Health Care Financing in Korea: Private Market Dilemmas for a Developing Nation

Abstract

Health insurance in developing nations has tended to widen rather than reduce the gulf between privileged and underprivileged and between urban and rural dwellers. Beneficiaries are typically urban industrial workers with regular jobs and adequate incomes. The case of health insurance implementation and health policy planning in Korea is of particular interest. It illustrates the dilemmas which arise out of a privatized model with decentralized administration and fragmented governmental responsibility in a rapidly industralizing economy. In this respect, Korean health care institutions and financing patterns reflect major influences from Japan, the United States, and Germany. Since 1976, when national health insurance was first implemented in Korea, problems in cost inflation, overspecialization of physicians, underutilization of hospital facilities, and maldistribution of health care resources have emerged. The consequences of waste and poor allocation in a developing nation are more severe than in developed nations and raise questions about the appropriate role of the public sector where conflicts between social welfare and economic objectives arise.