the government's preferences is the institute's Nash equilibrium strategy in a repeated game.
Third, there is the closed nature of reporting channels. The research results of government-funded institutes are primarily reported to the government. The government can selectively disclose and utilize only those parts of the results that align with its policy direction. This is the policy implementation of "information asymmetry" as discussed in information economics. The government knows the entirety of the research results, but the public only encounters the parts selectively disclosed by the government. The logic of the "market for lemons" analyzed by George Akerlof operates in the knowledge market as well. Adverse selection occurs, where low-quality information (biased research for policy justification) drives out high-quality information (research that directly analyzes structural flaws).
**3. Weaponization of Selective Indicators: How Numbers Lie**
The most powerful tool used by government-funded research institutes to conceal policy failure is "numbers." Built upon the social myth that statistics are objective, selectively presented indicators become searchlights that illuminate only a portion of reality while hiding the rest in darkness.
Take the policy of expanding medical school quotas as an example. The government and research institutes have built an argument that there is an absolute shortage of doctors in Korea by repeatedly citing a single indicator: "the number of doctors per 1,000 people compared to OECD countries." This figure is true. Korea's number of doctors per 1,000 people does not reach the OECD average. However, what this number does not say is far more important.
First, the issue of distribution, rather than total volume, is concealed. As analyzed in Chapter 28, the problem of the doctor shortage in Korea is not a lack of "total volume" but a distortion of "distribution." Doctors are oversupplied in Seoul and the metropolitan area, while there is an extreme shortage in essential medical fields in rural areas. The total volume indicator—the number of doctors per 1,000 people—perfectly hides this distributional distortion. It is the same logic as in economics, where average income alone is insufficient to measure income inequality and distribution indicators like the Gini coefficient are required. Presenting only total volume indicators while omitting distribution indicators is no different from claiming there is no poverty problem because average income is high.
Second, the structural cause is concealed. The diagnosis of a "shortage of doctors" reduces the cause of the problem to a quantitative deficiency on the supply side. However, as repeatedly argued in previous chapters, the shortage of essential medical personnel occurs not because the absolute number of doctors is small, but because the low-fee structure systematically pushes the profitability of essential medical fields to the bottom. Recall the analysis in Chapter 5. The combination of three structural characteristics—labor-intensive, high-risk, and limited transition to non-reimbursable services—makes it a Nash equilibrium for rational medical personnel to avoid these fields. No matter how much medical school quotas are increased, as long as this incentive structure remains unchanged, the additional doctors will merely be absorbed into non-reimbursable-centered "light medicine" according to the same economic logic.
It is difficult to find such analysis in the reports of government-funded research institutes. While there is an abundance of data supporting the government's pre-decided matter of "expanding the number of doctors," reports analyzing why that policy is structurally bound to fail are virtually non-existent. The "What You See Is All There Is" (WYSIATI) bias analyzed by Daniel Kahneman has been institutionalized at the policy level. The public sees only the numbers presented by the research institutes and fails to perceive the structural reality that those numbers do not show.
**4. Blocking Policy Learning: Why the Same Failures Repeat**
The most destructive consequence of the bias in government-funded research institutes is the blocking of policy learning. As defined by policy scholar Hugh Heclo, policy learning is the process of deriving lessons from past policy experiences to improve future policies. For this learning to function, honest and objective evaluation of policy successes and failures must be a prerequisite.
However, if the institution responsible for evaluating policy failure is a government-funded institute subordinate to the very government that designed that policy, honest evaluation becomes structurally impossible. This is not a logical contradiction but a structural flaw in governance. It is the same as the limitations of a structure where an internal auditor reports to the CEO in corporate management. According to W. Edwards Deming's principles of quality management, system improvement depends on the process of accurately measuring system flaws and providing feedback. If the measurement itself is distorted, the possibility of improvement is blocked at the source.
In the history of Korean healthcare policy, the clearest example of this blocking mechanism at work is "Moon Jae-in Care." As will be analyzed in detail in Chapter 33, Moon Jae-in Care was a policy to convert non-reimbursable services into reimbursable ones without addressing the fundamental cause of low medical fees. According to the logic of the "balloon effect" analyzed in Chapter 12, the outcome of this policy was predictable from the start. That the loss of profit in converted items would transfer to the creation of new non-reimbursable items is the most basic principle of general equilibrium.
Yet, reports from government-funded institutes systematically underestimated these structural side effects. Only visible, short-term indicators—such as a slight increase in the coverage rate, a decrease in MRI costs, and temporary improvement in patient satisfaction—were highlighted. Conversely, the explosive growth of the manual therapy market, the worsening concentration of patients in tertiary hospitals, and the rapid deterioration of health insurance finances were either reported as separate phenomena or placed entirely in the blind spots of the reports. The absence of "systems thinking" warned of by Peter Senge was exactly replicated at the level of policy evaluation.
What happened as a result? Encouraged by the "achievements" of Moon Jae-in Care, the government repeatedly attempts policies based on the same logic—converting non-reimbursable services to reimbursable ones while maintaining low fees. Since the feedback loop for learning from failure is blocked, the system falls into a state of "learning disability," repeating the same errors infinitely under different names. The distinction between "single-loop learning" and "double-loop learning" conceptualized by Chris Argyris is crucially important here. Single-loop learning refers to incremental adjustments within the existing frame, while double-loop learning refers to a fundamental re-examination of the frame itself. The knowledge production structure of government-funded research institutes allows only for single-loop learning and structurally blocks double-loop learning—that is, learning that re-examines the fundamental design of the system itself: "low fees, compulsory designation, and mandatory enrollment."
**5. The Politics of Comparison: How International Cases are Distorted**
Another powerful tool mobilized by government-funded research institutes to justify policy is international comparison. However, these comparisons mostly take the form of "selective comparison."
In comparative studies using OECD data, research institutes repeat a pattern of highlighting indicators favorable to Korea and omitting unfavorable ones. The fact that "Korea's healthcare expenditure growth rate exceeds the OECD average" is actively cited when arguing for the necessity of expanding coverage, but the fact that "Korea's share of public healthcare expenditure is significantly lower than the OECD average" is conveniently omitted when analyzing the causes of low medical fees.
Even more serious distortions occur in justifying "decontextualized policy transfer." As analyzed in Chapter 6, policy transfer failures warned of by Dolowitz and Marsh—incomplete understanding of the original policy, blind imitation ignoring context, and the absence of necessary complementary institutions—are structurally repeated in the comparative research of government-funded institutes. They cite the UK's NHS without mentioning the scale of public healthcare infrastructure the NHS presupposes; they refer to Germany's insurance system while omitting the collective bargaining structure between doctors and insurers in Germany; and they benchmark Japan's healthcare cost controls while ignoring the fact that Japan's medical fees are higher than Korea's.
The effect of this selective comparison is to conceal the "exceptionalism" of the Korean healthcare system—the deformed structure analyzed in Chapter 6, unparalleled anywhere else in the world, where "the state controls, but the private sector takes responsibility." International comparison has degenerated from a tool for revealing fundamental system heterogeneity into a tool for borrowing the legitimacy of individual policies. Academically, this is called "cherry-picking," and it is a violation of the most basic principles of scientific methodology.
**6. Examination of Competing Hypotheses: Is the "Lack of Competence" Argument Persuasive?**
One competing hypothesis must be examined here: the claim that the bias of government-funded research institutes is not intentional concealment but a simple limit of competence. It posits that analyzing the general equilibrium effects of a complex healthcare system is an extremely difficult methodological task, and the research personnel at these institutes may lack the competence to perform such analysis.
There is some validity to this hypothesis. General equilibrium analysis indeed requires high methodological sophistication, and it is possible to have a critical discussion about whether Korea's health policy research ecosystem has accumulated sufficient competence.
However, this hypothesis alone cannot explain the full extent of the observed phenomena. If a lack of competence were the problem, the bias in research results should be random. That is, results favorable and unfavorable to government policy should appear with similar frequency. However, the actually observed pattern is clearly directional. Research highlighting the achievements of government policy is abundant, while research pointing out structural flaws is rare. This "systematic bias" cannot be explained by a simple lack of competence; it can only be explained by introducing the structural factors analyzed earlier: the subordination of agenda setting, fiscal dependency, and the closed nature of reporting channels.
A more decisive piece of counter-evidence is the fact that the content of research produced by the same researchers changes after they leave government-funded institutes for academia or private research organizations. If the same human competence produces different results in different institutional contexts, the problem lies in the structure of the institution, not individual competence. This is exactly the same conclusion reached when analyzing the three-minute consultations of doctors in Chapter 5. Structure prescribes behavior.
**7. "Epistemological Capture": The Knowledge Version of Regulatory Capture**
The most accurate theoretical tool for capturing this phenomenon is the extension of the "regulatory capture" theory from economics to the domain of knowledge production. According to the theory of regulatory capture established by George Stigler, regulatory agencies tend to deteriorate over time to serve the interests of the industries they are supposed to regulate. The mechanisms of this capture include information asymmetry between regulators and the regulated, the "revolving door" of personnel exchange, and lobbying by interest groups.
What occurs within national research institutes is a mirror image of this regulatory capture. These research institutions are captured not by the industries they regulate, but by the government that establishes and operates them. This book terms this phenomenon "epistemic capture." It is a structural phenomenon in which knowledge-producing institutions, tasked with the scientific evaluation of policy, are captured by the government—the designer of those policies—consequently producing political justification instead of scientific objectivity.
The mechanisms of epistemic capture are similar to those of regulatory capture. First, a revolving door exists between the government and research institutes. Appointments for head-level positions at national research institutes are mostly determined within the sphere of influence of government officials, and a career at a research institute often serves as a pathway to appointments within the government. This revolving door structurally weakens the independence of research institutes. Second, information asymmetry exists. National research institutes are granted access to government-held medical data. This access is a core asset of the institute, and there is a risk of losing this asset if relations with the government deteriorate. Third, the "market for research" forms a quasi-monopsony structure dominated by a single buyer: the government. The same structural problem of quasi-monopsony in the medical service market, analyzed in Chapter 3, is reproduced in the knowledge market.
This structural similarity is no coincidence. It is the result of the same state applying the same governance method to both the medical service market and the knowledge market. Just as medical institutions sought the bypass of "non-reimbursement" (uncovered items) under state price controls, researchers develop their own adaptation strategies under epistemic capture. The strategy is to align the report's conclusion with the government's expectations while carefully inserting data that implies structural problems deep within the body of the text. However, for policymakers and the media who read only the conclusion, the implications within the text remain invisible.
8. Conclusion: The Broken Mirror and Conditions for Policy Learning
The legacy left by national research institutes in the Korean healthcare system is summarized in three points.
First is the invisibilization of failure. Structural flaws in government policy are systematically concealed by reports wearing the cloak of scientific authority, thereby blocking opportunities for the public and the political sphere to perceive the essence of the problem. If failure is not visible, it is impossible to hold anyone accountable or to learn from the failure.
Second is the foreclosure of alternatives. Research re-examining the fundamental design of the system is excluded from the agenda, blocking the path for structural alternatives—such as reforming the compulsory designation system, introducing selective contracting, or normalizing medical fees—to enter the public square. The power of "non-decision making" described by Bachrach and Baratz is perfectly exercised in the domain of knowledge production.
Third is the guaranteed repetition of the same failures. With policy learning blocked, the government repeatedly attempts the same structural errors under different names. "Moon Jae-in Care," the Essential Healthcare Package, and the expansion of medical school quotas—all these policies share the same logical structure of attempting to treat symptoms without touching the root cause of low medical fees. And each time, the reports of national research institutes provide the numbers to support the legitimacy of these policies.
Consider a counterfactual. What if there had lived a medical policy research institution financially and personnel-wise independent from the government? If there were an institution like Germany's Institute for Quality and Efficiency in Health Care (IQWiG), with legally guaranteed independence, the autonomy to set its own research agenda, and the mandate to disclose research results without filtration, the trajectory of Korean medical policy might have been significantly different. The structural destructive power of low medical fees would have been quantitatively analyzed and presented to the public, the balloon effect of Moon Jae-in Care would have been warned of in advance, and the structural limitations of expanding medical school quotas would have been honestly evaluated.
Thomas Kuhn argued that scientific revolutions occur not through gradual accumulation within an existing paradigm, but through a shift of the paradigm itself. What Korean medical policy needs is precisely this paradigm shift. However, a prerequisite for a paradigm shift is the clear recognition of the failure of the existing paradigm. The epistemic capture of national research institutes fundamentally blocks the possibility of a paradigm shift by obstructing this very recognition.
Ultimately, the problem with national research institutes lies not in the quality of individual reports, but in the structural design of the knowledge production system. If a mirror is broken, one cannot see one's true face no matter how closely one looks. For half a century, Korean medical policy has checked its image in front of a broken mirror. What was reflected in that mirror was not the actual image, but the image the government wished to see. The medical collapse of 2024 was the moment the discrepancy between the fantasy reflected by the broken mirror and reality finally manifested physically.
In the next chapter, we dissect how one of the most brilliant fantasies cast by this broken mirror—the "prison of good intentions" known as Moon Jae-in Care—deepened the contradictions of the system.
[Box] The KDI Report: The Trap of the Number "Price Factor 76.7%"
The report "Factors of Health Insurance Expenditure Growth and Implications" published by KDI in April 2025 contains serious methodological flaws. After decomposing the increase in medical expenses into three factors—population, quantity, and price—the report concluded that the "price factor accounts for 76.7%." However, this "price factor" is merely a residual category that includes all qualitative improvements in medical care, such as the introduction of the latest equipment, the use of high-quality pharmaceuticals, and changes in treatment intensity. As pointed out by the Medical Policy Research Institute, failing to distinguish between service intensity, disease complexity, and technological innovation while attributing everything to "price increases" is a clear methodological limitation.
The leap in interpretation is even more severe. While the report itself admits that "it is difficult to specifically pinpoint the cause of the price factor at the clinic level," it nonetheless identifies "over-treatment by local clinics" as the primary culprit in its conclusion and prescribes the reform of the fee-for-service system. It effectively shifted blame without identifying the cause.
The problem is that this leap became policy as is. The media amplified the most vulnerable interpretation of the report with provocative headlines such as "Deterioration of Health Insurance Finance Due to Over-treatment by Local Clinics," and lawmakers from both ruling and opposition parties spoke in unison, arguing that the fee-for-service system must be converted to bundled payments or Diagnosis-Related Groups (DRG) based on this evidence. Incomplete analysis passed through public opinion and went straight into policy aimed at strengthening control over providers. Nowhere was it mentioned that during the same period, GNI per capita increased by 56% and medical fees per case remained at half the level of advanced nations.
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[Box] How to Read a Report: The "What is Hidden" Checklist
When reading reports from national research institutes or government announcements, ask the following seven questions. If even one answer is "Yes," there is a high probability that the report is not "evidence-based policy" but "policy-based evidence."
① Were comparison targets hand-picked?
Were only countries supporting a favorable conclusion selected, while unfavorable countries were omitted? (e.g., "Korea lacks doctors compared to the OECD average"—omitting the fact that the volume of consultations per doctor is the highest in the OECD.)
② Was the context deleted?
Are the numbers correct, but the context in which those numbers hold meaning (delivery system, fee levels, legal environment, etc.) intentionally removed? (e.g., "The number of medical school graduates is insufficient"—without mentioning the proportion of graduates entering essential healthcare.)
③ Was the time frame manipulated?
Does it show only a period favorable to the conclusion? Were points where the slope of the trend line changes (policy change points) intentionally included or excluded?
④ Were alternative scenarios examined?
While concluding that "there is a shortage of doctors," did it analyze "why there is a shortage (is it a distribution problem or a total quantity problem?)" or "alternatives other than increasing the number of doctors (normalization of fees, reform of the delivery system)?"
⑤ Is there a conflict of interest?
Who determines the budget of the research institution that wrote the report? Does the conclusion lean in a direction favorable to the research institution (securing more follow-up research, gaining government favor)?
⑥ Were counterarguments cited?
Were major counterarguments raised by academia or the field cited and refuted, or were they not mentioned at all? Sound research does not avoid counterarguments.
⑦ Was a distinction made between "should be" and "will be"?
Are normative claims ("We must increase the number of doctors") and empirical predictions ("Increasing doctors will revive essential healthcare") mixed together? If it is an empirical prediction, what is the evidence?
This checklist is not limited to medical policy. Whether it concerns real estate, education, or energy—the ability to read "what was hidden" rather than "what was said" in any government report is a citizen's most powerful means of defense.
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Chapter 33. The Failed Reform, 'Moon Jae-in Care'
A Record of a Nation Attempting to Treat Cancer with Painkillers
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Prologue: The Cruelty of a Single Number
From 62.7 to 64.9. In seven years, with an astronomical budget of 30.6 trillion won, the expectations of tens of millions, and a promise staked on a government's fate, the change produced was a mere 2.2 percentage points. The health insurance coverage rate, which stood at 62.7% in 2017, remains at 64.9% in 2024. The target of 70% remains a mirage, and the OECD average of 76.3% feels like a story from another world.
The cruelty of this number transcends simple policy failure. The fact that the coverage rate rose by only 2 percentage points despite pouring in over 30 trillion won in public funds means that a massive "black hole" exists somewhere in this system. It is a jar where water leaks through a hole in the bottom no matter how much is poured from above. The tragedy of Moon Jae-in Care lies in the attempt to pour water harder without plugging that hole.
This chapter records how the noble promise of a "reliable nation without worries over hospital bills" collided with the fundamental flaws of the system, resulting in a predicted failure, and how that failure accelerated today's catastrophe.
Section 1. The Promise of Reform: Setting Up 'Non-Reimbursement' as the Enemy
On August 9, 2017, President Moon Jae-in personally announced the plan to strengthen health insurance coverage. The core was simple: to bring all "medical non-reimbursables," excluding cosmetic and plastic surgery, into health insurance. Public approval for the blueprint—to invest a total of 30.6 trillion won by 2022 to raise the coverage rate to 70%—soared up to 94% following the announcement.
The government's diagnosis was as follows: The share of direct household burden in Korea's current health expenditure was 33.7% as of 2017, significantly exceeding the OECD average of 20.5%. The primary culprit of this excessive burden is "non-reimbursable" medical expenses not covered by health insurance. Therefore, if non-reimbursables are converted to covered benefits, the burden on the public will decrease and the coverage rate will rise. This diagnosis, which appeared logically complete, hidden within it one fatal blind spot.
Non-reimbursement was a "symptom," not a "cause." The monster of non-reimbursement was something medical institutions had created themselves for survival within a structure of sub-cost low medical fees that had persisted for decades. When the state suppressed the prices of essential medical services below cost, hospitals and clinics survived through "cross-subsidization," making profits from non-reimbursable treatments free from price control to cover losses from covered treatments. Non-reimbursement was like the blood and pus discharged from a diseased system, yet the government declared that wiping away that pus would cure the disease.
Did the designers of Moon Jae-in Care not know this? They likely did. However, the words "we will eliminate non-reimbursement" were dozens of times sweeter to the public's ears than "we will reform the low-fee structure." Reforming low fees involves painful and time-consuming tasks such as raising insurance premiums, negotiating with the medical community, and redesigning the payment system. In contrast, the benefit-conversion of non-reimbursables was "low-hanging fruit" where visible results could be produced in a short period if the government possessed the will.
The government staked all its political capital on the question of "what"—the expansion of coverage—but deferred the question of "how"—touching the system's "operating system" through the reform of the fee-for-service system, the redesign of the medical delivery system, and the normalization of low fees—as a task for the future. They forcibly installed a latest application on an obsolete operating system.
Section 2. Pandora's Box: The Great Flood of Demand Opened by MRI
The most dramatic realization of the design flaws in Moon Jae-in Care was the benefit-conversion of MRI and ultrasound scans. This case is a textbook tragedy showing how a single policy triggers a chain reaction throughout the entire system.
In October 2018, the government applied health insurance to brain and cerebrovascular MRI scans. The cost of a scan, which patients previously had to bear in full (between 400,000 and 700,000 won), dropped to approximately 150,000 won at hospitals and 90,000 won at clinics after coverage. The price perceived by the patient plummeted to less than one-fourth.
The law of demand, a basic principle of economics, worked precisely. When the price falls, demand increases. However, the demand for medical services possesses characteristics different from general goods. The price elasticity of medical demand appeared much higher than general estimates, revealing how massive the latent demand suppressed by cost had been. The explosion of demand was fueled by a "trinity": the patient's request to "get a definite check-up while we're at it," the doctor's defensive medicine thinking "let's take a look just in case," and the medical institution's survival instinct to "preserve profit by increasing the number of cases."
The numbers were disastrous. Medical expenditures for ultrasounds and MRIs skyrocketed nearly tenfold in just three years, surging from 189.1 billion KRW in 2018, the first year of coverage expansion, to 1.8476 trillion KRW in 2021. The number of patients who received brain MRIs for simple headaches or dizziness also exploded more than tenfold, rising from 7,899 before the expansion to 82,082 after implementation.
It is necessary to reflect on the meaning of these figures. The government likely anticipated annual expenditures of several hundred billion KRW due to the MRI coverage expansion. However, the reality exceeded those expectations several times over. Pandora's box was opened, and the flood of demand pouring out from within began to swallow the system.
The audit results from the Board of Audit and Inspection (BAI) starkly revealed the insolvency of this process. (274) As the frequency of tests increased following the brain MRI coverage expansion, medical institutions' diagnostic revenue was estimated to have increased by approximately 79%, from 427.2 billion KRW in 2017 to 764.8 billion KRW in 2019. Although the unit price dropped due to the coverage expansion, the volume increased explosively, causing total revenue to actually rise.
Despite this, the government continued to pay additional compensation amounting to 459 billion KRW annually, claiming to compensate for "losses incurred by medical institutions due to coverage expansion." Furthermore, the BAI pointed out that a sample check of five types of ultrasounds and brain MRIs revealed cases suspected of violating coverage criteria totaling 160.6 billion KRW.
Ultimately, the succeeding government announced the "Plan to Enhance National Health Insurance Sustainability" in February 2023 and significantly tightened coverage criteria. (275) In the case of brain MRIs, coverage is now recognized only when "abnormal findings are confirmed in a neurological examination." This effectively returned MRI coverage expansion—a symbol of Moon Jae-in Care—to square one. It was the moment the succeeding government itself officially acknowledged that the policy's design was fundamentally flawed.
**Section 3. Pulling Out the Bottom Stone to Support the Top: The Deception of 'Loss Compensation'**
The most subtle yet harmful legacy of Moon Jae-in Care lies in the financial "robbing Peter to pay Paul" carried out under the name of "loss compensation." Understanding this mechanism explains why the benefit rate rose by a mere 2 percentage points despite an investment of 30 trillion KRW, and why essential healthcare became even more desolate.
Converting non-covered items to covered ones deals a double blow to medical institutions. First, as prices previously set freely during the non-coverage era are replaced by government-mandated insurance fees, profit per case decreases. Typically, insurance fees are set at 70–80% of conventional market prices. Second, the transition from non-covered to covered items eliminates the very source of cross-subsidization. In a structure where deficits in essential healthcare were covered by non-covered services, if those non-covered services disappear, there is nowhere left to cover the deficit.
To mitigate this impact, the government promised "loss compensation." However, the method was the problem. Instead of resetting appropriate fees by scientifically analyzing the cost of the medical service in question, the government chose a method of calculating the "estimated loss" of medical institutions due to MRI coverage expansion and then increasing the fees of other covered items by that amount.
This was a typical case of "pulling out the bottom stone to support the top." While the size of the limited health insurance financial pie remained the same, nominal compensation was given to one side just to spend money on the other. In reality, because the fee increases for essential healthcare were carried out at levels woefully insufficient to cover costs, this was closer to manipulating internal accounting books than actual compensation.
The BAI's audit results revealed the reality of this deception even more clearly. In the case of brain MRIs, loss compensation continued to be paid even though total revenue increased by 79% after coverage expansion. Based on a sample analysis of 11 university hospitals, the BAI estimated that loss compensation was overcalculated by 19%, resulting in an overpayment of 7.4 billion KRW. This suggests that "loss compensation" was not a scientific reimbursement for actual losses but a political gift to appease the medical community's backlash.
The harm left by this compensation method can be summarized in three points.
First is the distortion of medical resource allocation. To subsidize MRI test costs for patients with mild symptoms, finances intended for critical care, emergencies, and surgeries were mobilized. Money that should have been used where it was most urgent and important flowed to where it was politically popular.
Second is the disturbance of price signals. Every medical act should be priced based on its own input costs and medical value. However, by formalizing an abnormal cross-subsidization where the loss of "Act A" is covered by the profit of "Act B," the government fundamentally blurred the market's judgment on which medical acts are truly valuable and where investment should be made.
Third is the division within the medical community. Large hospitals equipped with expensive equipment like MRIs saw their total income increase due to coverage expansion and volume growth. Conversely, small-to-medium hospitals and neighborhood clinics dedicated to essential healthcare without such equipment only felt a deepening sense of relative deprivation.
**Section 4. Eliminating the Highway Toll: Accelerating the Collapse of the Medical Delivery System**
The most profound structural scar left by Moon Jae-in Care was the final blow it dealt to the already creaking medical delivery system. The basic principle of the medical delivery system—"mild cases at neighborhood clinics, severe cases at large hospitals"—collapsed helplessly before this policy.
The logic is simple. Expensive equipment such as MRIs and ultrasounds is concentrated mainly in tertiary general hospitals. In the past, high non-covered prices acted as a natural "toll" that deterred patients with mild symptoms from visiting large hospitals. Moon Jae-in Care eliminated this toll. Since insurance now applied anyway, a mass psychology of "I might as well get tested at a big hospital with the latest equipment" was triggered.
The increase in medical expenses for institutions at the general hospital level and above was clearly observed immediately after the implementation of Moon Jae-in Care. The growth rate of health insurance medical expenses recorded consecutive double digits: 7.4% in 2017, 12.0% in 2018 when Moon Jae-in Care was fully implemented, and 11.4% in 2019. The share of medical expenses for tertiary general hospitals rose by 2.4 percentage points, from 15.7% in 2015 to 18.1% in 2019.
The government countered this by arguing, "The main cause of the concentration at large hospitals is the increase in patients with severe illnesses, not the influx of patients with mild symptoms." This is a partially valid claim. It is true that the proportion of severe patients at tertiary general hospitals increased. However, this defense misses the core of the problem. Even if the proportion of mild patients decreased, if the absolute number of patients skyrocketed, the overload on large hospitals would occur identically.
While patients were being sucked into large hospitals, neighborhood clinics—the terminal capillaries of the medical delivery system—faced a crisis of extinction. As of 2024, the benefit rate for clinic-level medical institutions is only 57.5%. Compared to 72.2% for tertiary general hospitals, it is 14.7 percentage points lower. This means that the proportion of non-covered services in clinic treatments is overwhelmingly high, which leads to a rational choice for patients: "Rather than paying high prices for non-insured treatment at a neighborhood clinic, I will get it cheaply at a big hospital with insurance coverage."
The responses of neighborhood clinics split in two directions. One was to degenerate their own functions for survival. Abandoning their duty of primary care, such as chronic disease management and health gatekeeping, they jumped into the non-covered market like manual therapy and nutritional injections, or transformed into "specialized testing clinics" by bringing in ultrasound equipment. The other was simply closing their doors.
Ultimately, Moon Jae-in Care pushed the polarization of the medical delivery system to the extreme. Tertiary general hospitals became bloated by absorbing even mild patients, while neighborhood clinics lost patients and their inherent functions. In the middle, the significance of small-to-medium hospitals, which should handle acute inpatient care and surgery, became even more faint.
**Section 5. Revenge of the Balloon: The Meaning of 21.8 Trillion KRW in Non-Covered Expenditures**
The core goal of Moon Jae-in Care was to increase the benefit rate by reducing non-covered services. So, seven years later in 2024, have non-covered services decreased? The answer is grim. Far from decreasing, they have increased.
In 2024, non-covered medical expenses for health insurance patients are estimated at 21.8 trillion KRW. This is a 28.9% increase compared to 16.9 trillion KRW in 2017. Despite spending 30 trillion KRW to rein in non-covered services, those expenditures bloated by nearly 5 trillion KRW. This is the mathematical reason why the benefit rate rose only 2.2 percentage points, from 62.7% to 64.9%.
This phenomenon is called the balloon effect. Just as pressing one side of a balloon causes the other side to bulge, when the government expands coverage for specific non-covered items, medical institutions create new non-covered items or raise the prices of other existing non-covered items.
The 2024 health insurance benefit rate statistics prove this numerically. While the statutory co-payment rate decreased by 0.6 percentage points compared to the previous year, the non-covered co-payment rate increased by exactly 0.6 percentage points. It is a perfect specimen of the "balloon effect," where the amount reduced on the covered side increased on the non-covered side.
Where did the non-covered balloon bulge? According to the National Health Insurance Service's 2024 non-covered service report, the scale of non-covered medical expenses for all medical institutions reached 22.64 trillion KRW annually, with manual therapy and dental implants being major items. In particular, the increase in non-covered services related to cancer is striking.
The reason the benefit rate for the four major severe diseases fell from 81.8% in 2023 to 81.0% in 2024 is the surge in the use of high-priced treatment materials such as non-covered anticancer drugs. The benefit rate for cancer fell by 1.3 percentage points compared to the previous year to 75.0%. The fact that the benefit rate is actually worsening in the areas of severe and high-cost diseases—the very areas where Moon Jae-in Care's benefit expansion was most desperately needed—most poignantly demonstrates that the fundamental direction of this policy was wrong.
**Section 6. Fiscal Doomsday: 2026, the Watershed for Turning into Deficit**
No matter how noble a promise, it cannot overcome the gravity of finance. The trace Moon Jae-in Care left on health insurance finances can be summarized in one phrase: an "accelerator pedal" that decisively brought forward the arrival of the crisis.
Even before Moon Jae-in Care, warning lights were already flashing for health insurance finances. The world's fastest aging population was structurally pushing up medical expenditures. As of 2024, the elderly aged 65 or older, who account for approximately 19% of the total population, used 44.9% of total health insurance medical expenses.
Moon Jae-in Care was layered on top of this. Insurer contributions increased by 71.4% over seven years, from 52.5 trillion KRW in 2017 to 90 trillion KRW in 2024. Total medical expenses expanded by 65.6% during the same period, from 83.7 trillion KRW to 138.6 trillion KRW. Benefit expenditures covered by health insurance rose from 50.8906 trillion KRW in 2016 to 69.3510 trillion KRW in 2020, and through 92.9640 trillion KRW in 2024, they are estimated to surpass 100 trillion KRW for the first time in history in 2025.
Revenue failed to keep pace with this explosive increase in spending. The health insurance premium rate was only modestly raised from 6.12% in 2017 to 6.99% in 2022, frozen in 2023–2024, moved to 7.09% in 2025, and reached 7.19% in 2026. (276)
The fiscal outlook is bleak. The National Assembly Budget Office and the National Assembly Research Service predict that health insurance finances will turn into a deficit in 2025–2026, and the cumulative reserve, which amounts to approximately 28–30 trillion KRW, will be completely exhausted by 2028–2030. (277) According to long-term projections by the Korea Institute for Health and Social Affairs, total health insurance expenditures will reach 296.4 trillion KRW by 2050, but total revenue will only be 251.8 trillion KRW, leading to a projected financial shortage of approximately 44.6 trillion KRW. (277)
Moon Jae-in Care is not the sole cause of this crisis. Structural factors such as an aging population, advances in medical technology, and an increase in the supply of hospital beds exist. However, by rapidly expanding benefits without reforming the payment system, Moon Jae-in Care simultaneously exploded incentives for increased spending on both the demand and supply sides. Lower co-payments led more patients to hospitals, and medical institutions whose non-covered income decreased tried to compensate for revenue by increasing the volume of covered treatments. Moon Jae-in Care was the "decisive accelerating factor" that unleashed a torrent of water onto an already tilted financial dam.
The cost will be paid by future generations. The next government and the one after that must choose one from the painful options of raising insurance premiums, reducing benefits, or injecting national treasury funds. The Moon Jae-in government took the political gains, and the bill was passed on to posterity.
**Section 7. The Tragedy of the Pendulum: Endless Vibration Between Benefit Coverage and Sustainability**
The deepest wound left by the failure of Moon Jae-in Care is not the damage to finances or the delivery system, but the entrenchment of a pattern where South Korean medical policy oscillates like a pendulum between the two extremes of "benefit expansion" and "fiscal soundness."
The Moon Jae-in government pushed the pendulum to the extreme towards "benefits." As a result, when demand exploded and finances faced a crisis, the succeeding Yoon Suk-yeol government pushed the pendulum in the opposite direction under the banner of "sustainability." They tightened coverage criteria for MRIs and ultrasounds and raised co-payment rates. From the public's perspective, this was "giving and then taking back."
However, the Yoon Suk-yeol government's approach was also incomplete in another sense. Reducing benefits provides temporary breathing room for finances, but it worsens the burden of household medical expenses again. If benefits are reduced without normalizing low fees, the non-covered balloon bulges again, and public dissatisfaction accumulates, leading to the emergence of a political force promising "benefit expansion" once more in the next election.
The only way to break this pendulum motion is structural reform that addresses both extremes simultaneously. Making finances sustainable while increasing benefit coverage is not an impossible task. However, it requires tasks that are politically unpopular and time-consuming: the normalization of low fees, the introduction of a value-based payment system beyond the fee-for-service model, and the redesign of a delivery system centered on primary care.
Moon Jae-in Care attempted to bypass this difficult path. It assumed that simply injecting more money without changing the structure would suffice. However, just as increasing water pressure in old pipes causes them to burst, pouring financial resources into an antiquated system only causes its structural cracks to expand explosively.
**Epilogue: What Is to Be Learned from This Failure?**
It is unfair to depict Moon Jae-in Care as a "policy born of pure malice." Its starting point was clearly rooted in goodwill. The goal of ensuring no one gives up treatment due to a lack of money, and the value that health insurance should serve as a genuine shield for the people, remain valid today. Indeed, the fact that tens of millions enjoyed short-term benefits in reduced medical expenses cannot be denied.
However, goodwill is a necessary condition for good policy, not a sufficient one. The tragedy of Moon Jae-in Care lay not in its objectives but in its methods. A reform that changed only the "what" of the system while neglecting the "how" ultimately pushed the entire system into a deeper crisis.
Expanding coverage without fundamental innovation in the payment system only creates a financial black hole. Unless a compensation system based on medical "value" and "performance" is designed—moving beyond the fee-for-service model—no amount of money injected can extract the system from the swamp of overtreatment and inefficiency.
Expanding coverage without rebuilding the healthcare delivery system only accelerates the concentration of patients in tertiary hospitals. Unless the gatekeeping function of primary care is restored and the division of roles between large hospitals and neighborhood clinics is institutionally established, any increase in coverage will merely be used to bloat large hospitals.
