Tokyo’s elderly population is ballooning, waiting lists for nursing homes run a mile long, and there’s a fierce scramble for free beds. So why are these businesses catering to the city’s aging denizens scaling back?

In Adachi Ward, as many as 4,000 elderly residents are wait-listed for nursing homes. Adachi Manyoen, a facility that opened last year with 100 beds, remains 30 percent empty. The problem: A worsening shortage of workers and impending cuts in government reimbursements.

Such homes are growing more vital to Japan: A quarter of its population is older than 65 and Tokyo is poised to have the biggest increase in elderly residents in the country.

Even as Prime Minister Shinzo Abe has urged the private sector to raise wages to beat two decades of deflation, rising public debt is driving his administration to cut reimbursements for nursing homes.

Operators of these facilities say this is making it harder for them to keep salaries competitive and retain staff — and compelling them to turn away more elderly clients.

“It’s so hard to find people to work for us,” said Shinsuke Matsushima, a manager at Adachi Manyoen. “It breaks my heart we have to refuse potential residents when we have rooms ready.”

Many of the nursing homes in Tokyo were started by landowners and run as family businesses. The government provides universal coverage for long-term care of the elderly, and residents of nursing homes pay only 10 percent out of pocket, with the rest reimbursed by premiums and taxes.

At facilities eligible for reimbursements, prices are fixed by the government and can’t be raised. They can’t close down without government permission, even if they are losing money, and so must find ways to turn a profit to stay afloat.

Less government aid

While homes like Matsushima’s have struggled for years with labor shortages, new financial pressures are making it even harder to keep wages competitive. The Abe administration is set to reduce reimbursements for the first time in nine years in April by an average of 2.27 percent. The cost to care for Japan’s elderly is slated to more than double to ¥19.8 trillion in 2025 from 2012, with the government footing about half of that.

The shortage of places in nursing homes puts more pressure on working-age children.

“Many families in cities don’t have the capacity to care for the elderly at home,” said Masahide Tanaka, chairman of general affairs at the Tokyo Council of Social Welfare. “It will add burdens to family members and may lead to a rise in people exiting from the workforce to care for the elderly at home, elderly abuse and neglect.”

The health ministry has said it will give nursing homes an extra ¥12,000 per month per worker for wages, pay a premium to facilities hiring those with higher qualifications and introduce a mentoring system to improve conditions to attract more people to the industry.

Family members have traditionally cared for the elderly at home. The shift to nursing homes took off in 2000, when the reimbursements were first introduced, making them an affordable option. The wealthy have the option of paying heavily for private homes that don’t receive any government support. The universal health insurance system is separate from the long-term care coverage.

About 490,000 Japanese quit or changed jobs to care for older relatives in the five years to 2012, according to a study by the internal affairs ministry. The country will need 2.5 million caregivers by 2025 and the health ministry forecasts it will be short 300,000 workers by then.

Eventually, the cuts may encourage small homes to merge and operate more efficiently, said Yukihiro Matsuyama, research director at the Canon Institute for Global Studies. “If they scale up their business, efficiencies improve and they can raise salaries to attract workers.”

Severe worker shortage

Japan carries the world’s largest debt burden and has a shrinking workforce. By 2060, about 40 percent of the population will be above the age of 65. About 520,000 Japanese seniors are on waiting lists for nursing homes nationwide.

Almost half of government-funded nursing homes in Tokyo were short of workers, a December survey by the Tokyo Council of Social Welfare found. Nine percent of the 305 facilities canceled or reduced activities for the elderly, while nine facilities are refusing new residents and two outlets have closed short-term stays, it found.

The Midorinosato home in Bunkyo Ward in central Tokyo, with 60 permanent beds and four for short-term stays, stopped accepting new residents last September and shut its short-stay service in November. After a couple of workers resigned at the end of 2013, the workload of the remaining nurses rose and as many as 10 people quit, said Takashi Nara, manager at the facility.

“It’s so ironic that we have to scale down our operation when we know for sure that the demand will rise even more,” Nara said.

The average actual cash reserve of nursing homes was ¥160 million, according to a survey by the health ministry in 2012. About 53 percent of nursing homes were categorized as low on cash reserves, with average profit margins of 3.5 percent, while 33 percent were marked as having high reserves and an average 6.4 percent margin.

Competing offers

The monthly average salary of workers in elderly care was ¥234,000 in 2013, compared with ¥324,000 across all industries.

The shortage of nursing homes is the most severe in six major prefectures, including the greater Tokyo area, Osaka and Aichi Tokyo alone will add 743,000 more people over the age of 75 and will have 1.98 million people above that age by 2025, according to the health ministry.

Tokyo homes in particular struggle to raise wages because subsidies don’t do a good job of reflecting price differences between cities and rural areas, said Tanaka of the Tokyo Council of Social Welfare. So profit margins of operators in the capital are already smaller than those in rural areas, he said.

The capital aims to increase the number of beds by 50 percent to 60,000 by 2025 and is paying incentives to encourage home operators.

Japan opened its labor market for nurses and caregivers from Indonesia and the Philippines as part of trade agreements in 2008, and did the same for Vietnam the following year. Initially, Japan required them to pass the professional exams in Japanese, including comprehension of technical terms, and few were able to clear the bar.

The passing rate has improved after the government loosened the requirements and put explanations for characters and translations of illnesses in English.

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