The long-term care (LTC) insurance reform

The problem stream

Japan faced the problem of a rapidly ageing population due to declining fertility and increasing longevity (Ng 2007: 37-8). Its fertility ratio fell sharply from 4.5 in 1947 to 2.1 in the 1960s, and to 1.42 in 1995 (Yashiro 1997: 248). From 1947 to 1995, the average life expectancy for males increased from 50.1 years to 76.4 years, while the average life expectancy for females increased from 54.0 years to 82.9 years (Yashiro 1997: 248). Hence, the share of older people in the total population had increased rapidly over time. From 1950 to 1960, Japan’s population aged 65 years and over rose from 4.9 percent to 5.7 percent (Statistics Bureau 2018: 10). In 1970, Japan officially became an ageing society when its total population aged 65 years and over reached 7.1 percent (Statistics Bureau 2018). By 1995, Japan had officially become an aged society when its population aged 65 years and over doubled to become 14.6 percent (Statistics Bureau 2018). The pace of population ageing was considered very rapid because Japan only took 25 years to move from an ageing to an aged society, whereas France and Sweden, respectively, took 115 years and 85 years to make the transition (United Nations Economic and Social Commission for Asia and the Pacific 2017a: 3).

The shift in demography to older ages greatly affected disease structure. The Japanese elderly ‘experience more chronic and multimorbidity, which require

Japan 65 long-term care (LTC) and put pressures on health-care expenditure and use of resources’ (Nomura et al. 2017: 1521-2). Health expenditures of the elderly drastically increased from 13.4 percent in 1975 to 25.4 percent in 1985, and to 33.1 percent in 1995 (Fukawa 2002: 7). In 1980, only 9 percent of NHI members were elderly but ‘their medical expenses accounted for more than 30 percent of NHI expenses’ (Powell and Anesaki 1990: 112). In 1994, elderly patients aged 70 years and above used more than five times more medical services than those below 70 years (Organization for Economic Co-operation and Development 1997: 133). This ratio was ‘one of the largest amongst the seven major OECD countries’ (Organization for Economic Co-operation and Development 1997: 133). This showed that the introduction of health insurance for the elderly in 1983 had little impact on containing health expenditures of the elderly.

Meanwhile, ‘medicalization of elderly care’ or social hospitalization was another reason for cofounding the problem of the rapid increase in health expenditures for the elderly (Estevez-Abe 2002; Ng 2007; Ozawa and Nakayama 2005). It referred to the phenomenon of weak or disabled elderly people occupying a hospital bed for a lengthy period of time, not because they had a critical medical condition but because they had no place to go (Eto 2001: 34; Ng 2007: 39-40). There were several reasons for social hospitalization, including changing family structures, higher labor force participation by women, the avoidance of stigma, and the inadequate provision of home care services and supply of nursing homes. In post-war Japan, society had ‘grown increasingly oriented toward nuclear families’ (Lai 2002: 9). The average number of persons in a household decreased from 4.97 in 1955 to 4.05 in 1965, 3.23 in 1985, and 2.99 in 1990 (Hashimoto and Takahashi 1995: 50). According to the National Census of 1990, nuclear family households accounted for 59.5 percent of all households in the nation (Hashimoto and Takahashi 1995: 50). From 1975 to 1990, the proportion of elderly people living with their children decreased from 71.9 percent to 58.5 percent (Peng 2005: 82). With the demographic trends of fewer children and the decline in co-residence, younger people found it difficult to perform caregiving work for elderly parents or parents-in-law (Lai 2002: 10). The traditional role of the family in caring for the elderly slowly became obsolete and difficult to maintain (Kimura 2002: 335-6). Women also found it difficult to provide full support for their elderly relatives because of their dual roles in the workplace and the family. They ‘were more likely to work and continue working after marriage and childbirth’ (Peng 2005: 82). The female labor force participation rate had increased and accounted for a larger proportion of regular employees in all age groups (The Japan Institute for Labour Policy and Training 2016: 23). From 1975 to 1995, the female labor force participation rate increased steadily from 46.1 percent to 49.3 percent (Statistics Bureau 2010). Hence, the availability of women and their capacity to take care of the elderly decreased (Ozawa and Nakayama 2005: 63; Curry etal. 2018: 2).

