Policy Options for Financing the Future Health and Long-Term Care Costs in Japan
AbstractAs 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 of these costs. This paper studies an alternative policy that prefunds the social insurance benefits for the elderly. During a transition process, the proposed scheme maintains a higher contribution rate in order to accumulate sufficient funds. Under our baseline scenario, the sum of the contribution rates toward health insurance and long-term care insurance increases from 5.06 percent of earnings to 12.41 percent of the same. The rate of increase in overall burdens, including taxes and subsidies, is 63 percent. Our sensitivity analysis has shown that the quantitative implications of the increase in total burdens depend on social cost scenarios, the labor force, and the interest rate. However, labor force scenarios do not have a considerable impact on the rate of burden. As against this, the setting of social costs has a significant impact on the same. Even under the most optimistic scenario, the rate of increase in total burden is 34 percent. Even though we cannot predict the exact amount of the necessary contribution rate that is capable enough to transfer the funded system, what we are sure of is that a significant increase in the contribution rate is inevitable.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12427.
Date of creation: Aug 2006
Date of revision:
Publication status: published as Itō, Takatoshi and Andrew Rose (eds.) Fiscal policy and management in East Asia. Chicago and London: University of Chicago Press, 2007.
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Other versions of this item:
- Tadashi Fukui & Yasushi Iwamoto, 2006. "Policy Options for Financing the Future Health and Long-term Care Costs in Japan," CIRJE F-Series CIRJE-F-432, CIRJE, Faculty of Economics, University of Tokyo.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I10 - Health, Education, and Welfare - - Health - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-HEA-2006-08-26 (Health Economics)
- NEP-IAS-2006-08-26 (Insurance Economics)
- NEP-PBE-2006-08-26 (Public Economics)
- NEP-SEA-2006-08-26 (South East Asia)
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