And above all, reform without social consensus is unsustainable. Honest and in-depth dialogue is required regarding what level of coverage our society desires and how much cost we are willing to bear for it. Moon Jae-in Care was a castle built upon the sweet lie that "coverage can be increased without significantly raising insurance premiums," and that castle eventually collapsed under the earthquake of financial reality.
A health insurance coverage rate of 64.9% in 2024. This number is not the legacy of Moon Jae-in Care alone. It is the collaborative product of every government that ignored the fundamental problem of low medical fees for decades to treat only the symptoms, every politician who sought easy solutions by pushing the pain of structural reform onto the next administration, and all of us who cheered for those easy promises.
Painkillers cannot cure cancer. This is the most brutal lesson left by Moon Jae-in Care.
**Chapter 34. The Truth About Nursing Hospital Restructuring: The Recurring Policy Cycle of "Abandonment After Destruction"**
The government kills the monster it raised, and builds nothing upon its corpse.
**Introduction: A New Act in a Familiar Script**
A single pattern runs through the history of Korean healthcare policy. When a government-designed policy yields predictable side effects, the government shifts the blame to private providers, uses this as a pretext to introduce new control policies, and then passes the resulting costs back onto the private sector and families. This is a "ratchet" cycle. When the separation of prescribing and dispensing drugs (72) bankrupted small and medium-sized hospitals, the government encouraged them to convert into nursing hospitals (128). Now that nursing hospitals have proliferated and the monster of "social hospitalization" has emerged, the government declares a restructuring, claiming there are too many of them. Yet, the community care infrastructure to fill the void is not being built, nor is there any will to invest in it. This is the essence of the crisis facing geriatric care in Korea as of 2026.
This text critically analyzes the government’s "medical-centered nursing hospital" policy—which aims to reduce nursing hospital beds from 264,000 to 100,000—and the Integrated Care Support Act to be implemented in March 2026, arguing they are essentially "deinstitutionalization without infrastructure" or "destruction without an alternative." It demonstrates that this entire process is the latest phase of the ratchet cycle: "policy error → patchwork → side effects → private sector mobilization and demonization → new policy error," which has repeated for the past 20 years.
**Section 1: The First Phase of the Ratchet — How the Government Created the Nursing Hospital Monster**
The nursing hospitals that the government now condemns as "excessive" were intentionally created by the government in the first place. In the early 2000s, when the shockwaves of the drug separation policy pushed small and medium hospitals to the brink of bankruptcy, the government defined their acute care beds as "over-supplied" and actively induced their conversion into nursing hospitals. Policy-makers, represented by Kim Yong-ik, advocated for a regional total bed cap system, making the restructuring of small hospitals a key means of cost containment. Consequently, the number of nursing hospitals exploded fifty-fold, from 28 in 2000 to 1,577 in 2019.
The per-diem fixed payment system introduced in 2008 played a critical role in this transition. This system bundled all medical services provided in nursing hospitals into a fixed daily rate. The management fee was set at 6,800 won per day, and the basic hospitalization fee was at 62% of that for acute care hospitals. Under this structure, active testing, treatment, and rehabilitation meant financial loss for the hospital. Administering expensive antibiotics to a sepsis patient or using proper dressing materials for a pressure sore patient resulted in a deficit. The per-diem system did not encourage treatment; it punished it. To survive, hospitals had to focus on "lodging" rather than "medicine," which was the very mechanism that birthed the monster of "social hospitalization."
The government converted functional community hospitals into low-cost, low-function custodial facilities and now blames those facilities for failing to provide proper medical care. This is no different from intentionally clipping a bird's wings and then scolding it for not flying. Here, the cynical, self-referential cycle—where the provider of the policy failure uses the results of that failure as a justification for the next stage of reform—is completed.
**Section 2: The Second Phase of the Ratchet — The Medical-Centered Nursing Hospital Policy as a "Death Note"**
In September 2025, the government announced the "Medical-Centered Nursing Hospital Innovation and Caregiving Benefit" plan. The core is to reduce nursing hospital beds from 264,000 to 100,000 and provide selective support to only 500 "medical-centered nursing hospitals." It plans to invest 6.5 trillion won over five years, but caregiving benefits will be granted only to large hospitals that meet the selection criteria. The Director of Health Insurance Policy at the Ministry of Health and Welfare publicly stated, "We must spread the perception that nursing hospitals are not places where one stays indefinitely just because they want to."
The essence of this policy is simple. The government intends to use the 6.5 trillion won—an "immense concession in the eyes of bureaucrats"—as a weapon to draft a "death note" for the entire nursing hospital market. The remaining 800+ small and medium nursing hospitals excluded from the list of 500 will be barred from caregiving support, facing de-facto exit pressure. This is why the Emergency Committee of 814 Small and Medium Nursing Hospitals declared, "The government's intent to eliminate small nursing hospitals and leave only 500 large ones within five years is clear," and "We will fight to the death."
What is noteworthy here is that while the government estimates patients with high medical needs at 80,000, it labels the remaining 130,000 inpatients with the stigma of "social hospitalization" and targets them for eviction. But where do these 130,000 people go? The government's answer to this question is "community integrated care," a system that does not yet exist.
**Section 3: The Third Phase of the Ratchet — Deinstitutionalization Built on a Non-Existent Alternative**
The Integrated Care Support Act, effective March 2026, sets the noble goal of "Aging in Place." However, the reality revealed just a month before its implementation is disastrous.
Let us first examine the fiction of home-visit medical care. Less than 3% of all clinics participate in the primary care visit pilot project, and only 30% of those actually bill and operate. Patients participating in the home medical center pilot project account for only 1% of all long-term care insurance beneficiaries. Among 229 municipalities nationwide, 35 have failed to even establish a home medical center; in South Jeolla Province alone, eight counties lack this basic infrastructure. Demanding that small rural clinics form multidisciplinary teams of doctors, nurses, and social workers is a classic example of desk-bound administration detached from reality. Places like Mungyeong City barely save face with a "collaborative model" involving public health centers because "there are no medical institutions capable of participating."
The reason doctors avoid home visits is clear. Despite being a high-density medical service requiring over 40-50 minutes for a first-time patient, the total fee is only around 140,000 won. Administrative burdens such as travel, parking, EMR entry, and billing documents fall entirely on the doctor. In a structure where outpatient care yields several times more profit in the same timeframe, what rational economic actor would voluntarily participate? This relies on the "goodwill" of doctors, not the design of a sustainable system.
The budget issue is even more severe. The 2026 integrated care budget was finalized at 91.4 billion won, far below the minimum of 213.1 billion won requested by care organizations. This is only half of the 177.1 billion won approved by the National Assembly’s Health and Welfare Committee. With an average project budget of 290 million won per local government, asking them to perform integrated care for both the elderly and the disabled with this amount is close to an insult. Only 5,394 of the required 10,000 personnel were accounted for, and even this is expected to fall on local governments' own expenses due to limited budget support. A Ministry official called this "seed money," but 53 care organizations asserted that "this budget guarantees failure from the first year."
The voices from the field at the National Assembly Welfare State Forum starkly reveal the abyss between the government's blueprint and reality. Appeals from local government officials such as "I am not sure if we can guarantee service delivery" and "I am afraid to promote it" testify that this policy has not even reached the "conception" stage, let alone "implementation." Housing policy remains at the level of temporary residences like "Care-Safe Housing," institutional mechanisms to force the integration of medical and long-term care are absent, and in a structure where the National Health Insurance Service leads long-term care while the private sector leads medicine, the control authority of local governments is virtually non-existent.
**Section 4: Anatomy of the Ratchet Cycle — Why Does This Pattern Repeat?**
At this point, we can formalize the mechanism of the ratchet cycle that has repeated over the past 20 years.
**Stage 1: Policy Error.** The government introduces a policy that squeezes providers to control costs. Examples include the drug separation (2000), inducing the conversion of small hospitals into nursing hospitals (2000s), and the per-diem payment system (2008). Policy design is based on financial logic rather than clinical reality.
**Stage 2: Predictable Side Effects.** Providers adapt to the distorted incentive structure and adopt abnormal survival strategies. The chain bankruptcy of small hospitals, the mushrooming of nursing hospitals, the prevalence of social hospitalization, and the decline in the quality of care and under-treatment. All these were predictable outcomes at the time of policy design.
**Stage 3: Patch-up.** When side effects become social issues, the government attempts superficial patches without addressing the root causes (low fees, distorted payment structures). Examples include Moon Jae-in Care's coverage expansion and the introduction of adequacy evaluations. These patches fail to solve the problem and instead make the system more complex.
**Stage 4: Private Sector Mobilization as an "Immense Concession."** The government announces a new framework and masks a certain amount of financial injection as an "immense concession." Examples include the 6.5-trillion-won support for medical-centered nursing hospitals and the 91.4-billion-won integrated care budget. However, this funding is grossly insufficient and effectively forces new roles onto private providers while shifting the costs.
**Stage 5: Financial Squeeze and Demonization of Private Providers.** When private providers fail to meet expectations due to insufficient funds and excessive demands, the government frames (83) this as provider greed, inefficiency, and lack of cooperation. Labels like "hotbeds of social hospitalization," "nursing hospitals abusing unnecessary non-reimbursable items (67)," and "selfish doctors refusing home visits" are applied. Public opinion aligns with the government.
**Stage 6: New Policy Error.** Using the "failure" of providers as a pretext, the government introduces even stronger control policies. These include restructuring to reduce beds from 260,000 to 100,000, eviction policies raising co-payments for patients with low medical needs to 50%, and deinstitutionalization without infrastructure. This new policy then becomes the Stage 1 Policy Error, restarting the cycle.
The core of this ratchet is that with each cycle, the autonomy of private providers decreases, government control expands, and the root cause of the problem remains forever untouched. The original sin of low fees remains for over 20 years; instead, more sophisticated control mechanisms are layered upon it through each cycle. The system becomes increasingly complex and increasingly dysfunctional.
**Section 5: It Will Repeat This Time Too — A Predictable Scenario of Catastrophe**
Following the logic of this ratchet, the future scenario is practically already scripted.
The ongoing restructuring will accelerate the mass closure of over 800 small and medium nursing hospitals. Already, the number of nursing hospitals nationwide has fallen below 1,400 for the first time in history, and the closure rate in rural areas is nearing 110%, an inverted phenomenon where closures outnumber new openings. As reported by Chosun Ilbo, the outlook that "800 out of 1,300 will fail" is openly discussed in the field.
However, when these hospitals close, where do the admitted patients go? Home healthcare centers do not even exist in over 15% of regions nationwide. Only 3% of clinics participate in home-visit medical services. The budget for the Integrated Care Support Act is less than half of the required amount. Local governments are crying out, claiming they have "neither money nor manpower." If the pressure valve known as long-term care hospitals bursts, displaced elderly patients will pour into emergency rooms (59), acute care wards, and ultimately back to families who lack the capacity to care for them. This is not a prediction; it is an arithmetic necessity shown by current figures.
What will the government do then? According to the logic of the ratchet, the government will once again shift the responsibility for this chaos onto the private sector. It will criticize clinics that do not participate in home visits, rebuke long-term care facilities that do not accept patients, and lament the "irresponsibility" of families who cannot take over care. Using this as a pretext, it will introduce even stronger controls—perhaps mandatory home visits, strengthening the compulsory designation system for clinics (63), or another form of forced mobilization.
This is precisely the ratchet. Once the internal gear of control moves forward, it never turns back. Every time it fails, it is tightened further; the tighter it is squeezed, the greater the failure; and the greater the failure, the more justification there is to tighten it further. Within this self-reinforcing cycle, the system ultimately reaches a state of paralysis.
**Section 6: The Mirror of Regional Extinction—Community Care Without Community**
The most cruel paradox of this policy is that it works the least where it is needed the most. In a country where 113 out of 228 cities, counties, and districts are classified as "areas at risk of extinction," the term "community care" itself is an oxymoron.
In regions at risk of extinction, there are no doctors to conduct home visits. There is no young workforce to provide care. Public health centers are saturated with existing public health duties, and social welfare centers struggle with labor shortages. For the elderly in these regions, "independent living in the place where they have resided" effectively means "living alone without any help." This policy, designed with a focus on Seoul, might function passably in the metropolitan area, but in the extinction zones that cover half the national territory, it merely creates a "care desert."
The case of Gyeongsangbuk-do clearly illustrates this. Mungyeong-si, Yeongyang-gun, Chilgok-gun, and Bonghwa-gun are facing the implementation of the law without having established a single home healthcare center. The "collaborative model," where public health centers take over because there are no private medical institutions, is a mere stopgap. Public health centers in these areas are already overloaded with their inherent public health projects, such as infectious disease management, health checkups, and chronic disease management. To demand they take on home healthcare as well is akin to loading more cargo onto an already sinking ship.
**Section 7: The Completion of Generational Exploitation—Family Care as an Invisible Tax**
If deinstitutionalization is pursued in the absence of a large-scale public home care workforce, the result is clear. The burden of elderly care is privatized back to the family unit. Already, families are responsible for over 81% of elderly care in Korea. While the Integrated Care Support Act specifies "supporting" families, it does not replace the fundamental labor of care itself. Without professional personnel to care for patients discharged from long-term care hospitals, the role automatically falls to families, especially women.
This is an invisible tax imposed on the younger generation. The costs incurred by the "sandwich generation"—those who must reduce working hours or exit the labor market entirely to care for parents—are not calculated anywhere. In the government's financial models, these costs are treated as non-existent because they do not come out of the national health insurance budget but out of the lives of individuals. The myth of fiscal neutrality in community care is merely the transfer of costs from the state's ledger to the shoulders of families, rather than their disappearance.
**Conclusion: If We Do Not Break the Ratchet, We Will All Be Broken**
The core problem of the policy cycle analyzed in this text is not simply that "this particular policy is wrong." The problem is that the system itself is designed to reproduce failure. As long as the ratchet structure—piling control upon the original sin of low medical fees, and even stronger control upon the failure of that control—operates, no individual policy, regardless of its good intentions, can succeed. This applies equally to community care, medical-centered long-term care hospitals, and the expansion of home visits.
This does not mean that the restructuring of long-term care hospitals is unnecessary. The problem is the sequence. Alternatives must be established first, and the transition should follow. What the government is doing now is the exact opposite. It seeks to destroy the existing system first and claims it will create alternatives "as it goes." If the 91.4 billion KRW mentioned by the Ministry of Health and Welfare official is "priming water," then the well to be drawn with that water has not even been dug yet.
True reform must begin by breaking the cycle of the ratchet itself. This means facing the original sin of low fees, replacing the per-diem flat-rate reimbursement system with a rational payment system based on function and severity, creating a realistic compensation structure that encourages doctors to voluntarily participate in home visits and home healthcare, and preemptively building a public care infrastructure that covers extinction zones by securing dedicated funds rather than just "priming water." The prerequisite for all of this is for the government to honestly acknowledge 20 years of policy failure.
However, the history of the ratchet offers a pessimistic outlook. This is because the ratchet has a self-reinforcing quality. Once again, the government will phase out long-term care hospitals, community care will struggle due to a lack of infrastructure, displaced elderly people will be pushed toward emergency rooms and families, and the government will blame the chaos on private sector non-cooperation while signaling the next stage of control. And five years from now, we will stand before the same question: "Why is Korean healthcare collapsing?"
Every time the internal gear of the ratchet moves forward one notch, it is not just the system that breaks. The elderly who are kicked out of long-term care hospitals without proper care, the middle-aged who give up their lives to care for parents, and the youth who will inherit the costs through insurance premiums and taxes—all of these people are broken together. Stopping the ratchet is no longer a matter of policy choice, but an essential task involving the survival of society.
**Chapter 35. The Illusion of Physician-Scientist Discourse: Shifting Responsibility for Failed Policies and Excuses from the Pharmaceutical Industry**
**Introduction: Deconstructing the 'Physician-Scientist Crisis' Discourse**
The "training of physician-scientists" has emerged as a national task to secure future growth engines for South Korea's bio-health industry. The government and industry speak with one voice, raising a "physician-scientist crisis theory" that national competitiveness in new drug development is declining as excellent medical talents remain only in clinical fields and avoid research and development (R&D). This discourse defines the cause of the problem as a "lack of a sense of mission" or "research avoidance" among individual doctors and emphasizes the need for various personnel training projects to resolve this.
In fact, numerous policies such as the "Global Physician-Scientist Training Project" and the "Convergence Physician-Scientist Training Project" are being promoted, centered on the Ministry of Health and Welfare and the Ministry of Science and ICT. (284) These projects are attempts to induce entry into the research field by providing financial support and educational programs for medical school graduates, residents, and early-career physicians. The industry also actively aligns with this government stance. The Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA) diagnoses in its policy report that "the cultivation of excellent talent needed for new drug development, a future food industry, is still desperately insufficient at the pan-national level," emphasizing that the shortage of talent is the biggest obstacle to industrial development. (285) As such, the official narrative shared by the government and industry is clear: the core of the problem lies on the supply side—that is, doctors choosing not to follow the path of a researcher.
However, this report raises fundamental questions about this dominant discourse and argues that the "shortage of physician-scientists" is not the 'cause' of the crisis, but rather the 'result' of deeper, structural system failures. The current discourse functions as a sophisticated "responsibility avoidance" mechanism that masks the essence of the government's failed science and technology policies and the structural limitations of the pharmaceutical industry, cunningly shifting the responsibility to the professional choices and ethical consciousness of individual doctors. As pointed out in the user's inquiry, this is close to a type of "gaslighting" that distorts reality and misleads the essence of the problem.
Under this awareness, this report aims to systematically deconstruct the "physician-scientist crisis" discourse and analyze the structural contradictions hidden behind it. First, it investigates how the volatility and instability of government R&D policies over several decades have demoted the profession of a scientist to an "unstable contract position." Second, it uncovers the inconvenient truth of how the pharmaceutical industry hides its meager R&D investment and generic-centered, safety-oriented business model behind its cries of "talent shortage." Third, it critically analyzes how the American MD-PhD model, presented as an ideal alternative, is actually facing serious internal contradictions and crises, and how dangerous it is to blindly follow it.
In conclusion, this report demonstrates that the shortage of physician-scientists is not a matter of individual choice but a rational and predictable result of a barren research ecosystem. Through this, it suggests that beyond empty slogans of talent cultivation, fundamental qualitative improvement of the scientific research ecosystem—such as ▲long-term and stable R&D investment ▲improvement of employment stability and treatment for researchers ▲creation of a social atmosphere that tolerates failure—is the only way South Korea can leap forward as a true bio-powerhouse. The slogan "physician-scientist" alone is an empty echo that merely shifts responsibility for failed policies and distorts reality.
**Architects of Neglect: An Anatomy of Decades of Government R&D Policy Failure**
To point to the selfishness of the medical profession as the root cause in the current "physician-scientist shortage" discourse is to intentionally ignore the fundamental cause: the unstable research ecosystem that the government has proactively built over several decades. The reality faced by scientists—structural instability where long-term research projects are derailed overnight due to changes in administration and where a lifetime of research results in an opaque future—is a direct product of the government's R&D policy failures. Demanding that doctors abandon stable clinical settings and devote themselves to research while ignoring this reality is nothing short of cowardly shifting of responsibility that misleads the nature of the problem.
**The Volatility of R&D Budgets: The Tragedy of Science Subjugated to Politics**
The biggest malady of South Korea's science and technology policy is "lack of consistency." The national R&D budget has been reduced to an unstable resource that fluctuates sharply according to short-term political goals and the tastes of the administration, rather than a long-term strategy for scientific development. (286) The extreme volatility—where the R&D budget surged by 51.7% over four years during the Moon Jae-in administration with concentrated investment in specific fields, only to be drastically cut by 16.6% for the first time in 33 years under the Yoon Suk-yeol administration—symbolizes this instability. (287)
Such abrupt budget fluctuations bring fatal results to research sites. Due to the nature of bio-R&D, where it takes an average of over 10 years to develop a single new drug, long-term and stable financial support is essential. However, the government's budget policy wavers according to the five-year cycle of changing administrations, severely undermining research continuity, as seen in the sharp decline in budgets for mid-to-long-term projects like "Materials, Parts, and Equipment." (287) Even the National Assembly Budget Office points out that the government's R&D fiscal expenditure plan lacks consistency compared to the five-year plan and lacks alignment with the mid-to-long-term investment strategy for national R&D. (288)
The government put forward "improving inefficiency" and "breaking down the R&D cartel" as pretexts for the budget cuts, but this actually amounts to admitting how much the R&D budget allocation process has been swayed by political logic and non-professional judgment. Criticisms that proposals were written to reflect the demands of specific research groups or that budgets were used inefficiently for government "showcase" projects prove that science and technology policy has been determined by political interests rather than scientific rationality. In such an environment, it is difficult for researchers to immerse themselves in research with a long-term vision under the extreme anxiety that their work might be halted at any moment. A system where the life or death of research is decided every time an administration changes does not encourage innovative challenges but instead forces obsession with short-term results and solidifies a risk-averse research culture.
**The Reality of Scientists: PhDs Demoted to 'Contract Workers'**
The instability of government R&D policy directly affects the employment forms of scientists. The unstable, project-based budget structure makes universities and research institutions reluctant to hire research personnel as regular employees, which pushes scientists into being "contract workers suffering from constant employment insecurity." This is not just a problem for a few, but a structural reality faced by PhD-level talent in science and engineering in South Korea.
The table below provides a statistical snapshot showing the employment instability of South Korean research personnel.
| Metric | Period | Statistic/Value | Source |
| ----------------------------------------------------- | ----------- | ----------------- | ------ |
| Ratio of non-regular workers among new PhD recipients | 2016 | 40% | 14 |
| Average annual salary of temporary PhD employees | 2017 | 38.22 million KRW | 14 |
| Ratio of non-regular workers among all wage earners | August 2024 | 38.2% | 15 |
Statistics reveal clear facts. As of 2016, four out of ten new doctoral degree holders were non-regular workers, and job instability remains unimproved, with the proportion of non-regular workers among all wage earners reaching 38.2% in 2024. (289) In particular, the average annual salary of temporary doctoral researchers in 2017 was a mere 38.22 million KRW, which clearly demonstrates the poor social and economic treatment afforded to human resources possessesing high levels of expertise. (290)
These statistics prove that it is an entirely rational choice for physicians to avoid research fields. It is a complete disregard for reality to demand that a physician, who has obtained specialist certification through years of arduous training, abandon clinical practice where a stable high income is guaranteed to choose the life of a non-regular researcher with an average annual salary of less than 40 million KRW. The core of the problem lies not in the "lack of a sense of duty" among physicians, but in the structural failure of the national system that fails to provide even minimum professional stability to scientists.
**The Structure of 'Gaslighting': Shifting the Responsibility for Failure to Individuals**
Ultimately, the government's discourse on "fostering physician-scientists" follows a sophisticatedly designed mechanism of "gaslighting." First, the government devastated the research ecosystem by increasing the volatility of the R&D budget and causing job instability for scientists. Second, as the path of a researcher became an unattractive option, physicians, who are evaluated as the most elite talent group, began to shun research. Third, regarding this phenomenon, the government deletes the cause—its own policy failure—and shifts the frame to a problem of selfishness within the physician group, claiming that "it is a national loss that the smartest talents go to medical schools" or that "the industry cannot develop because physicians do not engage in basic research."
This logical structure is a typical method of shifting the responsibility for the failure of the national system onto the ethical flaws of individuals. Forcing "sacrifice" and a "sense of duty" upon individuals without providing a stable research environment and a vision for the future, which the state ought to provide, constitutes an abandonment of the state's responsibilities. If the goal is truly to nurture physician-scientists, the first thing the state must do, before criticizing individual physicians, is to establish a stable and predictable system where any scientist can take pride and dedicate their life to research.
**A Convenient Excuse: How the Pharmaceutical Industry Weaponizes Talent Discourse**
South Korea's pharmaceutical and biotech industry points to the "shortage of physician-scientists" as the biggest obstacle to industrial development, effectively concealing more fundamental structural problems faced by the industry. The claim that innovation is impossible due to a lack of talent functions as a convenient excuse to hide the reality of the industry's low R&D investment and its safety-oriented business model, which relies on generic drugs and licensed-in items (merchandise sales). Furthermore, this discourse is utilized as a sophisticated lobbying strategy to elicit government support by reframing the industry's responsibility as a "national failure to nurture talent."
**The Reality of R&D Investment: The Truth Told by Numbers**
The pharmaceutical industry's plea regarding a "talent shortage" loses persuasiveness when compared to the actual scale of its R&D investment. According to a report by the Korea Pharmaceutical and Bio-Pharma Manufacturers Association, the total R&D investment of all listed domestic pharmaceutical and biotech companies in 2023 was only about 4.7 trillion KRW. This is merely one-fourth of the annual R&D investment of a single top-tier global pharmaceutical company (approximately 17 trillion KRW). The investment of the top domestic R&D investing company was also about 400 billion KRW, showing a gap of more than 40 times compared to the top global company. (285)
This gap cannot be explained simply by the difference in company size. Looking at the ratio of R&D investment to revenue, the top 10 global pharmaceutical companies invest an average of 24%, while domestic pharmaceutical companies remain in the 10% range. (285) This suggests that rather than reinvesting profits earned into high-risk R&D for innovative new drug development, the domestic pharmaceutical industry focuses on relatively safe areas. The table below clearly compares the scale of R&D investment between domestic and global pharmaceutical companies.
| Entity | Annual R&D Investment (Estimated as of 2023) | R&D Ratio to Revenue | Source |
| :--------------------------------------------------- | :------------------------------------------- | :------------------- | :----- |
| All listed domestic pharmaceutical/biotech companies | Approx. 4.7 trillion KRW | 12.5% | 8 |
| Top domestic R&D investing company | Approx. 400 billion KRW | N/A | 8 |
| Top global pharmaceutical company (Roche) | Approx. 17 trillion KRW | 28.7% | 8 |
| Average of Top 10 global pharmaceutical companies | N/A | Approx. 24% | 8 |
Such an overwhelming investment gap clearly shows that the bottleneck in new drug development lies not in the "absence of talent" but in the "absence of capital." The pharmaceutical industry shows a strong tendency to choose the easy path of selling generic drugs, health functional foods, or imported drugs developed overseas, instead of high-risk new drug development. Appealing about a labor shortage by claiming that "due to the inability to secure physician-background personnel, they are being brought in from overseas such as China" while ignoring this reality obscures the essence of the problem. If innovation is truly desired, the internal investment strategy must be fundamentally re-examined before blaming external talent.
**The Reality of the Business Model: Growth Reeling on 'Merchandise Sales'**
The financial statements of major domestic pharmaceutical companies show that their business models depend more heavily on marketing and distribution than on innovative R&D. A company's revenue is largely divided into "product sales," which involve selling products developed and produced in-house, and "merchandise sales," which involve importing and selling drugs from other companies (mainly multinational pharmaceutical companies). A high proportion of merchandise sales means that the company pursues stable profits through domestic sales agency for already verified products, rather than bearing the risks and costs of new drug development.
In fact, many top-tier domestic pharmaceutical companies show a high proportion of merchandise sales. In the case of Jeil Pharmaceutical, the proportion of merchandise sales reached 71% in the first quarter of 2024, and Boryung also increased its merchandise sales proportion to 49% through its Legacy Brands Acquisition (LBA) strategy, which involves acquiring domestic rights for original drugs whose patents have expired. (291) While such a business model may be advantageous for short-term revenue growth, it acts as an obstacle to internalizing R&D capabilities and developing independent new drugs in the long term.
| Company Name | Proportion of Merchandise Sales to Total Revenue (Q1 2024) | Key Strategies and Items | Source |
| :------------------ | :--------------------------------------------------------- | :----------------------------------------------------------- | :----- |
| Jeil Pharmaceutical | 71% | Sales of multinational products such as hyperlipidemia treatment 'Lipitor', pain treatment 'Lyrica', etc. | 19 |
| Boryung | 49% | Acquisition of anticancer drug 'Gemzar', schizophrenia treatment 'Zyprexa', etc., via LBA strategy | 19 |
Of course, there are positive movements, such as Jeil Pharmaceutical's attempt to improve its structure by developing the new drug 'Jaquvo' through its subsidiary Onconic Therapeutics. (291) However, looking at the structure of the industry as a whole, many companies still settle for low-risk, medium-return merchandise distribution and generic sales rather than high-risk, high-return innovative drug development. (292) Under such a business structure, the actual demand for physician-scientists with high expertise to discover unmet needs in clinical fields and design complex clinical trials is inevitably limited. Unless companies themselves expand R&D investment for innovation and transition their business models, high-quality jobs to absorb physician-scientists will remain significantly scarce, no matter how many are nurtured.
**Politics of Discourse: Lobbying Strategies Shifting Responsibility Outward**
In this context, the pharmaceutical industry's "shortage of physician-scientists" discourse functions as a very effective political and strategic tool. This discourse successfully transforms internal problems—namely the "lack of bold R&D investment" and the "safety-oriented business model"—into external problems, the "failure of the national talent nurturing system."
The Korea Pharmaceutical and Bio-Pharma Manufacturers Association points out through policy proposals that "at a pan-national level... the nurturing of excellent talent is still significantly insufficient," and strongly demands government-led talent training programs and expanded R&D support. (285) This is an attempt by the industry to evade the essential tasks of improving competitive treatment and expanding R&D investment, which it should solve on its own, and instead shift that responsibility to the government and society as a whole.
A symbiotic relationship of shifting responsibility is formed between the government and the pharmaceutical industry. The government has lowered the professional appeal of scientists through unstable R&D policies. Using the resulting "talent shortage" as a justification, the pharmaceutical industry requests support from the government. The government responds by producing visible "talent nurturing" programs, thereby appearing to actively support the industry without resolving its fundamental policy failures. In the end, within this framework that benefits both parties, the essence of the problem is obscured, and the responsibility falls on individual physicians who turned away from the research field. This is nothing more than a sophisticated illusion created by a failed system to justify and maintain itself.
**The Trap of the American Fantasy: A Critical Review of the MD-PhD Model and 'Soft Money' System**
Whenever discussions on nurturing physician-scientists take place in Korea, the MD-PhD (Medical Doctor-Doctor of Philosophy) combined degree program in the United States is frequently summoned as the ideal model. However, the blind fantasy regarding this "American model" is a dangerous idea that overlooks the serious structural crisis facing the U.S. medical research ecosystem. In particular, the 'Soft Money' system, which makes researchers depend on external research grants for most of their salaries, fundamentally threatens the job security of researchers. Consequently, the physician-scientist workforce in the U.S. has been suffering from the double burden of decline and aging for decades. Attempting to blindly transplant the system while ignoring this reality is merely a path toward repeating failure.
**The Declining American Physician-Scientist: A Crisis Shown by Statistics**
Contrary to the perception that the American physician-scientist model is flourishing, the reality is the opposite. The physician-scientist workforce in the U.S. accounts for only 1.5% of the total physician workforce, and their numbers have been steadily decreasing over the past few decades while their age group has been rising. (293) Even the National Institutes of Health (NIH) warned of the possible collapse of the physician-scientist workforce pipeline in a 2014 report, expressing deep concern over the phenomenon of young physicians avoiding research careers. (293)
According to a 2018 study by the Association of American Medical Colleges (AAMC), the attrition rate from research careers among MD-PhD program graduates has been a persistent problem for decades, and this is directly related to the barren research environment faced after obtaining the degree. (294) While the value of physician-scientists lies in bridging clinical practice and research, the system to support and grow them is not functioning properly. This lends weight to the criticism that the MD-PhD degree has devolved into a "title" for a few elites who received tuition waivers, rather than a reliable indicator of research capability.
**The Trap of 'Soft Money': Financial Risks Shifting from Universities to Researchers**
At the center of the crisis in the U.S. physician-scientist workforce lies a unique and unstable employment structure called 'Soft Money.' Unlike 'Hard Money,' where a university or research institution directly guarantees the salary of an affiliated researcher (Principal Investigator, PI), this system means the researcher must personally cover a significant portion (80% to 100%) of their salary through external research grants (primarily NIH grants) they secure. (295)
This system is a structure that directly transfers the financial risk of the university to individual researchers. In the 1970s, universities paid about 75% of a PI's salary as 'Hard Money,' but entering the 21st century, this ratio decreased sharply. (295) While universities earn massive profits through Indirect Cost Recovery (ICR) from NIH grants, they evade responsibility for the job security of the researchers.
This structure was not a major problem during periods when the NIH budget was surging, but it revealed fatal weaknesses as the NIH budget stagnated or effectively decreased after 2004. (295) Competition for limited research funds escalated into a state of "unsustainable hypercompetition," and failing to secure funding led directly to a situation threatening the researcher's livelihood and professional survival. The pressure to secure research funds forces researchers into the constant, exhaustive writing of research proposals, weakens loyalty to institutions and colleagues, and causes extreme stress and professional instability. (295)
**A System Eroding Science: Depletion of Creativity and Risk Aversion**
The instability caused by the 'soft money' system does not merely stop at the suffering of individual researchers; it produces serious side effects that undermine the very essence of scientific research.
First, it shrinks creative and high-risk research. To pass the peer review process during research funding evaluations, there is an increased incentive to select 'safe' research topics that are less controversial and guarantee short-term results. In the past, researchers could take on bold challenges that had a high possibility of failure but could provide scientific breakthroughs; however, in the current competition for research grants upon which livelihoods depend, such 'risky ideas' are easily ignored. (296) This results in the depletion of creativity and a spirit of challenge, which are the driving forces of scientific advancement.
Second, it destroys the collaborative culture of the scientific community. Intense competition over limited resources causes scientists to perceive one another as rivals rather than colleagues, hindering an open research culture of sharing knowledge and data. (296) This runs counter to the trend of modern science, where multidisciplinary cooperation is essential to solving complex challenges.
Third, it makes basic science researchers even more vulnerable. While clinician-scientists can secure a portion of their income through clinical practice, pure basic science researchers must rely solely on 'soft money,' placing them in a far more financially precarious position. (295) This acts as a major cause accelerating the departure of physician-scientists from the field of basic medicine.
In conclusion, the U.S. MD-PhD model and the underlying 'soft money' system are not ideal models for Korea to emulate, but are rather closer to a 'negative teacher' (an object lesson) possessing serious structural flaws. Korean policymakers must look past the flashy exterior of the U.S. system and face the unstable reality of researchers and the crisis of the scientific ecosystem. Simply introducing the MD-PhD degree system would merely result in importing the unstable foundation that supports it. This would not improve Korea's research ecosystem but would instead be a worst-case policy error that reproduces America's failures domestically.
