Silviase/jgov_v1.4_full_ann huggingface dataset:
cases and some interesting implications particularly on case 4. Further, we deal with two problems: the distributive transfers among age groups and the effects of the current health policy.

## 3 -a) Some features on the future NME

We focus on the NMEs in 2025 in order to make clear the following problems: What kind of differences will appear between the present and future? What kind of differences and similarities among the four cases will appear in the future? Before proceeding to analyze these problems, it is useful to refer to the changes in the population for each age group (0-14, 15-64 and 65-) between 1993 and 2025: the figures are 20.8 million (16.7 percent), 87.0 million (69.8 percent) and 16.9 million (13.5 percent), respectively, in 1993, while 15.8 million (13.1 percent), 72.0 million (59.5 percent) and 33.1 million (27.4 percent), respectively, in 2025 $ ^{8)} $ .

First, let us examine case 1, which assumes C and R will remain at the 1993 level over the next about 30 years. This case could be regarded as the standard reflecting only the impact of future demographic changes on the NME. The NME in 2025 will be about 26.4 trillion yen (in 1990 price), and increase by 6.2 trillion yen compared with the 1993 figure (Appendix Table 1-1). As far as the health expenditure for each age group is concerned, its share in the total expenditure (i.e., NME) is 6.1 percent for the age group 0-14, 51.0 percent for the group 15-64 and 42.9 percent for the group 65-in 1993, while in 2025 the respective figures are 3.5, 32.2, and 64.2 percent. Clearly, the age group 15-64 is decreasing its share in the total expenditure from 1993 to 2025 and the age group 65-taking an increasingly dominant share.

Among the four cases, the most likely might be case 4 since the per capita medical expense is growing over time due to the development of medical technology and an increase in per capita income $ ^{9} $ . Therefore, great emphasis should be put on the results in case 4. Figure 1-1 suggests that the NMEs will increase drastically particularly for the elderly and be about 49 trillion yen in 2025 $ ^{10} $ . Without fundamental health care reforms or restructuring the current system $ ^{11} $ , our society in 2025 will have to burden at least twice as high the NME as in 1993.
Figure 1-1: Projected National Medical Expenditure by type of services, model I, case 4

Source : As in Appendix Table 1-1.

Table 1-1: Average annual growth rate of the projected NMEs in each case

Inpatient	Outpatient	(percent)
0-14	15-64	65+	0-14	15-64	65+	Total
Case 1	-0.9	-0.6	2.1	-0.9	-0.6	2.1	0.8
Case 2	0.7	0.9	3.8	1.6	1.2	4.0	2.6
Case 3	-0.7	-0.3	2.4	-0.7	-0.3	2.2	1.1
Case 4	0.8	1.2	4.0	1.8	1.6	4.1	2.8

Notes: Figures are annual growth rates of the projected NMEs from 1993 to 2025 in real terms. The NMEs are estimated by model I in each case. See Appendix Table 1-1 in detail.

Source: As in Appendix Table 1-1.
Next, let us focus on the estimated health expenditure for each age group in 2025. As far as the health expenditure for each age group is concerned, interestingly, its share in the total expenditure (i.e., NME) is not very different among the four cases and falls in a narrow range (Appendix Table 1-1). Between 1993 and 2025, changes in the share for each age group is as follows: from 3.5 to 4.1 percent for the age group 0-14, from 31.9 to 33.1 percent for the group 15-64 and from 63.1 to 64.2 percent for the group 65-.

Table 1-1 shows the average annual growth of the projected NMEs in each case from 1993 to 2025. There is a wide range of annual growth among the age groups as well as among four cases. For example, in case 4, the highest growth rate is 4.1 percent for the age group 65- in outpatient expenditure, and the lowest 0.8 percent for the age group 0-14 in inpatient expenditure.

## 3 -b) Discussions

## i) Distributive transfer among age groups

With a rapidly ageing population, the share of health expenditure for each age group will be expected to change drastically over the next 30 years. Its share for the age group 15-64 during the period will decrease from 51.0 to about 33 percent, while that for the age group 65- will increase from 42.9 to about 63 percent. Income transfers from the shrinking working-age population to the growing retired will increase significantly. Consequently, there will appear a serious problem of income transfer unless further fundamental reforms are carried out in the medical insurance system.

