Physician behavior for “invisible” treatment; Korean herbal medicine doctor’s treatment covered by auto insurance

Background: This study examines healthcare utilization patterns and provider behavior under auto insurance coverage in South Korea. We investigate whether the significant growth in insurance claims for Korean Herbal Medicine (KHM) is driven by clinical necessity or supply-side structural incentives, such as physician-induced demand. Methods: We analyze the utilization gap between Conventional Medicine (CM) and Korean Herbal Medicine (KHM) using cross-sectional secondary data from the Korea Health Panel (KHP). The decomposition method developed by Chernozhukov et al. (2013) allows for the decomposition of differences across the entire distribution of medical visits and length of stay (LOS), distinguishing between patient characteristics and provider-side factors. Results: The results indicate that the higher utilization of KHM services is primarily attributable to structural factors rather than patient endowments. In the upper deciles of outpatient visits, structural effects accounted for over 100% of the observed difference, suggesting that provider-side incentives are the dominant driver of high-utilization outliers. Similarly, prolonged hospitalization in the KHM sector was largely unexplained by patient characteristics and remained robust after controlling for patient demographics. Conclusions: The observed disparities suggest that structural incentives within the KHM sector may influence provider behavior and utilization patterns differently than in the CM sector. While these findings are consistent with the theoretical framework of supply-side inducements, further research incorporating direct clinical severity measures is needed to establish definitive causal links. These results show the need for policy interventions targeting reimbursement structures to enhance the efficiency of auto insurance healthcare delivery.