A Congressional vote on the proposed Korea-U.S. Free Trade Agreement (KORUS FTA) is likely to be held in the coming weeks, yet few members of Congress are fully aware of the implications of the agreement. Christine Ahn interviewed Mr. Joo-Ho Lee on January 22, 2011 about the Korea-U.S. Free Trade Agreement’s impact on Korea’s health system. Mr. Lee is the Senior Director of Strategic Planning for the Korean Health and Medical Workers Union (KHMU).
In the interview, Mr. Lee discusses the threat that the FTA represents to public health in Korea: among other points, because health insurance corporations are classified as financial investment institutions, not health institutions, they are subject to finance regulations, but not public health regulations. Meanwhile, provisions of the proposed FTA, negotiated primarily in 2006-2007, represent the deregulatory fervor that swept U.S. economic policy at that time. Experts have identified financial deregulation as a major cause of the economic recession in the U.S., and such deregulatory provisions become law under the KORUS FTA. Mr. Lee speaks from his standpoint in the context of Korean society, but this matter, and others that Mr. Lee raises, also impact conditions and public life in the U.S. The Investor-State Dispute (ISD) clause he discusses applies equally to U.S., Korean, and third-nation corporations operating in both countries, allowing corporations to sue governments in Korea or the U.S. to strike down legislation passed in the interest of public health and be awarded taxpayer dollars for profits lost on account of laws protecting the public health.
[Ahn] Mr. Lee, what brings you to the United States?
[Lee]: I am here to lo learn about single-payer universal health care and California’s Registered Nurse (RN)-to-patient ratio legislation. My union aims to see Korea provide free health care for all citizens and provide adequate staffing for patient safety, which they currently don’t have yet.
In order to prepare for a future where health care is free (universal health care), my union is interested in the single payer plan. I am conducting research on what other kinds of health care systems exist through a joint research project with the California Nurses Association and National Nurses United. The Korean healthcare industry, government and hospitals are working to reducing human resources costs to make health care more cost-beneficial. As a result many workers have been laid off and then rehired as irregular workers.
[Ahn] The Korea-U.S. FTA is likely to come up very soon for a vote and very few people understand it. What do you think about the FTA?
[Lee] Overall, I am against the Korea-U.S. FTA, actually against all FTAs, and instead would like to see fair trade. The FTA supposedly means free trade, but the ‘free’ part refers to corporate freedom, their freedom to make more profit. It’s irrelevant whether the FTA is beneficial to the U.S. or Korea. From the perspective of the working class and public, this FTA is only going to increase the profit maximization of U.S. and Korean corporations, and decrease the quality of life of the working class in both countries. That is why I am opposed to the FTA and very critical of it.
[Ahn] My understanding is that there are some provisions within the FTA that would extend the life of patents on pharmaceuticals and negatively influence Korea’s positive list. Could you explain this and also the issue of Free Economic Zones (FEZ) U.S. health care insurance companies are establishing in South Korea?
[Lee] Since being here in the United States, I have discovered that a lot of people are critical of pharmaceutical companies because of their extensive taking of benefits and profits, and that their profits were huge. In Korea, it’s the same problem. The entire amount spent annually on health care is about 30 trillion won, or $26 billion dollars. A third of that budget goes to paying for medicines. This is quite high because worldwide, statistically the cost of medicines is typically 1/10th of the entire cost of health care. In Korea it’s much higher because Koreans spend more money on over the counter medicines rather than going to the hospital. Due to the high ratio of spending on medicine, Roh Moo Hyun (the former late South Korean President) sought to introduce a bill to put a limit on the positive list, that it only include generic medicines to keep people’s health care costs low. This bill didn’t go through and his reform failed because of internal politics and lack of support.
Under the FTA, pharmaceutical companies and the Korean government will purportedly create an independent agency to determine the costs of medicine. But we all know that pharmaceutical companies will determine the prices of medicine. Patents on U.S. pharmaceuticals would be extended 20-30 years and will therefore prevent all these medicines from becoming generic. Then these corporations can determine their own price, and by being able to determine their own price, they will be able to lobby for their own medicines to be included in the positive list. This will definitely have a huge impact on the cost of medicine, and the money will come from the people’s pockets. Pharmaceutical companies are known for their lobbying activities and their financial support for politicians, for profit hospitals and doctors. For example, pharmaceutical companies finance most medical conferences, not just in Korea but also in the United States, which is also where doctors are given promotional medicines to give to their patients.
