Medical need or moral hazard? Public insurance transitions and healthcare utilization in South Korea.

Abstract

In South Korea's dual public insurance system, National Medical Aid (NMA) beneficiaries use more healthcare than National Health Insurance (NHI) enrollees, a pattern often attributed to moral hazard arising from low cost-sharing. Higher use may instead reflect greater medical need among a socially vulnerable population. We distinguish these explanations using both insurance status and eligibility transitions. Using longitudinal data from the Korea Health Panel 2019-2023 (analytic sample 2020-2023), we analyzed three outpatient outcomes-any use, visit days, and out-of-pocket expenditure-with individual random-effects panel models (utilization, visit days) and GEE-based two-part models (expenditure). Static models compared NHI and NMA beneficiaries; dynamic models compared four annual transition types defined by insurance status in consecutive years. We further tested insurance-by-health-status interactions. NMA beneficiaries did not differ significantly from NHI enrollees in the probability of any outpatient use but had significantly more annual outpatient visit days and lower out-of-pocket spending. We also observed elevated visit days among individuals who transitioned from NMA to NHI, although this estimate was based on a small transition group. Additional visit days associated with NMA were concentrated among beneficiaries reporting poorer self-rated health, a pattern that was broadly maintained when prior-year health status was used. These findings are more consistent with sustained medical need than with widespread moral hazard. The findings underscore NMA's role as a financial safety net for medically vulnerable populations. Policies to contain spending among low-income populations should account for underlying health needs to avoid restricting necessary care.