Why Is Innovation in the Care Business So Difficult in Korea? [Part 1] Korea’s Care Market: Korea’s Care Market: Why Are New Care Businesses So Rare Despite So Many Providers??
[Author’s Note]
This
is the first of four articles in the series “Korea’s Care Market: Why Are New Care Businesses So Rare Despite So Many Providers?”
Korea’s care market is growing rapidly. But
as the market expands, are new care businesses becoming equally diverse? This
four-part series explores that question.
Part 1 examines the supply structure of
Korea’s care market; Part 2 explores business model innovation among care
companies in Korea and abroad; Part 3 examines the characteristics of demand in
Korea’s care market; and Part 4 considers how entrepreneurs can start small and
enter the market.
.png)
1. More Providers, but Little Innovation
Korea’s elder care market has grown
rapidly. Total long-term care benefit expenditures rose from approximately KRW
11.1146 trillion in 2021 to KRW 17.684 trillion in 2025—an increase of
approximately 59 percent over four years.[1]
The care delivery network expanded
alongside it. As of the end of June 2026, Korea had 30,054 long-term care
institutions, including 23,653 home-based care providers and 18,613 home-visit
care providers alone.[2]
By the numbers, Korea’s elder care market
is already substantial. The market has grown, and so has the number of
providers. A nationwide network capable of delivering long-term care services
has also developed rapidly.
Demand is not declining, either. The older
population continues to grow, as does the proportion of older people living
alone.[3] As Joseph F. Coughlin of the MIT AgeLab (2017) explained through the
concept of the “Longevity Economy,” people’s needs create new markets as they
live longer.[4] Care lies at the center of this shift, and the number of people
needing care is bound to increase.
But
has the number of innovative care businesses grown as quickly as the number of
providers?
The increase in long-term care institutions
is unquestionably an important achievement. In a relatively short time,
long-term care insurance established a nationwide care delivery network. It
substantially broadened the foundation on which people needing care can access
services.
Yet
the expansion of supply has not been accompanied by a comparable expansion of
innovation.
Across Korea’s care delivery network,
institutionally defined services—home-visit care, home-visit bathing, home
nursing, day and night care, and residential care—have spread rapidly. The
number of institutions delivering standardized services prescribed by the
system has risen sharply.
But among all these providers, how many new
services, organizational arrangements, pricing structures, or business models
have emerged?
Companies such as Caring, Caredoc, and
Carenation have, of course, emerged with efforts to reorganize care delivery
through IT and platforms. Most, however, still operate within the covered
service categories and reimbursement rates set by long-term care insurance.
Rather than redesigning service categories or pricing structures themselves,
their innovations have largely concerned operations and the ways services and
people are connected within the existing system.
Why, despite these initiatives, has the
market structure itself changed so little?
A lack of market size or providers is an unlikely
explanation. Both the market and the number of providers have already grown
substantially.
I
believe the difficulty of innovating in the care business lies less in the
volume of supply than in the market structure within which providers can
operate.
A large number of private providers does
not necessarily mean ample room for private initiative. What matters more is
which services providers may create, how freely they may set prices and service
hours, and whether they can combine and organize services in new ways.
In other words, the scope of provider
discretion may matter more than the number of providers: discretion over
pricing, the design and combination of services, and the deployment of staff.
The question I want to address, then, is
not simply how large Korea’s care market is.
It is why some market structures allow new
care businesses to emerge, while others mainly encourage the expansion of
existing models of provision.
In the United States, some locally based
home care businesses have expanded through franchising. In the United Kingdom,
consumer-funded care companies have grown. Japan has a market for paid services
outside long-term care insurance. And in the Netherlands, a company has grown
within a publicly funded system by introducing self-managing nursing teams as a
new form of care delivery.
This article first looks for answers in the
market structures of different countries. Part 2 will then examine actual
company cases.
Is
expanding supply the same as expanding innovation?
At
least in Korea’s care market, innovation has not increased in proportion to the
growth in supply.
What we have established so far is
reasonably clear. Korea’s elder care market is not small, and it is difficult
to argue that providers are in short supply.
To understand why the room for new care
businesses is so limited in Korea, we need to look beyond market size to how
the market works.
This article therefore compares Korea with
the United States, the United Kingdom, the Netherlands, and Japan to identify
the structural characteristics of its care market. The comparison takes the
perspective of businesses and seeks to answer two questions. First, what
distinguishes Korea’s care market structurally from those of other countries?
Second, why does Korea’s market structure leave businesses relatively few
options for testing new services and business models?
2. What Kind of Market Is Korea’s Care Market?
Private providers deliver a substantial
share of Korea’s long-term care services. Private and nonprofit organizations
play major roles in home-visit care, day and night care, and residential care
facilities.
On the surface, it looks like a highly
privatized market.
But private provision of services is not
the same as the free buying and selling of services in a private market.
