Fairness of Health care financing: Progressivity and Retstributive Effect

The present study attempts to examine the progressivity of health care financial sources based on the income approach, for which it decomposes redistributive effects into vertical, horizontal, and re-ranking components. The study data include Korean Household Expenditure Survey (2000) conducted every 5 year by Korea National Statistical Office. The data were sampled from the national population by the multistage probabilistic sampling method, and amounts to 23,270 households. For the better application of the income approach, the study employs household total expenditure in Korea instead of total income, because the former data source is more reliable and less fluctuated over time. Progressivity of health care financing was measured by Kakwani index. Aronson's decomposition equation was used in case of the analysis where differential treatment of health care expenditure needs to be considered. Despite the progressivity of Korea's governmental contributions, total expenditure of health care showed regressive pattern, which may largely be attributable to the higher regressivity in out-of-pocket money. With the result of negative Kakwani index, differential treatment increased income redistribution biased for better-off. It is worth to note that social insurance displays not only negative Kakwani index, but also horizontal inequality, suggesting that the first step of health care financing reform should be the revision of social insurance premium rates toward effective and equable way

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