12 health facilities, thev have done so at the cost of equity in the use of services and inefficiency in their organization and production.

# _Republic of Korea'_

The first compulsory social security health insurance scheme covering less than 15 percent of the population was introduced in 1977, and the beneficiary population has been rapidly increased until universal coverage was achieved in 1989. Insurance is provided through a large number of nonprofit, noncompeting societies organized at the firm, firm-group, or county level. 'There are programs for the unemployed and self-employed, plus public assistance programs which essentially pay the insurance premium for indigent persons (about 10 percent of the population). There are two large administrative agencies which handle claims processing and payment, data collection, and program monitoring for all of the insurance societies. They work closely with the Ministry of Health and occasionally engage in monitoring of claims and utilization review (Yang, 1991).

Services are largely delivered in private facilities, and the insurance agencies and the government (through the MOH) are somewhat more active than are similar agencies in Brazil and China _vis-a-vis_ providers. In mid-1989, a law was passed requiring patients to have a referral slip from clinics before they are allowed to use hospital care, changing the prior situation wherein patients could choose the provider level at which they entered the health care system. The MOH also defines the services that are covered by insurance and ultimately determines the prices for covered services. However, a number of high-technology expensive services, such as CT scanners and Extra-corporeal Shock Wave Lithotripsy (ESWL) are not covered, and providers can charge unregulated prices for these (Yang, 1991).

A national schedule of fees is negotiated and then set on a cost-plus basis, and providers are retrospectively reimbursed on a fee-for-service basis according to this schedule. Un!ike the programs in Brazil and most health insurance in China, there are significant cost sharing requirements in the Korean program, except for certain categories of the medically indigent. The combination of third party benefit payments and cost sharing serves to finance health care, which is largely provided by private facilities. A combination of deductibles and copayments yield effective coinsurance rates of 62, 65, and 41 percent for outpatient services in general hospitals (highest level), hospitals, and clinics, respectively. The inpatient coinsurance rate is 20 percent at all facilities. However, extra payments to senior physicians and other undocumented expenses mean that actual cost sharing rates are even higher (Yang, 1991).

Cost escalation. Attempts to sort out the effects of the expansion of insurance coverage on total Korean health expenditures are confounded by the effects of the rapid growth in per capita income (ahout eight percent annually) that Korea has experienced during the last two decades. Nevertheless, it is I ikely that the expansion of health insurance played an important role in the growth of total health spending from 2.8 percent of GNP in 1976 to 4.2 percent in 1985 and an estimated 7.0 percent in 1989 (Yang, 1991). For example, a study (Kim _et al.,_ 1986) of one rural province s A World Bank Technical Paper (De Geyndt, 1991) has recently been published providing insights into cost escalation and Korea's national health insurance program. The paper assesses alternative strategies for mitigating the rise in health care expenditures. We were not able to incorporate this paper's findings into our analysis because the technical paper was not available at the time this section was completed.