For the purpose of dealing with this issue quantitatively, we define a rough indicator regarding benefits and burdens between age groups as follows:
$$ \begin{aligned}&\theta_{t}=NME/population of the age group15-64\\&\ =ME for the age group15-64/population of the age group15-64\\&\ +ME for the age groups0-14and65-/population of the age group15-64\\&\ =~\theta_{1,t}+\theta_{2,t}\\ \end{aligned} $$

$ \theta_{1} $ is defined to be the ME (medical expenditure) for the age group 15-64 divided by the population of that same group, and $ \theta_{2} $ the ME for the age groups 0-14 and 65-divided by the population of the age group 15-64. For the age group 15-64, the former represents per capita health expenditure for maintaining their own health status and the latter for the other groups' good health. However, these indicators do not reflect the accurate amount of burden on the working-age population since the NME is divided by the population of the age group 15-64. In addition, the amount would be influenced greatly by the premium and copayment structures of the medical insurance system and public subsidies through central or local governments.

Table 1-2: Burdens to the working-age population, model I, case 4

$ \theta_{t} $	$ \theta_{1,t} $	$ \theta_{2,t} $	$ \theta_{t}/\theta_{93} $	$ \theta_{1,t}/\theta_{1,93} $	$ \theta_{2,t}/\theta_{2,93} $
1993*	231,766	118,230	113,535	100.0	100.0	100.0
2000	322,814	147,688	175,126	139.3	124.9	154.2
2005	386,029	163,130	222,899	166.6	138.0	196.3
2010	460,944	178,572	282,371	198.9	151.0	248.7
2015	558,025	194,014	364,011	240.8	164.1	320.6
2020	632,591	209,457	423,134	272.9	177.2	372.7
2025	685,194	224,899	460,295	295.6	190.2	405.4

Notes: Figures are estimated by equation (2) in case 4. The NME is divided by the population of the age group 15-64, so that they are not the accurate amounts paid by the working-age population. See the text in detail.

$ ^{*} $ The figures in 1993 are actual.

Source : As in Appendix Table 1-1.
Table 1-2 shows the results of the most likely case, i.e., case 4, over the next 30 years. The total burdens $ (\theta_{25}) $ to the age group 15-64 will increase by 196 percent up to 685,194 yen. As for the individual components, $ \theta_{1,25} $ will rise by 90 percent and $ \theta_{2,25} $ by 305 percent. Therefore, the working-age population would bear heavy burdens on behalf of the non-working population, particularly the elderly $ ^{12)} $ . These amounts are different between case 4 and case 1 $ ^{13)} $ , while the ratio of health expenditures for the working-age population to those for the other population groups is not very different. This ratio is approximately 49 percent in 1993 and 67 percent in 2025 for both cases.

## ii) Effects of the current health policy

During the last decade, the government has been reorganizing and restructuring the health care system in Japan. In the context of this paper, we have to take into consideration some measures designed particularly for the inpatient care of the elderly: the introduction of fixed payment system, the reorganization of some of hospital beds into those for long-term care and the Gold Plan. These measures will be expected to have great impacts on the NME in the future. However, it is hardly possible to consider all of them and it is not the purpose of this research either. So, taking the Gold Plan as an example, we try to consider its impacts upon the NMEs in the future.

First of all, let us explain the Gold Plan in brief. It is the ten-year strategy to promote health care and welfare for the aged which started in 1990. All purposes of this plan will be achieved by 1999 $ ^{14} $ . According to the plan, HSFs (Health Service Facilities) and SNHs (Special Nursing Homes) for the aged are expected to be enriched in order to provide care services for the targeted number, i.e., 280,000 and 290,000 elderly people respectively. So, how do we evaluate the plan? We take the simplified procedure that merely accounts for the number of elderly inpatients in hospitals. That is, all the elderly who will occupy these newly built facilities are assumed to be transferred from hospitals $ ^{15} $ .
Considering simply the number of the elderly transferred from hospitals to the new facilities $ ^{16} $ , the reduction in inpatient expenditure for the age group 65- in 2000 is expected to amount to 2.4 trillion yen (8.5 percent of the NME) in case 4 and, in contrast, 2.1 trillion yen (9.2 percent) in case 1. More important, as far as our estimation of the future NME is concerned, "cost shifting" from the hospital sector to the other related sectors will occur. In our case, accompanied with this transfer, the following additional expenses must be borne in the facilities transferred. If all these facilities are assumed to be HSFs, the expenses for care and rehabilitation services will be borne by and included in the tern National Medical Expenditure defined by the MHW, but not in the NME under our definition. However, if elderly inpatients are transferred into SNHs, the expenses will not be included either. Further, if the elderly are remaining at home while receiving home health services, the situation is more complicated.