**A Result, Not a Cause: The Inevitable Consequence of a Hollowed-Out Research Ecosystem**
Synthesizing the preceding analyses, it becomes clear that the 'shortage of physician-scientists' is not the 'cause' of the problems facing South Korea's bio-health industry, but rather the inevitable 'result' of a hollowed-out research ecosystem created by government policy failures and the strategic choices of the pharmaceutical industry. Doctors do not choose to avoid the path of a researcher because they lack a sense of mission; it is an extremely rational decision made in the face of a barren reality. This decision is structurally forced by three core factors: unstable employment, low economic compensation, and an opaque future.
**A Rational Economic Choice: Weighing Against an Unstable Future**
Choosing the path of a physician-scientist involves accepting enormous opportunity costs. A career as a clinical physician promises a high level of professional stability, social recognition, and substantial economic rewards. Conversely, the path of a researcher, as previously examined, is filled with extreme uncertainty, including chronic job insecurity, low wages, and research funding support that fluctuates depending on the administration. (290)
The medical community, including the Korean Medical Association, has consistently pointed to the significant economic gap with clinical colleagues and anxiety regarding career paths after graduation as the primary reasons medical school graduates avoid basic medicine. (297) Unlike clinical medicine specialties, which guarantee various options such as clinical professorships, hospital employment, or opening a private practice, there is almost no guarantee of obtaining a stable professorship or building a meaningful career when majoring in basic medicine. (297) In the face of this reality, asking individuals to devote themselves to research while demanding 'sacrifice' is merely empty rhetoric. The shortage of physician-scientists is ultimately a natural market response to an incentive structure that is overwhelmingly tilted toward clinical practice.
**Absent Institutional Support and Career Paths**
Beyond economic issues, the absence of institutional infrastructure to support physician-scientists so they can immerse themselves in research is at a serious level. Hospitals have almost no incentive to financially support research personnel who do not generate clinical revenue. Systems that guarantee research time and pay a corresponding salary are non-existent; rather, research is often dismissed as an 'additional' activity outside of clinical duties.
Furthermore, opportunities to gain research experience during the training process are decreasing. As the residency training period has been shortened from four years to three, it has become physically more difficult to pursue in-depth research alongside busy clinical training. (298) Even after obtaining a doctoral degree, the situation does not improve. Finding a stable job as a full-time researcher after receiving a degree is 'as difficult as plucking a star from the sky,' and faced with an uncertain future, most choose the path of returning to the clinical field. (299) The absence of mentoring systems, the lack of research infrastructure, and a rigid hospital culture that makes it difficult to balance clinical work and research act as structural barriers that cause doctors to give up even if they have intentions to pursue research. (293)
**The True Value of Physician-Scientists and the System's Neglect**
While the system ignores physician-scientists, we are missing the irreplaceable role they play in the bio-health innovation ecosystem. A physician-scientist is not simply a researcher with medical knowledge. They are those who treat patients on the front lines of the clinical field and discover the limitations of existing treatments and 'Unmet Medical Needs' first and most deeply. (300) This field-based insight provides the core ideas that serve as the starting point for new drug development.
In addition, a doctor's expertise is essential for designing clinical trials—the core process of drug development—interpreting the results from a clinical perspective, and evaluating the efficacy and safety of candidate substances. (301) They speak the languages of both science and the clinic, performing the vital role of a 'translator' connecting laboratory discoveries (Bench) to the patient's bedside.
However, the current system neither properly recognizes nor compensates for the value of these physician-scientists. While the system shouts that it needs talent to solve 'unmet medical needs,' it thoroughly ignores the most desperate 'unmet need' faced by those talents—the need for a stable and rewarding research career. This is a self-contradiction and hypocrisy of the system.
In conclusion, the shortage of physician-scientists is the final symptom where all structural failures converge. The sum of all fears—unstable R&D funding, precarious employment, passive investment from the industry, and the absence of institutional support—has caused doctors to turn clinical backs on research. To solve this problem, one must no longer commit the error of mistaking the phenomenon for the cause. It is time to put the root of the problem—the hollowed-out research ecosystem itself—on the operating table.
**Conclusion: Beyond Blame and Slogans, a Blueprint for a True Bio-Powerhouse**
The discourse on the 'shortage of physician-scientists' is nothing more than a mirage that masks the essence of the crisis facing South Korea's bio-health industry. As this report has analyzed, this phenomenon is not due to a lack of an individual doctor's sense of mission, but is the inevitable result of decades of accumulated government policy failures and the strategic bystanderism of the pharmaceutical industry. Structural problems—unstable R&D budgets, the casualization of scientists, low R&D investment by the industry, and the blind pursuit of the U.S. model—have combined to make the path of research an unsustainable option.
Therefore, the solution for leaping forward as a true bio-powerhouse does not lie in blaming individual doctors or shouting empty slogans like 'fostering convergent talent.' Fundamental and structural reform of the overall research and industrial ecosystem, which is the root of the problem, is urgent. This must start with stopping the blame and excuses and building a system that respects and supports the activity of science itself. The specific blueprint for this is as follows.
**Recommendations for the Government: Establish a Foundation of Stability**
1. End R&D Budget Volatility: R&D budgets must be separated from short-term political cycles. A long-term and predictable R&D budget system must be legislated through non-partisan agreements on a 5-year or 10-year basis. This will serve as a minimum safety device to ensure that long-term projects, such as drug development, are not shaken by changes in administration. (286)
2. Regularization of Scientists and Improvement of Treatment: The employment structure of research personnel in government-funded research institutes and universities must be fundamentally reformed. Project-based non-regular hiring should be avoided, and stable regular positions should be greatly expanded to create an environment where scientists can immerse themselves in research without job insecurity. This is not a simple welfare issue, but a security task to protect research personnel, who are key national assets. (290)
3. Stop the Blind Pursuit of the U.S. Model: The harms caused by the U.S. 'soft money' system must be clearly recognized, and attempts to introduce it uncritically must stop immediately. Instead, a 'Korean-style' support model should be designed, similar to the Max Planck Institutes in Germany or various European countries, where institutions guarantee the stability of researchers while maximizing creativity. (293)
**Recommendations for the Industry: Invest in True Innovation**
1. Transition from 'Merchandise' to 'Products': The pharmaceutical industry must no longer use the 'lack of talent' as an excuse to avoid R&D investment. The government should induce companies to lower their dependence on 'merchandise sales' (reselling imported goods) and increase the proportion of 'product sales' through in-house drug development by providing powerful policy incentives such as tax benefits and preferential drug pricing. Innovation carries risk, but only companies that take those risks deserve to reap the fruits of the future. (285)
2. Internalize the Responsibility of Securing Talent: The industry should not wait for the government to 'foster' and supply talent but should compete to attract the best talent themselves. This means establishing competitive salaries that meet global standards, stable employment, challenging research projects, and a rational compensation system for research achievements. If companies truly need physician-scientists, they must make offers valuable enough for them to leave the clinical field and join.
**Recommendations for the Ecosystem: Rebuild the Culture of Science**
1. A Culture That Respects All Scientists: Policy focus must shift from an excessive concentration on a specific group called 'physician-scientists' to improving the treatment and environment for all researchers who constitute the bio-health ecosystem, including life scientists, engineers, and data scientists. Without a solid foundation in basic science, physician-scientists cannot demonstrate their capabilities.
2. A System That Tolerates and Encourages Failure: Innovation blooms on the soil of numerous failures. The current research evaluation and support system, which is obsessed with short-term results and does not tolerate failure, must be completely reformed. It is most important to create a social and institutional atmosphere through long-term and stable funding where researchers can challenge bold and creative research without fear of failure. (285)
In conclusion, the 'shortage of physician-scientists' is a warning signal sent by our society. This is not simply a matter of human resource supply and demand, but a fundamental question of how we treat science and research. If we ignore this warning and continue to pass responsibility to individuals and cling to stop-gap prescriptions, South Korea's dream of becoming a bio-powerhouse will remain a mirage forever. It is time to resolve the true 'deficiency' of political will, strategic industrial investment, and social respect for science. This is the only way to move beyond empty slogans and build a sustainable innovation ecosystem.
**Chapter 36. The Essence of the Essential Healthcare Package: A Blueprint for Salvation or a Contract of Deception?**
**Introduction: A Relief Pitcher Thrown into a Crisis**
February 1, 2024, Seoul National University Bundang Hospital Healthcare Innovation Park. At a town hall meeting presided over by the President himself, the government put a relief pitcher on the mound under the name of the 'Essential Healthcare Policy Package.' The disappearance of pediatrics and thoracic surgery, the serial closure of rural emergency rooms, and the collective departure of residents. Faced with a medical upheaval where structural contradictions neglected for decades erupted to the surface all at once, the government declared this to be the final golden time.
The framework of the package consisted of four pillars: a financial injection of over 10 trillion KRW by 2028 and a concentrated increase in fees for essential healthcare; the mitigation of the burden of criminal punishment through the enactment of the Special Act on Medical Accident Handling; the fostering of regional flagship national university hospitals and the introduction of a contract-based regional essential physician system; and a manpower plan to expand the medical school admission quota by 2,000 students per year starting from the 2025 academic year to secure an additional 10,000 doctors by 2035. Without missing anything, it was a 'blueprint for salvation' designed with great care by the state, appearing very rational and even attractive on the surface.
However, the moment this flashy wrapping paper is removed, a completely different landscape is revealed. If the failure of 'Moon Jae-in Care' analyzed in Chapter 33 showed how the good intention of 'expanding coverage' produced paradoxical results on top of a low-fee structure, this chapter dissects a mechanism one level more sophisticated. We will look into how the three layers of devices hidden within the detailed design of the Essential Healthcare Package—an economic division engine, an administrative unfair contract, and a political scapegoat mechanism—work together like interlocking gears.
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**Section 1. The Economic Engine: Three Gears Designing Division**
**Winners and Losers Created by Differential Conversion Factors**
The core of the package's compensation system consists of three economic tools operating under the name of a 'Value-Based Payment System.' First is the Differential Conversion Factor. This method raises the conversion factor for acts classified as 'high value' by the government, such as high-difficulty major surgeries, while freezing or cutting the conversion factor for 'low value' acts like mild outpatient treatments. Second is Risk Adjustment, which grants additional compensation to hospitals that treat many patients with high severity. Third is a Pay-for-Performance system, which pays bonuses to hospitals with good treatment outcomes.
Each tool, when viewed in isolation, is textbook-valid. In the Value-Based Health Care framework proposed by Michael E. Porter of Harvard Business School, the principle that health care systems should reward "patient health outcomes" rather than "volume" is considered a core premise. The problem arises the moment this principle is transplanted onto the unique soil of South Korea.
When these three gears mesh and rotate simultaneously, the medical community is structurally split into two camps. Tertiary general hospitals in the capital region become overwhelming winners. Since severe and high-risk patients are already concentrated there, they hold an advantage in risk adjustment; their large-scale data infrastructure and resident workforce enable the management of performance indicators; and since they have a high proportion of high-difficulty surgeries, they fully absorb the benefits of the differential conversion factor. On the opposite side are local clinics and small-to-medium sized hospitals in rural areas. In a practice structure centered on mild cases, their conversion factors are cut, they lack the capacity to manage performance indicators, and they are far removed from the benefits of risk adjustment. To them, this package is the very embodiment of the threat of fee cuts and penalties.
Here, it is necessary to bring out a key textbook concept: the problem of "information asymmetry" in Information Economics. In a structure where the government unilaterally sets and evaluates the criteria for "value" and "performance," the complex context of the medical field—such as a rural hospital’s effort to treat a critically ill patient to the end without transfer despite poor infrastructure, or the preventive value of a local clinic preventing the hospitalization of a chronic patient for years—is excluded as unmeasurable. A declaration that unmeasurable value will not be compensated is ultimately equivalent to framing the rules of the game in favor of large hospitals that monopolize measurable indicators.
**The Political Economy of Divide-and-Rule**
Whether this structure is an intentional design or an accident caused by incompetence becomes clear when looking at the results. In political science, "Divide et Impera" (Divide and Rule) refers to a classic technique of power that internally divides a subject group to make unified resistance impossible. Daron Acemoglu and James A. Robinson (2006) analyzed that this strategy works particularly effectively in weak institutional environments. To block the incentive for a group to unite and challenge an unjust system, the ruler artificially inserts a rift of interests within the group.
The way the Essential Healthcare Package operates is exactly like that. If the compensation structure is designed so that surgery and internal medicine, tertiary hospitals and clinics, and the capital region and rural areas have different interests, the medical community can no longer speak with one voice. Tertiary general hospitals have an incentive to support the package, while clinics have an incentive to oppose it, and within this internal conflict, collective resistance against the government weakens. Indeed, the rifts revealed during the 2024 conflict between the government and the medical community—between large hospitals and private practitioners, between residents and specialists, and between essential and non-essential departments—demonstrate that this mechanism is already in operation.
In economic terms, the government, while maintaining its status as a single monopsony buyer, has employed a strategy of selectively dismantling the cohesion of the supplier side. The core of the monopsony concept defined by Joan Robinson in 1933 is that when a buyer monopolizes pricing power, suppliers are forced to accept compensation below the market equilibrium. When internal division among suppliers is added to this, the bargaining power of individual suppliers virtually vanishes.
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**Section 2. Administrative Deception: A Contract Designed to Fail**
**Conditions for a Performance Agreement**
Examining the package more microscopically reveals that it is essentially a type of Performance Agreement in which the government (principal) delegates the task of "reviving essential healthcare" to the medical community (agent). In public administration, three conditions must be met for a performance agreement to function properly. First, goals must be measurable and achievable (SMART principle). Second, it must be based on mutual agreement between the contracting parties. Third, risks and rewards must be balanced.
The Essential Healthcare Package violates all three conditions.
The criteria for "value" and "performance" are set unilaterally by the government. Most rural and small-to-medium hospitals lack the very infrastructure to meet those criteria. Setting unattainable goals and imposing disadvantages for failure is not a contract; it is a punishment. This package is not a product of negotiation but a unilateral notification by the government. Although an entity called the Special Committee on Medical Reform existed, if one asks whether it was anything more than what Erving Goffman called "dramaturgical interaction"—a performance on the "front stage" to conceal substantive power relations—the course of events, where residents and medical students were not recognized as dialogue partners and coercive measures such as "back-to-work orders" were mobilized, provides the answer.
The most decisive problem is the imbalance between risk and reward. The safety net known as the Special Act on Medical Accident Processing does not "exempt" criminal punishment in the most serious cases of "death," but merely allows for "discretionary reduction." Considering that medical malpractice is not subject to criminal punishment at all in North America and Europe, this Special Act is still a harsh system by developed-country standards, rather than a privilege. While compensation is uncertain, control is tightened; while the safety net is full of holes, duties are infinite. This is an unfair contract that shifts all risks to one party, directly contradicting both the "principle of freedom of contract" and the "equivalence of performance (Äquivalenz)," which are basic principles of civil law.
**Errors in the Selection of Policy Tools**
According to the policy design theory of Anne Schneider and Helen Ingram, the success of a policy depends on the selection of appropriate policy tools that the target group can voluntarily comply with. The spectrum of policy tools ranges widely from incentive tools to coercive tools, and the effective combination of tools varies depending on the political status and social perception of the target group.
The Korean government has relied almost entirely on coercive tools regarding the medical community. The compulsory designation system for National Health Insurance, back-to-work orders, and license suspension measures are quintessential examples. Incentive tools—guaranteeing appropriate medical fees, creating a stable working environment, and respecting self-regulation—have been rhetorically promised but rarely implemented. This imbalance is a textbook case of "policy tool mismatch" that induces long-term resistance and evasive behavior from the target group.
The promise of a 10 trillion won investment is the same. As of 2026, two years after the February 2024 announcement, the actual increase in essential healthcare fees is progressing slowly, and the Special Act on Medical Accident Processing is pending in the National Assembly. From the beginning, the timetable of "by 2028" was a long-term promise, and the political landscape could change in the meantime. There is no legal binding force to the financial promise, and the health insurance budget is expected to turn into a deficit starting from 2026. Only the obligations are certain; the rewards are merely promises. This asymmetry suggests that this contract was designed from the start on the premise of one party's inability to perform.
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**Section 3. Political Apparatus: The Scapegoat and the Betrayal of Publicity**
**René Girard's Scapegoat Mechanism**
Throughout the conflict, the government and the media repeatedly invoked "patient suffering" and "the lives of the people." By highlighting tragic cases where surgeries were delayed and emergency patients were not treated on time due to strikes, they framed the collective action of doctors as a "selfish struggle for their own interests using patients' lives as collateral." This frame is powerful and effective, but it simultaneously functions as a sophisticated device for shifting responsibility that masks the essence of the problem.
In *Violence and the Sacred* (La Violence et le Sacré), French philosopher René Girard analyzed the "Scapegoat Mechanism." When a social crisis reaches its peak, the community, instead of resolving the structural causes of the crisis, designates a specific group as a "scapegoat" and pins all the blame on them. Collective violence against the scapegoat temporarily relieves internal tension within the community and maintains the existing power structure. The key point is that the scapegoat is not the actual cause of the crisis. The scapegoat is merely an entity to which the responsibility for the crisis is transferred.
The narrative strategy employed by the government in this conflict matches Girard's model with surprising precision. Patient suffering is real. However, is the cause of that suffering in the individual residents at the strike site, or in the structural contradictions of a system accumulated over 30 years—low fees, fear of medical lawsuits, and murderous working environments? Borrowing Johan Galtung's concept, patients are victims not of "direct violence," but of "structural violence." This is a phenomenon where the social structure and institutions themselves systematically cause harm to a specific group without the exercise of physical force.
Instead of acknowledging and resolving the responsibility for this structural violence, the government transformed the medical professionals resisting that violence into "perpetrators." By highlighting the immediate damage caused by the resistance (delayed surgeries, emergency gaps), the government concealed the structural responsibility it had neglected or fostered for decades.
**Ideological Weapon in the Name of "Publicity"**
The government claims that the package is a measure to restore "publicity" (public interest/common good). However, the "publicity" defined by the government here is a severely distorted concept—one unilaterally defined by the state and forced from the top down.
In *The Structural Transformation of the Public Sphere* (Strukturwandel der Öffentlichkeit), Jürgen Habermas viewed true publicity (Öffentlichkeit) as the process itself in which members of civil society form a universal consensus through rational and free discussion without the intervention of state power. Publicity is not something "granted" or "restored" by the state, but something constructed within equal communication among participants.
By this standard, the current medical reform by the government is not realizing publicity but rather destroying it. Residents and medical students, who are the core parties in the medical field, were not recognized as dialogue partners. The Special Committee on Medical Reform was not a public forum for hearing diverse voices, but rather a device for ex post facto justification of already decided policies. Instead of free discussion, coercive means like back-to-work orders were mobilized, and administrative measures such as license suspensions followed non-compliance. The attitude of bypassing democratic procedures and making all state decisions under the pretext of "for the people" is no different from the "colonization of the lifeworld" (Kolonisierung der Lebenswelt) that Habermas warned against—a phenomenon where the logic of the state system invades and destroys the autonomous communication sphere of citizens.
Ultimately, the sword of "publicity" wielded by the government is an extension of the ideological control analyzed in Chapter 23. It is a rhetorical weapon intended to strengthen state control and suppress the autonomy of the professional group, not a principle for substantially guaranteeing the right to health for all citizens.
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**Section 4. Betrayal of Future Generations: From the Perspective of the Theory of Justice**
**Rawls' Question: Behind the Veil of Ignorance**
The government claims to pursue policies from the "patient's" perspective. However, this is a serious misreading of John Rawls' theory of justice. Rawls' principle of justice is that social institutions should be chosen behind a "Veil of Ignorance," where one does not know their own social status or circumstances. In this situation, a rational human being would choose a system that primarily improves the situation of the "least advantaged"—those in the most unfavorable positions in society (the difference principle).
Who, then, are the least advantaged in the current healthcare system? Imagine yourself behind the veil of ignorance. You could become a rural essential healthcare doctor who earns 4 million won a month, works 100 hours a week, and is subject to criminal punishment for medical accidents at any time. Or you could become a patient who must be treated by that doctor. Which system would you choose?
Confronted with this question, one realizes that simply increasing the number of doctors does not solve the problem. Rather, as long as there are doctors working under such poor conditions, the patients treated by them are also bound to become potential victims. A truly just system is one that creates an environment where medical professionals can work with a sense of calling and be respected. Only then can all of us, as future patients, receive high-quality medical services.
The current government's policy does not consider the position of the least advantaged. Instead, it attempts to solve short-term problems by pushing doctors into even poorer environments and forcing their sacrifice. The announcement of the 2,000-student increase in 2024, the mass resignation of residents, the boycott of classes by medical students, and the return of medical students in July 2025—this series of events has already proven that government policy resulted in a decline in the quality of education and chaos in the personnel ecosystem. The fact that the number of medical students at risk of repeating a grade reached 43% of the total vividly demonstrates the impact this policy has had on the future medical training system.
**Lessons from the Bismarck Model: A State That Ignored Partnership**
The government often mentions Germany's Bismarck Health Insurance (1883) as a successful example of state-led reform. However, this is a superficial interpretation that only looks at the surface of history. The key factor for the success of the Bismarck model lay not in the state's strong will, but in the principle of "social partnership" (Sozialpartnerschaft).
The German model was not a method where the state decided unilaterally. It established a "self-governance" (Selbstverwaltung) system in which sickness funds (insurers), medical associations (suppliers), and the government participated as equal negotiating entities. They constantly negotiated and compromised to build the system together. The state only played the role of referee and mediator, without trying to control everything. The appropriateness of compensation was determined through negotiations between the parties, and the trust formed in this process ensured the sustainability of the system.
In contrast, the history of South Korean healthcare policy has been a history of "mobilization," not "partnership." The government has always regarded medical professionals not as partners in reform, but as targets to be mobilized and controlled to achieve state goals. The Essential Healthcare Package of 2024 has not strayed an inch from this old inertia.
In February 2026, the Health and Medical Policy Deliberation Committee finalized the scale of the medical school quota increase for the 2027 academic year, which was drastically reduced to an annual average of 668 students. This represents a contraction to a mere quarter of the original proposal of 2,000. Paradoxically, this retreat proves how far removed the original policy was from reality. However, the fundamental structures—low reimbursement rates, forced incorporation, and unilateral control—remain unchanged.
**Max Weber’s Warning: The Ethics of Conviction vs. The Ethics of Responsibility**
In *Politics as a Vocation (Politik als Beruf)*, Max Weber emphasized that politicians require an "ethics of responsibility" (Verantwortungsethik) rather than an "ethics of conviction" (Gesinnungsethik). While the ethics of conviction prioritizes the "intent" or "noble cause" behind an action, the ethics of responsibility refers to an attitude of taking accountability for the "foreseeable consequences" that the action will bring.
The current government, intoxicated by the ethics of conviction claiming to "serve the people," is turning a blind eye to the responsibility for the catastrophic outcomes their policies will cause. It is predicted that unprepared medical school expansions will lead to substandard education, churning out unskilled doctors. It is predicted that even the remaining doctors will flee the essential healthcare frontlines due to poor environments and legal instability. Ultimately, future patients will not experience the benefit of an increased number of doctors; instead, they will face a "medical dystopia" where they wander in search of competent physicians and are exposed to dangerous clinical environments.
These predictions have already largely materialized through the developments of 2024–2025. With the majority of residents failing to return, university hospitals faced a financial crisis, and the collective leave of absence by medical students created irreversible gaps in the educational curriculum.
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**Section 5. Conclusion: Essential Healthcare Suffocates Inside a Pressure Cooker**
Friedrich Hayek warned in *The Fatal Conceit*: attempts by the government to ignore market complexities and intervene artificially, only to solve the resulting problems with further coercive intervention, merely breed greater chaos and inefficiency. The government is trapped in a vicious cycle of demanding even stronger controlling power using the self-inflicted crisis as an excuse.
Synthesizing the essence of the "Essential Healthcare Package" reveals the following. Economically, it is a divide-and-conquer mechanism that splits the medical community into winners and losers through the three gears of differential conversion factors, risk adjustment, and value-based payment. Administratively, it is an unfair contract embedded with a triple defect: unattainable goals, unilateral notification, and an imbalance between risk and reward. Politically, it is a power-maintenance technique that uses doctors as scapegoats to shift structural responsibility and justifies state control through the ideology of "publicness."
When these three layers of mechanisms function as a single pressure cooker, essential healthcare does not revive; it slowly suffocates within. On the surface, it is a blueprint for salvation, but underneath, it is a master plan for control. Genuine reform must begin by opening this pressure cooker, by the state honestly admitting its policy failures, and by recognizing medical professionals as equal partners rather than targets for mobilization. Only then can we together build a system where patients, doctors, and future generations can all survive.
The next chapter analyzes how these structural defects create a disastrous chemical reaction when met with another prescription—the "transplantation of advanced systems"—and why systems that succeed elsewhere in the world turn into poison specifically in Korea.
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**[Box] The Essential Healthcare Package as a "Contract": 5 Questions on Fairness**
Let us read the Essential Healthcare Package as a contract between the government and medical professionals. For a contract to be fair, it must satisfy the following five conditions.
**① Was it agreed upon by both parties of their own free will? (Free Consent)**
- Was this package created through prior consultation with medical professionals, or did the government design it unilaterally and then notify them to "accept it"?
- **Judgment:** At the time of the January 2024 announcement, a substantive consultation process with the Korean Medical Association and related academic societies was virtually nonexistent. → **Fail**
**② Are obligations and rewards balanced? (Reciprocity)**
- Is the scale of what is demanded of medical professionals (working in essential healthcare, working in rural areas, achieving performance) proportional to what the government provides (reimbursement increases, legal protection, improvement of working conditions)?
- **Judgment:** The reimbursement increase barely exceeds the inflation rate, and legal protection (immunity from criminal punishment) was not included. Obligations are specific, while rewards are merely declaratory. → **Fail**
**③ Does it include unattainable conditions? (Feasibility)**
- Are the set goals (reduction in ER mortality rates, securing medical personnel in rural areas, etc.) achievable within the given resources and time?
- **Judgment:** It takes at least 10 years to train medical personnel, yet the evaluation cycle for performance indicators is 1 to 3 years. The design makes goal achievement structurally impossible. → **Fail**
**④ Are the sanctions for non-compliance fair to both parties? (Symmetric Sanctions)**
- If a medical professional fails to achieve performance, their additional payments are cut. What sanctions exist if the government fails to implement the promised investments (infrastructure, legal protection)?
- **Judgment:** There are no sanction clauses for the government’s failure to fulfill its obligations. This is an asymmetric contract. → **Fail**
**⑤ Is there freedom to terminate the contract? (Exit Option)**
- If the contract terms are judged to be unfair, can medical professionals opt out of the package?
- **Judgment:** Under the compulsory designation system, medical institutions cannot refuse National Health Insurance treatments, and failure to comply with "orders to commence work" leads to criminal punishment. This is a contract where exit options are blocked. → **Fail**
**Overall Judgment: Failure in all five items.**
In light of the basic principles of civil law, this "contract" corresponds to a **compulsory unilateral contract**. A structure that imposes obligations only on one party (medical professionals) while the other party (the government) has no obligations and no freedom of termination exists. This is not a contract, but a command.
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**Chapter 37. Why "Advanced Systems" Turn into Poison in Korea: The Political Economy of Failed Institutional Transplantation**
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**Introduction — The Bed of Procrustes**
In Greek mythology, there is a bandit named Procrustes. He would place travelers on his iron bed; if they were longer than the bed, he cut off their limbs, and if they were shorter, he stretched them to fit. He fitted the traveler to the bed, not the bed to the traveler. Either way, the traveler died.
The half-century of South Korea's healthcare policy is a history of repeating this Procrustean myth. The government has successively imported "advanced systems"—the UK’s GP system, Germany’s capitation, the US’s DRG (Diagnosis Related Group), Sweden’s no-fault compensation, and most recently, "Value-Based Healthcare." Each time, it tried to fit the traveler—the reality of Korean healthcare—into the imported bed. The result was always the same. The traveler’s body was either severed or stretched into a deformity; it never became healthy.
This chapter is an anatomy of those repeated failures. Through three specific cases—DRG, Value-Based Healthcare, and the Special Act on Medical Accident Processing—we track how advanced systems deteriorate the moment they meet Korean soil. We then reveal two structural principles and one historical root that permeate this deterioration. Finally, we ask what this diagnosis warns about future reforms.
**I. Three Failures — Clinical Records of Institutional Transplantation**
**1. Diagnosis Related Group (DRG): The Scalpel of Efficiency Becomes a Weapon of Self-Harm**
The DRG system is a method of paying a predetermined total amount based on the patient's diagnosis and severity. If the fee-for-service system is a structure where "the more you do, the more you receive," the DRG is a structure of "treating most efficiently within a set amount." Since its introduction to US Medicare in 1983, it spread across Europe and is credited with contributing to the suppression of excessive treatment and the stabilization of medical costs.
Korea began pilot projects in 1997, transitioned to a voluntary participation model in 2002, and implemented full mandatory application for seven disease groups (cataracts, tonsils, appendix, hernia, hemorrhoids, C-sections, and uterine surgery) in 2012–2013. Outwardly, the number of hospital days decreased, and readmission rates also dropped. According to a 2019 Yonsei University study analyzing over 3 million inpatient records, the hospital days for mandatory participation hospitals decreased significantly.
However, these figures hide something critical. For the DRG system to function normally, one absolute premise must be met: the set total amount must reflect the actual cost—the prime cost—of treating the disease. The DRG payments the UK’s NHS makes to medical institutions are recalculated every year based on a national Reference Cost Collection. Germany’s G-DRG also collects actual cost data from approximately 300 hospitals through InEK (the Institute for the Hospital Remuneration System) to adjust weights.
Korea ignored this premise from the start. The standard for the DRG was a summation of existing fee-for-service items, but those fee-for-service rates themselves were already far below prime cost. According to an analysis of cost compensation rates by medical department submitted to the National Assembly in 2024, the average cost compensation rate for National Health Insurance benefits was only 87%. This means if 100 KRW worth of treatment is provided, only 87 KRW is reimbursed. In essential healthcare fields, the numbers become even more disastrous: Obstetrics and Gynecology 61%, Mental Health 55%, Internal Medicine 72%, and Pediatrics 79%. In a structure where only half to three-quarters of the cost is compensated, the DRG became a shackle that locked in losses rather than a tool for efficiency.
Medical institutions wearing these shackles began to make rational yet unethical choices to survive. First is "cherry-picking." They select only young, healthy patients who yield a profit within the DRG and refuse or transfer "difficult patients" with many complications whose costs would exceed the limit. This is exactly what the Korean Medical Association warned about before full implementation in 2013: "The DRG pilot project resulted in a decline in healthcare quality, patient concentration in large hospitals, refusal of treatment by hospitals, and avoidance of severe patients." Second is "up-coding." Entering a diagnosis code for a more severe condition for the same disease allows for a higher reimbursement. Third is "under-treatment." Since the treatment must be finished within a set amount, incentives arise to omit necessary tests or treatments.
Ultimately, Korea's DRG system is a case where a system designed in advanced nations as a "scalpel to reduce unnecessary medical acts" was distorted in Korea into a "weapon that carves away even necessary medical acts." The problem was not the blade of the knife, but that the ground on which the hand holding the knife stood was tilted.
**2. Value-Based Care: Control Exercised in the Name of "Value"**
Value-Based Care is the most sophisticated language of 21st-century medical reform. This paradigm, which proposes rewarding based on the patient's health outcome rather than the volume of treatment, is a revolutionary idea that shifts the goal of medicine from cost reduction to health promotion. Since Michael Porter established the concept in *Redefining Health Care* in 2006, it has spread worldwide, led by the US Medicare Alternative Payment Models (APM). This was the system the Yoon Suk-yeol administration presented as the core compensation framework for the "Essential Healthcare Policy Package."
However, for Value-Based Care to work, two fundamental premises must exist. First, trust and agreement between providers and payers regarding the performance indicators that measure "value." Second, a total compensation amount sufficient to pursue that value. Neither exists in Korea.
First is the absence of trust. The background that allowed Value-Based Care to be discussed in the US included market pressure from multiple private insurers competing to provide better "value," and a professional tradition of medical groups autonomously managing quality. Korea is different. In a market where a single purchaser (monopsony)—National Health Insurance—unilaterally determines prices, there is no incentive for "value" competition to function. The medical community perceives the "performance indicators" presented by the government not as shared goals for improving quality, but as new means of control for monitoring clinical behavior and cutting costs. To a medical community that has repeatedly experienced unilateral fee determinations, the forced separation of prescribing and dispensing, and the dogmatic pursuit of medical school quota increases over decades, every government proposal triggers a defensive reaction like Pavlov’s bell. This is not paranoia, but a learned, rational suspicion.
Next is the design of inequality. Sophisticated management of performance indicators, establishment of networks with community hospitals, and big data-based measurement of outcomes—all these conditions are designed to be absolutely advantageous for ultra-large hospitals in the Seoul metropolitan area that possess vast capital and administrative personnel. For small and medium-sized regional hospitals struggling with manpower and financial shortages, this is a game they cannot even join. Ultimately, under the neutral language of "value," National Health Insurance finances will again concentrate in large hospitals in the capital, directly contradicting the policy goal of reviving essential and regional healthcare. Value-Based Care is likely to become a mechanism that justifies existing inequality by laundering it under the name of "value," rather than a mechanism for upward equalization of healthcare quality.
The 2025 World Economic Forum (WEF) report, *Data and Trust: The Two Pillars of Value-Based Healthcare*, pinpointed this accurately: "Without trust, the responsible use of data cannot be guaranteed, and without data, value cannot be measured." Korea lacks both pillars. A roof without pillars is bound to collapse.
**3. Special Act on Medical Accident Processing: A "Safety Net" with the Largest Hole**
One of the most direct causes of the collapse of essential healthcare is the fear of criminal punishment for medical accidents. Korea’s judicial culture, which indicts doctors for "occupational negligence resulting in death or injury" when an emergency surgery performed in good faith and with best efforts leads to an unexpected death, is anomalous globally. This fear drives doctors toward defensive medicine and the avoidance of high-risk medical specialties.
Accordingly, the government pushed for the enactment of the Special Act on the Handling of Medical Accidents, referencing Sweden’s no-fault compensation system (introduced in 1975) and New Zealand’s ACC (Accident Compensation Corporation). Much like the Special Act on the Handling of Traffic Accidents, the concept was to exempt physicians from criminal punishment if they subscribed to comprehensive insurance.
However, the reason this system functions in Sweden is not simply because the legal provisions are well-designed. The system stands upon a culture that views medical accidents as "system errors" rather than "individual failures," a social consensus that focuses on root cause analysis and prevention of recurrence rather than punishment, and the financial backing that allows the state to sufficiently compensate victims. These three elements constitute the invisible infrastructure of the Swedish system; the legal provisions are merely the roof placed on top.