Even when a private operator runs a
home-visit care agency, long-term care insurance rules on covered benefits and
cost calculations determine what it may provide, what it may charge, which
staff it must deploy, and how it must document and bill for services.[5]
The
operators are private, but public institutions establish the purchasing power
and basic rules of the market.
For this discussion, I distinguish three
types of care market: (1) direct public provision, (2) a quasi-market, and (3)
a general market.
Under direct public provision, central or
local government not only finances services but also operates the organizations
and employs the staff that deliver them. In a quasi-market, government does not
produce all services itself. Instead, government or public insurance
establishes purchasing power and market rules, while private and nonprofit
providers deliver services within that framework. A general market—or
private-pay market—is one in which consumers select and purchase needed
services with their own money. Compared with the other two arrangements, this
market gives providers greater scope for choice and innovation.
The key is not simply which type of market
exists. All three can coexist within a single country. What differs is where
providers are concentrated and how much freedom they have to change what they
do. By “market structure,” I therefore mean the arrangement that determines
where businesses receive payment, who may become a provider, what they are free
to design, and how they can develop and expand new models. Korea has many
private providers, but their main field of activity is not the private-pay
market. It is the institutionalized quasi-market created by long-term care
insurance.
3. Comparing Care Market Structures in Five Countries from a Business Perspective: The United States, United Kingdom, Netherlands, Japan, and Korea
International comparisons of long-term care
systems often focus on public spending, utilization, and supply. The OECD
compares long-term care systems along five dimensions: access, availability,
funding, governance, and quality.[6]
For businesses, however, the questions are
somewhat different: Where does the money come from? Who can become a provider?
What can businesses design freely? And how can they grow?
Drawing on the OECD perspective, this
article reorganizes the comparison around four criteria to explore the actual
room businesses have to operate.
These are (1) financing and purchasing
structure, (2) provider structure and market entry, (3) provider discretion,
and (4) pathways for business model expansion.
The analysis proceeds in three stages.
First, the OECD’s comparative perspective on long-term care systems provides a
common reference framework.[6] Second, I examine country-specific sources using
the same four criteria: Medicaid and HHS/ASPE materials for the United
States[7][8]; Department of Health and Social Care and ONS materials for the
United Kingdom[9][10]; NZa materials for the Netherlands[11]; materials from
Japan’s Ministry of Health, Labour and Welfare, Ministry of Agriculture,
Forestry and Fisheries, and Ministry of Economy, Trade and Industry[12]; and
National Health Insurance Service regulations and the Long-Term Care Insurance
Act for Korea.[5][13] Finally, I interpret the findings from a business
perspective to identify each country’s characteristics.
The assessments of financing and purchasing
structure, provider structure and market entry, and provider discretion draw
primarily on each country’s institutional arrangements and public materials.
“Pathways for business model expansion” interprets what the structures
identified by the first three criteria allow businesses to choose and expand.
The final column, “Analytical characterization,” assigns a descriptive category
by synthesizing all four criteria. The table below is therefore not an official
classification drawn from a single international statistical dataset. It is a
comparison reconstructed for this article from a common analytical framework
and country-specific sources.
The table is not intended to rank national
systems. Its purpose is to compare where businesses have room to act. As noted
earlier, a “quasi-market” is one in which public institutions establish
purchasing power and rules while private providers deliver services. A
“private-pay market” is one in which consumers choose services and pay for them
with their own money. The discussion of the Netherlands is specifically limited
to community nursing, not the entire care sector.
<Structural Characteristics of Care
Markets: A Comparison of the United States, United Kingdom, Netherlands, Japan,
and Korea>
|
Country |
Financing and
purchasing structure |
Provider structure
and market entry |
Provider discretion |
Pathways for
business model expansion |
Analytical
characterization |
|
United States |
Public purchasing,
including Medicaid, plus private-pay purchasing |
Publicly funded and
private home care markets coexist |
Relatively greater
in private-pay segments |
Scope to expand
products and operating models in private-pay segments |
Coexistence of
private-pay and publicly funded purchasing markets |
|
United Kingdom |
Local authority purchasing plus
self-funders |
Private and nonprofit providers
participate in both markets |
Scope to choose services and
prices in private-pay segments |
Use both public purchasing and
self-funder markets |
Coexistence of a public-purchasing
quasi-market and a private-pay market |
|
Netherlands
(community nursing only) |
Primarily publicly
funded insurance |
Contracts between
insurers and providers |
Relatively greater
professional and organizational discretion in community nursing |
Scope to design
organizations and service delivery even within the publicly funded market |
Professional- and
organizational-discretion quasi-market |
|
Japan |
Long-term care insurance plus
private purchases outside insurance |
Designated providers plus private
non-insurance businesses |
Standardized within insurance;
product design possible outside it |
Scope to develop and expand daily
living support and care products outside insurance |
Coexistence of an insurance-based
quasi-market and a non-insurance market |
|
Korea |
Primarily long-term
care insurance |
Numerous private
institutions deliver services as designated providers |
Covered benefits,
reimbursement rates, hours, staffing, and documentation governed by institutional
standards |
Attempts at new
business models are relatively concentrated within the institutional market |
Institutionally
regulated quasi-market |
Source: Reconstructed using the OECD comparative framework[6] and country-specific soThe first criterion is financing and purchasing structure. Publicly funded purchasing and private-pay markets coexist in the United States and United Kingdom, while Japan combines long-term care insurance with private purchases of services outside insurance.[7][8][9][10][12] In Korea, by contrast, long-term care insurance is the principal source of purchasing power.
