Health care reform and change in public-private mix of financing: a Korean case

The objective of this paper is to examine the changes in the Korean health care system invoked by the reform (in the latter part of 2000) in regard to the separation of drug prescription and dispensation, especially from the point of view of the public-private financing mix. It seeks particularly to estimate and analyse the relative financing mix in terms of both modes of production and types of medical provider. The data used to estimate health care expenditure financed by out-of-pocket expenditure by were sourced from the National Health and Nutritional Survey (conducted by interviewing representatives of households) and the General Household Survey (a household diary survey). National Health Insurance data, etc. were used to estimate health expenditure financed by public sources. This study concentrates on the short-run empirical links between the reform and the public-private mix in finance. The reform increased remarkably the public share in total health expenditure. This public share increase has been prominent particularly in the case of expenditure on drugs since the reform has absorbed much of the previously uncovered drugs into the National Health Insurance coverage. However, a higher public share in medical goods than in out-patient care would raise an issue in terms of prioritization of benefit packages. The five-fold increase in the public share of expenditure at pharmacies reflects not only the fact that drugs previously not covered by NHI are covered now but also the fact that prescribed drugs are currently purchased mainly at pharmacies, as opposed to in doctors' clinics, as a result of the reform.