Sunday, 20 July 2014

Medical subsidies for the elderly weighing on Japan

Welfare costs contributing to an increase in govt debt
The Straits Times, 19 Jul 2014

TOKYO - Mr Kaoru Ishiyama goes to an orthopaedic clinic in Kawasaki city early so he can chat with about 20 other retirees while they wait outside for it to open, each sitting on a folding chair brought from home.

"I come (here) six times a week to have a doctor check my back and for rehabilitation," said Mr Ishiyama, 82, who was injured in a car accident seven years ago.

"We see one another almost every day. Coming to this clinic to see my friends is the secret to staying in good spirits."

Mr Ishiyama, like most others aged 70 or older, pays just 10 per cent of his medical fees.

It is a feature of a social welfare system that gives little incentive to reduce hospital visits, and encourages the Japanese to see a doctor three times more often than people in the United States.

Medical costs are the fastest-growing burden for an indebted government with a budget deficit of 41 trillion yen (S$503 billion), larger than Thailand's economy.

People in Japan are required by law to sign up for public health insurance, with the type of plan varying by occupation and the size of contributions depending on incomes.

The 90 per cent subsidy for people aged 70 or older applies to those with household income of less than 5.2 million yen.

People in that age bracket used an average 806,800 yen of medical services in 2011, four times as much as those under 70, who bear 30 per cent of their bill.

Thirty-eight per cent of the expense fell on local and national governments.

The light financial burden for patients, underdeveloped home health-care services and an abundance of hospital beds all help drive up medical costs for the government, said economics professor Hisao Endo of Gakushuin University.

"This encourages them to see a doctor even when they don't have a serious illness," he said.

People in Japan see a doctor 13 times a year on average, compared with four times in the US and five times in Britain.

The average hospital stay for patients with an illness or injury requiring short-term treatment is 17.5 days in Japan, above 4.8 days in the US and seven days in Britain, according to the Organisation for Economic Cooperation and Development.

Meanwhile, the 70-plus age bracket is projected to account for a quarter of the population by 2030, about six million more than last year.

The bigger socio-economic task now for Prime Minister Shinzo Abe may be to prevent welfare costs from overwhelming the government over the longer term.

"With a view on the year 2025, when baby boomers will be 75 or older, it is important to create a system where all generations support each other," Mr Abe said in Tokyo on Thursday.

Even under the most optimistic scenario, Japan's debt is forecast to rise to 264 per cent of gross domestic product (GDP) by 2030 from 227 per cent last year.

To stabilise debt at about 270 per cent of GDP by 2020, the government would have to cut social- welfare spending for people 65 or over and raise the sales tax.

To rein in pension expenses, it is gradually lifting the age that people start to receive benefits to 65 by 2025 from 60 last year. It plans to keep pension payment increases below inflation, reducing the real burden over time.

Shifting more of the burden to the public, especially the elderly, is difficult for politicians concerned with votes, said Mr Junichi Makino, chief economist in Tokyo at SMBC Nikko Securities.

"The public still does not share a sense of crisis," said Mr Makino. "Making a commitment to raise the self-pay burden for medical care would be a ticket to losing an election."

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