ˆã—ÃII
Policy Options for Financing the
Future Health and Long-term Care Costs in Japan
Tadashi Fukui
Kyoto Sangyo University
and
Yasushi Iwamoto
University of Tokyo
Abstract
As the Japanese population structure changes, health care and long-term
care costs will steadily increase. The current style of financing
(pay-as-you-go) will create a large increase in future burden and
intergenerational inequity of burdens. This paper studies an
alternative policy that pre-funds the benefits for the elderly.
During a transition process, the scheme keeps a higher contribution
rate to accumulate enough funds. Under our baseline scenario, the sum
of contribution rates of health insurance and long-term care insurance
increases from 5.06 percent of earnings to 12.41 percent. The rate of
increase in total burdens including taxes devoted for subsidies is 63
percent.
Our sensitivity analysis has shown that quantitative implications
depend on the settings of social costs, the labor force, and the
interest rate. The setting of labor force does not affect very much.
The assumption of social costs has a significant impact.
Even under the most optimistic scenario, the rate of increase in total
burdens is 34 percent. Although we cannot tell the exact number of
necessary contribution rate that is able to transfer the funded system,
what is sure is that the significant increase in contribution rate is
needed.
JEL classification numbers: H55, I10
Keywords: social insurance; pre-funding; health insurance; long-term
care; long-term care