South Korea lacks this infrastructure. The powerful retributive legal sentiment in Korean society believes that if the outcome of medical care is poor, someone must be punished. Within such a culture, the exemption from criminal punishment is immediately translated into the frame of an "indulgence giving special privileges only to doctors." This was demonstrated in 2024 when civic and patient groups protested, calling it an "unconstitutional bill that violates the right to life of victims of medical accidents."
Faced with the pressure of public opinion, the government retreated. This is where the most fatal flaw of the bill occurs. In the case of death—the most serious of medical accidents—the bill was designed to stop at "discretionary mitigation" at the judge’s discretion, rather than "exemption" from criminal punishment. Consider how this sounds to doctors. This law fails to alleviate the worst-case scenario you fear most—the terror that you might go to prison because a patient died after you performed emergency surgery all night. To call it a safety net, the largest hole is punched exactly in the most dangerous spot.
In conclusion, the patient safety system introduced to change a punishment-oriented culture paradoxically succumbed to that very culture and fell into a self-contradiction, abandoning its own principles. Only one message remains for doctors: “The state has neither the will nor the ability to protect us.”
II. Two Structural Principles — Why This Pattern Repeats
While the three cases belong to different policy areas, their circuits of failure are remarkably identical. Two structural gravitational fields operate within the Korean healthcare system, and no matter what system is imported, it is sucked into these fields and loses its original function.
Principle 1: The ‘Low Trust-High Control’ Matrix — A Black Hole of Relationships That Distorts Everything
In the Republic of Korea, the relationship between the state and the medical community is like a vacuum where "trust" has completely evaporated. This vacuum was not created overnight. It is a geological structure formed by layers of unilateral policy decisions deposited over half a century.
In 1977, while introducing medical insurance, the government unilaterally forced low fees without agreement from the medical community. This is the first stratum of distrust. In 2000, during the separation of prescribing and dispensing drugs, the government pushed through reform while ignoring the fierce opposition of the medical community. This is the second stratum. In the attempt to increase medical school quotas in 2020 and its re-promotion in 2024, the government again unilaterally announced and enforced policies without sufficient consultation with the medical community. This is the most recent stratum.
The significance of the thickness of these deposits is clear. The medical community has developed a deep-rooted learning effect where they suspect every government proposal first. No matter how plausible the justifications the government presents—such as ‘efficiency,’ ‘value enhancement,’ or ‘patient safety’—the medical community's decoding algorithm automatically translates them into ‘cost cutting’ and ‘strengthening control.’
The government, likewise, does not trust the medical community. The government regards medical professionals not as partners pursuing the public interest together, but as potential interest groups threatening National Health Insurance finances through overtreatment and abuse of non-reimbursable services. Consequently, all policies are designed toward monitoring and controlling medical professionals rather than respecting their autonomy. Price control using the status of a monopsony buyer of health insurance, control of medical acts through audits, and control of the freedom of professional practice through business commencement orders.
A vicious cycle persists where control strengthens as resistance grows, and stronger control is mobilized as resistance intensifies. This is the ‘Low Trust-High Control’ matrix that dominates Korean government-medical relations. It becomes clear when summarizing how advanced systems deteriorate within this matrix in a table.
| System | Function in Advanced Countries (Based on High Trust-Autonomy) | Deterioration in Korea (Based on Low Trust-High Control) |
| :---------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- |
| DRG (Diagnosis Related Group) | Inducing autonomous efficiency in medical institutions | A price control tool that fixes fees below cost |
| Value-Based Healthcare | Building partnerships for quality improvement | A tool for monitoring medical behavior and cutting costs through performance indicators |
| Medical Accident Safety Net | Creating a culture of voluntary error reporting and learning | A half-baked device that evades state responsibility by excluding core risks |
The pattern revealed in this table is clear. Systems designed on the premise of autonomy and partnership are converted into tools of control and monitoring. This is not a flaw of the system itself, but a flaw in the relationship in which the system operates.
Principle 2: Distorted Price System — The Economic Original Sin That Corrupts Everything
If ‘Low Trust-High Control’ is a poison for relationships, ‘Low Medical Fees’ is a poison for the economy. In a healthy market economy, price is a signal that guides the efficient allocation of resources. However, in Korean healthcare, the price (fee) is not determined by market supply and demand, the actual value of medical acts, or costs. It is a political price unilaterally determined solely by the government’s fiscal logic and political calculations.
Numbers tell the whole story. According to the 2025 OECD health statistics, the workload index for Korean doctors is 6.77, approximately four times the OECD average of 1.68. On the other hand, Korea's medical fee index is 0.47, one-third the level of the OECD average of 1.40. Working four times as much and receiving one-third the pay—this is the economic coordinate of Korean healthcare.
This abnormal price structure neutralizes all system transplantations. We have already seen the deterioration of the DRG system. What about Value-Based Healthcare? Value-Based Healthcare functions by redistributing compensation based on value when the "size of total compensation" is appropriately guaranteed. However, in a situation where the total amount does not meet the cost—a pie that is too small—discussing value is meaningless. Whether you divide it into eight pieces or six, if the pie itself is only three-quarters of the size needed, someone must starve. In this situation, Value-Based Healthcare becomes a ‘game of plunder’ rather than a ‘game of cooperation.’
Low fees also feed and grow the monster known as non-reimbursable services. Medical institutions have survived through cross-subsidization, covering losses from reimbursed treatments with profits from non-reimbursed ones. This deformed symbiosis turns system transplantation even more grotesque. Indemnity insurance grew into an uncontrollable monster by feeding on the expansion of the non-reimbursable market. "Moon Jae-in Care" attempted to convert non-reimbursable items into reimbursed ones but did so while leaving the low-fee structure intact, resulting only in hospitals creating new non-reimbursable items or explosively increasing the volume of newly reimbursed treatments. It is an endless repetition of the balloon effect, where pressing one side causes the other to bulge.
Economist Dani Rodrik warned that "institutions are context-specific." He argued that the appropriate institution for a developing country is not a copy of a ‘first-best’ institution, but a ‘second-best’ institution that considers the specific distortions and constraints of that society. South Korean policymakers have ignored this basic warning for half a century. They have always copied the ‘best institutions’ of other countries and never asked what chemical reaction occurs when those meet the ‘worst conditions’ of Korea.
III. Deeper Roots — A Country Lacking a 'Social Contract'
If the two structural principles—the Low Trust-High Control matrix and the distorted price system—are the direct causes of the failure of system transplantation, where is the cause of those causes? Descending deeper, one reaches the historical root: the absence of the 'Social Contract' that characterizes modern Western states.
In many Western countries, the relationship between the state and the medical professional group is governed by an invisible social contract, even if conflicts exist. The essence of that contract is this: the state guarantees doctors a high level of professional autonomy, social status, and economic compensation. In return, doctors take responsibility for the public’s health and serve the public interest based on strict professional ethics. This contract is not codified in law, but it is a social norm and a foundation of mutual respect formed through hundreds of years of history.
In the Republic of Korea, the relationship between the state and doctors has never experienced such an equal contract. From the period when the modern medical system was transplanted—the Japanese colonial era and military dictatorships—the state treated doctors not as equal partners, but as technocrats to be mobilized and managed for national goals (population management, industrial development). The status and authority given to doctors were not rights based on a contract, but closer to favors that the state could grant or withdraw as needed. This historical experience gave birth to the statist notion that the state is superior to society, and policy opposition from the medical group was easily neutralized with the stigma of ‘collective selfishness’ rather than being seen as a legitimate expression of interest.
The absence of this contract leads to different dreams regarding the concept of ‘publicness.’ In the West, publicness is understood not as something monopolized by the state, but as a collective domain created together by the state, the market, and civil society. Doctors are recognized as autonomous subjects contributing to the public interest according to their own professional ethics and responsibility, not because they are controlled by the state. In Korea, ‘publicness’ is almost synonymous with ‘state-ness.’ To say ‘strengthen publicness’ is interpreted as ‘strengthen state control.’ Within this frame, the professional autonomy of doctors is disparaged as an act of pursuing private interest that hinders publicness.
In a country where the social contract is absent and publicness is reduced to state-ness, the cultural soil for advanced systems predicated on autonomy and partnership to take root does not exist. The government attempts to control doctors through systems, and doctors resist that control; this confrontational structure holds back all reform. This is the deepest root of the failure of Korean medical reform.
IV. Institutional Isomorphism — The Pathology of Reform That Only Borrows the Shell
The concept of ‘Institutional Isomorphism’ presented by sociologists DiMaggio and Powell (1983) is a useful lens to explain why Korean medical policy constantly imports foreign systems yet constantly fails. Isomorphism refers to the phenomenon where organizations (or states) imitate the structure and form of successful organizations in their environment to secure legitimacy. DiMaggio and Powell distinguished this into three types: coercive, mimetic, and normative isomorphism.
The importation of medical policy in Korea is a case of complex isomorphism where all three types operate. The obsession with having systems similar to those of members of the OECD, the club of advanced nations (mimetic isomorphism); the international pressure to follow recommendations from the WHO or OECD (coercive isomorphism); and the professional inertia of health policy experts who studied abroad trying to apply the models they learned (normative isomorphism) have combined to cause Korea to constantly import the external forms of advanced systems.
However, only the form was copied, while the function was not. As a result of the accumulation of the gap between form and function over half a century, the Korean medical system has become a Frankenstein monster of unknown identity. The supply system follows the German Bismarck model in that most facilities are privately owned, but the payment system bears the strong colors of the British Beveridge model in that the government controls all prices and mandates insurance enrollment. Furthermore, the management method indiscriminately introduces elements of American Managed Care, such as performance evaluation and network building. Each system operates organically with its own rationality within its original social context. However, in Korea, only the most convenient parts of each system—especially those elements easy for ‘control’—have been stripped away and grotesquely spliced together. Consequently, the parts of the system clash and cancel each other out, constantly producing inefficiencies and distortions that no one intended.
To use a medical metaphor, this is like Graft-versus-Host Disease (GVHD). A healthy organ (an advanced system) was transplanted, but the host's (Korean healthcare system) immune system (the pathological ecosystem of low fees, low trust, and high control) reacts hypersensitively and attacks the transplanted organ, eventually leading to both the organ and the host becoming ill. Unless this immune system is normalized, rejection will repeat regardless of which organ is transplanted.
V. Future Traps — What This Diagnosis Warns Of
If the analysis thus far has been an autopsy of past failures, this section is a preventive warning regarding future risks. Imagine the most innovative medical reforms currently discussed worldwide—AI-based precision medicine, digital healthcare, and telehealth platforms—being introduced to Korea. These technologies have the potential to change the medical paradigm. However, the law of contaminated soil applies to the future as well.
If the government again sets the fees for AI diagnostic algorithms at low levels below cost, hospitals will avoid adopting the technology or will bundle and sell unnecessary additional tests with AI diagnostics to make up for losses. The gravity of low fees can distort even state-of-the-art technology like AI into a non-reimbursable product.
Digital healthcare platforms that collect patient health data will be suspected in a low-trust environment as "a new means for the state to control and monitor the sensitive information of citizens." In a state where social distrust regarding the use of personal information is already rampant, the large-scale collection of health data could lead to adverse effects such as refusal to participate and data distortion.
If a legal responsibility for AI misdiagnosis is imposed once again on individual doctors in the field when medical accidents occur due to new technology, no one will actively attempt to use that technology. The reason AI-assisted diagnosis could spread in the UK is that the public system, the NHS, absorbs the responsibility at the institutional level. If individual doctors in Korea must even bear criminal responsibility for AI misdiagnosis, any innovative technology will merely become a "dangerous burden."
The same applies to telemedicine. What would happen if a primary physician system or a capitation system were introduced in Korea? Capitation is a method where a fixed total amount is paid based on the number of registered patients, and the doctor autonomously manages treatment within that budget. In developed countries, this system functions under the premise of appropriate medical fees and provides incentives for doctors to focus on prevention-oriented health management. However, if capitation is transplanted into Korea's low-fee environment, doctors are forced to engage in medical rationing—reducing necessary treatment for patients—in order to survive within the fixed budget. A tool for health management is thus inverted into a tool for health suppression. This is not a prediction; it is arithmetic.
VI. Conclusion — Unless the Soil Is Purified, Any Seed Becomes a Poisonous Weed
The soil of South Korea’s medical system is contaminated with three toxic substances.
First, political toxicity. A low-trust, high-control matrix accumulated by half a century of unilateral policies. Within this relationship, all reforms become targets of "struggle" rather than "cooperation," and systems based on autonomy are perverted into tools of control.
Second, economic toxicity. A chronic price distortion where low fees do not even reach the cost of service. In a structure where one works four times as much but receives one-third the pay, no rational payment system can function. Discussing "value-based healthcare" in the face of figures like a 61% cost recovery rate for obstetrics and gynecology and 55% for psychiatry is hypocrisy.
Third, historical and cultural toxicity. An authoritarian legacy lacking an equal social contract between the state and professional groups. This legacy equates publicness with state control and dismisses professional autonomy as selfishness.
When these three toxicities combine, the result remains the same regardless of what advanced system is imported—be it a DRG system, value-based healthcare, or a no-fault compensation system. Tools for efficiency turn into tools for exploitation, partnership mechanisms into surveillance mechanisms, and safety nets into nets full of holes.
Therefore, the starting point for true reform is not the importation of new systems. The warehouse of already imported systems is piled with unused goods. The New Diagnosis Related Group (New DRG) system, which has been in a pilot phase for 15 years, is proof of this. The problem is not a lack of systems, but the contamination of the soil.
Purifying the soil specifically means three things.
One, the normalization of prices. Creating a rational fee system based on the actual value and cost of medical acts. This entails a financial burden, but it is a prerequisite for all other reforms. Discussing efficiency in a system that does not compensate for costs is as cruel and meaningless as recommending a diet to a starving person.
Two, the restoration of trust. For the government and the medical community to recognize each other as partners rather than enemies, and to guarantee substantive joint participation in the policy-making process. This is not a unilateral concession by the government, but a resetting of the relationship toward the common goal of national health.
Three, the establishment of a new social contract. Not unilateral governance by the state, but the creation of a new protocol where the state, the medical community, and civil society agree on their respective roles and responsibilities. It must guarantee autonomy for doctors while demanding corresponding responsibility. The state must design the system but also take responsibility for its failures.
Importing another "advanced system" before honestly embarking on these three tasks is like Procrustes ordering a new bed. Even if the bed changes, the traveler still dies. Fitting the bed to the traveler. Fitting the system to reality. That is the question this chapter and this book are asking.
Chapter 38. A Garrison State Ruled by Phantoms: From Manchukuo to the Private Practice Licensing System
1. The Return of Old Gears: The National Total Mobilization System Resurrected in the 21st Century
Looking into the engine room of the South Korean medical system, an old, rusted gear rotates with a loud grinding noise amidst 21st-century high-tech parts. It is a legacy of the governance techniques experimented with by Nobusuke Kishi in Manchukuo during the 1930s. This chapter argues through constitutional, comparative institutional, and socio-economic lenses that the "private practice licensing system" and "regional total hospital bed volume system" recently submitted by the government are not simple medical policy debates, but a 21st-century reenactment of this historical governance structure.
2. Historical Lineage: Functional Convergence and Selective Transplantation
The academically accurate statement is this: primary sources proving direct benchmarking between the Soviet Semashko model and Manchukuo medical governance are currently insufficient. However, "functional convergence"—where both systems independently produced similar institutional forms under the common pressure of total war mobilization logic—is clearly established.
The South Manchuria Railway (Mantetsu) established the Hygiene Research Institute (Mantetsu Eisei Kenkyūjo) in 1926, which functioned as a hub for public health research. The core of this system was treating healthcare as a "functional infrastructure of imperial management" equal to railways, ports, and electricity (Kim, 2018; Suenaga, 2021). In mainland Japan, the National Medical Act (Kokumin Iryō Hō) of 1942 restricted the establishment of private hospitals and strengthened state direction of medical services. Yamagishi (2022) analyzes this as a "transition to total war and a quasi-public support program for medical care."
The path through which this governance technique was transplanted into post-war Korea is confirmed in two directions. Directly, the Park Chung-hee administration, composed of Manchukuo Military Academy graduates, applied the same logic—maintaining private ownership while the state monopolizes pricing and control—to the 5-Year Economic Development Plans. Institutionally, the introduction of the Compulsory Designation System for National Health Insurance in 1977 serves as the decisive moment.
Interpreted through the institutional isomorphism theory of DiMaggio & Powell (1983), three pressures are identified: coercive pressure from colonial/wartime total mobilization, mimetic pressure from Park Chung-hee’s bureaucrats referencing the Japanese health insurance model, and normative pressure from the instrumentalization of medicine under the developmentalist paradigm. The result is the "control without responsibility" structure identified by the franchise economics of Lafontaine & Slade (2007). The state (headquarters) monopolizes prices and standards, while private providers (franchisees) take full charge of daily operations and financial/legal risks.
3. The Constitutional Bankruptcy of the Private Practice Licensing System: An Extreme Violation of the Step Theory
The private practice licensing system and the total bed volume system recently proposed by the government represent the final form reached by this governance structure.
3.1 Violation of the Step Theory (Stufentheorie)
Article 15 of the Constitution of the Republic of Korea stipulates that "All citizens shall enjoy the freedom of occupation." The Step Theory established by the German Federal Constitutional Court divides restrictions on the freedom of occupation into three stages: regulation of the manner of practicing an occupation (Stage 1), restriction of the choice of occupation based on subjective reasons (Stage 2), and the most extreme final resort, the prohibition of entry into an occupation based on objective reasons (Stage 3).
The private practice licensing system is a clear Stage 3 restriction. Even if an individual possesses sufficient medical skill and capital, they are blocked from crossing the threshold of practicing their profession by an invisible wall called "total volume" arbitrarily set by the state. A restriction of this level must be the least intrusive measure for public welfare under the "Principle of Proportionality" in Article 37, Paragraph 2 of the Constitution, but the existence of alternatives—such as the French APL model—already demonstrates its excessiveness.
3.2 The State's Evasion of Responsibility and the Asymmetry of Coercion
Regional medical imbalance is empirically catastrophic. The transport time for severe trauma in Chuncheon, Gangwon-do, reaches 46 minutes, with a fatality rate nearing 54.7%. While the number of doctors per 1,000 people in Seoul is 3.4, it is only 1.3 in Gyeongbuk. Article 36, Paragraph 3 of the Constitution stipulates the state's health obligations by stating, "All citizens shall be protected by the state regarding health."
However, the Republic of Korea, instead of acting as the "party responsible" for building public infrastructure and investing finances, assumes the role of a "conscription officer" who drives private doctors into medically vulnerable areas by binding them with the whip of a licensing system. Deconstructing this through comparative institutionalism makes the conclusion even clearer.
France accurately selects vulnerable areas based on APL (Local Access to Healthcare Index) data and provides hortatory tools such as tax exemptions, incentives, and free infrastructure provision to doctors who open practices there. Korea mandates that the costs of establishing and maintaining hospitals be handled 100% by private capital and loans, while forcing compliance with state commands regarding location decisions and operational control. This is an asymmetrical structure where capital is procured privately, but control is exercised publicly.
3.3 The Site of Micro-Violence: The 6-Hour Rule in Nursing Hospitals
The true face of this extortion is revealed not in grand judicial rulings but in the wards of nursing hospitals every night. When a terminal cancer patient nearing the end of life is transferred to a nursing hospital and passes away in the early morning, the health insurance system cancels the hospitalization itself because the patient died within 6 hours of admission, paying only a symbolic outpatient fee of around 70,000 to 80,000 KRW. Within that amount, expensive medication costs, fluids, and the emotional labor of medical staff are all squeezed in.
The state cries out for "dignified care for terminal patients," but it resolves the costs and financial risks by free-riding on the tears and dedication of private hospital directors and nurses. This is how the control machine actually operates.
4. Consequences of the Structure: The Inevitability of the Balloon Effect
At the end of this oppressive regulation, only the balloon effect remains. The phenomenon of medical professionals escaping the controlled field of covered medical services to non-covered markets such as manual therapy, dermatology, and aesthetics—where price differences reach up to 62.5 times—is already underway.
This is a precisely predictable result based on the mechanism of system decline identified by Hirschman (1970). Hirschman categorized the ways system members respond to decline into "Voice" and "Exit." Korean doctors have warned of the system's contradictions through "Voice"—strikes and constitutional petitions—for decades. The state dismissed these voices by hiding behind the shield of "public welfare." The result is the collective resignation and leave of absence of approximately 10,000 residents and medical students in 2024.
This is not a strike. It is an event that proved that even if the state blocks private practice via a licensing system and confines space (Medical Service Act, Article 33), it cannot block the permanent "Exit" of abandoning the profession itself. Just because judges strike their gavels and declare the constitutionality of control does not mean thoracic surgeons will fall from the sky to hold scalpels in emergency rooms at 3 AM.
5. Conclusion: Toward the Realignment of Authority and Responsibility
The Manchukuo created by Nobusuke Kishi perished in 1945, but the legacy of the governance techniques he left behind persists in a modified form in 21st-century Korean healthcare. The core mechanism is consistent: ownership and financial risk belong to the private sector, while pricing power and entry control are monopolized by the state.
The policy implications shown by the comparison of the three countries are clear. Japan legislates a negotiable exit (the designated resignation procedure) to allow providers bargaining leverage. France resolves the problem of medical care in vulnerable areas through incentive structures rather than coercion. Only Korea adheres to a "hard franchise" structure that blocks escape routes while transferring financial responsibility to the private sector.
The private practice licensing system and the total bed volume system are not just professional issues for doctors. They are the latest version of the logic of forced requisition packaged in the language of "publicness." A system where authority and responsibility do not coincide inevitably collapses. The reason we persistently dissect this structure is simple: to deprive the state in advance of the alibis it will present when the system completely collapses—"We didn't know" or "It was for a good cause."
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[Box] Core Mechanism of the Manchukuo Model: "Private Ownership, State Control"
The industrial development system of Manchukuo, led by Nobusuke Kishi, maintained the appearance of private ownership to avoid the resistance that nationalization would bring. However, the direction of profit generation, pricing power, and entry control were monopolized by the state (the Kwantung Army and bureaucrats). Modern franchise economics (Lafontaine & Slade, 2007) terms this "control without residual claims": the franchisee bears the risk, but the headquarters sets the brand and price.
The 1977 Compulsory Designation System for National Health Insurance transplanted this structure into the medical system. Hospital establishment costs and the risk of bankruptcy belong to the private sector, while fees and entry control are monopolized by the state. The private practice licensing system is the logical completion of this structure. Expressed in the concepts of Hirschman (1970), a system that blocks both Voice and Exit leaves only silence. And a silent system collapses.
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Part VII. A Society Handed a Blank Bill: What Will We Choose?
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Chapter 39. Scientific Signs of Collapse: Dissecting the Death of the Medical System via Critical Transition Theory
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Introduction — This Is Not a Crisis; It Is a Phase Transition
In February 2024, over 90% of residents (69) at training hospitals nationwide submitted their resignations. The government responded with return-to-work orders and threats of license suspension; the media framed it as a "doctors' strike"; and public opinion was split between a "struggle for their own interests" and "violation of the Hippocratic Oath." Eighteen months later, in September 2025, 7,984 residents returned, but the recruitment rate remained at only 59.1%, with devastating figures of 17.4% for pediatrics relative to the quota and 27.6% for obstetrics and gynecology in non-metropolitan areas. Even after the return, the number of notices regarding difficulty in accepting emergency room (59) patients soared from 58,520 in 2023 to 110,033 in 2024, nearly doubling, and the re-transfer of emergency patients increased from 4,227 to 5,657. Though the residents returned, the system did not recover.
This fact points to an uncomfortable truth. What we witnessed was not a temporary 'crisis,' but a critical transition (315) as defined in complex systems science. Just as water suddenly turns into steam at 100 degrees Celsius, a complex system appears stable for a long time under gradual stress, only to shift abruptly to an entirely different state the moment it crosses a specific threshold. In physics, this is called a phase transition; in ecology, a regime shift; and in dynamical systems theory, a bifurcation. The names differ, but the mathematical structure is identical. Furthermore, that transition is irreversible. Cooling steam to 100 degrees does not immediately turn it back into water. This phenomenon is known as hysteresis.
This chapter intends to prove the following proposition: The South Korean healthcare system experienced a critical transition in 2024; this shift was a scientific consequence foretold by decades of accumulated structural stress; and the system has now entered a new regime from which it cannot return to its previous state spontaneously. To this end, I mobilize analytical tools from ecology, complex systems science, and macroeconomics to attempt a scientific dissection of the collapse—not through emotion, but through data; not through slogans, but through equations.
Section 1. Early Warning Systems: Signals Foretelling the Collapse
1. Critical Slowing Down — The System’s First Scream
In a groundbreaking paper published in Nature in 2009, Dutch ecologist Marten Scheffer discovered common statistical signs that appear before various complex systems—such as lakes, climates, financial markets, and ecosystems—collapse. This is is known as ‘critical slowing down.’ As a system approaches a critical point, the speed at which it returns to equilibrium after an external disturbance slows down significantly. This slowing manifests as two observable statistical fingerprints in time-series data: an increase in autocorrelation and an increase in variance.
This is exactly the same principle by which a healthy lake maintains its clarity through self-purification even when pollutants are introduced, but as phosphorus concentrations approach a threshold, it takes longer and longer for the water quality to recover after a period of degradation, and the fluctuations in water quality grow larger. Then, at a certain moment, the lake suddenly shifts into a completely different state filled with green algae. Even if the phosphorus concentration is lowered again, the lake does not easily return to its clear state.
The South Korean healthcare system exhibited exactly the same pattern.
Observation 1: Slowing recovery speed. The system experienced repeated external shocks, such as the 2000 pharmaceutical separation (72) crisis, the 2014 opposition to telemedicine, and the 2020 opposition to medical school quota increases. Initially, when the government stepped back, the medical community returned to work quickly, and the system restored its equilibrium relatively fast. However, the frequency of conflicts and the time required for resolution grew progressively longer. The 2000 crisis was resolved within months, but the 2020 situation was only settled due to the intervention of an external factor—COVID-19—and the 2024 situation failed to reach a full recovery even after 18 months. This is an increase in the time taken to restore equilibrium following a disturbance—a textbook case of critical slowing down.
Observation 2: Increasing volatility. Yearly fluctuations in essential healthcare (61) and residency application rates grew drastically starting in the late 2010s. In the case of pediatrics, the system's ‘shaking’ became incomparable to the past, with recruitment falling into an extreme deficit in the first half of 2024 and recording an ultra-low point of 13.4% (8.0% in non-metropolitan areas) even after returns in the second half of 2025. In a stable system, application rates would fluctuate within a relatively narrow range even after a specific shock, but the Korean healthcare system saw the amplitude of its core indicators grow uncontrollably, like micro-vibrations before an earthquake.
Observation 3: The ‘flickering’ phenomenon. Another early warning indicator proposed by Scheffer in Science in 2012 is ‘flickering,’ where a system fluctuates unstably between two alternative stable states. This was already appearing in the field of essential healthcare. Surgeries in regional public hospitals would cease due to doctor shortages, barely resume with the deployment of public health doctors, and then cease again. Pediatric emergency shifts would be maintained one month, disappear the next, and then barely be filled again. This shows the system is flickering between the states of ‘operating’ and ‘halted,’ serving as the most urgent warning that a complete transition is imminent.
2. Avoidable Mortality — The Vital Signs of System Health
If critical slowing down is an abstract indicator revealing structural vulnerability, avoidable mortality is the result of that vulnerability translated into actual human lives. This indicator measures the proportion of deaths that could have been prevented given timely preventive activities and medical intervention. The OECD (66) categorizes and calculates this as ‘preventable mortality’ and ‘treatable mortality,’ the sum of which is the avoidable mortality rate.
As of 2022, Korea’s avoidable mortality rate was 151.0 per 100,000 population, lower than the OECD average (228.6). Looking only at this figure, the Korean healthcare system still appears healthy. However, this average hides two fatal traps.
First is the stagnation of the improvement rate. Korea’s avoidable mortality rate decreased rapidly at an average annual rate of 5.1% from 206 deaths in 2012 to 159 in 2017, but between 2017 and 2022, it only decreased from 159 to 151, an annual average reduction of just 1.0%. Improvement has nearly stopped. This means the system has exhausted the gains available from ‘low-hanging fruit’ and has entered a stage where structural investment is required for further improvement. However, that investment did not occur. The deceleration of the improvement rate itself is an early warning that system capacity has reached its limit.
Second is the deepening regional gap. While the national average is favorable, the landscape changes completely when moving down to the city, county, and district levels. As of 2023, the treatable mortality rate in Seoul was 39.55 per 100,000 population, whereas North Chungcheong Province recorded the nation's highest at 49.94. The Preventable Trauma Death Rate for severe injuries is even more dramatic. This figure, which hovered in the 30% range until the 2000s, improved to 13.9% by 2021 following the establishment of regional trauma centers; however, this improvement is limited to areas with trauma centers. In non-urban areas with poor access to trauma centers, the rate of death due to failure to receive appropriate treatment within the ‘golden hour’ remains high.
The stability of the average value masks partial collapses. This is the primary reason why ‘early warnings’ of the healthcare system were ignored. While large hospitals in Gangnam, Seoul, boasted state-of-the-art robotic surgeries, hospitals capable of pediatric care were disappearing in the counties of South Jeolla Province. Behind the figure of the national average, the system was already crumbling from the edges.
3. The Necessity of Composite Indicators — Moving Beyond the Trap of Single Indicators
Relying on a single indicator makes it difficult to grasp the actual state of a system. Just as the health of a lake cannot be judged solely by phosphorus concentration in ecology, the health of a healthcare system cannot be diagnosed by mortality rates alone. What is needed is a composite indicator that combines various dimensions of data.
An ‘Early Warning Dashboard’ to detect the critical transition of the healthcare system must include at least the following four dimensions:
Dimension 1: Outcome indicators — Avoidable mortality, preventable trauma mortality, avoidable readmission rates. These measure the quality of the system's output.
Dimension 2: Process indicators — Number of notifications of emergency room overcrowding, number of emergency patient re-transfers, surgical waiting times, and the ratio of outpatient consultations lasting less than three minutes. These measure the operational efficiency of the system.
Dimension 3: Input indicators — Recruitment rates of residents in essential medical departments, the number of specialists by region, nurse turnover rates (70), and medical institution closure rates. These measure the quantity and quality of resources flowing into the system.
Dimension 4: Emotional indicators — Physician job satisfaction, burnout indices, the rate of negative responses to ‘would you become a doctor if born again,’ and the intent to leave essential healthcare fields. These measure the psychological state of the system's constituents.
By weighting and summing these four dimensions into a single time series, the trajectory of the entire system, which was invisible in individual indicators, is revealed. Applying the statistical tests proposed by Scheffer to that time series—trend tests for rolling-window autocorrelation and rolling-window variance—allows for a quantitative evaluation of how close the critical transition has approached.
The tragedy is that such an integrated early warning system did not exist in Korea. Each indicator was scattered across individual ministries and institutions; no one saw the whole picture of the puzzle. Or rather, no one wanted to see it.
Section 2. Erosion of Resilience — The Slow March Toward the Bifurcation Point
The core insight of critical transition theory is that what triggers a collapse is not the final shock, but the gradual erosion of resilience. In ecology, resilience is defined as ‘the ability of a system to absorb disturbances and maintain its original state.’ Using a physical metaphor, this corresponds to the depth and width of a valley where a ball is placed. If the valley is deep and wide, the ball returns to its original spot even after a strong impact. However, as the valley gradually becomes shallower, even a small shock can cause the ball to roll over the ridge into an entirely different valley. That is precisely what a critical transition is.
The ‘resilience valley’ of the South Korean healthcare system has been systematically eroded over decades. The drivers of this erosion are the structural factors analyzed in detail from Part 1 to Part 4 of this book. In this section, they are reconstructed from a dynamical perspective.
1. Erosion of Economic Resilience: Chronic Stress of Low Medical Fees
Just as nutrient deficiency gradually weakens an organism's immunity in an ecosystem, low medical fees have chronically weakened the economic immunity of medical institutions. Within a structure where health insurance fees remain at approximately 90% of the cost, medical institutions have survived through abnormal adaptation strategies such as ‘three-minute consultations’ and the expansion of non-reimbursable services (67). While this appeared to maintain the system in the short term, it was actually steadily eating away at ‘savings’ of resilience.
Expressed dynamically, low medical fees are a slow variable that gradually moves the system's stable equilibrium toward a bifurcation point. Just as phosphorus concentrations slowly rise in a lake, the pressure of low fees accumulated year by year, pushing the system into a danger zone. As analyzed in Chapter 5, the financial buffer of medical institutions within this ‘gilded cage’ steadily decreased, effectively exhausting the capacity to absorb external shocks.
2. Erosion of Human Resilience: Accumulation of Systemic Debt
The second pillar maintaining system resilience is the dedication and capability of human resources. However, the systemic debt imposed on the medical workforce has brought even this pillar down.
According to a 2024 survey by Intermd (321), job satisfaction among Korean doctors reached 53.7%, the lowest since the survey began in 2018. 82.6% experienced burnout, and more than half responded negatively to whether they would become doctors if born again. These figures are not a collection of individual complaints; they are quantified evidence that the human dimension of system resilience has fallen below critical levels.
Killing labor of over 80 hours per week (debt of time), the constant risk of criminal punishment for medical accidents (legal debt), and the extreme gap between social expectations of being ‘doctor-gods’ and actual treatment (emotional debt)—these three debts grew like compound interest, exhausting the psychological resilience of the medical workforce. This is isomorphic to the process of desertification in ecology, where excessive grazing erodes the soil of a grassland until the vegetation can no longer be restored.
3. Erosion of Institutional Resilience: Dissolution of the Healthcare Delivery System
The third pillar is the resilience of the institutional structure itself. The ‘three dominoes’ analyzed from Chapter 7 to Chapter 12—the pharmaceutical separation, the induced shift to long-term care hospitals (128), and the neglect of private indemnity insurance—sequentially dismantled the institutional framework of the healthcare delivery system.
The chain bankruptcy of regional small and medium-sized hospitals destroyed the functional division of labor between primary, secondary, and tertiary medical institutions. Patients bypassed local clinics to go directly to university hospitals. While university hospitals generated profit by treating patients with mild symptoms, the available beds and personnel for emergency and critical patients decreased. This is similar to a trophic cascade in an ecosystem, where the extinction of a meso-predator disrupts the entire food chain. With the disappearance of the middle layer—regional hospitals—overload occurred at the top (university hospitals) while hollowing out occurred at the bottom (private practices), leading to the collapse of the entire system's structural stability.
As the erosion of these three pillars proceeded simultaneously, the system's ‘resilience valley’ became shallower every year. In the 2000s, the system recovered despite the strong shock of the pharmaceutical separation crisis, and the same was true in 2014. However, by 2024, when the valley had become sufficiently shallow, the shock of a 2,000-person increase in the medical school quota was enough to send the ball rolling over the ridge.
