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Appendix A: Intergenerational Conflict in an Aging Japan

A1 Introduction

The benefits and burdens of social security continue to increase their roles in Japan’s economy because of the aging population, low birthrate, and the spread of nuclear families. We focus on the two major components of social security: pensions and medical care. The benefits are financed by social security premiums, taxes, and income from the investment of public pension reserves.

Benefits now total 120 trillion yen (23.5 % of GDP) in 2015 and are projected to rise to 149 trillion yen (24.4 % of GDP) in 2025. The government’s projections of social security expenditures are shown in Tables 7.A1 and 7.A2.

Japan has social security programs specifically for the “elderly” (also called the “aged”). In this case study, we first describe the social security system and then discuss reform of the current pay-as-you-go system.

A2 Medical Insurance

A2.1 Japan's Health Care System

Medical care in Japan is provided through a universal health care system. By definition, the system includes all Japanese citizens and those working in Japan who are not citizens. Participation is compulsory. Universal coverage was established in 1961. The system covers sickness, injury, death (funeral benefit), pregnancy, and childbirth, but does not cover dental surgery, cosmetic surgery, hair removal, vaccinations, health examinations, and high-tech treatment (such as heart transplants).

The system is composed of a number of plans. At the most general level, working status or age determines which of the plans is applicable to an individual. Although the system is universal, the actual insurer (plan provider) can be either a government body or a private entity.

Table 7.A1 Trends and projections for social security benefits (percentage of GDP)

2012

2015

2025

Pension (%)

11.2

11.0

9.9

Medical care (%)

7.3

7.8

8.8

Long-term care (%)

1.8

2.1

2.7

Others (%)

2.5

2.6

3.0

Total (%)

22.8

23.5

24.4

Notes: These figures include the benefits of unemployment insurance, workers’ compensation insurance, and public assistance (which is similar to Supplemental Security Income in the United States)

Source: http://www5.cao.go.jp/keizai-shimon/kaigi/special/future/ 0421/shiryou_03.pdf

Table 7.A2 Trends and projections for social security benefits (in trillion Yen)

2012

2015

2020

2025

Pension

53.8

56.5

58.5

60.4

Medical care

35.1

39.5

46.9

54.0

Long-term care

8.4

10.5

14.9

19.8

Others

12.2

13.3

14.1

14.7

Total

109.5

119.8

134.4

148.9

Notes: As Table 7.A1 Source: As Table 7.A1

Note that the National Health Insurance (NHI) Plan is administered by municipal governments. So, also, are the plans covering retirees. NHI is financed by government subsidy and premiums.

Further, it is important to note that most care is provided by private practitioners in private facilities. In other words, the system is not like the National Health Service in the United Kingdom, where most doctors work directly for the government. In addition, the Japanese system provides free access to medical services for all patients. Namely, this is a system in which all patients can freely choose a hospital.

 
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