Health insurance reform and economic growth: Simulation analysis in Japan

Toshihiro Ihori, Ryuta Kato, Masumi Kawade () and Shun-ichiro Bessho

Japan and the World Economy, 2011, vol. 23, issue 4, 227-239

Abstract: This paper evaluates the drastic reforms of Japanese public health insurance initiated in 2006. We employ a computable general equilibrium framework to numerically examine the reforms for an aging Japan in the dynamic context of overlapping generations. Our simulation produced the following results: first, an increase in the co-payment rate, a prominent feature of the 2006 reform, would promote economic growth and welfare by encouraging private saving. Second, the ex-post moral hazard behavior following the increase in co-payment rates, however, reduces economic growth. Third, Japan's trend of increasing the future public health insurance benefits can mainly be explained by its aging population, and increasing the co-payment rate does little to reduce future payments of public health insurance benefits. Fourth, the effect on future economic burdens of reducing medical costs through efficiencies in public health insurance, emphasis on preventive medical care, or technological progress in the medical field is small. Finally, a policy of maintaining public health insurance at a fixed percentage of GDP will require reducing public health insurance benefits, perhaps up to 45% by 2050. Such a policy also reduces economic growth until approximately 2035. Our simulation indicates that the reform does not significantly reduce future public health insurance benefits, but it can enhance economic growth and welfare by encouraging private saving.

Keywords: Public health insurance; Japan; National medical expenditure; Economic growth; Aging population; Dynamic CGE model (search for similar items in EconPapers)
JEL-codes: C68 D58 E17 E62 H51 H55 H62 I18 O40 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Working Paper: Health Insurance Reform and Economic Growth: Simulation Analysis in Japan (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:23:y:2011:i:4:p:227-239

DOI: 10.1016/j.japwor.2011.07.003

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