Reform of National Health Insurance for the Elderly and the Revitalization of Japan's Regional Areas

Abstract

The Abe administration initiated a policy of "regional revitalization" and proposed to promote migration of younger people from large cities to local municipalities.

The present paper points out that in order to revitalize local regions, it is necessary to promote the migration of elderly people from large cities to local municipalities by reforming the National Health Insurance programs.

Local municipalities have a comparative advantage in medical and nursing care services for elderly people, because land prices in local municipalities are much lower than in large cities. For this reason, promotion of the movement of members of Japan's elderly population to the nation's regional areas is an effective and very practical policy of regional revitalization.

The greatest obstacle to the movement of members of the elderly population to regional areas is that municipalities are required to share part of the medical care expenditure associated with the National Health Insurance system. When elderly people move from a city to a regional area, they join the National Health Insurance programs in their new municipality. The migration of elderly people to a municipality therefore increases the burden of payment for the municipal administration. For this reason, elderly people moving in from other cities represent a burden to the municipalities, and these municipalities often attempt to block the movement of elderly people to their areas by refusing to grant permission for the construction of new nursing care facilities.

The present paper proposes that the central government pay the "model medical expenditure" for each age cohort to municipalities, and that municipal governments pay the difference between this model payment and the actual payment. This reform will relieve the fiscal burden of municipalities in accepting elderly people, and will boost migration to local municipalities and stimulate the economies of those areas. At the same time, the fact that the central government pays only the model payment implies that it will provide an incentive for cost savings to municipalities.