Gov’t insurance payouts climb
But health insurance is expected to dry up by 2023.
The government on Tuesday said social insurance spending will dramatically increase in the next 10 years, largely due to the 7.11 million baby boomers who have begun to retire. Baby boomers were born between 1955 and 1963.
Social insurance spending last year was 106 trillion won. In the next 10 years that spending is expected to increase an average 8.4 percent annually, the Ministry of Strategy and Finance said. By 2025 it will reach 219.8 trillion won, equivalent to 9.2 percent of the nation’s GDP. Last year, social insurance spending accounted for 6.5 percent of the GDP. This is a 2.7 percentage point increase from the previous year.
“As the demographic changes caused by low birth and aging population started last year and will continue through 2025, major changes in revenue and spending of the eight social insurances will likely realize during this time period,” said Son Un-seok, deputy minister of Strategy and Finance. “There is a need of a preemptive measure that could guarantee the sustainability of social insurance in the long and mid term.”
Spending on the national pension is expected to see the sharpest increase. Last year, the national pension fund spent 17.7 trillion won. It is expected to grow an average 10.7 percent annually until 2025 when the spending will amount to 44.4 percent.
Last year, 4.13 million retirees collected a pension. That figure is expected to reach 6.45 million in 2025. Retirees who received pensions in 2016 accounted for 38 percent of all senior citizens in the country, a figure that is expected to increase to 46 percent by 2025.
Spending is increasing not only because of the growing number of people that will be receiving a pension but also the amount that the government will have to dole out.
Last year, the average pension that recipients invested in for more than 10 years received was 480,000 won per month. That figure in 2025 is expected to grow 42 percent to 680,000 won.
For those who have contributed for more than 20 years the monthly amount that they will receive will grow from 890,000 won per month to 1.13 million won in 2025.
The number of people that have been collecting three pensions also is expected to increase, adding to the larger spending. Spending on the four pensions - national pension, teacher’s pension, government employees pension and military pension - is expected to amount to 75 trillion won, more than double the 35 trillion won spent last year.
The four major insurances - national health insurance, long-term care insurance, employment insurance and workers’ compensation and welfare insurance - is expected to reach 145 trillion won, twice the 71 trillion won spent last year.
The aging population is expected to increase the burden on long-term care insurance as on average it will rise 9.3 percent annually until 2025 to 10.5 trillion won, more than the 4.7 trillion won spent last year. Health insurance is expected to grow 8.7 percent annually to 111.6 trillion won, the government estimated. The government spent 52.6 trillion won on health insurance payments last year. Health insurance spending will be equivalent to 4.7 trillion won of the nation’s GDP. Last year it was equivalent to 3.2 percent of the GDP.
Health insurance payments per capita are expected to double from 950,000 won to 1.8 million won by 2025 largely due to rising medical bills of senior citizens.
The government forecast that employment insurance will expand 7.2 percent annually to 15.8 trillion won by 2025 due to rising wages and increasing participation in parental leave.
At this rate, the government expects, health insurance to be depleted by 2023 while the long-term care insurance to run dry much earlier in 2020 as spending will grow faster than its revenue. By 2025, health insurance will be in a net deficit of 20.1 trillion won while the deficit for long-term care insurance will be 2.2 trillion won. Even employment insurance, which reported a 600 billion won net profit is expected to run at a deficit starting in 2020 and likely to see its deficit increase to 2.6 trillion won by 2025.
On the contrary, the national pension fund is expected to see a net surplus of 57.2 trillion won, a 24 percent increase compared to last year’s 45.9 trillion won. This is largely because of the subscription of the national pension fund is expected to reach 1,000 trillion won by 2025.
However, the government projected that the net surplus growth will start to decelerate significantly as spending will be growing at a much faster rate than the pension service’s revenue. In fact, its revenue to spending rate will be slowed from 3.59 percent to 2.29 percent. Health insurance will have greater spending as its revenue to spending rate will drop from 1.06 percent to 0.82 percent.
In fact, last year the social insurance investment profit on average had changed little compared to the previous year. The national pension fund investment return was 4.7 percent in 2016, which is only a 0.1 percentage point improvement from 2015’s 4.6 percent. Among the social insurances, the pension fund is the largest. Last year, pension fund assets amounted to 557.7 trillion won, which accounts for 90 percent of the seven social insurances amounting to 620.2 trillion won. The government did not include long-term care insurance.
The health insurance suffered a drop in its profit last year as its investment to profit rate was 1.7 percent, down from 2.2 percent the previous year. Health insurance came second to the national pension fund as its assets amounted to 19.3 trillion won, which accounts for 3.1 trillion won of the social insurance.
The government said it plans to come up with measures to improve the social insurance including readjusting the insurance handout of the four major insurances by June.
BY LEE HO-JEONG [firstname.lastname@example.org]