Effects of Catastrophic Coverage Expansion on Out-of-Pocket Spending for Non-Covered Services and Financial Equity: Evidence from South Korea’s National Health Insurance

TL;DR

South Korea's expanded health insurance coverage for severe conditions reduced patients' out-of-pocket costs without increasing use of uncovered services.

Contribution

Demonstrates that catastrophic coverage expansion improves financial protection without inducing higher non-covered service use.

Findings

Annual probability of non-covered out-of-pocket spending decreased by 7.3% overall after policy implementation.

Patients with positive spending saw a 164 USD annual reduction in total non-covered out-of-pocket costs.

No significant differences in effects were found based on private health insurance status.

Abstract

Background: Patients with catastrophic health conditions have continuously faced substantial out-of-pocket (OOP) costs for non-covered services despite universal health coverage in South Korea. In 2013, the National Health Insurance Service (NHIS) expanded coverage for four major catastrophic conditions—cancers, cardiovascular diseases, cerebrovascular diseases, and rare illnesses—aiming to strengthen financial protection for patients with catastrophic conditions. However, concerns remain that providers may respond by inducing more use of non-covered services, potentially offsetting reductions in patients’ financial burden. Methods: We evaluated the impact of the 2013 catastrophic coverage expansion on patients’ OOP spending for non-covered services using a quasi-experimental difference-in-differences design. Using nationally representative longitudinal healthcare expenditure data, the Korean Health Panel Survey (KHPS), from 2011 to 2016, we compared patients with the four targeted conditions to a control group with clinically comparable conditions. A two-part model was applied to separately estimate changes in the probability of incurring any non-covered OOP spending and changes in spending levels conditional on positive expenditures. We further examined whether effects differed by supplemental private health insurance (PHI) status. Results: We found that 7.3-, 5.2-, and 7.7-percentage-point decreases in annual probability of incurring any non-covered OOP spending for total, inpatient, and outpatient services, respectively, after policy implementation. Among patients with positive spending, OOP spending for total and inpatient non-covered services decreased by approximately 164 USD and 254 USD per year, while outpatient spending showed no statistically significant change. No statistically significant differential effects were also observed by PHI status. Conclusion: The catastrophic coverage expansion reduced patients’ exposure to and burden of non-covered OOP spending, indicating improved financial protection without evidence of compensatory increases in non-covered service use. These findings suggest that targeted benefit expansions for high-cost conditions can enhance financial equity within universal health systems.

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