14 after a 1981 demonstration project introduced insurance coverage in three rural provinces, inpatient service use increased by nearly 75 percent and outpatient use by 80 percent. Comparison of utilization and charges amongst insured and uninsured inpatients at one university hospital found that the average volume of services and length of stay for five diagnostic categories were greater for the insur..d, whereas out-of-pocket charges were greater for the uninsured (Yu, 1983).

Universal coverage under Korea's national health insurance program should theoretically provide for universal access and better equity implications than had previously existed. However, as in Brazil, smaller per capita supply of physicians and facilities in rural areas has led to geographically-based inequity. Another equity concern is the very high coinsurance rates which are charged in this system. With the exception of some categories of the medically indigent, these charges are levied irrespective of patient income and thus are more of a burden for poorer families. Data on per capita health service utilization by income class for insured persons in 1987 shows that utilization by the poorer insured was considerably less than that of higher income insured persons (Yang, 1991). In addition, the capacity to make informal "under the table" payments and to pay for non-covered high-technology services has led to a two-class system of health care. Moreover, according to Yang, many providers are unwilling to serve public assistance program beneficiaries, even though they are legally entitled to care. Another source of inequity in this system of universal coverage derives from the large number of insurance societies. Because each has a relatively small number of beneficiaries and serves a small geographic area, some serve largely healthy, high-income persons, and others have to contend with a less healthy risk pool. With no mechanism in place for premium to be transferred across insurance societies, the higher-risk pools will tend to have higher payments and fewer resources than lower-risk pools.

**Lessons learned.** Universal coverage should provide universal access, but the heavy official cost-sharing obligations which are not income-related (except for the poorest groups) and the unofficial payments demanded by private providers weigh most heavily on lower-income insured persons. Despite these significant beneficiary cost sharing requirements in Korea's fee-for-service reimbursement system, however, the introduction and expansion of insurance has been associated with rapid growth in health and hospital costs. Demand side approaches to encourage appropriate use of referral facilities have not been very effective. This suggests that the key to encouraging a more efficient service delivery system is on the supply side, by providing strong incentives to providers to limit the volume of services which they provide and to use more cost effective treatment technologies and settings. Clearly, such incentives are not present in Korea's health insurance system, with the exception of the recent requirement for patient referral. Although Korea's insurance program uses its strength as the principle purchaser of services to negotiate a national hospital fee schedule, an unintended consequence of this has been that private hospitals compete for patients on the basis of perceived quality. Because consumers' understanding of hospital and medical practice is usually limited, there may often be great differences between perceived quality and actual quality. As a result, this competition has taken the form of hospitals accumulating technologically advanced equipment to attract patients. This has created a distorted pattern of investment which will lead to an increasingly inefficient mix of services in the future.