Apr 1, 2010 - Mar 31, 2011
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This project aims to provide both theoretical and quantitative analyses of impacts of population aging on health care system. In particular we focus on the financing methods, corresponding tax burden, and effects on aggregate economy. We will also evaluate some potential policy reforms on the health care system. The current cost of health care in Japan is relatively low (about 6.6% of GDP in 2005) compared with it in the other OECD countries. In addition, the Japanese have among the highest life expectancy and lowest infant mortality in the world. The health care system in Japan seems to be in remarkably good shape. However, the low-cost is probably not easy to sustain with the current framework and the same financing methods. Japan already has the worldandrsquo;s oldest population, and it is projected that 40% will be 65 or older by 2050. The population aging affects the health care system through two channels. First, a larger elder population indicates fewer tax and premium payers in the economy. The current health care expenditure is financed by the National Health Insurance (NHI) with copayment. The government pays one-quarter of the total cost and employers and workers share the rest through the mandatory NHI. It is obvious that the burden of financing health care is mainly on the working-age population (age 15-64), which is projected to shrink to 50% of total population by 2050 with a dependency ratio as high as 93%. Second, the elder face higher health risk and need much more care than young people. In addition, the data show that the cost of elderly care is increasing in a fast speed. A big elderly population then implies higher average medical cost in the economy. Either government subsidy or insurance premium has to increase to financing the cost. Both increase the burden of working age population. In this research project, we try to understand: 1.The impacts of demographic changes (in particular population aging) on aggregate medical cost. 2.Under current financing methods, the tax and insurance premium burden would be caused by future increase in the medical cost. 3.The impacts of above changes on peopleandrsquo;s working and saving behavior and then on the aggregate economic performance and welfare. 4.Effects of potential policy reforms. The implications from this study would be important for designing appropriate government policies for incoming changes in population structure and health care system.