Valuing longer, healthier lives : assessing the productivity of health spending in South Korea

Abstract

This research studies the link between medical spending and health outcomes in South Korea, providing evidence on the productivity of medical spending over recent decades.The author advocates for the Korean government to develop a “satellite account for health” to complement national income and product accounts. Current measures do not account for changing quality nor give providers any incentive for cost-effective substitution between forms of treatment for a given condition. By leveraging existing strengths of Korea’s National Health Insurance and health outcome data, Korea can develop an accurate measure of medical productivity and a more accurate measure of overall economic productivity, while becoming a global pioneer of “health satellite accounts” for overall populations. Such a productivity metric built on condition-specific net value can help Korea increase the “bang for the buck” from medical spending, mitigate wasteful spending, and promote high-value innovations for longer, healthier lives.