1. Analysis by Service Type

Figure 4 shows the factor contribution trends of price and quantity for inpatient and outpatient services. As with overall health insurance expenditure growth, price has become increasingly dominant across both services. Particularly, price contribution in outpatient services has surged since 2012, suggesting that outpatient care has been the main driver of the overall rise in price effects.

The faster increase in outpatient price contribution may be attributable to greater utilization of high-cost medical services, changes in treatment intensity, and increases in medical service fees. In cancer treatment, for example, where price contribution is especially high in healthcare spending, the average length of inpatient stays following tumor excision has steadily declined, with related treatments shifting to outpatient settings. This shift has increased outpatient volume in tertiary hospitals, possibly leading to higher treatment intensity and unit costs, resulting in higher per-service expenditure and greater price effects. According to Kwon (2023), outpatient visits at tertiary hospitals rose by 32.2% between 2009 and 2019, nearly twice the growth in inpatient services, which increased by 16.0% over the same period. Differences in service fee increases may also explain the higher outpatient price contribution. From 2009 to 2019, medical service fees increased by 28.4% at primary care clinics, compared to 18.1% at hospital-level institutions. This suggests that fee increases have amplified the price contribution in outpatient care, meriting further investigation.

2. Analysis by Institution Type

Figure 5 shows the results of contribution decomposition by healthcare institution type—tertiary hospitals (third-tier), general hospitals and hospitals (second-tier), and primary care clinics (first-tier). The institution-level analysis also reveals a reversal in contribution patterns, where institutions with higher price contributions tend to have lower quantity contributions. In 2019, price contribution in primary care clinics accounted for 24.9% of the increase in health insurance expenditure compared to 2009, the highest among all institution types, followed by tertiary hospitals at 17.0% and general hospitals and hospitals at 14.6%.

Unlike the growing influence of price, quantity contributions have declined since 2012. The decline has been especially pronounced in primary care clinics and tertiary hospitals, while general hospitals and hospitals experienced a more gradual decrease.

Meanwhile, the young-old population (ages 65–74) exhibits distinct patterns in health insurance expenditure compared to those aged 75+, most notably a decline in medical service utilization. A decomposition of health insurance expenditure shows that quantity has made a negative contribution among individuals aged 65-69 since 2012, reflecting a sustained reduction in healthcare use. This steady decline has partially offset the overall growth in expenditure. Had service utilization in the 65-69 group remained at the 2009 level, the 2019 growth rate would have been 3.3%p higher, reaching 10.9%. A similar trend has been observed among those aged 70-74 since 2017, though with a smaller diminishing effect, at –4% in 2019. The utilization decrease among those aged 65–69, followed by a lagged decrease in the 70–74 group, appears to be a cohort effect. If healthier cohorts with different patterns of healthcare use continue to enter the elderly population, the overall growth of health insurance expenditure among the young-old population may further decelerate. In contrast, such a decline is not evident among those aged 85+, indicating a sharp rise in service utilization among them. In 2019, quantity accounted for 27% of the expenditure increase for this oldest-old group, compared to 23% for price, behind both the demographic and quantity factors.

Ⅴ. Conclusion and Policy Recommendations

The decomposition of spending growth reveals that price―especially in outpatient care―has been the most influential factor driving the rise in health insurance expenditure between 2009 and 2019. While price contribution is increasing across all institution types, it is the highest in primary care clinics. However, the specific causes of these pronounced price effects in local clinics remain unclear at this level of analysis.

Nevertheless, the rising price contribution in outpatient services and primary care clinics may signal increased use of high-cost medical services or a shift toward more intensive treatment. To address this trend, oversight and control over unnecessary high-cost services and excessive treatment should be prioritized. However, under the current fee-for-service payment model―which reimburses healthcare providers based on pre-determined fees for individual services―there is limited incentive for providers to moderate the volume or intensity of care. In particular, the role of price contribution in primary care clinics as a key driver of expenditure growth highlights the need to reform the fee-for-service model applied to them.

Nevertheless, the rising price contribution in outpatient services and primary care clinics may signal increased use of high-cost medical services or a shift toward more intensive treatment. To address this trend, oversight and control over unnecessary high-cost services and excessive treatment should be prioritized. However, under the current fee-for-service payment model―which reimburses healthcare providers based on pre-determined fees for individual services―there is limited incentive for providers to moderate the volume or intensity of care. In particular, the role of price contribution in primary care clinics as a key driver of expenditure growth highlights the need to reform the fee-for-service model applied to them.

In Korea, the healthcare delivery system, designed to differentiate functions by healthcare institution type, remains underdeveloped. Consequently, primary care clinics, commonly called neighborhood clinics, are increasingly incentivized to compete with higher-tier institutions rather than fulfill their core role of delivering basic care, contributing to unnecessary and excessive treatment. As efforts continue to establish the delivery system as intended, primary care clinics should expand their role as family physicians, treating, preventing, and managing mild and chronic conditions. Effective chronic disease prevention and management require continuity and comprehensiveness of care. Yet the present fee-for-service payment system undercompensates providers for services, such as long-term patient management, counseling, and preventive care, offering little incentive for them to deliver primary care functions. To address the rising burden of chronic illnesses, healthcare pricing reform should supplement the current model with bundled payments and pay-for-performance mechanisms to incentivize comprehensive and continuous primary care for primary care providers.

Meanwhile, the demographic contribution appears relatively limited in driving health insurance spending, suggesting the possible emergence of healthy aging in Korea. Strengthening this positive trend will require proactive investment in health promotion to prevent age-related decline and frailty. Alongside financial support expansion for cost-effective preventive care services, policy efforts should focus on creating environments that foster healthy behaviors, including regular physical activity, abstaining from alcohol, and smoking cessation.

Healthcare service use among the oldest-old population (85+) continues to increase, in contrast to the young old (65-74). This suggests that improvements in health outcomes among older adults have not yet reached all age groups and that there may be a delay in the onset of disease and the period of concentrated healthcare spending. Given that a substantial share of lifetime healthcare costs is incurred during this stage of life, there is a need to develop strategies to manage rising end-of-life healthcare utilization, including non-beneficial life-sustaining treatments.

Lastly, it is essential to review the drivers of health insurance expenditure growth and formulate evidence-based policy responses. Regular evaluations for key contributing factors should be institutionalized, together with the development of expenditure management strategies based on these assessments. Furthermore, formalizing an evaluation framework for health insurance expenditure should serve as a tool to strengthen transparency and accountability in the governance of the national health insurance system.