Social Security as Viewed through Micro-data

Part 7: Determinants of Long-term Care

Consulting Fellow, RIETI

In Japan, a society where the population is aging rapidly, how to provide for care needs is one of the greatest old age concerns. Expenditures under the Long-Term Care Insurance System, a public insurance program primarily for the elderly, increased from 3.6 trillion yen in fiscal 2000 (April 2000 through March 2001) to the budgeted amount of 7.7 trillion yen in fiscal 2009, more than doubling in less than 10 years.

Against the backdrop of deteriorating fiscal conditions, government policy has been steered in the direction of discouraging the use of care insurance in recent years. However, for the policy to be effective, it must be firmly underpinned by an appropriate incentive mechanism at the micro level. More specifically, the diversity of the elderly population in their health and economic conditions should be considered and appropriate incentives to reduce the use of the care insurance system provided. The current government policy is geared toward preventing elderly people from falling into a condition requiring long-term care. But this approach is not backed by sufficient empirical evidence.

Moreover, an important factor to look at in considering the Long-Term Care Insurance System from the micro level is the substitutive relationship between informal (family) care and formal care services under the Long-Term Care Insurance System. The availability of family care depends not only on whether the elderly person in need of care has a spouse and/or a child, but also on whether the family is able to provide care at home. Even among the elderly living alone, situations vary significantly. While there are those who are wealthy and living alone out of their own choice, there are also those who are in need of care but have no alternative but to live alone as they have no family. It should be also noted that bequests are a key incentive factor that is inseparable from the provision of family care. It is highly likely that a strategic bequest motive significantly affects the availability of family care.

However, there has not been sufficient analysis to examine these points as comprehensive data that give an overall picture of the family capacity of providing care to their elderly members—i.e., their livelihood and economic conditions including inheritance prospects—have been virtually nonexistent in Japan. In our panel survey for the Japanese Study of Aging Retirement (JSTAR) project, we ask respondents to provide such detailed information as the attributes of their children and parents, the frequency of contact with them, and the actual and/or expected amounts and division of inheritance (to be) received or given away (in the case of a death of a respondent, we ask the bereaved family to answer on behalf of the respondent). Findings from our survey to date have found significant differences across regions and individuals, for instance, in the frequency of contact with children.

Against the backdrop of a rapid increase in the numbers of solitary deaths and elderly persons living alone, the role of a local community as providers of long-term care has been emphasized by the government in recent years. In particular, the concept of social capital, which focuses on intangible capital such as mutual support among people and relationships of mutual trust, is drawing significant attention. Indeed, some research studies have found that when a local community is richer in social capital, its health status is better and health disparities among individuals are more modest. One of the questions in the JSTAR survey asks respondents whether they can trust the people in their local communities. Needless to say, responses to this question differ significantly between urban and rural areas. But we have also found significant differences across municipalities even among those located in rural areas.

However, it is difficult to discern whether elements showing the richness of social capital—such as strong mutual trust among community members—are attributable to the characteristics of individuals or those of the community. We must find out the actual state and nature of the existing social capital by conducting in-depth analysis of micro-level data. Only then can we see a big picture of the challenge we face and how we should define the role of local communities in government policy for elderly long-term care services.

>> Original text in Japanese

* Translated by RIETI from the original Japanese "Yasashii Keizaigaku" column in the September 20, 2011 issue of Nihon Keizai Shimbun.

September 20, 2011