Korea’s rapid aging has brought the pressing policy concern of social hospitalization to the forefront. Older adults with low medical but high long-term care needs often occupy beds in high-cost medical institutions for extended periods―a trend that is driving up elderly medical spending. In 2008, the government introduced the Long-Term Care Insurance (LTCI) system to address the growing demand for care among older adults and improve their quality of life, while curbing inefficient medical spending. Since then, long-term care services have expanded in both eligibility and scope. The original three-grade classification was restructured into a six-grade system encompassing older adults with mild dementia, and home-based benefits were strengthened as part of a broader shift from facility-centered to home-centered care.

This study uses the Elderly Cohort Database of the National Health Insurance Service to examine how expanding LTCI affects medical expenditures. For identification, it employs a fuzzy regression discontinuity design and an event study design, exploiting the fact that LTCI grades are assigned based on the Long-Term Care Need Score and that the costs and benefits of these grade assignments shift exogenously around each threshold.

Comparing first-time applicants near each grade threshold, the analysis finds that, for Grades 1 and 2, which correspond to greater care needs, the expansion of either facility-based or home-based benefits reduced medical facility utilization and medical expenditures. By institution type, expenditures declined at hospital-level institutions and long-term care hospitals; by utilization type, inpatient costs decreased. For Grades 3 through 5, by contrast, expanding home-based benefits did not have a statistically meaningful effect on reducing medical expenditures. The event study results show that for the Cognitive Support Grade, which covers older adults with mild dementia, expanded home-based benefits lowered medical expenditures.

These results suggest that the effect of LTCI on medical expenditures may be heterogeneous across grades. Particularly for Grades 3 through 5, the quantity and quality of home-based services may have been insufficient to provide the integrated support to meet complex needs for both medical and long-term care. For the Cognitive Support Grade, however, beneficiaries face fewer physical constraints compared to those with greater care needs. This allows easier access to cost-efficient services such as Day and Night Care Centers for extended hours, which may explain the relatively larger reduction in medical expenditures.

Based on these findings, the study proposes policy measures for improving the quality of home-based care through the integration of medical and long-term care services. In particular, drawing primarily on international case studies, it offers recommendations to ensure the stable and effective implementation of the Integrated Care Support System scheduled for 2026. These measures include introducing intermediate long-term care facilities capable of providing a continuum of medical and long-term care services; developing a specialized workforce to ensure the smooth operation of the new framework; optimizing the expansion of this workforce in depopulating regions; and clarifying accountability for social hospitalization among stakeholders to improve the efficiency of medical expenditures.

Abstract (ENG)
Preface
Summary (KOR)

Chapter 1. Introduction

Chapter 2. Overview of the Long-Term Care Insurance System

Chapter 3. Analysis of the Effects of the Long-Term Care Insurance System
　Section 1. Inefficient Medical Expenditures
　Section 2. Literature Review
　Section 3. Data
　Section 4. Identification Strategy and Analysis Model
　Section 5. Research Results
　Section 6. Robustness Checks
　Section 7. Discussion

Chapter 4. International Case Studies
　Section 1. Japan
　Section 2. Sweden

Chapter 5. Policy Implications
　Section 1. Measures to Establish an Integrated Care System

Chapter 6. Conclusion

References
Appendix