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KMID : 1124019970130020083
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Korean Social Security Studies
1997 Volume.13 No. 2 p.83 ~ p.107
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The Optimal Policy Range for the Health Insurance Premium Rate
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Abstract
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The health insurance premium rate affects the medical care demand in two ways. When the health insurance premium rate rises, the medical care demand is expected to be increased due to the well-known moral hazard problem. On the other hand, the increase of health insurance premium rate is expected to invoke a negative income effect on the medical care demand assuming the positive relationships between real income and medical care demand. The purpose of this study is to determine the optimal policy range for the health insurance premium rate on which the medical care demand is not reduced due to the overwhelmed negative income effect.
In this study, we derived the medical care demand function from the household utility maximization problem. The derived medical care demand is econometrically estimated using the household expenditure survey data of 1503 households conducted by the National Statistical Office of Korea. White´s HCCM method is applied to correct the presence of the heteroskedasticity in the residual. The estimated results generally support the maintained hypothesis. Based on the estimated results, we conducted a simulation to find the optimal policy range of the health insurance premium rate.
The income elasticity of the medical care demand is measured as 0.238 and this result is consistent with the previous studies. The simulation results indicate that the optimal policy range of the health insurance premium rate should be between 3.0% and 4.6%.
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