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THE REFORM OF THE PUBLIC HEALTH INSURANCE AND ECONOMIC GROWTH OF JAPAN

Toshihiro Ihori, Ryuta Ray Kato, Masumi Kawade, Shun-ichiro Bessho
Authors registered in the RePEc Author Service: Ryuta Ray Kato (), Shun-ichiro Bessho and Masumi Kawade ()

Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University

Abstract: This paper evaluates one of the most drastic reforms of the Japanese public health insurance started in year 2006, by numerically examining the reform in an aging Japan in a dynamic context with overlapping generations within a computable general equilibrium framework. Our simulation results are as follows. First of all, an increase in the co-payment rate, which is one of the most prominent changes in the reform, would result in higher economic growth as well as higher welfare since it stimulates private savings. Secondly, the ex-post moral hazard behavior reduces economic growth. Thirdly, an increasing trend of the future public health insurance benefits can mainly be explained by an aging population, and an increase in the co-payment rate has little effect to reduce the public health insurance benefits in the future. Fourthly, the effect of a decrease in the medical cost, which could possibly be achieved by the improvement in efficiency in the public health insurance, the provision of more preventative medical services, or technological progress in the medical field, on the future burdens is very small. Finally, if the government implements a policy to keep the ratio of the public health insurance benefits to GDP constant, then the government has to keep reducing the public health insurance benefits over time, and the reduction rate should be 45 percent in year 2050. Such a policy also eventuates in lower economic growth until around year 2035. Our simulation results thus indicate that the reform is not so effective to reduce the future public health insurance benefits, but it can achieve higher economic growth and enhance welfare by stimulating private savings.

JEL-codes: C68 D58 E17 E62 H51 H55 H62 I18 O40 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2011
New Economics Papers: this item is included in nep-cmp, nep-hea and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:csg:ajrcau:392

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