B4.2 Simulation Results
With the assumptions indicated above, the benchmark result is shown in Table 7.B2, where actual values for 2005 are also presented. Note that the benchmark values for the ratio of public pension benefits to GDP and the ratio of public health insurance benefits to GDP are close to the actual values for 2007. The benchmark case forecasts that by 2050, the social security burden ratio will more than double compared with 2005. Our benchmark case shows that public health insurance benefits will increase by 1 % every 10 years.
Our simulation reports the following results. First, increasing the copayment rate, one of the most prominent changes in the reform, will improve economic growth and welfare by encouraging private saving. However, the magnitude of the effect on economic growth is not large: 0.0 % and 0.01 % in 2050 depending upon the change in the copayment rate, and 0.01-0.09 % in the short run. The positive effect on economic growth is relatively larger when the policy change is implemented, but the magnitude of the positive effect decreases over time. However, the positive effect of increasing the copayment rate on lifetime income or
Table 7.B2 Base simulation results
|
Year |
GDP growth rate (n) |
Interest rate (r) |
n—r |
Bond outstanding |
Primary balance |
Public pension benefit |
Health insurance benefit |
National burden |
Copayment rate |
Social security contribution rate |
|
|
Percentage of GDP |
|||||||||||
|
Actual |
2005 |
2.53 % |
127.9% |
-7.45 % |
8.44% |
6.42 % |
27.05 % |
14.4% |
19.55 % |
||
|
Simulation results |
2005 |
1.75% |
8.23 % |
-6.48 % |
127.9% |
3.78 % |
8.59 % |
6.46% |
38.03 % |
13.5% |
15.18% |
|
2010 |
1.38% |
8.17% |
-6.79 % |
135.9% |
4.05 % |
10.02 % |
7.29 % |
39.01 % |
13.0% |
15.26% |
|
|
2015 |
0.78 % |
7.56% |
-6.78 % |
148.9 % |
6.82 % |
12.16% |
8.11% |
44.93 % |
12.4% |
18.88% |
|
|
2020 |
0.93 % |
7.38% |
-6.45 % |
150.7% |
8.96 % |
13.40% |
8.88% |
48.97 % |
11.7% |
20.95 % |
|
|
2025 |
0.78 % |
7.33 % |
-6.55 % |
150.7% |
9.18% |
13.93 % |
9.56% |
50.34% |
11.1% |
22.20 % |
|
|
2030 |
0.46% |
7.17% |
-6.71% |
150.7% |
9.02 % |
14.69 % |
10.23 % |
51.67% |
10.9 % |
23.87 % |
|
|
2035 |
0.16% |
6.96% |
-6.80% |
150.7% |
8.93 % |
15.89 % |
10.94% |
53.51% |
10.8% |
26.04 % |
|
|
2040 |
-0.03 % |
6.79 % |
-6.82% |
150.7% |
9.17% |
17.88 % |
11.61% |
56.33 % |
10.8% |
28.89 % |
|
|
2045 |
0.08 % |
6.97 % |
-6.89% |
150.7% |
9.81 % |
19.08 % |
12.25 % |
58.64% |
10.5 % |
30.67 % |
|
|
2050 |
0.13% |
7.31% |
-7.18% |
150.7% |
10.51% |
19.75 % |
12.92% |
60.48 % |
10.1% |
31.85% |
|
Appendix B: Simulation Analysis in an Aging Japan 199
welfare is greater among relatively younger generations. Our simulation estimates that the increase in the copayment rate in the reform induces benefits that vary between 10,000 yen for the generation born in 1920 and 3.52 million yen for the generation born in 2000.
Second, potential ex post moral hazard behavior also results in a decrease in medical expenditures, although it weakens the benefits to economic growth of increasing copayment rates. The maximum short-run effect of the ex post moral hazard on economic growth is measured at 0.04 % when medical expenditures decrease by 10 % because of the behavior.
Third, the rise in future public health insurance benefits can mainly be explained by Japan’s aging population. Increasing the copayment rate does little to reduce future public health insurance benefits, even when re-examined in a general equilibrium framework.
Fourth, reducing medical costs through efficiencies, preventive care, or technological progress has little effect on future economic burdens. A change in the national burden ratio in 2050 is merely 1.2%, even if per capita medical costs change by 10 %.
Finally, if the government tries to hold public health insurance benefits as a percentage of GDP, it must continually reduce benefits, perhaps by up to 45 % by 2050. Such a policy also restrains economic growth until approximately 2035.