Section 3. Triggers and Transition — Crossing the Bifurcation point in 2024
1. Dissecting the External Shock: Why ‘This Time’ Was Different
The 2,000-person medical school quota increase announced by the government in February 2024 was qualitatively different from past shocks. While previous shocks affected a single specific variable of the system, this shock struck all three pillars of resilience simultaneously.
From an economic perspective, the large-scale increase in personnel signaled a dilution of future income. From a human perspective, the policy of "merely pushing more people into that poisonous structure" trampled upon the last remaining professional self-esteem of frontline medical practitioners. From an institutional perspective, the unilateral decision made without any prior consultation with the medical community completed a confirmation bias that "the state will never listen to us." As these three axes were struck simultaneously, the already shallow valley vanished in an instant, and the system transitioned into an entirely different state.
Dynamically, this is a classic manifestation of a saddle-node bifurcation. Slow variables (low medical fees, labor exploitation, and the disintegration of the referral system) have pushed the system toward a bifurcation point over several decades, and the policy shock of 2024 acted as the "pin" that pushed it past the final threshold. It is akin to the moment a branch breaks when the last snowflake settles upon it. What breaks the branch is not the final snowflake, but the weight of all the snow accumulated before it.
**2. Positive Feedback Loop: The Death Spiral Is Activated**
The moment the threshold is crossed, positive feedback loops latent within the system are activated, accelerating the collapse. This is the "death spiral."
**Loop 1: Departure → Overload → Additional Departure.** When 90% of residents resigned, the overload concentrated on the remaining specialists. The overload accelerated burnout, and even established specialists began to leave the essential medical frontlines. The reduced workforce increased the burden on those remaining. This is a self-reinforcing loop that spins rapidly like a revolving door.
**Loop 2: Decrease in Supply → Worsening Accessibility → Social Condemnation → Decline in Professional Value → Decrease in Workforce Influx.** As "ER wandering" became commonplace and "pediatric open runs" were reported in the news, social condemnation poured in, claiming that "doctors have abandoned their patients." This damaged the social value of the medical profession and further weakened the motivation of future generations to apply for essential medical fields. The 17.4% recruitment rate for pediatrics in the second half of 2025 proves that this loop is already in operation.
**Loop 3: Collapse of Essential Medicine → Expansion of the Non-reimbursable Market → Outflow of Essential Medical Personnel.** As the essential medical field collapses, the attractiveness of relatively safe and profitable non-reimbursable sectors (esthetics, dermatology, plastic surgery) grows. The extreme polarization seen in the recruitment rates for returning residents in the second half of 2025—where dermatology reached 92.6% and radiology 95.3%, while general surgery stopped at 36.8%—shows that this loop is drastically distorting the allocation of personnel.
When these three loops operate simultaneously, the system experiences exponential acceleration rather than linear deterioration. This is why people feel that the collapse arrived "suddenly." In reality, the erosion that progressed slowly for decades went out of control due to positive feedback the moment it crossed the threshold.
**Section 4. Hysteresis and Irreversibility — Why We Cannot Go Back to "The Way It Was"**
**1. Hysteresis: The Reason We Cannot Return by the Same Path**
The most cold-blooded implication of this analysis is hysteresis. In ecology, to restore a desertified grassland, simply reducing grazing is insufficient. Because the soil has been lost and the seed bank vanished, restoration requires a much larger reverse intervention (irrigation, soil restoration, seed reintroduction) than the level of grazing that originally caused the desertification. This is because the path taken when a system collapses differs from the path that must be taken to recover.
In the medical system, hysteresis manifests as follows:
**Irreversible loss of human capital.** The 18 months during which residency training was suspended due to the 2024 resignations left a permanent void in the clinical competency of that cohort. A study published in *Frontiers in Public Health* in December 2025 confirmed the impact of mass resident resignations on the delivery of essential medical services, and one study reported that the surgical competency of surgical residents significantly decreased during the medical crisis. Training opportunities once lost cannot be recovered unless time is reversed.
**Loss of institutional memory.** The medical infrastructure and community networks of closed local small-to-medium hospitals disappear along with their physical closure. Buildings can be rebuilt, but patient-doctor relationships, regional medical expertise, and emergency transport networks accumulated over decades are not easily reconstructed.
**Destruction of trust capital.** The most deeply destroyed element in the 2024 crisis is the trust between the government, the medical community, and the public. The government came to perceive the medical community as "collective egoism," the medical community perceived the government as "addicted to control," and the public perceived both as "groups only looking out for their own interests." Trust takes decades to build but can be destroyed in months. And restoring destroyed trust requires far more cost and time than its original construction. This is social hysteresis.
**2. Shift of Attractor: The Arrival of a New "Steady State"**
From a dynamical perspective, the system has now left its past stable state (the "Korean medical miracle" of high accessibility, high quality, and low cost) and is converging toward a new attractor. This new attractor is a qualitatively different state from the past.
The characteristics of this state are as follows: essential medical departments maintain only minimal functions in a state of chronic personnel shortage. Personnel are oversupplied in the non-reimbursable esthetic and plastic surgery sectors. Medical disparities between the capital and non-capital regions become structurally fixed. The doctor-patient relationship transitions into a consumer-provider contract relationship, medical litigation increases further, and defensive medicine becomes the standard.
This is not complete extinction. The system continues to operate. However, it is fundamentally a different system from the one we knew. Just as a clear lake remains a "lake" after transitioning into a green algae-filled one, it becomes an ecologically entirely different world. Just as the UK NHS received warnings of reaching a "tipping point" in 2021 and yet the *New England Journal of Medicine* (NEJM) had to publish a paper titled "Broken or Just Breaking?" in 2023, once the transition begins, the time for warnings passes and only the time for management remains.
**Section 5. Interlocking with Macroeconomics — No Crisis is Isolated**
**1. The Medical System is Not an Island**
The medical system does not exist in isolation from the macroeconomic environment. The two are connected through multiple paths, and the deterioration of one is amplified and transmitted to the other.
**Path 1: The Demographic Time Bomb.** As of 2024, South Korea's total fertility rate is the lowest in the world, and its aging speed is the highest in the OECD. This means that while medical demand (chronic diseases of the elderly population) increases exponentially, the working-age population capable of handling that demand and the premium-paying base shrink. The structural deficit pressure on health insurance finances acts to further solidify low medical fees.
**Path 2: Consumption Contraction from Household Debt.** South Korea's household debt-to-GDP ratio is among the highest in the world. When household debt shrinks consumption, government tax revenue decreases and the capacity for national treasury support for health insurance diminishes. Simultaneously, the household's ability to pay for medical expenses decreases, making the upward adjustment of low medical fees politically more difficult.
**Path 3: The Vicious Cycle of Human Capital Outflow.** The collapse of the medical system lowers the overall quality of life in Korean society, which accelerates the overseas brain drain of elite personnel. Not only medical professionals but also high-level talent in other fields who feel the deterioration of medical accessibility begin to consider "leaving Korea" (see Chapter 37). The outflow of human capital undermines the growth potential of the entire economy, which in turn reduces the resources that can be invested back into the medical system.
The inter-system positive feedback loops formed by these three paths expand the death spiral within the medical system into a larger socioeconomic death spiral. The collapse of healthcare deepens public anxiety and despair, leading to birth avoidance, increased emigration, and weakened social cohesion, which again weakens the foundation of the medical system.
**2. Dynamics of Collective Sentiment**
At the core of this macro vicious cycle lies the long-term decline of collective sentiment. The falling birth rate, the highest suicide rate in the OECD (23.2 per 100,000 people vs. the OECD average of 10.7), and the structural despair of the youth generation—these indicators show that the "total will to live" in Korean society is declining.
From the perspective of bubble economics, the most decisive variable when an asset bubble (real estate, stocks) collapses is the collective psychological state of investors. The moment optimism turns to pessimism, panic selling occurs regardless of rational judgment. Similarly, in a medical system, if the collective sense of calling among medical professionals falls below a critical level, the departure from the field accelerates regardless of rational compensation or institutional improvements. The mass resignation of residents in 2024 was not a result of economic calculation, but a critical transition of collective sentiment. The moment the feeling that "I can't do this anymore" became collectively synchronized, individual cost-benefit analysis became meaningless.
**Section 6. Back-testing — Do Past Warnings Support This Analysis?**
The value of a scientific model lies not in post-hoc explanation, but in whether it can be verified through back-testing against past events.
**The 2000 Separation of Prescribing and Dispensing Crisis: The shock was great, but recovery was fast.**
At that time, the system's resilience was sufficient. The valley was deep. Job satisfaction among doctors was relatively high, the exit of the non-reimbursable market was just beginning to open, and the residency training system was still functioning. Once the government partially increased medical fees, the system regained equilibrium within months. The fact that the indicator of critical slowing down (recovery time) was short implies that the system was still far from the bifurcation point at this stage. However, because this patch-up covered up the fundamental problem rather than solving it, it continued the movement toward the bifurcation point by depleting resilience reserves.
**The 2014 Opposition to Telemedicine: Critical slowing down begins to be observed.**
In this event, the time taken to patch the conflict was longer than in 2000. The intensity of the medical community's backlash was fiercer, and distrust toward the government deepened. The system recovered, but the "flickering" (fluctuation range of indicators) during the recovery process increased. This is the second statistical fingerprint of critical slowing down: an increase in moving variance.
**The 2020 Opposition to Medical School Enrollment Increase: The emergence of "flickering" phenomenon.**
This was a perfect preview of 2024. Residents actually engaged in collective action, and the system was temporarily paralyzed. This is the system beginning to "flicker" between 'operation' and 'stoppage.' Had it not been for the external factor of the COVID-19 pandemic, it is highly likely this situation would have led to the 2024 results. Recovery occurred, but in the process, the members of the system learned that "collective action is possible and can be effective." This learning effect became the cognitive foundation that enabled the unprecedented action of full-scale resignations four years later.
When these three events are arranged chronologically, it is confirmed that Scheffer’s three early warning signals—increase in recovery time after disturbance, expansion of fluctuation range, and the emergence of flickering—appeared in textbook order. The collapse did not arrive "suddenly" in 2024; it had been foretold for at least 20 years.
**Section 7. Predictions and Implications — Three Questions Science Asks Politics**
**1. The Most Likely Future Predicted by the Model**
In a system where hysteresis exists, it is impossible to return to the previous state simply by removing the cause (increasing fees, withdrawing the enrollment increase). In addition to removing the cause, additional reverse energy must be injected to overcome the hysteresis.
If the current trajectory continues without this additional energy, the system will converge to the following state: Essential medicine will shrink to a "minimum viable" system dependent on the public sector (military doctors, public health doctors, and graduates of public medical schools). Private medicine will differentiate into a consumer goods industry centered on non-reimbursable services. The medical disparity between the capital and non-capital regions will effectively create "two countries." This is not a pessimistic imagination, but a characteristic of the attractor toward which the current system dynamics mathematically converge.
**2. Questions Science Poses to Politics**
First, which variable of the system are you trying to change? Increasing the medical school quota by 2,000 is a policy that touches only one input indicator (the number of doctors). However, as critical transition theory clearly shows, the collapse of a system stems from the multidimensional erosion of resilience, not a single variable. Unless low medical fees (economic dimension), labor exploitation (human dimension), and the disintegration of the referral system (institutional dimension) are addressed simultaneously, even if the workforce is increased, that workforce will not go into essential medicine. The recruitment rate for the second half of 2025 has already proven this. Dermatology at 92.6%, pediatrics at 13.4%. Even with an increased workforce, if the incentive structure of the system does not change, water always flows to the lower ground.
Second, do you have a strategy to overcome hysteresis? To restore a desertified grassland, more than just reducing grazing is needed. The soil must be rebuilt, seeds must be replanted, and it must be protected for a long time. Similarly, to restore a collapsed medical system, in addition to removing the cause by resolving low medical fees, additional reverse energy is required: rebuilding destroyed trust (honest apology from the government and admission of policy failure), re-entry of departed human capital (drastic improvement in treatment and legal protection), and reconstruction of the disintegrated referral system (investment in regional medical infrastructure). This is not an arrangement of fragmentary policies, but a comprehensive intervention at the level of a phase transition that changes the state of the system itself.
Third, is there an awareness of how much time remains? In a system where a positive feedback loop is operating, time does not flow linearly. The decline in the recruitment rate of residents for essential medical fields is accelerating, and the aging of specialists currently in training is irreversible. As of 2024, the average age of the total 148,250 specialists is 50.1 years. A massive wave of retirements will begin within the next 10 to 15 years, and the pipeline of essential medical personnel to replace them is already severely damaged. Wasting five years on political debate deepens the hysteresis of the system, causing the cost of restoration to increase exponentially. This is not a threat; it is mathematics.
Conclusion — Collapse was not destiny, but restoration demands an awakening.
A summary of the analysis in this chapter is as follows:
The South Korean healthcare system experienced a critical transition, as defined by complex systems science, in 2024. This transition was not a sudden event, but the result of decades of systematic erosion of resilience. The primary drivers of this erosion were the weakening of economic resilience due to low medical fees, the exhaustion of human resilience due to labor exploitation, and the dismantling of institutional resilience due to flawed policies. This erosion across three axes had already been generating scientific early warning signals—critical slowing down, increased variance, and flickering—since the 2000s, but these were ignored, hidden behind the statistical illusion of national averages. The policy shock of 2024 was merely the final snowflake. In a system that has passed its tipping point, a positive feedback loop was activated, accelerating the collapse, and due to hysteresis, simply removing the cause is insufficient to return to the previous state. The system is now converging toward a new, qualitatively degraded attractor.
However, this analysis should not be read as a scientific justification for pessimism. Critical transition theory does not only predict collapse. The same theory tells us that if sufficient energy and intervention in the correct direction are provided, the system can be transitioned to a new stable state, one that is better than before. A desert can become a grassland with the right restoration strategy. A lake filled with green algae can return to being a clear lake through a large-scale purification project.
Yet, this demands a decision of a fundamentally different dimension from the complacent expectation that the branch will reattach itself if only the last snowflake is cleared. It requires changing the fundamental parameters of the system. It requires re-digging the valley. It requires facing the weight of all the snow accumulated previously and being prepared to clear it.
That is the final question "Science" poses to "Politics": Will you awaken, or will you surrender to inertia? History will record the results of this choice in the cold numbers of avoidable mortality.
Chapter 40. Is There an Exit: The Rise of the 'Leaving Korea' Discourse
"People do not leave because the environment is bad; they leave when they are certain there is no possibility of it getting better."
— Albert O. Hirschman, *Exit, Voice, and Loyalty* (1970)
1. Introduction: Voting with One’s Feet
On February 20, 2024, the very day approximately 10,000 residents submitted their resignations at training hospitals nationwide, the server of the United States Medical Licensing Examination (USMLE) Korean community site crashed due to excessive concurrent users. According to K-DOC, a platform for medical career advancement overseas, inquiries from doctors regarding overseas employment more than doubled in 2024 compared to the previous year. Resigned residents picked up USMLE textbooks instead of returning to training. In the same year, Henley & Partners, a British investment migration consultancy, projected that the net outflow of high-net-worth individuals (with investable assets of $1 million or more) leaving South Korea would double from 1,200 in 2024 to 2,400 in 2025, ranking fourth in the world. It was estimated that approximately 21 trillion won in financial assets would flow across the border.
These two events are not coincidences occurring simultaneously in different worlds. They are two different symptoms erupting from a single systemic diagnosis. Doctors are reaching for passports instead of scrubs, and asset owners are opening Singaporean bank accounts instead of buying Gangnam apartments. The "Leaving Korea" phenomenon analyzed in this chapter is the final stage and the most tragic symptom of the "designed crisis" tracked through the 34 chapters of this book.
In 1970, economist Albert O. Hirschman argued in his book *Exit, Voice, and Loyalty* that when an organization declines, members have three choices: "Exit," "Voice," and "Loyalty." Hirschman warned that exit undermines voice. If those who can leave do so, the people who should stay and raise their voices disappear, and the organization collapses even faster, having lost its capacity for self-purification. For the past half-century, South Korea's doctors remained "loyal" and occasionally used their "voice." Examples include the 1971 medical ethics movement, the 2000 medical separation strike, and the 2020 collective walkout. However, each time, the state merely crushed the protest with the whip of medical service commencement orders and did not resolve the contradictions of the system. For a rational human being, when protest is repeatedly neutralized, only one final option remains: Exit.
After 2024, the elite groups of South Korea pulled out this final card. This is what political science calls "voting with one’s feet." It is an act of declaring final no-confidence in the system—not with a ballot, but with a boarding pass; not through protest, but through absence. In this chapter, we track who is leaving, why, and where they are going using empirical data, and analyze the "blank check" this exodus will leave for both those who depart and those who remain.
2. The Exodus as Told by Numbers: Reality, Not Discourse
"Leaving Korea" is not the sentimental grumbling of online communities. It is an ongoing reality already captured by international organization statistics.
In the "Brain Drain Index" published annually by the International Institute for Management Development (IMD) in Switzerland, South Korea's ranking plummeted from 28th in 2020 to 48th in 2025. It fell sharply into the lower ranks among the 69 countries surveyed. This index indicates that the closer the score is to 10, the less brain drain affects the economy, while a score closer to 0 signifies a severe negative impact. During the same period, South Korea fell 11 places in the IMD "World Talent Ranking," dropping from 26th in 2024 to 37th in 2025. Among Asian countries, it trails behind Hong Kong (4th), Singapore (7th), the UAE (9th), Taiwan (17th), and Malaysia (25th).
The specific figures supporting this are even more shocking. U.S. government data on the issuance of employment-based immigrant visas for high-level personnel (EB-1 and EB-2) proves this. In the 2024 fiscal year, a total of 5,847 South Koreans were issued these visas, the highest number in seven years since 2017. While it ranks third in absolute scale behind India and China, when converted to the number of people per 100,000 population, South Korea is approximately 11.3, effectively ranking first in the world. By the same standard, Japan is only 0.66. This means the intensity of South Korea's talent outflow is 17 times that of its neighbor, Japan. Comparisons with India (1.44) or China (0.94) are rendered meaningless.
The situation in the field of AI is particularly bleak. According to the Stanford Institute for Human-Centered AI's "AI Index Report 2025," South Korea recorded a net outflow of -0.36 AI talents per 10,000 population, ranking 35th out of 38 OECD countries. Except for 2020, there has been a continuous net outflow of AI talent every year from 2010 to 2024. The Bank of Korea estimated that approximately 16% of South Korea's professional AI workforce left for overseas during this period. While the government announced a 73-trillion-won national AI investment plan, the brains tasked with executing those investments are flowing out of the country every year.
Broadening the view to the general STEM fields, the number of South Korean STEM PhD holders in the United States more than doubled from approximately 9,000 in 2010 to approximately 18,000 in 2021. The net overseas outflow ratio of talent from five major domestic universities (Seoul National University, KAIST, POSTECH, Yonsei, and Korea University) reached an average of 47.5% between 2004 and 2024. This means nearly half of the talent educated at South Korea's top universities is building careers abroad. More seriously, 71% of South Koreans who obtained a doctorate in the United States expressed their intention to remain there. The brightest minds no longer intend to return to their home country.
In a survey conducted by the Bank of Korea, 62% of young domestic STEM personnel at the master's and doctoral levels responded that they were considering moving abroad. The reason is clear: the compensation gap. According to a report by the Korea Chamber of Commerce and Industry, the average domestic annual salary for STEM personnel with 10 years of experience after obtaining a degree is approximately 97.4 million won. The same talent receives an average annual salary of about 390 million won overseas. The average annual salary for domestic doctors is approximately 300 million won. Even for top-tier talent belonging to the "top 1% of the natural sciences," choosing STEM results in compensation that is only one-third that of a doctor and one-fourth that of overseas employment. This is the structural reason why the highest STEM talents flock to medical schools, and even those medical students prepare for the USMLE.
These numbers converge to one conclusion: "Leaving Korea" is a calculation, not an emotion; a reality already unfolding, not a mere discourse.
3. The Four Horses: Riders of the New Exodus
While past immigration was "subsistence migration" to escape economic deprivation, the "Leaving Korea" phenomenon after 2024 is fundamentally different in that it is "survival migration" led by the elite at the top of the system. These individuals are not leaving simply to make more money. They are people who have reached a state of "systemic distrust," believing that the South Korean system can no longer protect their capabilities, assets, or futures.
There are four horses leading this new exodus.
The First Horse: Escape of Human Capital — Doctors. The group of doctors, the core theme of this book, stands at the epicenter of the "Leaving Korea" discourse. Immediately after the collective resignation of residents in February 2024, traffic to USMLE community sites surged to the point of server failure. Concrete plans to "receive recommendation letters and match with U.S. residencies" began to be shared among resigned residents. The push factors are clear: murderous working hours of over 80 hours per week, fear of criminal punishment for medical accidents, economic exploitation through low medical fees, and social condemnation labeling them as "public enemies." The pull factors are also powerful. Around 2024, 15 U.S. states relaxed medical licensing requirements for graduates of foreign medical schools. Some states, such as Texas, Tennessee, and Florida, began implementing laws that allow for provisional licenses without having to undergo the residency training process within the U.S. The annual salary for a resident in the U.S. is between $60,000 and $70,000 (approx. 80–94 million won) before taxes, and the government separately pays training hospitals between $100,000 and $150,000 (approx. 150–200 million won) per resident as an educational subsidy. Compared to the annual salary residents receive in Korea, the difference is vast. With this door wide open, the more the Korean government tries to bolt it shut with medical service commencement orders, the more doctors perceive Korea as a "prison" rather than a "workplace."
The Second Horse: Escape of Financial Capital — Asset Owners. According to Henley & Partners' "Global Wealth Migration Report 2025," the expected net outflow of high-net-worth individuals from South Korea in 2025 is ,2400, ranking fourth in the world after the UK, China, and India. This is a sixfold increase compared to 400 people three years ago (2022). It is estimated that approximately $15.2 billion (approx. 21 trillion won) in financial assets will leave the country with them. In a survey of 4,000 individuals holding assets of 1 billion won or more conducted by the KB Financial Group Research Institute, 26.8% of respondents answered that they had "considered overseas investment migration." The primary reasons cited were excessive inheritance and gift taxes, unpredictable real estate policies, and political instability. The emergency martial law incident in December 2024 dealt a decisive blow to these anxieties. For asset owners, political uncertainty is asset risk. And capital has no nationality.
The Third Horse: Escape of Intellectual Capital — Professors and Researchers. At Seoul National University alone, 56 professors have moved to overseas institutions over the past four years: 28 in humanities and social sciences, 12 in natural sciences, and 12 in engineering. They left for the United States, Hong Kong, Singapore, and China. At the four major science and technology institutes—KAIST, GIST, DGIST, and UNIST—119 professors moved between 2021 and the first half of 2025, with a significant number heading overseas. The reasons are structural. South Korean universities have been suffering from deteriorating finances as tuition has been effectively frozen for 17 years, and the average annual salary of private university professors has risen by only 0.8% (about 800,000 won) over five years. Given that overseas universities offer salaries more than four times higher, abundant research subsidies, and housing assistance, "there is really no reason to reject a good offer," according to the testimony of an anonymous AI research professor. Witnessing the unilateral decision of the number "2,000" without scientific basis during the 2024 medical school enrollment expansion crisis, these researchers became convinced that Korean society does not respect "expertise" and "knowledge."
Fourth Word: Escape of Future Capital—The Youth Elite. The most tragic aspect is that the youth who must lead the future are joining this procession. According to one survey, 50.1% of 1,400 young job seekers responded that they desired overseas employment, and another survey showed that approximately 70% of those in their 20s and 30s were willing to leave South Korea to reside abroad. At KAIST, 182 students dropped out between 2021 and 2023 to apply to medical or dental schools. Among the top 1% of students in the natural sciences, 76.9% proceed to medical school, while enrollment in general science and engineering stands at only 10.3%. A dual outflow is forming: top-tier scientific and technological talent converges on medical schools, and from those medical schools, they look abroad again. Their reason for leaving is simple: despair over a "growthless society." It is the conviction that no matter how hard they work, they cannot surpass their parents' generation amid the social support burden caused by ultra-low birth rates, extreme competition, and insurmountable asset inequality.
The simultaneous departure of these four groups signifies something clear. The vessel known as the Republic of Korea can no longer contain its most important contents: people, money, knowledge, and the future.
**4. The Anatomy of Rationality: The Logic of Escape Seen Through Game Theory**
"Traitors who turn their backs on their motherland." Moral condemnation of those choosing to leave Korea is easy and convenient. However, this blame masks the essence of the problem. This is because their choice is not an emotional escape but corresponds exactly to the rational optimal strategy predicted by Game Theory.
Let us simplify the model. A single elite individual stands before two options: "Stay" and "Leave." The expected payoff of this choice is determined by one external variable beyond the individual's control: the "probability of system collapse (P)."
If the system is maintained (probability 1-P): The person who stays enjoys the premiums of existing social status, human networks, and cultural identity. The person who leaves pays the opportunity cost of immigration (language barriers, cultural adaptation, loss of social capital). The reward for staying is superior.
If the system collapses (probability P): The person who stays takes a direct hit from plummeting asset values, a paralyzed medical system, and social chaos. The person who leaves avoids the direct damage of the collapse, though the fixed costs of immigration difficulties remain. However, those costs are negligible compared to the damage of the collapse. The reward for leaving is overwhelmingly superior.
The key is the magnitude of P. When P is low—that is, when trust in the system is high—staying is the naturally dominant strategy. No one leaves a flourishing country. However, the moment P crosses a certain tipping point, the expected value of "leaving" mathematically transcends the expected value of "staying." At this moment, "leaving" switches to the dominant strategy. This is the inflection point of exodus.
The plummeting of the IMD Brain Drain Index (from 28th to 48th), the explosion of EB-1 and EB-2 visa issuances (1st in the world relative to population), the sixfold increase in the outflow of high-net-worth individuals, and the 62% of master's and doctoral degree holders in science and engineering intending to move abroad. All this data points to the fact that the P (probability of collapse) perceived by the elite groups of Korean society has already passed the inflection point.
Blaming them is like blaming the thermometer. The real question should not be "Why are they leaving?" but "What has made such rational people perceive the future of their motherland as a foregone collapse?" And the answer has already been presented throughout Chapters 1 to 36 of this book. Low medical fees, forced mobilization, policy failures, and the shifting of responsibility. Structural failures spanning half a century have pierced through the floor of trust.
**5. The Death of Political Efficacy: Why Give Up Resistance?**
Returning to Hirschman’s theory: theoretically, opposite to "Exit" exists the option of "Voice." Even if the system is unsatisfactory, if there is a belief that raising one's voice can bring about change, a rational individual might choose to fight instead of leave. The "Loyalty" Hirschman spoke of is precisely this function—a buffer that delays exit and buys time for voice.
However, for South Korean doctors, this buffer has already worn away and disappeared. "Political efficacy"—the belief that one's actions can influence policy decisions—has completely vanished.
This is the result of historical learning. In the 1971 medical crisis, the government responded with consistent control instead of improving treatment. In the 2000 pharmaceutical separation strike, the medical community was defeated without gaining substantial concessions. The same occurred in the 2020 strike against medical school quota increases. And in 2024, during the most intense and longest-lasting collective resignation of residents, the government's first reaction was the familiar whip of "medical commencement orders" and "threats of license revocation." This conflict, which lasted approximately 627 days, finally reached a superficial closure with the return of residents and medical students in July and August 2025, but it was closer to "exhaustion" than a "victory" for the medical community.
The repeating pattern gave birth to a form of "learned helplessness." "No matter what we say, no matter what we do, the state will ultimately suppress us with force." Once this perception takes hold, voice is relegated to a meaningless act that only incurs costs without bringing any change. The moment the expected reward for voice converges to zero, rational humans are left with only two choices: resigned compliance or leaving.
The bankruptcy of "policy trust" further accelerates this loss of efficacy. Even if the government promises an "essential healthcare policy package," a "10 trillion won investment," and a "safety net for medical accidents," the medical community already categorizes these as "promises that will not be kept." In a relationship where trust has collapsed, promises are merely noise. As analyzed in Chapter 34, looking into the details of the promises reveals that fatal accidents are excluded from the safety net, and the actual scale of the fee increases is negligible. The suspicion that a "carrot" is offered but contains poison inside is the legacy left by repeated betrayals.
When political efficacy dies, loyalty is no longer a buffer that buys time for voice; it becomes a shackle that forces the voluntary endurance of exploitation. The act of breaking these shackles is "Exit." Leaving is not betrayal. It is the final resistance of those deprived of all means to protest.
**6. The Mirror of History: Brain Drain Was the Omen of Collapse**
The large-scale departure of elite groups is a phenomenon repeatedly observed in history, and it has invariably been the most certain omen signaling the decline or collapse of a nation.
Russia after the collapse of the Soviet Union (1990s). After the fall of the Soviet Union in 1991, approximately 80,000 scientists migrated to the United States and Europe in the first half of the 1990s alone. During the same period, Russia's scientific research budget was cut by 90%. Russia's research capability, which once vied with the U.S. for global scientific and technological hegemony, suffered irreparable damage due to this exodus. Russia's scientific infrastructure, deprived of its core personnel, has not recovered to Soviet-era levels even after 30 years.
Venezuela (2010s to present). The economic mismanagement of the Chavez and Maduro regimes triggered a massive overseas departure of the professional class, including doctors, professors, and engineers. According to the Venezuelan Alliance for Health, more than 24,000 doctors migrated abroad. This scale accounts for one-third of all doctors. NPR reported in 2018 that "more than 13,000 doctors left Venezuela in the last four years." As a result, the remaining hospitals have no electricity, no medicine, and no doctors. In a nation where even basic medical services have collapsed, reconstruction is a distant dream. That patients cannot be safe in a country where doctors have left is a reality, not a theory.
South Korea in the 1970s. As analyzed in Chapter 2 of this book, during the 1971 medical crisis, going to the United States was a realistic option for South Korean doctors. Doctors dissatisfied with the Park Chung-hee government's authoritarian control and the poor environment actually left for the U.S. However, South Korea at that time had conditions crucially different from today. The population was growing rapidly, the economy was on a high-growth trajectory, and the belief that "tomorrow will be better than today" permeated the entire society. Even if people left, new personnel were constantly supplied to fill the system.
In today's South Korea, all these conditions are reversed. The total fertility rate is at the lowest level in the world, the economic growth rate is slowing, and pessimism that "tomorrow will be worse than today" dominates the youth generation. When one elite leaves, the next generation of talent to fill that vacancy is dwindling. This is why the current "Exit Korea" is potentially more destructive than the outflow of the 1970s or Russia after the Soviet collapse. Russia at least had a young population left to replace the departed scientists. In South Korea, system collapse and demographic collapse are progressing simultaneously, and this combination extinguishes the very potential to rise again once it falls.
**7. A Whip Without a Carrot: The Government’s Fatal Miscalculation**
The government's response to the elite exodus is filled with fatal miscalculations that, far from stopping this flow, actually accelerate it. The core of that miscalculation can be summarized in one phrase: "A whip without a carrot."
The whip the government relies on consists of medical commencement orders based on Article 59 of the Medical Service Act, threats of license revocation, and the solicitation of refusal of recommendation letters for resigning residents. In March 2024, the government announced administrative dispositions for residents preparing to go abroad and pressured professors to refrain from writing recommendation letters. In response, parts of the medical community erupted with backlash, demanding an "end to the intimidation."
This "whip strategy" carries two fundamental limitations. First, it is effective only within national borders. Doctors, scientists, and asset owners are no longer beings subordinate to a single nation. In the global talent market, their skills and assets are welcomed across borders. The fact that 15 U.S. states are easing licensing requirements for foreign doctors proves this. No matter how fiercely the whip is swung within the borders, it cannot reach the world beyond the open door. Second, repression strengthens the motivation to exit. The more one is struck by the whip, the more the perception solidifies that "this country is not a place to stay, but a place to escape." The more a hand is thrust in to catch a bird in a cage, the more desperately the bird flies toward the open window.
The carrots the government has extended—the essential healthcare policy package and the 10 trillion won investment promise—have already lost trust or are deceptive in content. The wall of distrust left by decades of repeated broken promises cannot be demolished by any flowery rhetoric. Looking into the details of the promises, fatal accidents are excluded from the safety net, and the practical benefits of fee increases are concentrated in large hospitals in the capital region. This is like saying, "I will strike you if you do not eat this rotten apple, but there is fresh fruit in the house next door." Any rational human would climb over the fence.
The essence of the government's fatal miscalculation lies in the delusion that nationalistic control methods from the era of developmental dictatorship will still work in an era of global competition. In the 1970s, borders were closed, overseas information was blocked, and alternatives were invisible. In the 2020s, everything is open. The annual salaries of U.S. doctors are searched in real-time, and reviews of settling abroad record tens of thousands of views on YouTube. The cost of control has risen exponentially, and the effectiveness of control is converging to zero. This is why all of the government's responses are operating, contrary to intention, as the accelerator for the exodus known as "Exit Korea."
**8. Ethical Dilemma: Between the Right to Leave and the Responsibility to Stay**
This exodus raises deep ethical questions. Does a doctor have the right to leave an oppressive system to pursue a better life, or do they have a special obligation to stay and care for patients?
The argument for the "Right to Exit" is as follows: every individual possesses basic freedom of movement. If the state first breaches the social contract with professionals—the guarantee of rational compensation and professional autonomy—the basis for the individual to be unilaterally bound by that contract disappears. In the South Korean medical system, the state has forced economic exploitation through low fees, restricted the freedom of labor through medical commencement orders, and threatened professional safety through a structure of criminal punishment. The state is the party that breached the social contract first. When one party to a contract does not fulfill its obligations while forcing performance only on the other side, it is difficult to justify legally or ethically.
The argument for the "Responsibility to Restore" also exists. A doctor is not a simple market participant but a professional with a special social calling directly responsible for the lives of the people. When a ship sinks, the captain has an obligation to be the last to leave the ship. If one abandons the collapsing system and leaves, the patients who cannot leave—the elderly, the low-income, and rural residents—bear the damage entirely.
The "Ethics of Responsibility" (Verantwortungsethik) spoken of by Max Weber provides an important standard for this dilemma. According to Weber, to demand responsibility from a professional, the minimum conditions to fulfill that responsibility—predictability, autonomy, and basic dignity—must be guaranteed. When a system systematically destroys these conditions while demanding only "sacrifice," the responsibility to restore degenerates into an unjust shackle. The story of a captain having to leave the ship last applies when the ship owner has maintained the ship in a condition fit for navigation. If the owner deliberately poked holes in the ship, removed the lifeboats, and forced the departure while ignoring the captain's protests, then demanding the captain go down with the sinking ship is not ethics, but violence.