In addition to pharmaceutical companies, U.S. private health insurance companies coming into Korea will be really detrimental to South Korea’s national health care. Insurance companies will not be regulated by public health care laws—rather, they are set to be regulated by financial legislation because health insurance companies are technically finance companies. MetLife, for example, doesn’t just do health care. There are no articles on public health care or health provisions under financial regulations.
The social movements have been fighting for free, universal health care. Currently, public (government run) health care covers about 64% of an individual’s medical costs. Because 36% is not covered, many people buy private insurance. The social movements have been calling for increasing national health care coverage up to 90%. Recently, the South Korean Democratic Party has added this call onto their platform. The critical problem if the FTA passes is with the Investor to State Dispute [ISD] mechanism. If it passes, U.S. health care insurance companies will be able argue that if they lose their profits they will have legal right to sue the state for their losses. For this reason, the South Korean parliament will likely decide against increasing the portion of national health care to 90% of a person’s coverage since such a policy would place the government at risk of being sued for lost and future profits under the ISD mechanism.
In recent years, the South Korean parliament tried to regulate the entrance into Korea of super supermarkets (SSM), like Wal-Mart. But Tesco, a British supermarket, used the Korea-EU FTA to threaten lawsuits alleging that such legislation was impeding its future profits. But small-businesses are seeking support from their locally elected officials for some protection from these SSMs. The Korean legislature considered regulations that would prohibit them from entering certain portions of the market, but Tesco threatened to sue the government. Due to the threats, this legislation didn’t even pass Parliament. Even though this regulation was intended to protect Korean markets and the people, the excuse legislators made publicly was “Let the market handle it.” The ISD clause in the FTA is universal to all incoming corporations, including insurance companies, which will only be regulated by the Finance Committee, not the Public Health Committee.
Currently, the entrance of private insurance companies into the Korean market will be detrimental for many reasons. First and foremost is the issue of the lack of regulations. In the United States, there are many private insurance companies and U.S. regulations, which prohibit insurance companies from taking advantage of consumers. In Korea, private health insurance is still a relatively recent trend.
Korean private health insurance companies have been lobbying to increase their share of the country’s health coverage (currently at 36%). Of the $26 USD billion national budget for medical care, $10-12 billion, half, goes to private insurance. We fear that with the FTA and the incoming U.S. private health insurance companies, the Korean healthcare market will be soon be entirely privatized. Private health insurance already absorbs 30-40 percent of the nation’s entire health cost, and with this FTA their share of the entire health care budget will only grow.
[Ahn] Why are South Korean insurance companies supporting this FTA given that they would be in fierce competition with U.S. health insurance companies?
[Lee] Good point. First, why would Korean capitalists be supporting the FTA if they would be in direct competition with U.S. corporations? Why would Korean private health care insurance companies support FTA? Actually, if you look at most of Korea’s corporations, the majority of their shareholders are U.S. corporations. For example, if you look at POSCO, Korea electricity, Korea communications, most of the shareholders are comprised of American companies. In other words, the Korean economy is subjugated to the U.S. economy, in that most Korean corporations are already U.S. ones. Approximately 50% of most Korean companies are U.S. owned. For example, GM owns Daewoo.
The second reason is that by weakening Korea’s national health care system, the market would expand for private insurance companies. If the national health care system collapses, private insurance companies, which now have 36% of the market, can reap profits from the remaining 64% of the market now receiving care from the public health system. Even small Korean health insurance companies can get a small portion of that market dominated by U.S. companies. It’s still beneficial to them, so of course they would support the FTA.
[Ahn] Do you think that because of the growing popularity of moving public health coverage to 90% and the threats to Korea’s national health care system by this FTA, that there is widespread opposition, like there was to the beef issue?
[Lee] At the time of the explosive candlelight vigils, there were two important issues. One was beef and the second one was the issue of the privatization of health care. At the time, the progressive movement was able to highlight that the Lee Myung Bak administration was about to privatize the national health care system, which would collapse with the FTA. These two issues became very close to the people’s hearts. It was such a sensitive issue that even political parties are using it on their presidential election platforms. The largest oppositional party is now called the Democratic Party, and they won the last mid-term elections.
The Democratic Party took on the issue of free lunch for elementary school students. The conservative Grand National Party was against it. They realized that the policy wouldn’t cost much money and with this issue, they got popular support from the people. With regards to the Yeon-pyeong-do issue, they took up the banner of, “Do we want war or peace? We don’t want war.” This position also received broad popular support. The Democratic Party is running the 90% public coverage of health care on their election platform because they recognize that this is an important issue for the people. I think that their advocating for this policy as an election platform means they think they can win it.