Due to changing public attitudes toward family responsibilities and the care burdens on families, family caregivers began to treat hospitals as a substitute to a nursing home and sent their elderly to hospitals with little medical justification

(Matsuda 2009: 34; Curry et al. 2018: 14). Besides, it was ‘less stigmatizing to place older parents in a hospital than in a residential care facility’ (Ng 2007: 40). The under-development of home care services (Ng 2007: 40) and the inadequate supply of nursing homes also aggravated the problem of social hospitalization (Olivares-Tirado and Tamiya 2014: 18). There were ‘waiting lists for nursing home placements of two to three years in many localities’ (Ozawa and Nakayama 2005: 67). ‘Legally as well as administratively, the request for services or institutionalization was not regarded as a claim or right of an elderly person’ (Kimura 2002: 337). The placement (Sochi) system which was used by local authorities to distribute scarce elderly services had stringent eligibility criteria (Hieda 2012: 104-5) and ‘was generally targeted to low-income elderly people and those without other family members at home’ (Ozawa and Nakayama 2005: 66). The needs of other categories of the elderly were neglected by the government (Eto 2001: 21). Middle-class frail elderly who were not qualified for means-tested services in public nursing homes had to pay expensive user fees for home-based or institutional care services out of pocket (Ozawa and Nakayama 2005: 66). This drove them to substitute hospitals for temporary nursing homes (Estevez-Abe 2002: 159-60). Meanwhile, hospitals and doctors had great incentives to keep elderly patients hospitalized longer (Estevez-Abe 2002: 160) and oversupply medical services because the provision of medical treatment was fee-for-service based and doctors enjoyed great autonomy in their medical practices (Hieda 2012: 117). Hence, the quality of LTC in hospitals was ‘often poor - very little space, few opportunities for recreation or “human” services, too many drugs and tests’ (Campbell and Ikegami 1998: 194).

The ten-year Strategy to Promote Health and Welfare for the Aged (commonly known as the Gold Plan) implemented in 1989 to increase home beds, home helpers, and adult daycare centers failed to alleviate pressures on the health service because access was limited to older persons with few means and no family support (Curry et al. 2018: 14). The provision of services failed to keep pace with the growing needs of the elderly (Eto 2000: 24-5). From 1963 to 1995, about half of all inpatients were 65 years and over, and about one-third of them had been hospitalized for more than one year (Ng 2007: 39). The problem of social hospitalization led to a serious waste of medical resources and tax dollars. In 1983, government subsidies to NHI reached 2 trillion yen (Fujii and Reich 1988: 16). The NHI scheme ‘represented one of the three largest sources of deficit in the national budget’ (Fujii and Reich 1988: 16). Hence, there was an urgent need to separate LTC from medical care (Izuhara 2003: 397) through reforming the health insurance and LTC systems.

The rapid increase in health expenditures negatively affected the stabilization and sustainability of health insurance funds. To make matters worse, money contributed to health insurance funds being decreased due to the shrinking workforce and a stagnating economy. The shrinking workforce was caused by an ageing population. The labor force participation rate decreased from 67.1 percent in 1970 to 64.1 percent in 1980, and to 63.4 percent in 1990 (Statistics Bureau 2010). Meanwhile, a prolonged period of economic stagnation caused by the

Japan 67 bursting of Japan’s asset price bubbles in the period from the late 1980s to the early 1990s (Fujii and Kawai 2010) led to a serious unemployment problem. From 1990 to 1995, the number of unemployed persons drastically increased from 1.91 million to 2.87 million (Statistics Bureau 2010). The increase in the number of retirees and unemployed persons meant that the number of NHI subscribers also increased. During the period 1992-994, the growth of the Gross Domestic Product (GDP) was close to zero (Ozawa and Kono 1997: 308). Since 1992, the government had been continuously running a substantial fiscal budget deficit (Cabinet Office 2001). In times of economic difficulty, the government was under heavy financial pressure to support the health insurance system.