13 found that insurance coverage effected a 37 percent increase in inpatient admission rates and a 66 percent increase in inpatient days per 100 persons. In addition, the number of visits to outpatient departments at clinics and hospitals . -eased by 71 percent after the introduction of insurance coverage.

Yang (1991) found that total expenditure growth resulted from a combination of increases in cost per case (a nearly threefold increase for inpatient services and a near doubling of outpatient services from 1980 to 1988, compared to a consumer price index increase of only 60 percent over the same period) and in the volume of services used (outpatient visits per capita nearly doubled and hospital admissions per capita rose by about 40 percent). He suggests that one important cause of the increases in both the average cost and volume of services has been the retrospective fee-forservice reimbursement system using cost-plus pricing. Under this system, cost-increasing behaviors are always rewarded, and this is exacerbated over the long run as higher costs induce higher fees. Despite the presence of significant copayments in the system, hospital utilization data indicate that there has been a growing tendency to increase the volume of services provided; the frequency of repeat visits is rising and lengths of hospital stay are increasing. This suggests that incentives on the demand side (i.e., high copayments) have not been very effective at limiting demand in the face of rapidly rising incomes.

**Resource allocation and referral.** There has been no clear distinction among the roles of clinics, hospitals, and general hospitals because these have all been competing with each other for patients (Yang, 1991). The insured show a marked tendency to use large general hospitals even for primary care; these hospitals tend to have higher proportions of specialists and advanced medical eqtuipment and are accordingly more costly. Using hospitals is also the most expensive option for a consumer: they are allowed to charge fees which are about 15 percent more expensive than at clinics, and the perceintage copayment for outpatient care is 50 percent greater. Despite these higher charges, however, the utilization of general hospitals has risen at almost the same rate as that of clinics in recent years (Anderson, 1989). The pattern of overuse of the more sophisticated general hospitals which is becoming established in Korea may give signals that there is a need for more of these facilities, which could generate still more undesirable cost escalation. The referral requirement introduced in mid-1989 appears to be an appropriate device for steering patients toward lower level providers for entry into the health care system, but it is too early to tell how effective this has been in practice.

**Medical technology incentives.** Because prices are set by the government, Korean hospitals cannot compete for patients on the basis of price and must do so on some other basis. By and large, this other basis has been the availability of senior medical staff and of sophisticated medical equipment because of the strong societal perception that anything less is not good medical care. Therefore, it is not surprising that hospitals are acquiring large quantities of modern equipment. One example is CT scanners, which are now in nearly every hospital with more than 200 beds. The costs of these devices generally are greater than the revenues collected from their use, but hospitals use them as loss leaders to attract patients. There are 38 hospitals with approved heart transplant facilities, and Korea also has 26 ESWLs. That these figures are high is evidenced by a comparison with Canada, which has 32 heart transplant centers and only four ESWLs (Yang, 1991).

**Access and equity.** Results from studies undertaken prior to the universalization of health insurance support the conclusion that insurance coverage leads to moral hazard, and coverage of only part of the population results in inequitable access to care. Anderson (1989) reports that two years