Land of the Rising Age

With one in five citizens aged over 65 and its working population ever shrinking, Japan is having to radically rethink the funding of its healthcare system. Japan’s population ages more rapidly than any other in the world. Already, one in five Japanese citizens is over 65 years of age, and by 2055, the government estimates that they will make up more than 40 per cent of the population. The good news behind the statistics is that Japanese people are living longer. Life expectancy is the highest in the world according to United Nations data: 79 years for men and 86 years for women, compared with an average in the US of 75 for men and 80 for women, and 77 for men and 81 for women in the UK. And in Japan, there are 3.2m people aged 100 or above.

Relatively healthy diets and low-cost universal healthcare have ensured that Japanese people can expect to live a healthy life and take care of their own everyday needs until an average age of 72 for men and 77 for women, according to a government study.

The bad news is that this longer life expectancy and the corresponding rise in the number of pensioners is resulting in a demographic profile that poses unprecedented challenges, not least in the provision of healthcare. By 2055, Japan will have just 1.3 persons of working age (between 15 and 64 years) supporting each person over 65. Even if the working age is raised to 79, there will be only 1.7 working age persons per retiree. Medical expenditures are forecast to rise to up to 8.5 per cent of GDP by 2025.

The strains of a greying society on the medical care system are already evident throughout Japan, where a shortage of medical workers, including doctors, has affected the quality of treatment and care patients can expect to receive. Furthermore, the number of people requiring nursing care has risen relentlessly but the supply has fallen far short of demand, due to the low wages, long hours and backbreaking work that is the typical plight of care workers. In an effort to secure more nursing care workers, the Japanese government, which has kept a strict lid on immigration, agreed in 2007 to accept 1,000 carers and nurses from Indonesia and up to 450 from the Philippines over two years. During Japan’s period of strong economic growth, the system worked well. Many health insurance schemes overflowed with excess funds, which they used to build company resorts and subsidise other perks. But as costs have surged along with the increase in the number of elderly, the system has become unsustainable.

The government has set out to reform the healthcare system by reducing costs and more evenly distributing the financial burden on patients. Over the past decade, public re-imbursements to medical facilities have been repeatedly lowered while the financial burden on patients has been raised. The government has also tried to reduce costs by encouraging the use of generic pharmaceuticals but so far its efforts have been hampered by a reluctance by doctors to prescribe them and lack of interest among patients, who generally pay just 10 per cent of a drug’s cost. Another reform, that the government hopes will save a total of ¥4,000bn, is reducing the average length of hospital stays from 35 to 30 days. It is also trying to cut back ¥2,000bn through general improvements in public health, by targeting lifestyle-related diseases.

The government believes it will be difficult to raise the contribution from the elderly, despite the fact that they spend substantially more on medical care than younger generations. This is because of their political clout. It is the older generation that goes to the polls, so policy is aimed at helping them, not those who work or are raising families.

One politically sensitive measure being considered is to increase the consumption tax from the current 5 per cent, to cover increasing social welfare costs, including medical spending.

Financial Times

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