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Although the vaccination of older people is accelerating in Japan, the country’s elderly continue to be particularly threatened by COVID-19, both directly and indirectly. Japan’s public broadcaster, NHK, is running a series of special reports on how the pandemic is “changing the world,” and the May 23 installment was about senior caregiving services. The program took aim at the government’s kaigo hoken (caregiving insurance) system implemented in 2000 and to which everyone starting at age 40 contributes. Although the problems inherent in the system have been discussed previously, the pandemic has exacerbated them, making them even more apparent since the well-publicized aging of Japanese society has yet to peak. Demand for services will increase over the next decade even as the caregiving insurance system collapses.

So far, media coverage has focused on the lack of caregivers owing to low pay and difficult working conditions. One of the sectors hardest hit by the pandemic is resident facilities, which became hotbeds of infection clusters early on, thus bringing to the fore one of the main purposes of the caregiving insurance system, which is to encourage and promote care at home, where seniors can be attended to either by family members or contracted “home helpers.” The main idea behind caregiving insurance was to take pressure off national health insurance in order to reduce government expenditure.

As NHK pointed out, the need for such workers did not suddenly decrease with the spread of the coronavirus. Even with states of emergency in effect, home helpers are expected to make their usual rounds checking in on senior charges and attending to their needs, which, in addition to giving baths and changing bedclothes, often includes shopping and housekeeping.

In one scene from the broadcast, a contracted home helper calls the local administrative office and informs the manager that her husband has tested positive for COVID-19, and although she herself is asymptomatic she understands she must isolate. The office manages some 20 home helpers who attend to about 100 seniors. Losing one means having to juggle schedules and divert other helpers to different addresses. Ideally, a helper makes five or six visits a day, but with the pandemic some are doing 15 or 16 a day without extra pay or additional assistance. NHK follows one middle-age helper who is shown riding her bicycle to clients’ homes through pouring rain. She works from 8 a.m. to 6 p.m. without a break.

The pandemic has been even more damaging to senior day care facilities, to which older people commute in order to receive care they may not be able to receive at home. NHK profiled one small private facility in Kamakura, Kanagawa Prefecture, that had to close last June due to financial problems caused by the pandemic. Set up to handle eight people at a time with a staff of four, the facility tried to make do by serving four people, but their income, paid through the caregiving insurance system based on the number of patients, wasn’t enough. The owner is now thinking of starting over in a new facility, since the government subsidizes renovations that discourage the spread of viruses. He asked for ¥1.5 million, but was turned down without an explanation. Since he was given to understand the government favored his kind of smaller service to reduce pressure on large institutions, he was puzzled by the response.

The monthly premium for caregiving insurance in 2000 was ¥2,911 a month. By 2040 it will be ¥9,000 a month, and the total cost of caregiving services will be ¥25 trillion, up from ¥3.2 trillion in 2000. It’s estimated the system will be short 380,000 caregivers by 2025. The government needs to either charge more for premiums or reduce services.

The government’s plan applies market principles to a public health matter, since the main aim is to save money overall. If that’s the case, maybe it should rely more on the private sector, which, as it happens, is attempting to take advantage of the situation. Various foreign equity funds are interested in buying up senior-care facilities in Japan in order to make them profitable by streamlining costs through consolidation.

A May 25 Asahi Shimbun article reported on funds buying up controlling shares in senior-care businesses. The idea is to purchase a listed company, delist it, improve its management and then relist the company for a considerable profit. In some cases, the fund tripled the value they paid for the company. Improving profitability is a matter of scale. The funds take over caregiving businesses, combine them, buy supplies in bulk, negotiate rents for facilities and hire help through employment agencies.

The risk for the funds is almost zero. As one fund manager told the Asahi Shimbun, the government, through the caregiving insurance system, pays a fixed amount per person depending on the service, so the caregiving company is guaranteed income. However, a representative of the finance ministry said that it would be better if there was a “difference” in the amount of money the government paid to such businesses “based on their size.” In other words, what’s good for these funds isn’t necessarily advantageous for the government, or to the people who contribute to the caregiving insurance system.

Will such businesses improve service? At this stage it’s difficult to tell, but private equity firms in the United States have been buying up and managing nursing homes for years, and the results have often been tragic: higher mortality rates due to reduced staffing and draconian care methods, all in the name of enhanced profitability.

In Japan, private nursing homes are still something of a luxury, but the business model that equity funds use in Japan for caregiving services is the same as that used by equity funds in the United States. Obviously, the government needs to watch such businesses closely, but right now their central concern seems to be financial solvency rather than the well-being of seniors.

Visit www.philipbrasor.com for addenda to Media Mix contributions.

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