The conclusion of this book regarding this dilemma is clear. "Exit Korea" is not a moral failure of the individual, but a rational response to the systemic failure of the state. Before blaming the departure of doctors, it is the state's duty to create the conditions under which doctors can stay. As long as the state abandons this duty and forces sacrifice only on individuals, the exodus will not stop.
9. The Economics of Exodus: The Bill for Those Left Behind
What those who depart leave behind is not merely an empty space. It is an astronomical cost transferred to everyone who remains.
The erosion of the tax base. Doctors, asset owners, and successful professionals are the core source of income and property taxes, as well as major contributors to health insurance and the national pension. When they leave, the two pillars of national finance—tax revenue and social insurance finances—weaken simultaneously. The outflow of approximately 21 trillion won in financial assets accompanying the departure of 2,400 high-net-worth individuals is, in itself, a direct blow to the tax base. More serious is the fact that their departure exponentially increases the burden on those staying behind. While the elderly population requiring support grows, the working-age population available to share that cost shrinks. On top of the inverted population pyramid already created by South Korea’s ultra-low birth rate, the additional blow of an elite brain drain is dealt.
The extinction of innovation potential. The outflow of professors, researchers, and young talents directly destroys the competitiveness of universities and research institutes. The departure of 56 professors from Seoul National University over four years signifies not just the loss of their individual research capabilities, but the simultaneous disappearance of the laboratories they led, the graduate students they mentored, and the international networks they had built. As warned by the report from the Korea Chamber of Commerce and Industry, in a situation where a shortage of at least 580,000 talents in the fields of AI, cloud, and big data is expected by 2029, the overseas outflow of core brains stifles the long-term growth engine of the Korean economy. Even if the government promises 73 trillion won in AI investment, without the brains to lead that investment, the money is like being poured into an empty shell.
Downward pressure on the asset market. When asset owners seeking to emigrate begin disposing of domestic real estate, they add an additional burden of supply to a real estate market already facing long-term downward pressure due to population decline. The motivation for foreign investment capital to flow into a country that even domestic elites are leaving also weakens. The dual effect of domestic capital outflow and decreased foreign capital inflow makes a soft landing for the asset market even more difficult.
A self-reinforcing vicious cycle. All these effects form a "death spiral" that amplifies one another. Elite exodus → decreased tax revenue and slowed innovation → decline in national attractiveness → more elite exodus → even more severe tax revenue decrease and slowed innovation. Once this spiral starts, it is difficult to stop without a powerful external shock. When those who have left settle successfully abroad, it serves as a signal to those remaining that "I can leave too" and acts as a bridge providing the information and networks necessary for local settlement, further accelerating the exodus. The "network effect" spoken of in economics operates even in the process of departure.
Ultimately, the true cost of "Exodus Korea" is not paid by those who leave. It is transferred entirely to those who cannot leave—the elderly, the low-income class, rural residents, and children. On the final line of the economic bill left by the "Exodus Korea" phenomenon, a sentence is written: the society known as the Republic of Korea is no longer "sustainable."
10. The River of No Return: Can the Exodus Be Stopped?
The conclusion of a sober analysis is pessimistic. In the short term, and under current political conditions, reversing this exodus is extremely difficult. It is highly likely that we are already standing in the middle of a "river of no return."
There are three reasons for this.
First, the irreversibility of trust. Just as a broken glass cannot be restored to its original state, rebuilding trust in a system once it has been destroyed requires several or dozens of times the duration it took to destroy it. It is beyond naive—it is ignorant—to believe that the distrust accumulated over half a century from 1971 to 2024 can be offset by a single policy package.
Second, the irreversibility of the population structure. The ultra-low birth rate and extreme population aging, which comprise the most fundamental background of the exodus, represent a fixed future whose direction cannot be reversed for decades to come. A child not born in 2024 cannot become a 25-year-old youth in 2050. As long as this demographic pressure exists, structural pessimism regarding the future of Korean society will not vanish.
Third, the irreversibility of migration. Historically, "brain drain" has been a phenomenon extremely difficult to reverse once it begins. The time, cost, and emotional energy invested in the process of settling abroad become massive sunk costs. The probability of abandoning a new foundation for life, children's schools, and professional networks to return to a homeland filled with uncertainty is eloquently demonstrated by the fact that 71% of South Korean physical science PhD recipients in the U.S. intend to remain there.
If there is a single exit, it is not incremental improvement within the existing framework, but a fundamental transformation on the level of rewriting the operating system itself. This includes clearing the original sin of low medical fees, epochal guarantees of professional autonomy, the establishment of a new social contract between the state and the medical community, and the building of a predictable and rational policy environment. None of these are "easy tasks." All must be achieved simultaneously, a challenge that is nearly impossible in the current political landscape.
Paradoxically, such fundamental transformations have historically been possible only after a system has completely collapsed—upon the ruins. Germany's social market economy was born atop the ruins of World War II, and South Korea’s own industrialization began from the ruins after the war. Ironically, as long as the collapse is not total, vested interest structures do not permit self-transformation. This is the deepest ground for the prediction that the exodus of "Exodus Korea" will not easily stop.
11. Conclusion: Questions Beginning in an Empty Land
The "Exodus Korea" phenomenon tracked in this chapter is the final destination reached by the arguments of this entire book. The "original sins" analyzed in Part 1—low fees, forced mobilization, and the shifting of responsibility—were the seeds; the "three dominoes" of Part 2 grew the stem; and the "distorted market" of Part 3 and "predatory cartel" of Part 4 extended the branches. The "scapegoats" analyzed in Part 5—medical residents, nurses, and rural patients—are the people swallowed by this tree. And the final fruit of that tree is indeed "Exodus Korea."
People leave, money leaves, knowledge leaves, and the future leaves. The crash of the IMD index (from 28th to 48th), the world's highest issuance rate of EB-1 and EB-2 visas (11.3 per population), the world's 4th highest outflow of high-net-worth individuals, and the OECD's lowest tier in AI talent outflow. These numbers are not independent statistics but the same symptoms of a single systemic diagnosis captured by various measurement tools. The vessel called the Republic of Korea is cracking, and the most precious contents are leaking out first.
The title of Part 7, "A Society That Received a Blank Bill," now reveals its full meaning. The bill we have received does not only list the collapse of the medical system. In its final item, the most fundamental and irrecoverable cost is written: "The Extinction of the Community." A state where "we," who solve problems and create the future together, no longer exist. That is the final destination of the exodus.
However, analysis must not end in despair. Science can calculate the probability of possibilities, but it cannot determine human will and choice. Those who left found their own exit based on rational calculation. That is their right. However, the true "blank bill" they left behind has become the burden of those who cannot leave or have chosen not to leave.
Hirschman warned that "exit" undermines "voice," but he also left one possibility open. When the shock of exit is sufficiently large, it can serve as an alarm that makes the remaining members realize the crisis of the system. Perhaps a true transformation can only begin at the moment when the people left behind, with nowhere else to lean after the most brilliant have departed, face one another in the empty space.
When that moment arrives, the question we must answer is not "Why did they leave?" We already know that answer. The real question is this:
"Nevertheless, how shall we start again?"
The process of finding the answer to that question is the only light we must face at the end of this long and dark analysis. In the next chapter, we finally explore where that light might come from.
Chapter 41. Toward Truth and Reconciliation
Introduction — Hospitals Turned into Battlegrounds, Questions Left Behind
In February 2024, an event unprecedented in the history of South Korean medicine began. Approximately 12,000 medical residents (69) left their training hospitals all at once. Operating rooms stopped, emergency rooms (59) closed, and the government issued its highest-level crisis alert in the health and medical sector for the first time in history. Eighteen months passed—a duration for which it is difficult to find a precedent in any other country. In September 2025, the residents finally returned to the hospitals, and in October, the crisis alert was lifted. Then, just four months later in February 2026, the government announced an expansion of the medical school quota again. The plan was to increase the quota by 3,342 in total by 2031, starting with an increase of 490 from the 2027 academic year.
On the surface, the crisis appears to have concluded. The Minister of Health and Welfare announced that "the medical system has recovered to 95 percent of normal operations." However, the truth hidden behind these numbers is different. Not a single structural contradiction analyzed throughout this book has been resolved. The original sin of low medical fees remains intact, the framework of forced mobilization under the compulsory designation system for medical institutions (63) is still there, and the collapse of the medical delivery system has deepened. The return of the residents was not a "reconciliation," but rather closer to a surrender of individuals who could no longer hold out. And the government’s push for a quota increase was an act of confessing that it had learned no lessons from the 18 months of social suffering.
We are now in a state where the symptoms of conflict have been temporarily alleviated without the causes of the conflict being removed. The wound has been sutured, but it is festering inside. The question we must ask in this chapter is clear: Is true healing and reconstruction possible atop these ruins? If so, where does that path begin?
To answer this question, we intend to borrow a precedent from history.
1. Why 'Truth and Reconciliation' — Through the Lens of Transitional Justice
In 1996, in South Africa, immediately after the official abolition of apartheid—one of the most barbaric systems in human history—the 'Truth and Reconciliation Commission (TRC)' was launched with Archbishop Desmond Tutu as its chairperson. The philosophy of this commission was simple yet revolutionary: to create a foundation for forgiveness through the confession of truth rather than punishment. The process of perpetrators publicly testifying to their actions and victims hearing those testimonies became a practical act of healing that reconnected a destroyed community.
Someone might immediately object, questioning whether the organized violence of a racist regime and the failure of medical policy can be placed on the same level. Of course, their scale and nature differ. However, there is a core common denominator. In both cases, the power known as the state exercised structural injustice against a specific group, and in that process, social trust was completely destroyed. On top of this destroyed trust, no institutional reform can function.
In fact, the South African TRC held a separate hearing for the health and medical sector. In the "Health Sector Hearing" held in June 1997, the TRC investigated how the health system participated in or turned a blind eye to human rights violations under the apartheid regime. Instances where doctors and nurses collaborated in or ignored the torture of detainees, structures where medical resource distribution was discriminatory by race, and how the professional ethics of health experts were distorted by state power were recorded in detail. This hearing officially identified that injustice in the health system was not a mere matter of "lack of resources," but an institutional violence created by power structures.
The crisis of South Korea's medical system essentially shares the same structure. Over half a century, the government has forcibly incorporated private medical institutions, forced medical fees below cost, and legitimized this exploitative structure under the name of "public welfare." When all the contradictions created by this structure exploded, it shifted the responsibility to the medical community under the single frame of a "shortage of doctors." This is a type of "institutional scapegoating," blaming a specific group for the results of policy failures.
Therefore, the framework of "truth and reconciliation" is not a rhetorical decoration. It is an analytical tool to clarify that the essence of South Korea's medical crisis is not a technical problem (number of doctors, system design), but a matter of justice and trust. Technical solutions only take root in the soil of trust. In a state where that soil is completely contaminated, no seed can grow.
2. Three Layers of Truth — What Must Be Identified
The identification of truth is not an abstract declaration but means the confirmation of specific facts and official records. Just as the South African TRC distinguished four categories of truth—factual truth, personal/narrative truth, social/dialogical truth, and healing/restorative truth—the truth of South Korea's medical collapse also has multiple layers.
The First Layer: Identifying Structural Causality — "Who Designed This System?"
The entirety of this book has been the task of identifying this first layer of truth. Starting from the introduction of the compulsory designation system for medical institutions in 1977, we have traced the causality of a chain of policies spanning half a century: the entrenchment of the low-fee structure, the serial bankruptcy of small and medium-sized hospitals triggered by the separation of prescribing and dispensing (72), the forced conversion into long-term care hospitals (128), the explosion of the non-reimbursed (67) market due to the neglect of indemnity insurance, and finally, the complete destruction of the medical delivery system.
In this analytical process, we encountered two interpretations. One is the 'patchwork prescription hypothesis.' It posits that the government, lacking a vision to solve fundamental structural problems, resorted to nearsighted, temporary expedients to evade immediate crises. The other is the 'ratchet hypothesis.' This suggests that government policy was the product of a cynical strategy to secure 'maximum control at minimum cost,' intentionally following the stages of 'construction → functional castration → strengthening control → dismantling and replacement.'
Which of the two hypotheses is the truth is a task to be left to the follow-up research of political historians. However, the core of uncovering the truth does not lie in judging the 'intent' of the government. The key is to clarify the fact that the state—whether incompetent or competent—has been the entity designing and operating every key variable of the South Korean healthcare system for the past 50 years, and therefore, the final responsibility for the current catastrophe also rests with the state. Even if the intent was benevolent, failing to prevent a foreseeable disaster cannot be a ground for exemption from responsibility. This is where the distinction between 'ethics of conviction' (Gesinnungsethik) and 'ethics of responsibility' (Verantwortungsethik), as defined by German sociologist Max Weber, applies. The excuse that "it was a good intention" does not extinguish political responsibility.
**The Second Layer: Deconstructing Discursive Deception — “The Grand Illusion of ‘Doctor Shortage’”**
In 2024, the government’s reduction of all causes of the crisis to a single variable—the 'absolute shortage of doctors'—and its presentation of a simple solution—increasing the medical school quota by 2,000—was not a scientific diagnosis but a political framing (83). This frame served two core functions.
First, the shift of responsibility. By covering decades of complex policy failures—such as low medical fees, the collapse of the delivery system, the neglect of indemnity insurance, and the oversupply of nursing hospitals—with the single proposition that 'doctors are insufficient,' the government successfully shifted the blame onto the medical community opposing the quota increase. Second, the justification of control. The stigma of being a 'selfish vested interest group disregarding the lives of the people' became a powerful rhetorical weapon to neutralize all resistance from the medical community as 'collective egoism.'
As this book has argued, doctors did not disappear; they moved. From the essential healthcare (61) field, where risks of criminal punishment and inhuman labor intensity loom, they rationally migrated to the stable non-reimbursable market guaranteed by indemnity insurance. This was not a matter of individual ethics but an inevitable result created by the system's incentive structure. The second layer of uncovering the truth is for society as a whole to acknowledge that this 'doctor shortage' discourse was a sophisticatedly designed 'scapegoat mechanism.' Unless this illusion is lifted, discussions addressing the real cause—structural defects in the system—cannot begin.
In February 2026, the government’s re-announcement of an increase in the medical school quota is evidence that this illusion remains robust. Of course, there are differences this time, such as reducing the scale to 490 (for 2027) instead of 2,000 and distributing them primarily to local medical schools rather than the metropolitan area. However, the essence remains unchanged. This is because they are repeating the same logic—'increasing the number will solve it'—without a structural diagnosis of why doctors leave the provinces or avoid essential healthcare. The condition of '10-year mandatory regional service' included in this expansion plan starkly reveals that the state’s old habit of trying to solve problems through coercion, rather than incentives, has not been corrected at all.
**The Third Layer: Acknowledging Collective Responsibility — “We Are All the Recipients of the Blank Invoice”**
The most difficult yet essential final layer of uncovering the truth is facing the uncomfortable fact that the responsibility for this collapse does not lie with a specific group alone.
The state must bear the heaviest responsibility as the final authority that designed and operated the system. However, other actors are not free from blame. The medical community, while enjoying economic benefits from the non-reimbursable market within the distorted system, failed to speak out sufficiently for the structural reform of the entire system. Citizens settled for the myth of 'low cost-high efficiency' and maintained contradictory expectations, demanding world-class medical care while paying insurance premiums at the lowest levels of the OECD (66). The media, instead of analyzing the structural causes of the conflict, consumed and amplified it through a binary frame of 'greedy doctors vs. victimized patients.'
The system’s human capital (doctors' sense of calling) and financial capital (health insurance finances) are destroying each other and falling into a 'death spiral.' The engine of this spiral is not the malice of any one group, but a collective irrationality created by the results of every actor rationally pursuing their own self-interest. The 'fallacy of composition' in economics has swallowed the entire national healthcare system. Therefore, the final layer of truth lies in painful self-reflection, ending the politics of 'blaming others' and admitting that this is 'our' problem.
**3. Why Reconciliation is Impossible Now — The Political Economy of a Broken Mirror**
Even if the truth is uncovered, reconciliation does not automatically follow. The South African TRC also showed the limits of naive optimism that 'confession of truth brings reconciliation.' There were countless cases where the victims' anger and trauma were not healed despite the perpetrators' testimony, and structural inequality persisted for a long time despite the TRC's recommendations. Truth is a necessary condition for reconciliation, not a sufficient one.
In the case of the South Korean healthcare system, the possibility of headquarters reconciliation is even more limited. The reason is that social trust has not merely been damaged; it has been completely destroyed.
The framework of 'communicative action' (kommunikatives Handeln) and 'strategic action' (strategisches Handeln) distinguished by Jürgen Habermas accurately captures the current situation. Communicative action refers to an act where parties interact with sincerity, aiming for mutual understanding. Strategic action is an act where one treats the other as a tool to achieve one’s own goals, performing manipulation under the guise of communication. Currently, all 'dialogue' surrounding South Korean healthcare policy operates as strategic action, not communicative action.
From the medical community's perspective, the hand of dialogue extended by the government is another deception. A half-century history of broken promises and the sense of humiliation left by the 'demonization of doctors' in 2024 causes any government proposal to be interpreted as 'strategic action to use us again.' Unless the perpetrator acknowledges their wrongdoing, the victim has no justification to sit at the table of reconciliation.
From the government's perspective, the medical community is a vested interest group resisting national policy while holding the lives of the people hostage. For a government backed by public opinion, there is no political incentive to bow first and admit policy failure. Rather, 'subjugating' the medical community is perceived as a political victory. The push for quota expansion in February 2026 confirms that this perception still dominates.
This mutual distrust has trapped the entire society in the 'Prisoner’s Dilemma' of game theory. The best outcome for both sides is cooperation, but because they cannot trust each other, both sides eventually choose betrayal, leading to the worst outcome. The government strengthens control because it distrusts the medical community, and the medical community leaves essential healthcare because it distrusts the government. The result is the joint sinking of the system.
Robert Axelrod’s classic study, *The Evolution of Cooperation*, shows under what conditions such a dilemma can be overcome. The key is the 'iterated game.' When there is an expectation of meeting the same opponent in the future—that is, when the 'shadow of the future' is long enough—long-term cooperation becomes a more rational choice than short-term betrayal. The 'Tit for Tat' strategy that won Axelrod’s tournament embodied four principles: be nice (cooperate first), be retaliatory (respond immediately to betrayal), be forgiving (forgive immediately if the opponent cooperates again), and keep the strategy clear (simple and transparent).
However, the tragedy of the South Korean healthcare system lies in the collapse of the preconditions for this 'iterated game.' In a structure where policy directions change abruptly every time a single five-year term president changes, and promises made by one government are easily overturned by the next, the 'shadow of the future' becomes extremely short. In a game where there is no expectation that the opponent will keep their word, cooperation cannot be a rational choice. This is why reconciliation is structurally impossible at present.
**4. Three Cornerstones of Reconciliation — Preconditions for a New Social Contract**
Is it, then, forever impossible? No. What is impossible is 'immediate' reconciliation, not reconciliation itself. However, it only becomes possible after several fundamental preconditions are met. These preconditions are the minimum cornerstones for rebuilding shattered trust, and until they are laid, any policy alternative is merely a house built on sand.
**Cornerstone 1: Acknowledgment of State Responsibility and Official Apology**
All reconciliation begins with the perpetrator's sincere reflection. This is not a sentimental demand but a minimum symbolic act to reconstruct destroyed institutional trust.
The government must officially acknowledge, in the name of the President, that its policies over the past half-century were structural causes that led the healthcare system to its current crisis. In particular, it must officially apologize to the public and the medical community for the errors committed during the 2024 medical crisis—prioritizing political logic over scientific evidence and amplifying conflict by socially stigmatizing a specific professional group.
This act is a declaration of a break from the past. Only when the state acknowledges its errors does the medical community gain the minimum justification to reflect on its own limitations and come to the table for dialogue. In Axelrod’s framework, this is the act of the state sending the first 'cooperation' signal.
Counterarguments will arise that this is politically impossible. However, in South Korean society, having experienced the martial law crisis of December 2024 and subsequent political upheavals, a declaration that 'the new power will acknowledge and correct the errors committed by the past power' can actually be a powerful political asset. The mention of "establishing a future roadmap through dialogue with the medical community" by Jung Eun-kyeong, who took office as the Minister of Health and Welfare under the Lee Jae-myung administration, is noteworthy—even if it is too early to judge the sincerity of the attempt—in that it uses different rhetoric from the past.
**Cornerstone 2: Depoliticization of Healthcare Policy — Construction of Independent Governance**
The healthcare system can no longer be an area subject to the whims of a five-year single-term political power. To lengthen the 'shadow of the future'—that is, to create an expectation that promises will be kept even if the administration changes—the healthcare policy-making process itself must be separated from politics.
Since 1977, Germany has operated a corporatist governance model in the field of health insurance called 'Concerted Action in Health Care' (Konzertierte Aktion im Gesundheitswesen). In this permanent consultative body, where all stakeholders—the government, doctor groups, insurers, hospital associations, and pharmacist groups—participate with equal status, recommendations for medical fee increase rates and healthcare expenditure growth rates were decided through a consensus-building method. While this model had its limits and was officially abolished in 2003, it evolved into a more powerful autonomous decision-making body called the 'Federal Joint Committee' (Gemeinsamer Bundesausschuss, G-BA). The key is the principle that the state does not unilaterally decide key matters of healthcare policy, but follows rules created together by stakeholders.
South Korea needs a similar body. Just as the Monetary Policy Board of the Bank of Korea decides monetary policy independently of political pressure, an independent 'National Medical Committee (tentative name)' should be established to handle core healthcare policy matters such as fee determination, health insurance financial management, and workforce supply planning. This committee should include the medical community, government, patient groups, insurers, and independent experts participating with equal status, making decisions based on scientific evidence and social consensus rather than political popularity.
This is an institutional device to fundamentally block the populist policy-making that birthed 'patchwork prescriptions' and 'ratchet effects.' When policy is independent of politics, rational discussion aimed at long-term sustainability rather than short-term gain becomes possible. At the same time, the existence of this body itself serves as an institutional guarantee that lengthens the 'shadow of the future' as mentioned by Axelrod. The expectation that promises decided by this body will be maintained even if the presidency changes makes cooperation in the iterated game possible.
**Cornerstone 3: Social Deliberation on Costs — “There Is No Such Thing as a Free Lunch”**
A sustainable healthcare system is not given for free. An honest social discussion must begin regarding what level of medical care South Korean society wants and how those costs will be shared.
Under the auspices of the independent medical committee, the financial status and future projections of health insurance, along with comparative data with OECD countries, must be transparently disclosed to the public. Based on this, a full-scale social deliberation on the level of 'appropriate burden-appropriate benefit' must begin. This should include all uncomfortable but unavoidable topics, such as realistic increases in health insurance premium rates, adjustments to co-payment rates, and the expansion of state subsidies.
This is a core task of political deliberative democracy. *Eight Ways to Institutionalise Deliberative Democracy*, published by the OECD in 2021, shows that various forms of deliberative public consultation, such as citizen juries and citizen assemblies, are effective in drawing social consensus in complex policy decisions. The future of medical finance cannot be left to experts alone. Since it is a matter directly linked to every citizen's premiums, taxes, and health, it must be decided through informed deliberation.
The starting point of this process is for society as a whole to acknowledge that the myth of 'low cost-high efficiency' has been shattered. As analyzed in the appendix of this book, the myth of 'cost-effectiveness' in the South Korean medical system was an illusion maintained atop hidden subsidies: the inhuman labor of medical professionals and the burden on future generations. There is no free lunch in the world. Only when a social consensus is reached to pay a fair 'cost' for the 'value' of the medical care we want can we liquidate the original sin of low fees and establish the financial foundation for system reconstruction.
**5. Two Futures — The Crossroads of South Korean Healthcare**
Through the framework of clarifying the truth and establishing the stepping stones of reconciliation, we can envision two drastically different futures toward which the South Korean healthcare system may head. This is not a prophecy, but an analysis of the causal consequences that current choices will create.
**Scenario 1: The Path of Control and Resignation**
This path involves adhering to the current methods. The government refuses to clarify the truth, suppresses the resistance of the medical community with force, and pushes through the expansion of medical school quotas as planned. Doctors reluctantly remain in the field to avoid punishment, but their sense of calling is already exhausted. The government controls medical fees, monitors medical acts through performance indicators, and establishes complete administrative control over the system.
At the end of this path lies the equalization of low-quality medical care. Doctors who have lost their sense of calling immerse themselves in defensive medicine and minimal treatment. As doctors educated in poor environments at the expanded medical schools enter the field, the overall level of healthcare undergoes a downward equalization. Elite talents no longer choose essential healthcare. While the wealthy consume high-quality medical care through non-reimbursed treatments or overseas medical tourism, the vast majority of the public must live content with state-provided, managed low-quality healthcare. On the surface, it appears stable, but internally it is a lifeless system filled with distrust, cynicism, and resignation.
**Scenario 2: The Path of Responsibility and Reconstruction**
This path involves facing the process of truth and reconciliation head-on, however painful it may be. Under new political leadership, the government officially acknowledges past policy failures, an independent medical governance body is launched, and a grand social compromise involving all stakeholders begins. The public accepts the end of the "low cost-high efficiency" myth and agrees to a reasonable cost burden for a sustainable system.
At the end of this path lies a sustainable system based on high trust. In an environment where reasonable compensation and legal stability are guaranteed, doctors focus again on providing the best possible care, and as proper value is assigned to essential healthcare, elite talents begin to return. In the short term, there is the pain of increased insurance premiums, but in the long term, the entire society shares a healthier and more stable future.
The choice between the two paths seems clear. However, the second path simultaneously demands the courage of the state to relinquish power, an open attitude from the medical community to move beyond isolation toward dialogue, and the maturity of the public to choose long-term trust over immediate benefits. The reality consistently shown by the analysis in this book is that the possibility of these three conditions being met simultaneously is not high.
**6. Conclusion — Can the First Sentence of Hope Be Written on a Blank Invoice?**
This book has argued that the collapse of the South Korean healthcare system is not the result of a specific group's greed or accidental policy failures, but the inevitable consequence of a "designed crisis" and "transferred responsibility" spanning half a century. And in this final chapter, we asked whether a path to reconstruction exists atop those ruins.
Scientific prediction is pessimistic. A system that has once entered a "collapse attractor" finds it difficult to escape by its own strength. The political reality is even bleaker. In February 2026, less than half a year after the end of an 18-month medical crisis, the government's push for quota expansion again demonstrates that this system remains unable to break free from the inertia of repeating the same mistakes. Perhaps we have already entered the "Path of Control and Resignation."
Yet, human history has also been a history of "choices" that transcend scientific prediction and political inertia. When South Africa undertook the unprecedented experiment of the TRC (Truth and Reconciliation Commission) atop the ruins of apartheid, no one was certain it would succeed. The TRC did not bring about perfect reconciliation, but it at least enabled the community to face the past and stand at a new starting line. That process itself was already an achievement.
What is needed for the reconstruction of the South Korean healthcare system is not "more doctors" or "newer institutions." It is a process of social maturation possible only upon the three stepping stones presented in this chapter: the courage to face the truth, the determination to share power, and the sense of responsibility to share costs. This can never be achieved through the efforts of either doctors or the government alone. It is a price that our entire society must pay together.
This book was written to pose questions, not to provide answers. Clarifying the causes of collapse is not to confirm despair, but to avoid repeating the same mistakes. Exposing the existence of the blank invoice is not to declare bankruptcy, but to emphasize that we still have the opportunity to fill it.
Will we record the language of despair and resignation on this invoice, which lists the unpaid balances of several decades? Or will we record the truth, despite the pain, and write down the first sentence of hope called a new social contract? The choice remains with all of us living in the present.
**Chapter 42. The Value of Trust**
**— No advanced institution can be successfully established without social trust capital.**
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**1. What a Single Judgment Destroyed**
On the night of December 4, 1997, a man was brought to the emergency room (59) of Seoul Boramae Hospital. He was a patient who had fallen while heavily intoxicated and suffered a severe head injury. A neurosurgeon and a third-year resident (69) immediately performed brain surgery and successfully removed a hematoma. However, due to severe cerebral edema, spontaneous breathing did not return. A ventilator was connected, and the patient showed signs of gradually recovering consciousness, reacting to light and showing pain reflexes. Medically, hope still remained.
The problem was the patient's wife. After the husband's business failed, he had beaten his family, and she could not afford even the 2.6 million won in medical expenses already incurred. She strongly requested his discharge. The medical staff dissuaded her several times. They repeatedly warned that he would die if discharged now. However, the wife's will was firm. Eventually, the medical staff obtained a signature on voluntary discharge papers and removed the ventilator. The patient died at home two days later.
After a seven-year legal battle, this tragic incident solidified into a precedent that permeates South Korean medical history. On June 24, 2004, the Supreme Court upheld a conviction of "aiding and abetting murder" for the attending specialist and the resident (2002Do995). The core logic of the ruling was as follows: doctors have a legal duty to refuse a guardian's request for discharge and continue treatment, and the act of allowing discharge constitutes "willful negligence" (dolus eventualis), recognizing but accepting the possibility of the patient's death.
The depth of the wound this ruling left on the South Korean medical community should not be understood merely as a legal precedent. It was a "cultural trauma." A doctor who stood at the operating table to save a patient ended up in court with the stigma of "murder" simply because they could not ignore the guardian's plea. Following this incident, an unwritten rule spread through South Korean hospitals: regardless of the patient's condition or what the guardian appeals for, once hospitalized, never discharge them until a death pronouncement is made. In the medical community, this is called the "Ghost of Boramae Hospital."
The Boramae Hospital case is an archetypal example showing how "trust," the core theme of this chapter, is destroyed. The moment the state's judicial system defined a doctor's professional judgment and good intentions as "aiding and abetting murder," the trust between doctors and the state collapsed to an unrecoverable level. And that distrust became an invisible toxin that corroded the entire South Korean medical system over the following quarter-century. Doctors began to perceive themselves not as healers caring for patients, but as potential suspects who could become criminals at any time.
This chapter is precisely about that invisible capital called "trust." This is because every analysis of the collapse of South Korean healthcare eventually converges on one conclusion. Neither low medical fees, nor mandatory enrollment, nor policy failures, nor conflicts between doctors and patients—at the bottom of all these problems lies the structural distrust of a society that does not believe in one another. In a state where social trust capital is exhausted, no matter what advanced system from any country in the world is introduced, it will not function.
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**2. Invisible Infrastructure: The Sociology and Economics of Trust**
**Trust is an institution, not an emotion**
If one understands trust (Trust) merely as an emotional bond between individuals, one misses the essence of the problem. In modern social science, trust is treated as a core component of "Social Capital" and one of the most powerful predictors determining the prosperity of a society.
Sociologist Robert D. Putnam, while studying the dramatic economic disparity between Southern and Northern Italy, discovered that even if the form of the institutions is identical, the actual performance of the institutions varies significantly depending on the level of "social capital"—trust among citizens, networks of voluntary cooperation, and reciprocal norms. Within Italy, which has the same constitution, laws, and administrative structure, the North, with high levels of trust among citizens, prospered, while the South, with low levels, stagnated. The success of an institution depended not on the design of the institution itself, but on the quality of the social soil in which that institution was rooted.
Political scientist Bo Rothstein went a step further. He argued that social trust is formed by "Institutional Trust." People come to trust each other not by confirming the morality of others, but by having rational expectations that "most people will follow the rules" through institutions that operate fairly and predictably. Therefore, when institutional trust breaks down, social trust also collapses.
Francis Fukuyama expanded this to the national level in his book *Trust*. High-trust societies—such as Germany, Japan, and the Scandinavian countries—were able to voluntarily build large and efficient organizations, whereas in low-trust societies, only small-scale economic units centered on family and kinship functioned. The level of trust determined the upper limit of organizational complexity a society could reach.
**Transaction costs as an invisible tax**
The economic value of trust is most clearly explained by the concept of "Transaction Cost." According to transaction cost theory, established by Nobel laureate Ronald Coase and developed by Oliver Williamson, every economic exchange entails additional costs beyond the cost of the goods or services themselves to finalize and maintain the transaction—search costs, negotiation costs, monitoring costs, and enforcement costs.
In a high-trust society, these transaction costs are minimized. There is no need to attach dozens of pages of provisos to a contract, nor is there a need to maintain a bureaucratic organization to monitor every transaction. Conversely, in a low-trust society, because every relationship is assumed to involve potential deception, astronomical costs are spent on monitoring and control. This is an invisible tax borne by all members of society.
Applying this theory to the South Korean healthcare system reveals the scale of costs generated by the absence of trust. In the case of medical disputes, according to the Judicial Yearbook, approximately 950 medical lawsuits are filed in court annually. However, if disputes at the pre-litigation stage—such as the Korea Medical Dispute Mediation and Arbitration Agency, the Korea Consumer Agency, and informal settlements—are included, the actual number of disputes is much higher. According to an international comparative analysis by the Research Institute for Healthcare Policy (RIHP), the ratio of criminal medical lawsuits relative to the number of doctors in Korea is estimated to be 10 times that of France and 50 times that of the United Kingdom.
To this, the cost of defensive medicine must be added. Defensive medicine refers to the practice where doctors perform unnecessary tests or treatments not for medical necessity but for the purpose of avoiding legal liability. Since the Boramae Hospital case, defensive medicine has become a daily occurrence in South Korean medical settings. While its cost is difficult to estimate directly, considering that American studies estimate it at 46 billion to 210 billion dollars annually, one can surmise it reaches a scale of several trillion won annually in Korea. Furthermore, the spread of defensive medicine forms a vicious cycle where the expansion of medical disputes shrinks the conscientious practice of doctors, produces overtreatment, and deepens the avoidance of high-risk specialized fields.
Ultimately, the social cost arising from the absence of trust is the sum of litigation costs, defensive medicine costs, administrative monitoring costs, and opportunity costs due to the departure of medical personnel. This is the expensive invoice that South Korean society pays every year for its "distrust."
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**3. Triple Bankruptcy of Trust: Doctor-Patient-State**
The collapse of trust in South Korean healthcare did not occur along a single axis, but proceeded in the form of a "Triple Bankruptcy" where three sets of relationships collapsed simultaneously.
**First, the bankruptcy of trust between the state and the medical community**
As traced in detail in the first half of this book (Parts 1 to 4), the state has systematically destroyed trust with medical providers over half a century. Forced enrollment through the Compulsory Designation System (63), control of medical fees below cost, unilateral institutional changes, and administrative coercion through business commencement orders against medical resistance. All of these show that the state has treated medical providers as objects of control rather than equal negotiating partners.
When the experience of the state failing to keep its promises is repeated, institutional learning occurs among providers. Every time the government announces a new policy, the medical community suspects hidden intentions rather than the stated goals and interprets every proposal as a ploy to tighten the noose further. This is not an irrational victim mentality, but the result of empirical learning accumulated over decades.
