The Ministry of Health and Welfare's "Phase 2 Pilot Project for Health Insurance Coverage of Herbal Medicine (Cheopyak)" has overrun its original budget by approximately 1.6 times, raising concerns that vast public funds are leaking into mild conditions such as allergic rhinitis and indigestion rather than life-threatening severe and essential medical care.
According to "Health Insurance Execution Status for Herbal Medicine at Oriental Medicine Clinics" data submitted by the National Health Insurance Service to Rep. Kim Mi-ae of the People Power Party, a member of the National Assembly's Health and Welfare Committee, on the 27th, total benefit payments for 2024 and 2025 — when the Phase 2 pilot was implemented — reached 191.39 billion won. The figure significantly exceeds the 118.8 billion won budget originally estimated by the government through the Health Insurance Policy Deliberation Committee. As of March this year, 36.64 billion won had already been paid out, surpassing more than half of this year's estimated budget of 75.3 billion won.
The financial overrun stems from the government substantially lowering the threshold for health insurance coverage of herbal medicine starting in 2024 under the Phase 2 pilot. During the Phase 1 pilot from 2020 to 2023, coverage was limited to three conditions — facial nerve paralysis, cerebrovascular disease sequelae, and menstrual pain — with total payments over the three-year period amounting to only around 5 billion won. From Phase 2, however, three additional conditions with high patient demand were added: allergic rhinitis, functional indigestion, and lumbar disc herniation. Looking at payments by condition for 2025, the largest portions of insurance funds were concentrated in functional indigestion (60.35 billion won) and allergic rhinitis (34.65 billion won).
In addition, the prescription limit per oriental medicine doctor was doubled from a maximum of 4 cases per day (30 per month, 300 per year) to a maximum of 8 cases per day (60 per month, 600 per year), while patient out-of-pocket rates were sharply reduced from 50 percent to 30 percent at oriental medicine clinics, causing prescription incentives to surge. The rule previously restricting coverage to one condition per year was also relaxed to two conditions, further boosting utilization.
However, voices both inside and outside the medical community are warning that the priority of distributing limited health insurance funds is being undermined. Critics argue it is unreasonable to pour hundreds of billions of won into herbal prescriptions for mild conditions that need not receive priority insurance coverage, when concentrated financial support is urgently needed to raise reimbursement rates and prevent the collapse of essential medical care directly tied to lives — including pediatrics, obstetrics and gynecology, and emergency medicine. The Ministry of Health and Welfare has set a policy of completing cost-level reimbursement compensation by 2030 to strengthen essential medical care. As guaranteed reimbursement rates rise, health insurance financial capacity will inevitably tighten as well.
The issue of excessive treatment and prescriptions, one cause of fiscal waste, is also likely to intensify. According to the Health Insurance Review and Assessment Service, the average number of outpatient visits per Korean citizen in 2023 was 18, 2.8 times higher than the OECD average. With overtreatment already a concern, applying health insurance to herbal medicine creates a structure in which patients receive duplicate consultations and prescriptions, worsening fiscal waste.
"Because mild conditions involve a large number of patients, fiscal spending will inevitably grow rapidly when health insurance coverage is expanded," said Lee Joo-yeol, a professor of health administration at Namseoul University. "Even though health insurance finances are currently in surplus, medical cost increases are unavoidable as Korea enters a super-aged society, so reserves need to be accumulated further over the long term."
