Reform plan no remedy for health care

Elderly targeted in bid to finance snowballing welfare costs

by Ayako Mie

Staff Writer

Japan has been resorting to patchwork reforms over the past decade to prevent the health care system from collapsing as a rapidly graying society demands more funds from an ever-shrinking pool of tax revenue.

Despite improvements, the outline of the government’s latest reform plan, approved by the Cabinet on Wednesday, is more of the same, experts say.

Instead of designing a welfare system sustainable for decades to come, the new reform plan assumes the consumption tax will rise in April to fund ballooning welfare costs and relieve pressure on the national debt. But Prime Minister Shinzo Abe won’t commit to the tax hike until autumn — if he judges the economy is strong enough to weather it.

“Nobody knows if the system will be affordable,” said Yukihiro Matsuyama, a research director at the Canon Institute for Global Studies. “The program is going in the right direction, but it does not have concrete action plans, and it is unclear who would initiate those measures.”

In two decades, Japan’s welfare costs have more than doubled to ¥109 trillion a year, with the government covering about ¥40 trillion. This tops the fiscal 2013 budget of ¥92.6 trillion, of which tax revenue accounted for ¥43.9 trillion.

Welfare costs will only grow in the years to come. The annual total is expected to hit ¥149 trillion in 2025, when Japan’s nearly 7 million baby boomers reach an average age of 75. Even if the sales tax is eventually doubled to 10 percent as scheduled in October 2015, it will only add some ¥14 trillion to the government’s coffers.

To make the nation’s current health care regime sustainable, the outline mentions the need to impose a heavier burden on the elderly and wealthy. At the same time, it stipulates lowering heath insurance premiums for those with lower income levels. The legislation will be submitted to the Diet in the fall.

The government’s main concerns appear to be health and nursing care costs. By fiscal 2025, health expenditures are expected to be more than 50 percent higher than now, and nursing care costs more than double, figures show.

For people between 70 and 74, their portion of hospital fees payable may rise to 20 percent from the current 10 percent as early as fiscal 2014. This is expected to discourage elderly people who don’t necessarily need medical attention from frequenting hospitals.

High earners in major companies will pay higher health care insurance premiums based on their income to better finance a special health care system for people over 75. People over 75, whose medical bills are expected to rise, join a separate health care system, which is also funded by the premiums collected from the younger generation.

Meanwhile low-level nursing care patients would be taken off the national insurance plan and be covered by their municipalities, which are to take responsibility for covering the costs of about 1.5 million people. This risks creating quality gaps in medical care that might hinge on the financial strength of each ward, city or village.

At present, people in need of nursing care are categorized in seven levels based on their level of need. Low-level nursing care patients are placed in two levels while those in higher need, estimated at around 4.1 million people, are categorized in five levels.

Under the plan, wealthy seniors would see nursing insurance premiums rise in fiscal 2015.

On pension reform, the outline states that the government ought to shoulder half of people’s basic pensions. This fixed portion of the pension scheme totaled around ¥11 trillion in fiscal 2012 and is expected to grow 10 percent by fiscal 2025. For fiscal 2013, this segment was partly covered by deficit-covering government bonds worth ¥2.6 trillion.

The outline also envisions creating a more integrated medical community so individual hospitals won’t have to cover all of a patient’s care needs. This move is aimed at diversifying nursing care and medical services among hospitals and nonprofit organizations so the community as a whole can support seniors.

However, the outline failed to state how much extra the rich might have to pay or how much might be waived for the poor.

It also ditched a widely discussed proposal to raise the pension eligibility age to 68 from 65. Critics say this was dropped to shield the ruling Liberal Democratic Party while the specifics are hammered out, because seniors have been core supporters of the party in elections.

The outline also fails to propose steps to restructure the bleeding national health insurance program, which covers everyone from the self-employed to retirees and the jobless. The program, run by municipalities that collect health care premiums, is losing more than ¥300 billion a year as the number of poor and jobless unable to afford the premiums rises.

To resolve the issue, the outline calls on prefectures to take charge of national health. Proponents of this plan say it will allow patients’ medical records to be integrated so suitable health care can be provided over wider areas. But prefectural governments sorely lack the expertise needed to analyze medical records in order to provide the best health care to individuals.

“This is not a perfect plan,” said LDP Councilor Takamaro Fukuoka, who chaired the party’s labor committee Monday. “It just sets the outlines; the details have to be fleshed out when the outline is drafted into a bill for submission to the Diet.”

To truly provide more cost-effective health care, critics say Japan needs a more drastic reform plan that does more than just hike premiums and cut spending.

Matsuyama of the Canon Institute said that any national health insurance system run by the prefectures should more focus on prevention, by emulating a system called “population health” that has been introduced by Australia and Canada and private medical entities in the U.S.

Under population health, medical service providers are also thee patients’ insurers. This allows them to manage databases containing the health details of the insured and analyze them to see if a patient should undergo treatment or preventive measures.

“Because the entity is both a giver of medical treatment and insurer, it has an incentive to cut the medical cost by offering preventive measures,” Matsuyama said.

  • Alita

    Easiest solution. Tell the elderly they can no longer use clinics for social visits and that a cough every couple of days does not mean you need to see a doctor.

  • blimp

    Sort of along the lines of what Alita is proposing, although without singling out a specific group and at the same time providing economic incentives.

    Japan should introduce a minimum fee. Today you can go to the doctor and end up paying 300 yen for something simple. The minimum fee should instead be, say, 2,000 yen. This will hopefully lead to people not going to the hospital just for a cold or a light fever. The money that Japan will possible make and definitely save will be spent on more expensive treatment such as cardiac or cancer treatment (of course not limited to these treatments)