Association for Public Policy Analysis & Management

Background: Despite mandatory social health insurance in Korea, the fraction of total healthcare spending paid out of pocket (35.9%) is considerably higher than the average among OECD member countries (19.0%). In response, the Korean government expanded coverage of treatments for the costliest disease groups (cardiovascular and cerebrovascular diseases, cancer, and rare diseases) beginning in October 2013.

Methods: We utilize individual longitudinal information from the Korea Health Panel from 2008 to 2015 to estimate the impacts of the policy change on healthcare spending and utilization, the demand for private supplemental health insurance. Exploits within-person variation in exposure to the benefit expansion of public insurance, we use difference-in-differences approach to estimate the effects.

Results: The benefits expansion resulted in decreases in out-of-pocket spending by 23%. Results also indicate that the policy change led patients to substitute away from primary care provided in an office setting to care provided in the hospital outpatient setting. Quantile regression models reveal that the reduction in out-of-pocket spending was greater among patients from the low healthcare spending region of the distribution. We did not find evidence that expanding of public insurance was related with changes in the demand for supplemental insurance.

Discussion: The expansion of benefits coverage of public health insurance had a substantial effect on out-of-pocket spending for healthcare without affecting the demand for the coverage for remaining risks. My subgroup analysis reveals that the effects are higher for individuals in low-income household groups and for individuals not covered by private supplemental insurances.