COVERAGE EXPANSION OF UNIVERSAL HEALTH CARE AND ITS IMPACTS ON HEALTH INSURANCE MARKET AND WELFARE: THE CASE OF SOUTH KOREA

Abstract

We examine how the coverage expansion of universal health care (UHC) affects the private health insurance (PHI) market and welfare using a quantitative macroeconomic model. Reduced medical expenditure and risk by the UHC coverage expansion leads individuals to save less and purchase less of PHI. The raised UHC premium to finance the coverage expansion discourages individuals to work since UHC is primarily financed by an earmarked payroll tax. Although the aggregate level labor, capital, output, and PHI take-up ratio decrease, welfare increases monotonically with the coverage expansion with the redistribution effect toward the old and the poor.