The government’s medical insurance scheme for smaller firms, which covers nearly 20 million salaried workers, will be effectively bankrupt by the end of fiscal 2002, the Ministry of Health and Welfare revealed Wednesday.

The ministry told the Medical Insurance and Welfare Council that by March 31, 2003, the scheme is expected to have deficits of 580 billion yen.

The insurance, which currently covers 19.78 million employees, will face a fund shortage of between 230 billion yen and 520 billion yen, even if its cash reserves are used, according to ministry estimates.

In order to avoid the shortfall, the ministry said the percentage of insurance fees deducted from salaries must be increased from the current 8.5 percent to 9.6 percent by revising relevant laws.

For instance, workers earning 290,000 yen per month would be required to pay an additional 1,600 yen a month in fees.

According to the Social Insurance Agency, the scheme had a deficit of 316.3 billion yen in fiscal 1999, its second-worst shortfall and its seventh straight year in the red.

Its balance of cash reserves for the year fell to 803.9 billion yen, down from 1.5 trillion yen in fiscal 1992. The average salary of policyholders was 290,853 yen, down 0.5 percent from the previous year for the first year-on-year fall.

The agency explained that the scheme’s budget has dwindled because insurance revenue has shown little growth due to the sluggish economy. Expenditures, meanwhile, have steadily increased, with ballooning payments for elderly patients’ health care.

Another medical insurance scheme mostly covering employees of large firms will post a record deficit of more than 200 billion yen in fiscal 1999, the ministry said.

The government plans to overhaul medical insurance systems in fiscal 2002 to resolve the looming funding crisis.

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