In sum, the projected NMEs in the long run as in this research, however the term is defined, will be greatly influenced by changes in institutional arrangements concerning the health care delivery system $ ^{17} $ . Rather, what should be emphasized is the fact that most of the elderly who need long-term care have so far gone into hospitals due to the paucity of care-providing staff and facilities $ ^{18} $ . Therefore, hospitals have been providing not only therapeutic cure but also care. From the viewpoint of patient's welfare, these hospitals would not be appropriate particularly for the elderly inpatients who need care. The present situation suggests inefficiency in production and consumption in hospitals from the economic point of view.
## I II Estimations and the empirical results: Model II

1) Model II

Model II categorizes medical institutions into hospitals and clinics and, therefore, can be expressed as follows:

$$ \mathrm{E}_{\mathrm{t}}=\Sigma\mathrm{E}_{\mathrm{ijk},\mathrm{t}}=\Sigma\mathrm{C}_{\mathrm{ijk},\mathrm{t}}\mathrm{N}_{\mathrm{ijk},\mathrm{t}}=\Sigma\mathrm{C}_{\mathrm{ijk},\mathrm{t}}\mathrm{R}_{\mathrm{ijk},\mathrm{t}}\mathrm{P}_{\mathrm{ijk},\mathrm{t}} $$

i(= 1 or 2) representing the elderly or non-elderly

j(= 1 or 2) representing in- or outpatient care

k(= 1 or 2) representing hospitals or clinics

In the equation, the variables E, C, N, R and P are as in equation (1). However, patients are divided into two groups in model II: the elderly (age group 70+) and non-elderly (age group 0-69). This categorization is based on the current medical insurance system. In Japan, all those over 70 are covered under the Health Services System for the Aged (HSSA) and their copayment is very different from other age groups $ ^{19} $ .

Model II faces a difficult problem in obtaining data on $ C_{ijk} $ for the past (therefore for the future) owing to the data limitation. We have to put together data related to $ C_{ijk} $ and estimate it for the past before making projections. Therefore, we take the following procedure: Since data on $ C_{ij} $ is available, we seek the ratio $ (\delta_{ijk}) $ which divides $ C_{ij} $ into medical expenses for hospitals and for clinics from the documents $ ^{20)} $ and, therefore, obtain $ C_{ijk} = \delta_{ijk} \cdot C_{ij} $ for the past. We can calculate $ \delta_{ijk} $ only in 1992 and 1993, the only years for which the relevant figures are available (Appendix Table 1-4).

These ratios ( $ \delta_{ijk} $ ) in the table seem to be comparatively stable in both years. As a preliminary approach we assume that $ \delta_{ijk} $ remain constant at the 1993 level and so does $ R_{ijk} $ . However, as these assumptions are subject to some problems $ ^{[21]} $ , the results will need to be dealt with caution.
Figure 1-2: Projected National Medical Expenditure by medical institution, model II

Notes: Figures are estimated by model II. This model assumes that the distributive ratios ( $ \alpha_{ijk} $ ) of medical expenditures between hospitals and clinics are their 1993 figures and the case I as described in section I holds. See the text and Appendix Table 14 in detail. $ ^{*} $ The figures in 1993 are actual

Source : As in Appendix Table 1-4.

## 2 ) Empirical results and implications

## 2 -a) Some features on the future NME

Figure 1-2 shows the projected NMEs on the basis of model II. It reflects only impacts of the ageing population on the NMEs since $ C_{ijk} $ and $ R_{ijk} $ are assumed to remain in the 1993 level. Consequently, the results have an advantage of shedding light on distinctive functions between hospitals and clinics in terms of the amount of health expenditures.

