Abstract
I propose to replace the automatic adjustment system of pension benefits, embedded in the 2004 reform of the Japanese public pension scheme, with one providing for specific required care levels and thus assure the logical financial adjustment of long-term care insurance and public pensions. For this purpose, I introduce a multi-state Markov chain model and estimate the transition matrix combining the existent local experience data and nationwide public data. The following policy effect will be anticipated. If an LTCI beneficiary falls into a certain required care status, his or her required care benefit will need to be upgraded and the individual expense burden will increase. A similar approach is proposed by annuity products in the private sector such as the QLAC (qualified longevity annuity contract) in the U.S. and “life care pensions” in Britain.
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More From: The Geneva Papers on Risk and Insurance - Issues and Practice
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