**Second, the bankruptcy of trust between patients and doctors**
Economist Kenneth Arrow (92), in his monumental 1963 paper, found the reason why the medical market is fundamentally different from general commodity markets in "Uncertainty." Patients cannot know as much about their illnesses as doctors do and lack the independent ability to judge whether the treatment proposed by a doctor is appropriate. For the market to work in this situation of "Information Asymmetry," the patient must "trust" the doctor’s expertise and good intentions. As Arrow pointed out, trust in healthcare is not a luxury but a prerequisite for the market to function.
However, in Korea, this prerequisite has collapsed. The "three-minute consultation" forced by the low-fee system has degraded the doctor-patient relationship from a therapeutic one involving sufficient explanation and rapport into a mechanical contact occurring on a factory conveyor belt. Patients feel that doctors do not pay enough attention to them, and doctors, driven to high-volume low-margin practice to survive under low fees, become alienated from the essence of medicine.
As media sensationalism combined with a consumerist view of healthcare, a vicious cycle of mutual distrust took root: patients regard doctors as "money-hungry merchants," while doctors view patients as "potential enemies who might sue at any moment."
Third, the Bankruptcy of Trust Between the Public and the System
Returning to Rothstein’s theory, institutional trust is formed when institutions operate fairly and predictably. However, the South Korean healthcare system is neither fair nor predictable.
In a system where the quality of treatment for the same disease varies drastically depending on whether one has private indemnity insurance, it is difficult for the public to trust the fairness of the institution. While the government declares a "country where no one worries about medical expenses," it practically neglects the non-reimbursable (uncovered) market, thereby increasing the out-of-pocket burden on patients. In this reality, the public does not believe the promises of the system. Consequently, *gak-ja-do-saeng* (each seeking their own way to survive) has become the basic strategy for medical consumption; this has further intensified system distortions, such as the overcrowding of tertiary hospitals and the expansion of the non-reimbursable market.
This triple bankruptcy of trust forms a positive feedback loop that reinforces each other. Because the state distrusts doctors, it strengthens control; as control strengthens, doctors distrust the state even more. As doctors' dissatisfaction is projected into medical consultations, patients distrust doctors; when patient distrust leads to lawsuits, doctors respond with defensive medicine. As defensive medicine raises medical costs, the public distrusts the system. Once this vicious cycle begins, it does not stop on its own without powerful external intervention. It is a typical manifestation of a "reinforcing loop" in system dynamics.
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4. Grammar of a Different World: The "High-Trust" Systems of New Zealand and Sweden
While South Korea flounders in a vicious cycle of distrust, healthcare systems built on entirely different principles have been functioning for over half a century on the other side of the globe. These are the Accident Compensation Corporation (ACC) system in New Zealand and the No-Fault Patient Insurance (*Patientförsäkring*) system in Sweden.
The difference between these systems and Korea's is not a matter of a few legal provisions. The philosophy of the entire society regarding healthcare—the operating system, so to speak—is fundamentally different.
Philosophy 1: Medical Accidents are "Social Risks"
The foundation of New Zealand’s ACC system is a consensus that society collectively accepts the uncertainty inherent in medical acts. It rejects the premise that even if medicine advances, unexpected bad outcomes can occur and must be punished by attributing them to someone's "fault." Instead, it perceives medical accidents as "social risks" that the community must endure together, similar to traffic accidents or natural disasters.
The practical results of this philosophical shift are dramatic. In New Zealand, patients who suffer medical harm can claim compensation from the ACC without the obstacle of proving negligence. According to an analysis by the Commonwealth Fund, simple claims are processed within weeks, and all decisions are made within nine months. Compensation items include treatment and rehabilitation costs, 80% compensation for lost income, lump-sum payments, and survivor support. The administrative costs of this system account for only about 10% of total expenditures, contrasting sharply with fault-based litigation systems where administrative and litigation costs consume 50–60% of total compensation.
The medical indemnity fees for New Zealand doctors are approximately £790 per year, which is incomparable to the tens or hundreds of thousands of dollars in indemnity premiums in the United States. This cost difference leads directly to the difference in medical expenses borne by patients.
Philosophy 2: Doctors are "Partners," Not "Suspects"
When a medical accident occurs in South Korea, judicial procedures are activated. Arguments erupt over negligence and the burden of proof, and in the worst cases—such as the Boramae Hospital incident—cases are referred to criminal trial. In this structure, the rational response for a doctor is "defense." They conceal unfavorable information, do not report errors, and avoid high-risk patients.
In contrast, the no-fault compensation systems of New Zealand and Sweden trust doctors as "partners in system improvement." Because compensation is separated from the pursuit of liability, doctors can voluntarily report errors without fear of punishment. New Zealand’s 2005 revised law requires reporting to relevant agencies only when there is a "risk of harm to the public," creating an environment where doctors can actively participate in the compensation claim process. This open error-reporting culture becomes the foundation of a "learning culture" that enhances the safety of the entire system.
It is practically impossible to expect voluntary reporting of medical errors from doctors in South Korea. In a legal environment where reported information can be diverted as evidence for criminal litigation, no rational actor would choose voluntary disclosure of information. This is not a matter of morality, but a matter of incentive structures.
Philosophy 3: Patient Relief Should Be "Swift and Fair"
In a negligence-based litigation system, patients must personally prove a doctor's fault to receive compensation. This process is long, expensive, and emotionally painful. The average duration of medical lawsuits in Korea spans several years, and the rate of plaintiffs winning entirely is only about 1%. Even if they win, the actual compensation is significantly reduced after deducting attorney fees and appraisal costs. Eventually, a structural contradiction arises where patients who suffered the most serious harm—such as severe disability or death—find it the hardest to receive relief.
Under the New Zealand ACC system, since proof of negligence is unnecessary, the compensation process is simple and swift. Thanks to a standardized compensation structure where similar harm receives similar compensation, equity among patients is ensured. Patients save the time and cost otherwise spent on litigation and can focus on treatment and rehabilitation sooner.
Of course, the New Zealand system is not perfect. Criticisms that compensation levels are insufficient, limitations on income preservation for the unemployed, and equity issues arising at the boundary between "treatment injury" and disease are continuously raised. Some analyses suggest that 30 years after the introduction of ACC, safety levels in New Zealand hospitals are not particularly higher than those in the UK or Australia. However, the important fact is that, compared to negligence litigation systems, this system provides relief to more victims, more quickly, and at a lower social cost.
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5. Paper Fortress: Limitations of Attempts to Replace Trust with Institutions
The South Korean medical community has long advocated for the introduction of a no-fault compensation system. The discussion of the "Special Act on the Processing of Medical Accidents" included in the government’s 2024 "Essential Healthcare Package" was a political response to this demand. However, looking into the essence of this attempt, it is closer to an "attempt to bypass the absence of trust through institutional devices" rather than the "building of trust."
The design of the Korean-style medical dispute resolution system generally takes the following multi-layered structure. In the first stage, "unavoidable accidents" where a doctor's negligence is unclear are compensated by a fund operated by the state and society. In the second stage, accidents involving clear negligence are compensated by liability insurance that doctors subscribe to. In the third stage, once compensation from the first and second stages is provided, criminal liability is waived, except for cases of gross negligence.
At first glance, it seems like a rational design. However, every stage of this structure is predicated on the premise that "no one can be trusted."
Because doctors cannot be trusted, every accident must be classified as negligence or no-fault and subjected to monitoring and review. Because patients cannot be trusted, it is assumed they will not be satisfied with monetary compensation alone and will try to punish doctors criminally. Because the state cannot be trusted, doctors doubt whether the fund promised by the government will be operated properly or if subrogation rights will eventually be claimed against them.
As such, a system designed with mutual distrust as the default inevitably falls into a trap of high cost and low efficiency. Enormous costs are invested in appraisals and reviews to determine negligence, administrative resources are consumed in operating complex funds and insurance systems, and despite all these devices, defensive medicine continues because the fear of criminal punishment does not completely disappear. Specifically, with a single exemption clause stating that "criminal responsibility for fatal accidents is maintained," the very situation doctors fear most—the fear of becoming a criminal in the face of a patient’s death—remains. It is as if a hole is pierced in the fortress that allows for the most fatal attack.
A problem that New Zealand solves with an annual indemnity premium of £790 and 10% administrative costs remains unsolved in Korea despite pouring in trillions of won in social costs. The cause of this gap is not the difference in legal provisions, but the presence or absence of the social infrastructure called "trust."
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6. Inland Non-Transplantable Organs: Why We Cannot Become Sweden
The logic of "institutional transplant" failure analyzed in Chapter 35 is precisely repeated here. New Zealand’s legal provisions can be imported. However, the "social soil" necessary for those laws to function—trust among citizens, trust in the government, and respect for experts—cannot be imported.
The barriers blocking the introduction of a no-fault compensation system in Korea are not technical problems, but cultural and political barriers.
Barrier 1: Retributive View of Justice
A strong concept of "retributive justice"—that those who do wrong must be punished—is established in Korean society. This is a cultural tendency to view medical accidents as "individual faults" rather than "system errors," believing that justice is served only through the punishment of the perpetrator. In this legal sentiment, a no-fault compensation system that "compensates even if there is no negligence" inevitably faces fierce backlash: "The person who did wrong is someone else, so why should compensation be paid with taxpayers' money?"
The core of the problem here is a cognitive structure where "justice" and "punishment" are equated. Unless restorative justice—a view of justice that prioritizes the recovery from harm and the restoration of relationships—is socially accepted, the political foundation for a no-fault compensation system is difficult to form.
Barrier 2: Deepened Ravine of Distrust
Even if the law is changed, the already formed mutual distrust hinders the effective operation of the system. Even if the government announces the establishment of a "no-fault compensation fund," the medical community suspects that if finances become insufficient, the government will claim subrogation rights against doctors or drastically increase insurance premiums. Even if immunity from punishment is promised for "voluntary error reporting," the fear that the report will eventually be used as evidence against oneself takes precedence. On the patient side, they suspect the no-fault compensation system is a conspiracy between the medical community and the government to cover up doctors' mistakes.
This distrust is not a groundless delusion. It has been learned over decades as the state broke promises, the medical community became isolated, and the public experienced *gak-ja-do-saeng*. It is naive to expect that distrust accumulated over a generation can be resolved with a single law.
Barrier 3: Political Incentive Structure
To introduce a no-fault compensation system, politicians must make a socially and politically disadvantageous decision: "exempting doctors from criminal liability." In the Korean political landscape, the medical profession is not a group that receives public favor. As confirmed during the 2024 conflict between the government and doctors, the frame of "greedy doctors" has public appeal, and for politicians, criticizing doctors is a strategy to gain high public opinion returns at a low cost.
In this structure, proposing a bill to exempt doctors from criminal liability is a demand for politicians to risk exposure to criticism for "defending criminals." A rational politician has no incentive to willingly take this risk. The reason this was possible in New Zealand was that respect for experts and trust in the government existed throughout society.
Ultimately, because of the "absence of trust," Korea cannot take the path of low cost and high efficiency, and is forced to remain trapped in an equilibrium where everyone consumes each other while paying the cost of distrust on a path of high cost and low efficiency. It is a situation that precisely fits the "Prisoner's Dilemma" in game theory—where all participants make rational choices to maximize their own interests, but the result is an equilibrium where everyone loses. To escape this equilibrium, a long-term and painful process of rebuilding trust must come first.
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7. Invisible Tax: The Invoice for the Absence of Trust
Synthesizing the analysis so far, the costs that the absence of trust imposes on the South Korean healthcare system are categorized into at least five areas.
First is the direct litigation cost. This includes legal fees, appraisal costs, and administrative costs invested in hundreds of civil lawsuits, criminal complaints, and mediation/arbitration cases annually.
Second is the cost of defensive medicine. This refers to the cost of unnecessary tests and treatments performed for legal defense rather than medical necessity. This depletes health insurance finances and ultimately increases the burden of insurance premiums on the public.
Third is the opportunity cost of personnel attrition. Due to the fear of criminal punishment and poor working environments, specialists increasingly avoid high-risk essential departments such as surgery, obstetrics and gynecology, and emergency medicine. This leads directly to a decrease in medical supply in those fields and a threat to patient safety. While this cost is difficult to convert into monetary value, it is the most fatal loss from a social perspective.
Fourth is the administrative cost of system operation. This is the cost of maintaining complex monitoring, review, and adjustment systems built to replace trust. A significant part of the monitoring functions performed by the Health Insurance Review and Assessment Service, the Korea Medical Dispute Mediation and Arbitration Agency, and various evaluation committees could be replaced by unnecessary or much simpler forms in a high-trust society.
Fifth is the cost of system distortion. The balloon effect tracked in this book—the phenomenon where the non-reimbursable market expands as the reimbursed sector is suppressed—essentially stems from distrust between the state and medical providers. If the state had trusted the value of medical care and paid appropriate fees, the incentive for hospitals to escape to the non-reimbursable market for survival would have significantly decreased.
When adding all five costs, the scale is estimated to reach trillions of won annually. This is the invisible tax that South Korean society pays every year for "distrust." And this tax is increasing year by year.
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8. Where Does Trust Begin?
It is time to draw a conclusion. The analysis in this chapter points neither toward cynicism nor despair. Rather, the discovery that the root of the problem converges on a single variable called "trust" paradoxically means that the direction of the solution is also singular.
What we must rebuild is neither a complex legal system nor a fund of astronomical proportions. It is the relationship itself between us.
If so, where should trust begin?
**The State Must Disarm First**
In the reconstruction of trust, the question of "who will start first" is a decisive one. This is because, in a prisoner's dilemma, taking the first step toward cooperation is the act of taking the greatest risk. However, the entity that must move first in this situation is clear. It is the state.
This is true for two reasons. First, as this entire book has argued, the state is the architect and operator of the current system. If the primary responsibility for destroying trust lies with the state, it is only fitting that the state takes the first step toward its recovery. Second, only the state possesses the authority to change the institution. What individual doctors or patients can do is limited, but the state can change the fee schedule, relax mandatory clauses, and reorganize the structure of criminal punishment.
The first action the state must show is the "truth-finding" discussed in Chapter 38—honestly admitting the policy failures of the past half-century. And the second action is to loosen the reins of control, even if only slightly, and treat the medical community as a partner in negotiation rather than an object of command. This must be shown through actions, not words; through institutional changes, not declarations.
**The Medical Community Must Escape Isolation**
The medical community likewise cannot contribute to the reconstruction of trust as long as it remains within the walls of isolation and defense. It must voluntarily break the state of the "isolated victim" analyzed in Chapter 29 and communicate at the eye level of the public.
As long as doctors fail to convince society of their expertise and goodwill, the frame of the "greedy doctor" will not disappear. And as long as that frame exists, the political foundation for trust-based policies, such as a no-fault compensation system, will not be formed. Trust is not something to be demanded, but something to be demonstrated.
**Society Must Discard the Myth of the "Free Lunch"**
Lastly, there is an uncomfortable truth that Korean society as a whole must face. We must let go of the belief that world-class medical care can be enjoyed at the lowest cost in the OECD—the myth of the "Free Lunch" that this book has denounced from the beginning.
A sustainable medical system incurs costs. Proper compensation for doctors, sufficient consultation time, a safe training environment, and a rational dispute resolution system—all of these entail costs. Demanding the world's highest level of medical care without the willingness to share those costs is no different from a declaration to free-ride on someone else's sacrifice.
That "someone" was the 88-hour work week of residents, the 57% turnover rate of nurses, and the series of bankruptcies of local small and medium-sized hospitals. And the final invoice for that free ride is the medical collapse of 2024.
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**Epilogue: The Poorest Society**
This book has traversed a long journey across the realms of politics, economics, law, and history to find the cause of the collapse of South Korean healthcare. Low fees, the mandatory designation system, the separation of prescribing and dispensing drugs, private health insurance, balloon effects, university hospital cartels, demographic catastrophes, asset bubbles... Numerous variables and mechanisms were analyzed, but the final point of convergence for all analyses is one: the structural distrust of a society where members cannot believe in one another.
The problem of low fees arose because the state did not trust the value of medical care. Defensive medicine spread because the judicial system did not trust the goodwill of doctors. The resistance of the medical community intensified because they could not trust the promises of the state. The public's rush to tertiary hospitals deepened because they could not trust local clinics and regional hospitals.
This chain of total distrust trapped all participants of the system in a prisoner's dilemma, creating a structure of mutual destruction where the more rationally each individual acts, the closer the whole comes to ruin.
So, I ask again. What kind of society is the poorest society?
It is not a society without money. It is not a society with a low GDP. The poorest society is a society where people do not trust each other. Despite having the world's 10th largest economy, South Korea is a country that forces the world's lowest medical fees on healthcare professionals, records the world's highest frequency of criminal punishment for doctors, and maintains a mandatory inclusion model unprecedented in the world. A country that is economically wealthy but socially bankrupt—this is the portrait of South Korean healthcare.
The path out of this poverty of trust is long, painful, and may perhaps not be completed within a single generation. However, there is no other path but this one.
Rebuilding trust. That is the only and most important task we must begin atop the ruins of all this collapse.
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**[Sidebar] Seven Final Questions for the Reader**
Before closing this book, ask yourself:
**Question 1. What are we prepared to pay for, and how much?**
Instead of paying more in health insurance premiums, what if you could receive a 15-minute consultation instead of a 3-minute one? If the "Emergency Room Merry-Go-Round" disappeared and local obstetrics and gynecology clinics survived? Are you willing to accept that cost, or not?
**Question 2. Can we choose partnership over governance?**
Can you imagine a system where the government treats medical professionals not as "targets for mobilization" but as "equal partners"? For that to happen, the state must give up part of its control. Is our society ready to allow that?
**Question 3. Did you agree when the word "publicness" was used as an excuse?**
Has the phrase "Medical care is a public good" been used to take the dedication of medical professionals for granted and to justify the state's dereliction of responsibility?
**Question 4. When you called doctors "the vested interest," was the system invisible to you?**
When you were angry at the income of individual doctors, were the institutional mechanisms that created that income structure (non-benefit safety valves, low fees, fee-for-service systems) within your sight?
**Question 5. Do you know where the insurance premiums you pay go?**
Were you aware of the structure where health insurance and long-term care insurance premiums are collected together, the costs of the oversupply of nursing hospitals are covered by health insurance finances, and debt is passed on to future generations?
**Question 6. If your child became a doctor, would you recommend surgery, obstetrics/gynecology, or pediatrics?**
If you answer "No" to this question, at that moment, you are already sensing the collapse of the system. And that accumulation of "Noes" has become the current crisis.
**Question 7. How long will we repeat the diagnosis that "the first button was fastened incorrectly"?**
The diagnosis is already sufficient. It has long been known that the first button was fastened incorrectly. The question is whether there is the political courage, social consensus, and willingness to bear personal costs to undo that button and fasten it again.
"What are we prepared to pay for, and how much?" This is the first and last question this book poses.
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**Closing Remarks**
Final words written on a blank invoice
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**Ⅰ. Concluding the Autopsy**
This book is an autopsy report.
The cadaver is the South Korean healthcare system. The cause of death is not singular. There was a congenital heart defect called low fees, which started at 55% of the cost in 1977. There were the shackles of forced mobilization called the mandatory designation system for medical institutions. There was a reckless surgical incision called the separation of prescribing and dispensing, uncontrollable bleeding called private health insurance, and multiple organ failure called policy failures accumulated over half a century. All of these overlapped to lead to one inevitable death. The medical examiner's conclusion is clear. This is not a natural death. This is homicide.
We started from a distant place to perform this autopsy. The scene of the "Medical Art Crisis" in 1971, which tried to hold back doctors leaving for overseas. The birth of the mandatory designation system, where the military regime forced private hospitals to become subcontractors for public insurance. The moment the Constitutional Court stamped "constitutional" on this forced mobilization with the four syllables "public welfare." The low fee schedule underlying it—a design where the state fixed the price of medical care below cost and shifted the survival of medical professionals onto the professionals themselves.
We watched three dominoes fall in succession. When the separation of prescribing and dispensing killed the last breath of small and medium-sized hospitals, the government set up a tombstone for regional healthcare by saying, "Go to nursing hospitals." National health screenings, instead of providing painkillers for low fees, sowed the seeds of turning healthy citizens into patients. When the Pandora's box of private health insurance opened, a massive shadow economy called "non-benefits" began to suck the blood of essential healthcare.
Atop this, residents were consumed as the lowest tier of labor rather than trainees, and 57.4% of new nurses could not last a year before leaving the hospital. University hospitals fattened themselves with mild patients and non-benefit treatments behind the sign of "the last bastion," and the reality of 12 million people flocking to tertiary general hospitals annually was an EKG signaling that the medical delivery system was already in cardiac arrest.
In February 2024, 11,000 residents submitted their resignations. 627 days. This crisis, recorded by the international medical journal *The Lancet*, informed the world not of the anger of Korean residents, but of the design flaws of the system that created that anger.
The finding upon concluding this autopsy is simple. The system is dead. Only one question remains: What will we build upon this corpse?
**Ⅱ. The Janus Named the State**
James C. Scott warned in *Seeing Like a State* that when a state tries to control a complex reality by reducing it to simple diagrams, that arrogance inevitably returns as a disaster. The history of medical policy in South Korea is the most accurate empirical proof of this warning.
The state showed two faces alternately.
The first face was the "patching technician." When the separation of prescribing and dispensing killed small hospitals, it induced a transition to nursing hospitals. When low fees pushed practitioners into a corner, it offered the carrot of health screenings. When private health insurance caused non-benefits to run wild, it discussed regulations belatedly. A chain of nearsightedness, setting fire to the neighbor's house to put out the fire in one's own. "Moon Jae-in Care" was the culmination of this nearsightedness. The goodwill of strengthening coverage ended in the paradox of accelerating the rush to tertiary hospitals while leaving low fees untouched.
The second face was the "ratchet-turning architect." This side was colder and more systematic. Maximum control with minimum finance. Forced mobilization of private resources while refusing proper compensation; when contradictions exploded, setting up a scapegoat called "doctor shortage" to divert anger; and swinging the whip of "medical service commencement orders" against resistance. The slogan "Medical care is a public good" was the alchemy of language used to justify this exploitation.
Whether it was incompetence or design, the result was the same. The state reigned as the final judge but did not record the costs in its own ledger. Those costs were always someone else's share. The sleep of a resident working 88 hours a week, the ideals of a nurse who leaves before completing a year, the life of an emergency patient who dies on the road, and the future of generations not yet born. The state's ledger was always clean. Blood was always on someone else's hands.
And the state does not reflect. This is an observation, not a criticism. In human history, there are few cases where a state voluntarily admitted its structural faults. The Truth and Reconciliation Commission (TRC) of South Africa was nearly the only exception, and even that was possible because of the extraordinary leader Mandela and the historical severance of the total termination of the Apartheid system. In South Korea, there is no Mandela, there is no severance, and the system is constantly extending itself.
**Ⅲ. The Mirror Called the People**
Then what about the people? Can the people reflect?
To answer honestly, the people do not reflect either. For the same reason the state does not reflect. Reflection is an act of accepting a truth that goes against one's own interests, and a collective is structurally inferior to an individual in this ability.
A more uncomfortable story must be told. In this society, there is a deep habit of gaining collective pleasure from designating and punishing someone rather than analyzing the cause of a problem and improving the system. When a medical accident occurs, the demand for criminal punishment of the doctor in charge precedes questions about systemic flaws. When residents leave, the condemnation of "How can you abandon your patients?" precedes an examination of the contradictions in the training system. This pattern, where retribution comes before truth-finding, is the exact opposite of how no-fault compensation systems were naturally agreed upon in Sweden and New Zealand.
The frequency of suicides among public officials and businesspeople in this society is uniquely high because the mechanism for taking responsibility while remaining alive is absent. Since the system does not give a living human the opportunity to admit fault and correct it, death becomes the final language of explanation. This is not an ethnic temperament. It is a symptom of institutional failure. In a long history of "rule by man" rather than the rule of law, when institutional relief was impossible, what remained was only the eruption of collective emotion. Because the *Sinmungo* (drum for petitions) of the Joseon Dynasty did not work, there were popular uprisings; because the judiciary is not trusted, there are trials by public opinion.
However, while the people do not reflect, they do learn. Reflection is a moral act, and learning is an adaptive act. Accepting an increase in health insurance premiums will happen not because of an awareness that low-cost medical care was built on the sacrifice of others, but because of the fear felt after wandering around in search of an emergency room oneself. Recognizing the value of local clinics will come not from an understanding of the medical delivery system, but from the experience of having a university hospital appointment pushed back three months. Even the TRC of South Africa was not a product of pure morality. The white ruling class accepted the TRC not because they repented, but because it was a more advantageous alternative for them than retributive justice. Tutu's genius lay in designing a realistic deal packaged in moral language.
Demanding reflection from the people will fail. However, they learn if they suffer enough. It is cruel, but that is the actual mechanism of collective learning. The problem is how expensive the tuition for that learning will be, and who will pay that tuition first.
**Ⅳ. Those Who Leave**
The state does not reflect. The people do not reflect. In the gap between them, talent leaves.
This is the cold point of convergence for the entire narrative of this book.
When institutions fail, trust collapses, and when trust collapses, the first to leave are those who can have their value recognized elsewhere. This is closer to physics than emotion. Just as energy flows from a higher state to a lower state in thermodynamics, human capital moves toward systems that exploit it less. The only force capable of halting this flow is institutional trust, and it is precisely that trust which has gone bankrupt.
The choice of the resident who contributed "Why I Decided to Leave Korean Medicine" to *The Lancet* is not cowardice. It is the most rational judgment. Within a system characterized by 88-hour legal exploitation, the deception of calling labor "education" instead of training, and responding to resistance with criminal punishment, the demand to "stay and fight anyway" may be morally sublime, but it is cruel to the individual. Furthermore, a system that must rely on individual sublimity to sustain itself is a system that has already failed.
Those who leave cannot be blamed. Those who stay cannot be forced to sacrifice. Therefore, reasons to stay must be created. However, the state, which possesses the authority to create those reasons, does not move. Because it does not reflect. There is no pressure from the people either. Because they do not learn until they have suffered enough. Meanwhile, time passes, and people leave.
This is the death spiral. When competent people leave, the burden on those remaining increases; the increased burden causes even the remaining people to leave, and the system gradually loses the ability to hold onto anyone. A 50% recruitment rate for training hospitals outside the capital region, zero applicants for fellowships, and 34 districts without emergency medical centers. The spiral is already spinning. The demographic sentence of a 0.65 total fertility rate means that the next generation to replace the departing talent is itself disappearing.
Thus, this system has operated on the logic of an extractive economy—squeezing those who remain as long as they can be squeezed, searching for the next person once they leave, and leaving only an empty building after exhausting the very last individual. When minerals are depleted in a mine, the mine is closed. Currently, the South Korean medical system is inside a shaft on the verge of closure.
**V. National Debt Named Distrust**
If there is a single thread running through this collapse, it is the bankruptcy of trust.
This system did not collapse due to a lack of technology. In a country that achieved top-tier efficiency with the lowest number of doctors in the OECD (66), speaking of a lack of technology is a contradiction. What has collapsed is not technology, but the trust between all subjects constituting the system.
Doctors do not trust the state. This is because they have learned over half a century that every promise from the state was another name for control. The state does not trust doctors. This is because it regards them not as partners in public insurance, but as selfish actors to be monitored. Patients trust neither side. There is no way to verify a doctor’s goodwill in a three-minute consultation, and no way to verify the state’s capability in the "emergency room merry-go-round."
A society without trust is the most expensive society in the world. Resources wasted on defensive medicine, finances consumed by excessive testing, judicial costs invested in medical litigation, and administrative power mobilized for surveillance and regulation—the sum of all these is the interest on distrust that this country pays every year. This interest is compounding.
The reason Sweden (1975) and New Zealand (1974) can operate no-fault compensation systems for medical accidents is not because they have more money. It is because there is enough trust to reach a consensus that "investigating the cause to prevent recurrence is more beneficial than punishing the person in charge." If the same system were transplanted into South Korea, doctors would suspect it as a new means of control, patients would be enraged at it as immunity for doctors, and 40,000 lawyers would resist losing their market. It is not a problem of the system. The soil supporting the system has undergone desertification.
The cost of this distrust is again transferred as a generational bill. The "586 generation" enjoyed the world's highest medical accessibility with the world's lowest premiums, thanks to medical fees set below cost. That system was maintained by pulling forward the portion belonging to future generations. The current pension deficit, premium hikes, and the expansion of long-term care insurance—these are the deferred bills for the credit signed by the previous generation. The generation receiving the bill is the one that never even sat at that table of prosperity.
The metaphor of the "blank check" (blank bill) in this book refers to exactly this. Fifty years of prosperity were not free. The price is being charged. However, no amount is written on the bill. No one has calculated what the real cost is. No one wants to calculate it. That is why it is blank.
**VI. Those Who Stay**
The state does not reflect. The people do not reflect. Talent leaves. When these three sentences are simultaneously true, what remains?
What remains are the people who cannot leave. Doctors without the resources to obtain overseas licenses, nurses without options for other professions, patients in rural areas without the means to travel to university hospitals in Seoul, and the generation not yet born or just recently born. The collapse of a system always lands most heavily on the positions of those least able to leave.
And what remains are those who could leave but do not.
This book is not complete without speaking of these people.
There are those who stay despite possessing the ability and qualifications to leave. There is more than one reason they stay. It is because there is a sense of grievance that is not resolved even if they leave. This grievance does not stem from personal loss but from the perception that injustice is being packaged as if it were justice; thus, it is not resolved geographically. Even if they board a plane and cross the Pacific, the wounds made by this country follow them like luggage.
It is because there are people who cannot leave. Because the faces of loved ones—parents, colleagues, patients, and those who have not yet secured the material basis for escape—hold them back. The fuel that enabled the analysis of 42 chapters and the tracking of models and policy history is not academic curiosity. That fuel is a concrete sense of responsibility toward concrete people with names and faces.
And it is because they have not yet become cold-hearted enough to chase only money. Some will call this naivety. This society has traditionally mocked such people. The "naive person who doesn't know the ways of the world," the "clueless person," the "person pretending to be the only clean one." In this country, anyone who speaks of justice has always been an object of ridicule. If one speaks of justice, one is mocked for being naive; if one speaks of community, one is rebuked for being out of touch with reality; and if one stays to fight instead of leaving, one is laughed at for lacking wit. The history of this ridicule runs deep. When a scholar of Joseon spoke directly, he was beheaded; when a pro-democracy activist took to the streets, they were called a communist; and voices pointing out the contradictions in the medical system were denounced with the logic of protecting vested interests.
That is why I am afraid to write this.
I know this book may sound to ordinary neighbors like the cry of a clueless swallow. People for whom the autumn sunlight is still warm do not understand the swallow crying out that winter is coming. The one who warns is always lonely. Cassandra prophesied the fall of Troy, but no one listened, and she was called a madwoman. In this society, the person who speaks of systemic collapse repeats the fate of Cassandra.
Though afraid, I write.
This is because the existence of people who stay when they could leave is the only non-false evidence this book can present. Not grand policy alternatives, nor predictions from scientific models, nor the transplantation of advanced systems, but just this one thing: that there are still people who stay when they could leave.
They do not stay because they love the system; they stay because there are still people they love within this system. Their choice is not sublime, but desperate. It is not beautiful, but harrowing. Opening one’s mouth while prepared for ridicule is not so much courage as it is the lack of other options. There is too much known to remain silent, and those left behind are too close to leave.
**VII. A Lighthouse Does Not Shine Upon Itself**
This book was not written to provide an answer. This is because there have already been too many deceptions masquerading as answers. The "Essential Healthcare Package," medical school quota increases, the primary care physician system, the capitation system—this book has proven over 42 chapters why every attempt to wrap advanced systems around a foundation of low medical fees without addressing the root cause fails.
What this book has done is something more humble: measuring the depth of the darkness. Plotting our coordinates without falsehood. So that when someone decides to hold up a light, they will know the direction in which to shine it.
The state will not reflect. History proves it. The people will not learn until they have suffered enough. Human nature proves it. And while that suffering accumulates, those who can leave will continue to leave. Physics proves it.
Knowing all this, I wrote this book. I wrote it knowing it might not be read. I wrote it knowing it might be mocked even if it is read. I wrote it knowing that even if it is not mocked, nothing might change.
Why did I write it?
A lighthouse does not shine upon itself. A lighthouse shines upon the dark sea. Even if a ship avoids submerged rocks because of the light the lighthouse emits, the lighthouse does not know that fact. Nevertheless, the lighthouse emits light. Because that is the entire reason for its existence.
The same is true for this book. It is unknown whether this book can change someone’s voyage. However, I had to record that there are submerged rocks in this sea, and that those rocks were not formed naturally but were created by someone’s design and neglect.
To record. That is the minimum, and perhaps the maximum, that a person who has not left can do.
The first word to be written on the blank check is not "hope." It is "truth." Only upon truth does hope become a choice rather than a fraud. And only upon choice can we finally face the amount on this bill.
May this book become the first line of that truth. And may someone who has read this line—someone who could leave but still remains, someone who wants to leave but cannot, or someone who left and returned—add a line in their own place and in their own way.
Every piece of writing is done alone, but change cannot be made alone.
There is no next opportunity.
Winter 2025,
By one who fears ridicule but fears silence more,
In the place I have not yet left.