From the figure (and Appendix Table 1-5), we can compare the shares of medical expenditures by the types of institutions as well as by the age group between 1993 and 2025. This suggests that the situation between the elderly and non-elderly in hospitals will change.
dramatically due to the ageing of population. As far as inpatient care in hospitals is concerned, the share of elderly expenditures in the NME will increase from 17.5 to 31.1 percent during the period, while its counterpart for the non-elderly will decrease from 27.5 to 16.9 percent. Moreover, as for outpatient care in hospitals, the share of the elderly expenditure will increase from 7.9 to 14.1 percent, while its counterpart for the non-elderly decrease from 19.6 to 12.0 percent. As a result, the total share for the elderly and non-elderly respectively in hospitals will be 45.2 and 28.9 percent in 2025.

In sum, the share of the elderly health expenditures is 58.8 percent in 2025 with 45.2 percent for hospitals and 13.6 percent for clinics respectively. In contrast, their share in the population is 21.7 percent in 2025. Therefore, 22 percent of the population will occupy or consume about 59 percent of the NME. The situation particularly for hospitals should be considered seriously. The share of the elderly inpatient expenditures in hospitals will reach 31.1 percent in 2025, and include inpatient expenditures for the elderly who need not medical cure but care. In this respect, there is ample room for improving efficiency in delivery of medical services and alleviating heavy burdens to the working-age population (see section II).

## 2 -b) Required medical resources

There will have to be large amounts of medical resources, both in terms of quality and quantity, behind the future NMEs shown in Figure 1-2. In this sub-section, the required medical resources are estimated quantitatively. However, the situation will change drastically over the next 30 years. For example, with the introduction of new technologies, the current reforms in delivery arrangements of health services and even revisions of reimbursement schedule every two years, the medical services provided will change in their quality and scope of care. Therefore, it is very difficult to find any indicator reflecting accurately the required resources in the future, so we employ some rough indicators, such as the number of beds, facilities, and doctors.

First, let us explain the procedure of estimation in brief and discuss the results. As far as the assumptions for estimation are concerned, based on the Model II, the existing medical
resources per patient in 1993 are assumed to remain constant in the future. That is, the number of beds, facilities and doctors per patient is each assumed to remain at the 1993 level. Therefore, the required resources can be obtained from multiplying these required resources per patient by the number of patients. Consequently, the results need to be dealt with caution since they depend on the conditions in 1993.

Table 1-3a shows the required number of beds and facilities for hospitals and clinics respectively in the future. By 2025, the required number of beds should rise by 43 percent for hospitals and by 56 percent for clinics respectively. These increases are due to demographic changes. As far as the required facilities are concerned, hospitals should increase in number by 30 percent and clinics by 26 percent in 2025. However, these figures need to be dealt carefully because the size of hospitals is not taken into consideration.

Table 1-3 a: Required medical resources in the future, model II

Hospital	Clinic
Bed	Facility	Bed	Facility
1993 $ ^{*} $	1,680,952(100.0)	9,844(100.0)	265,083(100.0)	84,128(100.0)
2000	1,893,069(112.6)	10,773(109.4)	306,509(115.6)	91,375(108.6)
2005	2,046,122(121.7)	11,427(116.1)	336,836(127.1)	96,420(114.6)
2010	2,165,340(128.8)	11,920(121.1)	360,856(136.1)	100,182(119.1)
2015	2,271,426(135.1)	12,334(125.3)	382,889(144.4)	103,252(122.7)
2020	2,397,883(142.7)	12,805(130.1)	409,683(154.5)	106,686(126.8)
2025	2,410,078(143.4)	12,782(129.8)	414,022(156.2)	106,276(126.3)
Table 1-3b: Required medical resources in the future, model II

Required Doctors	Supplied Doctors	Difference
RD	S70	S75	S80	S85	RD-S70	RD-S75	RD-S80	RD-S85
1994*	230,519	230,519	230,519	230,519	230,519	0	0	0	0
2000	251,292	222,447	240,756	250,681	254,699	28,845	10,536	611	-3,407
2005	265,827	243,198	255,285	270,855	278,341	22,629	10,542	-5,028	-12,514
2010	276,735	264,662	275,628	285,885	297,617	12,073	1,106	-9,150	-20,882
2015	285,754	284,851	296,294	305,594	313,294	903	-10,541	-19,840	-27,541
2020	295,952	297,931	315,364	325,086	332,060	-1,980	-19,412	-29,134	-36,108
2025	295,105	305,966	327,712	342,539	349,853	-10,861	-32,607	-47,434	-54,748

Notes: Required doctors are estimated by the same procedure as in Table 1-3a. Supplied doctors are estimated under alternative assumptions about retirement age: 70 years old, 75, 80, and 85. See the text and 22) in detail.

