A Long-Term Forecast of the Finances of Health Insurance Systems
- The sustainability of the new social security system in an era of birthrate
decline and population aging -
January 12, 2007
The construction of a sustainable social security system for an era of birthrate decline and population aging is one of the most important issues facing Japan today. It was to address this issue that the Health Insurance Law was revised in June 2006. Even the standard scenario in the governmentʹs population estimates predicts that birthrate decline and population aging will continue in the long term, for about the next 50 years. However, the only progress since the revision of the Health Insurance Law is the publication of a government forecast of the finances of the various health insurance systems — the Union-managed Health Insurance (ʺUnion Health Insuranceʺ) system, the Government-managed Health Insurance (ʺGovernment Health Insuranceʺ) system, etc. — up to 2015. This is not a sufficient basis on which to forecast whether or not the new system is likely to be sustainable in an era of birthrate decline and population aging. This report, therefore, mechanically projects the finances of the various health insurance systems based on the Revised Health Insurance Law, up to fiscal 2050, on the basis of the, and considers what action should be taken for the future.
Taking the Union Health Insurance system, whose subscribers are mainly salaried employees of major corporations, as an example, the structure of income and outgoings of the health insurance systems under the new system will be as follows. Income, as at present, will come almost entirely from health insurance premiums. The major items of expenditure will include medical benefit payments to subscribers, ʺolder elderly personsʹ supportʺ, ʺyounger elderly personsʹ contributionsʺ, and ʺretired personsʹ medical subscriptionsʺ (hereafter ʺsupport paymentsʺ, etc.). These support payments, etc. are all intended as means for those still working to provide financial support for the medical expenses of the elderly. The Government Health Insurance scheme, whose subscribers are mainly salaried employees of small and medium enterprises, and the Mutual Aid Society system, whose subscribers include public servants, have roughly the same income and expenditure structure.
The projections for the finances of the various health insurance systems, from the start of the new system in fiscal 2008 to fiscal 2050, can be summarized as follows. Owing to the rise in medical expenses of the elderly, and particularly of the very elderly, support payments, etc. will bring even greater pressure to bear on health insurance finances. In the case of the Union Health Insurance system, which will suffer the greatest impact of all systems making support payments, etc., expenditure is set to reach ¥5.8 trillion in fiscal, of which medical benefit payments account for ¥3.2 trillion and support payments, etc. will account for ¥2.6 trillion. At this point, the cost of support payments, etc. will be lower than that of medical benefit payments. In fiscal 2015, however, medical benefit payments and support payments, etc. are likely to be roughly equal, at ¥3.6 trillion and ¥3.5 trillion. Thereafter, support payments, etc. will continue to exceed medical benefit payments, by an increasing margin. In fiscal 2025, for instance, medical benefit payments are likely to be ¥4.2 trillion, but support payments, etc. are expected to be ¥0.5 trillion higher, at ¥4.7 trillion. By fiscal 2050, support payments, etc. are likely to reach ¥9.6 trillion, some ¥4.1 trillion higher than medical benefit payments (¥5.5 trillion). Although the main reason for the Union Health Insurance system to collect health insurance premiums is, in principle, to fund benefit payments to subscribers, the level of support payments, etc. will exceed that of benefit payments, reversing the natural order of things.
Needless to say, it is not realistic to expect the Union Health Insurance system to go on paying out support payments, etc. in excess of even medical benefit payments, without making some changes. In fact, as the burden of support payments, etc. increases, the calls for further reforms are likely to grow, and, at the same time, enterprises are likely to address the problem by curbing subscriber numbers, which serve as the basis for the calculation of support payments, etc. (in other words, keeping regular employment down), disbanding health insurance associations, etc. In this light, would be difficult to claim that the 2006 revision of the Health Insurance Law has assured the sustainability of health insurance systems in an era of ongoing birthrate decline and population aging.
As to what should be done to prepare for the future, the two courses of action suggested by the projections of this article are to rationalize national medical expenses, in particular the medical expenses of elderly persons, and to maintain and increase Japanʹs ability to bear the cost by promoting economic growth. Another important issue is likely to be switching the funding of support payments, etc. to tax revenues, so that the cost is more evenly spread across generations.
For more information on the content of this report, please contact Kazuhiko Nishizawa, the Japan Research Institute, Limited.