[Footnote]
[1]: Transformations in doctor–patient responsibilities in China's quasi-marketised healthcare system - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC12616967/
[2]: Nobusuke Kishi - Wikipedia, Accessed February 22, 2026, https://en.wikipedia.org/wiki/Nobusuke_Kishi
[3]: Testimony of Karen Eggleston, Stanford University Asia Health Policy Program Director, Shorenstein Asia-Pacific Research Center, Accessed February 22, 2026, https://www.uscc.gov/sites/default/files/Eggleston_testimony.pdf
[4]: The Politics of Drug Price Control Policy in China: Regulation, Deregulation and Re-regulation, Accessed February 22, 2026, https://www.tandfonline.com/doi/pdf/10.1080/24761028.2015.11869080
[5]: Semashko model - Wikipedia, Accessed February 22, 2026, https://en.wikipedia.org/wiki/Semashko_model
[6]: The Promises, Realities, and Legacies of the Bolshevik Revolution, 1917–2017 - AJPH, Accessed February 22, 2026, https://ajph.aphapublications.org/doi/10.2105/AJPH.2017.304092
[7]: Planning for Empire: Reform Bureaucrats and the Japanese Wartime State
[Hardcover ed.] 080144926X, 9780801449260 - DOKUMEN.PUB, Accessed February 22, 2026, https://dokumen.pub/planning-for-empire-reform-bureaucrats-and-the-japanese-wartime-state-hardcovernbsped-080144926x-9780801449260.html
[8]: Manchukuo - Wikipedia, Accessed February 22, 2026, https://en.wikipedia.org/wiki/Manchukuo
[9]: What are the four basic models of healthcare? - The Lowdown NHS, Accessed February 22, 2026, https://lowdownnhs.info/explainers/what-are-the-four-basic-models-of-healthcare/
[11]: Disability and the Soviet Union: Advances and retreats | International Socialist Review, Accessed February 22, 2026, https://isreview.org/issue/103/disability-and-soviet-union-advances-and-retreats/index.html
[12]: 'The Work of the People's Commissariat of Health' by Nikolai Semashko, People's Commissar of Health from Soviet Russia (New York). Vol. 3 No. 12. September 18, 1920. - Revolution's Newsstand, Accessed February 22, 2026, https://revolutionsnewsstand.com/2024/12/09/the-work-s-commissar-of-health-from-soviet-russia-new-york-vol-3-no-12-september-18-1920/
[13]: The Soviet Social (Chapter 8) - Social Rights and the Politics of Obligation in History, Accessed February 22, 2026, https://www.cambridge.org/core/books/social-rights-and-the-politics-of-obligation-in-history/soviet-social/D09CAE637DB6529952C3C5BDBF9EA822
[14]: The evolving Semashko model of primary health care: the case of the Russian Federation, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC6220729/
[15]: Visionarity and Health: The Semashko Model and the Sovietization of Public Health in Bulgaria (1944–1951) - ResearchGate, Accessed February 22, 2026, https://www.researchgate.net/publication/355708875_Visionarity_and_Health_The_Semashko_Model_and_the_Sovietization_of_Public_Health_in_Bulgaria_1944-1951
[17]: Bismarck and the Long Road to Universal Health Coverage - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC7149836/
[18]: Japanese Empire in Manchuria | Oxford Research Encyclopedia of Asian History, Accessed February 22, 2026, https://oxfordre.com/asianhistory/display/10.1093/acrefore/9780190277727.001.0001/acrefore-9780190277727-e-78?d=%2F10.1093%2Facrefore%2F9780190277727.001.0001%2Facrefore-9780190277727-e-78&p=emailAAbsV3vNZ0Rlw
[19]: RUNNING AN EMPIRE, BUILDING A NATION: KOREAN BUREAUCRATS AND THE MANCHUKUO LEGACY, 1931–1961 Rolf I. Siverson A DISSERTATION - University of Pennsylvania, Accessed February 22, 2026, https://repository.upenn.edu/bitstreams/85d41510-44f5-4a68-bd15-1e55365cce53/download
[20]: Kishi and Corruption: An Anatomy of the 1955 System - Gwern.net, Accessed February 22, 2026, https://gwern.net/doc/japan/history/2001-12-samuels-kishiandcorruptionananatomyofthe1955system.html
[21]: Bodies in the Service of the Japanese Empire: Colonial Medicine in Manchuria, Accessed February 22, 2026, https://apjjf.org/2021/24/suenaga
[23]: Physicians as Agents of the State - AMA Journal of Ethics - American Medical Association, Accessed February 22, 2026, https://journalofethics.ama-assn.org/article/physicians-agents-state/2002-12
[25]: Kishi Nobusuke - New World Encyclopedia, Accessed February 22, 2026, https://www.newworldencyclopedia.org/entry/Kishi_Nobusuke
[27]: HEALTH INSURANCE POLITICS IN JAPAN - Oxford Academic, Accessed February 22, 2026, https://academic.oup.com/cornell-scholarship-online/book/45163/book-pdf/48534336/upso-9781501763496.pdf
[28]: The Japanese healthcare system: The issue is to solve the “tragedy of the commons” without making another - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC1226232/
[29]: Medicine: Doc Strike - Time Magazine, Accessed February 22, 2026, https://time.com/archive/6832696/medicine-doc-strike/
[30]: The iron triangle of Japan's health care: The Japan Medical Association is losing its grip on healthcare policy - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC543855/
[31]: Healthcare in South Korea - Wikipedia, Accessed February 22, 2026, https://en.wikipedia.org/wiki/Healthcare_in_South_Korea
[32]: Health Care Reform in South Korea: Success or Failure? - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC1447690/
[33]: The 'Korean' Resolution of the Doctorless Village Crisis and the Entanglement with the Conscription System in South Korea in the 1950s-70s - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC10822699/
[34]: Doctor (Revision r3168) - Namuwiki, Accessed February 22, 2026, https://namu.wiki/w/%EC%9D%98%EC%82%AC?uuid=27d24d79-eaf9-4f01-bd3d-c06ee33a3ec0
[35]: History of the medical licensure system in Korea from the late 1800s to 1992 - PMC, Accessed February 22, 2026, https://pmc.ncbi.nlm.nih.gov/articles/PMC11894032/
[37]: Mandatory Designation System for Health Insurance (Revision r64) - Namuwiki, Accessed February 22, 2026, https://namu.wiki/w/%EA%B1%B4%EA%B0%95%EB%B3%B4%ED%97%98%20%EB%8B%B9%EC%97%B0%EC%A7%80%EC%A0%95%EC%A0%9C?uuid=a72b4700-604d-496c-ba41-c67923e5a2de
[38]: (PDF) China's health care system reform: Progress and prospects - ResearchGate, Accessed February 22, 2026, https://www.researchgate.net/publication/317606310_China's_health_care_system_reform_Progress_and_prospects
[43]: Deepening Health Reform in China - World Bank Documents & Reports, Accessed February 22, 2026, https://documents1.worldbank.org/curated/en/800911469159433307/pdf/107176-REVISED-PUBLIC-ENGLISH-Health-Reform-In-China-Policy-Summary-Oct-reprint-ENG.pdf
[59]: Statistics on emergency room admission difficulties (re-transport of critically ill patients, etc.) are often calculated based on data from the National Emergency Department Information System (NEDIS), the National Medical Center, and the Ministry of Health and Welfare. Example: National Assembly Press Release (Office of Rep. Kim Sun-min), "Increase in Notices of Difficulty in Emergency Room Admissions" (2024-10-04) https://www.assembly.go.kr/assm/communication/press/news/222703?viewType=congressman; (Re-verification with NEDIS/National Medical Center raw data is recommended if possible). (Accessed 2026-02-17).
[60]: For the classic formulation of critical realism, refer to Roy Bhaskar, A Realist Theory of Science (Routledge, 1975); Roy Bhaskar, The Possibility of Naturalism (Routledge, 1979), etc.
[61]: Announcement materials for the government’s ‘Essential Healthcare Policy Package’ (Four Core Tasks for Medical Reform): Ministry of Health and Welfare Press Release, "Saving Essential Healthcare on the Brink through a Policy Package" (2024-02-01) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1480133; Attached PDF "Essential Healthcare Policy Package" (korea.kr) https://www.korea.kr/common/download.do?fileId=145537267 (Accessed 2026-02-17).
[62]: The history of achieving and incrementally expanding universal health insurance in South Korea (July 1989) can be verified through historical records from the National Archives of Korea and public institutions. Example: National Archives Topic-specific Content (Medical Insurance System) https://www.archives.go.kr/next/newsearch/listSubjectDescription.do?id=001507; HIRA ‘History’ (English) https://www.hira.or.kr/dummy.do?pgmid=HIRAJ010000003000 (Accessed 2026-02-17).
[63]: Representative Constitutional Court decision on the mandatory designation system for medical institutions: Constitutional Court 2002.10.31. 99Hun-Ba76 (Decision provided by the National Law Information Center) https://www.law.go.kr/Case/DecisionCase/99Hun-Ba76 (Accessed 2026-02-17). (Further confirmation of subsequent decisions and precedents using the same keywords is recommended.)
[64]: Discussions and statements regarding the setting of low medical fees at approximately '55% of cost' during the introduction of health insurance in 1977 can be reconstructed based on primary records (such as National Assembly minutes). Reference: Doctorsnews, "The High Price of Universal Health Insurance: Half-rate Medical Insurance Premiums and Fees at 55% of Cost" (2020-07-01) https://www.doctorsnews.co.kr/news/articleView.html?idxno=135845 (Accessed 2026-02-17).
[65]: As a classic starting point for discussions on monopsony in the medical labor market: Joan Robinson, The Economics of Imperfect Competition (Macmillan, 1933). (Modern discussions on healthcare monopsony modify and extend this framework.)
[66]: International comparative indicators (number of doctors, number of beds, frequency of outpatient visits, avoidable mortality, etc.) can use OECD Health Statistics/Health Data Explorer as primary sources. OECD Data Explorer (Health): https://data-explorer.oecd.org; Example: Indicator description for ‘Avoidable mortality’ https://www.oecd.org/en/data/indicators/avoidable-mortality.html (Accessed 2026-02-17).
[67]: The scale and composition of non-reimbursable items (manual therapy, extracorporeal shock wave therapy, nutritional injections, etc.) can be confirmed through the Health Insurance Review and Assessment Service (HIRA) "Non-reimbursable Medical Expenses" disclosure/survey data and analytical reports. Example: HIRA, Information on Non-reimbursable Medical Expenses https://www.hira.or.kr/biz/healthcareinfo/biznonpay/bizNonpayMain.do; National Health Insurance Service Press Release, "Analysis of Non-reimbursable Medical Expenses" (2026-01-30) https://www.nhis.or.kr/nhis/together/wbhaec06400m01.do?mode=view&articleNo=10840267 (Accessed 2026-02-17).
[68]: Classic text on the ‘unintended consequences’ of policy: Robert K. Merton, “The Unanticipated Consequences of Purposive Social Action,” American Sociological Review 1(6) (1936).
[69]: The scale of collective resignations and departures of medical residents in the first half of 2024 requires cross-verification between government statistics and major media reports. Example: MBC, "Over 90% of Residents Submit Resignations..." (2024-02-20) https://imnews.imbc.com/news/2024/society/article/6573253_36438.html; Newsis, "93% of Residents Depart from Workplaces" (2024-03-12) https://www.newsis.com/view/NISX20240312_0002657412 (Accessed 2026-02-17).
[70]: The turnover rate of new nurses within one year (e.g., 57.4%) is often cited based on health-related workforce surveys or nursing association statistics, necessitating verification of the original text. Example: Korean Nurses Association Press Release/Summary, "Turnover Rate of New Nurses Within One Year is 57.4%" (2024-02-27) https://nursenews.co.kr/main/ArticleDetailView.asp?sSection=61&idx=31884 (Accessed 2026-02-17).
[71]: Overview of the concepts of path dependence and ‘critical juncture’: Paul Pierson, “Increasing Returns, Path Dependence, and the Study of Politics,” American Political Science Review 94(2) (2000); James Mahoney, “Path Dependence in Historical Sociology,” Theory and Society 29(4) (2000).
[72]: The progress of implementing the separation of prescribing and dispensing drugs can be confirmed through policy materials from the Ministry of Health and Welfare. Example: Ministry of Health and Welfare, Introduction of the "Separation of Prescribing and Dispensing" policy https://www.mohw.go.kr/menu.es?mid=a10706060100 (Accessed 2026-02-17).
[73]: JANG Won Mo & PARK Seungmann, “Physicians Who Crossed the Pacific: The Scale and Causes of South Korean Physician Migration to the United States, 1965–1980,” Korean Journal of Medical History 34(2) (2025) http://dx.doi.org/10.13081/kjmh.2025.34.419; PDF https://pdfs.semanticscholar.org/910d/550d2723ebc7bba7da79668fba6bf50b41c7.pdf (Accessed 2026-02-21).
[74]: Jun-ho Jung, “The 1971 Residents’ Strike,” Journal of Historical Studies 52 (2023) (PMC) https://pmc.ncbi.nlm.nih.gov/articles/PMC12222390/; Yonhap News, “What Happened in the 1971 'Medical Benevolence Crisis'” (2020-10-19) https://www.yna.co.kr/view/AKR20201019093700530 (Accessed 2026-02-21).
[75]: Everett S. Lee, “A Theory of Migration,” Demography 3(1) (1966) (push–pull model). PDF https://www.uv.es/gabinet/polilib/Lee_migration.pdf (Accessed 2026-02-21).
[76]: Source verification required: The figure in the text stating that ‘40-60% of Seoul National University College of Medicine graduates moved to the US’ requires re-verification based on primary statistics or registries. Reference: Korea Economic Daily (based on Yonhap News), “What Happened in the 1971 'Medical Benevolence Crisis'” (2020-10-19) https://www.hankyung.com/article/202010199458Y; Refer to JANG Won Mo & PARK Seungmann (2025) for data on the 1960s–70s.
Cases of physician emigration and specific medical schools (e.g., 63.8% of Catholic University of Korea’s 1967 graduates moved to the U.S.) are presented (Accessed: 2026-02-21).
[77]: Yonhap News, “What Happened During the 1971 'Medical Act Crisis'?” (2020-10-19) https://www.yna.co.kr/view/AKR20201019093700530; Korea Economic Daily (based on Yonhap News), “What Happened During the 1971 'Medical Act Crisis'?” (2020-10-19) https://www.hankyung.com/article/202010199458Y (Accessed: 2026-02-21).
[78]: Centers for Medicare & Medicaid Services (CMS), “Medicare’s History” https://www.cms.gov/about-cms/history-and (Accessed: 2026-02-21).
[79]: Reuben A. Kessel, “The American Medical Association and Physician Supply,” Duke Law Journal 25(2) (1976) https://scholarship.law.duke.edu/dlj/vol25/iss2/4/ (Accessed: 2026-02-21).
[80]: Migration Policy Institute, “The 1965 Immigration and Nationality Act at 50” https://www.migrationpolicy.org/article/1965-immigration-nationality-act-50-year-anniversary; Immigration History (USCIS), “Immigration and Nationality Act of 1965” https://immigrationhistory.org/item/immigration-and-nationality-act-of-1965/ (Accessed: 2026-02-21).
[81]: For the compilation and citation of primary sources and regulations regarding the suppression of physician emigration (overseas travel permit criteria, mandatory service in specific regions, etc.), refer to JANG Won Mo & PARK Seungmann (2025) (specifically page 22 and footnotes 34–36). https://pdfs.semanticscholar.org/910d/550d2723ebc7bba7da79668fba6bf50b41c7.pdf (Accessed: 2026-02-21).
[82]: Yonhap News, “What Happened During the 1971 'Medical Act Crisis'?” (2020-10-19) https://www.yna.co.kr/view/AKR20201019093700530 (Accessed: 2026-02-21).
[83]: Classic formulations of framing/heuristic bias: Amos Tversky & Daniel Kahneman, “The Framing of Decisions and the Psychology of Choice,” Science 211(4481) (1981); Daniel Kahneman, Thinking, Fast and Slow (Farrar, Straus and Giroux, 2011).
[84]: (Reference) Overview of the Yusin Constitution (1972) and the Yusin System: https://ko.wikipedia.org/wiki/유신헌법 (Accessed: 2026-02-21).
[85]: Overview of the Prisoner’s Dilemma: Stanford Encyclopedia of Philosophy, “Prisoner’s Dilemma” https://plato.stanford.edu/entries/prisoner-dilemma/ (Accessed: 2026-02-21).
[91]: ‘Exit-Voice-Loyalty’ framework: Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Harvard University Press, 1970).
[92]: Classic text formulating medical care as a representative case of market failure: Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review 53(5) (1963).
[94]: Analysis of the judicialization of politics: Ran Hirschl, Towards Juristocracy: The Origins and Consequences of the New Constitutionalism (Harvard University Press, 2004).
[95]: Representative text on institutional change and path dependency: Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge University Press, 1990).
[102]: Classic discussion on deontology and the categorical imperative: Immanuel Kant, Groundwork of the Metaphysics of Morals (1785).
[105]: Discussions on systems thinking and learning organizations: Peter M. Senge, The Fifth Discipline: The Art & Practice of the Learning Organization (Doubleday, 1990).
[109]: For discussions on the paradox of regulation and behavioral economics-based regulation, refer to Cass R. Sunstein’s works on regulation/behavioral policy (e.g., co-authored Nudge) and law and economics literature.
[115]: South Korea’s number of outpatient visits per capita (international comparison) can also be verified through press releases/statistical portals based on OECD Health Statistics. Example: Ministry of Health and Welfare, Analysis Results of 「OECD Health Statistics 2022」 (2022-12-07) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=374869 (Accessed: 2026-02-17).
[128]: Institutional changes regarding the payment system for nursing hospital inpatient care (daily flat rate, etc.) require cross-verification through Ministry of Health and Welfare/HIRA data and reports from the time of introduction. Reference: Medical Times, 「Nursing Hospital Daily Flat Rate System Implemented in 2008」 (2007-11-16) https://www.medicaltimes.com/Main/News/NewsView.html?ID=102537 (Accessed: 2026-02-17).
[136]: Overview, targets, and cycles of the National Health Screening Program are verified through the National Health Insurance Service (NHIS) guide and the 『Framework Act on Health Examinations』. NHIS, 「National Health Screening」 https://www.nhis.or.kr/nhis/healthin/wbhaca00300m01.do; 『Framework Act on Health Examinations』 (National Law Information Center) https://www.law.go.kr/법령/건강검진기본법 (Accessed: 2026-02-17).
[140]: Classic critique of medicalization and the dysfunctions of medicine: Ivan Illich, Medical Nemesis: The Expropriation of Health (Pantheon, 1975). (Refer to subsequent literature such as Conrad for the sociological expansion of the concept of medicalization.)
[143]: National Health Insurance Service, “2017 Health Insurance Coverage Rate: 62.7%” (Press Release) https://www.nhis.or.kr/nhis/board/bda/BDAD0004.do?mode=view&articleNo=10781925; (Reference) “2024 Health Insurance Coverage Rate: 64.9%” Data (reposted press release) https://www.kiri.or.kr/report/downloadFile.do?docId=2501230903 (Accessed: 2026-02-21).
[144]: Financial Supervisory Service, 「Notice of Amendment to Standard Terms and Standard Business Methods for Indemnity Health Insurance」 (Press Reference Material, 2016-12-30) https://www.fss.or.kr/fss/bbs/B0000188/view.do?nttId=141577&menuNo=200218 (Accessed: 2026-02-21).
[145]: (Comparison of overseas 'mixed medical care' regulation) Korea Insurance Research Institute (KIRI), “Moral Hazard in Indemnity Insurance and Overseas Cases” https://www.kiri.or.kr/report/downloadFile.do?docId=240503346; Taiwan National Health Insurance Administration, “Management Measures for Out-of-Pocket Payment” https://www.nhi.gov.tw/en/cp-2255-17175-201.html; The Commonwealth Fund, International Health Care System Profile: Taiwan https://www.commonwealthfund.org/international-health-policy-center/countries/taiwan (Accessed: 2026-02-21). (Detailed verification is required for the main text regarding the operation of 'mixed medical care' in Taiwan and Japan, as specific items and exception regulations exist.)
[146]: (Arguments for/against) Problem awareness that indemnity insurance increases utilization and non-covered items, thereby worsening the loss ratio, and arguments for system reform (4th generation, etc.): Financial Services Commission, “Indemnity Insurance is Reducing Public Medical Expenses... but Overtreatment and Worsening Loss Ratios are 'Serious'” (2021-09-29) https://www.fsc.go.kr/no010101/81119; KIRI, “Moral Hazard in Indemnity Insurance and Overseas Cases” https://www.kiri.or.kr/report/downloadFile.do?docId=240503346 (Accessed: 2026-02-21).
[147]: Source verification required: The resident 'application rate (%)' figures for 2010 and 2020 presented in the text need to be reconfirmed with annual official disclosure data. For reference, recent discussions on application rates can partially be found in government/media and Financial Services Commission press releases: https://www.fsc.go.kr/no010101/81119 (Accessed: 2026-02-21).
[148]: Statistics and policy evaluations regarding the scale of indemnity insurance subscribers and loss ratios: Financial Services Commission, “Indemnity Insurance is Reducing Public Medical Expenses... but Overtreatment and Worsening Loss Ratios are 'Serious'” (2021-09-29) https://www.fsc.go.kr/no010101/81119 (Accessed: 2026-02-21).
[156]: The ‘sick role’ and the functionalist position of the medical profession: Talcott Parsons, The Social System (Free Press, 1951) and related papers.
[157]: Discussions on modernity, expert systems, and trust: Anthony Giddens, The Consequences of Modernity (Polity, 1990).
[158]: Discussion on the ‘experience economy’ of services: B. Joseph Pine II & James H. Gilmore, The Experience Economy (Harvard Business School Press, 1999).
[163]: Discussion on the ‘cost disease’ of the service sector: William J. Baumol & William G. Bowen, Performing Arts: The Economic Dilemma (Twentieth Century Fund, 1966); William J. Baumol, “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis,” American Economic Review 57(3) (1967).
[180]: Strengthening of requirements for involuntary hospitalization can be verified in the 『Act on the Improvement of Mental Health and the Support for Welfare Services for Mental Patients』 (National Law Information Center). https://www.law.go.kr/법령/정신건강증진및정신질환자복지서비스지원에관한법률; Refer to Ministry of Health and Welfare ‘OECD Health Statistics’ analysis data for comparative OECD psychiatric bed statistics (e.g., 2022-12-07 press release). (Accessed: 2026-02-17).
[193]: Verification of the proportion of public medical institution beds (Nationally Approved Statistics): National Medical Center Public Health Care Support Center, “2022 Status of Public Medical Institutions” https://www.edunmc.or.kr/nplms/openStudy/policy/7557 (PDF); National Medical Center, “2023 Major Statistics on Public Health Care” https://www.nmc.or.kr/nmc/board/B0000058/23895 (PDF) (Accessed: 2026-02-21).
[194]: Ministry of Health and Welfare (regarding resident return-to-work orders and processing of resignations): “A Message to Residents” (2024-02-16) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1480308&mid=a10503000000; “Guide on Measures Related to the Withdrawal of Return-to-Work Orders (2024.6.4.)” (2024-06-05) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1481841&mid=a10503010100 (Accessed: 2026-02-21).
[195]: Grounds for disqualification and license revocation regulations for medical personnel (Amendment/Implementation): National Law Information Center, 「Medical Service Act」 https://www.law.go.kr/법령/의료법; Easy-to-Find Statutes Information, “Reorganization of Regulations Regarding Disqualification Grounds and License Revocation of Medical Personnel (Effective 2023-11-20)” https://www.easylaw.go.kr/CSP/NtcRetrieve01.laf?ntcSeq=1497 (Accessed: 2026-02-21).
[196]: Official materials on the Horizon scandal (combination of investigation/prosecution powers by the Post Office and large-scale miscarriages of justice): GOV.UK, “Post Office Horizon IT Inquiry” https://www.gov.uk/government/collections/post-office-horizon-it-inquiry; GOV.UK factsheet, “Horizon scandal factsheet (Post Office (Horizon System) Offences Bill)” https://www.gov.uk/government/publications/post-office-horizon-system-offences-bill-supporting-documents/horizon-scandal-factsheet-post-office-horizon-system-offences-bill; Post Office Horizon IT Inquiry https://www.postofficehorizoninquiry.org.uk/ (Accessed: 2026-02-21).
[197]: (Arguments for/against) Necessity and issues regarding the introduction of special judicial police (SJP) for the NHIS: National Assembly Research Service (NARS), 「Measures to Secure Effectiveness in Cracking Down on Shadow Hospitals: Focusing on the Necessity of Introducing Special Judicial Police for the National Health Insurance Service」(2023-12-15) https://www.nars.go.kr/fileDownload2.do?doc_id=1OnT2vg1vCf&fileName=; Korean Pharmaceutical Association (In favor) Example: https://www.kpanet.or.kr/board.cm?boardSeq=223112&menuCd=1002020000&tabYn=N (Accessed: 2026-02-21).
[199]: Concept of hegemony: Antonio Gramsci, Selections from the Prison Notebooks (Edited/Translated, 1971; original written 1929–1935).
[201]: Discussion on Ideological State Apparatuses (ISA): Louis Althusser, “Ideology and Ideological State Apparatuses,” in Lenin and Philosophy and Other Essays (Monthly Review Press, 1971/1970s English version).
[202]: Classic on the concept of moral panic: Stanley Cohen, Folk Devils and Moral Panics (MacGibbon and Kee, 1972; subsequent revised editions).
[203]: Discussions on biopolitics and governmentality: Michel Foucault, The History of Sexuality, Vol. 1 (1976) and Collège de France lectures (Security, Territory, Population; The Birth of Biopolitics), etc.
[209]: The upper limit for resident work and training hours (80 hours per week, exceptional extensions, etc.) is regulated under the 『Act on the Improvement of Training Environment and Status of Medical Residents』. Example: Article 7 (Training Hours, etc.) https://www.law.go.kr/법령/전공의의수련환경개선및지위향상을위한법률 (Accessed: 2026-02-17).
[230]: Classic discussion on collective action dilemmas/free-riding: Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Harvard University Press, 1965).
[233]: Discussions on the mobilization structures and repertoires of social movements: Charles Tilly, Social Movements, 1768–2004 (Paradigm, 2004) and Contentious Performances, etc.
[242]: Classic discussions on public choice and fiscal illusion: James M. Buchanan & Gordon Tullock, The Calculus of Consent (University of Michigan Press, 1962); Refer to Buchanan’s works on public finance/constitutional economics.
[262]: Classic discussion on information asymmetry and ‘the market for lemons’: George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84(3) (1970).
[268]: Regarding KDI’s decomposition of health insurance expenditure growth factors (‘price factor 76.7%’, etc.): KDI (English) Research-Focus List/Summary https://www.kdi.re.kr/eng/research/focusList and related reports (e.g., BusinessKorea 2025-04-21, https://biz.chosun.com/en/en-policy/2025/04/21/NVCA7YG42FFBLBUVGHU56GPAWU/). (Re-verification with original source data—PDF report, models, and decomposition methods—is recommended at the time of publication.) (Accessed: 2026-02-17).
[269]: Coverage rates (2017: 62.7%, 2024: 64.9%) and composition of non-covered items/out-of-pocket payments: National Health Insurance Service, “2017 Health Insurance...Coverage rate 62.7%” https://www.nhis.or.kr/nhis/board/bda/BDAD0004.do?mode=view&articleNo=10781925; “2024 Health Insurance Coverage Rate 64.9%” data (reposted PDF) https://www.kiri.or.kr/report/downloadFile.do?docId=2501230903 (Accessed: 2026-02-21).
[270]: International comparison indicators (out-of-pocket share, OECD average, etc.) are available in OECD Health Statistics/Health Spending data: OECD Data, “Health spending” https://data.oecd.org/healthres/health-spending.htm (Accessed: 2026-02-21). (Figures in the main text require re-verification with original OECD data for the application year and indicator definitions.)
[271]: Government announcement of the ‘Benefit Enhancement Plan (Moon Jae-in Care)’ (2017-08-09) and financial requirements/targets (coverage rate of 70%, etc.): Policy Briefing (korea.kr), “Moon Jae-in Care… Building a ‘Country Without Worries Over Medical Expenses’” https://www.korea.kr/policy/pressReleaseView.do?newsId=156222252 (Accessed: 2026-02-21).
[272]: Source verification required: The ‘94% support rate for Moon Jae-in Care’ requires verification of raw public opinion poll data (survey agency, questions, period).
[273]: Increased spending and management issues following the inclusion of ultrasound and MRI in benefit coverage: Ministry of Health and Welfare, “Board of Audit and Inspection Result: Status of Health Insurance Financial Management” (2022-07-28) https://www.mohw.go.kr/board.es?act=view&bid=0013&list_no=372381&mid=a10405010200 (Accessed: 2026-02-21).
[274]: Summary of points raised by the Board of Audit and Inspection (excessive loss compensation, suspected violations of benefit criteria, etc.): Ministry of Health and Welfare (Post of Audit Results) https://www.mohw.go.kr/board.es?act=view&bid=0013&list_no=372381&mid=a10405010200; Kyunghyang Shinmun, “Medical expenses and unfair claims increased after expansion of insurance coverage for Brain and Cerebrovascular MRI” (2022-07-28) https://www.khan.co.kr/article/202207281108001 (Accessed: 2026-02-21).
[275]: Yoon Suk-yeol government’s ‘Plan to Enhance Health Insurance Sustainability’ (strengthening MRI criteria, etc.): Ministry of Health and Welfare Press Release (2023-02-09) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1477257; Health Insurance Review and Assessment Service Information https://www.hira.or.kr/rc/dur/bbsViewRcDur.do?brdSeq=265 (Accessed: 2026-02-21).
[276]: Determination of health insurance premium rates (Health Insurance Policy Deliberation Committee): Ministry of Health and Welfare, “2025 Health Insurance Premium Rate Frozen at 7.09%” (2024-08-29) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1482524; Ministry of Health and Welfare, “2026 Health Insurance Premium Rate Determined at 7.19% (+1.6%)” (2025-09-04) https://www.mohw.go.kr/board.es?act=view&bid=0027&list_no=1485014 (Accessed: 2026-02-21).
[277]: Mid-to-long-term financial projections (shift to deficit, exhaustion of reserves, etc.): National Assembly Budget Office (NABO), “Financial Projections of the National Health Insurance” (2023-11-14) https://www.nabo.go.kr/en/trends/detail.do?seq=1051; NABO, “Health Insurance Financial Projections Reflecting Medical Reform and Emergency Medical Measures” (2024) PDF https://www.nabo.go.kr/files/01_report/trends/detail/2024100316294771818.pdf; Korea Institute for Health and Social Affairs, “Expansion of Health Insurance Coverage and Financial Soundness” (2020) https://repository.kihasa.re.kr/handle/201002/35950 (Accessed: 2026-02-21).
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[Ministry of Health and Welfare / 24.1.30~2.29] Announcement of new projects for the 2024 Global Physician-Scientist Training Program, accessed July 21, 2025, https://dhc.severance.healthcare/dhc/publicnotice.do?mode=view&articleNo=120853&title=%5B%EB%B3%B4%EA%B1%B4%EB%B3%B5%EC%A7%80%EB%B6%80%2F24.1.30%7E2.29%5D+2024%EB%85%84%EB%8F%84+Global+Physician-Scientist+Training+Program+Announcement
[285]: 2025_KPBMA_Brief_vol.28.pdf
[286]: 'Even if the R&D budget is restored… it will take at least 5 years to recover the collapsed ecosystem'
[Suggestions for the New Government] | Seoul Economic Daily, accessed July 21, 2025, https://www.sedaily.com/NewsView/2GU0QV0MWI
[287]: Properly understanding the controversy over R&D budget cuts, accessed July 21, 2025, https://contents.premium.naver.com/byteplus/byte/contents/231117011227879du
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[2024 Budget Analysis] Next year’s R&D budget cuts are negative for policy reliability… 'appropriateness' needs to be re-examined, accessed July 21, 2025, https://m.ddaily.co.kr/page/view/2023103113311552336
[289]: Results of the Supplementary Survey by Employment Type - Statistics Korea, accessed July 21, 2025, https://kostat.go.kr/boardDownload.es?bid=210&list_no=433307&seq=3
[290]: Statistical Information Report on 'Survey of New Domestic Doctoral Degree Recipients' - Statistics Korea, accessed July 21, 2025, https://kostat.go.kr/boardDownload.es?bid=12030&list_no=379912&seq=1
[291]: Decreasing trend in the share of generics and products is 'evident'… Focusing on 'in-house' new drugs - NewsWay, accessed July 21, 2025, https://www.newsway.co.kr/news/view?ud=2024062014123961847
[292]: 4 Indian companies included in the 'Global Top 10 Generics'... "No Korean companies," accessed July 21, 2025, http://www.hitnews.co.kr/news/articleView.html?idxno=40485
[293]: U.S. Physician-Scientist Workforce in the 21st Century: Recommendations to Attract and Sustain the Pipeline - PubMed Central, accessed July 21, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC5882605/
[294]: Physician-Scientists | AAMC, accessed July 21, 2025, https://www.aamc.org/what-we-do/mission-areas/medical-research/physician-scientist
[295]: Opinion: Expansion fever and soft money plague the biomedical ..., accessed July 21, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC6126718/
[296]: The Scientific Enterprise Must Change | Harvard Medical School, accessed July 21, 2025, https://hms.harvard.edu/news/scientific-enterprise-must-change
[297]: Policy proposals for training physician-scientist personnel in Korea, accessed July 21, 2025, https://jkma.org/upload/pdf/jkma-2024-67-2-68.pdf
[298]: MEDI:GATE NEWS: “Giving up on dreams after seeing senior physician-scientists with uncertain futures… the government must provide support with a long-term perspective” - Medigate News, accessed July 21, 2025, https://www.medigatenews.com/news/1032604269
[299]: Insufficient domestic physician-scientist training system, what are the problems hindering field settlement? - Medical Observer, accessed July 21, 2025, https://www.monews.co.kr/news/articleView.html?idxno=307888
[300]: Attachment 2 Demand survey form (draft) for identifying unmet needs in the clinical field, accessed July 21, 2025, https://www.thrombo.or.kr/include/lib/download_post_attachment.php?id=2696&idx=1
[301]: In-depth analysis of CRO operations and their impact on drug development - Novotech, accessed July 21, 2025, https://novotech-cro.com/kr/faq/depth-analysis-cro-operations-and-impact-drug-development
[315]: Overview of critical transitions and early-warning signals in complex systems: Marten Scheffer et al., “Early-warning signals for critical transitions,” Nature 461 (2009); Dakos et al., “Methods for Detecting Early Warnings of Critical Transitions,” PLoS ONE 7(7) (2012); Scheffer et al., “Anticipating Critical Transitions,” Science 338(6105) (2012).
[321]: Interpretations of surveys regarding physician perception/burnout/satisfaction may vary depending on the sample, questions, and weights; thus, it is safer to check the original text (survey design). News example: Health Chosun, “82.6% of Physicians Experience Burnout” (2024-01-16) https://health.chosun.com/site/data/html_dir/2024/01/16/2024011602379.html (Accessed: 2026-02-17).
[325]: It is recommended to verify procedures for U.S. medical licensure and residency entry through official guides from ECFMG, USMLE (NBME/FSMB), and NRMP as primary sources. While South Korean exam information exists through private educational institutions (e.g., USMLE Korea https://usmlekorea.com), policies and requirements must be re-verified through official documents. (Accessed: 2026-02-17).
[326]: Statistics on 'net outflow/inflow of the wealthy' by country are often cited from Henley & Partners' Private Wealth Migration Report series (including projected figures). Example: Henley & Partners Press Release “2025 wealth migration” (2025-06-24) https://www.henleyglobal.com/newsroom/press-releases/private-wealth-migration-report-2025; News related to Private Wealth Migration Report 2024 (South Korea's net outflow of 1,200 people, etc.): Korea JoongAng Daily (2024-06-05) https://koreajoongangdaily.joins.com/news/2024-06-05/business/economy/Henley-report-S-Korea-to-lose-1200-millionaires-this-year/2061936 (Accessed: 2026-02-17).