$ ^{*} $ The figures in 1994 are actual.

Source: "Survey of Doctors, Dentists and Pharmacists", 1994, (MHW) and "Abridged Life Table for Japan, 1994", (MHW) as well as in Appendix Table 1-1.

Next, Table 1-3b suggests the required number of doctors over the next 30 years calculated by the same procedure as beds and facilities. In addition, the supply of doctors is estimated by alternative procedures. Four alternative assumptions regarding the retirement ages of doctors (i.e., the age of 70, 75, 80 and 85) will be used. Clearly, the respective supplies are different in their quantity according to the assumptions about the retirement age $ ^{22} $ . The table suggests that the differences between the required number of doctors and the supplied doctors will be greatly influenced by the assumption used. Moreover, these differences are expected to widen in 2025 than in 1993.

However, there are some remarks to be made on the future number of doctors. With a rapidly ageing population, the disease patterns and needs for services will be changing in scope and quality. For example, the needs for long-term care and for geriatric care (geriatricians) will grow with the ageing of population. Therefore, the expertise and skills of doctors will also change. In this respect, we should notice that there are difficulties in evaluating the situation only through the number of doctors without considering the quality of doctors.
## I V Conclusion and Policy Implication

As our study shows, a rapid increase in NMEs requires effective reforms of Japan's health care scheme. Some important policy implications in order to moderate the impact of an aging society are derived from the results:

1. By and large, Japan's economic growth will fall due to progress of aging. Though medical expenditure per patient may lower, the ratio of NME to national income will increase to some extent.

2. From the point of macroeconomic view, a rapid increase of NME may cause such problems as how to satisfy the resource requirement for health care and to whom the burden should be attributed.

3. Even through the necessary amount of medical resource per patient is fixed at the level in 1993, NME in 2025 will be much larger than in 1993, mainly for the fulfillment of health care demand for the aged. Hence more need for beds in medical facilities will arise. It is necessary to make efforts to supply health care service better both in quality and in efficiency through the cooperation between medical treatment and long-term care.

4. Aging in Japan will have serious effects on the current schemes of health care and pension which aim to implement intergenerational supports. According to our study's result, the medical expenditure per working-age population in 2025 is estimated to be three times as large as the present level. Therefore the Japan's social security scheme would be definitely collapsed without any thorough reforms. It will be inevitable to increase the burden to the elderly in any case.
1) This definition by MHW also differs from the total expenditure on health care compiled by the OECD, which is usually used for international comparisons. The National Medical Expenditure does not include the following items that the OECD health care expenditure does: subsidies to public health service providers (except payments made through public medical care insurance scheme), administrative costs of medical insurance schemes, and household expenditures such as costs of over-the-counter medicine. See OECD $ ^{[1994]} $ .

2) They are often considered the inpatients caused by the social, not medical, conditions. This phenomenon could be considered to stem mainly from the paucity of such care-providing facilities as HSFs and SNHs for the elderly.

3) However, the National Medical Expenditure defined by the MHW includes the costs of nursing and rehabilitation services provided in HSFs, but not nursing costs in SNHs.

4) Nakaizumi $ ^{[1995]} $ analyzes this congestion problem under the Japanese health care system by formulating economic models. As for the reasons for choosing hospitals rather than clinics, see Chino $ ^{[1994]} $ which suggests that this is due to the paucity of information on the quality of care provided.

5) If strictly defined, N is obtained from multiplying R · P by 365 days.

6) We will also project the NMEs based on the low estimation of population to complement the results.

7) With respect to the per capita outpatient medical expense, a dummy variable for 1990 is introduced when it was regressed on time trends.

8) According to the low estimation of the population, the population for each age group in 2025 is 13.7 million (11.7 percent), 70.6 million (60.1 percent) and 33.1 million (28.2 percent), respectively.

9) According to studies on the determinants of health care expenditure across developed countries, income has been the most important factor (Newhouse $ ^{[1977]} $ , Gerdtham et al $ ^{[1992]} $ and Hitiris and Posnett $ ^{[1992]} $ ).

10) As for the results on the low estimation, see Appendix Table 1-2.

11) It is appropriate to consider not only the health care field but also other related fields such as social welfare services.

12) See Appendix Table 1-3 for case 1.

13) Due to the existence of the copayment system, actual burdens to the working-age