Long-Term Care Insurance and Health Care Financing in South Korea

Abstract

This paper is to evaluate how the new element of public health insurance for long-term care services (henceforth, LTCI) financially affects the preexisting National Health Insurance program (NHI). We focus on examining the role of the LTCI benefit in service use and costs of the elderly members in the NHI program. Using longitudinal data of 245 municipalities of South Korea for the period of 2008-2010, we conduct fixed-effects panel estimation of the NHI service use and spending for the elderly and find the statistically significant positive association with the LTCI payment for the elderly. The estimate (0.024, p<0.01) indicates additional 2,602 million KRW spending in the NHI account generated by the 1% increase in the LTCI spending on the elderly. Two lessons can be drawn for the directions of health care reforms in Korea: first, any attempt to enhance the generosity of the LTCI program in regard to eligibility and benefit package should take into account its cost-inducing effect on the NHI program. Secondly, the coordinated management of the LTC service and the NHI service delivery should be installed to serve the complex needs of the elderly for long-term care and acute care in a cost-effective way.