In 1996, Japanese government introduced Comprehensive Reimbursement for Elderly Outpatients, followed by per-visit charge and drug surcharge in 1977. They were an attempt to remove the three basic problems of the Japanese primary-care in those days; over-medication, over-testing, and over-visitation. Taken separately, each measure may have been a sensible measure, but, altogether, they did not work in the way the government had hoped. Particularly disastrous was CREO, as it actually worked to increase the costs of medical care. Through our analyses, we will shown why and how it happened. All the empirical evidences are consistent with our hypothesis; namely, the selectivity of CREO and FFS, and the exemption of CREO patients from paying drug surcharge were the sources of these policy failures. Our estimated treatment effect models indicate that CREO increased the drug costs and total medical costs by 40 to 50 percents.

Although Korea has been using a diagnosis-related group （DRG）-based payment since 1997, the system is applied only to a limited number of patients and providers, mainly due to the strong opposition among providers. Recently, health care authority in Korea released a new plan for expanding the coverage of the DRG system, but, this plan too came under severe criticism from both providers and experts. The present paper assesses the current DRG system as well as the new plan, and suggests policy directions and strategies to extend the current system. Because the health care industry is founded on a long-standing fee-for-service （FFS）system, payment reform will be difficult, and strategies aiming to expand the current DRG-based payment system must be prepared to withstand possible negative effects and provider backlash.

Public long-term care insurance was first introduced in Japan in 2000. Along with increasing the volume of benefits provided by insurance, a recent reform of public long-term care insurance de-emphasized home care for elderly individuals and eliminated coverage for housing and food expenses. At the same time, income has decreased in elderly households and the income gap among Japanese has gradually expanded. Introduction of policies reducing the number of hospital beds and promoting home care settings is narrowing individuals’ opportunities to receive insurance benefits while simultaneously increasing the economic burden placed on caregivers.
In this paper, I aim to identify the possible actions caregivers faced with increasing care costs may take in order to alleviate their care burden, and clarify whether private long-term care insurance can relieve caregiver burden. Econometric analysis revealed that 1）for those caring for elderly relatives, withdrawing money from savings, changing jobs, and purchasing private insurance have no significant effect on net income level; 2）younger individuals tend to change jobs in order to improve their situation; 3）changing jobs is selected significantly more often than withdrawing money from savings in home care cases; 4）those not requiring care tend to favor high premium-high reimbursement private long-term care insurance; and 5）private long-term care insurance plans providing sufficient compensation and approval-related benefit schemes may be favored by caregivers
Preparing for the huge costs of long-term care by saving or changing jobs may be quite unpredictable under the current trends of economic instability and differences in income expansion. Therefore, the role of private long-term care insurance in supplementing public insurance may be significant. However, no new private long-term care insurance plans exist in the market. It is therefore necessary to examine the reform of public long-term care insurance and introduce flexible measures such as cash payment schemes.

It is often said that the market mechanism does not enhance service quality in the care market because there is information asymmetry between users and providers. This research investigates the three arguments for this proposition by using the data of Group Home providers’ service quality performance index in the Japanese Long- Term Care Insurance（LTCI）market. The three argument models are
a）The Contract Failure model that claims users perceive nonprofit providers as a sign of good service quality.
b）The Medical Arms Race（MAR）model that argues the competition in the care market tends to lower the service quality.
c）Suzuki and Satake’s（2001）model that claims new entries in the care market do not contribute to improvement in the market’s service quality.
Analyzing the quality performance by attributes, research has revealed that none of the three models was fully supported in the Japanese LTCI market. After testing the Contract Failure model, there was no significant difference in the service quality between for-profit and nonprofit providers but it reflected the market share of each type of provider. Regarding the MAR model, the service quality of the providers in competitive markets was significantly better than that of those in non-competitive markets. As for Suzuki and Satake’s （2001）model, although new entry does not bring a more qualified service into the market for the initial year, new market entry providers improve the service quality more than old （existing）entry providers do. Moreover, the research uncovered implications for each model. First, the service quality of nonprofit providers may appear better from the viewpoint of the care recipients, but this may be opposite to that of the family. Second, bridging the information gap prevents the market competition from MAR syndrome. This also creates an incentive for the providers in non-competitive markets to improve the service quality. Third, the weakness of new entry in service quality is care management rather than care service itself.
The research concluded that the market mechanism overall worked efficiently for the improvement of service quality in the Japanese LTCI market. This was attributed to the government’s policies including a providers’ third-party evaluation system that bridged the information asymmetry in the market.

This paper investigates the validity of three topics related to service quality improvement in the long-term care market in Japan, especially focusing on service in Groupe homes. Three constraint models that explain the failure to improve service quality in the long-term care market: the Contract Failure Model, the Medical Arms Race（MAR）Model, and Suzuki and Satake’s（2001）Model are empirically addressed. In conclusion, none of the three models was fully supported. This sound conclusion is suggestive in considering the role of market mechanisms in the long-term care market, but some further factors or topics should have been noted for consistency with the real conditions of the Group home market in Japan.