This is more than a difference in
financing. Who purchases care shapes which customers businesses encounter and
what kinds of products they can design. In private-pay or non-insurance
markets, businesses can turn unmet consumer needs into separate offerings.
Where public purchasing predominates, however, businesses first encounter
customers within the boundaries of covered benefits and purchasing conditions.
The second criterion is provider structure
and market entry. Private providers operate in most of the countries compared.
In the United States and United Kingdom, private and nonprofit providers participate
in both publicly funded and private-pay markets. Japan also has designated
providers alongside private businesses offering non-insurance services. Korea
likewise has numerous private institutions operating as designated care
providers.[13]
Korea’s distinctive features therefore
cannot be explained merely by the fact that it has many private providers. What
matters is which markets they enter and the terms on which they transact and
grow.
The third criterion is provider discretion.
In the private-pay segments of the United States and United Kingdom, providers
have relatively more scope to design services and prices differently. Japan
offers room to design products outside insurance.[9][10][12] Although Dutch
community nursing is primarily publicly insured, professional judgment and
organizational discretion play comparatively substantial roles.[11] In Korea,
core elements—including covered services, reimbursement rates, service hours,
staffing, and documentation—are governed by institutional rules.[5]
The
location of discretion differs by country. In the
United States and United Kingdom, it operates in private-pay markets; in Japan,
outside long-term care insurance; and in the Netherlands, through the
professional and organizational discretion permitted within the public system.
The routes differ, but each leaves some space for providers to test solutions
that depart from existing practices.
Finally, pathways for business model
expansion are an additional inference, from the perspective of businesses, based
on the institutional structures identified by the first three criteria. In the
United States, private-pay markets offer room to expand products and operating
models. In the United Kingdom, businesses can draw on both public purchasing
and self-funder markets. In Japan, businesses can develop and expand daily
living support and care products outside insurance. In Dutch community nursing,
there is scope to design organizations and service delivery differently even
within a publicly funded market.
The central lesson of this comparison is
not whether provision is public or private. It is how these four elements
combine to define the room businesses have to act.
Viewed through the same criteria, Korea has
many private providers, but purchasing power is concentrated in long-term care
insurance, while core service conditions—prices, covered benefits, hours,
staffing, and documentation—are institutionally regulated.[5][13] Compared with
the other countries, Korea offers relatively limited options for testing new
customer relationships, services, and organizational arrangements.
4. Conclusion: What Makes the Structure of Korea’s Care Market Different?
Taken together, the comparison reveals
three structural characteristics of Korea’s care market.
First, private providers are numerous. Yet
a substantial share operate within the publicly funded purchasing market
created by long-term care insurance.[5][13]
Second, core service conditions—prices,
covered benefits, hours, staffing, and documentation—are governed by
institutional rules.[5] This does not mean that regulation itself is the
problem. When public insurance finances care, rules are necessary to safeguard
quality and ensure that public funds are used appropriately.
Third, the countries compared leave room to
test new models in different ways: through private-pay markets, markets outside
insurance, or professional and organizational discretion within publicly funded
care.[9][10][11][12] In Korea, by contrast, private providers are relatively
concentrated in the institutional market created by long-term care insurance,
and core service conditions within that market are also governed by
institutional rules.[5][13] Bringing these two features together, I
characterize Korea as an “institutionally regulated quasi-market.”
The reason innovative care businesses
remain rare despite rapid growth in supply cannot therefore be explained by
provider numbers. More important are the purchasing markets to which providers
are connected, how freely they can design core service conditions, and how much
room they have to test alternative models of provision.
Korea has rapidly expanded its care
delivery network through long-term care insurance. But if many providers within
the same structure operate under similar rules, growth in provider numbers and
greater diversity in services, organizations, and business models are two
separate matters.
Of course, businesses may exercise
discretion differently even within the same structure. Part 2 will therefore
examine how care companies in the United States, United Kingdom, Netherlands,
Japan, and Korea have translated the discretion available to them into business
models.
In my view, this institutionally regulated
quasi-market structure is the key reason innovative care businesses are rare in
Korea.
[About the Author]
Kim Sung-Kee, Ph.D. in Social Welfare
Director, The Care Biz Lab
Chair, SE Empower Social Cooperative
Email: skkwelfare@gmail.com
Comments
Post a Comment