Estimating the effectiveness of national health insurance in covering catastrophic health expenditure: Evidence from South Korea

The catastrophic health expenditure (CHE) indicator has been used to measure the medical cost burden of households. Many countries have institutionalized their health insurance systems to reduce out-of-pocket payments, the main contributor to the financial burden. However, there is no method to estimate how the insurance coverage reduces the CHE. This study proposes an approach to evaluate the effectiveness of insurance in reducing the CHE impacts in terms of incidence and gap, which are based on a modified calculation method of CHE. Additionally, we apply these methods to data from the Korea Health Panel Survey (2011-2016). The results are as follows. First, under the setting of a threshold of 10%, the CHE incidence rate was 19.26% when the Korean national health insurance benefits reduced the CHE's incidence for 15.17% of the population in 2017. Second, the results of the concentration index of CHE showed that the intensity approach of CHE is better than the incidence approach. Third, the new approach we applied revealed that health insurance reduces the burden of CHE to some degree, although it was not an efficient way to reduce CHE. In conclusion, this study provides new policy approaches to save the finances of national health insurance and reduce the intensity of CHE at the same time by raising the low-cost burden of medical services and lowering that of high cost. Moreover, we suggest that policymakers should focus on income level of the households rather than specific diseases.