The Peninsula

The Welfare State: The Differences in Healthcare in the United States and South Korea

By Seho Park

The welfare state is a concept of government in which the state or a well-established network of social institutions plays a key role in the protection and promotion of the economic and social well-being of citizens. This concept first appeared in late 19^th century in the United Kingdom, when the negative consequences of capitalism were observed and given public attention. The concept of the welfare state was soon adopted by Labour Government in United Kingdom after the 1945 election as the National Assistance Act ended the Poor Law. After the United Kingdom first adopt the concept of the welfare state, European countries and other nations slowly did as well. They did so in an effort to remedy the imperfections of capitalism (such as those shown during the Great Depression), the need to rebuild social overhead capital and communities after World War I and II, as well as to fight against communism by easing strains on the working class and making solid middle-income classes.

Generally, welfare states exist in three forms: 1) liberal 2) conservative corporatism and 3) social democracy. 1) ‘Liberal’ welfare states use means-tested assistance and have modest universal social-insurance. Usually, low-income working classes and state dependents are main beneficiaries in liberal welfare states. They use private welfare schemes to subsidize people in need. 2) Conservative corporatism welfare states tend to preserve status differentials. This is because rights are closely attached to class and status in the regime. Private insurance plays a marginal role in conservative corporatism welfare states. 3) In social democracy welfare states, universalism and de-commodification are extended to the new middle classes. They promote an equality of the highest standards, but not an equality of minimal needs. Since every citizen benefits and is dependent upon the state, they are obliged to contribute to the state. In these states, the market is crowded out by governmental support programs. Actually, there are no clear boundaries among the three clusters. Rather, criteria of welfare states can be more clearly defined by; a quality of social rights, social stratification and the relationship between state, market, and the family. Therefore, there are various paths to develop a welfare state.

According to the Beverage Report, there are five pillars of welfare state: social security, employment, housing, education and health. To make a clear differentiation between South Korea and United States, only health issue will be covered in this paper, though all sectors are closely connected to each other.

Healthcare services is vital for our general well-being and it is central to basic human rights. However, the price of healthcare is ever-increasing as advancing technology creates more demand (new diagnoses and medicines). Since citizen’s ill health can lead to increasing unemployment and lower the taxation rate if there is limited access to healthcare system, the state often takes responsibility for public healthcare.

Korea has corporatist health insurance system. The state organizes a comprehensive social health insurance fund that collects a fixed percentage of all citizens’ income via the taxation system and the membership scheme is compulsory. These social insurance schemes are designed to cover the costs of medical treatments. Therefore, all citizens can be covered and all pay an equal share of their income. However, there are modestly sized private insurance sectors that allow those with higher incomes to join schemes that offer additional levels of protection.

Unlike Korea, the United States has a liberal healthcare system. It is primarily seen as private responsibility and a matter for the free market. Patients in the U.S. can cover the costs either by using their own private medical insurance – sometimes as part of an employment package-or by paying one-off fees on their own. Therefore, access is determined on the basis of ability to pay. In United States, the state organized safety net includes emergency services and insurance schemes that provides funds for those on low incomes who cannot cover the costs of care themselves.

Other than Korea, the United Kingdom and Sweden have social democratic systems where the state plays the dominant role in healthcare by acting a near monopoly supplier of health services. The majority of healthcare facilities, employees and medical professionals are funded by taxes. The service is universally provide and all citizens are entitled to use the service on the basis of need.

To sum up, all healthcare services ration the supply of healthcare in order to cope with the pressures of demand. The level of demand for health services are rising not least because of technological and demographic change. Therefore, healthcare system have some inequalities of access (i.e., either money or time) and the structure of those systems can contribute to inequalities. As a result, healthcare outcomes are fundamentally shaped by underlying social and economic inequalities.

As in the case of the U.S. and Korean healthcare systems, welfare policy is not only delivered by governmental implementation, but also cooperation with private-owned institutions. The variation of welfare states was the outcome of specific historical and cultural conditions. For example, the United States’ healthcare system produced strong actors who are resistant to reform, while Korea takes it as a given that the state should be the main provider of healthcare. Not only that, welfare policy can vary within the same ‘pillar’. For example, Korea strictly controls tertiary tuition which is in a line with conservative corporatism regime. At the same time, Korea has selective system in which is typical in a liberal regime. Therefore, there are variety way to achieve a welfare state and policy makers should deeply contemplate the balance between welfare policy and a state’s unique historical, cultural, institutional background.

Seho Park is currently an Intern at the Korea Economic Institute of America as part of the Asan Academy Fellowship Program. He is also a BA candidate at Soongsil University. The views expressed here are the author’s alone.

Photo from James Jordan’s photostream on flickr Creative Commmons.