The people’s support for the issue is broad. If it comes to a debate in Parliament, then of course the people will advocate for keeping the national health care. One problem is that the Lee Myung Bak administration has been really silent on the FTA clause. They deny that the FTA will affect Korea’s public health system.
There are two pillars that support health care in Korea. First, all hospitals are supposed to be not-for-profit. Although a hospital may be privately owned, there are many regulations on how much profit you can make from providing care. As a not-for-profit, you have to reinvest the money back into the hospital. This law keeps hospitals from becoming for-profit. The second pillar is that all hospitals must take national health care insurance. They cannot say, ” I don’t want to take a national health care insurance, I only want to treat patients who have private insurance.” They cannot do that. These two regulations support national health care. Without them, public health care would not survive.
Naturally, there are doctors who have incurred high costs of training, and many of them have become discontent or disgruntled by their limited profit making. Meanwhile large hospitals have tried to privatize through lobbying government. One of President Lee’s platforms when he was running for office was to privatize health care. But as soon as he was elected, he hit the wall of people’s resistance on the beef issue and then on the issue privatization of health care. This is one of the sensitive, very sensitive areas that Lee has yet to move on. He could not do anything, so far.
[Ahn] But maybe through the FTA he can?
[Lee] He may be able to through the FTA, if he can mask the details. But the progressive movements are conducting massive education campaigns to build public support for expanding public healthcare coverage. I believe that the FTA can be stopped by the issue over the public’s right to healthcare.
[Ahn] It seems to me the most promising, and I’m honored to be sitting with the person who’s going to help make it happen!
[Lee] As for the Free Economic Zone [FEZ], it’s not a part of the FTA package although it came about at the same time. As I’ve noted, the pharmaceutical companies and private health insurance companies (financial services companies) are major drivers for the passage of the FTA.
The third industry that threatens the healthcare system is large, for-profit hospitals in the Free Economic Zones. The three interest groups (pharmaceutical companies, private health insurance companies and for-profit hospitals) are working together to destroy the national health care system. We have to see all them working together in tandem.
The Lee Myung Bak government has established six special economic zones in major cities, like Incheon, Gwanyang, and Busan. In these six places, U.S. for-profit hospitals have been established to accommodate foreigners, especially foreign investors. The government argues that foreigners living in South Korea will find it hard to go into any hospital to receive care, and that special hospitals must be built for them. In these free economic zones, only private health insurance companies can operate. These for-profit hospitals are not required to take national health care insurance. The reality, however, is that these hospitals are also set up to service Korean nationals who can afford private health insurance. These companies advertise that they have the best health care in the world, the best technology, and direct connections to the U.S. health care system.
In response to this trend, our union has come up with the slogan “one country, two health care systems.” This type of health care system will divide up people according to their income level, which will in turn enable private health insurance companies to come in and worsen the quality of the national health care system.
[Ahn] Could you clarify that point, Mr. Lee?
If you are a trained doctor, and you thought you were one the best doctors, where would you want to work? Would you want a regulated salary position or to work for a private, for-profit hospital that will pay you much more money. The quality of the national health care system will go down, which is the point we have been making in our public education that according to income level, the national health care system will suffer, which covers most (90%) of the people. In response, the government has said that they are just testing this model only in six cities. The government has also said that this would not impact the overall national health care system, but we know otherwise.
In conclusion, the three threatening forces—pharmaceutical companies, private health care insurance companies, and for-profit hospitals—are what has made U.S. health care not work for the people, and now they are going to do the same in Korea. They are the enemies of public health care systems around the world, so we need a joint struggle against them, from the United States and Korea.
When we talk about the problems of the FTA, we talk about tariffs, opening up markets, protectionist policies. But in the Kor-U.S. FTA, I understand that in the U.S., the loss of jobs in the auto industry and other manufacturing industries is more tangible. It becomes the easy social issue. But, what the FTA also does is deregulate and privatize sectors. It changes a country’s social and public policies. It destroys them, what is left of a social welfare system. We have to understand that this is really about destroying public welfare systems so that corporate profits in both countries will be maximized. Under that premise, when we are struggling against the FTA, there are a lot of things that both countries can learn from each other.
There are four classes of social insurances that every country should have: 1) Health care insurance, 2) Compensation for industrial accidents, 3) National pensions, and 4) Unemployment compensation. These are four universal social insurances a country must provide for its people. When we struggle against the FTA, we can focus on how to restore these basic social pacts. We should fight not only to protect what’s left, but also draw from other countries’ examples and learn how people in the United States can restore their social welfare from what has already been privatized. Of course, this is going to be really hard. But this is a movement for humanity.
*Christine Ahn is Executive Director of the Korea Policy Institute.