Effects of medical insurance on the demand for medical care in Korea

Lee, Kyu Sik
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The main objective of this study is to investigate the policy goal of the government of Korea in the implementation of the medical insurance system. The policy goal of the medical insurance system is to improve the accessibility to medical care regardless of one's ability to pay. To achieve this goal, the government set the premium rate at a fixed proportion of the employee's wage and salary, under the presumption that it contributes to equitable utilization of medical services among the different income groups. However, it is disputable whether the benefits from insurance programs are equally distributed among the insured. This policy goal is analyzed in this study based upon the analysis of demand behavior of the insured. Therefore the purposes of this study are twofold: (l) to examine the demand behavior for medical services of the insured, and (2) to investigate the equity aspect of medical care utilization among the insured based upon demand analysis. Data used in this analysis are insurance claims and premium data from 2,144 insured households of the government employees and school teachers and 4,208 insured households of the Class I insurance in Seoul City area. These data do not contain information about time consumption and quality attributes in the demand for medical care. Therefore, the traditional Marshalling demand approach is used in this study. The major determinants of demand for medical care are the severity of illness, family size, disposable earned income, price of medical care, the ratio of children to family size and the habit of medical care consumption. The importance of the severity is rather natural since the person who has serious symptoms needs more medical care. The relationship between family size and the quantity demanded is positive. The child age group (0-4) consume more medical care, while the aged (65 and over) do not significantly consume more medical care in Korea. Since the history of medical insurance system is relatively short in Korea, the habit of visiting drug stores and Chinese herb medicine persists for some time even after medical insurance is purchased. We can not find any evidence that females consume more medical care compared to males. The income elasticities of this study range from 0.3 to 1.4. They are higher than the figures in the previous analyses for developed countries. The high income elasticities imply that income barriers to medical care consumption still remain in Korea. The price elasticities vary from -0.03 to -0.4, which are lower than those in the literature reviewed. Especially, when we consider that estimated price elasticities are upwardly biased due to the case and quality mix of price variable, the real elasticities would be lower than the estimated price elasticities. The low income group has slightly higher price elasticities than the high income group when the other factors such as demographic and habit variables are excluded from the demand function. This difference in price elasticities among the income groups, however, loses its significance when other factors are taken into account in the demand function. Thus, the price effect of insurance is inferred to have encouraged the demand for the low income group. The distributional effect through premium payments has not contributed to the improvement of the accessibility to medical care for the low income group. The benefits of insurance come not from the premium but from. the consumption of medical care. The high income group, while paying relatively larger premiums, consumes more medical care and gets more benefits from the insurance. As a consequence, the high income group benefits from the pooled resources more than the group's contribution. The tax subsidy on premium payments is determined in proportion to the amount of premium. Thus, the distributional effect of premium and tax subsidy prove to be unfavorable to the low income group. The suggestions obtained from this study for the equitable medica1 insurance system in Korea include two devices. First, the premium rate could be revised from a fixed to a progressive proportion of the wages. Second, the coinsurance rate (copayment portion of patient) could be lowered for the low income group.
Thesis (Ph. D.)--University of Hawaii at Manoa, 1984.
Bibliography: leaves 109-114.
xii, 114 leaves, bound ill. 29 cm
Health insurance -- Korea (South), Medical policy -- Korea (South)
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