# Direction and concrete measures in reforming the social security systems

—Sustainable social security systems with 'intergenerational equity' and 'mutual aid' as the core—

May 12, 2011

## Background to social security reformation

Ministry of Health, Labour and Welfare

* This reform plan reflects all the discussions, including those of the National Social Security Commission and Peaceful Society Commission held during the LDP-Komeito regime, as well as those of the DPJ Research Commission and Advisory Committee, which assembled their reports last year, and public hearings conducted at the Intensive Study Commission up to this April.

■ The framework of the current social security system was formed during the high economic growth period (from 1960 through to the 1970s)

• It was based on 'regular, lifetime, and full employment', 'a steadily growing economy', 'a standard family model that was comprised of a nuclear family with a full-time homemaker wife', 'generous welfare being provided by corporations', and 'relationships within communities and with relatives'

• Social security expenditure remained low with regard to its ratio to GDP and of public to national income when compared to other developed countries

■ Changes in the situation surrounding the social security systems

• Changes in the employment infrastructure (such as increasing non-regular employment), family types (such as an increasing number of one-person households), regional infrastructure (such as aging in urban areas), the lifestyle and risk infrastructure (such issues as disparity and poverty), and corporate infrastructure (employment practices in an era of globalization)

• The majority of the cost of social security was covered by deficit-financing bonds, thus bestowing the burden on future generations

• Relatively generous benefits for elderly persons, thus creating an intergenerational imbalance between benefits and the burden

[Matters to be considered in the reformation of the social security systems]

■ The restoration and strengthening of the fundamental functions of the social security systems and the development of an infrastructure that supports the peaceful and self-supporting lifestyles of Japanese citizens from their point of view

■ A trinity (triangle) of 'peacefulness', 'mutual aid', and 'equity'

• A society that supports a variety of types of households and lifestyles, and where everyone can exhibit their abilities in a 'comfortable place' and with 'chances' secured for all

• Contribution to a new form of regional cooperation and the reconstruction of communities

• Ensuring intergenerational equity, maintenance of social solidarity via elimination of issues such as poverty and disparities, and mechanisms for use in sharing responsibilities and the burden between Japanese citizens on the basis of mutual aid

## Primary direction of reformation in social security systems

## Three philosophies: (1) guaranteed participation, (2) universalism, and (3) vitality on the basis of peacefulness Five principles: (1) encompassing all generations, (2) investing in the future, (3) decentralized and pluralistic supply systems, (4) comprehensive support, and (5) stable sources of finance without bestowing the burden on the next generations

### 1. Encompassing all generations and investing the future

—Social security systems that aim at 'intergenerational equity'—

●The creation of social security systems that enable all generations to feel secure and confident based on mutual aid and solidarity through converting the systems to encompass all generations with consideration being given to not only the elderly but also the current and next working generations.

●Support for the employment and social participation of the working age, as well as encouraging the next generations.

●The provision of more opportunities for all persons to create and exhibit their own personal abilities, regardless of age or gender.

⇒·Guarantee of participation via employment (enhanced support for self-supporting youth, in particular, who are the 'foundation of the working generation' and will be the 'core generation in the future')

·Enhancement of support for children and child-rearing (realization of a 'new system for children and child-rearing' and support for the working generation to start families)

## Steady enhancement of social security functions is necessary

### 2. Guarantee of participation and comprehensive support (society that supports the participation of all people)

—Construction of a 'multi-layered safety net' on the basis of 'mutual aid'—

●Construction of social security systems using enhanced 'mutual aid' that support and are supported by the whole of society, which then prevents and eliminates poverty and disparities, and their reproduction that can then lead to the fragmentation and polarization of society.

●Establishment of a multi-layered safety net on the basis of 'mutual aid'.

⇒·Correction of fluctuations within the 'primary layer of the safety net' (universal insurance and universal pension systems)

(for example wider application of social insurance in thereby covering non-regular employees and enhanced measures for anyone with a low income)

• Construction of the 'secondary layer of the safety net', which needs to resemble a trampoline

(for example the establishment of a support system for job seekers and promotion of personal support services)

• Reconsideration of the public assistance system as the 'final layer of the safety net'

## Resurgence from the Great Earthquake

• Prioritized benefits in consideration of the changes in social and economic conditions via careful selection and concentration

• Enhancement of social security functions with a focus on mutual aid

• Presentation of future-oriented models for 'peaceful communities'

### 3. Universalism, decentralized and pluralistic service delivery systems

—Comprehensive community-based care systems in collaboration with and the cooperation of various entities—

●Construction of 'comprehensive community-based care systems' that provide consistent integrated medical and nursing care services in their own areas via the construction of networks and diverse functions.

●Provision of efficient services of guaranteed quality in providing Japanese citizens with both comfort and satisfaction.

●Simultaneous improvement in both functionality and efficiency by selective and intensive investment in human and material resources based on individual regions (communities).

⇒·Network that provides comfortable and quality medical and nursing care services (for example shorter hospitalization periods and more timely rehabilitation with intensive investment of resources into acute medical care, the promotion of functional specialization into rehabilitation and chronic medical care, enhancement of in-home medical and nursing care, and the promotion of team medical efforts and personnel procurements)

·Prioritization and efficiency of benefits (for example adaptation into advanced medical care and prioritized functions of medical insurance)

### 4. Vitality on the basis of peacefulness

—A virtuous cycle with economic growth via the achievement of the new growth strategy—

●Social security can be considered to often contribute to growth strategy in terms of both demand and supply, and the growth of Japan's economy can lead to ensuring stable revenue from tax and social insurance contributions, thus enhancing the functionality of social security.

●Ensuring the sustainability of the social security systems makes the creation of a positive cycle of a strong economy, strong finances, and strong social security very important, rather than the constant imposition of being a heavily excessive burden on finances.

⇒·Promotion of innovations in medical care (for example pharmaceuticals, medical equipment, regenerative medicine, and personalized medical care)

• Expansion of employment in areas that include medical and nursing care as well as support for children and child rearing, which will also contribute to improving the regional employment situation

• 'Expansion of employment' and 'decent work' using measures that improve the employment situation

• Expansion of and underpinning consumption via the 'creation of peacefulness' through social security reform