The Quality and Efficiency of At-Home Long-term Care in Japan: Evidence from Micro-level Data

This paper evaluates the quality and efficiency of the at-home long-term care market in Japan, a market in which for-profit enterprises were allowed to enter after the introduction of the long-term care insurance in Spring of 2000. We take advantage of data from a unique self-conducted survey to compare the quality of services and efficiency of various types of providers with different ownerships, including for-profits, nonprofits and public-owned providers, and different lengths of operation. We present two major findings. First, contrary to the prevailing perception, there are no statistically significant differentials in the quality of services between for-profit and nonprofit providers. Although the non-profits have the advantages in qualification and experience of staff and provision of professional training, the quality of services provided by nonprofits is worse than that of the for-profit counterparts from a couple of perspectives. Second, our estimates on the cost function after controlling for quality of services demonstrate that the management of newer providers is more efficient than that of the older providers. We find that public-owned providers could not necessarily be more advantageous in efficiency than other providers under an "equal fitting" market and that there is no reason to believe that the for-profit providers were behaving opportunistically. In other words, our results indicate that the competition mechanism works effectively in the at-home long term care market and that free market policy contributes significantly toward improving the quality and the efficiency of the at-home long term care market in Japan.